Castor Maritime Inc. (Form: 20-F, Received: 12/16/2019 09:18:39)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from October 1, 2018 to December 31, 2018

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report: Not applicable

For the transition period from ___________________________ to ___________________________

Commission file number 001-38802

	CASTOR MARITIME INC.
	(Exact name of Registrant as specified in its charter)


	(Translation of Registrant’s name into English)

	Republic of the Marshall Islands
	(Jurisdiction of incorporation or organization)

	223 Christodoulou Chatzipavlou Street
	Hawaii Royal Gardens
	3036 Limassol, Cyprus
	(Address of principal executive offices)

	Petros Panagiotidis, Chairman, Chief Executive Officer and Chief Financial Officer 223 Christodoulou Chatzipavlou Street, Hawaii Royal Gardens, 3036 Limassol, Cyprus + 357 25 357 767 petrospan@castormaritime.com
	(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

	Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, $0.001 par value	CTRM	The Nasdaq Stock Market LLC
Series C Participating Preferred Shares	CTRM	The Nasdaq Stock Market LLC

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of share capital as of the close of the period covered by the transition report:

As of December 31, 2018, there were outstanding 2,400,000 common shares, $0.001 par value per share.

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes

☒ No

If this report is an annual report or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

☐ Yes

☒ No

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes

☐ No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during this preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes

☐ No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Emerging Growth Company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☒

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:

☒ U.S. GAAP

☐ International Financial Reporting Standards as issued by the International Accounting Standards Board

☐ Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow.

☐ Item 17

☐ Item 18

If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes

☐ No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

☐ Yes

☐ No

TABLE OF CONTENTS

		Page

PART I		4

ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	4

ITEM 8.	FINANCIAL INFORMATION	15

PART II		17

ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	17

ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	17

PART III		19

ITEM 17.	FINANCIAL STATEMENTS	18

ITEM 18.	FINANCIAL STATEMENTS	18

ITEM 19.	EXHIBITS	19

GENERAL INFORMATION

All references in this Transition Report on Form 20-F, or the Transition Report, to “Castor,” the “Company,” “we,” “us” and “our” refer to Castor Maritime Inc. and its consolidated subsidiaries, except as otherwise noted.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

The consolidated financial statement data as at December 31, 2018 and September 30, 2018 and 2017 and for the three months ended December 31, 2018, the year ended September 30, 2018 and the period from December 13, 2016 to September 30, 2017, have been derived from our consolidated financial statements, as presented elsewhere in this Transition Report, which have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, as issued by the Financial Accounting Standards Board, or FASB. All references in this Transition Report to “$” are to U.S. dollars.

Explanatory Note

On September 27, 2019, our Board of Directors announced a change in the Company’s fiscal year end from September 30 to December 31. As a result, we are required to file this Transition Report on Form 20-F for the transition period from October 1, 2018 to December 31, 2018. After we file this Transition Report, our next fiscal year will end on December 31, 2019. We note that this Transition Report on Form 20-F is filed pursuant to Rule 13a-10(g)(4) of the Securities Exchange Act of 1934, as amended, which permits us to respond to only Items 5, 8.A.7., 13, 14 and 17 or 18 of Form 20-F.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Matters discussed in this Transition Report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995, or the PSLRA, provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

Castor Maritime Inc. desires to take advantage of the safe harbor provisions of the PSLRA and is including this cautionary statement in connection with this safe harbor legislation. This Transition Report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. When used in this Transition Report, the words “anticipate,” “believe,” “expect,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” and similar expressions identify forward-looking statements.

The forward-looking statements in this Transition Report are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition to these assumptions and matters discussed elsewhere herein and in the documents incorporated by reference herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the following:

•

our future operating or financial results;

•

our continued borrowing availability under our debt agreements and compliance with the covenants contained therein;

•

our ability to procure or have access to financing, our liquidity and the adequacy of cash flows for our operations;

•

our ability to successfully employ our existing dry bulk vessels;

•

changes in our operating expenses, including bunker prices, dry docking and insurance costs;

•

our ability to fund future capital expenditures and investments in the construction, acquisition and refurbishment of our vessels (including the amount and nature thereof and the timing of completion thereof, the delivery and commencement of operations dates, expected downtime and lost revenue);

•

planned, pending or recent acquisitions, business strategy and expected capital spending or operating expenses, including drydocking, surveys, upgrades and insurance costs;

•

risks associated with vessel construction;

•

our expectations regarding the availability of vessel acquisitions and our ability to complete acquisition transactions planned;

•

vessel breakdowns and instances of off-hire;

•

potential conflicts of interest involving members of our Board of Directors, or the Board, and senior management;

•

potential liability from pending or future litigation;

•

potential exposure or loss from investment in derivative instruments;

•

general dry bulk shipping market trends, including fluctuations in charter hire rates and vessel values;

•

changes in supply and demand in the dry bulk shipping industry, including the market for our vessels and the number of newbuildings under construction;

•

the strength of world economies;

•

stability of Europe and the Euro;

•

fluctuations in interest rates and foreign exchange rates;

•

changes in seaborne and other transportation;

•

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

•

general domestic and international political conditions; and

•

potential disruption of shipping routes due to accidents or political events.

Any forward-looking statements contained herein are made only as of the date of this Transition Report, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all or any of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.

PART I

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Introduction

The following discussion provides a review of the performance of our operations and compares its performance with that of the preceding year on an annual basis and for the three-month periods ended December 31, 2017 and 2018. Our business was founded in December 2016 and our first fiscal year ended on September 30, 2017. Therefore, these consolidated financial statements present the operations for the three month period ended December 31, 2018, the year ended September 30, 2018 and the period from December 13, 2016 to September 30, 2017. All dollar amounts referred to in this management’s discussion and analysis are expressed in United States dollars except where indicated otherwise.

The following discussion of the results of our operations and our financial condition should be read in conjunction with the financial statements and the notes to those statements included in “Item 18. Financial Statements”. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth in “Item 3 Key Information-D. Risk Factors” of our annual report on Form 20-F for the year ended September 30, 2018, as amended, filed with the Commission on January 31, 2019.

Overview

We are a provider of worldwide seaborne transportation services for dry bulk cargo, including, among others, iron ore, coal and grain, collectively referred to as “major bulks,” and steel products, fertilizers, cement, bauxite, sugar and scrap metal, collectively referred to as “minor bulks.” As of December 31, 2018, we owned the Magic P, which is a Panamax vessel with a carrying capacity of approximately 76,000 dwt, or our Vessel. Our Vessel is managed by Pavimar S.A, or Pavimar, under the supervision of our Chief Executive Officer and our Board of Directors. Pavimar is controlled by the sister of our Chairman, Chief Executive Officer and Chief Financial Officer.

We may from time to time deploy our Vessel on a mix of period time charters and spot charters according to our assessment of market conditions, adjusting the mix of these charters to take advantage of the relatively stable cash flow and high utilization rates associated with period time charters or to profit from attractive spot charter rates during periods of strong charter market conditions. As of the date of this Transition Report, we have historically deployed our Vessel solely on time charters. We believe that our customers enter into period time and spot charters with us because of the good performance of our Vessel, the superior cargo holds and our reliable operations. During the three-month period ended December 31, 2018, we generated revenues of approximately $1.1 million.

A. Operating Results

Principal factors impacting our business, results of operations and financial condition

Our results of operations are affected by numerous factors. The principal factors that have impacted the business during the periods presented in the following discussion and analysis and that are likely to continue to impact our business are the following:

•

The cyclical nature of the industry and its impact on charter rates and vessel values;

•

Results of employment and operation of our Vessel; and

•

Results of Management of the financial, general and administrative elements involved in the conduct of our business and ownership of our Vessel.

Our operating results also are largely driven by the vessel Ownership days, Available days and Fleet utilization, as defined below.

Because many of these factors are beyond our control and certain of these factors have historically been volatile, past performance is not necessarily indicative of future performance and it is difficult to predict future performance with any degree of certainty.

Cyclical nature of the industry

One of the factors that impact our profitability is the hire rates that we are able to charge. The drybulk shipping industry is cyclical with attendant volatility in charter hire rates and profitability. The drybulk industry has often been characterized by periods of imbalance between supply and demand, causing charter hire rates to be volatile. The degree of charter hire rate volatility among different types of drybulk vessels has varied widely, and charter hire rates for drybulk vessels have also varied significantly in recent years. Fluctuations in charter rates result from changes in the supply and demand for vessel capacity and changes in the supply and demand for the major commodities carried by sea internationally. Because the factors affecting the supply and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in industry conditions are also unpredictable.

Our Vessel deployment strategy seeks to maximize charter revenue throughout industry cycles while maintaining cash flow stability. Our gross revenues for the period from October 1, 2018 to December 31, 2018 consisted primarily of hire earned under time charter contracts, where charterers pay a fixed daily hire. In the future, our revenues may also consist of amounts earned under voyage charter contracts, where charterers pay a fixed amount per ton of cargo carried. Our future gross revenues may be affected by the proportion of voyage and time charters, since revenues from voyage charters are generally higher than equivalent time charter hire revenues, as they are of a shorter duration and cover all costs relating to a given voyage, including port expenses, canal dues and fuel (bunker) costs. Accordingly, year-to-year comparisons of gross revenues are not necessarily indicative of vessel performance. We believe that the time charter equivalent per vessel, or TCE, which is defined as gross revenue per day less commissions and voyage costs and is widely used in the industry, provides a more accurate measure for comparison.

In 2018, charter hire rates improved from the low levels of recent years due to demand continuing to catch up with supply. The Baltic Dry Bulk Index, or BDI, average for the years ended December 31, 2016, 2017 and 2018 was 673, 1,145 and 1,354 points, respectively. Following the increased flow of newbuilding vessels that entered the market during the early 2000’s, the oversupply of capacity had a negative impact on the market as demand for dry-bulk commodities transfer was not able to absorb the flow of the vessels entering the market. As the flow of newbuilding vessels is constantly being driven down and scrapping of vessels having reached record levels, the increase in deadweight carrying capacity for 2018 is expected to increase by approximately 4.9%, which is significantly lower from the double digit increases during the early 2000’s while increase in demand of commodities is expected to increase by approximately 4.3%. The volatility in charter rates in the drybulk market affects the value of drybulk vessels, which follows the trends of drybulk charter rates, and earnings on our charters, and similarly, affects our cash flows and liquidity.

Employment and operation of our Vessel

A factor that impacts our profitability is the employment and operation of our Vessel which mainly requires; its regular maintenance and repair; effective crew selection and training; ongoing supply of our Vessel with the spares and the stores that it requires; contingency response planning; auditing of our Vessel’s onboard safety procedures; arrangements for our Vessel’s insurance; chartering of the vessel; training of onboard and on shore personnel with respect to our Vessel’s security and security response plans (ISPS); obtaining of ISM certification and performing the necessary audit for the vessel within the six months of taking over a vessel; and the ongoing monitoring of the Vessel’s performance.

Financial, general and administrative management.

The management of financial, general and administrative elements involved in the conduct of our business and ownership of our Vessel, requires us to manage our financial resources, including banking relationships, such as administration of bank accounts; manage our accounting system and records and financial reporting; monitor and ensure compliance with the legal and regulatory requirements affecting our business and assets; and manage our relationships with our service providers and customers.

Important Measures and Definitions for Analyzing Results of Operations

We believe that important concepts and measures for analyzing trends in our results of operations include the following:

Available days. Available days are the Ownership days we possessed our Vessel during the relevant period after subtracting off hire days associated with major repairs, drydockings or special or intermediate surveys. The shipping industry uses Available days to measure the aggregate number of days in a period during which vessels are available to generate revenues.

Ownership days. Ownership days are the total days we owned our Vessel during the relevant period. Ownership days are an indicator of the size of our fleet over a period and determine both the level of revenues and expenses recorded during that specific period.

Fleet utilization. We calculate fleet utilization by dividing the number of our Available days during a period by the number of our Ownership days during that period. Fleet utilization is used to measure a company’s ability to efficiently find suitable employment for its vessels and minimize the number of days that its vessels are off-hire for reasons such as major repairs, vessel upgrades, dry-dockings or special surveys.

Off-hire. The period our Vessel is unable to perform the services for which it is required under a charter for reasons such as major repairs, vessel upgrades, dry-dockings or special or intermediate surveys or other unforeseen events.

Dry-docking. We periodically dry-dock our Vessel for inspection, repairs and maintenance and any modifications to comply with industry certification or governmental requirements. Our ability to control our dry-docking expenses and our ability to complete our scheduled dry-dockings on time also affects our financial results.

Daily vessel operating expenses. The level of our vessel operating expenses, including crewing costs, insurance and maintenance costs. Our ability to control our vessel operating expenses also affects our financial results. These expenses include crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost of spares and consumable stores, lubricating oil costs, tonnage taxes and other miscellaneous expenses. Daily vessel operating expenses are calculated by dividing Fleet operating expenses by the Ownership days for the relevant period.

Daily company administration expenses. Daily company administration expenses include administration expenses such as audit fees, executive officer compensation and other miscellaneous expenses and are calculated by dividing company administration expenses by the Ownership days for the relevant period.

Daily management fees. Daily management fees are calculated by dividing management fees by the Ownership days for the relevant time period and represent the fees payable to our Manager for managing our Fleet.

Time charter. A time charter is a contract for the use of a vessel for a specific period of time during which the charterer pays substantially all of the voyage expenses, including port charges, bunker expenses and canal charges. The vessel owner pays the vessel operating expenses, which include crew costs, provisions, deck and engine stores and spares, lubricants, insurance, maintenance and repairs. The vessel owner is also responsible for each vessel's dry-docking and intermediate and special survey costs. Time charter rates are usually fixed during the term of the charter. Prevailing time charter rates fluctuate on a seasonal and year-to-year basis and may be substantially higher or lower from a prior time charter agreement when the subject vessel is seeking to renew the time charter agreement with the existing charterer or enter into a new time charter agreement with another charterer. Fluctuations in time charter rates are influenced by changes in spot charter rates.

The following table presents the operational metrics that management uses to assess our financial condition and results of operations:

(In U.S. dollars, except for days and utilization)	For the three- month period ended December 31, 2017			For the three- month period ended December 31, 2018
Operational Metrics
Available days		63			92
Ownership days		92			92
Fleet utilization		68.5	%		100	%
Daily time charter equivalent (or TCE) ⁽¹⁾		10,129			11,864
Daily vessel operating expenses		6,541			4,702
Daily management fees		262			320
Daily general and administrative expenses		390			250
EBITDA ⁽²⁾		(139,135	)		446,354

(In U.S. dollars, except for days and utilization)	For the period ended September 30, 2017			For the year ended September 30, 2018
Operational Metrics
Available days		216			336
Ownership days		222			365
Fleet utilization		97	%		92	%
Daily time charter equivalent (or TCE) ⁽¹⁾		8,969			11,677
Daily vessel operating expenses		5,383			4,734
Daily management fees		250			305
Daily general and administrative expenses		425			1,259
EBITDA ⁽²⁾		1,061,522			1,617,699

Non-GAAP Financial Information

⁽¹⁾TCE. TCE is a measure of the average daily revenue performance of a vessel. Our method of calculating the TCE rate is determined by dividing revenues net of voyage expenses by the Available days for the relevant time period. The TCE rate is not a measure of financial performance under U.S. GAAP, (a non-GAAP measure), and may not be comparable to similarly titled measures of other companies. TCE is a standard shipping industry performance that provides additional meaningful information in conjunction with voyage revenues, because it assists Company management and investors to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., spot voyage charters, period time charters and bareboat charters) under which a shipping Company’s vessels may be employed between periods. The Company believes that it provides useful information to investors and its Management regarding the Company's financial performance.

The following table reflects the calculation of our TCE rate for the period presented:

(In U.S. dollars, except for Available Days)	For the three- month period ended December 31, 2017			For the three- month period ended December 31, 2018
Revenues	$	666,587		$	1,111,075
Voyage expenses		(28,440	)		(19,556	)
Time charter equivalent revenues		638,147			1,091,519
Available days		63			92
Time charter equivalent rate	$	10,129		$	11,864

(In U.S. dollars, except for Available Days)	For the period ended September 30, 2017			For the year ended September 30, 2018
Revenues	$	2,018,061		$	3,960,822
Voyage expenses		(80,853	)		(37,373	)
Time charter equivalent revenues		1,937,208			3,923,449
Available days		216			336
Time charter equivalent rate	$	8,969		$	11,677

⁽²⁾EBITDA. We define EBITDA as earnings before interest and finance costs (if any), net of interest income, taxes (when incurred), depreciation and amortization. EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess our operating performance. We believe that EBITDA assists our management and investors by providing useful information that increases the comparability of our operating performance from period to period and against the operating performance of other companies in our industry that provide EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, depreciation and amortization and taxes, as and if incurred, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. We believe that including EBITDA as a measure of operating performance benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring our ongoing financial and operational strength. EBITDA is not a measure of financial performance under U.S. GAAP, does not represent and should not be considered as an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with U.S. GAAP. Therefore, EBITDA as presented below may not be comparable to similarly titled measures of other companies. The following table reconciles EBITDA to net income, the most directly comparable U.S. GAAP financial measure, for the periods presented:

Reconciliation of Net Income/(loss) to EBITDA	Three months ended December 31,
(In U.S. Dollars)	2017			2018
Net Income/(loss)	$	(247,858	)	$	276,442
Depreciation and amortization		107,925			177,378
Interest and finance costs, net		798			(7,466	)
EBITDA	$	(139,135	)	$	446,354


Reconciliation of Net Income to EBITDA	For the period ended September 30, 2017		For the year ended September 30, 2018
(In U.S. Dollars)
Net Income	$	878,644	$	980,938
Depreciation and amortization		182,346		637,611
Interest and finance costs, net		532		(850	)
EBITDA	$	1,061,522	$	1,617,699

Results of Operations

Three months ended December 31, 2018 as compared to the three months ended December 31, 2017

(In U.S. Dollars, except for share and per share data)	Three-Month Period ended December 31, 2017	Three-Month Period ended December 31, 2018	Change -amount	Change-%
Revenues (net of address commissions)	666,587	1,111,075	444,488	66.7%
Expenses:
Voyage expenses	(28,440)	(19,556)	(8,884)	(31.2)%
Vessel operating expenses	(601,787)	(432,544)	(169,243)	(28.1)%
Management fees to related party	(24,120)	(29,440)	5,320	22.1%
General and administrative expenses
• Company administration expenses	(35,834)	(22,954)	(12,880)	(35.9)%
• Public Registration Costs	(115,761)	(161,116)	45,355	39.2%
Depreciation and amortization	(107,925)	(177,378)	69,453	64.4%

Operating income/ (loss)	(247,280)	268,087	528,875	202.8%

Total Other (expenses)/Income ,net	(578)	8,355	8,933	1545,5%

Net income/ (loss) and comprehensive income/ (loss)	(247,858)	276,442	524,300	211.5%

Loss per common share, basic and diluted	(0.26)	(0.30)
Weighted average number of common shares, basic and diluted	2,400,000	2,400,000

•	Vessel Revenue, Net – Vessel revenues increased by $444,488 or 66.7%, to $1,111,075 in the three month period ended December 31, 2018, compared to $666,587 for the three month period ended December 31, 2017.

This increase was primarily due to:

(i) the higher revenues earned on our Vessel during the three month period ended December 31, 2018, as compared to the revenues earned in the prior year three month period which was the result of an increase in prevailing charter rates. More specifically, our Vessel generated $10,895 of average daily revenues in 2017 which increased to average daily revenues of $12,500 in 2018; and

(ii) the increase in Available days from 63 in the three-months ended December 31, 2017 to 92 in the three months ended December 31, 2018 due to our Vessel undergoing its scheduled dry-docking in the fourth quarter of 2017.

•

Voyage Expenses – In the three month period ended December 31, 2018, voyage expenses decreased to $19,556 as compared to $28,440 for the three months ended December 31, 2017, representing a decrease of $8,884 or 31.2%. This decrease is mainly reflective of certain peripheral port costs we incurred in 2017 in connection with the dry-dock of our Vessel.

•

Vessel Operating Expenses – Vessel operating expenses decreased by 28.1%, or $169,243, to $432,544 during the three-month period ended December 31, 2018, from $601,787 during the three-month period ended December 31, 2017. Accordingly, our daily operating expenses, decreased from $6,541 in 2017 to $4,702 in 2018. This decrease is mainly associated with the additional technical maintenance works and re-stocking of spares and supplies which were carried out simultaneously with dry-docking our Vessel during the fourth quarter of 2017.

•

Management Fees – During the three-month periods ended December 31, 2017 and 2018, we incurred $24,120 and $29,440 in management fees, respectively, or an average daily management fee of $262 and $320, respectively. From December 16, 2017, onwards and for a period of two years thereof, we and our Manager agreed to re-adjust the daily management fee of our Vessel from $250 per day to $320 per day, which explains the increase in daily average management fees between the compared periods.

•	General and Administrative Expenses

Company administration expenses

During the three month periods ended December 31, 2017 and 2018, we incurred Company administration expenses of $35,834 and $22,954, respectively. The decrease in Company administration expenses between the compared periods is mainly attributed to increased audit fees costs in the comparative period. Company administrative expenses generally consist of audit fees, Chief Financial and Chief Executive Officer remuneration fees as well as other miscellaneous expenditures essential to conduct our business.

Public registration costs

Public registration costs increased by $45,355 or 39.2%, from $115,761 in the three months ended December 31, 2017 to $161,116 in the three months ended December 31, 2018. The increased public registration fees are directly associated with the registration and listing of our common shares in the Norwegian OTC market on December 21, 2018 and the listing of our common shares in the NASDAQ stock exchange on February 11, 2019. Apart from registration and listing costs, public registration costs further include legal, consultancy and other costs incurred in connection with the subject listings.

◾

Depreciation and Amortization – Depreciation and amortization expense comprises of Vessel’s depreciation and the amortization of Vessel’s capitalized dry-dock costs. Depreciation and amortization charges totaled $177,378 in the three months ended December 31, 2018 as compared to $107,925 in the three months ended December 31, 2017, thereby amounting to a $69,453, or a 64.4%, increase.

Amortization of deferred dry-docking costs was $102,324 during the three months ended December 31, 2018, compared to $34,108 during the corresponding period of 2017. The increase by $68,216, or 200.0%, between the compared periods exclusively relates to the amortization of deferred dry-dock charges for a full quarter in the current three-month period, compared to a shorter amortization period in the prior period, as our Vessel completed its scheduled dry-dock on November 25, 2017.

The Vessel’s depreciation did not significantly vary in the compared periods.

Year ended September 30, 2018 as compared to the period ended September 30, 2017

(In U.S. Dollars, except for share data)	Period ended September 30,2017	Year ended September 30, 2018	Change -amount	Change-%
Revenues (net of address commissions)	2,018,061	3,960,822	1,942,761	96.3%
Expenses:
Voyage expenses	80,853	37,373	(43,480)	(53.8)%
Vessel operating expenses	1,194,995	1,727,770	532,775	44.6%
Management fees to related party	55,500	111,480	55,980	100.9%
General and administrative expenses
• Company administration expenses	58,467	109,233	50,766	86.8%
• Public Registration Costs	35,973	350,167	314,194	873.4%
Depreciation and amortization	182,346	637,611	455,265	249.7%

Operating income	409,927	987,188	577,261	140.8%

Other income/(expenses):
Gain on derivative financial instruments	475,530	-	(475,530)	(100.0)%
Total Other income/(expenses)	468,717	(6,250)	(474,967)	(101.3)%

Net income and comprehensive income	878,644	980,938	102,294	11.6%

Earnings/(loss) per common share, basic and diluted	0.35	(0.28)
Weighted average number of common shares, basic and diluted	2,400,000	2,400,000

◾

Vessel Revenue, Net - The increase was attributable to the increase in prevailing charter rates and the increase in number of days our vessel was employed. We had 336 available days in the year ended September 30, 2018 (365 ownership days less 29 dry-dock days) compared to 216 available days in the period ended September 30, 2017 as the vessel was acquired on February 21, 2017. The average TCE rate increased in 2018 by 30% to $11,677 compared to $8,969 for 2017. TCE rate is a non-GAAP measure. Please see the reconciliation above of TCE rates to Net Revenues, the most directly comparable U.S. GAAP measure.

◾

Voyage Expenses – Voyage expenses include gain on bunkers which may arise where the cost of the bunker fuel sold to the new charterer exceeds the cost of the bunker fuel acquired. The decrease in voyage expenses was primarily attributable to $0.08 million higher gain on bunkers which was partly offset by an increase of $0.04 million in brokerage commissions due to the increase in revenue earned for the year ended September 30, 2018 compared to the period ended September 31, 2017.

◾

Vessel Operating Expenses - The increase was primarily attributable to the increase in ownership days. We had 365 ownership days as of September 30, 2018 as compared to 222 ownership days as of September 30, 2017 as our Vessel was acquired on February 21, 2017. With the use of a strict planned technical maintenance program for our Vessel we managed to reduce the cost of our daily vessel operating expenses from $5,383 to $4,734.

◾

Management Fees - The increase was attributable to the increase in ownership days and the daily management fee rate payable to our Manager. We had 365 ownership days for the year ended September 30, 2018 compared to 222 ownership days for the period ended September 30, 2017. The management fee for the vessel payable to the Manager was $250 per day for the period up to September 30, 2017 and increased to $320 per day from December 16, 2017 onwards and for a period of two years thereof.

◾	General and Administrative Expenses - The increase of $0.4 million in the year ended September 30, 2018 compared to September 30, 2017 is primarily attributable to higher professional legal, consultancy and audit fees relating to our registration statement filing requirements.

◾

Depreciation and Amortization - The increase is attributable to (1) an increase in depreciation from $0.2 million to $0.3 million as a result of the higher ownership days and (2) drydock amortization charge of $0.3 million in the year September 30, 2018 related to the vessel dry-dock performed in 2018, the cost of which will be amortized over a period of approximately two years

◾

Gain from derivative financial instruments: During the period ended September 30, 2017 the Company realized a gain of $0.5 million from derivative financial instruments entered into to manage changes in the spot market rates associated with the deployment of our Vessel. During the year ended September 30, 2018 the Company did not have any derivative instruments in place. During the period from December 13, 2016 to September 30, 2017, the Company engaged in a series of forward freight agreements (FFAs) to manage its exposure to spot market rate fluctuations.

Recent Accounting Pronouncements

Refer to Note 2 of the consolidated financial statements included in this transition report.

Inflation

Inflation has not had a material effect on our expenses given recent economic conditions. In the event that significant global inflationary pressures appear, these pressures would increase our operating costs.

Implications of Being an Emerging Growth Company

We had less than $1.07 billion in revenue during our last fiscal year, which means that we are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act. An emerging growth company may take advantage of specified reduced public company reporting requirements that are otherwise applicable generally to public companies. These provisions include:

•

exemption from the auditor attestation requirement of management's assessment of the effectiveness of the emerging growth company's internal controls over financial reporting pursuant to Section 404(b) of Sarbanes-Oxley; and

•

exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and financial statements.

We may choose to take advantage of some or all of these reduced reporting requirements. We may take advantage of these provisions until the end of the fiscal year following the fifth anniversary of the date we first sell our common equity securities pursuant to an effective registration statement under the Securities Act or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if we have more than $1.07 billion in “total annual gross revenues” during our most recently completed fiscal year, if we become a “large accelerated filer” with a public float of more than $700 million, or as of any date on which we have issued more than $1 billion in non-convertible debt over the three-year period prior to such date. For as long as we take advantage of the reduced reporting obligations, the information that we provide shareholders may be different from information provided by other public companies.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. See Item 3. “Key Information—D. Risk Factors— We are an “emerging growth company” of our annual report on Form 20-F for the year ended September 30, 2018, as amended, filed with the Commission on January 31, 2019 and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common shares less attractive to investors”. As of October 1, 2018, we irrevocably elected to opt out of such extended transition period.

B. Liquidity and Capital Resources

We operate in a cyclical and capital intensive industry and financed our Vessel acquisition, that is, of the Magic P, through equity. As of September 30, 2017 and 2018 we had cash and cash equivalents of $0.8 million and $1.7 million, respectively. As of December 31, 2018, we had cash and cash equivalents of $1.9 million.

Working capital is equal to current assets minus current liabilities. As of September 30, 2017, we had a working capital surplus of $1.1 million as compared to a working capital surplus of $2.0 million as of September 30, 2018. As of December 31, 2018, we had a working capital surplus of $2.4 million. As of December 31, 2018, we believe our working capital is sufficient for our current requirements. Our working capital primarily increased due to increase of revenue based on prevailing charter rates and the increase in Vessel’s Available days during the period.

On November 15, 2018, we entered into contracts to purchase and install ballast water management systems (“BWMS”) on our dry bulk carriers, as amended on October 20, 2019, following the acquisition of the M/V Magic Sun and the M/V Magic Moon. We expect that the BWMS installation on our vessels will be completed during the vessels’ upcoming dry-docking in 2020 and estimate that the contractual obligations related to these purchases, excluding installation costs, will be approximately $0.8 million.

Equity Issuances

On September 22, 2017, we entered into an exchange agreement, or the Exchange Agreement, with Spetses and its shareholders. Under the terms of the Exchange Agreement, we issued 2,400,000 common shares, 480,000 Series A Preferred Shares and 12,000 Series B Preferred Shares of the Company in exchange for all of the issued and outstanding common shares of Spetses.

Our Borrowing Activities

As of December 31, 2018, we had no indebtedness. For more information relating to our secured and unsecured debt as of the date of this Transition Report, please see Note 15 to our transition period consolidated financial statements included elsewhere in this report.

Cash Flows

Cash Flows (In US Dollars)	Three-Month Period ended December 31, 2017	Three-Month Period ended December 31, 2018
Net cash from/(used in) operating activities	(349,798)	148,106
Net cash from/ (used in) investing activities	-	-
Net cash from/ (used in) financing activities	-	-

Operating Activities: Net cash used in operating activities amounted to $349,798 for the three-month period ended December 31, 2017, consisting of net loss after non-cash items of $139,933, further augmented by a reduction in working capital by $209,865. Net cash provided by operating activities amounted to $148,106 for the three-month period ended December 31, 2018, consisting of net income after non-cash items of $453,820 which was partly set-off by a reduction in working capital by $305,714.

Investing Activities: No cash inflow or outflow was made from any financing activities during the nine-month period ended September 30, 2018.

Financing Activities: No cash inflow or outflow was made from any financing activities during the nine-month period ended September 30, 2018.

Cash Flows (In US Dollars)	Year ended September 30,2017	Year ended September 30,2018
Net cash from operating activities	770,749	902,706
Net cash from investing activities	(7,549,281)	-
Net cash from financing activities	7,615,000	-

Operating Activities: For the period ended September 30, 2017, net cash provided by operating activities amounted to $0.8 million, consisting of net income after non-cash items of $1.1 million plus a decrease in working capital of $0.3 million. For the period ended September 30, 2018, net cash provided by operating activities amounted to $0.9 million, consisting of net income after non-cash items of $1.6 million plus a decrease in working capital of $0.7 million. The major driver of the increase in net cash provided by operating activities is the increase in the number of days our vessel operated and the increased hire rates earned during fiscal year ended September 30, 2018 compared to fiscal year ended September 30, 2017, partly offset by the cash outflow related to vessel dry-dock performed during fiscal year ended 2018

Investing Activities: Investing activities in 2017 represent cash outflow for the acquisition of our Vessel, Magic P, in February 2017. There were no cash flows relating to investing activities for the year ended September 30, 2018.

Financing Activities: The September 30, 2017 cash inflow resulted from shareholders contribution of $ 7.6 million. There were no contributions for the year ended September 30, 2018.

C. Research and Development, Patents and Licenses, Etc.

Not applicable.

D. Trend Information

Our results of operations depend primarily on the charter hire rates that we are able to realize. Charter hire rates paid for drybulk carriers are primarily a function of the underlying balance between vessel supply and demand. For a discussion regarding market performance, see above Item. 5.A. Operating Results - Cyclical nature of the industry.

While global trade is likely to continue to grow, we expect the overcapacity in the shipping market to come to a stop and therefore no longer exert the considerable pressure it did on charter rates in recent years. There can be no assurance as to how long charter rates will remain at their current levels or whether they will improve or deteriorate and, if so, when and to what degree. Charter rates may remain at current levels for some time, which may adversely affect our future growth potential and our profitability.

E. Off Balance Sheet Arrangements

As of December 31, 2018, we do not have any off-balance sheet arrangements.

F. Tabular Disclosure of Contractual Obligations

We have no contractual obligation as of December 31, 2018. However, we pay our Manager a daily fixed management fee of $320, which will remain at this level until December 16, 2019, at which time the daily management fee may be revised. By its terms, the agreement shall continue until the sale of our Vessel, unless terminated earlier by either party upon two months written notice.

G. Safe Harbor

See “Cautionary Statement Regarding Forward Looking Statements” at the beginning of this transition report.

H. Critical Accounting Estimates

We prepare our financial statements in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. For a description of our material accounting policies, please read “Item 18. Financial Statements Note 2 - Summary of Significant Accounting Policies.”

Vessel Depreciation

We record the value of our Vessel at its cost (which includes the contract price plus any direct expenses incurred upon acquisition, including improvements, delivery expenses and other expenditures to prepare the vessel for her initial voyage) less accumulated depreciation. Depreciation is calculated on a straight-line basis over the vessel's remaining economic useful life, after considering the estimated residual value (vessel residual value is equal to the product of its lightweight tonnage and estimated scrap rate). Our Vessel, being a secondhand vessel, is depreciated from the date of its acquisition through its remaining estimated useful life. We estimate the useful life of our Vessel to be 25 years from the date of initial delivery from the shipyard and the residual value of our Vessel to be $370 per lightweight ton. These assumptions are based on current and historical market trends. We do not expect these assumptions to change in the near future unless market trends indicate otherwise. An increase in the useful life of a vessel or in its residual value would have the effect of decreasing the annual depreciation charge whereas, a decrease in the useful life of a vessel or in its residual value would have the effect of increasing the annual depreciation charge. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its remaining useful life is adjusted at the date such regulations become effective.

Vessel Impairment

We follow the guidance under ASC 360, “Property, Plant and Equipment”, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets.

We evaluate the carrying amount of our Vessel to determine if events have occurred that would require modification to her carrying value or useful life. In evaluating useful lives and carrying values of long-lived assets, we review certain indicators of potential impairment, such as vessel sales and purchases, business plans and overall market conditions, including trends in charter rates in the drybulk charter market, drybulk vessel values, and overall global credit market climate.

If we identify indication for impairment for our Vessel, we determine undiscounted projected net operating cash flows for the vessel and compare them to its carrying value. In the event that impairment occurs, we determine the fair value of the related asset and we record a charge to earnings calculated by comparing the vessel’s carrying value to her estimated fair market value, which is determined based on management estimates and assumptions and by making use of available market data. There were no indications that the carrying value of the vessel is not recoverable as of December 31, 2018. As of September 30, 2017 and 2018, our Vessel’s carrying value, was below its estimated charter-free market value by approximately $4.6 million and $5.1 million respectively. As of December 31,2018, our Vessel’s carrying value, was below its estimated charter-free market value by approximately $3.7 million.

Our estimate of basic market value assumes that our Vessel is in good and seaworthy condition without need for repair and, if inspected, she would be certified in class without notations of any kind. The fair value is determined through Level 2 inputs of the fair value hierarchy as defined in ASC 820 “Fair value measurements and disclosures” and are derived principally from various industry sources, including:

•

reports by industry analysts and data providers that focus on our industry and related dynamics affecting vessel values;

•

news and industry reports of similar vessel sales;

•

news and industry reports of sales of vessels that are not similar to our Vessel where we have made certain adjustments in an attempt to derive information that can be used as part of our estimates;

•

approximate market values for our Vessel or similar vessels that we have received from shipbrokers, whether solicited or unsolicited, or that shipbrokers have generally disseminated;

•

offers that we may have received from potential purchasers of our Vessel; and

•

vessel sale prices and values of which we are aware through both formal and informal communications with shipowners, shipbrokers, industry analysts and various other shipping industry participants and observers.

Our estimates of basic market value are inherently uncertain because we obtain information from various industry and other sources. In addition, vessel values are highly volatile and, as such, our estimates may not be indi-cative of the current or future basic market value of our Vessel or prices that we could achieve if we were to sell her.

We refer you to the risk factor found in our annual report on Form 20-F for the year ended September 30, 2018, as amended entitled “Charter hire rates for dry bulk vessels are volatile and have declined significantly since their historic highs and may remain at low levels or decrease in the future, which may adversely affect our earnings, revenue and our profitability”.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and other Financial Information

See Item 18.

Legal Proceedings

To our knowledge, we are not currently a party to any lawsuit that, if adversely determined, would have a material adverse effect on our financial position, results of operations or liquidity. As such, we do not believe that pending legal proceedings, taken as a whole, should have any significant impact on our financial statements. From time to time in the future we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. While we expect that these claims would be covered by our existing insurance policies, those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. We have not been involved in any legal proceedings which may have, or have had, a significant effect on our financial position, results of operations or liquidity, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our financial position, results of operations or liquidity.

Dividend Policy

Under our Bylaws, our Board may declare and pay dividends in cash, stock or other property of the Company. Any dividends declared will be in the sole discretion of the Board and will depend upon earnings, restrictions in any of our agreements, market prospects, current capital expenditure programs and investment opportunities, the provisions of Marshall Islands law affecting the payment of distributions to shareholders and other factors.

As of December 31, 2018, our common shares were not traded on an established securities market in the United States, any dividends paid by us will be treated as ordinary income to a U.S. shareholder. Our common shares commenced trading on Nasdaq on February 11, 2019 unless we are classified as a PFIC for U.S. federal income tax purposes in (a) the year or (b) the year prior to the year such dividend is paid. Please see the section entitled “Taxation—U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of U.S. Holders—Distributions” of our annual report on Form 20-F for the year ended September 30, 2018, as amended, filed with the Commission on January 31, 2019 for additional information relating to the U.S. federal income tax treatment of our dividend payments, if any are declared in the future.

In addition, we may incur expenses or liabilities, including extraordinary expenses, decreases in revenues, including as a result of unanticipated off-hire days or loss of a vessel, or increased cash needs that could reduce or eliminate the amount of cash that we have available for distribution as dividends. The drybulk charter market is cyclical and volatile. We cannot predict with accuracy the amount of cash flows our operations will generate in any given period. Factors beyond our control may affect the charter market for our Vessel and our charterer’s ability to satisfy its contractual obligations to us, and we cannot assure you that dividends will actually be declared or paid in the future. We are a recently formed company and have a limited performance record and operating history. Accordingly, we cannot assure you that we will be able to pay dividends at all, and our ability to pay dividends will be subject to the limitations set forth above and in the section titled “Risk Factors” of our annual report on Form 20-F for the year ended September 30, 2018, as amended, filed with the Commission on January 31, 2019.

Dividends on our Series A Preferred Shares accrue and are cumulative from the date the Series A Preferred Shares were originally issued on September 22, 2017 and are payable on each June 15 and December 15, when, as and if declared by our Board or any authorized committee thereof out of legally available funds for such purpose. The dividend rate for our Series A Preferred Shares is 9.75% per annum per share. At any time on or after March 22, 2018, we may redeem, in whole or from time to time in part, the Series A Preferred Shares at a redemption price of $25.00 per share plus an amount equal to all accumulated and unpaid dividends thereon to the date of redemption, whether or not declared. Since December 31, 2018, we have revised the dividend terms of the Series A Preferred Shares. Please see the section herein “Item 13. Defaults, Dividend Arrearages and Delinquencies.”

Marshall Islands law provides that we may pay dividends on and redeem any shares of capital stock, including the Series A Preferred Shares, only to the extent that assets are legally available for such purposes. Legally available assets generally are limited to our surplus, which essentially represents our retained earnings and the excess of consideration received by us for the sale of shares above their par value. In addition, under Marshall Islands law we may not pay dividends on or redeem any shares of capital stock, including the Series A Preferred Shares, if we are insolvent or would be rendered insolvent by the payment of such a dividend or the making of such redemption.

The Company has not paid any dividends as of the date of this Transition Report.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

The accumulated, but not declared, due and overdue dividends on the Series A Preferred Shares as of September 30, 2017, September 30, 2018 and December 31, 2018, amounted to $29,250, $1,676,025, and $2,668,770, respectively.

On October 10, 2019, we reached an agreement with the holders of its Series A Preferred Shares to settle in full all accumulated dividend obligations on the Series A Preferred Shares, or the Series A Dividends Settlement Agreement, and to simultaneously adopt an Amended and Restated Statements of Designations of its Series A Preferred Shares, or the Series A Amended SOD. Pursuant to the Series A Dividends Settlement Agreement, the Series A Preferred holders agreed to waive the Company’s obligations related to all due and overdue accumulated dividends on the Series A Preferred Shares during the period from their original issue date up to and including June 30, 2019, amounting to $4.3 million, and to receive, in settlement thereof, 300,000 newly issued common shares, or the Settlement Shares. The Settlement Shares were issued to the Series A Preferred holders on October 17, 2019. In addition, in accordance with the terms of the Series A Amended SOD, the Company and the Series A Preferred holders mutually agreed to waive all dividend payment obligations on the Series A Preferred Shares during the period from July 1, 2019 until December 31, 2021, reduce the progressively increasing dividend payment default rate that is 1.30 times the rate payable on the Series A Preferred Shares on the date preceding such payment to a fixed dividend payment default rate that is 1.30 times the base dividend payment rate, increase the redemption price of the Series A Preferred Shares to $30 from $25 per share in case that the Company exercises its current option to redeem the Series A Preferred Shares, in whole or in part, with cash and increase the liquidation preference from $25 to $30 per Series A Preferred Share. As a result of the foregoing, dividends on the Series A Preferred Shares will neither accrue nor accumulate during the period from July 1, 2019 until December 31, 2021 and the Company will no longer have any restriction declaring dividends to holders of its common shares during this period.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

We have adopted the Stockholders Rights Agreement, pursuant to which each share of our common stock includes one preferred stock purchase right that entitles the holder to purchase from us a unit consisting of one-thousandth of a share of our Series C Participating Preferred Stock if any third-party seeks to acquire control of a substantial block of our common stock without the approval of our Board of Directors. See “Item 10. Additional Information—B. Memorandum and Articles of Association—Stockholders Rights Agreement” of our annual report on Form 20-F for the year ended September 30, 2018, as amended, filed with the Commission on January 31, 2019 for a description of our Stockholders Rights Agreement.

Please also see “Item 10. Additional Information—B. Memorandum and Articles of Association” of our annual report on Form 20-F for the year ended September 30, 2018, as amended, filed with the Commission on January 31, 2019 for a description of the rights of holders of our Series A cumulative redeemable perpetual preferred share and Series B Preferred Shares relative to the rights of holders of shares of our common stock.

PART III

ITEM 17. FINANCIAL STATEMENTS

See Item 18.

ITEM 18. FINANCIAL STATEMENTS

The financial information required by this Item is set forth on pages F-1 to F-23 filed as part of this transition report.

ITEM 19. EXHIBITS


1.1	Articles of Incorporation of the Company incorporated by reference to Exhibit 3.1 to the Company’s registration statement on Form F-4 filed with the Securities and Exchange Commission on April 11, 2018.

1.2	Bye-laws of the Company incorporated by reference to Exhibit 3.2 to the Company’s registration statement on Form F-4 filed with the Securities and Exchange Commission on April 11, 2018.

1.3	Statement of Designation of the Rights, Preferences and Privileges of the 9.75% Series A Cumulative Redeemable Perpetual Preferred Shares of the Company, filed with the Registrar of Corporations of the Republic of the Marshall Islands on September 22, 2017 incorporated by reference to Exhibit 3.3 to the Company’s registration statement on Form F-4 filed with the Securities and Exchange Commission on April 11, 2018.

1.4	Amended and Restated Statement of Designation of the Rights, Preferences and Privileges of the 9.75% Series A Cumulative Redeemable Perpetual Preferred Shares of the Company, filed with the Registrar of Corporations of the Republic of the Marshall Islands on October 10, 2019 incorporated by reference to Exhibit 99.2 of the Company’s current report on Form 6-K furnished with the Securities and Exchange Commission on October 11, 2019.

1.5	Statement of Designation of the Rights, Preferences and Privileges of the Rights, Preferences and Privileges of the Series B Preferred Shares of the Company, filed with the Registrar of Corporations of the Republic of the Marshall Islands on September 22, 2017 incorporated by reference to Exhibit 3.4 to the Company’s registration statement on Form F-4 filed with the Securities and Exchange Commission on April 11, 2018.

1.6	Statement of Designation of the Rights, Preferences and Privileges of the Rights, Preferences and Privileges of the Series C Participating Preferred Shares of the Company, filed with the Registrar of Corporations of the Republic of the Marshall Islands on November 29, 2017 incorporated by reference to Exhibit 3.5 to the Company’s registration statement on Form F-4 filed with the Securities and Exchange Commission on April 11, 2018.

2.1	Form of Common Share Certificate incorporated by reference to Exhibit 4.1 of the Company’s registration statement on Form F-4 filed with the Securities and Exchange Commission on April 11, 2018.

4.1	Exchange Agreement dated September 22, 2017, between Castor Maritime Inc., Spetses Shipping Co., and the shareholders of Spetses Shipping Co., incorporated by reference to Exhibit 10.1 of the Company’s registration statement on Form F-4 filed with the Securities and Exchange Commission on April 11, 2018.

4.2	Stockholder Rights Agreement dated as of November 20, 2017 by and between the Company and American Stock Transfer & Trust Company, LLC, as rights agent incorporated by reference to Exhibit 10.2 to the Company’s registration statement on Form F-4 filed with the Securities and Exchange Commission on April 11, 2018.

4.3	Management Agreement dated December 16, 2016, between Spetses Shipping Co. and Pavimar S.A., incorporated by reference to Exhibit 10.3 to the Company’s registration statement on Form F-4 filed with the Securities and Exchange Commission on April 11, 2018.

4.4	Fixture Slip for Time Charter, dated as of November 24, 2017, between Spetses Shipping Co. and Glencore Agriculture B.V., incorporated by reference to Exhibit 10.4 to the Company’s registration statement on Form F-4 filed with the Securities and Exchange Commission on April 11, 2018.

4.5	Fixture Slip for Time Charter, dated as of January 24, 2018, by and between Spetses Shipping Co. and Mitsui O.S.K. Line, incorporated by reference to Exhibit 10.5 to the Company’s registration statement on Form F-4 filed with the Securities and Exchange Commission on April 11, 2018.

4.6	Waiver and Consent Agreement entered into by the Company and all holders of the issued and outstanding 9.75% Series A Cumulative Redeemable Perpetual Preferred Shares, dated October 10, 2019 incorporated by reference to Exhibit 99.3 of the Company’s current report on Form 6-K furnished with the Securities and Exchange Commission on October 11, 2019.

4.7	$5.0 Million Term Loan Facility between the Company and Thalassa Investment Co. S.A. dated August 30, 2019

4.8	$7.5 Million Bridge Loan between the Company and Thalassa Investment Co. S.A. dated October 17, 2019

4.9	$11.0 Million Secured Term Loan Facility by and among Alpha Bank A.E., Pikachu Shipping Co., and Spetses Shipping Co. dated November 22,2019

8.1	List of Subsidiaries

12.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.

12.2	Rule 13a-14(a) /15d-14(a) Certification of the Chief Financial Officer.

13.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

13.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

15.1	Consent of Independent Registered Public Accounting Firm (Deloitte Certified Public Accountants S.A.)

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Schema Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Schema Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Schema Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Schema Presentation Linkbase Document

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this transition report on its behalf.

		CASTOR MARITIME INC.

/s/ Petros Panagiotidis		December 16, 2019
Name: Petros Panagiotidis
Title: Chairman, Chief Executive Officer and Chief Financial Officer

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of September 30, 2017, 2018 and December 31, 2018	F-3

Consolidated Statements of Comprehensive Income for the period from December 13, 2016 to September 30, 2017, the Year Ended September 30, 2018 and the Three Months Ended December 31, 2018	F-4

Consolidated Statements of Shareholders’ Equity for the period from December 13, 2016 to September 30, 2017, the Year Ended September 30, 2018 and the Three Months Ended December 31, 2018	F-5

Consolidated Statements of Cash Flows for the period from December 13, 2016 to September 30, 2017, the Year Ended September 30, 2018 and the Three Months Ended December 31, 2018	F-6

Notes to Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Castor Maritime Inc.,

Majuro, Republic of the Marshall Islands

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Castor Maritime Inc. and its subsidiary (the "Company") as of September 30, 2017 and 2018 and December 31, 2018, the related consolidated statements of comprehensive income, shareholders' equity, and cash flows, for the period from December 13, 2016 to September 30, 2017, the year ended September 30, 2018 and the three months ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2017 and 2018 and December 31, 2018, and the results of its operations and its cash flows for the period from December 13, 2016 to September 30, 2017, the year ended September 30, 2018 and the three months ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte Certified Public Accountants S.A.

Athens, Greece

December 16, 2019

We have served as the Company's auditor since 2017.

F-2

CASTOR MARITIME INC.

CONSOLIDATED BALANCE SHEETS

September 30, 2017, 2018 and December 31, 2018

(Expressed in U.S. Dollars – except for share data)

			September 30,				December 31,
ASSETS	Note		2017		2018		2018
CURRENT ASSETS:
Cash and cash equivalents			$	836,468	$	1,739,174	$	1,887,280
Accounts receivable trade				342,605		2,453		670,973
Due from related party		3		96,264		263,079		176,434
Inventories				46,586		60,697		57,530
Prepaid expenses and other current assets				29,060		44,597		55,200
Total current assets				1,350,983		2,110,000		2,847,417

NON-CURRENT ASSETS:
Vessel, net		5		7,366,935		7,070,404		6,995,350
Deferred charges, net		4		—		443,394		341,070
Total non-current assets				7,366,935		7,513,798		7,336,420

Total assets			$	8,717,918	$	9,623,798	$	10,183,837

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable			$	105,104		33,483		244,371
Unearned revenue				—		—		47,708
Accrued liabilities				119,170		115,733		140,734
Total current liabilities				224,274		149,216		432,813

Commitments and contingencies		8		—		—		—

SHAREHOLDERS' EQUITY:
Preferred shares, $0.001 par value: 50,000,000 shares authorized:		6
Series A Preferred Shares- 9.75% cumulative redeemable perpetual preferred shares (liquidation preference of $25 per share), 480,000 shares issued and outstanding as of September 30, 2017, 2018 and December 31, 2018, respectively		6		480		480		480
Series B Preferred Shares – 12,000 shares issued and outstanding as of September 30, 2017, 2018 and December 31, 2018, respectively		6		12		12		12
Common shares, $0.001 par value; 1,950,000,000 shares authorized; 2,400,000 shares issued and outstanding as of September 30, 2017, 2018 and December 31, 2018, respectively		6		2,400		2,400		2,400
Additional paid-in capital				7,612,108		7,612,108		7,612,108
Retained earnings				878,644		1,859,582		2,136,024
Total shareholders' equity				8,493,644		9,474,582		9,751,024

Total liabilities and shareholders' equity			$	8,717,918	$	9,623,798	$	10,183,837

The accompanying notes are an integral part of these consolidated financial statements.

F-3

CASTOR MARITIME INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the period December 13, 2016 to September 30, 2017, the year ended September 30, 2018 and the three months ended December 31, 2018

(Expressed in U.S. Dollars – except for share data)

			Period from December 13, 2016 to September 30,			Year Ended September 30,			Three Months Ended December 31,
	Note		2017			2018			2018
REVENUES:
Time charter revenues (net of address commissions of $74,271, 153,406 and $43,125, respectively)			$	2,018,061		$	3,960,822		$	1,111,075
Total revenues				2,018,061			3,960,822			1,111,075

EXPENSES:
Voyage expenses		11		(80,853	)		(37,373	)		(19,556	)
Vessel operating expenses		11		(1,194,995	)		(1,727,770	)		(432,544	)
Management fees to related party		3		(55,500	)		(111,480	)		(29,440	)
Depreciation and amortization		4,5		(182,346	)		(637,611	)		(177,378	)
General and administrative expenses		12
- Company administration expenses				(58,467	)		(109,233	)		(22,954	)
- Public registration costs				(35,973	)		(350,167	)		(161,116	)
Total expenses				(1,608,134	)		(2,973,634	)		(842,988	)

Operating income				409,927			987,188			268,087

OTHER INCOME/ (EXPENSES):
Interest and finance costs				(532	)		(3,393	)		(519	)
Interest income				—			4,243			7,985
Gain on derivative financial instruments		7		475,530			—			—
Foreign exchange (losses)/ gains				(7,021	)		(8,539	)		89
Other, net				740			1,439			800
Total other income/ (expenses), net				468,717			(6,250	)		8,355

Net income and comprehensive income			$	878,644		$	980,938		$	276,442

Earnings/ (Loss) per common share, basic and diluted		10	$	0.35		$	(0.28	)	$	(0.30	)
Weighted average number of common shares, basic and diluted				2,400,000			2,400,000			2,400,000

The accompanying notes are an integral part of these consolidated financial statements.

F-4

CASTOR MARITIME INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the period December 13, 2016 to September 30, 2017, the year ended September 30, 2018 and the three months ended December 31, 2018

(Expressed in U.S. Dollars – except for share data)

	Number of shares issued
	Common shares		Preferred A shares		Preferred B shares		Par Value of Shares issued		Additional Paid-in capital			Retained earnings		Total Shareholders' Equity
Balance December 13, 2016		—		—		—		—		—			—		—
- Issuance of common shares as part of exchange and shareholders’ contribution (Note 6)		2,400,000		—		—		2,400		7,612,108			—		7,614,508
- Issuance of preferred shares as part of exchange (Note 6)		—		480,000		12,000		492		2,740,000			—		2,740,492
- Deemed contribution of preferred shares as part of exchange (Note 6)		—		—		—		—		(2,740,000	)		—		(2,740,000	)
- Net Income		—		—		—		—		—			878,644		878,644
Balance, September 30, 2017		2,400,000		480,000		12,000	$	2,892	$	7,612,108		$	878,644	$	8,493,644
- Net income		—		—		—		—		—			980,938		980,938
Balance, September 30, 2018		2,400,000		480,000		12,000	$	2,892	$	7,612,108		$	1,859,582	$	9,474,582
- Net income		—		—		—		—		—			276,442		276,442
Balance, December 31, 2018		2,400,000		480,000		12,000		2,892		7,612,108			2,136,024		9,751,024

The accompanying notes are an integral part of these consolidated financial statements.

F-5

CASTOR MARITIME INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the period December 13, 2016 to September 30, 2017, the year ended September 30, 2018 and the three months ended December 31, 2018

(Expressed in U.S. Dollars)

			Period from December 13, 2016 to September 30,			Year Ended September 30,			Three Months Ended December 31,
	Note		2017			2018			2018
Cash Flows from Operating Activities:
Net income			$	878,644		$	980,938		$	276,442
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization				182,346			637,611			177,378
Changes in operating assets and liabilities:
Accounts receivable trade				(342,605	)		340,152			(668,520	)
Inventories				(46,586	)		(14,111	)		3,167
Due from related parties				(96,264	)		(166,815	)		86,645
Prepaid expenses and other current assets				(29,060	)		(15,537	)		(10,603	)
Accounts payable				105,104			(71,621	)		210,888
Accrued liabilities				119,170			(3,437	)		25,001
Unearned revenue				—			—			47,708
Deferred charges				—			(784,474	)		—
Net Cash provided by Operating Activities				770,749			902,706			148,106

Cash flow used in Investing Activities:
Vessel Acquisition		5		(7,549,281	)		—			—
Net cash used in Investing Activities				(7,549,281	)		—			—

Cash flows provided by Financing Activities:
Shareholders’ Contribution		6		7,615,000			—			—
Net cash provided by Financing Activities				7,615,000			—			—

Net increase in cash and cash equivalents				836,468			902,706			148,106
Cash and cash equivalents at the beginning of the year/period				—			836,468			1,739,174
Cash and cash equivalents at the end of the year/ period			$	836,468		$	1,739,174		$	1,887,280

Supplemental cash flow information:
Non-cash Financing Activities
Deemed contribution relating to issuance of preferred shares			$	2,740,000		$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

F-6

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

1.	Basis of Presentation and General information

Castor Maritime Inc. (“Castor”) was incorporated on September 11, 2017 under the laws of the Republic of the Marshall Islands. As of December 31, 2018, Castor was the sole owner of all outstanding shares of Spetses Shipping Co. (“Spetses”), a company incorporated under the laws of the Marshall Islands on December 13, 2016 and the 100% owner of the Magic P, a 76,453 DWT, 2004 built, Panamax, dry-bulk carrier vessel, which was acquired on February 21, 2017. Castor and Spetses are hereinafter referred to as the “Company”.

The Company is engaged in the worldwide ocean transportation of dry bulk cargoes through its vessel-owning subsidiary. On December 21, 2018, Castor’s common shares began trading on the Norwegian OTC whereas, on February 11, 2019, they began trading on the NASDAQ Stock Market under the ticker symbol “CTRM”.

Castor is controlled by Thalassa Investment Co. S.A. (“Thalassa”), an entity registered in Liberia, which as of December 31, 2018, held 46.8% of the Company's common shares and 100% of the Series B preferred shares and, accordingly, could control the outcome of matters on which stockholders are entitled to vote. Thalassa is wholly-owned and controlled by Petros Panagiotidis, the Company's Chairman, Chief Executive Officer and Chief Financial Officer.

On September 22, 2017, Castor entered into a share exchange agreement (the “Exchange Agreement”) with the shareholders of Spetses to acquire all of the outstanding common shares of Spetses in exchange for Castor issuing (i) 2,400,000 of common shares proportionally to the then shareholders of Spetses, (ii) 12,000 of Series B preferred shares to Thalassa, and (iii) 480,000 of 9.75% Series A cumulative redeemable perpetual preferred shares to the then shareholders of Spetses excluding Thalassa, all at par value of $0.001 (the “Series A Preferred Shares”). As the Exchange Agreement involved also the issuance of Preferred Shares, being a new and additional class of shares, these have been recorded at fair value. As further discussed in Note 6, the Company recorded a deemed contribution of $2.7 million representing the fair value of the 9.75% Series A cumulative redeemable perpetual preferred shares. The Series B preferred shares were deemed to have a fair value of zero as they have no rights to dividends, do not have redemption/call rights and do not have any redemption features or a liquidation preference. Following the completion of the exchange, Spetses became a wholly owned subsidiary of Castor. Prior to the date of the Exchange Agreement, 100% of Castor’s issued and outstanding common shares were held by Thalassa, and Thalassa also held 52% of the issued and outstanding common shares of Spetses.

As the transaction involved companies under common control, the transaction was accounted at the entities’ historical carrying amounts and in accordance with ASC 805-50-45 whereby the Company's consolidated financial statements present the results of operations for the period in which the transfer occurred as though the transfer of net assets and exchange of equity interests had occurred on the date Spetses was incorporated and as if Spetses was from its date of incorporation a consolidated subsidiary of the Company. Results of operations and cash flows for the period December 13, 2016 to September 30, 2017 comprise those of the previously separate entities combined from the date of their incorporation to the date the transfer was completed and those of the combined operations and cash flows from that date to the end of the period. Hence, the first reporting period of these consolidated financial statements was from December 13, 2016, the date Spetses was incorporated, to September 30, 2017 being the Company's first reporting period and the period from October 1, 2017 to September 30, 2018 is the second fiscal year of the consolidated financial statements.

Change of Fiscal Year

The Company changed its fiscal year end to December 31 from September 30. This transition report is for the three month period of October 1, 2018 through December 31, 2018, which is referred to as the transition period.

F-7

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

2.	Significant Accounting Policies and Recent Accounting Pronouncements:

Principles of consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts and operating results of Castor and its subsidiary. All intercompany balances and transactions have been eliminated upon consolidation.

Reclassifications

Our consolidated statements of comprehensive income for the year ended September 30, 2018 and the period from December 13, 2016 to September 30, 2017, have been reclassified to separately present within General and administrative expenses: Company administration expenses and Public registration costs. Management believes this reclassification provides a more comprehensive presentation of the Company's recurring administration costs and the non-recurring costs directly associated with the registration and listing of our common shares in the Norwegian OTC market on December 21, 2018 and the listing of our common shares on the NASDAQ stock exchange on February 11, 2019.

Use of estimates

The preparation of the 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, the 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. Significant estimates include vessel valuations, the valuation of amounts due from charterers, residual value and the useful life of the vessel. Actual results may differ from these estimates.

Other comprehensive income

The Company follows the accounting guidance relating to comprehensive income, which requires separate presentation of certain transactions that are recorded directly as components of shareholders' equity. The Company has no other comprehensive income/ (loss) items and, accordingly, comprehensive income equals net income for the periods presented.

Foreign currency translation

The Company's reporting and functional currency is the U.S. Dollar (“USD”). Transactions incurred in other currencies are translated into USD using the exchange rates in effect at the time of the transactions. At the balance sheet date, monetary assets and liabilities that are denominated in other currencies are translated into USD to reflect the end-of-period exchange rates and any gains or losses are included in the consolidated statements of comprehensive income.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents and trade accounts receivable. The Company places its cash and cash equivalents, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of the financial institutions in which it places its deposits. The Company limits its credit risk with accounts receivable by performing ongoing credit evaluations of the financial condition of its charterers and generally does not require collateral for its accounts receivable.

During the period ended September 30, 2017, the year ended September 30, 2018 and the three months ended December 31, 2018, charterers that individually accounted for more than 10% of the Company’s revenues were as follows:

Charterer	Period ended September 30, 2017		Year Ended September 30, 2018		Three Months Ended December 31, 2018
A	81	%	24	%	100	%
B	16	%	—	%	—	%
C	—	%	52	%	—	%
D	—	%	17	%	—	%
Total	97	%	93	%	100	%

F-8

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

2.	Significant Accounting Policies and Recent Accounting Pronouncements (continued):

Cash and cash equivalents

The Company considers highly liquid investments such as time deposits and certificates of deposit with an original maturity of three months or less to be cash equivalents.

Accounts receivable trade

The amount shown as trade receivables, net, at each balance sheet date, includes receivables from charterer for hire or other possible sources of income under the Company’s time charter contracts, net of any provision for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts. Provision for doubtful accounts as of the periods presented was zero.

Inventories

Inventories consist of lubricants and provisions on board of the vessel. Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price less reasonably predictable costs of disposal and transportation. Cost is determined by the first in, first out method.

Insurance Claims

The Company records insurance claim recoveries for insured losses incurred on damage to fixed assets and for insured crew medical expenses and for legal fees covered by directors' and officers' liability insurance. Insurance claim recoveries are recorded, net of any deductible amounts, at the time the Company's fixed assets suffer insured damages or when crew medical expenses are incurred, recovery is probable under the related insurance policies, the claim is not subject to litigation and the Company can make an estimate of the amount to be reimbursed following submission of the insurance claim and when the claim is not subject to litigation. The classification of the insurance claims into current and non-current assets is based on management's expectations as to their collection dates.

Vessel, net

Vessel, net is stated at cost net of accumulated depreciation. The cost of vessel consists of the contract price plus any direct expenses incurred upon acquisition, including improvements, delivery expenses and other expenditures to prepare the vessel for its initial voyage. 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 vessel; otherwise these amounts are charged to expense as incurred.

Vessel depreciation

Depreciation is computed using the straight line method over the estimated useful life of the vessel, after considering the estimated salvage value. Salvage value is estimated by the Company by taking the cost of steel times the weight of the ship noted in lightweight ton. Salvage values are periodically reviewed and revised to recognize changes in conditions, new regulations or for other reasons. Revisions of salvage values affect the depreciable amount of the vessels and affect depreciation expense in the period of the revision and future periods. Management estimates the useful life of its vessel to be 25 years from the date of its acquisition through its remaining estimated useful life.

F-9

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

2.	Significant Accounting Policies and Recent Accounting Pronouncements (continued):

Impairment of long‑lived assets

The Company reviews its vessel for impairment whenever events or changes in circumstances indicate that the carrying amount of the vessel may not be recoverable. When the estimate of future undiscounted cash flows expected to be generated by the use of the vessel is less than her carrying amount, the Company evaluates the vessel for an impairment loss. Measurement of the impairment loss is based on the fair value of the vessel in comparison to its carrying value. In this respect, management regularly reviews the carrying amount of the vessel in connection with her estimated recoverable amount. There were no indications that the carrying value of the vessel is not recoverable as of September 30, 2017, 2018 and December 31, 2018.

Dry-docking and special survey costs

Dry-docking and special survey costs are accounted under the deferral method whereby the actual costs incurred are deferred and are amortized on a straight-line basis over the period through the date the next survey is scheduled to become due. Costs deferred are limited to actual costs incurred at the yard and parts used in the dry-docking or special survey. Costs deferred include expenditures incurred relating to shipyard costs, hull preparation and painting, inspection of hull structure and mechanical components, steelworks, machinery works, and electrical works as well as lodging and subsistence of personnel sent to the yard site to supervise. If a dry-dock and/or a special survey is performed prior to its scheduled date, the remaining unamortized balance is immediately expensed. Unamortized balances of vessels that are sold are written-off and included in the calculation of the resulting gain or loss in the period of the vessel’s sale. The amortization charge related to dry-docking costs and special survey costs is presented within Depreciation and amortization in the accompanying consolidated statements of comprehensive income.

Revenue and expense recognition (including Leases)

I ) Types of Contracts

The Company’s revenues may be derived from time charter, bareboat charter and spot charter contracts. The Company currently generates and has historically generated its revenues under time charter contracts. A voyage charter is a type of contract that is entered into in the spot market for the use of a vessel for a specific voyage at a specified charter rate per ton of cargo, whereas a time charter is a type of contract that is entered into for the use of such vessel as well as such vessel’s operations for a specific period of time at a specified daily charter hire rate. A bareboat charter is a contract in which a vessel is provided to the charterer for a fixed period of time at a specified daily rate.

II) Lease Contracts

The Company accounts for its time and bareboat charter contracts as operating leases pursuant to ASC 842 “Leases” which was early adopted by the Company on October 1, 2018 and which superseded legacy leases recognition guidance under ASC 840. Upon adoption of ASC 842, the timing and recognition of income from time charter contracts to which the Company is a party, did not change from previous practice. Specific amendments to this update, provided the Company, amongst other things, with (i) an additional (and optional) transition method to adopt the new leases standard, under which an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption and (ii) a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if both of the following are met: (a) the timing and pattern of transfer of the non-lease component(s) and associated lease component are the same and (b) the lease component, if accounted for separately, would be classified as an operating lease.

F-10

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

2.	Significant Accounting Policies and Recent Accounting Pronouncements (continued):

As a result of the foregoing:

the Company elected the optional new transitional approach and the practical expedient for lessors described above which had no cumulative-effect to the October 1, 2018 opening balance of retained earnings and

ii)

the Company has determined that the most significant non-lease component in its time charter contracts relates to services for the operation of the vessel, which comprise of crew, technical and safety services, among others. The Company further elected to adopt the above discussed optional practical expedient and recognize lease revenue as a combined single lease component for all time charter contracts (operating leases) since it made a determination that the related lease component and non-lease component have the same timing and pattern of transfer and the predominant component is the lease. The Company qualitatively assessed that more value is ascribed to the use of the asset (i.e the vessel) rather than to the services provided under the time charter agreements.

Lease revenues are recognized on a straight line basis over the rental periods of such charter agreements, as rental service is provided, beginning when the vessel is delivered to the charterer until it is redelivered back to the Company, and is recorded as part of revenues in the Company’s Consolidated Statement of Comprehensive Income. Revenue generated from variable lease payments is recognized in the period when changes in facts and circumstances on which the variable lease payments are based occur. Unearned revenue includes cash received prior to the balance sheet date for which all criteria to recognize as revenue have not yet been met as at the balance sheet date and, accordingly, is related to revenue earned after such date. Lease revenue is shown net of address commissions payable directly to charterers under the relevant time charter agreements. Address commissions represent discount (sales incentive) on services rendered by the Company and no identifiable benefit is received in exchange for the consideration provided to the charterer. Apart from the agreed hire rate, the owner may be entitled to an additional income, such as ballast bonus, which is considered as reimbursement of owner’s expenses and is recognized together with the lease component over the duration of the charter. The Company made an accounting policy election to recognize the related ballast costs, which mainly consist of bunkers, incurred over the period between the charter party date or the prior redelivery date (whichever is latest) and the delivery date to the charterer, as contract fulfilment costs in accordance with ASC 340-40 and amortize these over the period of the charter.

Accordingly, the adoption of ASC 842 had no impact on the Company’s consolidated financial position and results of operations for the three month transition period ended December 31, 2018 or to any of the periods presented herein.

III) Revenue Contracts

The Company has determined to account for its spot charter contracts following the provisions of ASC 606. In May 2016, the FASB issued their final standard on revenue from contracts with customers. The standard, which was issued as ASU 2014-09 (Topic 606 or ASC 606) by the FASB, as amended, outlines a single comprehensive model for entities to use in accounting for revenue from contracts with customers and supersedes most legacy revenue recognition guidance. The core principle of the guidance in ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services by applying the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in each contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in each contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

F-11

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

2.	Significant Accounting Policies and Recent Accounting Pronouncements (continued):

The Company assessed the provisions of ASC 606 and concluded that there is one single performance obligation when accounting for its spot charters, which is to provide the charterer with an integrated transportation service within a specified period of time. In addition, the Company has concluded that spot charter contracts meet the criteria to recognize revenue over time as the charterer simultaneously receives and consumes the benefits of the Company’s performance. As a result of the foregoing, voyage revenue derived from spot charter contracts is recognized from the time when the vessel arrives at the load port until completion of cargo discharge. Demurrage income, which is considered a form of variable consideration, is included in voyage revenues, and represents payments by the charterer to the vessel owner when loading or discharging time exceeds the stipulated time in the voyage charter agreements. Under a spot charter, the Company incurs and pays for certain voyage expenses, primarily consisting of bunkers consumption, brokerage commissions, port and canal costs.

Following the adoption of ASC 606 and the implementation of ASC 340-40 Other assets and deferred costs- Contracts with customers for contract costs, all voyage costs are considered contract fulfilment costs because they are directly related to the performance of the voyage contract. Those costs are expensed as incurred, with the exception of contract fulfilment costs and incremental costs of obtaining a contract incurred prior to the commencement of loading the cargo on the relevant vessel, which are capitalized to the extent the Company, in its reasonable judgement, determines that they (i) are directly related to a contract, (ii) will be recoverable and (iii) enhance the Company’s resources by putting the Company’s vessel in a location to satisfy its performance obligation under a contract. These capitalized contract costs are amortized on a straight-line basis as the related performance obligations are satisfied. The Company has adopted the practical expedient not to capitalize incremental costs when the amortization period (voyage period) is less than one year. Costs to fulfill the contract prior to arriving at the load port primarily consist of bunkers which are deferred and amortized during the voyage period.

The Company adopted the provisions of ASC 606 on October 1, 2018 using the modified retrospective approach. As such, the comparative information has not been restated and continues to be reported under the accounting standards in effect for periods prior to October 1, 2018. The Company neither currently operates nor has historically operated any of its fleet vessels under voyage charters and therefore, does not currently have any charter contracts which fall under the provisions of ASC 606. Accordingly, as of the date of initial application, the new revenue recognition guidance as outlined above did not have any effect to the opening retained earnings of the Company as of October 1, 2018.

IV) Voyage Expenses

Voyage expenses, consist of: (a) port, canal and bunker expenses that are unique to a particular charter, are paid for by the charterer under time charter arrangements or by the Company under voyage charter arrangements, and (b) brokerage commissions, which are always paid for by the Company, regardless of charter type. All voyage expenses are expensed as incurred, except for brokerage commissions. Commissions paid to brokers are deferred and amortized over the related charter period to the extent revenue has been deferred since commissions are earned as the Company's revenues are earned. At the inception of a time charter, the Company records the difference between the cost of bunker fuel delivered by the terminating charterer and the bunker fuel sold to the new charterer as a bunker gain or loss within voyage expenses.

Accounting for Financial Instruments

The principal financial assets of the Company consist of cash and cash equivalents, amounts due from related parties and trade receivables, net. The principal financial liabilities of the Company consist of trade and other payables, accrued liabilities and amounts due to related parties. The Company is exposed to changes in the spot market rates associated with the deployment of its vessel and its objective is to manage the impact of such changes in its cash flows. In this respect, from time to time, the Company may engage in certain forward freight agreements.

F-12

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

2.	Significant Accounting Policies and Recent Accounting Pronouncements (continued):

When such derivatives do not qualify for hedge accounting the Company records these financial instruments in the consolidated balance sheet at their fair value as either a derivative asset or a liability, and recognizes the fair value changes thereto in earnings. When the derivatives do qualify for hedge accounting, depending upon the nature of the hedge, changes in fair value of the derivatives are either offset against the fair value of assets and liabilities through earnings, or recognized in other comprehensive income/(loss) (effective portion) until the hedged item is recognized in earnings. As of September 30, 2017 and 2018 and December 31, 2018, there were no open derivative instruments.

Fair value measurements

The Company follows the provisions of ASC 820, “Fair Value Measurements and Disclosures” which defines, and provides guidance as to the measurement of fair value. ASC 820 creates an hierarchy of measurement and indicates that, when possible, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets and the lowest priority (Level 3) to unobservable data, for example, the reporting entity's own data. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy. ASC 820 applies when assets or liabilities in the consolidated financial statements are to be measured at fair value, but does not require additional use of fair value beyond the requirements in other accounting principles.

Repairs and Maintenance

All repair and maintenance expenses including underwater inspection expenses are expensed in the period incurred. Such costs are included in vessel operating expenses in the accompanying consolidated statements of comprehensive income.

Earnings/ (losses) per common share

Basic earnings/(losses) per common share are computed by dividing net income available to common stockholders after subtracting the dividends accumulated for the period on cumulative preferred stock (whether or not earned), by the weighted average number of common shares outstanding during the period. Diluted earnings per common share, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised. The Company had no dilutive securities outstanding during any of the periods presented in the accompanying consolidated financial statements.

Commitments and contingencies

Commitments are recognized when the Company has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle this obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the present value of the expenditure expected to be required to settle the obligation. Contingent liabilities are not recognized in the financial statements but are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but are disclosed when an inflow of economic benefits is probable.

F-13

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

2.	Significant Accounting Policies and Recent Accounting Pronouncements (continued):

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, and reduced disclosure obligations. The Company may take advantage of these exemptions until the Company is no longer an emerging growth company. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company reassessed its position since the filing of its’ Annual Report on Form 20-F for the fiscal year ended September 30, 2018, filed with the Commission on January 31, 2019 and, effective October 1, 2018, elected to irrevocably opt out of the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act, which means that, whenever a standard is issued or revised, the Company, will adopt the new or revised standard at the time public companies adopt the new or revised standard. This will make comparison of the Company's consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period easier because of the convergence in accounting standards used.

The exemptions provided by the JOBS Act will apply up until the last day of the fiscal year following the fifth anniversary of the IPO or such earlier time that the Company no longer meets the requirements of being an emerging growth company. The Company would cease to be an emerging growth company if it has more than $1.07 billion in annual revenue, has more than $700 million in market value of its securities held by non-affiliates (and it has been a public company for at least 12 months, and has filed one annual report on Form 20-F), or it issues more than $1.0 billion of non-convertible debt securities over a three-year period.

Recent Accounting Pronouncements – Not Yet Adopted:

ASU 2016-13: In June 2016, the FASB issued ASU 2016-13- Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For public entities, the amendments of this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted. The adoption of this new accounting guidance is not expected to have a material effect on the Company's consolidated results of operations, financial condition or cash flows.

F-14

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

3.	Transactions with Related Parties:

The Company’s ship-owning subsidiary has entered into a separate vessel management agreement with Pavimar S.A. (“Pavimar” or the “Manager”), a company controlled by Ismini Panagiotidis, the sister of Petros Panagiotidis (see Note 1). Pursuant to the terms of the management agreement, Pavimar provides the Company with a wide range of shipping services, including, but not limited to, crew management, technical management, operational employment management, insurance arrangements, provisioning, bunkering, accounting, general administration and audit support services, in exchange for a fixed daily fee, for a period beginning upon the vessel's delivery and until the termination of the agreement. The agreement, which became effective upon the delivery of the Vessel to its then existing shareholders on February 21, 2017, shall continue until the sale of the Vessel, unless earlier terminated by either party giving two months’ written notice to the other. In the event of termination other than by reason of default by the Manager, the management fee payable to Pavimar shall continue to be payable for a further period of three calendar months as from the termination date. The management fee is subject to an annual review at the date of the anniversary of the management agreement. On November 13, 2017, it was agreed that the daily fixed fee of the vessel be increased from $250 to $320 and such fee to remain at this level until December 16, 2019, at which time the daily management fee may be revised.

During the period ended September 30, 2017, the year ended September 30, 2018 and the three months ended December 31, 2018, the Company incurred Management fees under the vessel management agreement amounting to $55,500, $111,480 and $29,440, respectively, which are separately reflected in the accompanying consolidated statements of comprehensive income.

In addition, each month the Manager makes payments for operating expenses with cash advances provided by the Company. As of September 30, 2017 and 2018 and December 31, 2018, amounts of $96,264, $263,079 and $176,434, respectively, were due from the Manager in relation to these working capital advances granted to it.

4.	Deferred charges, net:

On October 27, 2017, the M/V Magic P commenced its scheduled dry-dock which was completed on November 25, 2017. In accordance with the Company’s policy, such costs are deferred and amortized on a straight-line basis over the period until the Vessel’s upcoming dry-dock. As of September 30, 2017 and 2018 and December 31, 2018, net unamortized deferred dry-dock charges amounted to $0, $443,394 and $341,070, respectively. During the period ended September 30, 2017, the year ended September 30, 2018 and the three months ended December 31, 2018, amortization of deferred dry-dock costs amounted to $0, $341,080 and $102,324 respectively, and is included in Depreciation and amortization in the accompanying consolidated statements of comprehensive income. The unamortized balance as of December 31, 2018, is expected to be amortized to depreciation and amortization expense through the fourth quarter of 2019.

F-15

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

5.	Vessel, net:

On February 21, 2017, the Company took delivery of Magic P for a total cost of $7.5 million. Management reviews the carrying amount of the vessel to determine if events have occurred that would suggest the carrying value of the vessel is not recoverable. As of September 30, 2017 and 2018 and December 31, 2018, there were no indications that the carrying value of the vessel is not recoverable.

The amounts in the accompanying consolidated balance sheets are analyzed as follows:

	Vessel Cost		Accumulated depreciation			Net Book Value
Balance December 13, 2016	$	—	$	—		$	—
— Vessel acquisition		7,549,281		—			7,549,281
—Period depreciation		—		(182,346	)		(182,346	)
Balance September 30, 2017	$	7,549,281	$	(182,346	)	$	7,366,935
—Yearly depreciation		—		(296,531	)		(296,531	)
Balance September 30, 2018	$	7,549,281	$	(478,877	)	$	7,070,404
—Period depreciation		—		(75,054	)		(75,054	)
Balance December 31, 2018	$	7,549,281	$	(553,931	)	$	6,995,350

As of December 31, 2018, the Company’s vessel was free of encumbrances.

6.	Shareholders' Equity:

Under the Company's articles of incorporation, the Company's authorized capital stock consists of 2,000,000,000 shares, par value $0.001 per share, of which 1,950,000,000 shares are designated as common shares and 50,000,000 shares are designated as preferred shares. In connection with the Exchange Agreement discussed in Note 1, the Company issued 2,400,000 common shares, 480,000 of 9.75% Series A Preferred Shares and 12,000 Series B preferred shares to the then shareholders of Spetses. The accompanying consolidated financial statements give retroactive effect to the issuance of the shares as of December 13, 2016.

Furthermore, the Company determined the fair value of the 9.75% Series A cumulative redeemable perpetual preferred shares to be $2,740,000 as of the date of issuance and reflected the amount within additional paid-in capital. The fair value of these shares was determined using Level 3 hierarchical data. The fair value of these shares was determined using the income approach. In application of the income approach, a discounted cash flow method, or DCF, was utilized.

On September 29, 2017, the Company's shareholders authorized one or more amendments to its Articles of Incorporation to effect one or more reverse stock splits of the Company's issued common shares at a ratio of not less than one-for-two and not more than one-for-1000 and in the aggregate at a ratio of not more than one-for-1000, inclusive, with the exact ratio to be set at a whole number within this range to be determined by the Company's Board of Directors, or the Board, or any duly constituted committee thereof, at any time after approval of each amendment in its discretion, and to authorize the Board to implement any such reverse stock split by filing any such amendment with the Registrar of Corporations of the Republic of the Marshall Islands. As of September 30, 2017 and 2018 and December 31, 2018, no reverse stock splits have been effected under this authorization.

F-16

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

6.	Shareholders' Equity:(continued):

Common Shares:

Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Subject to preferences that may be applicable to any outstanding preferred shares, common shareholders are entitled to receive ratably all dividends, if any, declared by the Company's Board of Directors out of funds legally available for dividends. Upon the Company's dissolution or liquidation or the sale of all or substantially all of its assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, the common shareholders are entitled to receive pro rata the remaining assets available for distribution. Common shareholders do not have conversion, redemption or preemptive rights to subscribe to any of the Company's securities. The rights, preferences and privileges of common shareholders are subject to the rights of the holders of any preferred shares, which the Company has or may issue in the future.

Preferred Shares:

The table below presents a summary of preferred shares outstanding as of September 30, 2017 and 2018 and December 31, 2018:

Series	Description	Initial Issuance Date	Total Shares Outstanding	Liquidation Preference per Share (in dollars)	Par Value	Carrying Value ⁽¹⁾	Dividend Rate
Series A	9.75% Cumulative Perpetual Redeemable	09/22/17	480,000	$25	$480	$2,740,480	9.75% per annum of the Liquidation Preference per share
Series B	n/a	09/22/17	12,000	-	$12	$12	n/a
Total			492,000		$492	$2,740,492

⁽¹⁾	There are no issuance costs.

9.75% Series A cumulative redeemable perpetual preferred shares: Holders of Series A Preferred Shares have no general voting rights other than certain limited protective voting rights. Also, holders of Series A Preferred Shares, rank senior to the holders of common shares with respect to dividends, distributions and payments upon liquidation. Dividends on the Series A preferred shares are cumulative from the date of original issue and are payable on the 15^thday of June and December of each year, commencing December 15, 2017. In the event the Company is unable to make dividend payments to the holders of the Series A preferred shares, the dividend rate shall increase to a number that is 1.30 times the dividend rate payable on the day immediately preceding the date of such dividend arrearage until the dividend arrearage is cured. The Company has not declared or paid dividends on its Series A preferred shares. The accumulated, but not declared, due and overdue dividends on the Series A Preferred Shares as of September 30, 2017, September 30, 2018 and December 31, 2018, amounted to $29,250, $1,676,025, and $2,668,770, respectively. The Series A Preferred Shares do not have a mandatory redemption feature. The Company has the right to redeem the Series A Preferred Shares, in whole or from time to time in part, from any funds available for such purpose, on a date set by the Company at an amount equal to $25.00 per share (the liquidation preference) plus an amount equal to all accumulated and unpaid dividends thereon to date of redemption whether or not declared. Such redemption price may be paid in cash, common shares or a note as shall be determined at the Company's sole discretion. If paid in common shares, the price of the common shares will be 90% of the lowest daily volume weighted average price on any trading day during the 5-consecutive trading-day period ending and including the trading day immediately prior to the date of the applicable redemption date.

Series B preferred shares: The Series B preferred shares do not have redemption/call rights and do not earn any dividends or have any distribution rights. Holders of Series B preferred shares have 100,000 votes per share on all matters submitted to a vote of the shareholders of the Company (including determination for purposes of quorum)

F-17

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

6.	Shareholders' Equity:(continued):

and vote together with the holders of the Company's common shares as one class. Holders of Series B preferred shares do not have any other special voting rights.

Adoption of a shareholder rights plan: On November 21, 2017, the Company declared a dividend of one preferred share purchase right for each outstanding common share and adopted a shareholder rights plan, as set forth in a Stockholders Rights Agreement dated as of November 20, 2017, by and between the Company and American Stock Transfer & Trust Company, LLC, as rights agent. In connection with the Stockholders Rights Agreement, the Company designated 1,000,000 shares as Series C Participating Preferred Stock, none of which are outstanding as of December 31, 2018.

7.	Financial Instruments and Fair Value Disclosures:

The principal financial assets of the Company consist of cash at banks, trade accounts receivable and amounts due from related party. The principal financial liabilities of the Company consist of trade accounts payable.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

◾

Cash and cash equivalents, trade accounts receivable, amounts due from related party and trade accounts payable: The carrying values reported in the accompanying consolidated balance sheets for those financial instruments are reasonable estimates of their fair values due to their short-term nature. The carrying value of these instruments is separately reflected in the accompanying consolidated balance sheets.

Concentration of credit risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents and trade accounts receivable. The Company places its cash and cash equivalents, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of the financial institutions in which it places its deposits. The Company limits its credit risk with accounts receivable by performing ongoing credit evaluations of its customers' financial condition.

Derivative financial instruments: The Company is exposed to changes in the spot market rates associated with the deployment of its vessel and its objective is to manage the impact of such changes in its earnings and cash flows. In this respect, during the period from December 13, 2016 to September 30, 2017, the Company engaged in a series of forward freight agreements (FFAs) to manage its exposure to spot market rate fluctuations. The FFAs which had not been renewed upon maturity, were used as economic hedge agreements and did not meet the hedge accounting criteria, therefore, changes in their fair value were recorded in earnings. During the period from December 13, 2016 to September 30, 2017, the Company realized a gain of $475,530 which is separately reflected as “Gain on derivative financial instruments” in the accompanying consolidated statement of comprehensive income. As of September 30, 2018 and December 31, 2018, the Company did not have any derivative instruments in place to manage such fluctuations.

8.	Commitments and contingencies:

Various claims, lawsuits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, agents, insurance and other claims with suppliers relating to the operations of the Company's Vessel. Currently, management is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the accompanying consolidated financial statements.

F-18

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

8.	Commitments and contingencies (continued):

The Company accrues for the cost of environmental liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure. Currently, management is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the accompanying consolidated financial statements. The Company is covered for liabilities associated with the Vessel’s actions to the maximum limits as provided by Protection and Indemnity (P&I) Clubs, members of the International Group of P&I Clubs.

Commitment under Contract for BWMS Installation

On November 15, 2018, the Company entered into contracts to purchase and install ballast water management systems (“BWMS”) on its dry bulk carriers, as amended on October 20, 2019, following the acquisition of the M/V Magic Sun and the M/V Magic Moon. The Company expects that the BWMS installation on its vessels will be completed during the vessels’ upcoming dry-docking in 2020 and estimates that the contractual obligations related to these purchases, excluding installation costs, will be approximately $0.8 million. These costs will be capitalized and depreciated over the remainder of the life of each vessel. As of December 31, 2018, the Company had not made any advances in connection with the subject orders.

9.	Income Taxes:

Both Castor and its subsidiary are incorporated under the laws of the Republic of the Marshall Islands and they are not subject to income taxes in the Republic of the Marshall Islands. Castor’s ship-owning subsidiary is subject to registration and tonnage taxes, which have been included in Vessel operating expenses in the accompanying consolidated statements of comprehensive income. The Company and its subsidiary were not subject to United States federal income taxation in respect of income that is derived from the international operation of ships and the performance of services directly related as they qualified for the exemption of Section 883 of the Internal Revenue Code of 1986, as amended.

10.	Earnings / (Loss) Per Share:

The computation of earnings per share for the period December 13, 2016 to September 30, 2017 gives retroactive effect to the 2,400,000 common shares issued under the Exchange Agreement (refer to Note 1).

For the period from December 13, 2016 to September 30, 2017, the year ended September 30, 2018 and the three months ended December 31, 2018, there were no dilutive shares. The components of the calculation of basic and diluted earnings per share in each of the periods comprising the accompanying consolidated statements of comprehensive income are as follows:

	Period ended September 30,			Year ended September 30,			Three months ended December 31,
	2017			2018			2018
Net income and comprehensive income	$	878,644		$	980,938		$	276,442
Less: Accrued dividends on Series A Preferred Shares		(29,250	)		(1,646,775	)		(992,745	)
Net income/ (loss) and comprehensive income/ (loss) available to common shareholders		849,394			(665,837	)		(716,303	)
Weighted average number of common shares outstanding, basic and diluted		2,400,000			2,400,000			2,400,000
Earnings/ (Loss) per common share, basic and diluted	$	0.35		$	(0.28	)	$	(0.30	)

F-19

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

11.	Vessel Operating and Voyage Expenses:

The amounts in the accompanying consolidated statement of comprehensive income are analyzed as follows:


	Period ended September 30,		Year ended September 30,		Three months ended December 31,
Vessel Operating Expenses	2017		2018		2018
Crew and related costs		609,549		983,985		239,610
Repairs & maintenance, spares, stores, classification, chemicals & gases, paints, victualling		323,322		415,306		124,354
Lubricants		104,410		95,835		19,750
Insurances		75,321		133,090		31,869
Tonnage taxes		33,429		40,345		8,583
Other		48,964		59,209		8,378
Total vessel operating expenses	$	1,194,995	$	1,727,770	$	432,544

	Period ended September 30,			Year ended September 30,			Three months ended December 31,
Voyage expenses	2017			2018			2018
Brokerage commissions		51,735			90,194			14,375
Port & other expenses		59,287			57,042			5,181
Gain on bunkers		(30,169	)		(109,863	)		—
Total voyage expenses	$	80,853		$	37,373		$	19,556

12.	General and Administrative Expenses:

General and administrative expenses include public registration costs and costs in relation to the administration of the Company.

Company Administration Expenses: Company administration expenses for the period ended September 30, 2017, the year ended September 30, 2018 and the three-months ended December 31, 2018 amounted to $58,467, $109,233 and $22,954, respectively. Company administration expenses include audit fees, Chief Executive Officer and Chief Financial Officer compensation and other professional fees and expenses and are analyzed as follows:

	Period ended September 30,		Year ended September 30,		Three months ended December 31,
	2017		2018		2018
Audit fees	$	49,500	$	91,700	$	20,000
Chief Executive and Chief Financial Officer compensation		6,600		12,000		3,000
Other professional fees		2,367		5,533		(46	)
Total	$	58,467	$	109,233	$	22,954

Public Registration Costs: During the period ended September 30, 2017, the year ended September 30, 2018 and the three months ended December 31, 2018, the Company incurred public registration costs of $35,973, $350,167 and $161,116 respectively. Public registration costs relate to the costs incurred by the Company in connection with the Company’s registration and listing of its 2,400,000 issued and outstanding common shares in the Norwegian OTC on December 21, 2018 and the NASDAQ Stock Exchange on February 11, 2019. Apart from registration and

F-20

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

12.	General and Administrative Expenses (continued):

listing costs, public registration costs further include legal, consultancy and other costs incurred in connection with the subject listings.

13.	Future Minimum Time Charter Revenues:

The future minimum contracted charter revenues, based on vessel’s commitment to non-cancelable time charter contracts (including fixture recaps) as of December 31, 2018, was $44,531, all due within the next 12 months. This amount does not include any assumed off-hire.

14.	Selected Condensed Financial Data for the Three Months Ended December 31, 2017 (Unaudited):

The following tables present condensed unaudited comparative information for the three months ended December 31, 2017:

Results of Operations	Three months ended December 31,
	2017
Total revenues	$	666,587
Expenses:
Vessel Operating Expenses		(601,787	)
Voyage Expenses		(28,440	)
Management fees to related party		(24,120	)
Depreciation and amortization		(107,925	)
General and administrative expenses
- Company administration expenses		(35,834	)
- Public registration costs		(115,761	)
Total Expenses		(913,867	)
Other Income/ (Expenses):
Total Other Expenses		(578	)
Net loss and comprehensive loss	$	(247,858	)
Loss per common share, basic and diluted	$	(0.26	)

Cash Flows	Three months ended December 31,
	2017
Net cash used in operating activities	$	(349,798	)
Net decrease in cash and cash equivalents	$	(349,798	)

Balance Sheet Data	December 31,
	2017
Cash and cash equivalents	$	486,670
Vessel, net		7,293,118
Working Capital ⁽¹⁾		202,300
Other non-current assets		750,366
Total Assets		9,215,971
Retained Earnings		630,784
Total shareholders’ equity		8,245,784

⁽¹⁾ The Company defines working capital as current assets less current liabilities.

F-21

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

15.	Subsequent Events:

a.	Vessel Acquisitions:

Acquisition of the M/V Magic Sun

On July 25, 2019, the Company entered into an agreement with an unaffiliated third party for the purchase of one second hand Panamax dry-bulk carrier vessel, the M/V Magic Sun, for a cash consideration of $6.7 million. The Company took delivery of the M/V Magic Sun on September 5, 2019. The M/V Magic Sun acquisition was financed using a portion of Castor’s then existing cash and the proceeds drawn under a $5.0 million unsecured term loan with Thalassa Investment Co. S.A (“Thalassa”), a company controlled by Petros Panagiotidis, who is also the Company’s Chairman, Chief Executive Officer and Chief Financial Officer (the “$5.0 Million Term Loan Facility”). The $5.0 Million Term Loan Facility bears a fixed interest rate of 6% per annum and has a bullet repayment on March 3, 2021, a date which is eighteen (18) months from the drawdown date.

Acquisition of the M/V Magic Moon

On October 14, 2019, the Company entered into a purchase agreement with an entity in which an immediate family member of the Company’s Chairman, Chief Executive Officer and Chief Financial Officer has a minority interest, for the acquisition of a 2005 Japan built Panamax dry bulk carrier at a purchase price of $10.2 million. On October 20 2019, the Company took delivery of the subject vessel, namely the M/V Magic Moon. The M/V Magic Moon acquisition was financed using a combination of cash on hand, the net proceeds raised under the Company’s ATM Program, discussed below, and the proceeds from a $7.5 million interest free unsecured bridge loan, which was provided to the Company by Thalassa (the “$7.5 Million Bridge Loan”). The $7.5 Million Bridge Loan originally maturing on December 31, 2019, was repaid in full on December 6, 2019 using a part of the net proceeds received under the Alpha Bank Financing, discussed below.

b.	At-the-market common stock offering:

On June 28, 2019, the Company, entered into an equity distribution agreement, or as commonly referred to, an at-the-market offering, with Maxim Group LLC (“Maxim”), under which the Company may sell an aggregate offering price of up to US$10,000,000 of its common stock with Maxim acting as a sales agent over a minimum period of 12 months (the “ATM Program”). No warrants, derivatives, or other share classes were associated with this transaction. As of the issuance date of this Transition Report, the Company received $2,625,590 gross proceeds under the ATM by issuing 618,112 common shares, whereas, the net proceeds under the ATM, after deducting sales commissions and other transaction fees and expenses, amounted to $2,320,176.

c.	Series A Preferred Shares amendment and accumulated dividends settlement:

On October 10, 2019, the Company reached an agreement with the holders of its Series A Preferred Shares to settle in full all accumulated dividend obligations on the Series A Preferred Shares (the “Series A Dividends Settlement Agreement”) and to simultaneously adopt an Amended and Restated Statements of Designations of its Series A Preferred Shares (the “Series A Amended SOD”). Pursuant to the Series A Dividends Settlement Agreement, the Series A Preferred holders agreed to forgive the Company’s obligations related to all due and overdue accumulated dividends on the Series A Preferred shares during the period from their original issue date up to and including June 30, 2019, amounting to $4.3 million, and to receive, in settlement thereof, 300,000 newly issued common shares (the “Settlement Shares”). The Settlement Shares were issued to the Series A Preferred holders on October 17, 2019. In addition, in accordance with the terms of the Series A Amended SOD, the Company and the Series A Preferred holders mutually agreed to: i) waive all dividend payment obligations on the Series A Preferred Shares during the period from July 1, 2019 until December 31, 2021, ii) reduce the progressively increasing dividend payment default rate that is 1.30 times the rate payable on the Series A Preferred Shares on the date preceding such payment to a fixed dividend payment default rate that is 1.30 times the base dividend payment rate, iii) increase the redemption price of the Series A Preferred Shares to $30 from $25 per share in case that the Company exercises its current

F-22

CASTOR MARITIME INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars – except for share data unless otherwise stated)

15.	Subsequent Events (continued):

option to redeem the Series A Preferred Shares, in whole or in part, with cash and iv) increase the liquidation preference from $25 to $30 per Series A Preferred Share. As a result of the foregoing, dividends on the Series A Preferred Shares will neither accrue nor accumulate during the period from July 1, 2019 until December 31, 2021 and the Company will no longer have any restriction declaring dividends to holders of its common shares during this period.

d.	$11.0 Million Senior Secured Term Loan:

On November 22, 2019, the Company, through two of its then wholly-owned subsidiaries (the “Borrowers”) owning the Magic P and the Magic Moon, entered into a $11.0 million senior secured term loan with Alpha Bank S.A (“the Alpha Bank Financing”). The facility was drawn down on December 2, 2019. The Alpha Bank Financing has a term of five years from the drawdown date, bears interest at a margin of 3.50% over LIBOR per annum and will be repayable in 20 equal quarterly instalments plus a balloon instalment payable at maturity. The facility securities include among others a first preferred mortgage and first priority general assignment covering earnings, insurances and requisition compensation over the vessels owned by the Borrowers and is guaranteed by Castor. Pursuant to the terms of the Alpha Bank Financing, the Borrowers are subject to certain customary minimum liquidity restrictions and negative covenants. The Alpha Bank Financing net proceeds were partly used by the Company in order to repay the $7.5 Million Bridge Loan on December 6, 2019, whereas, the remainder of the proceeds is expected to be used for general corporate purposes.

Private & confidential

Dated: 22^nd November, 2019

ALPHA BANK A.E.

(as lender)

- and -

PIKACHU SHIPPING CO. and

SPETSES SHIPPING CO.

(as joint and several borrowers)

LOAN AGREEMENT

for a secured floating interest rate loan facility of up to US$11,000,000

Theo V. Sioufas & Co.

Law Offices

Piraeus

TABLE OF CONTENTS

CLAUSE	HEADINGS	PAGE

1.	PURPOSE, DEFINITIONS AND INTERPRETATION	1

2.	THE LOAN	22

3.	INTEREST	23

4.	REPAYMENT - PREPAYMENT	28

5.	PAYMENTS, TAXES AND COMPUTATION	31

6.	REPRESENTATIONS AND WARRANTIES	33

7.	CONDITIONS PRECEDENT	39

8.	COVENANTS	44

9.	EVENTS OF DEFAULT	56

10.	INDEMNITIES - EXPENSES - FEES	61

11.	SECURITY, APPLICATION, SET-OFF	67

12.	UNLAWFULNESS, INCREASED COST, BAIL-IN	70

13.	OPERATING ACCOUNTS	72

14.	ASSIGNMENT, TRANSFER, PARTICIPATION, LENDING OFFICE	74

15.	MISCELLANEOUS	77

16.	JOINT AND SEVERAL LIABILITY OF THE BORROWERS	80

17.	NOTICES AND COMMUNICATIONS	82

18.	LAW AND JURISDICTION	84

SCHEDULES

1.	Form of Drawdown Notice

2.	Form of Insurance Letter

THIS AGREEMENT is dated the 22^nd day of November, 2019 and made BETWEEN:

(1)	ALPHA BANK A.E., a banking société anonyme incorporated in and pursuant to the laws of the Hellenic Republic with its head office at 40 Stadiou Street, Athens, Greece, acting, except as otherwise herein provided, through its office at 93 Akti Miaouli, Piraeus, Greece, as lender (hereinafter called the “Lender”, which expression shall include its successors and assigns); and
(2)	(a)	PIKACHU SHIPPING CO., a company duly incorporated in the Republic of the Marshall Islands having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 (and includes its successors) (the “Pikachu Borrower”); and
	(b)	SPETSES SHIPPING CO., a company duly incorporated in the Republic of the Marshall Islands having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 (and includes its successors) (the “Spetses Borrower” and together with the Pikachu Borrower hereinafter called the “Borrowers”)

AND IT IS HEREBY AGREED as follows:

1.	PURPOSE, DEFINITIONS AND INTERPRETATION

1.1	Amount and Purpose

(a)

Amount: This Agreement sets out the terms and conditions upon and subject to which it is agreed that the Lender will make available to the Borrowers, on a joint and several basis, by one (1) Advance a secured term loan facility in the amount of up to the lesser of:

(i)

Dollars Eleven million ($11,000,000); and

(ii)

55% of the aggregate Market Value of the Vessels as determined in accordance with Clause 8.5(b) (Valuation of Vessels) by valuation obtained maximum twenty (20) days prior to the Drawdown Date;

(b)

Purpose: The Loan proceeds shall be used for the purpose of re-financing part of the acquisition cost of the Vessels.

1.2	Definitions

Subject to Clause 1.3 (Interpretation) and Clause 1.4 (Construction of certain terms), in this Agreement (unless otherwise defined in the relevant Finance Document and unless the context otherwise requires) and the other Finance Documents each term or expression defined in the recital of the parties and in this Clause shall have the meaning given to it in the recital of the parties and in this Clause:

“Accounts Pledge Agreement” means an agreement to be entered into between the Borrowers and the Lender for the creation of a pledge over the Operating Accounts in favour of the Lender, in form and substance as the Lender may approve or require, as the same may from time to time be amended and/or supplemented;

“Advance” means each borrowing of a portion of the Commitment by the Borrowers or (as the context may require) the principal amount of such borrowing;

“Affiliate” means, in relation to any person, a subsidiary of that person or a parent company of that person or any other subsidiary of that parent company;

“Alternative Rate” means a rate agreed between the Lender and the Borrowers on the basis of which (instead of LIBOR) the interest rate is determined pursuant to Clause 3.6 (Market disruption – Non Availability);

“Approved Manager” means for the time being PAVIMAR S.A., a corporation lawfully incorporated and validly existing under the laws of the Republic of the Marshall Islands, and having an office established in Greece pursuant to the Greek laws 378/68, 27/75, 2234/94, 3752/09 and 4150/13 (as amended and in force at the date hereof) at 25 F0inikos Street, Kifissia 145 64, Greece or any other person appointed by the Owner of the relevant Vessel with the consent of the Lender (such consent not to be unreasonably withheld), as the commercial manager and/or the technical manager of such Vessel, and includes its successors in title;

“Approved Manager’s Undertaking” means a letter of undertaking and subordination to be executed by the Approved Manager, as manager of the relevant Vessel, in favour of the Lender, the Approved Manager’s Undertaking to be in form and substance as the Lender may approve or require, as the same may from time to time be amended and/or supplemented;

“Approved Shipbrokers” means any of Clarksons (Hellas), Braemar, Golden Destiny and Allied Shipbroking or any other first class independent firm of internationally known shipbrokers, appointed by the Lender at its discretion and agreed by the Borrower, and includes their respective successors in title and “Approved Shipbroker” means any of them;

“Article 55 BRRD” means Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms;

“Assignable Charterparty” means in relation to a Vessel, any time or bareboat charterparty (irrespective of the duration of such bareboat charterparty), consecutive voyage charter or contract of affreightment or related document in respect of the employment of that Vessel having a duration (or capable of exceeding a duration) of more than 12 months and any guarantee of the obligations of the charterer under such charter in respect of that Vessel, whether now existing or hereinafter entered or to be entered into by the Owner thereof or any person, firm or company on its behalf and a charterer at a daily rate and on terms and conditions acceptable to the Lender (and shall include any addenda thereto);

“Assignee” has the meaning ascribed thereto in Clause 14.3 (Assignment by Lenders);

“Availability Period” means the period starting on the date hereof and ending on:

(a)

the 20^th day of February, 2020 or until such later date as the Lender may agree in writing; or

(b)

such earlier date (if any): (i) on which the whole Commitment has been advanced by the Lender to the Borrowers, or (ii) on which the Commitment is reduced to zero pursuant to Clauses 3.6 (Market disruption – Non Availability), 9.2 (Consequences of Default – Acceleration), 12.1 (Unlawfulness) or any other Clause of this Agreement;

“Bail-In Action” means the exercise of any Write-down and Conversion Powers;

“Bail-In Legislation” means:

(a)

in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time; and

(b)

in relation to any other state, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation;

“Balloon Instalment” has the meaning given in Clause 4.1 (Repayment);

“Banking Day” means any day on which banks and foreign exchange markets in New York, London, Athens and Piraeus and in each country or place in or at which an act is required to be done under this Agreement in accordance with the usual practice of the Lender, are open for the transaction of business of the nature contemplated in this Agreement;

“Basel II Accord” means the ”International Convergence of Capital Measurement and Capital Standards, a Revised Framework” published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement;

“Basel II Approach” means either the Standardised Approach or the relevant Internal Ratings Based Approach (each as defined in the Basel II Accord) adopted by the Lender (or its holding company) for the purposes of implementing or complying with the Basel II Accord;

“Basel II Regulation” means (a) any law or regulation implementing the Basel II Accord or (b) any Basel II Approach adopted by the Lender;

“Basel III Accord” means:

(a)

the agreements on capital requirements, leverage ratio and liquidity standards contained in "Basel III: A global regulatory framework for more resilient banks and banking systems", "Basel III: International framework for liquidity risk measurement, standards and monitoring" and "Guidance for national authorities operating the countercyclical capital buffer" published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated;

(b)

the rules for global systemically important banks contained in "Global systemically important banks: assessment methodology and the additional loss absorbency requirement – Rules text" published by the Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and

(c)

any further guidance or standards published by the Basel Committee on Banking Supervision relating to Basel III;

“Basel III Regulation” means any law or regulation implementing the Basel III Accord save and to the extent that it re-enacts a Basel II Regulation;

“Beneficial Shareholder(s)” means in respect of each of the Borrowers, the person or persons disclosed to the Lender as being the ultimate legal and beneficial owner or owners (either directly and/or through companies beneficially owned by such person or persons and/or trusts or foundations of which such person or persons are legal and beneficial

owners) of 100% of the shares in each of the Borrowers, and in the case of the Corporate Guarantor being the largest single ultimate beneficial shareholder and having at least a controlling interest of the Corporate Guarantor and the voting rights attaching to those shares and the legal ownership of those shares in each of the Borrowers and the Corporate Guarantor;

“Borrowed Money” means Financial Indebtedness incurred in respect of (i) money borrowed or raised, (ii) any bond, note, loan stock, debenture or similar instrument, (iii) acceptance of documentary credit facilities, (iv) deferred payments for assets or services acquired, (v) rental payments under leases (whether in respect of land, machinery, equipment or otherwise) entered into primarily as a method of raising finance or of financing the acquisition of the asset leased, (vi) guarantees, bonds, stand-by letters of credit or other instruments issued in connection with the performance of contracts and (vii) guarantees or other assurances against financial loss in respect of Financial Indebtedness of any person falling within any of sub-paragraphs (i) to (vi) above;

“Borrowers” means jointly and severally the Pikachu Borrower and the Spetses Borrower as specified at the beginning of this Agreement and “Borrower” means either of them as the context may require;

“Break Costs” means all costs, losses, premiums or penalties incurred by the Lender in the circumstances contemplated by Clause 10.1 (Miscellaneous indemnities), or as a result of it receiving any prepayment of all or any part of the Loan (whether pursuant to Clause 4 (Repayment-Prepayment) or otherwise), or any other payment under or in relation to the Security Documents on a day other than the due date for payment of the sum in question, and includes (without limitation) any losses or costs incurred in liquidating or re-employing deposits from third parties acquired to effect or maintain the Loan;

“Charterparty Assignment” means, in relation to a Vessel, an assignment of the rights of its Owner under any Assignable Charterparty and any guarantee of such Assignable Charterparty executed or to be executed by its Owner in favour of the Lender and the acknowledgement of notice of the assignment in respect of such Assignable Charterparty to be obtained (on best effort basis by its Owner) in form and substance as the Lender may approve or require, as the same may from time to time be amended and/or supplemented and, “Charterparty Assignments” means all of them;

“Classification” in relation to a Vessel means the classification referred to in the Mortgage registered thereon with the Classification Society or such other classification society as the Lender shall, at the request of the Borrowers, have agreed in writing, shall be treated as the Classification Society for the purposes of the Finance Documents;

“Classification Society” means such classification society which is a member of IACS (other than the China Classification Society and the Russian Maritime Registry of Shipping) and which the Lender shall, at the request of the Borrowers, have agreed in writing to be treated as the Classification Society for the purposes of the Finance Documents;

“Commitment” means the amount which the Lender agreed to lend to the Borrowers under Clause 2.1 (Commitment to Lend) as reduced by any relevant term of this Agreement;

“Commitment Letter” means the Commitment Letter dated 23^rd October, 2019 addressed by the Lender to the Borrowers and accepted by it on the same date, and shall include any amendments or addenda thereto;

“Corporate Guarantee” means an irrevocable and unconditional guarantee given or, as the context may require, to be given by the Corporate Guarantor in form and substance

satisfactory to the Lender as security for the Outstanding Indebtedness and any and all other obligations of the Borrowers under this Agreement and the Security Documents, as the same may from time to time be amended and/or supplemented;

“Corporate Guarantor” means Castor Maritime Inc., a corporation lawfully incorporated and validly existing under the laws of the Republic of the Marshall Islands, and/or any other person nominated by the Borrowers and acceptable to the Lender which may give a Corporate Guarantee, and includes its successors in title;

“Default” means any Event of Default or any event which with the giving of notice or lapse of time or the satisfaction of any other condition (or any combination thereof) would constitute an Event of Default;

“Default Rate” means that rate of interest per annum which is determined in accordance with the provisions of Clause 3.4 (Default Interest);

“DOC” means a document of compliance issued to an Operator in accordance with rule 13 of the ISM Code;

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

“Drawdown Date” means the date, being a Banking Day, requested by the Borrowers for the Loan to be made available, or (as the context requires) the date on which the Loan is actually made available;

“Drawdown Notice” means a notice substantially in the terms of Schedule 1 (Form of Drawdown Notice) (or in any other form which the Lender approves);

“Earnings” in relation to a Vessel means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Owner thereof and which arise out of the use or operation of that Vessel, including (but not limited to) all freight, hire and passage moneys, compensation payable to the Owner thereof in the event of requisition of that Vessel for hire, remuneration for salvage and towage services, demurrage and detention moneys, contributions of any nature whatsoever in respect of general average, damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of that Vessel and any other earnings whatsoever due or to become due to the Owner thereof in respect of that Vessel and all sums recoverable under the Insurances in respect of loss of Earnings and includes, if and whenever that Vessel is employed on terms whereby any and all such moneys as aforesaid are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing agreement which is attributable to that Vessel;

“EEA Member Country” means any member state of the European Union, Iceland, Liechtenstein and Norway;

“Environmental Affiliate” means any agent or employee of any of the Borrowers or any other Relevant Party or any person having a contractual relationship with any of the Borrowers or any other Relevant Party in connection with any Relevant Ship or her operation or the carriage of cargo thereon;

“Environmental Approval” means any consent, authorisation, licence or approval of any governmental or public body or authorities or courts applicable to any Relevant Ship or her operation or the carriage of cargo thereon and/or passengers therein and/or provisions of goods and/or services on or from the Relevant Ship required under any Environmental Law;

“Environmental Claim” means:

(a)

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

(b)

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

and “claim” means (i) a claim for damages, compensation, fines, penalties or any other payment of any kind which exceeds $400000 (or the equivalent in any other currency) per Vessel per incident or (ii) one or more claims for damages, compensation, fines, penalties or any other payment of any kind, the subject matter of which exceeds $400,000 (or the equivalent in any other currency) in aggregate, whether such claim or claims are in relation to one or more Vessels and whether resulting from one incident or a series of incidents;

“Environmental Incident” means (i) any release of Material of Environmental Concern from a Vessel, (ii) any incident in which Material of Environmental Concern is released from a vessel other than the Vessels and which involves collision between a Vessel and such other vessel or some other incident of navigation or operation, in either case, where a Vessel, the Borrowers (or any of them) or the Approved Manager are actually or allegedly at fault or otherwise liable (in whole or in part) or (iii) any incident in which Material of Environmental Concern is released from a vessel other than the Vessels and where a Vessel is actually or potentially liable to be arrested as a result and/or where the Borrowers (or any of them) or the Approved Manager are actually or allegedly at fault or otherwise liable;

“Environmental Laws” means all national, international and state laws, rules, regulations, treaties and conventions applicable to any Relevant Ship pertaining to the pollution or protection of human health or the environment including, without limitation, the carriage of Materials of Environmental Concern and actual or threatened emissions, spills, releases or discharges of Materials of Environmental Concern and actual or threatened emissions, spills, releases or discharges of Materials of Environmental Concern from any Relevant Ship (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);

“EU Bail-In Legislation Schedule” means the document described as such and published by the Loan Market Association (or any successor person) from time to time;

“Event of Default” means any event or circumstance set out in Clause 9.1 (Events) or described as such in any other of the Finance Documents;

“Expenses” means the aggregate at any relevant time (to the extent that the same have not been received or recovered by the Lender) of:

(a)

all losses, liabilities, costs, charges, expenses, damages and outgoings of whatever nature, (including, without limitation, Taxes, repair costs, registration fees and insurance premiums, crew wages, repatriation expenses and seamen’s pension fund dues) suffered, incurred, charged to or paid or committed to be paid by the Lender in connection with the exercise of the powers referred to in or granted by any of the Finance Documents or otherwise payable by the Borrowers or any of them in accordance with the terms of any of the Finance Documents;

(b)

the expenses referred to in Clause 10.2 (Expenses); and

(c)

interest on all such losses, liabilities, costs, charges, expenses, damages and outgoings from, in the case of Expenses referred to in sub-paragraph (b) above, the date on which such Expenses were demanded by the Lender from the Borrowers

and in all other cases, the date on which the same were suffered, incurred or paid by the Lender until the date of receipt or recovery thereof (whether before or after judgement) at the Default Rate (as conclusively certified by the Lender);

“FATCA” means:

(a)

sections 1471 to 1474 of the US Internal Revenue Code of 1986 (the “Code”) or any associated regulations or other associated official guidance;

(b)

any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of paragraph (a) above; or

(c)

any agreement pursuant to the implementation of paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction;

“FATCA Deduction” means a deduction or withholding from a payment under a Finance Document required by FATCA;

“FATCA Exempt Party” means a party that is entitled to receive payments free from any FATCA Deduction;

“Final Maturity Date” means the date falling on the fifth (5^th) anniversary of the Drawdown Date;

“Finance Documents” means, together, this Agreement, the Security Documents, the Insurance Letters and any other document designated as such by the Lender and the Borrowers;

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

(a)

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

(b)

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

(c)

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

(d)

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

(e)

under any interest or currency swap or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; or

(f)

under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within (a) to (e) if the references to the debtor referred to the other person;

“Financial Year” means, in relation to the Borrowers, each period of one (1) year commencing on 1^st January thereof in respect of which financial statements referred to in Clause 8.1(f) (Financial statements) are or ought to be prepared;

“Flag State” means in relation to each Vessel, the Republic of the Marshall Islands or such other state or territory designated in writing by the Lender, at the request of an Owner, as being the “Flag State” of such Vessel for the purposes of the Security Documents;

“General Assignment” means, in relation to each Vessel, the first priority assignment of the Earnings, Insurances and Requisition Compensation collateral to the Mortgage relative to such Vessel, executed or (as the context may require) to be executed by the Owner thereof in favour of the Lender, in form and substance as the Lender may approve or require, as the same may from time to time be amended and/or supplemented (together, the “General Assignments”);

“Government Entity” means and includes (whether having a distinct legal personality or not) any national or local government authority, board, commission, department, division, organ, instrumentality, court or agency and any association, organisation or institution of which any of the foregoing is a member or to whose jurisdiction any of the foregoing is subject or in whose activities any of the foregoing is a participant;

“Governmental Withholdings” means withholdings and any restrictions or conditions resulting in any charge whatsoever imposed, either now or hereafter, by any sovereign state or by any political sub-division or taxing authority of any sovereign state;

“Group” means the Borrowers, the Corporate Guarantor and their direct or indirect Subsidiaries and all other shipping companies now or in the future substantially directly or indirectly owned and/or controlled by same beneficial interests as the Borrowers from time to time during the Security Period and “member of the Group” means any member of the Group;

“Insurance Letter” in relation to a Vessel means a letter from the Owner thereof in the form of Schedule 2 (Form of Insurance Letter);

“Insurances” in relation to a Vessel means all policies and contracts of insurance (including, without limitation, all entries of such Vessel in a protection and indemnity, hull and machinery, war risks or other mutual insurance association) which are from time to time in place or taken out or entered into by or for the benefit of its Owner (whether in the sole name of its Owner or in the joint names of its Owner and the Lender) in respect of such Vessel and its earnings or otherwise howsoever in connection with such Vessel and all benefits of such policies and/or contracts (including all claims of whatsoever nature and return of premiums);

“Interest Payment Date” means in respect of the Loan or any part thereof in respect of which a separate Interest Period is fixed the last day of the relevant Interest Period and in case of any Interest Period longer than three (3) months the date(s) falling at successive three (3) monthly intervals during such longer Interest Period and the last day of such Interest Period, provided, however, that if any of the aforesaid dates falls on a day which is not a Banking Day the Borrowers shall pay the accrued interest on the first Banking Day thereafter unless the result of such extension would be to carry such Interest Payment Date over into another calendar month in which event such Interest Payment Date shall be the immediately preceding Banking Day;

“Interest Period” means in relation to the Loan or any part thereof, each period for the calculation of interest in respect of the Loan or such part ascertained in accordance with Clauses 3.2 (Selection of Interest Period) and 3.3 (Determination of Interest Periods);

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

(a)

“The International Management Code for the Safe Operation of Ships and for Pollution Prevention”, currently known or referred to as the “ISM Code”, adopted by the Assembly of the International Maritime Organisation by Resolution A. 741(18) on 4^th November, 1993 and incorporated on 19^th 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^th November, 1995;

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

“ISM Code Documentation” includes:

(a)

the DOC and SMC issued by a classification society in all respects acceptable to the Lender in its absolute discretion pursuant to the ISM Code in relation to the Vessels within the period specified by the ISM Code;

(b)

all other documents and data which are relevant to the ISM SMS and its implementation and verification which the Lender may require by request; and

(c)

any other documents which are prepared or which are otherwise relevant to establish and maintain each Vessel’s or each Owner’s compliance with the ISM Code which the Lender may require by request;

“ISM SMS” means the safety management system which is required to be developed, implemented and maintained under the ISM Code;

“ISPS Code” means the International Ship and Port Security Code of the International Maritime Organization and includes any amendments or extensions thereto and any regulation issued pursuant thereto;

“ISSC” in relation to a Vessel means an International Ship Security Certificate issued in respect of such Vessel pursuant to the ISPS Code;

“Lender” means the Lender as specified in the beginning of this Agreement, and includes its successors in title and transferees;

“Lending Office” means the office of the Lender appearing at the beginning of this Agreement or any other office of the Lender designated by the Lender as the Lending Office by notice to the Borrowers;

“LIBOR” means, in relation to the Loan or any part of the Loan:

(a)

the applicable Screen Rateat or about 11.45 a.m. (London time) on the Quotation Day for Dollars and for a period equal in length to the Interest Period then applicable to the Loan or that part of the Loan; or

(b)

as otherwise determined pursuant to Clause3.6(d) (Negotiation of alternative rate of interest),

and if, in either case, that rate is less than zero, LIBOR shall be deemed to be zero;

“Loan” means the aggregate principal amount borrowed by the Borrowers in respect of the Commitment or (as the context may require) the principal amount owing to the Lender under this Agreement at any time;

“Major Casualty” in relation to a Vessel means any casualty to such Vessel in respect whereof the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds the Major Casualty Amount;

“Major Casualty Amount” means Four hundred thousand Dollars ($400,000) or the equivalent in any other currency;

“Management Agreement” in relation to a Vessel means the agreement made between the Owner thereof and the Approved Manager providing (inter alia) for the Approved Manager to manage such Vessel, as amended and/or supplemented from time to time (together, the “Management Agreements”);

“Margin” means three point five zero per centum (3.50%) per annum;

“Market Value” in relation to a Vessel means the market value of such Vessel as determined in accordance with Clause 8.5(b) (Valuation of Vessels);

“Material of Environmental Concern” means and includes pollutants, contaminants, toxic substances, oil as defined in the United States Oil Pollution Act of 1990 and all hazardous substances as defined in the United States Comprehensive Environmental Response, Compensation and Liability Act 1980;

“Material Adverse Change” means any event or series of events which, in the opinion of the Lender, is likely to have a Material Adverse Effect;

“Material Adverse Effect” means a material, in the reasonable opinion of the Lender, adverse effect on:

(a)

the business, property, assets, liabilities, operations or condition (financial or otherwise) of the Borrower and/or any Security Party taken as a whole;

(b)

the ability of the Borrower and/or any Security Party to (i) comply with or perform any of its obligations or (ii) discharge any of its liabilities, under any Finance Document as they fall due; or

(c)

the validity, legality or enforceability of any Finance Document or the rights and remedies of the Lender under any Finance Document;

“MII” has the meaning given in Clause 10.9 (MII costs);

“month” means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it started, provided that (i) if the period started on the last Banking Day in a calendar month or if there is no such numerically corresponding day, it shall end on the last Banking Day in such next calendar month and (ii) if such numerically corresponding day is not a Banking Day, the period shall end on the next following Banking Day in the same calendar month but if there is no such Banking Day it shall end on the preceding Banking Day and “months” and “monthly” shall be construed accordingly;

“Mortgage” in relation to a Vessel means the first preferred ship mortgage or, as the case may be, first priority ship mortgage and the deed of covenant supplemental thereto on such Vessel to be executed by the Owner thereof in favour of the Lender in form and substance as the Lender may approve or require, as the same may from time to time be amended and/or supplemented (together, the “Mortgages”);

“Mortgaged Vessel(s)” means the Vessel(s) which remain mortgaged in favour of the Lender pursuant to this Agreement at any relevant time hereunder;

“Operating Account” means the account to be opened and maintained in the name of each Owner with the Lending Office or with any other branch of the Lender or any other office of the Lender or with such other bank as may be required by and at the discretion of the Lender pursuant to Clause 13.7 (Relocation of Operating Accounts) and shall include any sub-accounts or call accounts (whether in Dollars or any other currency) opened under the same designation or any revised designation or number from time to time notified by the Lender to the Borrowers, to which (inter alia) all Earnings of the relevant Vessel and/or any other moneys are to be paid in accordance with the provisions of this Agreement and/or the relevant General Assignment and/or any of the other Finance Documents (together, the “Operating Accounts”);

“Operating Expenses” means the voyage and operating expenses of the Vessels, including, but not limited to, the expenses for operating, crewing, victualing, insuring, maintaining, repairing and generally trading the Vessels (and if applicable, voyage expenses), the expenses for spares, administration and management of the Vessels (inclusive of the management fees, survey expenses, legal fees, commissions, bunkering expenses, ballast water treatment installation costs and corporate administration fees and taxes) as well as the reserves that the Borrowers, acting reasonably, consider necessary for the commercial operation of the Vessels and the costs of intermediate and special surveys and dry docking of the Vessels;

“Operator” means any person who is from time to time during the Security Period concerned in the operation of the Vessels (or any of them) and falls within the definition of “Company” set out in rule 1.1.2. of the ISM Code;

“Outstanding Indebtedness” means the aggregate of (a) the Loan and interest accrued and accruing thereon, (b) the Expenses, and (c) all other sums of any nature (together with all interest on any of those sums) which from time to time may be payable by the Borrowers to the Lender pursuant to the Finance Documents, whether actually or contingently and (d) any damages payable as a result of any breach by the Borrowers of any of the Finance Documents and (e) any damages or other sums payable as a result of any of the obligations of the Borrowers under or pursuant to any of the Finance Documents being disclaimed by a liquidator or any other person, or, where the context permits, the amount thereof for the time being outstanding;

“Owner” in relation to a Vessel means the owner of such Vessel as specified in the definition of the Vessels in this Clause 1.2 (together, the “Owners”);

“Party” means a party to this Agreement;

“Permitted Security Interest” means:

(a)

Security Interests created by the Finance Documents;

(b)

liens for unpaid crew’s wages in accordance with usual maritime practice;

(c)

liens for salvage;

(d)

liens arising by operation of law for not more than 2 months’ prepaid hire under any charter in relation to such Vessel not prohibited by this Agreement;

(e)

liens for master’s disbursements incurred in the ordinary course of trading and any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of a Vessel, provided such liens do not secure amounts more than 60 days overdue (unless the overdue amount is being contested in good faith by appropriate steps) and, in the case of liens for repair or maintenance, in such Vessel is put in the possession of any person for the purpose of work being done upon her in an amount exceeding or likely to exceed the Major Casualty Amount provided that (i) either that person has first given to the Lender and in terms satisfactory to it a written undertaking not to exercise any lien on such Vessel or her earnings for the cost of such work or (ii) the previous consent of the Lender shall have been obtained (which consent shall not be unreasonably withheld);

(f)

any Security Interest created in favour of a plaintiff or defendant in any action of the court or tribunal before whom such action is brought as security for costs and expenses where the Owner is prosecuting or defending such action in good faith by appropriate steps; and

(g)

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

“Pledged Deposit” has the meaning ascribed thereto in Clause 8.1(k) (Pledged Deposit);

“Pledgor” means the Corporate Guarantor or any other person(s) acceptable to the Lender who has/have executed or (as the context may require) shall execute the Shares Pledge Agreement (together, the “Pledgors”);

“Quotation Day” means, in respect of any period in respect of which LIBOR falls to be determined under this Agreement, the second Banking Day before the first day of such period;

“Registry” in relation to a Vessel means the offices of such registrar, commissioner or representative of the relevant Flag State who is duly authorised to register such Vessel, its Owner’s title thereto and the relevant Mortgage over such Vessel under the laws and flag of the relevant Flag State;

“Regulatory Agency” means the Government Entity or other organization in the relevant Flag State which has been designated by the government of the relevant Flag State to implement and/or administer and/or enforce the provisions of the ISM Code;

“Related Company” means any shipping company which is under the ultimate control, direct or indirect, of any individual(s) who has/have ultimate control of the Borrowers (or either of them) or other entity of which such company is a Subsidiary and any Subsidiary of any such company or entity;

“Relevant Jurisdiction” means any jurisdiction in which or where any Security Party is incorporated, resident, domiciled, has a permanent establishment, carries on, or has a place of business or is otherwise effectively connected;

“Relevant Nominating Body” means any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or the Financial Stability Board;

“Relevant Party” means the Borrower, the Borrower's Related Companies and the other corporate Security Parties and their respective Related Companies;

“Relevant Ship” means the Vessels and any other vessel from time to time (whether before or after the date of this Agreement) owned, managed or crewed by, or chartered to, by any Relevant Party;

“Repayment Date” means each of the dates specified in Clause 4.1 (Repayment) on which the Repayment Instalments shall be payable by the Borrowers to the Lender;

“Repayment Instalments” means each of the instalments of the Loan which becomes due for repayment by the Borrowers to the Lender on a Repayment Date pursuant to Clause 4.1 (Repayment);

“Replacement Benchmark” means a benchmark rate which is:

(a)

formally designated, nominated or recommended as the replacement for a Screen Rate by:

(i)

the administrator of that Screen Rate (provided that the market or economic reality that such benchmark rate measures is the same as that measured by that Screen Rate); or

(ii)

any Relevant Nominating Body,

and if replacements have, at the relevant time, been formally designated, nominated or recommended under both paragraphs, the "Replacement Benchmark" will be the replacement under paragraph (ii) above;

(b)

in the opinion of the Lender and the Borrower, generally accepted in the international loan markets as the appropriate successor to a Screen Rate; or

(c)

in the opinion of the Lender and the Borrower, an appropriate successor to a Screen Rate;

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

“Resolution Authority” means any body which has authority to exercise any Write-down

and Conversion Powers;

“Sanctions” means any economic, financial or trade sanctions laws, regulations, embargoes or other restrictive measures adopted, administered, enacted or enforced by any Sanctions Authority, or otherwise imposed by any law or regulation, compliance with which is reasonable in the ordinary course of business of the Borrowers (or any of them), any other Security Party and the Lender or to which the Borrowers, any other Security Party and the Lender are subject (which shall include without limitation, any extra-territorial sanctions imposed by law or regulation of the United States of America);

“Sanctions Authority” means:

(a)

the government of the United States of America;

(b)

the United Nations;

(c)

the European Union (or the governments of any of its member states);

(d)

the United Kingdom;

(e)

the Flag State; or

(f)

the respective governmental institutions and agencies of any of the foregoing including the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), the United States Department of State, the United States Department of Commerce and Her Majesty’s Treasury;

“Sanctions Restricted Jurisdiction” means any country or territory which is the target of country-wide or territory-wide Sanctions, including as at the date of this Agreement, Iran, Sudan, Syria, Crimea, North Korea and Cuba;

“Sanctions Restricted Person” means a person or vessel:

(a)

that is, or is directly or indirectly, owned or controlled (as such terms are defined by the relevant Sanctions Authority) by, or acting on behalf of, one or more persons or entities on any list (each as amended, supplemented or substituted from time to time) of restricted entities, persons or organisations (or equivalent) published by a Sanctions Authority;

(b)

that is located or resident in or incorporated under the laws of, or owned or controlled by, a person located or resident in or incorporated under the laws of a Sanctions Restricted Jurisdiction; or

(c)

that is otherwise the target or subject of Sanctions;

“Screen Rate” means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for Dollars for the relevant period displayed (before any correction, recalculation or republication by the administrator) on page LIBOR01 or LIBOR02 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters. If such page or service ceases to be available, the Lender may specify another page or service displaying the relevant rate after consultation with the Borrowers;

“Screen Rate Replacement Event” means, in relation to a Screen Rate:

(a)

the methodology, formula or other means of determining that Screen Rate has, in the opinion of the Lender and the Borrowers, materially changed;

(b)

(i)

(A)

the administrator of that Screen Rate or its supervisor publicly announces that such administrator is insolvent; or

(B)

information is published in any order, decree, notice, petition or filing, however described, or filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or judicial body which reasonably confirms that the administrator of that Screen Rate is insolvent,

provided that, in each case, at that time, there is no successor administrator to continue to provide that Screen Rate;

(ii)

the administrator of that Screen Rate publicly announces that it has ceased or will cease, to provide that Screen Rate permanently or indefinitely and, at that time, there is no successor administrator to continue to provide that Screen Rate;

(iii)

the supervisor of the administrator of that Screen Rate publicly announces that such Screen Rate has been or will be permanently or indefinitely discontinued; or

(iv)

the administrator of that Screen Rate or its supervisor announces that that Screen Rate may no longer be used; or

(v)

in the opinion of the Lender and the Borrowers, that Screen Rate is otherwise no longer appropriate for the purposes of calculating interest under this Agreement;

“Security Documents” means:

(a)

the Accounts Pledge Agreement;

(b)

the Approved Manager’s Undertaking;

(c)

the General Assignments;

(d)

the Mortgages;

(e)

any Charterparty Assignment;

(f)

the Corporate Guarantee;

(g)

the Shares Pledge Agreement; and

(h)

any other agreement or document (whether creating a Security Interest or not) that may have been or shall from time to time after the date of this Agreement be executed to guarantee and/or secure all or any part of the Outstanding Indebtedness and/or any and all other obligations of the Borrowers to the Lender pursuant to this Agreement and any other moneys from time to time owing or payable by the Borrowers under or in connection with this Agreement and/or any of the other documents referred to in this definition, as each such document may from

time to time be amended and/or supplemented, and “Security Document” means any of them as the context may require;

“Security Interest” means any mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest or other encumbrance of any kind securing any obligation of any person or any type of preferential arrangement (including without limitation title transfer and/or retention arrest, seizure, garnishee order (whether nisi or absolute) or any other order or judgement arrangements having a similar effect) or other encumbrance of any kind or the security rights of a plaintiff under an action in rem or any right conferring a priority of payment in respect of any obligation of any person;

“Security Party” means each Borrower, the Corporate Guarantor, the Pledgor, the Approved Manager and any other person (other than the Lender and any charterer) who, as a surety or mortgagor, as a party to any subordination or priorities arrangement, or in any similar capacity, executes a document falling within the last paragraph of the definition of “Finance Documents”, and “Security Parties” means any or all of them, as the context may require;

“Security Period” means the period commencing on and including the date hereof and terminating on and including the date upon which Outstanding Indebtedness has been paid in full to the Lender;

“Security Requirement” means the amount in Dollars (as certified by the Lender whose certificate shall, in the absence of manifest error, be conclusively binding on the Borrowers) which is at any relevant time not less than one hundred and twenty five percent (125%) of the Loan;

“Security Value” means the amount in Dollars (as certified by the Lender whose certificate shall, in the absence of manifest error, be conclusive and binding on the Borrowers) which, at any relevant time is the aggregate of (i) the aggregate Market Value of the Mortgaged Vessels as most recently determined in accordance with Clause 8.5(b) (Valuation of Vessels), (ii) the market value of any additional security provided under Clause 8.5(a) (Security shortfall-Additional Security) and accepted by the Lender (if any) and (iii) the Pledged Deposit;

“Shares” means the five hundred (500) registered shares in the issued share capital of the Borrower owned by the Pledgor;

“Shares Pledge Agreement” means the pledge agreement to be executed by the Pledgor(s) in favour of the Lender, whereby the Pledgor shall pledge all Shares, in form and substance as the Lender may approve or require, as the same may from time to time be amended and/or supplemented;

“SMC” means a safety management certificate issued in respect of the Vessels in accordance with rule 13 of the ISM Code;

“Subsidiary” of a person means any company or entity directly or indirectly controlled by such person;

“Taxes” includes all present and future taxes, levies, imposts, duties, fees or charges of whatever nature together with interest thereon and penalties in respect thereof (except taxes concerning the Lender and imposed on the net income of the Lender) and “Taxation” shall be construed accordingly;

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

(a)

actual, constructive, compromised or arranged total loss of that Vessel; or

(b)

any expropriation, confiscation, appropriation, expropriation, deprivation, forfeiture, requisition or acquisition of that Vessel, whether for full or part consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any Government Entity or by any person or persons claiming to be or to represent a Government Entity whether de jure or de facto, unless it is within thirty (30) days from the date of such occurrence redelivered to the full control of the Owner thereof; or

(c)

any condemnation of that Vessel by any tribunal or by any person or persons claiming to be a tribunal,

(d)

any arrest, capture, seizure, confiscation or detention of that Vessel (including any hijacking or theft or piracy or related incident) unless it is within ninety (90) days from the date of such occurrence redelivered to the full control of the Owner thereof;

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

(a)

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

(b)

in the case of a constructive, compromised, agreed or arranged total loss of that 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 Owner of that Vessel with that Vessel's insurers in which the insurers agree to treat that Vessel as a total loss;

“Transferee” has the meaning ascribed thereto in Clause 14.3 (Assignment by the Lender);

“UK Bail-In Legislation” means (to the extent that the United Kingdom is not an EEA Member Country which has implemented, or implements, Article 55 BRRD) Part 1 of the United Kingdom Banking Act 2009 and any other law or regulation applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutes or their Affiliates (otherwise than through liquidation, administration or other insolvency proceedings);

“US” means the United States of America;

“US Tax Obligor” means:

(a)

a Borrower which is resident for tax purposes in the US; or

(b)

a Borrower or a Security Party some or all whose payments under the Finance Documents are from sources within the US for US federal income tax purposes;

“Vessels” means:

(a)

the motor vessel “MAGIC MOON“, of about 39,727 gt and 25,754 nt, built in 2005 in

Japan by Imabari Shipbuilding Co. Ltd., having IMO No. 9336036, registered under the laws and flag of the Republic of the Marshall Islands at the Ships Registry of the port of Monrovia in the ownership of the Pikachu Borrower with Official No. 7474 (the “Vessel A”); and

(b)

the motor vessel “MAGIC P” of approximately 39,964 gt and 25,889 nt, built in 2004 in Japan by Tsuneishi Corporation and having IMO No. 9288447, registered under the laws and flag of the Republic of the Marshall Islands in the ownership of the Spetses Borrower with Official No. 7351 (the “Vessel B”),

in each case, together with all her boats, engines, machinery tackle outfit spare gear fuel consumable and other stores belongings and appurtenances whether on board or ashore and whether now owned or hereafter acquired and all the additions, improvements and replacements in or on the above described vessel,

(the Vessel A and the Vessel B hereinafter together called the “Vessels”, and “Vessel” means any of them, as the context may require);

“Write-down and Conversion Powers” means:

(a)

in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule; and

(b)

in relation to any other applicable Bail-In Legislation:

(i)

any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and

(ii)

any similar or analogous powers under that Bail-In Legislation; and

(c)

in relation to any UK Bail-In Legislation:

(i)

any powers under that UK Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or Affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that UK Bail-In Legislation that are related to or ancillary to any of those powers; and

(ii)

any similar or analogous powers under that UK Bail-In Legislation.

1.3	Interpretation

In this Agreement:

(c)

Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement;

(d)

subject to any specific provision of this Agreement or of any assignment and/or participation or syndication agreement of any nature whatsoever, reference to each of the parties hereto and to the other Finance Documents shall be deemed to be reference to and/or to include, as appropriate, their respective successors and permitted assigns;

(e)

where the context so admits, words in the singular include the plural and vice versa;

(f)

the words “including” and “in particular” shall not be construed as limiting the generality of any foregoing words;

(g)

references to (or to any specified provisions of) a Finance Document or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as it may from time to time be amended, restated, novated or replaced, however fundamentally, whether before the date of this Agreement or otherwise;

(h)

references to Clauses and Schedules are to be construed as references to the Clauses of, and the Schedules to, the relevant Finance Document and references to a Finance Document include all the terms of that Finance Document and any Schedules, Annexes or Appendices thereto, which form an integral part of same;

(i)

references to the opinion of the Lender or a determination or acceptance by the Lender or to documents, acts, or persons acceptable or satisfactory to the Lender or the like shall be construed as reference to opinion, determination, acceptance or satisfaction of the Lender at the sole discretion of the Lender, and such opinion, determination, acceptance or satisfaction of the Lender shall be conclusive and binding on the Borrowers;

(j)

references to a “regulation” include any present or future regulation, rule, directive, requirement, request or guideline (whether or not having the force of law) of any governmental or intergovernmental body, agency, authority, central bank or government department or any self regulatory or other national or supra-national authority or organisation and includes (without limitation) any Basel II Regulation or Basel III Regulation;

(k)

references to any person include such person’s assignees and successors in title; and

(l)

references to or to a provision of, any law include any amendment, extension, re-enactment or replacement, whether made before the date of this Agreement or otherwise;

1.4	Construction of certain terms

In this Agreement:

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

“company” includes any partnership, joint venture and unincorporated association;

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

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

"continuing", in relation to any Default or any Event of Default, means that the Default or the Event of Default has not been remedied or waived;

“control” of an entity means:

(a)

the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

(i)

cast, or control the casting of, more than 50 per cent of the maximum number of votes that might be cast at a general meeting of that entity; or

(ii)

appoint or remove all, or the majority, of the directors or other equivalent officers of that entity; or

(iii)

give directions with respect to the operating and financial policies of that entity with which the directors or other equivalent officers of that entity are obliged to comply; and/or

(b)

the holding beneficially of more than 50 per cent of the issued share capital of that entity (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital) (and, for this purpose, any Security Interest over the share capital shall be disregarded in determining the beneficial ownership of such share capital);

and “controlled” shall be construed accordingly;

“document” includes a deed; also a letter or fax;

“guarantee” means any guarantee, letter of credit, bond, indemnity or similar assurance against loss, or any obligation, direct or indirect, actual or contingent, to purchase or assume any indebtedness of any person or to make an investment in or loan to any person or to purchase assets of any person where, in each case, such obligation is assumed in order to maintain or assist the ability of such person to meet its indebtedness and “guaranteed” shall be construed accordingly;

“law” includes any form of delegated legislation, any order or decree, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;

“liability” includes every kind of debt or liability (present or future, certain or contingent), whether incurred as principal or surety or otherwise;

“person” includes any individual, firm, company, corporation, unincorporated body of persons or any state, political sub-division or any agency thereof and local or municipal authority and any international organisation;

“policy”, in relation to any insurance, includes a slip, cover note, certificate of entry or other

document evidencing the contract of insurance or its terms;

“regulation” includes any regulation, rule, official directive, request or guideline whether or not having the force of law of any governmental, intergovernmental or supranational body, agency, department or regulatory, self‑regulatory or other authority or organisation;

“right” means any right, privilege, power or remedy, any proprietary interest in any asset and any other interest or remedy of any kind, whether actual or contingent, present or future, arising under contract or law, or in equity;

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

“liquidation”, “winding up”, “dissolution”, or “administration” of person or a “receiver” or “administrative receiver” or “administrator” in the context of insolvency proceedings or security enforcement actions in respect of a person shall be construed so as to include any equivalent or analogous proceedings or any equivalent and analogous person or appointee (respectively) under the law of the jurisdiction in which such person is established or incorporated or any jurisdiction in which such person carries on business including (in respect of proceedings) the seeking or occurrences of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors.

1.5	Same meaning

Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

1.6	Inconsistency

Unless a contrary indication appears, in the event of any inconsistency between the terms of this Agreement and the terms of any other Finance Document when dealing with the same or similar subject matter (other than as relates to the creation and/or perfection of security) are subject to the terms of this Agreement and, in the event of any conflict between any provision of this Agreement and any provision of any Finance Document (other than in relation to the creation and/or perfection of security) the provisions of this Agreement shall prevail.

1.7	Finance Documents

Where any other Finance Document provides that Clause 1.3 (Interpretation) and Clause 1.4 (Construction of certain terms), shall apply to that Finance Document, any other provision of this Agreement which, by its terms, purports to apply to all or any of the Finance Documents and/or any Security Party shall apply to that Finance Document as if set out in it but with all necessary changes.

THE LOAN

2.1	Commitment to lend

The Lender, relying upon (inter alia) each of the representations and warranties set forth in Clause 6 (Representations and warranties) and in each of the Security Documents, agrees to lend to the Borrowers in (1) Advance and upon and subject to the terms of this Agreement, the amount specified in Clause 1.1 (Amount and Purpose) and the Borrowers shall apply all amounts borrowed under the Commitment in accordance with Clause 1.1 (Amount and Purpose).

2.2	Drawdown Notice irrevocable

A Drawdown Notice must be signed by a director or a duly authorised attorney-in-fact of the Borrowers and shall be effective on actual receipt thereof by the Lender and, once served, it, subject as provided in Clause 3.6 (Market disruption – Non Availability), cannot be revoked without the prior consent of the Lender.

2.3	Drawdown Notice and commitment to borrow

Subject to the terms and conditions of this Agreement, the Commitment shall be advanced to the Borrowers following receipt by the Lender from the Borrowers of a Drawdown Notice not later than 10:00 a.m. (London time) on the third Banking Day before the date on which the drawdown is intended to be made.

2.4	Number of advances agreed

The Commitment shall be advanced to the Borrowers by one (1) Advance and any amount undrawn under the Commitment shall be cancelled and may not be borrowed by the Borrowers at a later date.

2.5	Disbursement

Upon receipt of the relevant Drawdown Notice complying with the terms of this Agreement the Lender shall, subject to the provisions of Clause 7 (Conditions precedent), on the date specified in the relevant Drawdown Notice, make the Commitment available to the Borrowers, and payment to the Borrowers shall be made to the account which the Borrowers specify in the relevant Drawdown Notice.

2.6	Application of proceeds

Without prejudice to the Borrowers’ obligations under Clause 8.1(d) (Use of Loan proceeds), the Lender is not bound to monitor or verify the application of any amount borrowed pursuant to this Agreement and shall have no responsibility for the application of the proceeds of the Loan (or any part thereof) by the Borrowers.

2.7	Termination date of the Commitment

Any part of the Commitment undrawn and uncancelled at the end of the Availability Period shall thereupon be automatically cancelled.

2.8

Evidence

It is hereby expressly agreed and admitted by the Borrowers that abstracts or photocopies of the books of the Lender as well as statements of accounts or a certificate signed by an

authorised officer of the Lender shall be conclusive binding and full evidence, save for manifest error, on the Borrowers as to the existence and/or the amount of the at any time Outstanding Indebtedness, of any amount due under this Agreement, of the applicable interest rate or Default Rate or any other rate provided for or referred to in this Agreement, the Interest Period, the value of additional securities under Clause 8.5(a) (Security shortfall Additional Security), the payment or non payment of any amount. Nevertheless, enforcement procedures or any other court or out-of-court procedure can be commenced by the Lender on the basis of the above mentioned means of evidence including written statements or certificates of the Lender.

2.9	Cancellation

The Borrowers shall be entitled to cancel any undrawn part of the Commitment under this Agreement upon giving the Lender not less than five (5) Banking Days’ notice in writing to that effect, provided that no Drawdown Notice has been given to the Lender under Clause 2.3 (Drawdown Notice and commitment to borrow) for the full amount of the Commitment or in respect of the portion thereof in respect of which cancellation is required by the Borrowers. Any such notice of cancellation, once given, shall be irrevocable. Any amount cancelled may not be drawn. Notwithstanding any such cancellation pursuant to this Clause 2.9 the Borrowers shall continue to be liable for any and all amounts due to the Lender under this Agreement including without limitation any amounts due to the Lender under Clause 10 (Indemnities - Expenses – Fees).

2.10	No security or lien from other person

Neither of the Borrowers has taken or received, and each of the Borrowers undertakes that until all moneys, obligations and liabilities due, owing or incurred by the Borrowers under this Agreement and the Security Documents have been paid in full, none of the Borrowers will take or receive, any security or lien from any other person liable or for any liability whatsoever.

2.11	Interest to co-borrow

The Borrowers have an interest in borrowing jointly and severally in that they are companies which have close financial co-operation and mutual assistance and in that the Commitment would not have been available to each one of the Borrowers separately.

INTEREST

3.1	Normal Interest Rate

The Borrowers shall pay interest on the Loan (or as the case may be, each portion thereof to which a different Interest Period relates) in respect of each Interest Period (or part thereof) on each Interest Payment Date. The interest rate for the calculation of interest shall be the rate per annum determined by the Lender to be the aggregate of (i) the Margin and (ii) LIBOR for that Interest Period, unless there is an Alternative Rate in which case the interest rate for the calculation of interest shall be the rate per annum determined by the Lender to be the aggregate of (i) the Margin and (ii) the Alternative Rate.

3.2	Selection of Interest Period

(a)

Notice: The Borrowers may by notice received by the Lender not later than 10:00 a.m. (London time) on the second Banking Day before the beginning of each Interest Period specify (subject to Clause 3.3 (Determination of Interest Periods) below) whether such Interest Period shall have a duration of one (1) or two (2) or

three (3) months (or such other period as may be requested by the Borrowers and as the Lender, in its sole discretion, may agree to).

(b)

Non-availability of matching deposits for Interest Period selected: If, after the Borrowers by notice to the Lender have selected an Interest Period, the Lender notifies the Borrowers on the same Banking Day before the commencement of that Interest Period that it is not satisfied that deposits in Dollars for a period equal to that Interest Period will be available to it in the London Interbank Market when that Interest Period commences, that Interest Period shall be of such duration as the Lender may advise the Borrowers in writing.

3.3	Determination of Interest Periods

Every Interest Period shall, subject to market availability to be conclusively determined by the Lender, be of the duration specified by the Borrowers pursuant to Clause 3.2 (Selection of Interest Periods) but so that:

(a)

Initial Interest Period: the initial Interest Period in respect of the Loan will commence on the date on which the Commitment is advanced and each subsequent Interest Period will commence forthwith upon the expiry of the preceding Interest Period;

(b)

Interest tranches: if any Interest Period would otherwise overrun one or more Repayment Dates, then, in the case of the last Repayment Date, such Interest Period shall end on such Repayment Date, and in the case of any other Repayment Date or Dates the Loan shall be divided into parts so that there is one part equal to the amount(s) of the Repayment Instalment(s) due on each Repayment Date falling during that Interest Period and having an Interest Period ending on the relevant Repayment Date and another part equal to the amount of the balance of the Loan having an Interest Period determined in accordance with Clause 3.2 (Selection of Interest Period) and the other provisions of this Clause 3.3 and the other provisions of this Clause 3.3 and the expression “Interest Period in respect of the Loan” when used in this Agreement refers to the Interest Period in respect of the balance of the Loan;

(c)

Failure to notify: if the Borrowers fail to specify the duration of an Interest Period in accordance with the provisions of Clause 3.2 (Selection of Interest Period) and this Clause 3.3, such Interest Period shall have a duration of three (3) months unless another period shall be determined by the Lender at its sole discretion provided, always, that such period (whether of three (3) months or of different duration) shall comply with this Clause 3.3,

provided, always, that:

(i)

any Interest Period which commences on the last day of a calendar month, and any Interest Period which commences on the day on which there is no numerically corresponding day in the calendar month during which such Interest Period is due to end, shall end on the last Banking Day of the calendar month during which such Interest Period is due to end; and

(ii)

if the last day of an Interest Period is not a Banking Day the Interest Period shall be extended until the next following Banking Day unless such next following Banking Day falls in the next calendar month in which case such Interest Period shall be shortened to expire on the preceding Banking Day.

3.4	Default Interest

(a)

Default interest: If the Borrowers fail to pay any sum (including, without limitation, any sum payable pursuant to this Clause 3.4) on its due date for payment under any of the Finance Documents, the Borrowers shall pay interest on such sum from the due date up to the date of actual payment (as well after as before judgement) at the rate determined by the Lender pursuant to this Clause 3.4. The period beginning on such due date and ending on such date of payment shall be divided into successive periods as selected by the Lender each of which (other than the first, which shall commence on such due date) shall commence on the last day of the preceding such period. The rate of interest applicable to each such period shall be the aggregate (as determined by the Lender) of (i) two per cent (2%) per annum, (ii) the Margin and (iii) LIBOR. Such interest shall be due and payable on the last day of each such period as determined by the Lender and each such day shall, for the purposes of this Agreement, be treated as an Interest Payment Date, provided that if such unpaid sum is of principal which became due and payable by reason of a declaration by the Lender under Clause 9.2 (Consequences of Default – Acceleration) or a prepayment pursuant to Clauses 4.2 (Voluntary Prepayment), 4.3 (Compulsory Prepayment in case of Total Loss or sale of a Vessel), 8.5(a)(i), 12.1 (Unlawfulness) and 12.2 (Increased Cost) on a date other than an Interest Payment Date relating thereto, the first such period selected by the Lender shall be of a duration equal to the period between the due date of such principal sum and such Interest Payment Date and interest shall be payable on such principal sum during such period at a rate two per cent (2%) above the rate applicable thereto immediately before it fell due. If for the reasons specified in Clause 3.6 (Market disruption – Non Availability), the Lender is unable to determine a rate in accordance with the foregoing provisions of this Clause 3.4, interest on any sum not paid on its due date for payment shall be calculated at a rate determined by the Lender to be two per cent (2%) per annum above the aggregate of (i) the Margin and (ii) the Alternative Rate.

(b)

Compounding of default interest: Any such interest which is not paid at the end of the period by reference to which it was determined shall be compounded every 6 months and shall be payable on demand.

3.5	Notification of Interest and interest rate

The Lender shall notify the Borrowers promptly of the duration of each Interest Period and of each rate of interest determined by it under this Clause 3 without prejudice to the right of the Lender to make determinations at its sole discretion. In case that the Lender fails to notify the Borrowers as above, such failure will not affect the validity of the determination of the Interest Period and Interest Rate made pursuant to this Clause 3 and neither constitute nor will be interpreted as if to constitute a breach of obligation of the Lender except in case of wilful misconduct.

3.6	Market disruption – Non Availability

(a)

Market Disruption Event - Notification: If and whenever, at any time prior to the commencement of any Interest Period, the Lender (in its discretion) shall have determined (which determination shall be conclusive in the absence of manifest error) that a Market Disruption Event has occurred in relation to the Loan for any such Interest Period, then the Lender shall forthwith give notice thereof (a “Determination Notice”) to the Borrowers stating the circumstances falling within Clause 3.6(c) (Meaning of “Market Disruption Event”) which have caused its notice to

be given and the rate of interest on the Loan (or the relevant part thereof) for that Interest Period shall be the percentage rate per annum which is the sum of:

(i)

the Margin; and

(ii)

the rate which expresses as a percentage rate per annum the cost to the Lender of funding the Loan (or the relevant part thereof) from whatever source it may select.

(b)

Suspension of drawdown: If the Determination Notice is given before the Commitment (or a part thereof) is advanced, the Lender's obligation to make the Commitment (or a part thereof) available shall be suspended while the circumstances referred to in the Determination notice continue.

(c)

Meaning of “Market Disruption Event”: In this Agreement “Market Disruption Event” means:

(i)

at or about noon on the Quotation Day for the relevant Interest Period no Screen Rate is available for LIBOR for Dollars; and/or

(ii)

before close of business in London on the Quotation Day for the relevant Interest Period, the Lender determines (in its sole discretion) that the cost to it of obtaining matching deposits in the London Interbank Market to fund the Loan (or the relevant part thereof) for such Interest Period would be in excess of the Screen Rate for such Interest Period; and

(iii)

before close of business in London on the Quotation Day for the relevant Interest Period, deposits in Dollars are not available to the Lender in the London Interbank Market in the ordinary course of business in sufficient amounts to fund the Loan (or the relevant part thereof) for such Interest Period.

(d)

Negotiation of alternative rate of interest: If the Determination Notice is served after the Loan is borrowed, the Borrower and the Lender shall enter into negotiations (for a period of not more than 15 days after the date on which the Lender serves the Determination Notice (the “Negotiation Period”) and shall use reasonable endeavours to agree, an alternative interest rate or (as the case may be) an alternative basis for the Lender to fund or continue to fund the Loan during the Interest Period concerned. During the Negotiation Period the Lender shall set an Interest Period and interest rate representing the Cost of Funding of the Lender in Dollars, in each case as determined by the Lender, of the Loan plus the Margin.

(e)

Application of agreed alternative rate of interest: Any alternative interest rate or an alternative basis which is agreed during the Negotiation Period shall be binding on the Lender and all Security Parties and shall take effect in accordance with the terms agreed.

(e)

Alternative basis of interest in absence of agreement: If the Lender and the Borrowers will not enter into negotiations as provided in Clause 3.6(d)(i) or if an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation Period, then the Lender shall set the following Interest Period and an interest rate representing the cost of funding of the Lender in Dollars of the Loan (or the relevant part thereof) plus the Margin for such Interest Period; if the relevant circumstances

are continuing at the end of the Interest Period so set by the Lender and the Borrowers and the Lender are unable to agree a suitable alternative basis, the Lender shall continue to set the following Interest Period and an interest rate representing its cost of funding in Dollars of the Loan (or the relevant part thereof) plus the Margin for such Interest Period until such time as the circumstances specified in Sub-Clause 3.6(a) (Market Disruption Event) shall no longer exist, whereupon the normal rate of interest shall apply.

(f)

Notice of prepayment: If the Borrowers do not agree with an interest rate set by the Lender under Clause 3.6(e) (Alternative basis of interest in absence of agreement), the Borrowers may give the Lender not less than 5 Banking Days’ notice of its intention to prepay the Loan at the end of the interest period set by the Lender.

(g)

Prepayment; termination of Commitment: A notice under Clause 3.6(f) (Notice of prepayment) shall be irrevocable; and on the last Banking Day of the interest period set by the Lender, the Borrowers, if the Commitment has already been advanced, shall prepay (without premium or penalty) the Loan, together with accrued interest thereon at the applicable rate plus the Margin and the balance of the Outstanding Indebtedness or, if the Commitment has not been advanced, the Commitment shall be reduced to zero and no Advance shall be made to the Borrowers under this Agreement thereafter.

(h)

Application of prepayment: The provisions of Clause 4 (Repayment-Prepayment) shall apply in relation to the prepayment made hereunder.

3.7 Replacement of Screen Rate

(a)

If a Screen Rate Replacement Event has occurred in relation to the Screen Rate for dollars, any amendment or waiver which relates to:

(i)

providing for the use of a Replacement Benchmark in relation to that currency in place of that Screen Rate ; and

(ii)

(1)

aligning any provision of any Finance Document to the use of that Replacement Benchmark;

(2)

enabling that Replacement Benchmark to be used for the calculation of interest under this Agreement (including, without limitation, any consequential changes required to enable that Replacement Benchmark to be used for the purposes of this Agreement);

(3)

implementing market conventions applicable to that Replacement Benchmark;

(4)

providing for appropriate fallback (and market disruption) provisions for that Replacement Benchmark; or

(5)

adjusting the pricing to reduce or eliminate, to the extent reasonably practicable, any transfer of economic value from one Party to another as a result of the application of that Replacement Benchmark (and if any adjustment or method for calculating any adjustment has been formally designated, nominated or

recommended by the Relevant Nominating Body, the adjustment shall be determined on the basis of that designation, nomination or recommendation),

may be made with the consent of the Lender and the Borrowers.

4.	REPAYMENT - PREPAYMENT

4.1

Repayment

The Borrowers shall and it is expressly undertaken by the Borrowers to repay the Loan jointly and severally by (a) twenty (20) quarterly equal repayment instalments (the “Repayment Instalments”), the first of which to be repaid on the date falling three (3) months after the Drawdown Date, and each of the subsequent ones consecutively falling due for payment on each of the dates falling three (3) months after the immediately preceding Repayment Date with the last (the 20^th) of such Repayment Instalments falling due for payment on the Final Maturity Date and (b) a balloon installment in the amount of Dollars Three million ($3,000,000) (the “Balloon Installment”), such Balloon Installment to be repaid together with the last (the 20^th) Repayment Installment on the Final Maturity Date; subject to the provisions of this Agreement, each of the Repayment Instalments shall be in the amount of Dollars Four hundred thousand ($400,000);

provided that (a) if the last Repayment Date would otherwise fall after the Final Maturity Date, the last Repayment Date shall be the Final Maturity Date, (b) there shall be no Repayment Dates after the Final Maturity Date, (c) on the Final Maturity Date the Borrowers shall also pay to the Lender any and all other monies then due and payable under this Agreement and the other Finance Documents, (d) if any part of the Commitment is not advanced to the Borrowers the amounts of the Repayment Instalments and the Balloon Instalment shall be reduced pro-rata, and (e) if any of the Repayment Instalments shall become due on a day which is not a Banking Day, the due date therefor shall be extended to the next succeeding Banking Day unless such Banking Day falls in the next calendar month, in which event such due date shall be the immediately preceding Banking Day.

4.2	Voluntary Prepayment

The Borrowers shall have the right, to prepay, part or all of the Loan in each case together with all unpaid interest accrued thereon and all other sums of money whatsoever due and owing from the Borrowers to the Lender hereunder or pursuant to the other Finance Documents and all interest accrued thereon, provided that:

(a)

the Lender shall have received from the Borrowers not less than five (5) days’ prior notice in writing (which shall be irrevocable) of their intention to make such prepayment and specify the account and the date on which such prepayment is to be made;

(b)

such prepayment may take place only on the last day of an Interest Period relating to the whole of the Loan;

(c)

each such prepayment shall be equal to One hundred thousand Dollars ($100,000) or a whole multiple thereof or the balance of the Loan;

(d)

any prepayment of less than the whole of the Loan will be applied in or towards pro-rata satisfaction of the outstanding Repayment Installments and the Balloon Installment;

(e)

every notice of prepayment shall be effective only on actual receipt by the Lender, shall be irrevocable and shall oblige the Borrowers to make such prepayment on the date specified;

(f)

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

(g)

no amount prepaid may be re-borrowed; and

(h)

the Borrowers may not prepay the Loan or any part thereof save as expressly provided in this Agreement;

Provided always that if the Borrowers shall, subject always to Clause 4.2(a), make a prepayment on a Banking Day other than the last day of an Interest Period in respect of the whole of the Loan, it shall, in addition to the amount prepaid and accrued interest, pay to the Lender any amount which the Lender may certify is necessary to compensate the Lender for any Break Costs incurred by the Lender as a result of the making of the prepayment in question.

4.3	Compulsory Prepayment in case of Total Loss or sale of a Vessel

(a)

Total Loss of a Vessel: On a Vessel becoming a Total Loss:

(i)

prior to the advancing of the Commitment, the obligation of the Lender to make available the Commitment shall immediately cease and the Commitment shall be reduced to zero; or

(ii)

in case the Commitment or, as the case may be, any part thereof has been already advanced, the amount of the Loan shall, on 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 Lender of the insurance proceeds relating to such Total Loss, be reduced by an amount equal to the Relevant Percentage (as hereinafter defined) of the Loan and the Borrowers shall thereupon be obliged to make such repayment of the Relevant Percentage of the Loan.

(b)

Sale or refinancing of a Mortgaged Vessel: In the event of a sale or other disposal of any Mortgaged Vessel or in case of refinancing of a Mortgaged Vessel by another bank or financial institution or if the Borrowers request the Lender’s consent for the discharge of the Mortgage registered on a Mortgaged Vessel the amount of the Loan shall be reduced by an amount equal to the Relevant Percentage (as hereinafter defined) and the Borrowers shall thereupon be obliged to make such repayment of the Relevant Percentage of the Loan;

AND for the purpose of this Clause 4.3 “Relevant Percentage” in relation to any Mortgaged Vessel, means an amount equal to the higher of:

(i)

an amount equal to the proportion which the Market Value of such Mortgaged Vessel bears to the aggregate of the Market Values of both Mortgaged Vessels based on the valuations of such Vessels carried out under Clause 8.5(b) (Valuation of Vessels) immediately before the Total Loss occurred or the sale or other disposal of the relevant Mortgaged Vessel, as the case may be occurs; and

(ii)

the amount which is required to be repaid to the Lender so that, after the payment to the Lender of the amount referred to in paragraph (i), the aggregate of (1) the Market Value of the Vessel remaining mortgaged to the Lender determined in accordance with Clause 8.5(b) (Valuation of Vessels) immediately after the Total Loss or the sale or other disposal of the relevant Vessel, as the case may be, and (2) the Pledged Deposit is at least equal to 125% of the amount of the Loan;

provided, however, that if the relevant Mortgaged Vessel so lost or sold or otherwise disposed of is the last Mortgaged Vessel, then the full amount of the insurance or, as the case may be, the sale proceeds shall apply against repayment of the Outstanding Indebtedness and additionally the Borrowers shall pay to the Lender the balance (if any) of the Outstanding Indebtedness.

4.4	Application by the Lender in case of compulsory prepayment

Any amount prepaid in accordance with Clause 4.3(a) (Total Loss of a Mortgaged Vessel), and Clause 4.3(b) (Sale of a Mortgaged Vessel) which is less than the whole of the Outstanding Indebtedness will be applied by the Lender in or towards pro rata satisfaction of the outstanding Repayment Instalments and the Balloon Instalment.

4.5	Amounts payable on prepayment

Any prepayment of all or part of the Loan under this Agreement shall be made together with:

(a)

accrued interest on the amount of the Loan to the date of such prepayment (calculated, in the case of a prepayment pursuant to Clause 3.6 (Market disruption – Non Availability) at a rate equal to the aggregate of the Margin and the cost to the Lender of funding the Loan);

(b)

any additional amount payable under Clause 5.3 (Gross Up);

(c)

all other sums payable by the Borrowers to the Lender under this Agreement or any of the other Finance Documents including, without limitation, any amounts payable under Clause 10 (Indemnities - Expenses – Fees); and

(d)

in relation to any prepayment made on a date other than an Interest Payment Date in respect of the whole of the Loan, it shall, in addition to the amount prepaid and accrued interest, pay to the Lender any amount which the Lender may certify is necessary to compensate the Lender for any Break Costs incurred by the Lender as a result of the making of the prepayment in question.

5.	PAYMENTS, TAXES AND COMPUTATION

5.1	Payment - No set-off or Counterclaims

(a)

The Borrowers hereby jointly and severally acknowledge that in performing their respective obligations under this Agreement, the Lender will be incurring liabilities to third parties in relation to the funding of amounts to the Borrowers, such liabilities matching the liabilities of the Borrowers to the Lender and that it is reasonable for the Lender to be entitled to receive payments from the Borrowers gross on the due date in order that the Lender is put in a position to perform its matching obligations to the relevant third parties. Accordingly, all payments to be made by the Borrowers under this Agreement and/or any of the other Finance Documents shall be made in full, without any set-off or counterclaim whatsoever and, subject as provided in Clause 5.3 (Gross Up), free and clear of any deductions or withholdings or Governmental Withholdings whatsoever, as follows:

(i)

in Dollars (except for charges or expenses which shall be paid in the currency in which they are incurred), not later than 10:00 a.m. (London time) on the Banking Day (in Piraeus, Athens, London and New York City) on which the relevant payment is due under the terms of this Agreement; and

(ii)

to such account and at such bank as the Lender may from time to time specify for this purpose by written notice to the Borrowers, reference: “Pikachu Shipping Co./Spetses Shipping Co./Loan Agreement dated: 22^nd November, 2019” provided, however, that the Lender shall have the right to change the place of account for payment, upon three (3) Banking Days’ prior written notice to the Borrowers.

(b)

If at any time it shall become unlawful or impracticable for the Borrowers (or any of them) to make payment under this Agreement to the relevant account or bank referred to in Clause 5.1(a), the Borrowers may request and the Lender may agree to alternative arrangements for the payment of the amounts due by the Borrowers to the Lender under this Agreement or the other Finance Documents.

5.2	Payments on Banking Days

All payments due shall be made on a Banking Day. If the due date for payment falls on a day which is not a Banking Day, that payment due shall be made on the immediately following Banking Day unless such Banking Day falls in the next calendar month, in which case payments shall fall due and be made on the immediately proceeding Banking Day.

5.3

Gross Up

If at any time any law, regulation, regulatory requirement or requirement of any governmental authority, monetary agency, central bank or the like compels the Borrowers to make payment subject to Governmental Withholdings, the Borrowers shall pay to the Lender such additional amounts as may be necessary to ensure that there will be received by the Lender a net amount equal to the full amount which would have been received had payment not been made subject to such Governmental Withholdings. The Borrowers shall indemnify the Lender against any losses or costs incurred by the Lender by reason of any failure of the Borrowers to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. The Borrowers shall, not later than thirty (30) days after each deduction, withholding or payment of any Governmental Withholdings, forward to the Lender official receipts and any other documentary receipts and any other documentary evidence reasonably required by the

Lender in respect of the payment made or to be made of any deduction or withholding or Governmental Withholding. The obligations of the Borrowers under this provision shall, subject to applicable law, remain in force notwithstanding the repayment of the Loan and the payment of all interest due thereon pursuant to the provisions of this Agreement.

5.4	Mitigation

If circumstances arise which would result in an increased amount being payable by the Borrower under this Clause then, without in any way limiting the rights of the Lender under this Clause, the Lender shall use reasonable endeavours to transfer the obligations, liabilities and rights under this Agreement and the Security Documents to another office or financial institution not affected by the circumstances, but the Lender shall be under no obligation to take any such action if in its opinion, to do so would or might:

(a)

have an adverse effect on its business, operations or financial condition on the Lender; or

(b)

involve it in any activity which is unlawful or prohibited or any activity that is contrary to, or inconsistent, with any regulation of the Lender; or

(c)

involve the Lender in any expense (unless indemnified to its reasonable satisfaction) or tax disadvantage.

5.5	Claw-back of Tax benefit

If, following any such deduction or withholding as is referred to in Clause 5.3 (Gross-up) from any payment by the Borrower, the Lender shall receive or be granted a credit against or remission for any Taxes payable by it, the Lender shall, subject to the Borrower having made any increased payment in accordance with Clause 5.3 (Gross-up) and to the extent that the Lender can do so without prejudicing its retention of the amount of such credit or remission and without prejudice to the right of the Lender to obtain any other relief or allowance which may be available to it, reimburse the Borrower with such amount as the Lender shall in its absolute discretion certify to be the proportion of such credit or remission as will leave the Lender (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 Borrower. Such reimbursement shall be made forthwith upon the Lender certifying that the amount of the credit or remission has been received by it, provided, always, that:

(a)

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

(b)

nothing in this Clause shall oblige the Lender to rearrange its tax affairs in any particular manner, to claim any type of relief, credit, allowance or deduction instead of, or in priority to, another or to make any such claim within any particular time or to disclose any information regarding its tax affairs and computations;

(c)

nothing in this Clause shall oblige the Lender to make a payment which exceeds any repayment or credit in respect of tax on account of which the Borrower has made an increased payment under this Clause;

(d)

any allocation or determination made by the Lender under or in connection with this Clause shall be binding on the Borrower; and

(e)

without prejudice to the generality of the foregoing, the Borrower shall not, by virtue of this Clause 5.5, be entitled to enquire about the Lender’s tax affairs.

5.6	Loan Account

All sums advanced by the Lender to the Borrowers under this Agreement and all interest accrued thereon and all other amounts due under this Agreement from time to time and all repayments and/or payments thereof shall be debited and credited respectively to a separate loan account maintained by the Lender in accordance with its usual practices in the name of the Borrowers. The Lender may, however, in accordance with its usual practices or for its accounting needs, maintain more than one account, consolidate or separate them but all such accounts shall be considered parts of one single loan account maintained under this Agreement. In case that a ship mortgage in the form of Account Current is granted as security under this Agreement, the account(s) referred to in this Clause shall be the Account Current referred to in such mortgage.

5.7	Computation

All interest and other payments payable by reference to a rate per annum under this Agreement shall accrue from day to day and be calculated on the basis of actual days elapsed and a 360 day year.

6.	REPRESENTATIONS AND WARRANTIES

6.1	Continuing representations and warranties

The Borrowers jointly and severally represent and warrant to the Lender that;

(a)

Due Incorporation/Valid Existence: Each of the Borrowers and the other corporate Security Parties is duly incorporated and validly existing and in good standing under the laws of their respective countries of incorporation, and have power to own their respective property and assets, to carry on their respective business as the same are now being lawfully conducted and to purchase, own, finance and operate vessels, or, as the case may be, manage vessels, as well as to undertake the obligations which such Security Party has undertaken or shall undertake pursuant to the Finance Documents and does not have a place of business in the United Kingdom or the United States of America;

(b)

Due Corporate Authority: Each of the Borrowers has power to execute, deliver and perform its obligations under the Finance Documents to which is or is to be a party and to borrow the Commitment and each of the other Security Parties has power to execute and deliver and perform its/his obligations under the Finance Documents to which it/he is or is to be a party; all necessary corporate, shareholder and other action has been taken to authorise the execution, delivery and performance of the same and no limitation on the powers of the Borrowers (or any of them) to borrow will be exceeded as a result of borrowing the Loan;

(c)

Litigation: no litigation or arbitration, tax claim or administrative proceeding (including action relating to any alleged or actual breach of the ISM Code and the ISPS Code) involving a potential liability of the Borrowers (or any of them) or any other Security Party is current or pending or (to its or its officers’ knowledge) threatened against the Borrowers (or any of them) or any other Security Party, which, if adversely determined, would have a Material Adverse Effect of any of them;

(d)

No conflict with other obligations: the execution and delivery of, the performance of its obligations under, and compliance with the provisions of, the Finance Documents by the relevant Security Parties will not (i) contravene any existing

applicable law, statute, rule or regulation or any judgment, decree or permit to which the Borrowers (or any of them) or any other Security Party is subject, (ii) conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which the Borrowers (or any of them) or any other Security Party is a party or is subject to or by which it or any of its property is bound, (iii) contravene or conflict with any provision of the memorandum and articles of association/articles of incorporation/by-laws/statutes or other constitutional documents of the Borrowers (or any of them) or any other Security Party or (iv) result in the creation or imposition of or oblige the Borrowers (or any of them) or any other Security Party to create any Security Interest (other than a Permitted Security Interest) on any of the undertakings, assets, rights or revenues of the Borrowers (or any of them) or any other Security Party;

(e)

Financial Condition: the financial condition of the Borrowers (or any of them) and of the other Security Parties (other than the Approved Manager) has not suffered any material deterioration since that condition was last disclosed to the Lender;

(f)

No Immunity: neither the Borrowers nor any other Security Party nor any of their respective assets are entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgement, execution or other enforcement);

(g)

Shipping Company: each of the Borrowers and the Approved Manager is a shipping company involved in the owning or, as the case may be, managing of ships engaged in international voyages and earning profits in free foreign currency;

(h)

Licences/Authorisation: every consent, authorisation, license or approval of, or registration with or declaration to, governmental or public bodies or authorities or courts required by any Security Party to authorise, or required by any Security Party in connection with, the execution, delivery, validity, enforceability or admissibility in evidence of each of the Finance Documents or the performance by each Security Party of its obligations under the Finance Documents to which such Security Party is or is to be a party has been obtained or made and is in full force and effect and there has been no default in the observance of any of the conditions or restrictions (if any) imposed in, or in connection with, any of the same so far as the Borrowers are aware;

(i)

Perfected Securities: the Finance Documents do now or, as the case may be, will, upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents):

(i)

constitute the relevant Security Party's legal, valid and binding obligations enforceable against that Security Party in accordance with their respective terms (having the requisite corporate benefit which is legally and economically sufficient); and

(ii)

create legal, valid and binding Security Interests (having the priority specified in the relevant Finance Document) enforceable in accordance with their respective terms over all the assets and revenues intended to be covered to which they, by their terms, relate, subject to any relevant insolvency laws affecting creditors' rights generally;

(m)

No third party Security Interests: without limiting the generality of Clause 6.1(i) (Perfected Securities), at the time of the execution and delivery of each Finance Document to which each Borrower is a party:

(i)

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

(ii)

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

(j)

No Notarisation/Filing/Recording: save for the registration of any Mortgage in the appropriate shipping Registry, it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement or any of the other Finance Documents that it or they or any other instrument be notarised, filed, recorded, registered or enrolled in any court, public office or elsewhere or that any stamp, registration or similar tax or charge be paid on or in relation to this Agreement or the other Finance Documents;

(k)

Taxes paid: each Borrower has paid all taxes applicable to, or imposed on or in relation to that Borrower, its business or its Vessel; and

(l)

Valid Choice of Law: the choice of law agreed to govern this Agreement and/or any other Finance Document and the submission to the jurisdiction of the courts agreed in each of the Finance Documents are or will be, on execution of the respective Finance Documents, valid and binding on each of the Borrowers and any other Security Party which is or is to be a party thereto.

6.2	Initial representations and warranties

The Borrowers further jointly and severally represent and warrant to the Lender that:

(a)

Direct obligations - Pari Passu: the obligations of the Borrowers under this Agreement are direct, general and unconditional obligations of the Borrowers and rank at least pari passu with all other present and future unsecured and unsubordinated Financial Indebtedness of the Borrowers with the exception of any obligations which are mandatorily preferred by law;

(b)

Information: all information, accounts, statements of financial position, exhibits and reports furnished by or on behalf of any Security Party to the Lender in connection with the negotiation and preparation of this Agreement and each of the other Finance Documents are true and accurate in all material respects and not misleading, do not omit material facts and all reasonable enquiries have been made to verify the facts and statements contained therein; there are no other facts the omission of which would make any fact or statement therein misleading and, in the case of accounts and statements of financial position, they have been prepared in accordance with generally accepted international accounting principles, standards and practices which have been consistently applied;

(c)

No Default: no Default has occurred and is continuing;

(d)

No Taxes: no Taxes are imposed by deduction, withholding or otherwise on any payment to be made by any Security Party under this Agreement and/or any other of the Finance Documents or are imposed on or by virtue of the execution or delivery of this Agreement and/or any other of the Finance Documents or any document or instrument to be executed or delivered hereunder or thereunder. In case that any Tax exists now or will be imposed in the future, it will be borne by the Borrowers;

(e)

No Default under other Financial Indebtedness: neither of the Borrowers nor any other Security Party (other than the Approved Manager) is in Default under any agreement relating to Financial Indebtedness to which it is a party or by which it is or may be bound;

(f)

Ownership/Flag/Seaworthiness/Class/Insurance of the Vessels: each Vessel on the Drawdown Date will be:

(i)

in the absolute and free from Security Interests (other than in favour of the Lender) ownership of the Owner thereof who is and will on and after the Drawdown Date be the sole legal and beneficial owner of that Vessel;

(ii)

registered in the name of the Owner thereof through the relevant Registry of the port of registry of the Flag State under the laws and flag of the Flag State;

(iii)

operationally seaworthy and in every way fit for service;

(iv)

classed with a Classification Society member of IACS, which has been approved by the Lender in writing and such classification is and will be free of all requirements and recommendations of such Classification Society;

(v)

insured in accordance with the provisions of this Agreement and the relevant Mortgage;

(vi)

managed by the Approved Manager; and

(vii)

in full compliance with the ISM and the ISPS Code;

(g)

No Charter: unless otherwise permitted in writing by the Lender, none of the Vessels will on or before the Drawdown Date or be subject to any charter or contract nor to any agreement to enter into any charter or contract which, if entered into after the Drawdown Date would have required the consent of the Lender under any of the Finance Documents and there will not on or before the Drawdown Date be any agreement or arrangement whereby the Earnings of the relevant Vessel may be shared with any other person;

(h)

No Security Interests: neither the Vessel, nor its Earnings, Requisition Compensation or Insurances nor any other properties or rights which are, or are to be, the subject of any of the Security Documents nor any part thereof will, on the Drawdown Date, be subject to any Security Interests other than Permitted Security Interests or otherwise permitted by the Finance Documents;

(i)

Compliance with Environmental Laws and Approvals: eexcept as may already have been disclosed by the Borrowers in writing to, and acknowledged in writing by, the Lender:

(i)

each Borrower and its Related Companies have complied with the provisions of all Environmental Laws;

(ii)

each Borrower and its Related Companies have obtained all Environmental Approvals and are in compliance with all such Environmental Approvals; and

(iii)

neither the Borrowers nor any of their respective Related Companies have received notice of any Environmental Claim that the Borrowers or any of their respective Related Companies are not in compliance with any Environmental Law or any Environmental Approval;

(j)

No Environmental Claims: except as may already have been disclosed by the Borrowers in writing to, and acknowledged in writing by, the Lender:

(i)

there is no Environmental Claim pending or, to the best of the Borrowers’ knowledge and belief, threatened against either Borrower or its Vessel or that Borrower’s Related Companies or any other Relevant Ship; and

(ii)

there has been no emission, spill, release or discharge of a Material of Environmental Concern from the Vessels or any other Relevant Ship or any vessel owned by, managed or crewed by or chartered to either Borrower which could give rise to an Environmental Claim;

(k)

Copies true and complete: the copies of the Management Agreements delivered or to be delivered to the Lender pursuant to Clause 7.1 (Conditions precedent to the execution of this Agreement) are, or will when delivered be, true and complete copies of such documents; such documents will when delivered constitute valid and binding obligations of the parties thereto enforceable in accordance with their respective terms and there will have been no amendments or variations thereof or defaults thereunder;

(l)

DOC and SMC: in relation to each Vessel the DOC applicable to the Approved Manager and the SMC applicable to that Vessel are presently in full effect;

(m)

Compliance with ISM Code: each Vessel will comply on the Drawdown Date and the Operator complies with the requirements of the ISM Code and the SMC which has been or, as the case may be, shall be issued in respect of each relevant Vessel shall remain valid on the Drawdown Date and thereafter throughout the Security Period;

(n)

Compliance with ISPS Code: each Borrower has a valid and current ISSC in respect of its Vessel and it is and will be in full compliance with the ISPS Code; and the Operator complies with the requirements of the ISPS Code and the ISSC in respect of each Vessel shall remain valid throughout the Security Period;

(o)

Shareholdings:

(i)

each Borrower is a fully owned Subsidiary of the Corporate Guarantor and the shares in the Corporate Guarantor are legally and beneficially owned as disclosed to the Lender before signing of this Agreement; and

(ii)

no change of control has been made directly or indirectly in the ownership, beneficial ownership, or management of each of the Borrowers and the Corporate Guarantor or any share therein or of the Vessel and the voting rights in each of the Borrowers and the Corporate Guarantor, but, so far as the Corporate Guarantor is concerned, the result of such change is that either the controlling interest in the Corporate Guarantor ceases to remain in the Beneficial Shareholder(s) disclosed to the Lender before signing of this Agreement and/or such Beneficial Shareholder(s) cease(s) to remain the largest single ultimate beneficial shareholder, unless otherwise permitted by the Lender; and

(p)

No US Tax Obligor: none of the Security Parties is a US Tax Obligor;

(q)

Sanctions: neither any Security Party nor any other member of the Group:

(i)

is a Sanctions Restricted Person;

(ii)

owns or controls directly or indirectly a Sanctions Restricted Person; or

(iii)

has a Sanctions Restricted Person serving as a director, officer or, to the best of its knowledge, employee; and

(iv)

no proceeds of the Loan shall be made available, directly or to the knowledge of the Borrowers, or any of them (after reasonable enquiry) indirectly, to or for the benefit of a Sanctions Restricted Person contrary to Sanctions or for transactions in a Sanctions Restricted Jurisdiction nor shall they be otherwise directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions. EDW

6.3	Money laundering - acting for own account

Each of the Borrowers further jointly and severally represents and warrants and confirms to the Lender that it is the beneficiary for each part of the Loan made or to be made available to it and it will promptly inform the Lender by written notice if it is not, or ceases to be, the beneficiary and notify the Lender in writing of the name and the address of the new beneficiary/beneficiaries; each of the Borrowers is aware that under applicable money laundering provisions, it has an obligation to state for whose account the Loan is obtained; each of the Borrowers confirms that, by entering into this Agreement and the other Finance Documents, it is acting on its own behalf and for its own account and it is obtaining the Loan for its own account. In relation to the borrowing by the Borrowers of the Loan, the performance and discharge of its obligations and liabilities under this Agreement or any of the other Finance Documents and the transactions and other arrangements effected or contemplated by this Agreement or any of the Documents to which each of the Borrowers is a party, it is acting for its own account and that the foregoing will not involve or lead to a contravention of any law, official requirement or other regulatory measure or procedure which has been implemented to combat “money laundering” (as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Community).

6.4	Representations Correct

At the time of entering into this Agreement all above representations and warranties or any other information given by the Borrowers and/or the Approved Manager to the Lender are true and accurate.

6.5	Repetition of Representations and Warranties

The representations and warranties in this Clause 6 (except in relation to the representations and warranties in Clause 6.2 (Initial representations and warranties)) shall be deemed to be repeated by the Borrower:

(a)

on the date of service of the Drawdown Notice;

(b)

on the Drawdown Date; and

(c)

on each Interest Payment Date throughout the Security Period,

as if made with reference to the facts and circumstances existing on each such day.

7.	CONDITIONS PRECEDENT

7.1	Conditions precedent to the execution of this Agreement

The obligation of the Lender to make the Commitment or any part thereof available shall be subject to the condition that the Lender, shall have received, not later than two (2) Banking Days before the day on which the Drawdown Notice in respect of the Commitment or such part thereof is given, the following documents and evidence in form and substance satisfactory to the Lender:

(a)

Constitutional Documents: a duly certified true copy of the Articles of Incorporation and By-Laws or the Memorandum and Articles of Association, or of any other constitutional documents, as the case may be, of each corporate Security Party;

(b)

Certificates of incumbency: a recent certificate of incumbency of each corporate Security Party issued by the appropriate authority and/or at the discretion of the Lender signed by the secretary or a director of each of them respectively, stating the corporate body which binds every one of them, the officers and/or the directors of each of them and containing specimens of their signatures;

(c)

Shareholding: a statement to the Lender confirming the identity of the Beneficial Shareholder(s) of each of the Borrowers and the Corporate Guarantor in line with “know your customer” procedures of the Lender for opening account purposes, who should be acceptable in all respects to the Lender; in the event that the Lender agrees (at its sole discretion) that a Security Party may have a corporate shareholder, the conditions set out in Sub-clauses (a) (Constitutional Documents), (b) (Certificates of incumbency), (d) (Resolutions) and (e) (Powers of Attorney) of this Clause 7.1 shall apply (mutatis mutandis) to such corporate shareholder;

(d)

Resolutions: minutes of separate meetings of the directors and (if required) shareholders of each of the Borrowers and the Corporate Guarantor at which there was approved (inter alia) the entry into, execution, delivery and performance of this Agreement, the other Finance Documents and any other documents executed or to be executed pursuant hereto or thereto to which the relevant Security Party is or is to be a party;

(e)

Powers of Attorney: the original of any power(s) of attorney and any further evidence of the due authority of any person signing this Agreement, the other Finance Documents, and any other documents executed or to be executed pursuant hereto or thereto on behalf of any corporate person;

(f)

Consents: evidence that all necessary licences, consents, permits and authorisations (including exchange control ones) have been obtained by any Security Party for the execution, delivery, validity, enforceability, admissibility in evidence and the due performance of the respective obligations under or pursuant to this Agreement and the other Finance Documents;

(g)

Fees: evidence that the fees referred to in Clause 10.14 (Arrangement Fee) have been paid in full;

(h)

DOC: a copy of the DOC applicable to the Approved Manager certified as true and in effect;

(i)

Other documents: any other documents or recent certificates or other evidence which would be required by the Lender in relation to each Security Party evidencing that the relevant Security Party has been properly established, continues to exist validly and is in good standing;

(j)

Management Agreements – Assignable Charterparty: a copy of each of the following documents certified as true and complete by the legal counsel of the Borrowers:

(i)

each Management Agreement evidencing that the relevant Vessel is managed by the Approved Manager on terms acceptable to the Lender; and

(ii)

any Assignable Charterparty; and

(k)

Operating Accounts: evidence that the Operating Accounts have been duly opened and all mandate forms and other legal documents required for the opening of an account under any applicable law, as well as signature cards and properly adopted authorizations have been duly delivered to and have been accepted by the compliance department of the Lender.

7.2	Conditions precedent to the making of the Commitment

The obligation of the Lender to advance the Commitment (or any part thereof) is subject to the further condition that the Lender shall have received prior to the drawdown or, where this is not possible, simultaneously with the drawdown of the Commitment or the relevant part thereof or the Drawdown Date:

(a)

Conditions precedent: evidence that the conditions precedent set out in Clause 7.1 (Conditions precedent to the execution of this Agreement) remain fully satisfied;

(b)

Drawdown Notice: the Drawdown Notice duly executed, issued and delivered to the Lender as provided in Clause 2.2 (Drawdown Notice and commitment to borrow);

(c)

Security Documents: each of the Security Documents duly executed and where appropriate duly registered with the Registry or any other competent authority (as required);

(d)

Title and no Security Interests: evidence that, prior to or simultaneously with the drawdown, each Vessel will be duly registered in the ownership of the Owner thereof with the Registry and under the laws and flag of the Flag State free from any Security Interests save for those in favour of the Lender and otherwise as contemplated herein;

(e)

Insurances: evidence in form and substance satisfactory to the Lender that each Vessel has been insured in accordance with the insurance requirements provided for in this Agreement and the Security Documents, to be followed by full copies of cover notes, policies, certificates of entry or other contracts of insurance and irrevocable authority is hereby given to the Lender at any time at its discretion to obtain copies of the policies, certificates of entry or other contracts of insurance from the insurers and/or obtain any information in relation to the Insurances relating to that Vessel;

(f)

Insurers’ confirmations: evidence in form and substance satisfactory to the Lender that each Vessel has been insured in accordance with the insurance requirements provided for in this Agreement and the other Security Documents, including a MII,

together with an opinion from insurance consultants (appointed by the Lender at the Borrowers’ expense) as to the adequacy of the insurances effected or to be effected in respect of each Vessel, to be followed by full copies of cover notes, policies, certificates of entry or other contracts of insurance and irrevocable authority is hereby given to the Lender at any time at its discretion to obtain copies of the policies, certificates of entry or other contracts of insurance from the insurers and/or obtain any information in relation to the Insurances relating to each Vessel;

(g)

MII: the MII shall have been effected by the Lender, but at the expense of the Borrowers as provided in Clause 10.9 (MII costs);

(h)

Access to class records: due authorisation from the Drawdown Date in form and substance satisfactory to the Lender authorising the Lender to have access and/or obtain any copies of class records or other information at its discretion from the Classification Society of the relevant Vessel, provided however, that the Lender shall not exercise such right unless and until an Event of Default has occurred and is continuing;

(i)

Notices of assignment: duly executed notices of assignment in the form prescribed by the Security Documents;

(j)

Mortgage registration; evidence that each Mortgage on or before the Drawdown Date will be registered against the relevant Vessel through the Registry under the laws and flag of the Flag State;

(k)

Trading certificates: upon issuance, copies of the trading certificates of each Vessel certified as true and complete by the legal counsel of the Borrowers evidencing the same to be valid and in force;

(l)

Class confirmation: evidence from the Classification Society that on the Drawdown Date each Vessel is classed with the class notation (referred to in the Mortgage relative thereto), with the Classification Society or to a similar standard with another classification society of like standing to be specifically approved by the Lender and remains free from any overdue requirements or recommendations affecting her class;

(m)

Trim and stability booklet: if so requested by the Lender, an extract of the trim and stability booklet certifying the lightweight of each Vessel, certified as true and complete by the legal counsel of the Borrowers;

(n)

DOC and SMC: (i) a certified copy of the DOC issued to the Operator of each Vessel and (ii) a certified copy of the SMC for each Vessel;

(o)

ISM Code Documentation: copies of such applications for ISM Code Documentation as the Lender may by written notice to the Borrowers have requested not later than two (2) days before the Drawdown Date certified as true and complete in all material respects by the Borrowers and the Approved Manager;

(p)

ISPS Code compliance:

(i)

evidence satisfactory to the Lender that each Vessel is subject to a ship security plan which complies with the ISPS Code (such as proof that a security plan has been submitted to the recognized organisation for approval); and

(ii)

a copy, certified as a true and complete copy of the ISSC for each Vessel

delivered to the Lender on the Drawdown Date;

(r)

Valuation: charter free valuation of each Vessel satisfactory to the Lender, to be obtained by the Lender, at the Borrowers’ expense, not earlier than twenty (20) days prior to the expected Drawdown Date, made on the basis and in the manner specified in Clause 8.5(b) (Valuation of Vessels);

(s) Insurance Letters: the Insurance Letters duly executed;

(t)

Confirmations from process agents: confirmation from any agents nominated in this Agreement and elsewhere in the other Finance Documents for the acceptance of any notice or service of process, that they consent to such nomination;

(u)

Acknowledgement of Receipt: a receipt in writing in form and substance satisfactory to the Lender including an acknowledgement and admission of the Borrowers and the Corporate Guarantor to the effect that the Commitment or relevant part thereof (as the case may be) was drawn by the Borrowers and a declaration by the Borrowers and the Corporate Guarantor that all conditions precedent have been fulfilled, that there is no Event of Default and that all the representations and warranties are true and correct;

(v)

Legal opinions: draft opinion from lawyers appointed by the Lender as to all the matters referred to in Clause 6.1(a) (Due Incorporation/Valid Existence) and Clause 6.1(b) (Due Corporate Authority) and all such aspects of law as the Lender shall deem relevant to this Agreement and the other Finance Documents and any other documents executed pursuant hereto or thereto and any further legal or other expert opinion as the Lender at its sole discretion may require;

(w)

Flag State opinion: draft opinion of legal advisers to the Lender on matters of the laws of the Flag State of the relevant Vessel;

(x)

Condition survey report: if the Lender so requires, a satisfactory to the Lender physical condition survey report on each Vessel together with a comprehensive record inspection from a surveyor appointed by the Lender, at the Borrowers’ expense.

7.3	No change of circumstances

The obligation of the Lender to advance the Commitment or any part thereof is subject to the further condition that at the time of the giving of a Drawdown Notice and on advancing the Commitment:

(a)

Representations and warranties: the representations and warranties set out in Clause 6 (Representations and warranties) and in each of the other Finance Documents are true and correct on and as of each such time as if each was made with respect to the facts and circumstances existing at such time;

(b)

No Event of Default: no Event of Default shall have occurred and be continuing or would result from the drawdown;

(c)

No change: the Lender shall be satisfied that (i) there has been no change in the control of any of the Borrowers and the Corporate Guarantor from that disclosed to the Lender at the negotiation of this Agreement and no change directly or indirectly in the ownership, beneficial ownership, or management of the Borrowers (or either of them), each of which is a fully owned Subsidiary of the Corporate Guarantor, or

any share therein or of the Vessels (or either of them), but, so far as the Corporate Guarantor is concerned, the result of such change is that either the control in the Corporate Guarantor ceases to remain in the Beneficial Shareholder(s) disclosed to the Lender before signing of this Agreement and/or such Beneficial Shareholder(s) cease(s) to remain the largest single ultimate beneficial shareholder of the Corporate Guarantor and (ii) there has been no Material Adverse Change in the financial condition of any Security Party which (change) might, in the sole opinion of the Lender, be detrimental to the interests of the Lender, provided, however, that such ‘control’ (as defined in Clause 1.4 (Construction of certain terms) of the Loan Agreement) of each of the Borrowers and Guarantor will remain with such Beneficial Shareholder(s) throughout the remainder of the Security Period; and

(d)

No Market Disruption Event: none of the circumstances contemplated by Clause 3.6 (Market disruption – Non Availability) has occurred and is continuing.

7.4	Know your customer and money laundering compliance

The obligation of the Lender to advance the Commitment or any part thereof is subject to the further condition that the Lender, prior to or simultaneously with the drawdown, shall have received, to the extent required by any change in applicable law and regulation or any changes in the Lender’s own internal guidelines since the date on which the applicable documents and evidence were delivered to the Lender pursuant to Clause 8.9 (Know your customer and money laundering compliance), such further documents and evidence as the Lender shall require to identify the Borrowers and the other Security Parties and any other persons involved or affected by the transaction(s) contemplated by this Agreement.

7.5	Further documents

Without prejudice to the provisions of this Clause 7 each of the Borrowers hereby undertakes with the Lender to make or procure to be made such amendments and/or additions to any of the documents delivered to the Lender in accordance with this Clause 7 and to execute and/or deliver to the Lender or procure to be executed and/or delivered to the Lender such further documents as the Lender and its legal advisors may reasonably require to satisfy themselves that all the terms and requirements of this Agreement have been complied with.

7.6	Waiver of conditions precedent

The conditions specified in this Clause 7 are inserted solely for the benefit of the Lender and may be waived by the Lender in whole or in part and with or without conditions. Without prejudice to any of the other provisions of this Agreement, in the event that the Lender, in its sole and absolute discretion, makes the Commitment available to the Borrowers prior to the satisfaction of all or any of the conditions referred to in Clauses 7.1 (Conditions precedent to the execution of this Agreement), 7.2 (Conditions precedent to the making of the Commitment) and 7.3 (No change of circumstances), each of the Borrowers hereby covenants and undertakes to satisfy or procure the satisfaction of such condition or conditions by no later than fourteen (14) days after the Drawdown Date or within such longer period as the Lender may, in its sole and absolute discretion, agree to or specify.

COVENANTS

8.1

General

(a)

Notice on Material Adverse Change or Default: promptly inform the Lender upon becoming aware of any occurrence which might materially adversely affect the ability of any Security Party to perform its obligations under any of the Finance Documents and, without limiting the generality of the foregoing, will inform the Lender of any Default forthwith upon becoming aware thereof and will from time to time, if so requested by the Lender, confirm to the Lender in writing that, save as otherwise stated in such confirmation, no Default has occurred and is continuing;

(b)

Notification of litigation:

(i)

provide the Lender with details of any legal or administrative action involving that Borrower, the Vessel owned by it, any bareboat charterer, any bareboat guarantor, the Earnings or the Insurances in respect of that Vessel, any Security Party or the Approved Manager, as soon as such action is instituted or it becomes apparent to that Borrower that it is likely to be instituted, unless it is clear that the legal or administrative action cannot be considered material in the context of any Finance Document, and each Borrower shall procure that all reasonable measures are taken to defend any such legal or administrative action; and

(ii)

and shall procure that any bareboat charterer shall supply to the Lender promptly, to the extent permitted by law, details of any claim, action, suit, proceedings or investigation against it with respect to Sanctions by any Sanctions Authority;

(c)

Consents and licenses: without prejudice to Clauses 6 (Representations and warranties) and 7 (Conditions precedent), obtain or cause to be obtained, maintain in full force and effect and comply in all material respects with the conditions and restrictions (if any) imposed in, or in connection with, every consent, authorisation, license or approval of governmental or public bodies or authorities or courts and do or cause to be done, all other acts and things which may from time to time be necessary or desirable under applicable law for the continued due performance of all the obligations of the Security Parties under each of the Finance Documents;

(d)

Use of Loan proceeds: use the Loan exclusively for the purposes specified in Clause 1.1 (Amount and Purpose);

(e)

Pari passu: ensure that its obligations under this Agreement shall, without prejudice to the provisions of this Clause 8.1, at all times rank at least pari passu with all its other present and future unsecured and unsubordinated Financial Indebtedness with the exception of any obligations which are mandatorily preferred by law and not by contract;

(f)

Financial statements: furnish the Lender with (i) audited annual consolidated financial statements of the Corporate Guarantor audited by the auditors acceptable to the Lender and (ii) management prepared accounts of the Borrowers attested by its financial officer, in each case prepared in accordance with internationally

accepted accounting principles and practices consistently applied in respect of each Financial Year as soon as practicable but not later than 180 days after the end of the Financial Year to which they relate, commencing with Financial Year ending on 31^st December, 2019;

(g)

Provision of further information: promptly, when requested, provide the Lender with such financial and other information and accounts relating to the business, undertaking, assets, liabilities, revenues, financial condition commitments, operations or affairs of the Borrowers and the Corporate Guarantor and such other further general information relating to each Security Party as the Lender from time to time may reasonably require;

(h)

Financial Information: provide the Lender from time to time as the Lender may reasonably request with information on the financial conditions, cash flow position, commitments and operations of the Borrowers and the Corporate Guarantor including cash flow analysis and voyage accounts of each Vessel with a breakdown of income and running expenses showing net trading profit, trade payables and trade receivables, such financial details to be certified by an authorized signatory of the Borrowers as to their correctness;

(i)

Information on the employment of the Vessels: provide the Lender from time to time as the Lender may request with information on the employment of each Vessel, as well as on the terms and conditions of any charterparty, contract of affreightment, agreement or related document in respect of the employment of each Vessel, such information to be certified by one of the directors of the Borrowers as to their correctness;

(j)

Pledged Deposit: procure that upon drawdown and at all times during the Security Period, the Borrowers shall maintain in interest bearing accounts with the Lender an amount of Dollars Five hundred thousand ($500,000) ($250,000 per Vessel) (which for the purpose of this Agreement shall be called herein the “Pledged Deposit”), which amount will remain pledged in favour of the Lender throughout the Security Period; provided however that in case of sale or refinancing of either Vessel the amount of the Pledged Deposit will be reduced to $250,000;

(k)

Banking operations: ensure that all banking operations in connection with the Vessels are carried out through the Lending Office of the Lender;

(l)

Subordination: ensure that all Financial Indebtedness of the Borrowers to their respective shareholders is fully subordinated to the rights of the Lender under the Finance Documents, all in a form acceptable to the Lender, and to subordinate to the rights of the Lender under the Finance Documents any Financial Indebtedness issued to it by its shareholders, all in a form acceptable to the Lender;

(m)

Obligations under Finance Documents: duly and punctually perform each of the obligations expressed to be assumed by it under the Finance Documents;

(n)

Payment on demand: pay to the Lender on demand any sum of money which is payable by the Borrowers to the Lender under this Agreement but in respect of which it is not specified in any other Clause when it is due and payable;

(o)

Compliance with Laws and Regulations: comply, or procure compliance with all laws or regulations relating to it and/or its Vessel, its ownership, operation and management or to the business of such Borrower and cause this Agreement and the other Finance Documents to comply with and satisfy all the requirements and

formalities established by the applicable laws to perfect this Agreement and the other Finance Documents as valid and enforceable Finance Documents;

(p)

Maintenance of Security Interests:

(i)

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

(ii)

without limiting the generality of paragraph (p) above, at its own cost, promptly register, file, record or enrol any Finance Document with any court or authority in all Relevant Jurisdictions, pay any stamp, registration or similar tax in all Relevant Jurisdictions in respect of any Finance Document, give any notice or take any other step which may be 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;

(q)

Registered Office: maintain its registered office at the address referred to in the Recitals; and will not establish, or do anything as a result of which it would be deemed to have, a place of business in the United Kingdom or the United States of America;

(r)

Compliance with Covenants: duly and punctually perform all obligations under this Agreement and the other Finance Documents; and

(s)

No US Tax Obligor: procure that, unless otherwise agreed by the Lender, no Security Party shall become a US Tax Obligor.

8.2	Negative undertakings

(a)

Negative pledge:

(i)

not permit any Security Interest (other than a Permitted Security Interest) to subsist, arise or be created or extended over all or any part of its present or future undertakings, assets, rights or revenues to secure or prefer any present or future Financial Indebtedness or other liability or obligation of the Borrowers (or any of them) or any other person other than in the normal course of its business of owning, financing and operating vessels and owning or acquiring ship-owning companies; and

(ii)

not cease to hold the legal title to, and own the entire beneficial interest in its Vessel, its Insurances and Earnings, free from all Security Interests and other interests and rights of every kind, except for those created by the Finance Documents and the effect of the assignments contained in the relevant General Assignment and any other Finance Documents;

(b)

No further Financial Indebtedness: not incur any further Financial Indebtedness nor authorise or accept any capital commitments (other than that normally associated with the day to day operations and trading of the Borrowers and any Financial

Indebtedness that is subordinated (in writing with the Lender’s prior written consent, at its discretion, and pursuant to a subordination agreement acceptable to the Lender) to all Financial Indebtedness incurred under the Finance Documents) nor enter into any agreement for payment on deferred terms or hire agreement;

(c)

No merger: not merge or consolidate with any other person;

(d)

No disposals:

(i)

not sell, transfer, abandon, lend, lease or otherwise dispose of or cease to exercise direct control over any part (being either alone or when aggregated with all other disposals falling to be taken into account pursuant to this Clause 8.2(d) material in the opinion of the Lender in relation to the undertakings, assets, rights and revenues of the Borrowers) of its present or future undertaking, assets, rights or revenues (otherwise than by transfers, sales or disposals for full consideration in the ordinary course of operations and trading) whether by one or a series of transactions related or not; and

(ii)

not transfer, lease or otherwise dispose of any debt payable to it or any other right (present, future or contingent right) to receive a payment, including any right to damages or compensation;

(e)

No acquisitions: not acquire any further assets other than its Vessel and rights arising under contracts entered into by or on behalf of that Borrower other than in the ordinary course of its business of owning, operating and chartering its Vessel;

(f)

No other business: not undertake any type of business other than its current business of owning, financing and operating vessels and owning or acquiring ship-owning companies;

(g)

No investments: not make any investments in any person, asset, firm, corporation, joint venture or other entity;

(h)

No other obligations: not incur any liability or obligations except liabilities and obligations arising under the Finance Documents or contracts entered into in the ordinary course of its business of owning, operating, maintaining, repairing and chartering its Vessel (and for the purposes of this Clause 8.2(h) fees to be paid pursuant to the Management Agreement in respect of its Vessel shall be considered as permitted obligations under the Finance Documents);

(i)

No borrowing: not incur any Borrowed Money except for Borrowed Money pursuant to the Finance Documents;

(j)

No repayment of borrowings: not repay the principal of, or pay interest on or any other sum in connection with, any of its Borrowed Money except for Borrowed Money pursuant to the Finance Documents;

(k)

No Payments: unless otherwise provided in this Agreement and the other Finance Documents (and then only to the extent expressly permitted by the same) not pay out any funds (whether out of the Earnings or out of moneys collected under the relevant General Assignment and/or the other Finance Documents or not) to any person except in connection with the administration of such Borrower and the operation and/or maintenance and/or repair and/or trading of its Vessel;

(l)

No guarantees: not issue any guarantees or indemnities or otherwise become

directly or contingently liable for the obligations of any person, firm, or corporation except pursuant to the Finance Documents and except for, in the case of such Borrowers, guarantees or indemnities from time to time required in the ordinary course of its business or by any protection and indemnity or war risks association with which its Vessel is entered, guarantees required to procure the release of its Vessel from any arrest, detention, attachment or levy or guarantees or undertakings required for the salvage of its Vessel;

(m)

No loans: not make any loans or advances to, or any investments in any person, firm, corporation, joint venture or other entity including (without limitation) any loan or advance or grant any credit (save for normal trade credit in the ordinary course of business) to any officer, director, stockholder or employee or any other company managed by the Approved Manager directly or through the Approved Managers of the Vessels or agree to do so, provided, always, that any loans of its shareholders to either Borrower shall be fully subordinated to that Borrower's obligations under this Agreement and the other Finance Documents;

(n)

No securities: not permit any Financial Indebtedness of the Borrowers (or any of them) to any person (other than the Lender) to be guaranteed by any person (save, in the case of either Borrower, for guarantees or indemnities from time to time required in the ordinary course of business or by any protection and indemnity or war risks association with which its Vessel is entered, guarantees required to procure the release of its Vessel from any arrest, detention, attachment or levy or guarantees or undertakings required for the salvage of its Vessel);

(o)

No dividends or distribution: not declare or pay any dividends or other distribution under any name or description upon any of the issued shares or otherwise dispose of any of its present or future assets, undertakings, rights or revenues (which are all assigned to the Lender) to any of the shareholders of either Borrower without the prior written consent of the Lender, provided that, subject to (i) no Event of Default having occurred and being continuing and (ii) no Event of Default resulting from the payment of such dividends or the making of any other form of distribution, a Borrower shall be entitled to declare or make payments of any dividends without the prior written approval of the Lender;

(p)

No Subsidiaries: not form or acquire any Subsidiaries;

(q)

No change of business structure: not change the nature, organisation and conduct of its business or carry on any business other than the business carried on at the date of this Agreement;

(r)

No change of legal structure: (such consent not be unreasonably withheld) ensure that none of the documents defining the constitution of such Borrower shall be materially (in the Lender’s opinion) altered in any manner whatsoever;

(s)

No Security Interest on assets: other than Permitted Security Interests, not allow any part of its undertaking, property, assets or rights, whether present or future, to be mortgaged, charged, pledged, used as a lien or otherwise encumbered without the prior written consent of the Lender;

(t)

No change of control: ensure that no change shall be made directly or indirectly in the ownership, beneficial ownership, control or management of any of the Borrowers and the Corporate Guarantor or any share therein, or any of the Vessels, as a result of which the ultimate legal and beneficial ownership of the Beneficial

Shareholder(s) disclosed to the Lender at the negotiation of this Agreement and confirmed in writing on or before the date hereof is materially changed, but so far as the Corporate Guarantor is concerned the result of such change is that either the control in the Corporate Guarantor ceases to remain in the Beneficial Shareholder(s) disclosed to the Lender before signing of this Agreement and/or such Beneficial Shareholder(s) cease(s) to remain the largest single ultimate beneficial shareholder of the Corporate Guarantor, provided, however, that such ‘control’ (as defined in Clause 1.4 (Construction of certain terms) of the Loan Agreement) of each of the Borrowers and Guarantor will remain with such Beneficial Shareholder(s) throughout the remainder of the Security Period; and

(u)

No Master Agreement Derivatives: not enter into any transaction in a derivative of any description whatsoever.

8.3	Undertakings concerning the Vessels

(a)

Conveyance on default: where a Vessel is (or is to be) sold in exercise of any power conferred on the Lender, execute, forthwith upon request by the Lender, such form of conveyance of that Vessel as the Lender may require;

(b)

Mortgage: execute, and procure the registration of the relevant Mortgage over each Vessel under the laws and flag of the Flag State immediately upon the drawdown of the Loan on the Drawdown Date;

(c)

Chartering: not let or agree its Vessel to be let:

(i)

on demise charter for any period; or

(ii)

without the prior written consent of the Lender (such consent not to be unreasonably withheld) by any Assignable Charterparty; or

(iii)

on terms whereby more than two (2) months’ hire (or the equivalent) is payable in advance; or

(iv)

otherwise than on bona fide arm’s length terms at the time when its Vessel is fixed; or

(v)

under any pooling or sharing agreement in respect thereof on terms whereby any and all the Earnings of either Vessel are pooled or shared with any other person;

(d)

Laid-up: not de-activate or lay up its Vessel;

(e)

No amendment to Assignable Charterparty: not waive or fail to enforce, any Assignable Charterparty to which it is a party or any of its provisions, and will promptly notify the Lender of any material amendment or supplement to any Assignable Charterparty;

(f)

Approved Manager: not without the prior written consent of the Lender (such consent not to be unreasonably withheld) agree or appoint a manager of either Vessel other than the Approved Manager;

(g)

Ownership/Management/Control: ensure that each Vessel will be registered on the Drawdown Date in the ownership of the Owner thereof under the laws of the Flag State and thereafter ensure that each Vessel will maintain her registration, ownership, management, control and beneficial ownership;

(h)

Class: ensure that each Vessel will remain in class free of overdue recommendations or average damage affecting class or permitted by the Classification Society and provide the Lender on demand with copies of all class and trading certificates of each Vessel;

(i)

Insurances: ensure that all Insurances (as defined in the relevant Mortgage/General Assignment) of each Vessel is maintained and comply with all insurance requirements specified in this Agreement and in the relevant Mortgage and in case of failure to maintain either Vessel so insured, authorise the Lender (and such authorisation is hereby expressly given to the Lender) to have the right but not the obligation to effect such Insurances on behalf of the Owner (and in case that either Vessel remains in port for an extended period) to effect port risks insurances at the cost of the Borrowers which, if paid by the Lender, shall be Expenses; the Lender shall be entitled to obtain once per year at Borrowers’ expense an opinion from insurance consultants (appointed by the Lender at the Borrowers’ expense) as to the adequacy of the insurances effected or to be effected in respect of each Vessel, Provided that (i) if an Event of Default has occurred and is continuing or (ii) if there has been any change in the insurance placement within such year or (iii) if there has been a Material Adverse Change of the financial condition of any of the insurers of any of the Vessels at the Lender’s sole opinion, the Lender shall be entitled to obtain at Borrowers’ expense such opinion from such insurance consultants at any time it deems necessary;

(j)

Transfer/Security Interests: not without the prior written consent of the Lender agrees either Vessel or any share therein to be sold or otherwise disposed of or create or agree to create or permit to subsist any Security Interest over the Vessels (or either of them) (or any share or interest therein) other than Permitted Security Interests;

(k)

Not imperil Flag, Ownership, Insurances: ensure that each Vessel is maintained and trades in conformity with the laws of the Flag State, of its owning company or of the nationality of the officers, the requirements of the Insurances and nothing is done or permitted to be done which could endanger the flag of such Vessel or its unencumbered (other than Security Interests in favour of the Lender and Security Interests permitted by this Agreement) ownership or its Insurances;

(l)

Mortgage Covenants: ensure that each Owner always comply with all the covenants provided for in the Mortgage registered over its Vessel;

(m)

No assignment of Earnings: ensure that neither of the Owners will assign or agree to assign otherwise than to the Lender the Earnings or any part thereof;

(n)

No sharing of Earnings: ensure that neither of the Owners:

(i)

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

(ii)

will enter into any agreement or arrangement for the postponement of any date on which any Earnings are due or the reduction of the amount of any Earnings or otherwise for the release or adverse alteration of any right of

such Owner to any Earnings; and/or

(iii)

will enter into any agreement or arrangement for the release of, or adverse alteration to, any guarantee or Security Interest relating to any Earnings.

(o)

Assignable Charterparty: ensure and procure that in the event of its Vessel being employed under an Assignable Charterparty:

(i)

execute and deliver to the Lender within fifteen (15) days of signing thereof a specific assignment of all its rights, title and interest in and to such charter and any charter guarantee in the form of a Charterparty Assignment and a notice of such assignment addressed to the relevant charterer;

(ii)

ensure (on a best effort basis) that the relevant charterer and any charter guarantor agree to acknowledge to the Lender the specific assignment of such charter and charter guarantee by executing an acknowledgement substantially in the form included in the relevant Charterparty Assignment;

(iii)

in the case where such charter is a demise charter, the relevant charterer to undertake to the Lender (1) to comply with all of that Borrower's undertakings with regard to the employment, insurances, operation, repairs and maintenance of its Vessel contained in this Agreement, the relevant Mortgage and the relevant General Assignment and (2) to provide (inter alia) an assignment of its interest in the insurances of its Vessel in the form of a tripartite agreement in form and substance acceptable to the Lender, to be made between the Lender, that Borrower and such charterer;

(p)

No freight derivatives: not enter into or agree to enter into any freight derivatives or any other instruments which have the effect of hedging forward exposures to freight derivatives without the Lender’s consent;

(q)

Vessels’ inspection: permit the Lender (i) by surveyors or other persons appointed by it on its behalf to board its Vessel (and, subject to no Event of Default having occurred and being continuing, no more than once a year (but in any event without interfering with the ordinary trading of its Vessel) for the purpose of inspecting her condition or for the purpose of satisfying itself with regard to proposed or executed repairs and to afford all proper facilities for such inspections and (ii) at any time by financial or insurance advisors or other persons appointed by the Lender to review the operating and insurance records of its Vessel and the Owner thereof and the costs (as supported by vouchers) of any and all such valuations shall be borne by the Borrowers;

(r)

Trading: use its Vessel only for civil merchant trading;

(s)

Compliance with ISM Code: procure that the Approved Manager and any Operator will:

(i)

comply with and ensure that the Vessels and any Operator by no later than the Drawdown Date complies with the requirements of the ISM Code, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto throughout the Security Period;

(ii)

immediately inform the Lender if there is any threatened or actual withdrawal of either Owner, the Approved Manager’s or an Operator’s DOC or the SMC in respect of either Vessel; and

(iii)

promptly inform the Lender upon the issue to the relevant Owner, the Approved Manager or any Operator of a DOC and to a Vessel of an SMC or the receipt by either Owner, the Approved Manager or any Operator of notification that its application for the same has been realised;

(t)

Compliance with ISPS Code: procure that the Approved Manager or any Operator will:

(i)

maintain at all times a valid and current ISSC in respect of the relevant Vessel;

(ii)

immediately notify the Lender in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC in respect of the relevant Vessel; and

(iii)

procure that the relevant Vessel will comply at all times with the ISPS Code;

(u)

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

(v)

Compliance with Environmental Laws: comply with, and procure that all Environmental Affiliates of any Relevant Party comply with, all Environmental Laws including without limitation, requirements relating to manning and establishment of financial responsibility and to obtain and comply with, and procure that all Environmental Affiliates such Relevant Party obtain and comply with, all Environmental Approvals and to notify the Lender forthwith:

(i)

of any Environmental Claim made against any of the Vessels (or any of them), any Relevant Ship and/or their respective Owners; and

(ii)

upon becoming aware of any incident which may give rise to an Environmental Claim and to keep the Lender advised in writing of the relevant Owner’s response to such Environmental Claim on such regular basis and in such detail as the Lender shall require.

(w)

War Risk Insurance cover: in the event of hostilities in any part of the world (whether war is declared or not), it will not cause or permit its Vessel to enter or trade to any zone which is declared a war zone by any government or by its Vessel's war risks insurers unless the prior written consent of the Lender has been given and the relevant Owner has (at its expense) effected any special, additional or modified insurance cover which the Lender may approve or require.

8.4	Validity of Securities - Earnings - Taxes etc.

(a)

Validity: ensure and procure that all governmental or other consents required by law and/or any other steps required for the validity, enforceability and legality of this Agreement and the other Finance Documents are maintained in full force and effect and/or appropriately taken;

(b)

Earnings: ensure and procure that, unless and until directed by the Lender otherwise (i) all the Earnings of its Vessel shall be paid to its Operating Account and (ii) the persons from whom the Earnings are from time to time due are irrevocably instructed to pay them to the said Operating Account or to such account in the name of such Borrower as shall be from time to time determined by the Lender in accordance with the provisions hereof and of the relevant Security Documents;

(c)

Taxes: pay all Taxes, assessments and other governmental charges imposed on the Borrowers (or any of them) when the same fall due, except to the extent that the same are being contested in good faith by appropriate proceedings and adequate reserves have been set aside for their payment if such proceedings fail;

(d)

Additional Documents: from time to time and within fifteen (15) days after the request of the Lender, execute and deliver to the Lender or procure the execution and delivery to the Lender of all such documents as shall be deemed desirable at the reasonable discretion of the Lender for giving full effect to this Agreement, and for perfecting, protecting the value of or enforcing any rights or securities granted to the Lender under any one or more of this Agreement, the other Finance Documents and any other documents executed pursuant hereto or thereto and in case that any conditions precedent (with the Lender’s consent) have not been fulfilled prior to the Drawdown Date, such conditions shall be complied with within fifteen (15) Banking Days after the Lender’s written request (unless the Lender agrees otherwise in writing) and failure to comply with this covenant shall be an Event of Default.

8.5	Secured Value to Security Requirement ratio - Valuation of the Vessels

(a)

Security shortfall - Additional Security: If at any time during the Security Period, the Security Value shall be less than the Security Requirement, the Lender may give notice to the Borrowers requiring that such deficiency be remedied and then the Borrowers shall (unless the sole cause of such deficiency is the Total Loss of the relevant Vessel and the Owner thereof in full compliance with its obligations in relation to such Total Loss) either:

(i)

prepay (in accordance with Clause 4.2 (Voluntary prepayment) (but without regard to the requirement for ten (10) days’ notice) within a period of thirty (30) days of the date of receipt by the Borrowers of the Lender’s said notice such sum in Dollars as will result in the Security Requirement after such prepayment (taking into account any other repayment of the Loan made between the date of the notice and the date of such prepayment) being at least equal to the Security Value; or

(ii)

within thirty (30) days of the date of receipt by the Borrowers of the Lender’s said notice constitute to the satisfaction of the Lender such further security for the Loan as shall be acceptable to the Lender having a value for security purposes (as determined by the Lender in its absolute discretion) at the date upon which such further security shall be constituted which, when added to the Security Value, shall not be less than the Security Requirement as at such date. Such additional security shall be constituted by:

aa)

additional pledged cash deposits in favor of the Lender in an amount equal to such shortfall with the Lender and in an account and manner to be determined by the Lender; and/or

bb)

any other security acceptable to the Lender at its absolute discretion to be provided in a manner determined by the Lender.

The provisions of Clauses 4.3 (Compulsory Prepayment in case of Total Loss or sale of a Vessel) and 4.5 (Amounts payable on prepayment) shall apply to prepayments under Clause 8.5(a)(i).

(b)

Valuation of Vessels: Each of the Vessels shall, for the purposes of this Clause 8.5, be valued in Dollars at least once a year and at any time that the Lender may reasonably require by one (1) Approved Shipbroker appointed by the Lender, (such valuation to be addressed to the Lender and made without, unless required by the Lender, physical inspection, and on the basis of a sale for prompt delivery for cash at arm’s length on normal commercial terms as between a willing buyer and a willing seller, without taking into account the benefit of any Assignable Charterparty or other engagement concerning the relevant Vessel, as may be applicable. The Lender and the Borrowers agree to accept the valuation made by the Approved Shipbroker appointed as aforesaid as conclusive evidence of the Market Value of the relevant Vessel at the date of such valuation and that such valuation shall constitute the Market Value of the relevant Vessel for the purposes of this Clause 8.5.

The value of the relevant Vessel determined in accordance with the provisions of this Clause 8.5 shall be binding upon the Borrowers and the Lender until such time as any further such valuations shall be obtained.

(c)

Information: The Borrowers undertake to the Lender to provide the Lender and any such Approved Shipbrokers such information concerning the relevant Vessel and its condition as such Approved Shipbrokers may reasonably require for the purpose of making any such valuation.

(d)

Costs: All costs in connection with the Lender obtaining any valuation of each of the Vessels referred to in Clause 8.5(b) (Valuation of Vessels), and any valuation of any additional security for the purposes of ascertaining the Security Value at any time or necessitated by the Borrowers electing to constitute additional security pursuant to Clause 8.5(a)(ii) and all legal and other expenses incurred by the Lender in connection with any matter arising out of this Clause 8.5 shall be borne by the Borrowers.

(e)

Valuation of additional security: For the purpose of this Clause 8.5, the market value of any additional security provided or to be provided to the Lender shall be determined by the Lender in its absolute discretion without any necessity for the Lender assigning any reason thereto and if such security consists of a vessel shall be that shown by a valuation complying with the requirements of Clause 8.5(b) (Valuation of Vessels) (whereas the costs shall be borne by the Borrowers in accordance with Clause 8.5(d) (Costs)) or if the additional security is in the form of a cash deposit full credit shall be given for such cash deposit on a Dollar for Dollar basis.

(f)

Documents and evidence: In connection with any additional security provided in accordance with this Clause 8.5, the Lender shall be entitled to receive such evidence and documents of the kind referred to in Clause 7.1 (Conditions precedent to the execution of this Agreement) as may in the Lender’s opinion be appropriate and such favourable legal opinions as the Lender shall in its absolute discretion require.

8.6

Sanctions

(a)

Without limiting Clause 8.7 (Compliance with laws etc.), each of the Borrowers hereby undertakes with the Lender that, from the date of this Agreement and until the date that the Outstanding Indebtedness is paid in full, it shall ensure that none of the Vessels:

(i)

will be used by or for the benefit of a Sanctions Restricted Person contrary to Sanctions; and/or

(ii)

will be used in trading in any Sanctions Restricted Jurisdiction or in any manner contrary to Sanctions; and/or

(iii)

will be traded in any manner which would trigger the operation of any sanctions limitation or exclusion clause (or similar) in the Insurances.

(b)

Each Borrower shall:

(i)

not directly or to its knowledge (after reasonable enquiry) indirectly use or permit to be used all or any part of the proceeds of the Loan, or lend, contribute or otherwise make available such proceeds directly or to its knowledge (after reasonable enquiry) indirectly, to any person or entity (i) to finance or facilitate any activity or transaction of or with any Sanctions Restricted Person contrary to Sanctions or in any Sanctions Restricted Jurisdiction, or (ii) in any other manner that would result in a violation of any Sanctions by any Party;

(ii)

shall not fund all or part of any payment under the Loan out of proceeds derived directly or to its knowledge (after reasonable enquiry) indirectly from any activity or transaction with a Sanctions Restricted Person contrary to Sanctions or in a Sanctions Restricted Jurisdiction or which would otherwise cause any party to be in breach of any Sanctions; and

(iii)

procure that no proceeds to its knowledge (after reasonable enquiry) from activities or business with a Sanctions Restricted Person contrary to Sanctions or in a Sanctions Restricted Jurisdiction are credited to any of the Accounts.

8.7	Compliance with laws etc.

Each of the Borrowers shall:

(a)

comply, or procure compliance with all laws or regulations by the relevant Security Party:

(i)

relating to its respective business generally; and

(ii)

relating to its Vessel, its ownership, employment, operation, management and registration including, but not limited to, the ISM Code, the ISPS Code, all Environmental Laws and the laws of the Flag State; and

(iii)

all Sanctions;

(b)

obtain, comply with and do all that is necessary to maintain in full force and effect any Environmental Approvals; and

(c)

without limiting paragraph (a) above, not employ its Vessel nor allow its employment, operation or management in any manner contrary to any law or regulation including, but not limited to, the ISM Code, the ISPS Code and all Environmental Laws which has or is likely to have a Material Adverse Effect on any of the Security Parties.

8.8	Covenants for the Securities Parties

Each of the Borrowers, jointly and severally with the other Borrower, undertakes with the Lender that, from the date of this Agreement and until the full and complete payment and discharge of the Outstanding Indebtedness, it will ensure and procure that all other Security Parties and each of them duly and punctually comply, with the covenants in Clauses 8.1 (General), 8.3 (Undertakings concerning the Vessels), 8.4 (Validity of Securities - Earnings - Taxes etc.), 8.5 (Secured Value to Security Requirement ratio - Valuation of the Vessels), 8.6 (Sanctions) and 8.7 (Compliance with laws etc.) which are applicable to them mutatis mutandis.

8.9	Know your customer and money laundering compliance

Each of the Borrowers, jointly and severally with the other Borrower, undertakes with the Lender that, from the date of this Agreement and until the full and complete payment and discharge of the Outstanding Indebtedness, it will provide the Lender, or procure the provision of, such documentation and other evidence as the Lender shall from time to time require, based on applicable law and regulations from time to time and the Lender’s own internal guidelines from time to time to identify the each of the Borrowers and the other Security Parties, including the disclosure in writing of the ultimate legal and beneficial owner or owners of such entities, and any other persons involved or affected by the transaction(s) contemplated by this Agreement in order for the 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.

9.	EVENTS OF DEFAULT

9.1

Events

There shall be an Event of Default if:

(a)

Non‑payment: any Security Party fails to pay any sum payable by it under any of the Finance Documents at the time, in the currency and in the manner stipulated in the Finance Documents (and so that, for this purpose, sums payable on demand shall be treated as having been paid at the stipulated time if paid within five (5) Banking Days of demand and other sums due shall be treated as having been paid at the stipulated time if paid within two (2) Banking Days of its falling due); or

(b)

Breach of Insurance and certain other obligations: any of the Borrowers fails to obtain and/or maintain the Insurances (as defined in, and in accordance with the requirements of, the Finance Documents) or if any insurer in respect of such Insurances cancels the Insurances or disclaims liability by reason, in either case, of mis‑statement in any proposal for the Insurances or for any other failure or default on the part of the Borrowers or any other person or the Borrowers commit any breach of or omit to observe any of the obligations or undertakings expressed to be assumed by them under Clause 8 (Covenants); or

(c)

Breach of other obligations: any Security Party commits any breach of or omits to

observe any of its obligations or undertakings expressed to be assumed by it under any of the Finance Documents (other than those referred to in Clauses 9.1(a) (Non‑payment) and 9.1(b) (Breach of Insurance and certain other obligations) above) and, in respect of any such breach or omission which in the opinion of the Lender is capable of remedy, such action as the Lender may require shall not have been taken within fifteen (15) days of the Lender notifying in writing the relevant Security Party of such default and of such required action; or

(d)

Misrepresentation: any representation or warranty made or deemed to be made or repeated by or in respect of any Security Party in or pursuant to any of the Finance Documents or in any notice, certificate or statement referred to in or delivered under any of the Finance Documents is or proves to have been incorrect or misleading in any material respect; or

(e)

Cross‑default: any Financial Indebtedness (other than under the Finance Documents) of any of the Borrowers and the Corporate Guarantor (in each case related to an amount exceeding the amount of Five hundred thousand Dollars ($500,000) is not paid when due (unless contested in good faith) or any Financial Indebtedness (other than under the Finance Documents) of any of the Borrowers and the Corporate Guarantor becomes (whether by declaration or automatically in accordance with the relevant agreement or instrument constituting the same) due and payable prior to the date when it would otherwise have become due (unless as a result of the exercise by that Borrower or the Corporate Guarantor of a voluntary right of prepayment), or the Lender becomes entitled to declare any such Financial Indebtedness due and payable or any facility or commitment available to any of the Borrowers and the Corporate Guarantor relating to such Financial Indebtedness is withdrawn, suspended or cancelled by reason of any default (however described) of the person concerned, unless the relevant Security Party shall have satisfied the Lender that such withdrawal, suspension or cancellation will not affect or prejudice in any way the relevant Security Party’s ability to pay its debts as they fall due, or any guarantee given by any of the Borrowers and the Corporate Guarantor in respect of such Financial Indebtedness is not honoured when due and called upon; or

(f)

Legal process: any judgment or order made or commenced in good faith by a person against any of the Borrowers and the Corporate Guarantor is not stayed or complied with within thirty (30) days or a good faith creditor attaches or takes possession of, or a distress, execution, sequestration or other bonafide process is levied or enforced upon or sued out against, any of the undertakings, assets, rights or revenues of any of the Borrowers and the Corporate Guarantor and is not discharged, or bail is lodged in respect thereof, within thirty (30) days within ; or

(g)

Insolvency: any Security Party becomes insolvent or stops or suspends making payments (whether of principal or interest) with respect to all or any class of its debts or announces an intention to do so; or

(h)

Reduction or loss of capital: a meeting is convened by any of the Borrowers and the Corporate Guarantor for the purpose of passing any resolution to purchase, reduce or redeem any of its share capital; or

(i)

Winding up: any petition is presented or other step is taken for the purpose of winding up any Security Party or an order is made or resolution passed for the winding up of any Security Party or a notice is issued convening a meeting for the purpose of passing any such resolution; or

(j)

Administration: any bonafide petition is presented or other step is taken for the purpose of the appointment of an administrator of any Security Party or the Lender believes that any such petition or other step is imminent or an administration order is made in relation to any Security Party; or

(k)

Appointment of receivers and managers: any administrative or other receiver is appointed of any Security Party or any part of its assets and/or undertaking or any other steps are taken to enforce any Security Interest over all or any part of the assets of any such Security Party; or

(l)

Compositions: any steps are taken, or negotiations commenced, by any Security Party or by any of its creditors with a view to the general readjustment or rescheduling of all or part of its indebtedness or to proposing any kind of composition, compromise or arrangement involving such company and any of its creditors provided, however, that if the Borrowers are able to provide such evidence as is satisfactory in all respects to the Lender that such rescheduling will not relate to any payment default or anticipated default the same shall not constitute an Event of Default; or

(m)

Analogous proceedings: there occurs, in relation to any Security Party, in any country or territory in which any of them carries on business or to the jurisdiction of whose courts any part of their assets is subject, any event which, in the opinion of the Lender, appears in that country or territory to correspond with, or have an effect equivalent or similar to, any of those mentioned in Clauses 9.1(f) (Legal process) to (l) (Compositions) (inclusive) or any Security Party otherwise becomes subject, in any such country or territory, to the operation of any law relating to insolvency, bankruptcy or liquidation; or

(n)

Cessation of business: any Security Party suspends or ceases or threatens to suspend or cease to carry on its business; or

(o)

Seizure: all or a material part of the undertaking, assets, rights or revenues of, or shares or other ownership interests in, any Security Party are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any government; and the respective Security Party fails to procure for its release within a period of thirty (30) days; or

(p)

Consents: any consent, authorisation, licence or approval of, or registration with or declaration to, governmental or public bodies or authorities or courts required by any Security Party to authorise or otherwise in connection with, the execution, delivery, validity, enforceability or admissibility in evidence of this Agreement and/or any of the other Security Documents or the performance by the Security Parties of their respective obligations under this Agreement and/or any of the other Finance Documents is modified in a manner unacceptable to the Mortgagee or is not granted or is revoked or terminated or expires and is not renewed or otherwise ceases to be in full force and effect; or

(q)

Invalidity: any of the Finance Documents shall at any time and for any reason become invalid or unenforceable or otherwise cease to remain in full force and effect, or if the validity or enforceability of any of the Finance Documents shall at any time and for any reason be contested by any Security Party which is a party thereto, or if any such Security Party shall deny that it has any, or any further, liability thereunder; or

(r)

Unlawfulness: it becomes impossible or unlawful at any time for any Security Party, to fulfil any of the covenants and obligations expressed to be assumed by it in any

of the Finance Documents or for the Lender to exercise the rights or any of them vested in it under any of the Finance Documents or otherwise; or

(s)

Repudiation: any Security Party repudiates any of the Finance Documents or does or causes or permits to be done any act or thing evidencing an intention to repudiate any of the Finance Documents; or

(t)

Security Interests enforceable: any Security Interest (other than Permitted Security Interest) in respect of any of the property (or part thereof) which is the subject of any of the Finance Documents becomes enforceable; or

(u)

Arrest: any of the Vessels is arrested, confiscated, seized, taken in execution, impounded, forfeited, detained in exercise or purported exercise of any possessory lien or other claim or otherwise taken from the possession of its Owner and such Owner shall fail to procure the release of such Vessel within a period of thirty (30) days thereafter; or

(v)

Registration: the registration of any of the Vessels under the laws and flag of the relevant Flag State is cancelled or terminated without the prior written consent of the Lender; if the Vessel is only provisionally registered on the Drawdown Date and is not permanently registered under the laws and flag of the Flag State at least fifteen (15) days prior to the deadline for completing such permanent registration; or

(w)

Unrest: the Flag State of a Vessel becomes involved in hostilities or civil war or there is a seizure of power in such Flag State by unconstitutional means if, in any such case, (a) such event could in the opinion of the Lender reasonably be expected to have a Material Adverse Effect on the security constituted by any of the Finance Documents and (b) the relevant Owner has failed within thirty (30) days from receiving notice from the Lender to this effect (which notice shall have been sent following consultation with the Borrowers) to (i) delete the relevant Vessel from its Flag State and (ii) re-register the relevant Vessel under another Flag State approved by the Lender in its sole discretion through a relevant Registry, in each case, at the Borrowers’ cost and expense; or

(x)

Environment: any Relevant Party and/or any of their respective Environmental Affiliates fails to comply with any Environmental Law or any Environmental Approval or any of the Vessels or any Relevant Ship is involved in any incident which gives rise or which may give rise to any Environmental Claim, if in any such case, such non compliance or incident or the consequences thereof could (in the reasonable opinion of the Lender) be expected to have a material adverse change as described hereinbelow under paragraph (u); or

(y)

P&I: any Security Party or any other person fails or omits to comply with any requirements of the protection and indemnity association or other insurer with which any of the Vessels is entered for insurance or insured against protection and indemnity risks (including oil pollution risks) to the effect that any cover in relation to such Vessel (including without limitation, liability for Environmental Claims arising in jurisdictions where such Vessel operates or trades) is or may be liable to cancellation, qualification or exclusion at any time; or

(z)

Beneficial Ownership: there has been a change of control directly or indirectly in the Borrowers (or either of them) or any share therein or of either Vessel or of the Corporate Guarantor as a result of which any of the Borrowers and the Corporate Guarantor ceases to remain in the control of the Beneficial Shareholders disclosed to the Lender prior to the date of this Agreement or either Vessel ceases to remain

100% owned by the Owner thereof; or

(aa)

Change of Management: either Vessel ceases to be managed by the Approved Manager (for any reason other than the reason of a Total Loss or sale of such Vessel) without the approval of the Lender and the Owner thereof fails to appoint another Approved Manager prior to the termination of the mandate with the previous Approved Manager; or

(bb)

Deviation of Earnings: any Earnings of any of the Vessels are not paid to the relevant Operating Account for any reason whatsoever (other than with the Lender’s prior written consent); or

(cc)

ISM Code and ISPS Code: (without prejudice to the generality of Clause 9.1(c) (Breach of other obligations)) for any reason whatsoever the provisions of Clause 8.3(t) (Compliance with ISM Code) and Clause 8.3(u) (Compliance with ISPS Code) are not complied with and the relevant Vessel ceases to comply with the ISM Code or, as the case may be, the ISPS Code; or

(dd)

Operating Account: any moneys are withdrawn from the Operating Accounts (or any of them) other than in accordance with Clauses 8.4(b) (Earnings) and 13 (Operating Accounts); or

(n)

Material events: any other event or events (whether related or not) occurs or circumstance arises which constitutes a Material Adverse Change, from the position applicable as at the date of this Agreement, in the business, affairs or condition (financial or otherwise) of any Security Party) (including any such material adverse change resulting from an Environmental Incident) the effect of which is likely, in the opinion of the Lender, to impair, delay or prevent the due fulfilment by any Security Party of any of its respective obligations or undertakings contained in this Loan Agreement or any of the other Finance Documents and/or materially and adversely to affect the security created by any of the Finance Documents; or

(ee)

Finance Documents: any other event of default (as howsoever described or defined therein) occurs under the Finance Documents (or any of them).

9.2	Consequences of Default – Acceleration

The Lender may without prejudice to any other rights of the Lender (which will continue to be in force concurrently with the following), at any time after the happening of an Event of Default:

(a)

by notice to the Borrowers declare that the obligation of the Lender to make the Commitment (or any part thereof) available shall be terminated, whereupon the Commitment shall be reduced to zero forthwith; and/or

(b)

by notice to the Borrowers declare that the Loan and all interest accrued and all other sums payable under the Finance Documents have become due and payable, whereupon the same shall, immediately or in accordance with the terms of such notice, become due and payable without any further diligence, presentment, demand of payment, protest or notice or any other procedure from the Lender which are expressly waived by the Borrowers; and/or

(c)

put into force and exercise all or any of the rights, powers and remedies possessed by the Lender under this Agreement and/or under any other Finance Document and/or as mortgagee of each of the Vessels, mortgagee, chargee or assignee or as the beneficiary of any other property right or any other security (as the case may be) of the assets charged or assigned to it under the Finance Documents or

otherwise (whether at law, by virtue of any of the Finance Documents or otherwise);

9.3	Multiple notices; action without notice

The Lender may serve notices under sub-Clauses (a) and (b) of Clause 9.2 (Consequences of Default – Acceleration) simultaneously or on different dates and it may take any action referred to in that Clause if no such notice is served or simultaneously with or at any time after service of both or either of such notices, it being understood and agreed that the non-service of a notice in respect of an Event of Default hereunder, or under any of the Finance Documents (whether known to the Lender or not), shall not be construed to mean that the Event of Default shall cease to exist and bring about its lawful consequences.

9.4	Demand basis

If, pursuant to Clause 9.2(b), the Lender declares the Loan to be due and payable on demand, the Lender may by written notice to the Borrowers (a) call for repayment of the Loan on such date as may be specified whereupon the Loan shall become due and payable on the date so specified together with all interest accrued and all other sums payable under this Agreement or (b) withdraw such declaration with effect from the date specified in such notice.

9.5	Proof of Default

It is agreed that (i) the non-payment of any sum of money in time will be proved conclusively by mere passage of time and (ii) the occurrence of this (non payment) shall be proved conclusively by a mere written statement of the Lender (save for manifest error and in absence of willful misconduct).

9.6	Exclusion of Lender’s liability

Neither the Lender nor any receiver or manager appointed by the Lender, shall have any liability to the Borrowers or a Security Party:

(a)

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

(b)

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

except that this does not exempt the Lender or a receiver or manager from liability for losses shown to have been caused by the wilful misconduct of the Lender’s own officers and employees or (as the case may be) such receiver’s or manager’s own partners or employees.

10.	INDEMNITIES - EXPENSES – FEES

10.1	Miscellaneous indemnities

The Borrowers shall on demand (and it is hereby expressly undertaken by the Borrowers to) indemnify the Lender, without prejudice to any of the other rights of the Lender under any of the Finance Documents, against any loss (including loss of the applicable Margin and any Break Costs) or expense which the Lender shall certify as sustained or incurred as a consequence of:

(a)

any default in payment by any of the Security Parties of any sum under any of the Finance Documents when due;

(b)

the occurrence of any Event of Default which is continuing;

(c)

any prepayment of the Loan or part thereof being made under Clauses 4.2 (Voluntary Prepayment) and 4.3 (Compulsory Prepayment in case of Total Loss or sale of a Vessel), 8.5(a) (Security shortfall-Additional Security), Clause 12.1 (Unlawfulness) or Clause 12.4 (Option to prepay) or any other repayment of the Loan or part thereof being made otherwise than on an Interest Payment Date relating to the part of the Loan prepaid or repaid; or

(d)

the Commitment not being advanced for any reason (excluding any default by the Lender and any reason specified in Clauses 3.6 (Market disruption – Non Availability), 4.3(a) (Total Loss of a Mortgaged Vessel) or 12.1 (Unlawfulness) after the Drawdown Notice has been given, including, in any such case, but not limited to, any loss or expense sustained or incurred in maintaining or funding the Loan or any part thereof or in liquidating or re-employing deposits from third parties acquired to effect or maintain the Loan or any part thereof.

(e)

The Borrowers shall fully indemnify the Lender on its demand, without prejudice to any of its other rights under any of the Finance Documents, in respect of all claims, liabilities, losses or other Expenses which may be made or brought against or sustained or incurred by the Lender, in any country, as a result of or in connection with:

(i)

any action taken, or omitted or neglected to be taken, under or in connection with any Finance Document by the Lender or by any receiver appointed under a Finance Document;

(ii)

investigating any event which the Lender reasonably believes constitutes an Event of Default; or

(iii)

acting or relying on any notice, request or instruction which the Lender reasonably believes to be genuine, correct and appropriately authorised,

other than claims, liabilities, losses or other Expenses, which are shown to have been directly and mainly caused by the willful misconduct of the officers or employees of the Lender.

Without prejudice to its generality, this Clause 10.1 covers any claims, expenses, liabilities and losses which arise, or are asserted, under or in connection with any law relating to safety at sea, the ISM Code, the ISPS Code, any Environmental Law and any Sanctions.

10.2

Expenses

The Borrowers shall (and it is hereby expressly undertaken by the Borrowers to) pay to the Lender on demand:

(a)

Initial and Amendment expenses: all expenses (including reasonable legal, printing and out-of-pocket expenses) reasonably incurred by the Lender in connection with the negotiation, preparation and execution of this Agreement and the other Finance Documents and of any amendment or extension of or the granting of any waiver or consent under this Agreement and/or any of the Finance Documents and/or in connection with any proposal by the Borrowers to constitute additional security pursuant to Clause 8.5(a) (Security shortfall - Additional Security), whether any such security shall in fact be constituted or not;

(b)

Enforcement expenses: all expenses (including reasonable legal and out-of-pocket expenses) incurred by the Lender in contemplation of, or otherwise in connection with, the enforcement of, or preservation of any rights under, this Agreement and/or any of the other Finance Documents, or otherwise in respect of the moneys owing under this Agreement and/or any of the other Finance Documents or the contemplation or preparation of the above, whether they have been effected or not;

(c)

Legal costs: the legal costs of the Lender’s appointed lawyers, in respect of the preparation of this Agreement and the other Finance Documents as well as the legal costs of the foreign lawyers (if these are available) in respect of the registration of the Finance Documents or any search or opinion given to the Lender in respect of the Security Parties or the Vessels or the Finance Documents. The said legal costs shall be due and payable on the Drawdown Date; and

(d)

Other expenses: any and all other Expenses.

10.3	Value Added Tax

All fees and expenses payable pursuant to this Clause 10 shall be paid together with value added tax or any similar tax (if any) properly chargeable thereon. Any value added tax chargeable in respect of any services supplied by the Lender under this Agreement shall, on delivery of the value added tax invoice, be paid in addition to any sum agreed to be paid hereunder.

10.4	Stamp duty etc.

The Borrowers shall pay any and all stamp, registration and similar taxes or charges (including those payable by the Lender) imposed by governmental authorities in relation to this Agreement and any of the other Finance Documents, and shall indemnify the Lender against any and all liabilities with respect to, or resulting from delay or omission on the part of the Borrowers to pay such stamp taxes or charges.

10.5	Environmental Indemnity

The Borrowers shall indemnify the Lender on demand and hold the Lender harmless from and against all costs, expenses, payments, charges, losses, demands, liabilities, actions, proceedings (whether civil or criminal) penalties, fines, damages, judgements, orders, sanctions or other outgoings of whatever nature which may be suffered, incurred or paid by, or made or asserted against the Lender at any time, whether before or after the repayment in full of principal and interest under this Agreement, relating to, or arising directly or indirectly in any manner or for any cause or reason out of an Environmental Claim made or asserted against the Lender if such Environmental Claim would not have been, or been capable of being, made or asserted against the Lender if it had not entered into any of the Finance Documents and/or exercised any of its rights, powers and discretions thereby conferred and/or performed any of its obligations thereunder and/or been involved in any of the transactions contemplated by the Finance Documents.

10.6	Currency Indemnity

If any sum due from the Borrowers under any of the Finance Documents or any order or judgement given or made in relation hereto has to be converted from the currency (the “first currency”) in which the same is payable under the relevant Finance Document or under such order or judgement into another currency (the “second currency”) for the purpose of (i) making or filing a claim or proof against the Borrowers or any other Security

Party, as the case may be or (ii) obtaining an order or judgement in any court or other tribunal or (iii) enforcing any order or judgement given or made in relation to any of the Finance Documents, the Borrowers shall (and it is hereby expressly undertaken by the Borrowers to) indemnify and hold harmless the Lender from and against any loss suffered as a result of any difference between (a) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (b) the rate or rates of exchange at which the Lender may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgement, claim or proof. The term “rate of exchange” includes any premium and costs of exchange payable in connection with the purchase of the first currency with the second currency.

10.7	Central Bank or European Central Bank reserve requirements indemnity

The Borrowers shall on demand promptly indemnify the Lender against any cost incurred or loss suffered by the Lender as a result of its complying with the minimum reserve requirements of the European Central Bank and/or with respect to maintaining required reserves with the relevant national Central Bank to the extent that such compliance relates to the Commitment or deposits obtained by it to fund the whole or part of the Loan and to the extent such cost or loss is not recoverable by such Lender under Clause 12.2 (Increased cost).

10.8	Maintenance of the Indemnities

The indemnities contained in this Clause 10 shall apply irrespective of any indulgence granted to the Borrowers or any other party from time to time and shall continue to be in full force and effect notwithstanding any payment in favour of the Lender and any sum due from the Borrowers under this Clause 10 will be due as a separate debt and shall not be affected by judgement being obtained for any other sums due under any one or more of this Agreement, the other Finance Documents and any other documents executed pursuant hereto or thereto.

10.9

MII costs

The Borrowers shall reimburse the Lender on demand for any and all costs incurred by the Lender (as conclusively certified by the Lender) in effecting and keeping effected a Mortgagee’s Interest Insurance (herein “MII”), which the Lender may at any time effect for an amount equal to 120% of the Loan and on such terms and with such insurers as shall from time to time be determined by the Lender, provided, however, that the Lender shall in its absolute discretion appoint and instruct in respect of any such MII policy the insurance brokers in respect of such Insurance and provided, further, that in the event that the Lender effects any such Insurance on the basis of any mortgagee’s open cover, the Borrowers shall pay on demand to the Lender its proportion of premium due in respect of the Vessel(s) for which such insurance cover has been effected by the Lender, and any certificate of the Lender in respect of any such premium due by the Borrowers shall (save for manifest error) be conclusive and binding upon the Borrowers.

10.10

Communications Indemnity

It is hereby agreed in connection with communications that:

(a)

Express authority is hereby given by the Borrowers to the Lender to accept all tested or untested communications given by facsimile, or electronic mail or otherwise, regarding any or all of the notices, requests, instructions or other communications under this Agreement, subject to any restrictions imposed by the

Lender relating to such communications including, without limitation (if so required by the Lender), the obligation to confirm such communications by letter.

(b)

The Borrowers shall recognise any and all of the said notices, requests, instructions or other communications as legal, valid and binding, when these notices, requests, instructions or communications come from the fax number or electronic address mentioned in Clause 17.1 (Notices) or any other fax or electronic address usually used by it or its managing company and are duly signed or in case of emails are duly sent by the person appearing to be sending such notice, request, instruction or other communication.

(c)

The Borrowers hereby assume full responsibility for the execution of the said notices, requests, instructions or communications and promise and recognise that the Lender shall not be held responsible for any loss, liability or expense that may result from such notices, requests, instructions or other communications. It is hereby undertaken by the Borrowers to indemnify in full the Lender from and against all actions, proceedings, damages, costs, claims, demands, expenses and any and all direct and/or indirect losses which the Lender may suffer, incur or sustain by reason of the Lender following such notices, requests, instructions or communications.

(d)

With regard to notices, requests, instructions or communications issued by electronic and/or mechanical processes (e.g. by facsimile or electronic mail), the risk of equipment malfunction, including, without limitation, paper shortage, transmission errors, omissions and distortions is assumed fully and accepted by the Borrowers, save in case of Lender’s gross misconduct.

(e)

The risks of misunderstandings and errors resulting from notices, requests, instructions or communications being given as mentioned above, are for the Borrowers and the Lender will be indemnified in full pursuant to this Clause save in case of Lender’s gross misconduct.

(f)

The Lender shall have the right to ask the Borrowers to furnish any information the Lender may require to establish the authority of any person purporting to act on behalf of the Borrowers for these notices, requests, instructions or communications but it is expressly agreed that there is no obligation for the Lender to do so. The Lender shall be fully protected in, and the Lender shall incur no liability to the Borrowers for acting upon the said notices, requests, instructions or communications which were believed by the Lender in good faith to have been given by the Borrowers or by any of its authorised representative(s).

(g)

It is undertaken by the Borrowers to use its best endeavours to safeguard the function and the security of the electronic and mechanical appliance(s) such as fax(es) etc., as well as the code word list, if any, and to take adequate precautions to protect such code word list from loss and to prevent its terms becoming known to any persons not directly concerned with its use. The Borrowers shall hold the Lender harmless and indemnified from all claims, losses, damages and expenses which the Lender may incur by reason of the failure of the Borrowers to comply with the obligations under this Clause 10.10.

10.11

Electronic communication

Any communication from the Lender made by electronic means will be sent unsecured and without electronic signature, however, the Borrowers may request the Lender at any time in

writing to change the method of electronic communication from unsecured to secured electronic mail communication.

(a)

The Borrowers hereby acknowledge and accept the risks associated with the use of unsecured electronic mail communication including, without limitation, risk of delay, loss of data, confidentiality breach, forgery, falsification and malicious software. The Lender shall not be liable in any way for any loss or damage or any other disadvantage suffered by the Borrowers resulting from such unsecured electronic mail communication.

(b)

If the Borrowers (or any of them) or any other Security Party wish to cease all electronic communication, they shall give written notice to the Lender accordingly after receipt of which notice the Parties shall cease all electronic communication.

(c)

For as long as electronic communication is an accepted form of communication, the Parties shall:

(i)

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

(ii)

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

in case electronic communication is sent to recipients with the domain <@pavimarship.com>, the parties shall without undue delay inform each other if there are changes to the said domain or if electronic communication shall thereafter be sent to individual e-mail addresses.

10.12

FATCA Deduction

(a)

Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.

(b)

Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment.

10.13

FATCA status

(a)

Subject to Clause 10.13(c) below, each party shall, within ten Banking Days of a reasonable request by another party:

(i)

confirm to that other party whether it is:

(aa)

a FATCA Exempt Party; or

(bb)

not a FATCA Exempt Party; and

(ii)

supply to that other party such forms, documentation and other information relating to its status under FATCA (including its applicable passthru percentage or other information required under the Treasury Regulations or other official guidance including intergovernmental

agreements) as that other party reasonably requests for the purposes of that other party's compliance with FATCA.

(b)

If a party confirms to another party pursuant to Clause 10.13(a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that party shall notify that other party reasonably promptly.

(c)

Clause 10.13(a)(i) above shall not oblige the Lenders or the Lender to do anything which would or might in its reasonable opinion constitute a breach of:

(i)

any law or regulation;

(ii)

any policy of the relevant Lender;

(iii)

any fiduciary duty; or

(iv)

any duty of confidentiality.

(d)

If a party fails to confirm its status or to supply forms, documentation or other information requested in accordance with Clause10.13(a) above (including, for the avoidance of doubt, where Clause 10.13(c) above applies), then:

(i)

if that party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such party shall be treated for the purposes of the Finance Documents as if it is not a FATCA Exempt Party; and

(ii)

if that party failed to confirm its applicable passthru percentage then such party shall be treated for the purposes of the Finance Documents (and payments made thereunder) as if its applicable passthru percentage is 100%,

until (in each case) such time as the party in question provides the requested confirmation, forms, documentation or other information.

10.14

Arrangement fee

(a)

Arrangement fee: The Borrowers shall pay to the Lender an arrangement fee in an amount equal to one per cent (1.00%) of the amount of the Loan as at the Drawdown Date payable on the date hereof.

(b)

Non-refundable: The Arrangement Fee shall be payable by the Borrowers to the Lender irrespective of utilisation/cancellation in part or in whole of the Commitment and shall be non-refundable.

11.	SECURITY, APPLICATION, SET-OFF

11.1	Securities

As security for the due and punctual repayment of the Loan and payment of interest thereon as provided in this Agreement and of all other Outstanding Indebtedness, the Borrowers shall ensure and procure that the Security Documents are duly executed and, where required, registered in favour of the Lender in form and substance satisfactory to the Lender at the time specified herein or otherwise as required by the Lender and ensure that such security consists, on the Drawdown Date in respect of the Loan, of the Security Documents.

11.2	Maintenance of Securities

It is hereby undertaken by the Borrowers that the Finance Documents shall both at the date of execution and delivery thereof and so long as any moneys are owing and/or due under this Agreement and/or under the other Finance Documents be valid and binding obligations of the respective Security Parties thereto and rights of the Lender enforceable in accordance with their respective terms and that they will, at the expense of the Borrowers, execute, sign, perfect and do any and every such further assurance, document, act, omission or thing as in the opinion of the Lender may be necessary or desirable for perfecting the security contemplated or constituted by the Finance Documents.

11.3	Application of funds

(a)

Order of application: Except as any Finance Document may otherwise provide, any sums which are received or recovered by the Lender under or pursuant to or by virtue of any of the Finance Documents and expressed to be applicable in accordance with this Clause 11.3 shall be applied by the Lender in the following manner:

(i)

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

aa)

Firstly, in or towards satisfaction of all amounts then due and payable to the Lender under the Finance Documents other than those amounts referred to at paragraphs b) and c) below (including, but without limitation, all amounts payable by the Borrower under Clauses 11 (Indemnities- Expenses-Fees), 5.1 (Payments – No set-off or counterclaims) or 5.3 (Gross Up) of this Agreement or by the Borrower or any Security Party under any corresponding or similar provision in any other Finance Document);

Secondly, in or towards payment of any default interest then due and payable to the Lender;

bb)

Thirdly, in or towards payment of any arrears of interest (other than default interest) due and payable in respect of the Loan or any part thereof payable to the Lender under the Finance Documents;

cc)

Fourthly, in or towards satisfaction of the Loan then due and payable;

(ii)

SECOND: in retention of an amount equal to any amount not then due and payable under any Finance Document but which the Lender, by notice to the Borrower and the Security Parties, states in its opinion will either or may become due and payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction of them in accordance with the provisions of Clause 11.3(a); and

(iii)

THIRD: the surplus (if any), after the full and complete payment of the Outstanding Indebtedness, shall be paid to the Borrower or to any other person appearing to be entitled to it.

(b)

Notice of variation of order of application: The Lender may, by notice to the Borrower and the Security Parties, provide, at its sole discretion, for a different order of application from that set out in Clause 11.3(a) (Order of application) either

as regards a specified sum or sums or as regards sums in a specified category or categories, without affecting the obligations of the Borrower to the Lender.

(c)

Effect of variation notice: The Lender may give notices under Clause 11.3(b) (Notice of variation of order of application) from time to time; and such a notice may be stated to apply not only to sums which may be received or recovered in the future, but also to any sum which has been received or recovered on or after the third Banking Day before the date on which the notice is served.

(d)

Insufficient balance: For the avoidance of doubt, in the event that such balance is insufficient to pay in full the whole of the Outstanding Indebtedness, the Lender shall be entitled to collect the shortfall from the Borrower or any other person liable therefor.

(e)

Appropriation rights overridden: This Clause 11.3 and any notice which the Lender gives under Clause 11.3(b) (Notice of variation of order of application) shall override any right of appropriation possessed, and any appropriation made, by the Borrower or any other Security Party.

11.4

Set off

(a)

Application of credit balances: Express authority is hereby given by each Borrower to the Lender without prejudice to any of the rights of the Lender at law, contractually or otherwise, at any time after an Event of Default has occurred and is continuing, and without prior notice to the Borrowers:

(i)

to apply any credit balance standing upon any account of each Borrower with any branch of the Lender (including, without limitation, the Operating Account and in whatever currency in or towards satisfaction of any sum due to the Lender from the Borrowers under this Agreement, the General Assignments and/or any of the other Finance Documents;

(ii)

in the name of each of the Borrowers and/or the Lender to do all such acts and execute all such documents as may be necessary or expedient to effect such application; and

(iii)

to combine and/or consolidate all or any accounts in the name of each Borrower with the Lender; and

for that purpose:

aa)

to break, or alter the maturity of, all or any part of a deposit of the Borrowers (or either of them);

bb)

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

cc)

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

(b)

Existing rights unaffected: The Lender shall not be obliged to exercise any right given by this Clause; and those rights shall be without prejudice and in addition to any right of set-off, combination of accounts, charge, lien or other right or remedy to which the Lender is entitled (whether under the general law or any document). For all or any of the above purposes authority is hereby given to the Lender to

purchase with the moneys standing to the credit of any such account or accounts such other currencies as may be necessary to effect such application. The Lender shall notify the Borrowers forthwith upon the exercise of any right of set‑off giving full details in relation thereto.

12.	UNLAWFULNESS, INCREASED COST, BAIL-IN

12.1	Unlawfulness

If any change in, or introduction of, any law, regulation or regulatory requirement or any request of any central bank, monetary, regulatory or other authority or any order of any court renders it unlawful or contrary to any such regulation, requirement, request or order for the Lender to advance the Commitment or the relevant part thereof (as the case may be) or to maintain or fund the Loan, notice shall be given promptly by the Lender to the Borrowers whereupon the Commitment shall be reduced to zero and the Borrowers shall be obliged to prepay the Loan either (i) forthwith or (ii) on a future specified date not being earlier than the latest date permitted by the relevant law or regulation, together with accrued interest thereon to the date of prepayment and all other sums payable by the Borrowers under this Agreement.

12.2	Increased Cost

If the result of any change in, or in the interpretation, implementation or application of, or the introduction of, any law or any regulation (whether or not having the force of law, but, if not having the force of law, with which the Lender or, as the case may be, its holding company habitually complies), including (without limitation) those relating to Taxation, capital adequacy, liquidity, reserve assets, cash ratio deposits and special deposits or other banking or monetary controls or requirements which affect the manner in which the Lender allocates capital resources to its obligations hereunder (including, without limitation, those resulting from the implementation or application of or compliance with the Basel II Accord or the Basel III Accord or any Basel II Regulation or the Basel III Accord or any Basel III Regulation or any subsequent accord, approach or regulation thereto) (collectively, “Capital Adequacy Law”) or compliance by the Lender with any such Capital Adequacy Law or , is to:

(a)

increase the cost to, or impose an additional cost on, the Lender or its holding company in making or keeping the Commitment available or maintaining or funding all or part of the Loan; and/or

(b)

subject the Lender to Taxes or change the basis of Taxation of the Lender with respect to any payment under any of the Finance Documents (other than Taxes or Taxation on the overall net income, profits or gains of the Lender imposed in the jurisdiction in which its principal or lending office under this Agreement is located); and/or

(c)

reduce the amount payable or the effective return to the Lender under any of the Finance Documents; and/or

(d)

reduce the Lender’s or its holding company rate of return on its overall capital by reason of a change in the manner in which it is required to allocate capital resources to the Lender’s obligations under any of the Finance Document; and/or

(e)

require the Lender or its holding company to make a payment or forgo a return on or calculated by references to any amount received or receivable by it under any of the Finance Documents is required; and/or

(f)

require the Lender or its holding company to incur or sustain a loss (including a loss of future potential profits) by reason of being obliged to deduct all or part of the Commitment or the Loan from its capital for regulatory purposes,

then and in each case (subject to Clause 12.5 (Exception)):

(a)

the Lender shall notify the Borrowers in writing of such event promptly upon its becoming aware of the same; and

(b)

the Borrowers shall on demand pay to the Lender the amount which the Lender specifies (in a certificate and supporting documents setting forth and evidencing the basis of the computation of such amount but not including any matters which the Lender or its holding company regards as confidential) is required to compensate the Lender and/or (as the case may be) its holding company for such liability to Taxes, cost, reduction, payment, foregone return or loss whatsoever.

For the purposes of this Clause 12 “holding company” means the company or entity (if any) within the consolidated supervision of which the Lender is included.

12.3	Mitigation

If circumstances arise which would result in a notification under Clause 12.1 (Unlawfulness) or Clause 12.2 (Increased Cost), then, without in any way limiting the rights of the Lender under this Clause, the Lender shall use reasonable endeavours to transfer all the Lender’s obligations, liabilities and rights under this agreement and the Finance Documents to another office or financial institution not affected by the circumstances, but the Lender shall not be under any obligation to take any such action if, in its opinion, to do so would or might: (a) have an adverse effect on its business, operations or financial condition; or (b) involve it in any activity which is unlawful or prohibited or any activity that is contrary to, or inconsistent with, any regulation; or involve it in any expense (unless indemnified to its satisfaction) or tax disadvantage.

12.4	Claim for increased cost

The Lender will promptly notify the Borrowers of any intention to claim indemnification pursuant to Clause 12.2 (Increased Cost) and such notification will be a conclusive and full evidence binding on the Borrowers as to the amount of any increased cost or reduction and the method of calculating the same and the Borrowers shall be allowed to rebut such evidence by any means of evidence save for witness. A claim under Clause 12.2 (Increased Cost) may be made at any time and must be discharged by the Borrowers within seven (7) days of demand. It shall not be a defence to a claim by the Lender under this Clause 12.3 that any increased cost or reduction could have been avoided by the Lender. Any amount due from the Borrowers under Clause 12.2 (Increased Cost) shall be due as a separate debt and shall not be affected by judgement being obtained for any other sums due under or in respect of this Agreement.

12.5	Option to prepay

If any additional amounts are required to be paid by the Borrowers to the Lender by virtue of Clause 12.2 (Increased Cost), the Borrowers shall be entitled, on giving the Lender not less than fourteen (14) days prior notice in writing, to prepay (without premium or penalty) the Loan and accrued interest thereon, together with all other Outstanding Indebtedness, on the next Repayment Date. Any such notice, once given, shall be irrevocable.

12.6

Exception

Nothing in Clause 12.2 (Increased Cost) shall entitle the Lender to receive any amount in respect of compensation for any such liability to Taxes, increased or additional cost, reduction, payment, foregone return or loss to the extent that the same is subject of an additional payment under Clause 5.3 (Gross Up).

12.7	Contractual recognition of bail-in

Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding between the Parties, each Party acknowledges and accepts that any liability of any Party to any other Party under or in connection with the Finance Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:

(a)

any Bail-In Action in relation to any such liability, including (without limitation):

(i)

a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;

(ii)

a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and

(iii)

a cancellation of any such liability; and

(b)

a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.

13.	OPERATING ACCOUNTS

13.1

General

Each of the Borrowers undertakes with the Lender that it will:

(a)

on or before the Drawdown Date open its Operating Account; and

(b)

procure that all moneys payable to such Borrower in respect of the Earnings of its Vessel shall, unless and until the Lender directs to the contrary pursuant to the relevant General Assignment, be paid to its Operating Account, free from Security Interests and rights of set off other than those created by or under the Finance Documents and, shall be held there on trust for the Lender and shall be applied as provided in Clause 13.2 (Application of Earnings).

13.2	Application of Earnings

(a)

Subject to the terms and conditions of the Accounts Pledge Agreement no monies shall be withdrawn from the Operating Accounts save as hereinafter provided. Subject to no Event of Default having occurred and being continuing, all monies paid to the Operating Accounts (whether being Earnings or not) after discharging the costs (if any) incurred by the Lender, in collecting such monies, shall be applied by the Lender as follows:

(i)

First: in payment of any arrears of interest and principal of the Loan due and payable and any and all other sums whatsoever which from time to time

become due and payable to the Lender hereunder (such sums to be paid in such order as the Lender may in its sole discretion elect);

provided, however, that the Lender shall be entitled to withdraw the required amounts from the Operating Accounts or any time deposit substitute account under the same or different designation by breaking such time deposit in order to effect payment of any amount due under “First” above;

(ii)

Second: in payment of the Operating Expenses; and

(iii)

Third: any credit balance shall be, subject to the provisions of this Agreement (including dividends restriction) and the Accounts Pledge Agreement, available to the Borrowers to be used (unless the Lender otherwise direct at its discretion) for any purpose not inconsistent with the Borrowers’ other obligations under this Agreement;

13.3

Interest

Any amounts for the time being standing to the credit of the Operating Account shall bear interest at the rate from time to time offered by the Lender to its customers for Dollar deposits of similar amounts and for periods similar to those for which such amounts are likely to remain standing to the credit of the Operating Account. Such interest shall, provided that (a) the foregoing provisions of this Clause 13 shall have been complied with and (b) no Event of Default (or event which, with the giving of notice and/or lapse of time or other applicable condition, might constitute an Event of Default) shall have occurred and is continuing, be released to the Borrowers.

13.4	Drawings from Operating Accounts

Save as provided in Clause 13.2 (Application of Earnings), none of the Borrowers shall be entitled to draw from its Operating Account if an Event of Default has occurred and is continuing.

13.5	Authorisation

For the avoidance of doubt, the Lender shall be entitled (but not obliged) at any time, and to this respect the Lender is hereby authorised by each of the Borrowers from time to time to debit the Operating Accounts, without notice to the Borrowers, in order to discharge any amount due and payable to the Lender under the terms of this Agreement and the Security Documents or otherwise howsoever in connection with the Loan, including, without limitation, any payment of which the Lender has become entitled to demand under Clause 9.2 (Consequences of Default – Acceleration).

13.6	Obligations unaffected

Nothing herein contained shall be deemed to affect:

(a)

the liability and absolute obligation of the Borrowers to pay interest on and to repay the Loan as provided in Clauses 3 (Interest) and 4 (Repayment-Prepayment) nor shall they constitute or be construed as constituting a manner of postponement thereof; or

(b)

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

13.7	Relocation of Operating Accounts

Each of the Borrowers, at its own costs and expenses, undertakes with the Lender to comply with or cause to be complied with any written requirement of the Lender from time to time as to the location or re-location of its Operating Account and will from time to time enter into such documentation as the Lender may require in order to create or maintain a security interest in such Operating Account.

13.8	Application on Event of Default

Upon the occurrence of an Event of Default or at any time thereafter (whether or not notice of default has been given to the Borrowers) when an Event of Default continues the Lender shall be entitled to set off and apply all sums standing to the credit of the Operating Accounts (or any of them) and accrued interest (if any) without notice to the Borrowers in the manner specified in Clause 11.3 (Application of funds) (and express and irrevocable authority is hereby given by each of the Borrowers to the Lender so to set off by debiting the Operating Accounts accordingly by the same.

13.9	No Security Interests

The Borrowers hereby jointly and severally covenant with the Lender that the Operating Accounts and any moneys therein shall not be charged, assigned, transferred or pledged nor shall there be granted by the Borrowers or suffered to arise any third party rights over or against the whole or any part of the Operating Accounts (or any of them) other than in favour of the Lender as promised herein and in the General Assignments.

13.10

Operation of Operating Accounts

Each Operating Account shall be operated by the relevant Borrower to the degree permitted by this Agreement and the relevant General Assignment in accordance with the Lender’s usual terms and conditions (full knowledge of which the Borrowers hereby acknowledges) and subject to the Lender’s usual charges levied on such accounts and/or transactions conducted on such accounts (as from time to time notified by the Lender to the Borrowers).

13.11

Release

Upon payment in full of all principal, interest and all other amounts due to the Lender under the terms of this Agreement and the other Finance Documents, any balance then standing to the credit of any of the Operating Accounts shall be released and paid to the relevant Borrower or to whomsoever else may be entitled to receive such balance.

14.	ASSIGNMENT, TRANSFER, PARTICIPATION, LENDING OFFICE

14.1	Binding Effect

This Agreement shall be binding upon and inure to the benefit of the Lender and the Borrowers and their respective successors and assigns.

14.2	No Assignment by the Borrowers and other Security Parties

Neither the Borrowers nor any other Security Parties may assign or transfer any of its rights and/or obligations under this Agreement or any of the other Finance Documents or any documents executed pursuant to this Agreement and/or the other Finance Documents.

14.3	Assignment by the Lender

The Lender may at any time without the consent of, or consultation with, the Borrowers and the other Security Parties, cause all or any part of its rights, benefits and/or obligations under this Agreement and the other Finance Documents to be assigned or transferred to (i) another branch, any Subsidiary or Affiliate of, or company controlled by, the Lender, (ii) a member of the European Central Bank System, a credit institution, a financial services institution, a financial institution, an insurance company, a social security fund, a pension fund, an investment company/trust or a special purpose company established for the purposes of securitization, (iii) a capital investment company, hedge fund, financial intermediary or special purpose vehicle associated to any of them or (iii) a trust corporation, fund or other person which regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets of which are managed or serviced by the Lender (in each case an “Assignee” or a “Transferee”), provided that the Assignee or Transferee, shall deliver to the Lender such undertaking as the Lender may approve, whereby it becomes bound by the terms of this Agreement and agrees to perform all or, as the case may be, part of the Lender’s obligations under this Agreement and provided further that the liabilities of the Borrowers under this Agreement and any other Finance Document shall not be increased as a result of any such assignment or transfer and that in the event that the Borrowers’ liabilities (actual or contingent) are increased, the Borrowers shall not be liable for any such excess.

14.4	Participation

The Lender may at any time without the consent of, or consultation with, or notice to the Borrowers sub-participate all or any part of its rights, benefits and/or obligations under this Agreement and the other Finance Documents without the consent of, or consultation with or notice to the Borrowers and the other Security Parties, provided that the liabilities of the Borrowers under this Agreement and any other Finance Document shall not be increased as a result of any such sub-participation and that in the event that the Borrowers’ liabilities (actual or contingent) are increased, the Borrowers shall not be liable for any such excess.

14.5

Cost

Any cost of such assignment or transfer or granting sub-participation shall be for the account of the Lender and/or the Assignee, Transferee or sub-participant unless any such assignment, transfer or sub-participation is undertaken at the request of the Borrowers, in which case any cost arising therefrom shall be for the account of the Borrowers.

14.6	Documenting assignments and transfers

If the Lender assigns, transfers or in any other manner grants participation in respect of all or any part of its rights or benefits or transfers all or any of its obligations as provided in this Clause 14.6 the Borrowers undertake, immediately on being requested to do so by the Lender, to enter at the expense of the Lender into and procure that each Security Party enters into such documents as may be necessary or desirable to transfer to the Assignee, Transferee or participant all or the relevant part of the interest of the Lender in the Finance Documents and all relevant references in this Agreement to the Lender shall thereafter be construed as a reference to the Lender and/or assignee, transferee or participant of the Lender to the extent of their respective interests and, in the case of a transfer of all or part of the obligations of the Lender, the Borrowers shall thereafter look only to the Assignee, Transferee or participant in respect of that proportion of the obligations of the Lender under this Agreement assumed by such assignee, transferee or participant. Subject to the provisions of Clause 14.3 (Assignment by the Lender), each of the Borrowers hereby expressly consents to any subsequent transfer of the rights and obligations of the Lender and undertakes that it shall join in and execute such supplemental or substitute agreements

as may be necessary to enable the Lender to assign and/or transfer and/or grant participation in respect of its rights and obligations to another branch or to one or more banks or financial institutions in a syndicate or otherwise. The cost of any such assignment shall be borne by the Lender and/or the relevant Assignee or Transferee.

14.7	Disclosure of information

The Lender may disclose to a prospective assignee, substitute or transferee or to any other person who may propose entering into contractual relations with the Lender in relation to this Agreement such information about the Borrowers as the Lender shall consider appropriate if the Lender first procures that the relevant prospective assignee, substitute or transferee or other person (such person together with any prospective assignee, substitute or transferee being hereinafter described as the “Prospective Assignee”) shall undertake to the Lender to keep secret and confidential and shall not, without the consent of the Borrowers, disclose to any third party any of the information, reports or documents supplied by the Lender provided, however, that the Prospective Assignee shall be entitled to disclose such information, reports or documents in the following situations:

(a)

in relation to any proceedings arising out of this Agreement or the other Finance Documents to the extent considered necessary by the Prospective Assignee to protect its interest; or

(b)

pursuant to a court order relating to discovery or otherwise; or

(c)

pursuant to any law or regulation or to any fiscal, monetary, tax, governmental or other competent authority; or

(d)

to its auditors, legal or other professional advisers.

In addition the Prospective Assignee shall be entitled to disclose or use any such information, reports or documents if the information contained therein shall have emanated in conditions free from confidentiality, bona fide from some person other than the Lender or the Borrowers.

14.8	Changes in constitution or reorganisation of the Lender

For the avoidance of doubt and without prejudice to the provisions of Clause 14.1 (Binding Effect), this Agreement shall remain binding on the Borrowers and the other Security Parties notwithstanding any change in the constitution of the Lender or its absorption in, or amalgamation with, or the acquisition of all or part of its undertaking or assets by, any other person, or any reconstruction or reorganisation of any kind, to the intent that this Agreement shall remain valid and effective in all respects in favour of any Assignee, Transferee or other successor in title of the Lender in the same manner as if such Assignee, Transferee or other successor in title had been named in this Agreement as a party instead of, or in addition to, the Lender.

14.9	Securitisation

The Lender may include all or any part of the Loan in a securitisation (or similar transaction) pursuant to Law 3156/2003, or any other relevant legislation introduced or enacted after the date of this Agreement, without the consent of, or consultation with, but after giving 15-days notice to the Borrowers. The Borrowers will assist the Lender as necessary to achieve a successful securitisation (or similar transaction) provided that the Borrowers shall not be required to bear any third party costs related to any such securitisation (or similar transaction) and that such securitisation (or similar transaction) shall not result in an increase of the Borrowers’ obligations under this Agreement and the other Security Documents and need only provide any such information which any third parties may

reasonably require.

14.10

Lending Office

The Lender shall lend through its office at the address specified in the preamble of this Agreement or through any other office of the Lender selected from time to time by it through which the Lender wishes to lend for the purposes of this Agreement. If the office through which the Lender is lending is changed pursuant to this Clause 14.10, the Lender shall notify the Borrowers promptly of such change and upon notification of any such transfer, the word “Lender” in this Agreement and in the other Finance Documents shall mean the Lender, acting through such branch or branches and the terms and provisions of this Agreement and of the other Finance Documents shall be construed accordingly.

15.	MISCELLANEOUS

15.1	Time of essence

Time is of the essence as regards every obligation of the Borrowers under this Agreement.

15.2	Cumulative Remedies

The rights and remedies of the Lender contained in this Agreement and the other Finance Documents are cumulative and neither exclusive of each other nor of any other rights or remedies conferred by law.

15.3	No implied waivers

No failure, delay or omission by the Lender to exercise any right, remedy or power vested in the Lender under this Agreement and/or the other Finance Documents or by law shall impair such right or power, or be construed as a waiver of, or as an acquiescence in any default by the Borrowers, nor shall any single or partial exercise by the Lender of any power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy. In the event of the Lender on any occasion agreeing to waive any such right, remedy or power, or consenting to any departure from the strict application of the provisions of this Agreement or of any other Finance Document, such waiver shall not in any way prejudice or affect the powers conferred upon the Lender under this Agreement and the other Finance Documents or the right of the Lender thereafter to act strictly in accordance with the terms of this Agreement and the other Finance Documents. No modification or waiver by the Lender of any provision of this Agreement or of any of the other Finance Documents nor any consent by the Lender to any departure therefrom by any Security Party shall be effective unless the same shall be in writing and then shall only be effective in the specific case and for the specific purpose for which given. No notice to or demand on any such party in any such case shall entitle such party to any other or further notice or demand in similar or other circumstances.

15.4	Recourse to other security

The Lender shall not be obliged to make any claim or demand or to resort to any Finance Document or other means of payment now or hereafter held by or available to it for enforcing this Agreement or any of the other Finance Documents against the Security Parties (or any of them) or any other person liable and no action taken or omitted by the Lender in connection with any such Finance Document or other means of payment will discharge, reduce, prejudice or affect the liability of any Security Party under this Agreement and the other Finance Documents to which it is, or is to be, a party.

15.5	Integration of Terms

This Agreement contains the entire agreement of the parties and its provisions supersede the provisions of the Commitment Letter (save for the provisions thereof which relate to fees) and any and all other prior correspondence and oral negotiation by the parties in respect of the matters regulated by this Agreement.

15.6	Amendments

This Agreement and any other Finance Documents shall not be amended or varied in their respective terms by any oral agreement or representation or in any other manner other than by an instrument in writing of even date herewith or subsequent hereto executed by or on behalf of the parties hereto or thereto.

15.7	Invalidity of Terms

In the event of any provision contained in one or more of this Agreement, the other Finance Documents and any other documents executed pursuant hereto or thereto being invalid, illegal or unenforceable in any respect under any applicable law in any jurisdiction whatsoever, such provision shall be ineffective as to that jurisdiction only without affecting the remaining provisions hereof or thereof. If, however, this event becomes known to the Lender prior to the drawdown of the Commitment or of any part thereof the Lender shall be entitled to refuse drawdown until this discrepancy is remedied. In case that the invalidity of a part results in the invalidity of the whole Agreement, it is hereby agreed that there will exist a separate obligation of the Borrowers for the prompt payment to the Lender of all the Outstanding Indebtedness. Where, however, the provisions of any such applicable law may be waived, they are hereby waived by the parties hereto to the full extent permitted by the law to the intent that this Agreement, the other Finance Documents and any other documents executed pursuant hereto or thereto shall be deemed to be valid binding and enforceable in accordance with their respective terms.

15.8	Language and genuineness of documents

(a)

Language: All certificates, instruments and other documents to be delivered under or supplied in connection with this Agreement or any of the other Finance Documents shall be in the Greek or the English language (or such other language as the Lender shall agree) or shall be accompanied by a certified Greek translation upon which the Lender shall be entitled to rely.

(b)

Certification of documents: Any copies of documents delivered to the Lender shall be duly certified as true, complete and accurate copies by appropriate authorities or legal counsel practicing in Greece or otherwise as will be acceptable to the Lender at the sole discretion of the Lender.

(c)

Certification of signature: Signatures on Board or shareholder resolutions, Secretary’s certificates and any other documents are, at the discretion of the Lender, to be verified for their genuineness by appropriate Consul or other competent authority.

15.9	Further assurances

Each of the Borrowers undertakes that the Finance Documents shall both at the date of execution and delivery thereof and so long as any moneys are owing under any of the Finance Documents be valid and binding obligations of the respective parties thereto and enforceable in accordance with their respective terms and that it will, at its expense,

execute, sign, perfect and do, and will procure the execution, signing, perfecting and doing by each of the other Security Parties of, any and every such further assurance, document, act or thing as in the reasonable opinion of the Lender may be necessary or desirable for perfecting the security contemplated or constituted by the Finance Documents.

15.10

Inconsistency of Terms

In the event of any inconsistency or conflict between the provisions of this Agreement and the provisions of any other Finance Document the provisions of this Agreement shall prevail.

15.11

Counterparts

This Agreement may be executed in any number of counterparts and all such counterparts taken together shall be deemed to constitute but one and the same instrument.

15.12

Confidentiality

(a)

Each of the parties hereto agree and undertake to keep confidential any documentation and any confidential information concerning the business, affairs, directors or employees of the other which comes into its possession in connection with this Agreement and not to use any such documentation, information for any purpose other than for which it was provided.

(b)

The Borrowers acknowledge and accept that the Lender may be required by law or that it may be appropriate for the Lender to disclose information and deliver documentation relating to the Borrowers and the transactions and matters in relation to this Agreement and/or the other Finance Documents to governmental or regulatory agencies and authorities.

(c)

The Borrowers acknowledge and accept that in case of occurrence of any of the Events of Default the Lender may disclose information and deliver documentation relating to the Borrowers and the transactions and matters in relation to this Agreement and/or the other Finance Documents to third parties to the extent that this is necessary for the enforcement or the contemplation of enforcement of the Lender’s rights or for any other purpose for which in the opinion of the Lender, such disclosure would be useful or appropriate for the interests of the Lender or otherwise and the Borrowers expressly authorise any such disclosure and delivery.

(d)

The Borrowers acknowledge and accept that the Lender may be prohibited or it may be inappropriate for the Lender to disclose information to the Borrowers by reason of law or duties of confidentiality owed or to be owed to other persons.

(e)

This Clause 15.12 shall be: (i) in addition to all other duties of confidentiality imposed on the Lender and its professional advisers under applicable law; and (ii) subject to any other applicable provisions contained in this Agreement and the other Finance Documents.

15.13

Process of personal data

(a)

Process of personal data: The Borrower hereby confirms that it has been informed that its personal data and/or the personal data of its director(s), officer(s) and legal representative(s) (together the “personal data”) contained in this Agreement (and any supplemental or amendatory agreement thereof) and the other Finance

Documents or the personal data that have been or will be lawfully received or obtained by the Lender in relation to this Agreement and the other Finance Documents or the enforcement of all of the rights, powers and remedies possessed by the Lender under this Agreement (and any supplemental or amendatory agreement thereof) and/or under any other Finance Document will be included at the personal data database maintained by the Lender as processing agent (Υπεύθυνη Επεξεργασίας) and will be processed by the Lender or by third parties for the purpose of maintaining the security created by this Agreement (and any supplemental or amendatory agreement thereof) and the other Finance Documents and preserving of all of the rights, powers and remedies possessed by the Lender thereunder and properly serving, supporting and monitoring their current business relationship as provided in the information brochure “Information for the Processing of Personal Data” (Ενημέρωση για την επεξεργασία δεδομένων προσωπικού χαρακτήρα) which forms an integral part of this Agreement and the Borrower hereby confirms that a copy of such information brochure has been received by the Borrower, its director(s), officer(s) and legal representative(s) and has been perused, duly understood and fully agreed by each of them.

(b)

Duration of the process: The personal data process shall survive the termination of this Agreement for such period as it is required by the applicable law.

16.	JOINT AND SEVERAL LIABILITY OF THE BORROWERS

16.1	Joint and several liability

All liabilities and obligations of the Borrowers under this Agreement shall, whether expressed to be so or not, be joint and several.

16.2	No impairment of Borrowers’ obligations

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

(a)

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

(b)

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

(c)

the Lender releasing the other Borrower or any Security Interest created by a Finance Document; or

(d)

any time, waiver or consent granted to, or composition with the other Borrower or other person;

(e)

the release of the other Borrower or any other person under the terms of any composition or arrangement with any creditor thereof;

(f)

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, the other Borrower or other person or 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;

(g)

any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of the other Borrower or any other person;

(h)

any amendment, novation, supplement, extension, restatement (however

fundamental, and whether or not more onerous) or replacement of a Finance Document or any other document or security including, without limitation, any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security;

(i)

any unenforceability, illegality or invalidity of any obligation or any person under any Finance Document or any other document or security;

(j)

any insolvency or similar proceedings; or

(k)

any combination of the foregoing.

16.3	Principal debtor

Each Borrower declares that it is and will, throughout the Security Period, remain a principal debtor for all amounts owing under this Agreement and the Finance Documents and none of the Borrowers shall in any circumstances be construed to be a surety for the obligations of the other Borrower under this Agreement.

16.4	Subordination

Subject to Clause 16.5 (Borrowers’ required action), during the Security Period, none of the Borrowers shall:

(a)

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

(b)

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

(c)

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

(d)

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

(e)

exercise or assert any combination of the foregoing.

16.5	Borrowers’ required action

If during the Security Period, the Lender, by notice to the Borrowers, requires it to take any action referred to in paragraphs (a) to (d) of Clause 16.4 (Subordination), in relation to the other Borrower, that Borrower shall take that action as soon as practicable after receiving the Lender's notice.

16.6	Deferral of Borrowers' rights

Until all amounts which may be or become payable by the Borrowers under or in connection with the Finance Documents have been irrevocably paid in full and unless the Lender otherwise directs, no Borrower will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents:

(a)

to be indemnified by the other Borrower; or

(b)

to claim any contribution from the other Borrower in relation to any payment made by it under the Finance Documents.

17.	NOTICES AND COMMUNICATIONS

17.1

Notices

Every notice, request, demand or other communication under the Agreement or, unless otherwise provided therein, any of the other Finance Documents shall:

(a)

be in writing delivered personally or by first-class prepaid letter (airmail if available), or shall be served through a process server or subject to Clause 10.10 (Communications Indemnity) and Clause 10.11 (Electronic Communication) by fax or electronic mail;

(b)

be deemed to have been received, subject as otherwise provided in this Agreement or the relevant Finance Document, in the case of fax or electronic mail, at the time of dispatch as per transmission report (provided, in either case, that if the date of despatch is not a business day in the country of the addressee it shall be deemed to have been received at the opening of business on the next such business day), and in the case of a letter when delivered or served personally or five (5) days after it has been put into the post; and

(c)

be sent:

(i)

if to be sent to any Security Party, to:

c/o PAVIMAR S.A..

17 km National Road Athens-Lamia & 25 Foinikos Street,

Nea Kifissia 145 64, Greece

Facsimile No: +30 211 888 0299

Attention: Mrs. Viktoria Poziopoulou

E-mail: v.poziopoulou@pavimarship.com

and

(ii)

if to be sent to the Lender, to

Alpha Bank A.E.

93 Akti Miaouli

185 38 Piraeus, Greece

Fax No.: +30210 42 90 268

Attention: The Manager

E-mail: shipdivision@alpha.gr

or to such other person, address fax number or electronic address as is notified by the relevant Security Party or the Lender (as the case may be) to the other parties to this Agreement and, in the case of any such change of address, or fax number or electronic address notified to the Lender, the same shall not become effective until notice of such change is actually received by the Lender and a copy of the notice of such change is signed by the Lender.

17.2	Effective date of notices

Subject to Clauses 17.3 (Service outside business hours) and 17.4 (Illegible notices):

(a)

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

(b)

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

17.3	Service outside business hours

However, if under Clause 17.2 (Effective date of notices) a notice would be deemed to be served:

(a)

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

(b)

on such a Banking Day, but after 5 p.m. local time,

the notice shall (subject to Clause 17.4 (Illegible notices)) be deemed to be served, and shall take effect, at 9 a.m. on the next day which is such a Banking Day.

17.4	Illegible notices

Clauses 17.2 (Effective date of notices) and 17.3 (Service outside business hours) do not apply if the recipient of a notice notifies the sender within one hour after the time at which the notice would otherwise be deemed to be served that the notice has been received in a form which is illegible in a material respect.

17.5	Valid notices

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

(a)

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

(b)

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

17.6	Effect of electronic communication

(a)

Any communication to be made between any two Parties under or in connection with the Finance Documents may be made by electronic mail or other electronic means (including, without limitation, by way of posting to a secure website) if those two Parties:

(i)

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

(ii)

notify each other of any change to their address or any other such information supplied by them by not less than five Banking Days' notice.

(b)

Any such electronic communication as specified in paragraph 0(a) above to be made between a Security Party and the Lender may only be made in that way to the extent that those two Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication.

(c)

Any such electronic communication as specified in paragraph 0(a) above made between any two Parties will be effective only when actually received (or made available) in readable form and in the case of any electronic communication made by a Party to the Lender only if it is addressed in such a manner as the Lender shall specify for this purpose.

(d)

Any electronic communication which becomes effective, in accordance with paragraph (c) above, after 5.00 p.m. in the place in which the Party to whom the relevant communication is sent or made available has its address for the purpose of this Agreement shall be deemed only to become effective on the following Banking Day.

(e)

Any reference in a Finance Document to a communication being sent or received shall be construed to include that communication being made available in accordance with this Clause 17.6.

18.	LAW AND JURISDICTION

18.1	Governing Law

(a)

This Agreement and any non-contractual obligations connected with it shall be governed by and construed in accordance with English Law.

(b)

For the purposes of enforcement in Greece, it is hereby expressly agreed that English law as the governing law of this Agreement will be proved by an affidavit of a solicitor from an English law firm to be appointed by the Lender and the said affidavit shall constitute full and conclusive evidence binding on the Borrowers but the Borrowers shall be allowed to rebut such evidence save for witness.

18.2	Jurisdiction

(a)

The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement or any non-contractual obligations connected with it (including a dispute regarding the existence, validity or termination of this Agreement and including claims arising out of tort or delict) (a “Dispute”). Each of the Borrowers irrevocably and unconditionally submits to the jurisdiction of such courts.

(b)

The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary and waives any objections to the inconvenience of England as a forum.

(c)

This Clause 18.2 is for the benefit of the Lender only. As a result, the Lender shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions.

18.3	Process Agent for English Proceedings

Without prejudice to any other mode of service allowed under any relevant law each of the Borrowers irrevocably designates, appoints and empowers Messrs. Hill Dickinson Services (London) Limited, at present of The Broadgate Tower, 20 Primrose Street, London EC2A 2EW, England (Mr. Anthony Paizes, Email: Anthony.Paizes@hilldickinson.com), (hereinafter called the “Process Agent for English Proceedings”), to receive for it and on its behalf, service of process issued out of the English courts in relation to any proceedings before the English courts in connection with any Finance Document, provided, however, that:

(a)

each of the Borrowers hereby agrees and undertakes to maintain a Process Agent for English Proceedings throughout the Security Period and hereby agrees that in the event that if any Process Agent for English Proceedings is unable for any reason to act as agent for service of process, such Borrower must immediately (and in any event within ten (10) days of such event taking place) appoint another agent on terms acceptable to the Lender. Failing this, the Lender may appoint for this purpose a substitute Process Agent for English Proceedings and the Lender is hereby irrevocably authorised to effect such appointment on Borrowers’ behalf. The appointment of such Process Agent for English Proceedings shall be valid and binding from the date notice of such appointment is given by the Lender to the Borrowers in accordance with Clause 17.1 (Notices); and

(b)

each of the Borrowers hereby agrees that failure by a Process Agent for English Proceedings to notify the Borrowers of the process will not invalidate the proceedings concerned.

18.4	Proceedings in any other country

If it is decided by the Lender that any such proceedings should be commenced in any other country, then any objections as to the jurisdiction or any claim as to the inconvenience of the forum is hereby waived by each of the Borrowers and it is agreed and undertaken by each of the Borrowers to instruct lawyers in that country to accept service of legal process and not to contest the validity of such proceedings as far as the jurisdiction of the court or courts involved is concerned and each of the Borrowers agrees that any judgment or order obtained in an English court shall be conclusive and binding on the Borrowers and shall be enforceable without review in the courts of any other jurisdiction.

18.5	Process Agent (antiklitos) in Greece

Mr. Vicky Poziopoulou, an Attorney-at-Law, presently of c/o Pavimar S.A., currently of 25 F0inikos Street, Kifissia 145 64, Greece (hereinafter called the “Process Agent for Greek Proceedings”) is hereby appointed by each of the Borrowers as agent to accept service, upon whom any judicial process in respect of proceedings in Greece may be served and any process notice, judicial or extra-judicial request, demand for payment, payment order, foreclosure proceedings, notarial announcement of claim, notice, request, demand or other communication under this Agreement or any of the Finance Documents. In the event that the Process Agent for Greek Proceedings (or any substitute process agent notified to the Lender in accordance with the foregoing) cannot be found at the address specified above (or, as the case may be, notified to the Lender), which will be conclusively proved by a deed of a process server to the effect that the Process Agent for Greek Proceedings was not found at such address, any process notice, judicial or extra-judicial request, demand for payment, payment order, foreclosure proceedings, notarial announcement of claim or

other communication to be sent to any Security Party may be validly served/notified in accordance with the relevant provisions of the Hellenic Code on Civil Procedure.

18.6	Third Party Rights

A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

18.7	Meaning of “proceedings”

In this Clause 18 “proceedings” means proceedings of any kind, including an application for a provisional or protective measure.

[Remainder of page intentionally left blank]

SCHEDULE 1

Form of Drawdown Notice

(referred to in Clause 2.2)

To: ALPHA BANK A.E.

93 Akti Miaouli

185 38 Piraeus, Greece

[●] November, 2019

Re: US$11,000,000 Loan Agreement (the “Loan Agreement”) dated [●] November, 2019 made between (1) the Lender, as lender and (2) (a) Pikachu Shipping Co. of the Marshall Islands and Spetses Shipping Co., of the Marshall Islands (the “Borrowers”), as joint and several borrowers.

1.	We refer to the Loan Agreement (terms defined in the Loan Agreement have their defined meanings when used in this Drawdown Notice) and hereby give you notice that we wish to draw the Commitment as follows:

(i)

Loan: the full amount of the Commitment in the amount of [US$11,000,000 (Dollars Eleven million)];

(ii)

Drawdown Date: [●] November, 2019;

(iii)

duration of first Interest Period: duration of the first Interest Period in respect of the Loan shall be [●] months; and

(iv)

Payment instructions: [in payment to the Operating Accounts as per our instructions under separate cover for the purposes set out in Clause 1.1 (Amount and purpose) of the Loan Agreement].

2.	We confirm, represent and warrant that:

(i)

no event or circumstance has occurred and is continuing which constitutes a Default or will result from the borrowing of the Loan;

(ii)

the representations and warranties contained in Clause 6 (Representations and warranties) of the Loan Agreement and the representations and warranties contained in each of the other Finance Documents are true and correct at the date hereof as if made with respect to the facts and circumstances existing at such date;

(iii)

the borrowing to be effected by the drawing of the Loan will be within our corporate powers, has been validly authorised by appropriate corporate action and will not cause any limit on our borrowings (whether imposed by statute, regulation, agreement or otherwise) to be exceeded;

(iv)

we will not use the Loan proceeds or any part thereof for the purpose of acquiring shares in the share capital of the Lender or other banks and/or financial institutions or acquiring hybrid capital debentures (τίτλους υβριδικών κεφαλαίων) of the Lender or other banks and/or financial institutions; and

(v)

there has been no change in the ownership, management, operations and no Material Adverse Change in our financial position or in the consolidated financial position of ourselves and the other Security Parties from that described by us to the Lender in the negotiation of the Loan Agreement.

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

SIGNED by	)
Mr.	)
for and on behalf of	)
PIKACHU SHIPPING CO.	)
of the Marshall Islands,	)
in the presence of:	)	Attorney-in-fact

Witness:
Name:	[●]
Title:	Attorney-at-Law
Address:	[●],
	Piraeus, Greece

SIGNED by	)
Mr.	)
for and on behalf of	)
SPETSES SHIPPING CO.	)
of the Marshall Islands,	)
in the presence of:	)	Attorney-in-fact

Witness:
Name:	[●]
Title:	Attorney-at-Law
Address:	[●],
	Piraeus, Greece

Schedule 2

Form of Insurance Letter

To:	[P&I Club]
	[●]
	[●]

From:	[●]
	[●],
	[●]

[●] 20[●]

Dear Sirs

m.v. “[●]” (the “Vessel”)

We are obtaining loan finance from Alpha Bank A.E. (the “Lender”) secured (inter alia) by a first ship mortgage over the Vessel. The Vessel's insurances will also be assigned to the Lender.

You are hereby authorised to send a copy of the Certificate of Entry for the Vessel to the Lender, c/o their lawyers, namely, Theo V. Sioufas & Co. Law Offices, of 13 Defteras Merarchias Street, 185 35 Piraeus, Greece. Further, you are also irrevocably authorised to provide the Lender from time to time with any other information whatsoever which they may require relating to the entry of the Vessel in the association.

This letter is governed by, and shall be construed in accordance with, English law.

_____________________________

For and on behalf of

[●]

EXECUTION PAGE

IN WITNESS whereof the parties hereto have caused this Agreement to be duly executed on the date first above written.

SIGNED by	)
Mrs. Viktoria Poziopoulou	)
for and on behalf of	)
PIKACHU SHIPPING CO.,	)	/s/ Viktoria Poziopoulou
of the Marshall Islands, in the presence of:	)	Attorney-in-fact

Witness:	/s/ Charalampos Sioufas
Name:	Charalampos Sioufas
Address:	13 Defteras Merarchias Piraeus, Greece
Occupation:	Attorney-at-Law

SIGNED by	)
Mrs. Victoria Poziopoulou	)
for and on behalf of	)
SPETSES SHIPPING CO.,	)	/s/ Victoria Poziopoulou
of the Marshall Islands, in the presence of:	)	Attorney-in-fact

Witness:	/s/ Charalampos Sioufas
Name:	Charalampos Sioufas
Address:	13 Defteras Merarchias Piraeus, Greece
Occupation:	Attorney-at-Law

SIGNED by	)
Mrs. Aikaterini Damianidou and	)	/s/ Aikaterini Damianidou
Mrs. Chrysanthi Papathanasopoulou	)	Attorney-in-fact
for and on behalf of	)
ALPHA BANK A.E.,	)
of Greece,	)
in the presence of:	)	/s/ Chrysanthi Papathanasopoulou
		Attorney-in-fact

Witness:	/s/ Charalampos Sioufas
Name:	Charalampos Sioufas
Address:	13 Defteras Merarchias Piraeus, Greece
Occupation:	Attorney-at-Law

	(a)	in writing, delivered personally or sent by courier or fax or shall be served through process server or via e-mail; and

	(b)	sent:

SIGNED by	)
Petros Panagiotidis	)
for and on behalf of	)
CASTOR MARITIME INC.	)
the Borrower	)	/s/ Petros Panagiotidis

SIGNED by	)
Loucas Hadjiyiangou	)
for and on behalf of	)
THALASSA INVESTMENT CO. S.A.	)
the Lender	)	/s/ Loucas Hadjiyiangou

Name	Jurisdiction of Incorporation	Ownership Percentage

Spetses Shipping Co.	Republic of the Marshall Islands	100%

Bistro Maritime Co.	Republic of the Marshall Islands	100%

Pikachu Shipping Co.	Republic of the Marshall Islands	100%