UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
 [ ]
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
OR
 
 
 
 
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
For the fiscal year ended December 31, 2019
 
 
 
 
OR
 
 
 
 
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
For the transition period from _________________ to _________________
 
 
 
 
 
OR
 
 
 
 
[ ]
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 _________________
 
 
 
 
 
 
Commission file number 001-37889
TOP SHIPS 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)
 
 
1 Vasilisis Sofias and Megalou Alexandrou Str, 15124 Maroussi, Greece
(Address of principal executive offices)
 
 
Alexandros Tsirikos, (Tel) +30 210 812 8107, info@topships.org
1 Vasilisis Sofias and Megalou Alexandrou Str, 15124 Maroussi, Greece
 (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 Stock, par value $0.01 per share
 
 
TOPS
 
Nasdaq Capital Market
Preferred Stock Purchase Rights
   
 
Nasdaq Capital Market
Securities registered or to be registered pursuant to Section 12(g) of the Act.
NONE
(Title of class)
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
NONE
(Title of class)
 
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.
As of December 31, 2019, 8,695,348 shares of common stock, par value $0.01 per share, were outstanding.
Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
 
No
X
 
If this report is an annual 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
X
 
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
X
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 (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
X
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 the definitions 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:
X
    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
X
 
(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
X
 

TABLE OF CONTENTS

   
Page
     
PART I
 
3
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
3
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
3
ITEM 3.
KEY INFORMATION
3
ITEM 4.
INFORMATION ON THE COMPANY
31
ITEM 4A.
UNRESOLVED STAFF COMMENTS
48
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
48
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
64
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
67
ITEM 8.
FINANCIAL INFORMATION.
69
ITEM 9.
THE OFFER AND LISTING.
70
ITEM 10.
ADDITIONAL INFORMATION
71
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
87
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
88
PART II
 
88
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
88
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
88
ITEM 15.
CONTROLS AND PROCEDURES
88
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
90
ITEM 16B.
CODE OF ETHICS
90
ITEM 16C.
PRINCIPAL AUDITOR FEES AND SERVICES
90
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
90
ITEM 16D.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
90
ITEM 16F.
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
90
ITEM 16G.
CORPORATE GOVERNANCE
90
ITEM 16H.
MINE SAFETY DISCLOSURE
92
PART III
 
92
ITEM 17.
FINANCIAL STATEMENTS
92
ITEM 18.
FINANCIAL STATEMENTS
92
ITEM 19.
EXHIBITS
92



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters discussed in this 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 statements other than statements of historical facts.
TOP Ships 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 annual 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 annual report, statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "anticipate," "believe," "expect," "intend," "estimate," "forecast," "project," "plan," "potential," "continue," "possible," "likely," "may," "should," and similar expressions identify forward-looking statements.
The forward-looking statements in this annual 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 ability to maintain or develop new and existing customer relationships with major refined product importers and exporters, major crude oil companies and major commodity traders, including our ability to enter into long-term charters for our vessels;

our future operating and financial results;

our future vessel acquisitions, our business strategy and expected capital spending or operating expenses, including any dry-docking and insurance costs;

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

oil and chemical tanker industry trends, including charter rates and vessel values and factors affecting vessel supply and demand;

our ability to take delivery of, integrate into our fleet, and employ any newbuildings we may order in the future and the ability of shipyards to deliver vessels on a timely basis;

the aging of our vessels and resultant increases in operation and dry-docking costs;

the ability of our vessels to pass classification inspections and vetting inspections by oil majors and big chemical corporations;

significant changes in vessel performance, including increased vessel breakdowns;

the creditworthiness of our charterers and the ability of our contract counterparties to fulfill their obligations to us;

our ability to repay outstanding indebtedness, to obtain additional financing and to obtain replacement charters for our vessels, in each case, at commercially acceptable rates or at all;

changes to governmental rules and regulations or actions taken by regulatory authorities and the expected costs thereof;



our ability to comply with additional costs and risks related to our environmental, social and governance policies;

potential liability from litigation and our vessel operations, including discharge of pollutants;

changes in general economic and business conditions;

general domestic and international political conditions, potential disruption of shipping routes due to accidents, political events, including "trade wars," piracy or acts by terrorists;

changes in production of or demand for oil and petroleum products and chemicals, either globally or in particular regions;

the strength of world economies and currencies, including fluctuations in charterhire rates and vessel values;

potential liability from future litigation and potential costs due to any environmental damage and vessel collisions;

the length and severity of the recent coronavirus (COVID-19) outbreak and its impact on the demand for commercial seaborne transportation and the condition to the financial markets; and

and other important factors described from time to time in the reports filed by us with the U.S. Securities and Exchange Commission, or the SEC.
You should not place undue reliance on forward-looking statements contained in this annual report because they are statements about events that are not certain to occur as described or at all. All forward-looking statements in this annual report are qualified in their entirety by the cautionary statements contained in this annual report.
Any forward-looking statements contained herein are made only as of the date of this annual report, and except to the extent required by applicable law or regulation 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.
2

PART I
ITEM 1.
 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable.
ITEM 2.
 OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable.
ITEM 3.
KEY INFORMATION
Unless the context otherwise requires, as used in this annual report, the terms "Company," "we," "us," and "our" refer to TOP Ships Inc. and all of its subsidiaries, and "TOP Ships Inc." refers only to TOP Ships Inc. and not to its subsidiaries. We use the term deadweight ton, or dwt, in describing the size of vessels. Dwt, expressed in metric tons each of which is equivalent to 1,000 kilograms, refers to the maximum weight of cargo and supplies that a vessel can carry. Throughout this annual report, the conversion from Euros, or €, to U.S. dollars, or $, is based on the U.S. dollar/Euro exchange rate of 0.8924 as of December 31, 2019, unless otherwise specified.
A.
Selected Financial Data
The following table sets forth our selected Statement of Comprehensive (Loss)/Income and Balance Sheet Data  ("Historical consolidated financial information)" and other operating data as of and for the periods indicated. Our selected historical consolidated financial information as of December 31, 2018 and 2019 and for the years ended December 31, 2017, 2018 and 2019 is derived from our audited consolidated financial statements included in "Item 18. Financial Statements" herein. The selected historical consolidated financial information as of December 31, 2015, 2016 and 2017 and for the years ended December 31, 2015 and 2016 is derived from our audited consolidated financial statements that are not included in this annual report. Our consolidated financial statements are prepared and presented in accordance with U.S. generally accepted accounting principles, or U.S. GAAP.
The information provided below should be read in conjunction with "Item 4. Information on the Company" and "Item 5. Operating and Financial Review and Prospects" and the consolidated financial statements, related notes and other financial information included herein.
Following the one-for-ten reverse stock split of our issued and outstanding common shares effective on February 22, 2016, a one-for-twenty reverse stock split of our issued and outstanding common shares effective on May 11, 2017, a one-for-fifteen reverse stock split of our issued and outstanding common shares effective on June 23, 2017, a one-for-thirty reverse stock split of our issued and outstanding common shares effective on August 3, 2017, a one-for-two reverse stock split of our issued and outstanding common shares effective on October 6, 2017,  a one-for-ten reverse stock split of our issued and outstanding common shares effective on March 26, 2018 and a one-for-twenty reverse stock split of our issued and outstanding common shares effective on August 22, 2019, all share and per share amounts disclosed throughout this annual report, in the table below and in our consolidated financial statements have been retroactively updated to reflect this change in capital structure, unless otherwise indicated. Please see "Item 4. Information on the Company—History and Development of the Company".
3


U.S. Dollars in thousands, except per share data
                             
STATEMENT OF COMPREHENSIVE (LOSS)/INCOME
 
2015
   
2016
   
2017
   
2018
   
2019
 
Time charter revenues
   
13,075
     
28,433
     
39,363
     
39,442
     
61,695
 
Time charter revenues from related parties
   
-
     
-
     
-
     
1,606
     
1,311
 
Voyage charter revenue
   
-
     
-
     
-
     
-
     
3,082
 
Total charter revenue
   
13,075
     
28,433
     
39,363
     
41,048
     
66,088
 
                                         
Voyage expenses
   
370
     
736
     
999
     
1,020
     
3,038
 
Operating lease expense1
   
-
     
-
     
-
     
-
     
7,054
 
Bareboat charter hire expense1
   
5,274
     
6,299
     
6,282
     
6,282
     
-
 
Amortization of prepaid bareboat charter hire1
   
1,431
     
1,577
     
1,657
     
1,657
     
-
 
Vessel operating expenses
   
4,789
     
9,913
     
13,444
     
14,826
     
22,786
 
Dry-docking costs
   
-
     
-
     
-
     
-
     
399
 
Management fees-related parties
   
1,621
     
1,824
     
4,730
     
7,765
     
2,443
 
General and administrative expenses
   
2,983
     
2,906
     
5,805
     
6,997
     
1,730
 
Other operating (income)/loss
   
274
     
(3,137
)
   
(914
)
   
-
     
-
 
Vessel depreciation
   
668
     
3,467
     
5,744
     
6,390
     
12,392
 
Impairment on vessels
   
3,081
     
-
     
-
     
-
     
12,310
 
                                         
Operating (loss)/income
   
(7,416
)
   
4,848
     
1,616
     
(3,889
)
   
3,936
 
                                         
Interest and finance costs
   
(719
)
   
(3,093
)
   
(15,793
)
   
(9,662
)
   
(18,077
)
(Loss)/gain on derivative financial instruments
   
(392
)
   
(698
)
   
(301
)
   
1,821
     
1,601
 
Interest income
   
-
     
-
     
13
     
130
     
133
 
Equity (losses)/gains on investments
   
-
     
-
     
(27
)
   
291
     
778
 
Other (expense)/income, net
   
20
     
(5
)
   
1,120
     
180
     
-
 
Impairment on unconsolidated joint ventures
   
-
     
-
     
-
     
-
     
(3,144
)
                                         
Net (loss)/income and comprehensive (loss)/income
   
(8,507
)
   
1,052
     
(13,372
)
   
(11,129
)
   
(14,773
)
Deemed dividend for beneficial conversion feature of Series B & E convertible preferred stock
   
-
     
(1, 403
)
   
-
     
-
     
(9,339
)
Deemed dividend equivalents on outstanding Series E Preferred Shares related to redemption value
   
-
     
-
     
-
     
-
     
(2,359
)
Series E Preferred Shares Dividend
   
-
     
-
     
-
     
-
     
(2,650
)
Deemed dividend on Series E Preferred Shares realized redemptions
   
-
     
-
     
-
     
-
     
(1,868
)
Net loss attributable to common shareholders
   
(8,507
)
   
(351
)
   
(13,372
)
   
(11,129
)
   
(30,985
)
Attributable to:
                                       
Common stock holders
   
(8,507
)
   
(351
)
   
(13,404
)
   
(11,134
)
   
(30,985
)
Non-controlling interests
   
-
     
-
     
32
     
5
     
-
 
                                         
Loss per share, basic
 
$
(15,467,280
)
 
$
(319,100
)
 
$
(251
)
 
$
(12.20
)
 
$
(10.58
)
Loss per share, diluted
 
$
(15,467,280
)
 
$
(319,100
)
 
$
(251
)
 
$
(12.20
)
 
$
(10.58
)
Weighted average common shares outstanding, basic
   
-
     
1
     
53,169
     
909,072
     
2,927,608
 
Weighted average common shares outstanding, diluted
   
-
     
1
     
53,169
     
909,072
     
2,927,608
 
                                         
Other comprehensive loss
                                       
Effective portion of changes in fair value of interest swap contracts
   
-
     
-
     
-
     
-
     
(1,361
)
Total other comprehensive loss
   
(8,507
)
   
(351
)
   
(13,372
)
   
(11,129
)
   
(32,346
)
Attributable to:
                                       
Common stock holders
   
(8,507
)
   
(351
)
   
(13,404
)
   
(11,134
)
   
(32,346
)
Non-controlling interests
   
-
     
-
     
32
     
5
     
-
 
                                         
1 New guidance on Leases was implemented on January 1, 2019 and as permitted under the transition rules we elected not to restate comparative figures
4



U.S. dollars in thousands, unless otherwise stated
 
2015
   
2016
   
2017
   
2018
   
2019
 
BALANCE SHEET DATA
                             
Current assets
   
5,269
     
4,541
     
29,055
     
5,288
     
50,742
 
Total assets
   
74,006
     
143,317
     
220,448
     
258,488
     
444,890
 
Current liabilities, including current portion of long-term debt
   
17,577
     
20,033
     
25,581
     
36,819
     
75,417
 
Non-current liabilities
   
22,276
     
76,022
     
87,593
     
117,388
     
263,716
 
Total debt
   
24,226
     
84,539
     
103,949
     
140,655
     
309,007
 
Stockholders' and mezzanine equity
   
34,153
     
45,521
     
107,274
     
104,281
     
105,757
 
Preferred stock
   
-
     
-
     
1
     
1
     
1
 
Common stock
   
-
     
-
     
4
     
11
     
87
 

OTHER FINANCIAL DATA
   
2015
   
2016
   
2017
   
2018
   
2019
 
FLEET DATA
                             
Total number of vessels at end of period (including leased vessels)
   
3.0
     
6.0
     
7.0
     
8.0
     
12.0
 
Average number of vessels(1)
   
2.2
     
5.0
     
6.8
     
7.3
     
11.1
 
Total calendar days for fleet(2)
   
810
     
1,812
     
2,496
     
2,670
     
4,055
 
Total available days for fleet(3)
   
805
     
1,812
     
2,495
     
2,668
     
4,032
 
Total operating days for fleet(4)
   
796
     
1,799
     
2,491
     
2,663
     
3,959
 
Total time charter days for fleet
   
796
     
1,799
     
2,491
     
2,663
     
3,884
 
Total spot (voyage) days for fleet
   
-
     
-
     
-
     
-
     
75
 
Fleet utilization(5)
   
98.91
%
   
99.28
%
   
99.81
%
   
99.81
%
   
98.17
%


 
2015
 
2016
 
2017
 
2018
 
2019
 
AVERAGE DAILY RESULTS
                   
Time charter equivalent(6)
 
$
15,961
   
$
15,396
   
$
15,403
   
$
15,031
   
$
16,233
 
Vessel operating expenses(7)
 
$
5,914
   
$
5,470
   
$
5,386
   
$
5,552
   
$
5,619
 
General and administrative expenses(8)
 
$
3,684
   
$
1,604
   
$
2,323
   
$
2,620
   
$
427
 


U.S. dollars in thousands
2015
 
2016
 
2017
 
2018
 
2019
 
Adjusted EBITDA(9)
 
$
3,058
   
$
16,186
   
$
16,405
   
$
10,910
   
$
36,470
 


(1)
Average number of vessels is the number of vessels that constituted our fleet (including chartered in vessels) for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in that period.
(2)
Calendar days are the total days the vessels were in our possession for the relevant period. Calendar days are an indicator of the size of our fleet over the relevant period and affect both the amount of revenues and expenses that we record during that period.
(3)
Available days are the number of calendar days less the aggregate number of days that our vessels are off-hire due to scheduled repairs or scheduled guarantee inspections in the case of newbuildings, vessel upgrades or special or intermediate surveys and the aggregate amount of time that we spend positioning our vessels. Companies in the shipping industry generally use available days to measure the number of days in a period during which vessels should be capable of generating revenues.
(4)
Operating days are the number of available days in a period less the aggregate number of days that our vessels are off-hire due to unforeseen technical circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period that our vessels actually generate revenue.
(5)
Fleet utilization is calculated by dividing the number of operating days during a period by the number of available days during that period. The shipping industry uses fleet utilization to measure a company's efficiency in finding suitable employment for its vessels and minimizing the number of days that its vessels are off-hire for reasons other than scheduled repairs or scheduled guarantee inspections in the case of newbuildings, vessel upgrades, special or intermediate surveys and vessel positioning.
(6)
Time charter equivalent rate, or TCE rate, is a measure of the average daily revenue performance of a vessel.  Our method of calculating TCE rate is determined by dividing TCE revenues by operating days for the relevant time period. TCE revenues are revenues minus voyage expenses. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract, but are payable by us in the case of a voyage charter, as well as commissions. TCE revenues and TCE rate, which are non-U.S. GAAP measures, provide additional supplemental information in conjunction with shipping revenues, the most directly comparable U.S. GAAP measure. We use TCE rates and TCE revenues to compare period-to-period changes in our performance and it assists investors and our management in evaluating our financial performance. The following table below reflects the reconciliation of TCE revenues to revenues as reflected in the consolidated statements of operations and our calculation of TCE rates for the periods presented.
5



U.S. dollars in thousands, except average daily time charter equivalent and total operating days
 
2015
   
2016
   
2017
   
2018
   
2019
 
On a consolidated basis
                             
Total Revenues*
 
$
13,075
   
$
28,433
   
$
39,363
   
$
41,048
   
$
66,088
 
Less:
                                       
Voyage expenses
   
(370
)
   
(736
)
   
(999
)
   
(1,020
)
   
(3,038
)
 Time charter equivalent revenues
 
$
12,705
   
$
27,697
   
$
38,364
   
$
40,028
   
$
63,050
 
Total operating days
   
796
     
1,799
     
2,491
     
2,663
     
3,884
 
                                         
Average Daily Time Charter Equivalent (TCE)
 
$
15,961
   
$
15,396
   
$
15,403
   
$
15,031
   
$
16,233
 
*Represents the aggregate of Time charter revenues from third parties, Time charter revenues from Related Parties and Voyage charter revenue from third parties

(7)
Daily vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs are calculated by dividing vessel operating expenses by fleet calendar days for the relevant time period.
(8)
Daily general and administrative expenses are calculated by dividing general and administrative expenses by fleet calendar days for the relevant time period.
(9)
Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization (Adjusted EBITDA), is not a measure prepared in accordance with U.S. GAAP. We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, vessel bareboat charter hire expenses (including amortization of prepaid hire), operating lease expenses, asset impairments, and gains/losses on derivative financial instruments. Adjusted EBITDA is a non-U.S. GAAP financial measure that is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess our financial and operating performance. We believe that this non-GAAP financial measure assists our management and investors by increasing the comparability of our performance from period to period. This is achieved by excluding the potentially disparate effects between periods of interest, gain/loss on financial instruments, depreciation and amortization, vessel bareboat charter hire expenses (including amortization of prepaid hire), operating lease expenses, asset impairments and which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect results of operations between periods. This non-U.S. GAAP measure should not be considered in isolation from, as a substitute for, or superior to financial measures prepared in accordance with U.S. GAAP.  In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our definition of Adjusted EBITDA may not be the same as reported by other companies in the shipping industry or other industries. Adjusted EBITDA does not represent and should not be considered as an alternative to operating income or cash flow from operations, as determined in accordance with U.S. GAAP.

U.S. dollars in thousands
 
2015
   
2016
   
2017
   
2018
   
2019
 
Net (loss)/income and comprehensive (loss)/income
   
(8,507
)
   
1,052
     
(13,372
)
   
(11,129
)
   
(14,773
)
                                         
Add: Bareboat charter hire expenses
   
5,274
     
6,299
     
6,282
     
6,282
     
-
 
Add: Amortization of prepaid bareboat charter hire
   
1,431
     
1,577
     
1,657
     
1,657
     
-
 
Add: Operating lease expense
   
-
     
-
     
-
     
-
     
7,054
 
Add: Vessel depreciation
   
668
     
3,467
     
5,744
     
6,389
     
12,392
 
Add: Impairment on vessel
   
3,081
     
-
     
-
     
-
     
12,310
 
Add: Impairment on unconsolidated joint ventures
   
-
     
-
     
-
     
-
     
3,144
 
Add: Interest and finance costs
   
719
     
3,093
     
15,793
     
9,662
     
18,077
 
Add: Loss/(gain) on derivative financial instruments
   
392
     
698
     
301
     
(1,821
)
   
(1,601
)
Less: Interest income
   
-
     
-
     
-
     
(130
)
   
(133
)
                                         
Adjusted EBITDA
   
3,058
     
16,186
     
16,405
     
10,910
     
36,470
 

B.
Capitalization and Indebtedness

Not Applicable.
C.
Reasons for the Offer and Use of Proceeds
Not Applicable.
6


D.
Risk Factors
The following risks relate principally to the industry in which we operate and our business in general. Any of these risk factors could materially and adversely affect our business, financial condition or operating results and the trading price of our common shares.
RISKS RELATED TO OUR INDUSTRY
The international tanker industry has historically been both cyclical and volatile and this may lead to reductions and volatility in our charter rates, our vessel values, our revenues, earnings and cash flow results.
The international tanker industry in which we operate is cyclical, with attendant volatility in charter hire rates, vessel values and industry profitability. For tanker vessels, the degree of charter rate volatility has varied widely. Please see "—The international oil tanker industry has experienced volatile charter rates and vessel values and there can be no assurance that these charter rates and vessel values will not decrease in the near future." Currently, all of our vessels are employed on time charters. However, changes in spot rates and time charter rates can affect the revenues we receive from operations in the event our charterers default or seek to renegotiate the charter hire, as well as the value of our vessels, even if our vessels are employed under long-term time charters. Our ability to re-charter our vessels on the expiration or termination of their time or bareboat charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, economic conditions in the tanker markets and several other factors outside of our control. If we enter into a charter when charter rates are low, our revenues and earnings will be adversely affected. A decline in charter hire rates will also likely cause the value of our vessels to decline.
Fluctuations in charter rates and vessel values result from changes in the supply and demand for vessels and changes in the supply and demand for oil, chemicals and other liquids our vessels carry. Factors affecting the supply and demand for our vessels are outside of our control and are unpredictable. The nature, timing, direction and degree of changes in the tanker industry conditions are also unpredictable.
Factors that influence demand for tanker vessel capacity include:

supply and demand for petroleum products and chemicals carried;

changes in oil production and refining capacity resulting in shifts in trade flows for oil products;

the distance petroleum products and chemicals are to be moved by sea;

global and regional economic and political conditions, including "trade wars" and developments in international trade, national oil reserves policies, fluctuations in industrial and agricultural production, armed conflicts and work stoppages;

increases in the production of oil in areas linked by pipelines to consuming areas, the extension of existing, or the development of new pipeline systems in markets we may serve, or the conversion of existing non-oil pipelines to oil pipelines in those markets;

environmental and other legal and regulatory developments;

economic slowdowns caused by public health events such as the recent COVID-19 outbreak;

currency exchange rates;

weather, natural disasters and other acts of God;

competition from alternative sources of energy, other shipping companies and other modes of transportation; and

international sanctions, embargoes, import and export restrictions, nationalizations, piracy and wars.
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The factors that influence the supply of tanker capacity include:

the number of newbuilding deliveries;

current and expected newbuilding orders for vessels;

the scrapping rate of older vessels;

vessel freight rates, which are affected by factors that may affect the rate of newbuilding, swapping and laying up of vessels;

the price of steel and vessel equipment;

technological advances in the design and capacity of vessels;

potential conversion of vessels for alternative use;

changes in environmental and other regulations that may limit the useful lives of vessels;

port or canal congestion;

the number of vessels that are out of service at a given time, namely those that are laid-up, drydocked, awaiting repairs or otherwise not available for hire, including those that are in drydock for the purpose of installing exhaust gas cleaning systems, known as scrubbers; and

changes in global petroleum and chemical production.
The factors affecting the supply and demand for tankers have been volatile and are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable. Market conditions have been volatile in recent years and continued volatility may reduce demand for transportation of oil, petroleum products and chemicals over longer distances and increase the supply of tankers, which may have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to pay dividends and existing contractual obligations.
Outbreaks of epidemic and pandemic diseases and governmental responses thereto could adversely affect our business.
Public health threats, such as the COVID-19 outbreak (as described more fully below), influenza and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate, including China, could adversely impact our operations, the timing of completion of any outstanding or future newbuilding projects, as well as the operations of our customers.
The recent outbreak of coronavirus COVID-19, a virus causing potentially deadly respiratory tract infections first identified in China and subsequently spreading around the world, has negatively affected economic conditions, the supply chain and the labor market regionally as well as globally and may otherwise impact our operations and the operations of our customers and suppliers. As of March 2020, the outbreak of COVID-19 has been declared a pandemic by the World Health Organization ("WHO"). Governments in affected countries are imposing travel bans, quarantines and other emergency public health measures. As of March 15, 2020, the United States has temporarily restricted travel by foreign nationals into the country from a number of areas, including China and Europe. In addition, on March 18, 2020, the U.S. and Canada agreed to restrict all nonessential travel across the border. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses. These restrictions, and future prevention and mitigation measures, are likely to have an adverse impact on global economic conditions, which could materially and adversely affect our future operations. Uncertainties regarding the economic impact of the COVID-19 outbreak are likely to result in sustained market turmoil, which could also negatively impact our business, financial condition and cash flows. These measures, though temporary in nature, may continue and increase as countries attempt to contain the outbreak. As a result of these measures, our vessels may not be able to call on ports, or may be restricted from disembarking from ports, located in regions affected by COVID-19. In addition we may experience severe operational disruptions and delays, unavailability of normal port infrastructure and services including limited access to equipment, critical goods and personnel, disruptions to crew change, quarantine of ships and/or crew, counterparty solidity, closure of ports and custom offices, as well as disruptions in the supply chain and industrial production which may lead to reduced cargo demand, amongst other potential consequences attendant to epidemic and pandemic diseases.  The extent of the COVID-19 outbreak's effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, we cannot predict the impact it may have on our future operations, which could be material and adverse, particularly if the pandemic continues to evolve into a severe worldwide health crisis.
8


In addition, public health threats such as COVID-19, in any area, including areas where we do not operate, could disrupt international transportation. Our crews generally work on a rotation basis, with a substantial portion relying on international air transport for rotation. Any such disruptions could impact the cost of rotating our crews, and possibly impact our ability to maintain a full crew on all vessels at any given time. Any of these public health threats and related consequences could adversely affect our financial results.
The international oil tanker industry has experienced volatile charter rates and vessel values and there can be no assurance that these charter rates and vessel values will not decrease in the near future.
The Baltic Dirty Tanker Index, or the BDTI, a U.S. dollar daily average of charter rates issued by the Baltic Exchange that takes into account input from brokers around the world regarding crude oil fixtures for various routes and oil tanker vessel sizes, has been volatile. For example, in 2019, the BDTI reached a high of 1,958 and a low of 610. The Baltic Clean Tanker Index, or BCTI, a comparable index to the BDTI but for petroleum product fixtures, has similarly been volatile. In 2019, the BCTI reached a high of 1,031 and a low of 448. Although the BDTI and BCTI were 1,122 and 827, respectively, as of April 7, 2020, there can be no assurance that the crude oil and petroleum products charter market will increase, and the market could again decline. This volatility in charter rates depends, among other factors, on (i) the demand for crude oil and petroleum products, (ii) the inventories of crude oil and petroleum products in the United States and in other industrialized nations, (iii) oil refining volumes, (iv) oil prices, and (v) any restrictions on crude oil production imposed by the Organization of the Petroleum Exporting Countries, or OPEC, and non-OPEC oil producing countries.
If the charter rates in the oil tanker market decline from their current levels, our future earnings may be adversely affected, we may have to record impairment adjustments to the carrying values of our fleet and we may not be able to comply with the financial covenants in our loan agreements.
Volatile economic conditions throughout the world could have an adverse impact on our operations and financial results.
Among other factors, we face risks attendant to changes in economic environments, changes in interest rates, and instability in the banking and securities markets around the world.
The world economy continues to face a number of challenges. Concerns persist regarding the debt burden of certain European countries and their ability to meet future financial obligations and the overall stability of the euro. A renewed period of adverse development in the outlook for the financial stability of European countries, or market perceptions concerning these and related issues, could reduce the overall demand for oil and chemicals, and thus for shipping and our services, and thereby could affect our financial position, results of operations and cash available for distribution. In addition, turmoil and hostilities in the Middle East and other geographic areas and countries may negatively impact the world economy.
A general deterioration in the global economy may also cause a decrease in worldwide demand for certain goods and, thus, shipping. In the past, economic and governmental factors, together with concurrent declines in charter rates and vessel values, have had a material adverse effect on our results of operations, financial condition and cash flows, causing the price of our common shares to decline.
European countries have recently experienced relatively slow growth. Over the past several years, the credit markets in Europe have experienced significant contraction, deleveraging and reduced liquidity, and European authorities continue to implement a broad variety of governmental action and/or new regulation of the financial markets. Worldwide economic conditions have in the past impacted, and could in the future impact, lenders' willingness to provide credit to us and our customers. If economic conditions in Europe preclude or limit financing, we may not be able to obtain financing on terms that are acceptable to us, or at all, even if conditions outside Europe remain favorable for lending.
The current state of the global financial markets and current economic conditions may adversely impact our results of operation, financial condition, cash flows and ability to obtain financing or refinance our existing and future credit facilities on acceptable terms, which may negatively impact our business.
Global financial markets and economic conditions have been, and continue to be, volatile. Beginning in February 2020, due in part to fears associated with the spread of COVID-19 (as more fully described below), global financial markets and starting in late February, financial markets in the U.S. experienced even greater relative volatility and a steep and abrupt downturn, which volatility and downturn may continue as COVID-19 continues to spread. Credit markets and the debt and equity capital markets have been distressed and the uncertainty surrounding the future of the global credit markets has resulted in reduced access to credit worldwide, particularly for the shipping industry. These issues, along with significant write-offs in the financial services sector, the re-pricing of credit risk and the current weak economic conditions, have made, and will likely continue to make, it difficult to obtain additional financing. The current state of global financial markets and current economic conditions might adversely impact our ability to issue additional equity at prices that will not be dilutive to our existing shareholders or preclude us from issuing equity at all. Economic conditions and the economic slow-down resulting from COVID-19 and the intentional governmental responses to the virus may also adversely affect the market price of our common shares.
9


Also, as a result of concerns about the stability of financial markets generally, and the solvency of counterparties specifically, the availability and cost of obtaining money from the public and private equity and debt markets has become more difficult. Many lenders have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at all or on terms similar to current debt, and reduced, and in some cases ceased, to provide funding to borrowers and other market participants, including equity and debt investors, and some have been unwilling to invest on attractive terms or even at all. Due to these factors, we cannot be certain that financing will be available if needed and to the extent required, or that we will be able to refinance our existing and future credit facilities, on acceptable terms or at all. If financing or refinancing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they come due or we may be unable to enhance our existing business, complete additional vessel acquisitions or otherwise take advantage of business opportunities as they arise. The recent COVID-19 outbreak has negatively impacted, and may continue to negatively impact, global economic activity, demand for energy, and funds flows and sentiment in the global financial markets. Continued economic disruption caused by the continued failure to control the spread of the virus could significantly impact our ability to obtain additional debt financing.
Volatility of LIBOR and potential changes of the use of LIBOR as a benchmark could affect our profitability, earnings and cash flow.
The London Interbank Offered Rate ("LIBOR") is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to be eliminated or to perform differently than in the past. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of our variable rate indebtedness and obligations. LIBOR has been volatile in the past, with the spread between LIBOR and the prime lending rate widening significantly at times. Because the interest rates borne by a significant portion of our outstanding indebtedness fluctuates with changes in LIBOR, significant changes in LIBOR would have a material effect on the amount of interest payable on our debt, which in turn, could have an adverse effect on our financial condition.
Furthermore, the calculation of interest in most financing agreements in our industry has been based on published LIBOR rates. Due in part to uncertainty relating to the LIBOR calculation process, in recent years, it is likely that LIBOR will be phased out in the future. As a result, lenders have insisted on provisions that entitle the lenders, in their discretion, to replace published LIBOR as the base for the interest calculation with their cost-of-funds rate. If we are required to agree to such a provision in future financing agreements, our lending costs could increase significantly, which would have an adverse effect on our profitability, earnings and cash flow. In addition, the banks currently reporting information used to set LIBOR will likely stop such reporting after 2021, when their commitment to reporting information ends. The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate, or "SOFR." The impact of such a transition from LIBOR to SOFR could be significant for us.
In order to manage our exposure to interest rate fluctuations, we may from time to time use interest rate derivatives to effectively fix some of our floating rate debt obligations. No assurance can however be given that the use of these derivative instruments, if any, may effectively protect us from adverse interest rate movements. The use of interest rate derivatives may affect our results through mark to market valuation of these derivatives. Also, adverse movements in interest rate derivatives may require us to post cash as collateral, which may impact our free cash position. Interest rate derivatives may also be impacted by the transition from LIBOR to SOFR or other alternative rates.
We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business.
Our operations are subject to numerous laws and regulations in the form of international conventions and treaties, national, state and local laws and national and international regulations in force in the jurisdictions in which our vessels will operate or are registered, which can significantly affect the operation of our vessels. These regulations include, but are not limited to the International Convention for the Prevention of Pollution from Ships of 1973, as from time to time amended and generally referred to as MARPOL, including the designation of Emission Control Areas, or ECAs, thereunder, the International Convention on Load Lines of 1966, the International Convention on Civil Liability for Oil Pollution Damage of 1969, generally referred to as CLC, the International Convention on Civil Liability for Bunker Oil Pollution Damage, or Bunker Convention, the International Convention for the Safety of Life at Sea of 1974, or SOLAS, the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or ISM Code, the International Convention for the Control and Management of Ships' Ballast Water and Sediments, or the BWM Convention, the U.S. Oil Pollution Act of 1990, or OPA, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, the U.S. Clean Water Act, the U.S. Clean Air Act, the U.S. Outer Continental Shelf Lands Act, the U.S. Maritime Transportation Security Act of 2002, or the MTSA, and European Union regulations. Compliance with such laws, regulations and standards, where applicable, may require installation of costly equipment or operational changes and may affect the resale value or useful lives of our vessels. We may also incur additional costs in order to comply with other existing and future regulatory obligations, including, but not limited to, costs relating to air emissions, the management of ballast waters, maintenance and inspection, development and implementation of emergency procedures and insurance coverage or other financial assurance of our ability to address pollution incidents. These costs could have a material adverse effect on our business, results of operations, cash flows and financial condition. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations.
10


Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the United States. Events such as the 2010 explosion of the Deepwater Horizon and the subsequent release of oil into the Gulf of Mexico, or other events, may result in further regulation of the shipping industry, and modifications to statutory liability schemes, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. An oil spill could result in significant liability, including fines, penalties and criminal liability and remediation costs for natural resource damages under other federal, state and local laws, as well as third-party damages. We are required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although insurance covers certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on our business, results of operations, cash flows and financial condition and our ability to pay dividends, if any, in the future.
We are subject to international safety regulations and requirements imposed by classification societies and the failure to comply with these regulations may subject us to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports.
The operation of our vessels is affected by the requirements set forth in the United Nations' International Maritime Organization's International Management Code for the Safe Operation of Ships and Pollution Prevention, or ISM Code. The ISM Code requires ship owners, ship managers and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. We expect that any vessels that we acquire in the future will be ISM Code-certified when delivered to us. The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject it to increased liability, may invalidate existing insurance or decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports, including United States and European Union ports.
In addition, the hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the International Convention for Safety of Life at Sea. If a vessel does not maintain its class and/or fails any annual survey, intermediate survey or special survey, the vessel will be unable to trade between ports and will be unemployable, which will negatively impact our revenues and results from operations.
Climate change and greenhouse gas restrictions may adversely impact our operations and markets.

Due to concern over the risk of climate change, a number of countries and the IMO have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures may include, among others, adoption of cap and trade regimes, carbon taxes, increased efficiency standards and incentives or mandates for renewable energy. More specifically, on October 27, 2016, the International Maritime Organization's Marine Environment Protection Committee ("MEPC") announced its decision concerning the implementation of regulations mandating a reduction in sulfur emissions from 3.5% currently to 0.5% as of the beginning of January 1, 2020. Additionally, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships. The initial strategy identifies levels of ambition to reducing greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through implementation of further phases of the EEDI for new ships; (2) reducing carbon dioxide emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008 emission levels; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared to 2008 while pursuing efforts towards phasing them out entirely.

Since January 1, 2020, ships have to either remove sulfur from emissions or buy fuel with low sulfur content, which may lead to increased costs and supplementary investments for ship owners. The interpretation of "fuel oil used on board" includes use in main engine, auxiliary engines and boilers. Shipowners may comply with this regulation by (i) using 0.5% sulfur fuels on board, which are available around the world but at a higher cost; (ii) installing scrubbers for cleaning of the exhaust gas; or (iii) by retrofitting vessels to be powered by liquefied natural gas, which may not be a viable option due to the lack of supply network and high costs involved in this process. Costs of compliance with these regulatory changes may be significant and may have a material adverse effect on our future performance, results of operations, cash flows and financial position.

In addition, although the emissions of greenhouse gases from international shipping currently are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which required adopting countries to implement national programs to reduce emissions of certain gases, or the Paris Agreement (discussed further below), a new treaty may be adopted in the future that includes restrictions on shipping emissions. Compliance with changes in laws, regulations and obligations relating to climate change could increase our costs related to operating and maintaining our vessels and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions or administer and manage a greenhouse gas emissions program. Revenue generation and strategic growth opportunities may also be adversely affected.

11


Adverse effects upon the oil and gas industry relating to climate change, including growing public concern about the environmental impact of climate change, may also adversely affect demand for our services. For example, increased regulation of greenhouse gases or other concerns relating to climate change may reduce the demand for oil and gas in the future or create greater incentives for use of alternative energy sources. In addition, the physical effects of climate change, including changes in weather patterns, extreme weather events, rising sea levels, scarcity of water resources, may negatively impact our operations. Any long-term material adverse effect on the oil and gas industry could have a significant financial and operational adverse impact on our business that we cannot predict with certainty at this time.

We don't plan to install scrubbers and may have to pay more for fuel which could adversely affect our business, results of operations and financial condition.

Effective January 1, 2020 all vessels must comply with the IMO's low sulfur fuel oil ("LSFO") requirement, which cuts sulfur levels from 3.5% to 0.5%. Shipowners may comply with this regulation by (i) using 0.5% sulfur fuels, which is available in most ports globally but at a higher cost than high-sulfur fuel oil ("HSFO"); (ii) installing scrubbers for cleaning of the exhaust gas; or (iii) by retrofitting vessels to be powered by liquefied natural gas, which may not be a viable option due to the lack of supply network and high costs involved in this process. Costs of compliance with these regulatory changes may be significant and may have a material adverse effect on our future performance, results of operations, cash flows and financial position.

While 50% our fleet is scrubber-fitted, in light of operating and economic uncertainties surrounding the use of scrubbers, we have chosen not to purchase and install these units on the vessels of our fleet that aren’t scrubber-fitted. However, we may, in the future, determine to purchase scrubbers for installation on our vessels. While scrubbers rely on technology that has been developed over a significant period of time for use in a variety of applications, their use for maritime applications is a more recent development. Each vessel will require physical modifications to be made in order to install a scrubber, the scope of which will depend on, among other matters, the age and type of vessel, its engine and its existing fixtures and equipment. The purchase and installation of scrubbers will involve significant capital expenditures, currently estimated at $1.5 million per vessel, and the vessel will be out of operation for more than 30 days in order for the scrubbers to be installed. In addition, future arrangements that we may enter into with respect to shipyard drydock capacity to implement these scrubber installations may be affected by delays or issues affecting vessel modifications being undertaken by other vessel owners at those shipyards, which could cause our vessels to be out of service for even longer periods or installation dates to be delayed. In addition, as there is a limited operating history of scrubbers on vessels such as those owned and operated by us, the operation and maintenance of scrubbers and related ongoing costs to these vessels is uncertain. Any unforeseen complications or delays in connection with acquiring, installing, operating or maintaining scrubbers installed on our vessels could adversely affect our business, results of operations and financial condition.

Furthermore, it is uncertain how the availability of HSFO and LSFO around the world will be affected by implementation of the IMO 2020 Regulations, as well as the prices of HSFO and LSFO generally and the price differential between the two fuels after January 1, 2020, are also uncertain. If LSFO is unavailable in port and we or our charterers cannot obtain a temporary waiver to refuel and use HSFO for the next voyage, we or our charterers could be subject to fines by regulatory authorities and be in violation of the charter agreements. Scarcity and the quality in the supply of LSFO, or a higher-than-anticipated difference in the costs between the two types of fuel, may cause us to pay more for fuel than scrubber-fitted vessels, which could adversely affect our business, results of operations and financial condition.

There is limited operating history of using LSFO on our vessels and new compliant fuel blends which have been introduced but the vessel performance, economic impact and timing of using such fuels on our vessels is still evolving. In addition, our vessels will likely incur higher fuel costs associated with using more expensive compliant fuel. Currently these costs are borne by our charterers but in case we enter into a spot or voyage charter in the future, such costs may be material and could adversely affect our business, results of operations and financial condition.


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Our vessels may suffer damage due to the inherent operational risks of the tanker industry and we may experience unexpected dry-docking costs, which may adversely affect our business and financial condition.
The operation of an ocean-going vessel carries inherent risks. Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather and other acts of God, business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human error, war, terrorism, piracy, diseases (such as the recent outbreak of COVID-19), quarantine and other circumstances or events. These hazards may result in death or injury to persons, loss of revenues or property, the payment of ransoms, environmental damage, higher insurance rates, damage to our customer relationships or delay or re-routing, which may also subject us to litigation. In addition, the operation of tankers has unique operational risks associated with the transportation of oil or chemicals. An oil or chemical spill may cause significant environmental damage, and the costs associated with a catastrophic spill could exceed the insurance coverage available to us. Compared to other types of vessels, tankers are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision, or other cause, due to the high flammability and high volume of the oil and chemicals transported in such tankers.
If our vessels suffer damage, they may need to be repaired at a dry-docking facility. The costs of dry-dock repairs are unpredictable and may be substantial. We may have to pay dry-docking costs that our insurance does not cover in full. The loss of earnings while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, would decrease our earnings. In addition, space at dry-docking facilities is sometimes limited and not all dry-docking facilities are conveniently located. We may be unable to find space at a suitable dry-docking facility or our vessels may be forced to travel to a dry-docking facility that is not conveniently located to our vessels' positions. The loss of earnings while these vessels are forced to wait for space or to steam to more distant dry-docking facilities would decrease our earnings.
The market value of our vessels, and those we may acquire in the future, may fluctuate significantly, which could cause us to incur losses if we decide to sell them following a decline in their market values or we may be required to write down their carrying value, which will adversely affect our earnings.
The fair market value of our vessels may increase and decrease depending on the following factors:

general economic and market conditions affecting the shipping industry;

prevailing level of charter rates;

competition from other shipping companies;

types, sizes and ages of vessels;

the availability of other modes of transportation;

supply and demand for vessels;

shipyard capacity;

cost of newbuildings;

price of steel;

governmental or other regulations; and

technological advances.
If we sell any vessel at a time when vessel prices have fallen, the sale price may be less than the vessel's carrying amount in our financial statements, in which case we will realize a loss. Vessel prices can fluctuate significantly, and in the case where the market value falls below the carrying amount, we will evaluate the vessel for a potential impairment adjustment.  If the estimate of undiscounted cash flows, excluding interest charges, expected to be generated by the use of the vessel is less than its carrying amount, we may be required to write down the carrying amount of the vessel to its fair value in our financial statements and incur a loss and a reduction in earnings. See "Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies—Impairment of Vessels."
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An over-supply of tanker capacity may lead to reductions in charter hire rates and profitability.
The market supply of tankers is affected by a number of factors such as demand for energy resources, crude oil, petroleum products and chemicals, as well as strong overall economic growth of the world economy. If the capacity of new tankers delivered exceeds the capacity of such tankers being scrapped and lost, vessel capacity will increase, which could lead to reductions in charter rates. As of April 3, 2020, newbuilding orders have been placed for an aggregate of approximately 7.6% of the existing global tanker fleet with the bulk of deliveries expected during 2021.
An over-supply of oil tankers has already resulted in an increase in oil tanker charter hire rate volatility. If this volatility persists, we may not be able to find profitable charters for our vessels, which could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.
Our vessels may call on ports located in countries that are subject to restrictions, sanctions, or embargoes imposed by the U.S., the European Union, the United Nations, China, or other governments, which could lead to monetary fines or adversely affect our business, reputation and the market for our common shares.
None of our vessels called on ports located in countries or territories subject to country-wide or territory-wide U.S. sanctions or embargoes or countries identified by the U.S. government or other authorities as state sponsors of terrorism during 2019. While we intend to comply with all applicable sanctions and embargo laws and regulations, our vessels may call on ports in these countries or territories on charterers' instructions in the future, and there can be no assurance that we will maintain such compliance, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. The U.S. sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time.
Current or future counterparties of ours may be affiliated with persons or entities that are or may be in the future the subject of sanctions imposed by the Trump administration, the European Union, China and/or other international bodies. If we determine that such sanctions require us to terminate existing or future contracts to which we or our subsidiaries are party or if we are found to be in violation of such applicable sanctions, our results of operations may be adversely affected or we may suffer reputational harm. Currently, we do not believe that any of our existing counterparties are affiliated with persons or entities that are subject to such sanctions.
Although we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain such compliance, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in fines, penalties or other sanctions that could severely impact our ability to access U.S. capital markets and conduct our business, and could result in some investors deciding, or being required, to divest their interest, or not to invest, in us. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, our common shares may adversely affect the price at which our common shares trade. Moreover, our charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation. In addition, our reputation and the market for our securities may be adversely affected if we engage in certain other activities, such as entering into charters with individuals or entities in countries subject to U.S. sanctions and embargo laws that are not controlled by the governments of those countries, or engaging in operations associated with those countries pursuant to contracts with third parties that are unrelated to those countries or entities controlled by their governments. Investor perception of the value of our common shares may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.
Political instability, terrorist or other attacks, war, international hostilities and public health threats can affect the tanker industry, which may adversely affect our business.
We conduct most of our operations outside of the United States, and our business, results of operations, cash flows, financial condition and available cash may be adversely affected by changing economic, political and government conditions in the countries and regions where our vessels are employed or registered. Moreover, we operate in a sector of the economy that is likely to be adversely impacted by the effects of political conflicts, including the current political instability in the Middle East and the South China Sea region and other geographic countries and areas, geopolitical events such as the withdrawal of the U.K. from the European Union, or "Brexit," terrorist or other attacks, and war (or threatened war) or international hostilities, such as those between the United States and North Korea.
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Terrorist attacks such as those in Paris on November 13, 2015, Manchester on May 22, 2017, and the frequent incidents of terrorism in the Middle East, and the continuing response of the United States and others to these attacks, as well as the threat of future terrorist attacks around the world, continues to cause uncertainty in the world's financial markets and may affect our business, operating results and financial condition. Continuing conflicts and recent developments in the Middle East, including increased tensions between the U.S. and Iran, as well as the presence of U.S. or other armed forces in Iraq, Syria, Afghanistan and various other regions, may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets. As a result of the above, insurers have increased premiums and reduced or restricted coverage for losses caused by terrorist acts generally. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. Any of these occurrences could have a material adverse impact on our operating results, revenues and costs. Additionally, Brexit, or similar events in other jurisdictions, could impact global markets, including foreign exchange and securities markets; any resulting changes in currency exchange rates, tariffs, treaties and other regulatory matters could in turn adversely impact our business and operations.
Further, governments may turn and have turned to trade barriers to protect their domestic industries against foreign imports, thereby depressing shipping demand. In particular, leaders in the United States and China have implemented certain increasingly protective trade measures. The results of the 2016 presidential election and the potential results of the upcoming 2020 presidential election in the United States have created significant uncertainty about the future relationship between the United States, China and other exporting countries, including with respect to trade policies, treaties, government regulations and tariffs. For example, in March 2018, President Trump announced tariffs on imported steel and aluminum into the United States that could have a negative impact on international trade generally and in January 2019, the United States announced expanded sanctions against Venezuela, which may have an effect on its oil output and in turn affect global oil supply. There have also been continuing trade tensions, including significant tariff increases, between the United States and China. Protectionist developments, or the perception that they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade. Moreover, increasing trade protectionism may cause an increase in (a) the cost of goods exported from regions globally, (b) the length of time required to transport goods and (c) the risks associated with exporting goods. Such increases may significantly affect the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs, which could have an adverse impact on our charterers' business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us. This could have a material adverse effect on our business, results of operations, financial condition and our ability to pay any cash distributions to our stockholders.
In January 2020, in response to certain perceived terrorist activity, the United States launched an airstrike in Baghdad that killed a high-ranking Iranian general, increasing hostilities between the U.S. and Iran. This attack or further escalations between the U.S. and Iran that may follow, could result in retaliation from Iran that could potentially affect the shipping industry, through increased attacks on vessels in the Strait of Hormuz (which already experienced an increased number of attacks on and seizures of vessels in 2019), or by potentially closing off or limiting access to the Strait of Hormuz, where a significant portion of the world's oil supply passes through. Any restriction on access to the Strait of Hormuz, or increased attacks on vessels in the area, could negatively impact our earnings, cash flow and results of operations.
In the past, political instability has also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea and the Gulf of Aden off the coast of Somalia. Any of these occurrences could have a material adverse impact on our future performance, results of operations, cash flows and financial position.
In addition, public health threats, such as the coronavirus, influenza and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate, including China, could adversely impact our operations, and the operations of our customers.
The U.K.'s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.
In June 2016, a majority of voters in the U.K. elected to withdraw from the EU in a national referendum, a process that the government of the U.K. formally initiated in March 2017. Since then, the U.K. and the EU have been negotiating the terms of a withdrawal agreement, which was approved in October 2019 and ratified in January 2020. The U.K. formally exited the EU on January 31, 2020, although a transition period remains in place until December 2020, during which the U.K. will be subject to the rules and regulations of the EU while continuing to negotiate the parties' relationship going forward, including trade deals. There is currently no agreement in place regarding the aftermath of the withdrawal, creating significant uncertainty about the future relationship between the U.K. and the EU, including with respect to the laws and regulations that will apply as the U.K. determines which EU-derived laws to replace or replicate following the withdrawal. Brexit has also given rise to calls for the governments of other EU member states to consider withdrawal. These developments and uncertainties, or the perception that any of them may occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business and on our consolidated financial position and results of operations. Additionally, Brexit or similar events in other jurisdictions, could impact global markets, including foreign exchange and securities markets; any resulting changes in currency exchange rates, tariffs, treaties and other regulatory matters could in turn adversely impact our business and operations.
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Brexit contributes to considerable uncertainty concerning the current and future economic environment. Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets.
Acts of piracy on ocean-going vessels could adversely affect our business.
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Arabian Sea, the Red Sea, the Gulf of Aden off the coast of Somalia, South China Sea, Sulu Sea, Celebes Sea, the Indian Ocean and in particular, the Gulf of Guinea, region off Nigeria, which experienced increase incidents of privacy in 2019. Sea piracy incidents continue to occur. Acts of piracy could result in harm or danger to the crews that man our vessels.  If insurers or the Joint War Committee characterize the regions in which our vessels are deployed as "war risk" zones or "war and strikes" listed areas," respectively, premiums payable for insurance coverage could increase significantly and such coverage may be more difficult to obtain if available at all. In addition, crew costs, including costs that may be incurred to the extent we employ onboard security guards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, least of all for bearing the cost of the applicable deductible(s) or unforeseen charges/costs, which could have a material adverse effect on us. In addition, hijacking as a result of an act of piracy against our vessels, or an increase in cost or unavailability of insurance for our vessels, could have a material adverse impact on our business, results of operations, cash flows, financial condition and ability to pay dividends and may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.
An economic slowdown or changes in the economic and political environment in the Asia Pacific region could have a material adverse effect on our business, financial condition and results of operations.

We anticipate a significant number of the port calls made by our vessels will continue to involve the loading or discharging of cargoes in ports in the Asia Pacific region. As a result, any negative changes in economic conditions in any Asia Pacific country, particularly in China, may have a material adverse effect on our business, financial condition and results of operations, as well as our future prospects. Before the global economic financial crisis that began in 2008, China had one of the world's fastest growing economies in terms of gross domestic product, or GDP, which had a significant impact on shipping demand. The year-over-year growth rate of China's GDP was approximately 6.1% for the year ended December 31, 2019, as compared to approximately 6.6% for the year ended December 31, 2018, and continues to remain below pre-2008 levels. We cannot assure you that the Chinese economy will not experience a significant contraction in the future, especially in light of the impact of COVID-19. Furthermore, there is a rising threat of a Chinese financial crisis resulting from massive personal and corporate indebtedness and "trade wars". The International Monetary Fund has warned that continuing trade tensions, including significant tariff increases, between the United States and China are expected to result in a 0.8% cumulative reduction of global GDP in 2020. We cannot assure you that the Chinese economy will not experience a significant contraction in the future.

Although state-owned enterprises still account for a substantial portion of the Chinese industrial output, in general, the Chinese government is reducing the level of direct control that it exercises over the economy through state plans and other measures. There is an increasing level of freedom and autonomy in areas such as allocation of resources, production, pricing and management and a gradual shift in emphasis to a "market economy" and enterprise reform. Limited price reforms were undertaken with the result that prices for certain refined petroleum products are principally determined by market forces. Many of the reforms are unprecedented or experimental and may be subject to revision, change or abolition based upon the outcome of such experiments. If the Chinese government does not continue to pursue a policy of economic reform, the level of imports to and exports from China could be adversely affected by changes to these economic reforms by the Chinese government, as well as by changes in political, economic and social conditions or other relevant policies of the Chinese government, such as changes in laws, regulations or export and import restrictions. Notwithstanding economic reform, the Chinese government may adopt policies that favor domestic shipping and tanker companies and may hinder our ability to compete with them effectively. For example, China imposes a tax for non-resident international transportation enterprises engaged in the provision of services of passengers or cargo, among other items, in and out of China using their own, chartered or leased vessels. The regulation may subject international transportation companies to Chinese enterprise income tax on profits generated from international transportation services passing through Chinese ports. This could have an adverse impact on our charterers' business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us. Moreover, an economic slowdown in the economies of the European Union and other Asian countries may further adversely affect economic growth in China and elsewhere.

In addition, concerns regarding the possibility of sovereign debt defaults by European Union member countries, including Greece, have in the past disrupted financial markets throughout the world, and may lead to weaker consumer demand in the European Union, the United States, and other parts of the world. The possibility of sovereign debt defaults by European Union member countries, including Greece, and the possibility of market reforms to float the Chinese renminbi, either of which development could weaken the Euro against the Chinese renminbi, could adversely affect consumer demand in the European Union. Moreover, the revaluation of the renminbi may negatively impact the United States' demand for imported goods, many of which are shipped from China. Future weak economic conditions could have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends to our stockholders. Our business, financial condition, results of operations, as well as our future prospects, will likely be materially and adversely affected by another economic downturn in any of the aforementioned countries and regions.

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Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.
International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination. Inspection procedures can result in the seizure of, delay in the loading, off-loading or delivery of, the contents of our vessels or the levying of customs duties, fines or other penalties against us. It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. Furthermore, changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, financial condition, and results of operations.
We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.
The efficient operation of our business is dependent on computer hardware and software systems. Information systems are vulnerable to security breaches by computer hackers and cyber terrorists. We rely on industry-accepted security measures and technology to securely maintain confidential and proprietary information kept on our information systems. However, these measures and technology may not adequately prevent cybersecurity breaches, the access, capture or alteration of information by criminals, the exposure or exploitation of potential security vulnerabilities, the installation of malware or ransomware, acts of vandalism, computer viruses, misplaced data or data loss. In addition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could result in decreased performance and increased operating costs, causing our business and results of operations to suffer. Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business, results of operations and financial condition, as well as our cash flows, including cash available for dividends to our stockholders.
RISKS RELATED TO OUR COMPANY
We are subject to litigation and we may be subject to similar or other litigation in the future.
We and certain of our current executive officers were defendants in purported class-action lawsuits pending in the U.S. District Court for the Eastern District of New York, brought on behalf of our shareholders.  The lawsuits alleged violations of Sections 9, 10(b), 20(a) and/or 20A of the Securities Exchange Act of 1934, as amended, or the Exchange Act and Rule 10b-5 promulgated hereunder. In connection with these lawsuits, certain co-defendants requested that we indemnify and hold them harmless against all losses, including reasonable costs of defense, arising from the litigation, pursuant to the provisions of the Common Stock Purchase Agreement between us and Kalani.
On August 3, 2019 the Eastern District Court of New York dismissed the case with prejudice.  On August 26, 2019, plaintiffs appealed the dismissal to the United States Court of Appeals for the Second Circuit. We filed our response briefs on November 26 and November 27, 2019, and plaintiffs/appellants filed their reply brief on December 11, 2019. The Court of Appeals held oral argument on March 10, 2020 and took the matter under advisement. On April 2, 2020, the Court of Appeals issued a summary order affirming the District Court's decision dismissing Plaintiffs' claims and denying leave to amend. The Court of Appeals is scheduled to issue a mandate making the decision effective on April 23, 2020 if Plaintiffs do not file a motion for reargument.
We believe these claims to be without merit and intend to continue to defend these lawsuits vigorously. Furthermore, we may, from time to time, be a party to other litigation in the normal course of business. Monitoring and defending against legal actions, whether or not meritorious, is time-consuming for our management and detracts from our ability to fully focus our internal resources on our business activities. In addition, our legal fees and costs incurred in connection with such activities and any legal fees of co-defendants for which we are deemed responsible may be significant and we could, in the future, be subject to judgments or enter into settlements of claims for significant monetary damages. A decision adverse to our interests could result in the payment of substantial damages and could have a material adverse effect on our cash flow, results of operations and financial position.
With respect to any litigation, our insurance may not reimburse us or may not be sufficient to reimburse us for the expenses or losses we may suffer in contesting and concluding such lawsuit. Furthermore, our insurance does not cover legal fees associated with co-defendants. Substantial litigation costs, including the substantial self-insured retention that we are required to satisfy before any insurance applied to the claim, or an adverse result in any litigation may adversely impact our business, operating results or financial condition.
17



As of the date of this annual report our fleet consists of ten tankers. Any limitation in the availability or operation of these vessels could have a material adverse effect on our business, results of operations and financial condition.
As of the date of this annual report, our fleet consists of eight 50,000 dwt MR product tankers and two 157,000 dwt Suezmax crude oil tankers that we have bareboat chartered-in via sale and leaseback agreements, or SLBs. Our MR product tanker fleet consists of M/T Stenaweco Energy, M/T Stenaweco Evolution, M/T Nord Valiant, M/T Stenaweco Excellence, M/T Eco California, M/T Eco Marina Del Ray and M/T Eco Los Angeles and M/T Eco City of Angels. Our Suezmax fleet consists of M/T Eco Bel Air and M/T Eco Beverly Hills.  Furthermore, we have a 50% interest in M/T Palm Springs, a 50,000 dwt product/chemical tanker vessel that we have agreed to sell subject to customary closing conditions.  If these vessels are unable to generate revenue as a result of off hire time, early termination of the applicable time charter or otherwise, our business, results of operations, financial condition and ability to pay dividends on our common shares could be materially adversely affected.
We expect to be dependent on a limited number of customers for a large part of our revenues, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.
During 2019, 95% of our revenues derived from seven charterers, Stena Weco A/S, BP Shipping Limited ("BP"), Clearlake Shipping Pte Ltd ("Clearlake"), Central Tanker Chartering Inc, Dampskibsselskabet NORDEN A/S ("DS Norden A/S"), Shell Tankers Singapore Private Limited ("Shell") and Cargill International SA ("Cargill"). Such agreements subject us to counterparty risks. The ability of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime industry, the overall financial condition of the counterparty, charter rates received for specific types of vessels, work stoppages or other labor disturbances, including as a result of the recent outbreak of COVID-19 and various expenses. The combination of a reduction of cash flow resulting from declines in world trade, a reduction in borrowing bases under reserve-based credit facilities and the lack of availability of debt or equity financing may result in a significant reduction in the ability of charterers to make charter payments to us. In addition, in depressed market conditions, charterers and customers may no longer need a vessel that is then under charter or contract or may be able to obtain a comparable vessel at lower rates. As a result, charterers and customers may seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those contracts. Should one of our counterparties fail to honor its obligations under agreements with us, we could sustain significant losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The bareboat charters treated as financing, in connection with our SLBs contain restrictive covenants that may limit our liquidity and corporate activities, and could have an adverse effect on our financial condition and results of operations.
The bareboat charters in connection with the SLBs of our fleet contain, and any future SLBs we may enter into are expected to contain, customary covenants and termination event clauses, including cross-default provisions and restrictive covenants and performance requirements that may affect our operational and financial flexibility. Such restrictions could affect, and in many respects limit or prohibit, among other things, our ability to incur additional indebtedness, pay dividends, create liens, sell assets, or engage in mergers or acquisitions. These restrictions could also limit our ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise restrict corporate activities. There can be no assurance that such restrictions will not adversely affect our ability to finance our future operations or capital needs.
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Our bareboat charters in connection with the SLBs require us to maintain specified financial ratios, satisfy financial covenants and contain cross-default clauses and other representations, including the following:

maintain a consolidated leverage ratio of not more than 75% (and in one case 80%);

maintain minimum free liquidity of $1.0 million per Suezmax tanker $0.75 million per owned MR tanker and $0.5 million per bareboated chartered-in MR tanker; and

assure no change of control of the company takes place, except with the lessors prior written consent.
As of December 31, 2019, we are in compliance with the consolidated leverage ratio and the minimum free liquidity covenants in our SLBs.
As a result of the restrictions in our bareboat charters in connection with our SLBs, or similar restrictions in our future SLBs, we may need to seek permission from the owners of our leased vessels in order to engage in certain corporate actions. Their interests may be different from ours and we may not be able to obtain their permission when needed. This may prevent us from taking actions that we believe are in our best interest, which may adversely impact our revenues, results of operations and financial condition.
A failure by us to meet our payment and other obligations, including our financial covenant requirements, could lead to defaults under our bareboat charters in connection with our SLB or any future SLBs. If we are not in compliance with our covenants and we are not able to obtain covenant waivers or modifications, the current or future owners of our leased vessels, as appropriate, could retake possession of our vessels or require us to pay down our indebtedness to a level where we are in compliance with our covenants or sell vessels in our fleet. Events beyond our control, including changes in the economic and business conditions in the shipping markets in which we operate, interest rate developments, changes in the funding costs of our banks, changes in vessel earnings and asset valuations and outbreaks of epidemic and pandemic of diseases, such as the recent outbreak of COVID-9, may affect our ability to comply with these covenants. We could lose our vessels if we default on our bareboat charters in connection with the SLBs, which would negatively affect our revenues, results of operations and financial condition.
Servicing current and future debt (including SLBs) will limit funds available for other purposes and impair our ability to react to changes in our business.
We must dedicate a portion of our cash flow from operations to pay the principal and interest on our indebtedness. These payments limit funds otherwise available for working capital, capital expenditures and other purposes. As of December 31, 2019, we had a total indebtedness of $316.6 million, excluding deferred finance fees. Our current or future debt could have other significant consequences on our operations. For example, it could:

increase our vulnerability to general economic downturns and adverse competitive and industry conditions;

require us to dedicate a substantial portion, if not all, of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

place us at a competitive disadvantage compared to competitors that have less debt or better access to capital;

limit our ability to raise additional financing on satisfactory terms or at all; and

adversely impact our ability to comply with the financial and other restrictive covenants of our current or future financing arrangements, which could result in an event of default under such agreements.
Furthermore, our current or future interest expense could increase if interest rates increase. If we do not have sufficient earnings, we may be required to refinance all or part of our current or future debt, sell assets, borrow more money or sell more securities, and we cannot guarantee that the resulting proceeds therefrom, if any, will be sufficient to meet our ongoing capital and operating needs.
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If we fail to manage our planned growth properly, we may not be able to successfully expand our market share.
We intend to continue to grow our fleet in the future in line with our strategy. Our future growth will primarily depend on our ability to:

generate excess cash flow for investment without jeopardizing our ability to cover current and foreseeable working capital needs (including debt service);

raise equity and obtain required financing for our existing and new operations;

locate and acquire suitable vessels;

identify and consummate acquisitions or joint ventures;

integrate any acquired business successfully with our existing operations;

our manager ability to hire, train and retain qualified personnel and crew to manage and operate our growing business and fleet;

enhance our customer base; and

manage expansion.
Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel, managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures. We may not be successful in executing our growth plans and we may incur significant additional expenses and losses in connection therewith.
Our ability to obtain additional debt financing may be dependent on our ability to charter our vessels, the performance of our charters and the creditworthiness of our charterers.
Our inability to re-charter our vessels and the actual or perceived credit quality of our charterers, and any defaults by them, may materially affect our ability to obtain the additional capital resources that we will require to purchase additional vessels or may significantly increase our costs of obtaining such capital. Our inability to obtain financing, or receiving financing at a higher than anticipated cost, may materially affect our results of operation and our ability to implement our business strategy.
The industry for the operation of tanker vessels and the transportation of oil, petroleum products and chemicals is highly competitive and we may not be able to compete for charters with new entrants or established companies with greater resources.
We will employ our tankers and any additional vessels we may acquire in a highly competitive market that is capital intensive and highly fragmented. The operation of tanker vessels and the transportation of cargoes shipped in these vessels, as well as the shipping industry in general, is extremely competitive. Competition arises primarily from other vessel owners, including major oil companies as well as independent tanker shipping companies, some of whom have substantially greater resources than we do. Competition for the transportation of oil, petroleum products and chemicals can be intense and depends on price, location, size, age, condition and the acceptability of the vessel and its operators to the charterers. Due in part to the highly fragmented market, competitors with greater resources could enter and operate larger fleets through consolidations or acquisitions that may be able to offer better prices and fleets than us.
A limited number of financial institutions hold our cash.
A limited number of financial institutions, including institutions located in Greece, hold all of our cash. Our cash balances have been deposited from time to time with banks in Monaco, Germany, Holland, United Kingdom, Greece and Switzerland amongst others. Our cash balances are not covered by insurance in the event of default by these financial institutions. The occurrence of such a default could have a material adverse effect on our business, financial condition, results of operations and cash flows, and we may lose part or all of our cash that we deposit with such banks.
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Uncertainty related to the Greek sovereign debt crisis may adversely affect our operating results.
Uncertainty related to the Greek sovereign debt crisis may adversely affect our operating results. Greece experienced a macroeconomic downturn in recent years, including as a result of the sovereign debt crisis and the related austerity measures implemented by the Greek government. As a result, our operations in Greece may be subjected to new regulations or regulatory action that may require us to incur new or additional compliance or other administrative costs and may require that we or Central Shipping Inc, which we refer to as our Fleet Manager or CSI, a related party affiliated with the family of Mr. Evangelos J. Pistiolis, our President, Chief Executive Officer and Director, pay to the Greek government new taxes or other fees. We and our Fleet Manager also face the risk that strikes, work stoppages, civil unrest and violence within Greece may disrupt our and our Fleet Manager's shore side operations located in Greece. The Greek government's taxation authorities have increased their scrutinization of individuals and companies to secure tax law compliance. If economic and financial market conditions remain uncertain or deteriorate further, the Greek government may impose further changes to tax and other laws to which we and our Fleet Manager may be subject or change the ways they are enforced, which may adversely affect our business, operating results, and financial condition.
Our President, Chief Executive Officer and Director, who may be deemed to beneficially own, directly or indirectly, 100% of our Series D Preferred Shares has control over us.
As of April 10, 2020, Lax Trust, which is an irrevocable trust established for the benefit of certain family members of our President, Chief Executive Officer and Director, Mr. Evangelos Pistiolis, may be deemed to beneficially own, directly or indirectly, all of the 100,000 outstanding shares of our Series D Preferred Shares. Each Series D Preferred Share carries 1,000 votes. By its ownership of 100% of our Series D Preferred Shares, Lax Trust has control over our actions.
As of April 10, 2020, the Lax Trust may be deemed to own all of the outstanding shares of Family Trading Inc., a company related to Mr. Evangelos Pistiolis, our President, Chief Executive Officer and Director, or Family Trading, and Tankers Family Inc., which in aggregate and on an as converted basis own approximately 12.8% of our outstanding common shares, including 17,274,140 common shares issuable upon the conversion of 10,364 Series E Perpetual Convertible Preferred Shares ("Series E Preferred Shares") held by Family Trading. Due to the number of shares that the Lax Trust may be deemed to own, it has the power to exert considerable influence over our actions and to effectively control the outcome of matters on which our shareholders are entitled to vote, including the election of our directors and other significant corporate actions. The interests of the Lax Trust or the family of Mr. Pistiolis may be different from your interests.
We may be unable to attract and retain key management personnel and other employees in the international tanker shipping industry, which may negatively impact the effectiveness of our management and our results of operations.
Our success depends to a significant extent upon the abilities and efforts of our management team. All of our executive officers are employees of Central Mare Inc., or Central Mare, a related party affiliated with the family of Mr. Evangelos J. Pistiolis, our President, Chief Executive Officer and Director, and we have entered into agreements with Central Mare for the compensation of Mr. Evangelos J. Pistiolis; Alexandros Tsirikos, our Chief Financial Officer and Director; Vangelis G. Ikonomou our Chief Operating Officer and Konstantinos Patis, our Chief Technical Officer. The loss of any of these individuals could adversely affect our business prospects and financial condition. Difficulty in hiring and retaining personnel could adversely affect our results of operations. We do not maintain "key man" life insurance on any of our officers.
If labor interruptions are not resolved in a timely manner, they could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash.
Our Fleet Manager, is responsible for recruiting, mainly through a crewing agent, the senior officers and all other crew members for our vessels and all other vessels we may acquire. If not resolved in a timely and cost-effective manner, industrial action or other labor unrest could prevent or hinder our operations from being carried out as we expect and could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash.
If we expand our business, we will need to improve our operations and financial systems and staff; if we cannot improve these systems or recruit suitable employees, our performance may be adversely affected.
Our current operating and financial systems may not be adequate if we implement a plan to expand the size of our fleet, and our attempts to improve those systems may be ineffective. If we are unable to operate our financial and operations systems effectively or to recruit suitable employees as we expand our fleet, our performance may be adversely affected.
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A drop in spot charter rates may provide an incentive for some charterers to default on their charters, which could affect our cash flow and financial condition.
When we enter into a time charter or bareboat charter, rates under that charter are fixed throughout the term of the charter. If the spot charter rates in the tanker shipping industry become significantly lower than the time charter equivalent rates that some of our charterers are obligated to pay us under our then existing charters, the charterers may have incentive to default under that charter or attempt to renegotiate the charter. If our charterers fail to pay their obligations, we would have to attempt to re-charter our vessels at lower charter rates, and as a result we could sustain significant losses which could have a material adverse effect on our cash flow and financial condition, which would affect our ability to meet our current or future loans or current leaseback obligations. If our current or future lenders choose to accelerate our indebtedness and foreclose their liens, or if the owners of our leased vessels choose to repossess vessels in our fleet as a result of a default under the SLBs, our ability to continue to conduct our business would be impaired.
An increase in operating costs could decrease earnings and available cash.
Vessel operating costs include the costs of crew, fuel (for spot chartered vessels), provisions, deck and engine stores, insurance and maintenance and repairs, which depend on a variety of factors, many of which are beyond our control. Some of these costs, primarily relating to insurance and enhanced security measures, have been increasing. If any vessels we have or will acquire suffer damage, they may need to be repaired at a dry-docking facility. The costs of dry-docking repairs are unpredictable and can be substantial. Increases in any of these expenses could decrease our earnings and available cash.
The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings.
In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. As our fleet ages, operating and other costs will increase. In the case of bareboat charters, operating costs are borne by the bareboat charterer. Cargo insurance rates also increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations, including environmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations or the addition of new equipment to our vessels and may restrict the type of activities in which our vessels may engage. As our fleet ages, market conditions might not justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.
Unless we set aside reserves or are able to borrow funds for vessel replacement, our revenue will decline at the end of a vessel's useful life, which would adversely affect our business, results of operations and financial condition.
Unless we maintain reserves or are able to borrow or raise funds for vessel replacement, we will be unable to replace the vessels in our fleet upon the expiration of their remaining useful lives, which we estimate to be 25 years from the date of initial delivery from the shipyard. Our cash flows and income are dependent on the revenues earned by the chartering of our vessels to customers. If we are unable to replace the vessels in our fleet upon the expiration of their useful lives, our business, results of operations and financial condition will be materially and adversely affected.
Purchasing and operating secondhand vessels may result in increased operating costs and vessels off-hire, which could adversely affect our earnings.
We may expand our fleet through the acquisition of secondhand vessels. While we rigorously inspect previously owned or secondhand vessels prior to purchase, this does not normally provide us with the same knowledge about their condition and cost of any required (or anticipated) repairs that we would have had if these vessels had been built for and operated exclusively by us. Accordingly, we may not discover defects or other problems with such vessels prior to purchase. Any such hidden defects or problems, when detected, may be expensive to repair, and if not detected, may result in accidents or other incidents for which we may become liable to third parties. Also, when purchasing previously owned vessels, we do not receive the benefit of warranties from the builders if the vessels we buy are older than one year. In general, the costs to maintain a vessel in good operating condition increase with the age and type of the vessel. In the case of chartered-in vessels, we run the same risks.
Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations, or the addition of new equipment, to our vessels and may restrict the type of activities in which the vessels may engage. As our vessels age, market conditions may not justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.
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We may not have adequate insurance to compensate us if we lose any vessels that we acquire.
We carry insurance for all vessels we acquire against those types of risks commonly insured against by vessel owners and operators. These insurances include hull and machinery insurance, protection and indemnity insurance (which includes environmental damage and pollution insurance coverage), freight demurrage and defense and war risk insurance. Reasonable insurance rates can best be obtained when the size and the age/trading profile of the fleet is attractive. As a result, rates become less competitive as a fleet downsizes.
In the future, we may not be able to obtain adequate insurance coverage at reasonable rates for the vessels we acquire. The insurers may not pay particular claims. Our insurance policies also contain deductibles for which we will be responsible as well as limitations and exclusions that may increase our costs or lower our revenue.
We may be subject to increased premium payments, or calls, as we obtain some of our insurance through protection and indemnity associations.
We may be subject to increased premium payments, or calls, in amounts based on our claim records and the claim records of our Fleet Manager as well as the claim records of other members of the protection and indemnity associations through which we receive insurance coverage for tort liability, including pollution-related liability. In addition, our protection and indemnity associations may not have enough resources to cover claims made against them. Our payment of these calls could result in significant expense to us, which could have a material adverse effect on our business, results of operations and financial condition.
Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance ("ESG") policies may impose additional costs on us or expose us to additional risks.

Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor advocacy groups, certain institutional investors, investment funds, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG and similar matters may hinder access to capital, as investors and lenders may decide to reallocate capital or to not commit capital as a result of their assessment of a company's ESG practices. Companies which do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.

We may face increasing pressures from investors, lenders and other market participants, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result, we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders remain invested in us and make further investments in us. If we do not meet these standards, our business and/or our ability to access capital could be harmed.

Additionally, certain investors and lenders may exclude shipping companies, such as us, from their investing portfolios altogether due to environmental, social and governance factors.  These limitations in both the debt and equity capital markets may affect our ability to develop as our plans for growth may include accessing the equity and debt capital markets.  If those markets are unavailable, or if we are unable to access alternative means of financing on acceptable terms, or at all, we may be unable to implement our business strategy, which would have a material adverse effect on our financial condition and results of operations and impair our ability to service our indebtedness. Further, it is likely that we will incur additional costs and require additional resources to monitor, report and comply with wide ranging ESG requirements.  The occurrence of any of the foregoing could have a material adverse effect on our business and financial condition.
Technological innovation and quality and efficiency requirements from our customers could reduce our charter hire income and the value of our vessels.
Our customers, in particular those in the oil industry, have a high and increasing focus on quality and compliance standards with their suppliers across the entire supply chain, including the shipping and transportation segment. Our continued compliance with these standards and quality requirements is vital for our operations. Charter hire rates and the value and operational life of a vessel are determined by a number of factors including the vessel's efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to load and discharge cargo quickly. Flexibility includes the ability to enter harbors, utilize related docking facilities and pass through canals and straits. The length of a vessel's physical life is related to its original design and construction, its maintenance and the impact of the stress of operations. If new vessels are built that are more efficient or more flexible or have longer physical lives than our vessels, competition from these more technologically advanced vessels could adversely affect the amount of charter hire payments we receive for our vessels, and the resale value of our vessels could significantly decrease which may have a material adverse effect on our future performance, results of operations, cash flows and financial position.
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The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.
Our vessels may call in ports where smugglers may attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face governmental or other regulatory claims that could have an adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.
Maritime claimants could arrest our vessels or vessels we acquire, which could interrupt our cash flow.
Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lienholder may enforce its lien by "arresting" or "attaching" a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels or vessels we acquire could result in a significant loss of earnings for the related off-hired period. In addition, in jurisdictions where the "sister ship" theory of liability applies, a claimant may arrest the vessel which is subject to the claimant's maritime lien and any "associated" vessel, which is any vessel owned or controlled by the same owner. In countries with "sister ship" liability laws, claims might be asserted against us or any of our vessels for liabilities of other vessels that we own.
Governments could requisition our vessels or vessels we acquire during a period of war or emergency, resulting in loss of earnings.
A government could requisition vessels for title or hire. Requisition for title occurs when a government takes control of a vessel and becomes the owner. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of any of our vessels or vessels we acquire could negatively impact our revenues should we not receive adequate compensation.
U.S. federal tax authorities could treat us as a "passive foreign investment company," which could have adverse U.S. federal income tax consequences to U.S. shareholders.
A foreign corporation will be treated as a "passive foreign investment company," or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of "passive income" or (2) at least 50% of the average value of the corporation's assets produce or are held for the production of those types of "passive income." For purposes of these tests, "passive income" includes dividends, interest, gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. Income derived from the performance of services does not constitute "passive income" for this purpose. U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.
In general, income derived from the bareboat charter of a vessel should be treated as "passive income" for purposes of determining whether a foreign corporation is a PFIC, and such vessel should be treated as an asset which produces or is held for the production of "passive income."  On the other hand, income derived from the time charter of a vessel should not be treated as "passive income" for such purpose, but rather should be treated as services income; likewise, a time chartered vessel should generally not be treated as an asset which produces or is held for the production of "passive income."
We believe that we were not a PFIC for our 2014 through 2019 taxable years and do not expect to be treated as a PFIC in subsequent taxable years. In this regard, we intend to treat the gross income we derive or are deemed to derive from our time chartering activities as services income, rather than rental income. Accordingly, we believe that our income from our time chartering activities does not constitute ''passive income,'' and the assets that we own and operate in connection with the production of that income do not constitute passive assets.
There is, however, no direct legal authority under the PFIC rules addressing our proposed method of operation. Accordingly, no assurance can be given that the United States Internal Revenue Service, or IRS, or a court of law will accept our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of our operations.
Our U.S. shareholders may face adverse U.S. federal income tax consequences and certain information reporting obligations as a result of us being treated as a PFIC.  Under the PFIC rules, unless those shareholders make an election available under the Code (which election could itself have adverse consequences for such shareholders, as discussed below under "Taxation– U.S. Federal Income Consequences—U.S. Federal Income Taxation of U.S. Holders"), such shareholders would be liable to pay U.S. federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of their common shares, as if the excess distribution or gain had been recognized ratably over the shareholder's holding period of the common shares.  See "Taxation —U.S. Federal Income Consequences—U.S. Federal Income Taxation of U.S. Holders" for a more comprehensive discussion of the U.S. federal income tax consequences to U.S. shareholders as a result of our status as a PFIC.
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We may have to pay tax on U.S. source income, which would reduce our earnings.
Under the U.S. Internal Revenue Code of 1986, or the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as ourselves and our subsidiaries, that is attributable to transportation that begins or ends, but that does not begin and end, in the United States is characterized as U.S. source shipping income and such income is subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code. Although we have qualified for this statutory exemption in previous taxable years and have taken this position for U.S. federal income tax return reporting purposes in such taxable year, there are factual circumstances beyond our control that could cause us to lose the benefit of the exemption and thereby become subject to U.S. federal income tax on our U.S. source shipping income. For example, we would fail to qualify for exemption under Section 883 of the Code for a particular tax year if shareholders, each of whom owned, actually or under applicable constructive ownership rules, a 5% or greater interest in the vote and value of our common shares, owned in the aggregate 50% or more of the vote and value of such stock, and "qualified shareholders" as defined by the Treasury regulation under Section 883 of the Code did not own, directly or under applicable constructive ownership rules, sufficient shares in our closely-held block of common shares to preclude the shares in that closely-held block that are not so owned from representing 50% or more of the value of our common shares for more than half of the number of days during the taxable year. Establishing such ownership by qualified shareholders will depend upon the status of certain of our direct or indirect shareholders as residents of qualifying jurisdictions and whether those shareholders own their shares through bearer share arrangements. In addition, such shareholders will also be required to comply with ownership certification procedures attesting that they are residents of qualifying jurisdictions, and each intermediary or other person in the chain of ownership between us and such shareholders must undertake similar compliance procedures. Due to the factual nature of the issues involved, we may not qualify for exemption under Section 883 of the Code for any future taxable year. We intend to take the position for U.S. federal income tax reporting purposes that we are not subject to U.S. federal income taxation for the 2019 taxable year because more than 50% of our stock was not owned by non-qualified shareholders that each held 5% or more of our stock.
We are a "foreign private issuer," which could make our common shares less attractive to some investors or otherwise harm our stock price.
We are a "foreign private issuer," as such term is defined in Rule 405 under the Securities Act. As a "foreign private issuer" the rules governing the information that we disclose differ from those governing U.S. corporations pursuant to the Exchange Act. We are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within four days of their occurrence. In addition, our officers and directors are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchase and sales of our securities. Our exemption from the rules of Section 16 of the Exchange Act regarding sales of common shares by insiders means that you will have less data in this regard than shareholders of U.S. companies that are subject to the Exchange Act. Moreover, we are exempt from the proxy rules, and proxy statements that we distribute will not be subject to review by the Commission. Accordingly there may be less publicly available information concerning us than there is for other U.S. public companies. These factors could make our common shares less attractive to some investors or otherwise harm our stock price.
RISKS RELATED TO OUR COMMON SHARES
Our share price may continue to be highly volatile, which could lead to a loss of all or part of a shareholder's investment.
The market price of our common shares has fluctuated widely since our common shares began trading in July of 2004 on the Nasdaq Stock Market LLC, or Nasdaq. Over the last few years, the stock market has experienced price and volume fluctuations, especially due to factors relating to the recent outbreak of COVID-19. This volatility has sometimes been unrelated to the operating performance of particular companies. During 2019, the price of our common shares experienced a high of $22.00 in January and a low of $0.65 in November. This market and share price volatility relating to the effects of COVID -19, as well as general economic, market or political conditions, has and could further reduce the market price of our common shares in spite of our operating performance and could also increase our cost of capital, which could prevent us from accessing debt and equity capital on terms acceptable to us or at all.
The market price of our common shares is affected by a variety of factors, including:

fluctuations in interest rates;

fluctuations in the availability or the price of oil and chemicals;

fluctuations in foreign currency exchange rates;
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announcements by us or our competitors;

changes in our relationships with customers or suppliers;

actual or anticipated fluctuations in our semi-annual and annual results and those of other public companies in our industry;

changes in United States or foreign tax laws;

actual or anticipated fluctuations in our operating results from period to period;

shortfalls in our operating results from levels forecast by securities analysts;

market conditions in the shipping industry and the general state of the securities markets;

business interruptions caused by the recent outbreak of COVID-19;

mergers and strategic alliances in the shipping industry;

changes in government regulation;

a general or industry-specific decline in the demand for, and price of, shares of our common shares resulting from capital market conditions independent of our operating performance;

the loss of any of our key management personnel;

our failure to successfully implement our business plan; and

issuance of shares.
There is no guarantee of a continuing public market for you to resell our common shares.
Our common shares currently trade on the Nasdaq Capital Market. We cannot assure you that an active and liquid public market for our common shares will continue and you may not be able to sell your common shares in the future at the price that you paid for them or at all. The price of our common shares may be volatile and may fluctuate due to factors such as:

actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry;

mergers and strategic alliances in the shipping industry;

market conditions in the shipping industry and the general state of the securities markets;

changes in government regulation;

shortfalls in our operating results from levels forecast by securities analysts; and

announcements concerning us or our competitors.
Further, a lack of trading volume in our stock may affect investors' ability to sell their shares. Our common shares have been experiencing low daily trading volumes in the market. As a result, investors may be unable to sell all or any of their shares in the desired time period, or may only be able to sell such shares at a significant discount to the previous closing price.
Nasdaq may delist our common shares from its exchange which could limit your ability to make transactions in our securities and subject us to additional trading restrictions.
On December 26, 2019, we received a written notification from Nasdaq indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer meet the minimum bid price requirement under Nasdaq rules. Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance is 180 days, or until June 23, 2020. We intend to monitor the closing bid price of our common shares between now and June 23, 2020 and are considering our options, including a reverse stock split, in order to regain compliance with the Nasdaq Capital Market minimum bid price requirement.  We can cure this deficiency if the closing bid price of our common shares is $1.00 per share or higher for at least ten consecutive business days during the grace period.
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On July 27, 2016, we transferred our Nasdaq listing from the Nasdaq Global Select Market to the Nasdaq Capital Market. Our common shares continue to trade on Nasdaq under the symbol "TOPS". The Nasdaq Capital Market is a continuous trading market that operates in substantially the same manner as the Nasdaq Global Select Market. We then fulfilled the listing requirements of the Nasdaq Capital Market and the approval of the transfer cured our deficiency under Nasdaq Listing Rule 5450(b)(1)(C).
On June 27, 2017, we received written notification from Nasdaq, indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement for the Nasdaq Capital Market, set forth in Nasdaq Listing Rule 5450(a)(1). Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance was 180 days, or until December 26, 2017. We regained compliance on August 17, 2017.
On October 10, 2017, we received written notification from Nasdaq indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer meet the minimum bid price requirement for the Nasdaq Capital Market, set forth in Nasdaq Listing Rule 5450(a)(1). Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance is 180 days, or until April 9, 2018. After requesting a grace period from Nasdaq, we regained compliance on April 11, 2018.
On March 11, 2019, we received written notification from Nasdaq, indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement for the Nasdaq Capital Market, set forth in Nasdaq Listing Rule 5450(a)(1). Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance is 180 days, or until September 9, 2019.
On August 22, 2019 we effectuated a 20 to 1 reverse stock split in order to regain compliance with Nasdaq Listing Rule 5450(a)(1). As a result, we regained compliance on September 5, 2019.
A continued decline in the closing price of our common shares on Nasdaq could result in suspension or delisting procedures in respect of our common shares. The commencement of suspension or delisting procedures by an exchange remains, at all times, at the discretion of such exchange and would be publicly announced by the exchange. If a suspension or delisting were to occur, there would be significantly less liquidity in the suspended or delisted securities. In addition, our ability to raise additional necessary capital through equity or debt financing would be greatly impaired. Furthermore, with respect to any suspended or delisted common shares, we would expect decreases in institutional and other investor demand, analyst coverage, market making activity and information available concerning trading prices and volume, and fewer broker-dealers would be willing to execute trades with respect to such common shares. A suspension or delisting would likely decrease the attractiveness of our common shares to investors, will constitute a breach under certain of our credit agreements and constitute an event of default under certain classes of our preferred stock and cause the trading volume of our common shares to decline, which could result in a further decline in the market price of our common shares.
Finally, if the volatility in the market continues or worsens, it could have a further adverse effect on the market price of our common shares, regardless of our operating performance.
We issued 7,544,475 and 109,009,808 common shares during 2019 and 2020, respectively, through various transactions. Shareholders may experience significant dilution as a result of our offerings.
We have already sold large quantities of our common shares pursuant to previous public and private offerings of our equity and equity-linked securities.  We currently have an effective registration statement on Form F-3 (333-234281), for the sale of $200,000,000 of which we have sold $18 million. We also have 10,364 Series E Preferred Shares outstanding, which are convertible into approximately 17,274,140 common shares as of the date of this report and the Class B Warrants, discussed in Item 4. Information on the Company—A. History and Development of the Company and Item 10. Additional information—B. Memorandum and Articles of Association—2019 Class A Warrants and Class B Warrants below, exercisable into 4,200,000 common shares.  All of the Series E Preferred Shares are held by Family Trading.
Purchasers of the common shares we sell, as well as our existing shareholders, will experience significant dilution if we sell shares at prices significantly below the price at which they invested. In addition, we may issue additional common shares or other equity securities of equal or senior rank in the future in connection with, among other things, debt prepayments, future vessel acquisitions, redemptions of our Series E Preferred Shares, or our equity incentive plan, without shareholder approval, in a number of circumstances. Our existing shareholders may experience significant dilution if we issue shares in the future at prices below the price at which previous shareholders invested.
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Our issuance of additional shares of common shares or other equity securities of equal or senior rank would have the following effects:

our existing shareholders' proportionate ownership interest in us will decrease;

the amount of cash available for dividends payable on the shares of our common shares may decrease;

the relative voting strength of each previously outstanding common share may be diminished; and

the market price of the shares of our common shares may decline.
Future issuances or sales, or the potential for future issuances or sales, of our common shares may cause the trading price of our securities to decline and could impair our ability to raise capital through subsequent equity offerings.
We have issued a significant number of our common shares and we may do so in the future. Shares to be issued in future equity offerings could cause the market price of our common shares to decline, and could have an adverse effect on our earnings per share if and when we become profitable. In addition, future sales of our common shares or other securities in the public markets, or the perception that these sales may occur, could cause the market price of our common shares to decline, and could materially impair our ability to raise capital through the sale of additional securities.
The market price of our common shares could decline due to sales, or the announcements of proposed sales, of a large number of common shares in the market, including sales of common shares by our large shareholders, or the perception that these sales could occur. These sales or the perception that these sales could occur could also depress the market price of our common shares and impair our ability to raise capital through the sale of additional equity securities or make it more difficult or impossible for us to sell equity securities in the future at a time and price that we deem appropriate. We cannot predict the effect that future sales of common shares or other equity-related securities would have on the market price of our common shares.
Our Third Amended and Restated Articles of Incorporation, as amended, authorize our Board of Directors to, among other things, issue additional shares of common or preferred stock or securities convertible or exchangeable into equity securities, without shareholder approval. We may issue such additional equity or convertible securities to raise additional capital. The issuance of any additional shares of common or preferred stock or convertible securities could be substantially dilutive to our shareholders. Moreover, to the extent that we issue restricted stock units, stock appreciation rights, options or warrants to purchase our common shares in the future and those stock appreciation rights, options or warrants are exercised or as the restricted stock units vest, our shareholders may experience further dilution. Holders of shares of our common shares have no preemptive rights that entitle such holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.
Future issuance of common shares may trigger anti-dilution provisions in our Series E Preferred Shares and affect the interests of our common shareholders.
The Series E Preferred Shares contain anti-dilution provisions that could be triggered by the issuance of common shares in a future offering, depending on their offering price. For instance, the issuance by us of common shares for less than $20.00 per common share, which is the current fixed conversion price of the Series E Preferred Shares, could result in an adjustment downward of the Series E Preferred Shares conversion price and an increase in the number of common shares each Series E Share is converted into. These adjustments could affect the interests of our common shareholders and the trading price for our common shares. Furthermore the Series E Preferred Shares holders have the option to replace the fixed conversion price with a variable conversion price, namely 80% of the lowest daily Volume-Weighted Average Price ("VWAP")  of our common shares over the 20 consecutive trading days expiring on the trading day immediately prior to the date of delivery of an exercise notice (but in no event can this variable conversion price be less than $0.60) and purchase such proportionate number of shares based on the variable conversion price in effect on the date of conversion. If using the variable conversion price of the Series E Preferred Shares, as of April 10, 2020, the Series E Preferred Shares have a conversion price of $0.60 and are converted into 17,274,140 common shares per Series E Share, as may be further adjusted. Moreover, future issuance of other equity or debt convertible into or issuable or exchangeable for common shares at a price per share less than the then current conversion price of the Series E Preferred Shares would result in similar adjustments.
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We are incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate law and as a result, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States.
Our corporate affairs are governed by Our Third Amended and Restated Articles of Incorporation and Amended and Restated By-laws, as further amended, and by the Marshall Islands Business Corporations Act, or BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain United States jurisdictions. Shareholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, our public shareholders may have more difficulty in protecting their interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction.
It may not be possible for investors to serve process on or enforce U.S. judgments against us.
We and all of our subsidiaries are incorporated in jurisdictions outside the U.S. and substantially all of our assets and those of our subsidiaries are located outside the U.S. In addition, all of our directors and officers are non-residents of the U.S., and all or a substantial portion of the assets of these non-residents are located outside the U.S. As a result, it may be difficult or impossible for U.S. investors to serve process within the U.S. upon us, our subsidiaries or our directors and officers or to enforce a judgment against us for civil liabilities in U.S. courts. In addition, you should not assume that courts in the countries in which we or our subsidiaries are incorporated or where our assets or the assets of our subsidiaries are located (1) would enforce judgments of U.S. courts obtained in actions against us or our subsidiaries based upon the civil liability provisions of applicable U.S. federal and state securities laws or (2) would enforce, in original actions, liabilities against us or our subsidiaries based on those laws.
Our By-laws provide that the High Court of the Republic of Marshall Islands shall be the sole and exclusive forum for certain disputes between us and our shareholders, which could limit our shareholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our By-laws provide that, unless we consents in writing to the selection of an alternative forum, the High Court of the Republic of Marshall Islands, shall be the sole and exclusive forum for (i) any shareholders' derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation's shareholders, (iii) any action asserting a claim arising pursuant to any provision of the Business Corporations Act of the Republic of the Marshall Islands, or (iv) any action asserting a claim governed by the internal affairs doctrine.  This forum selection provision may limit a shareholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.
We may not achieve the intended benefits of having a forum selection provision if it is found to be unenforceable.
Our By-laws include a forum selection provision as under the section herein entitled "Description of Share Capital – Shareholders' Derivative Actions". However, the enforceability of similar forum selection provisions in other companies' governing documents has been challenged in legal proceedings, and it is possible that in connection with any action a court could find the forum selection provision contained in our By-laws to be inapplicable or unenforceable in such action. If a court were to find the forum selection provision to be inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition and results of operations.
Anti-takeover provisions in our organizational documents could have the effect of discouraging, delaying or preventing a merger, amalgamation or acquisition, which could reduce the market price of our common shares.
Several provisions of our Third Amended and Restated Articles of Incorporation and Amended and Restated By-laws, as further amended, could make it difficult for our shareholders to change the composition of our Board of Directors in any one year, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable.
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These provisions include:

authorizing our Board of Directors to issue "blank check" preferred stock without shareholder approval;

providing for a classified Board of Directors with staggered, three-year terms;

prohibiting cumulative voting in the election of directors;

authorizing the removal of directors only for cause and only upon the affirmative vote of the holders of at least 80% of the outstanding shares of our capital stock entitled to vote for the directors;

prohibiting shareholder action by written consent unless the written consent is signed by all shareholders entitled to vote on the action;

limiting the persons who may call special meetings of shareholders; and

establishing advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted on by shareholders at shareholder meetings.
In addition, we have entered into a stockholders rights agreement, or the Stockholders Rights Agreement, that makes it more difficult for a third-party to acquire us without the support of our Board of Directors. See "Item 10. Additional Information—B. Memorandum and Articles of Association—Stockholders Rights Agreement." These anti-takeover provisions could substantially impede the ability of public shareholders to benefit from a change in control and, as a result, may reduce the market price of our common shares and your ability to realize any potential change of control premium.
RISKS RELATED TO OUR RELATIONSHIP WITH OUR FLEET MANAGER AND ITS AFFILIATES
We are dependent on our Fleet Manager to perform the day-to-day management of our fleet.
Our executive management team, provided by Central Mare, consists of Evangelos J. Pistiolis; Alexandros Tsirikos, our Chief Financial Officer and Director; Vangelis G. Ikonomou our Chief Operating Officer and Konstantinos Patis, our Chief Technical Officer. We subcontract the day-to-day vessel management of our fleet, including crewing, maintenance and repair to our Fleet Manager. Furthermore, upon delivery of any vessels we may acquire, we expect to subcontract their day-to-day management to our Fleet Manager. Our Fleet Manager is a related party affiliated with the family of Mr. Pistiolis. We are dependent on our Fleet Manager for the technical and commercial operation of our fleet as well as for all accounting and reporting functions and the loss of our Fleet Manager's services or its failure to perform obligations to us could materially and adversely affect the results of our operations. If our Fleet Manager suffers material damage to its reputation or relationships it may harm our ability to:

continue to operate our vessels and service our customers;

renew existing charters upon their expiration;

obtain new charters;

obtain financing on commercially acceptable terms;

obtain insurance on commercially acceptable terms;

maintain satisfactory relationships with our customers and suppliers; and

successfully execute our growth strategy.
Our Fleet Manager is a privately held company and there may be limited or no publicly available information about it.
Our Fleet Manager is a privately held company. The ability of our Fleet Manager to provide services for our benefit will depend in part on its own financial strength. Circumstances beyond our control could impair our Fleet Manager's financial strength, and there may be limited publicly available information about its financial condition. As a result, an investor in our common shares might have little advance warning of problems affecting our Fleet Manager, even though these problems could have a material adverse effect on us.
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Our Fleet Manager may have conflicts of interest between us and its other clients.
We subcontract the day-to-day vessel management of our fleet, including crewing, maintenance and repair to our Fleet Manager. Our Fleet Manager may provide similar services for vessels owned by other shipping companies, and it also may provide similar services to companies with which our Fleet Manager is affiliated. These responsibilities and relationships could create conflicts of interest between our Fleet Manager's performance of its obligations to us, on the one hand, and our Fleet Manager's performance of its obligations to its other clients, on the other hand. These conflicts may arise in connection with the crewing, supply provisioning and operations of the vessels in our fleet versus vessels owned by other clients of our Fleet Manager. In particular, our Fleet Manager may give preferential treatment to vessels owned by other clients whose arrangements provide for greater economic benefit to our Fleet Manager. These conflicts of interest may have an adverse effect on our results of operations.
ITEM 4.
 INFORMATION ON THE COMPANY
A.
History and Development of the Company
Our predecessor, Ocean Holdings Inc., was formed as a corporation in January 2000 under the laws of the Republic of the Marshall Islands and renamed Top Tankers Inc. in May 2004. In December 2007, Top Tankers Inc. was renamed TOP Ships Inc. Our common shares are currently listed on Nasdaq under the symbol "TOPS." The current address of our principal executive office is 1 Vasilisis Sofias and Megalou Alexandrou Str, 15124 Maroussi, Greece. The telephone number of our registered office is +30 210 812 8000. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC's Internet site is http://www.sec.gov.  The address of our Internet site is https://www.topships.org.
On February 1, 2017, the Commission declared effective our registration statement on Form F-1, which covered the registration of (i) $200,000,000 common shares (including preferred stock purchase rights), preferred shares, debt securities, warrants, purchase contracts, rights and units and (ii) 0.3 common shares offered for resale by Yorkville underlying the Series B Convertible Preferred Shares issued in the Private Placement.
On February 2, 2017, we launched a registered equity line for the sale of up to $3,099,367 of our common shares from time to time to Kalani Investments Limited, or Kalani, over the next 24 months pursuant to the Purchase Agreement between us and Kalani dated February 2, 2017.  On March 17, 2017, we expanded the registered equity line to allow for the sale of up to $6,940,867 of our common shares from time to time to Kalani pursuant to an amendment to the Purchase Agreement dated February 2, 2017, or the First Amendment.  On March 27, 2017, we further expanded the registered equity line to allow for the sale of up to $12,540,867 of our common shares to Kalani, or the Second Amendment.  On April 4, 2017, we further expanded the registered equity line to allow for the sale of up to $20,340,867 of our common shares, or the Third Amendment.  On April 27, 2017, we further expanded the registered equity line to allow for the sale of up to $40,340,867 of our common shares to Kalani, or the Fourth Amendment. On October 12, 2017 we announced that we have issued and sold the total dollar amount of common shares under the registered equity line and sold a total of 31,638 common shares.
On February 17, 2017, we closed a private placement with Xanthe Holdings Ltd, or Xanthe, a non-U.S. institutional investor non-affiliated with us but affiliated with Kalani for the sale of 7,500 newly issued Series C Convertible Preferred Shares, which were convertible into our common shares, for $7.5 million pursuant to a securities purchase agreement, or the Series C Transaction. Series C shares were fully converted into 45,232 common shares by October 31, 2017.
On February 20, 2017, we, through our wholly-owned subsidiary, Style Maritime Ltd., acquired a 40% ownership interest in Eco Seven Inc., a Marshall Islands corporation, or Eco Seven, from Malibu Shipmanagement Co., a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust for an aggregate purchase price of $6.5 million, pursuant to a share purchase agreement, or the Eco Seven Transaction. Eco Seven was a party to a newbuilding contract for the construction of M/T Stenaweco Elegance, a 50,118 dwt product/chemical tanker that was delivered from Hyundai on February 28, 2017. Eco Seven was also a party to a time charter agreement that commenced upon the vessel's delivery at a rate of $16,500 per day for the first three years, and at the charterer's option, $17,500 for the first optional year and $18,500 for the second optional year. The Eco Seven Transaction was approved by a special committee of our board of directors, or the Transaction Committee, of which the majority of the directors were independent. In the course of its deliberations, the Transaction Committee hired and obtained a fairness opinion from an independent financial advisor.
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Throughout 2017, we issued multiple promissory notes to Kalani and Xanthe. On February 6, 2017, we entered into a note purchase agreement and issued a $3.5 million 6% Original Issue Discount Promissory Note to Kalani for cash consideration of $3.3 million, with a mandatory redemption no later than May 15, 2017. On March 22, 2017, we entered into a note purchase agreement and issued a $5.0 million 4% Original Issue Discount Promissory Note to Kalani for cash consideration of $4.8 million, with a mandatory redemption no later than October 7, 2017. On March 28, 2017, we entered into a note purchase agreement and issued an unsecured promissory note to Kalani in the principal amount of $10 million for cash consideration of $10 million, with a mandatory redemption no later than August 25, 2017.  On April 5, 2017, we entered into a note purchase agreement and issued an unsecured promissory note to Kalani in the principal amount of $7.7 million for cash consideration of $7.7 million, with a mandatory redemption no later than September 4, 2017.  On May 15, 2017, we entered into a note purchase agreement and issued an unsecured promissory note to Xanthe in the principal amount of $5.0 million for cash consideration of $5.0 million, with a mandatory redemption no later than August 23, 2017.  On June 26, 2017, we entered into a note purchase agreement and issued an unsecured promissory note to Kalani in the principal amount of $3.0 million for cash consideration of $3.0 million, with a mandatory redemption no later than October 24, 2017. On July 12, 2017, we entered into a note purchase agreement and issued an unsecured promissory note to Xanthe in the principal amount of $3.1 million for cash consideration of $3.0 million, with a mandatory redemption no later than November 7, 2017. On September 15, 2017, we issued an unsecured promissory note in the amount of $2.0 million with an original issue discount of 1% to Xanthe.  As of December 31, 2018 all of the promissory notes issued to Kalani and Xanthe had been settled.
On March 27, 2017, pursuant to the management agreement between us and Central Shipping Monaco SAM ("CSM"), a related party affiliated with the family of Mr. Evangelos J. Pistiolis, than was our Fleet Manager from March 10, 2014 to December 31, 2018, our board of directors granted to CSM a $1.25 million cash performance fee for its dedication and provision to us of high quality ship management and newbuilding supervision services during 2016.
On March 27, 2017, our board of directors granted to our executive officers an aggregate cash bonus of $1.5 million in consideration of the successful completion of our newbuilding program in 2016.
On March 30, 2017, we, through our wholly-owned subsidiary Style Maritime Ltd., acquired another 9% ownership interest in Eco Seven from Malibu Shipmanagement Co., a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, for an aggregate purchase price of $1.5 million, or the Eco Seven Extended Transaction. Pursuant to the Eco Seven Extended Transaction, our ownership interest in Eco Seven increased to 49%.  On May 30, 2017, we announced that we entered into an agreement with Eco Seven to purchase for $6.5 million, an additional 41% interest, increasing our interest to 90% ownership in Eco Seven.
On March 30, 2017, we, through our wholly-owned subsidiary, Lyndon International Co., acquired a 49% ownership interest in City of Athens from Fly Free Company, a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, for an aggregate purchase price of $4.2 million, or the City of Athens Transaction. City of Athens was party to a newbuilding contract for the construction of M/T Eco Holmby Hills, a 50,000 dwt newbuilding product/chemical delivered from Hyundai in March 2018.
On March 30, 2017, we, through our wholly-owned subsidiary, Gramos Shipping Company Co., acquired a 49% ownership interest in Eco Nine from Maxima International Co., a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, for an aggregate purchase price of $3.5 million, or the Eco Nine Transaction.  Eco Nine was party to a newbuilding contract for the construction of M/T Eco Palm Springs, a 50,000 dwt newbuilding product/chemical delivered from Hyundai in May 2018.
The Eco Seven Extended Transaction, the City of Athens Transaction the Astarte Transaction and the Eco Nine Transaction were approved by a special committee of our board of directors, or the Transaction Committee, of which the majority of the directors were independent. In the course of its deliberations, the Transaction Committee hired and obtained a fairness opinion from an independent financial advisor.
On June 27, 2017, we received written notification from Nasdaq, indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement for the Nasdaq Capital Market, set forth in Nasdaq Listing Rule 5450(a)(1). We regained compliance on August 17, 2017.
On October 10, 2017, we received written notification from Nasdaq indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement for the Nasdaq Capital Market, set forth in Nasdaq Listing Rule 5450(a)(1). We regained compliance on April 11, 2018.
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On November 3, 2017 we held our Special Meeting of Shareholders where our shareholders approved and adopted one or more amendments to our Amended and Restated Articles of Incorporation to effect one or more reverse stock splits of our issued common shares at a ratio of not less than one-for-two and not more than one-for-10,000 and in the aggregate at a ratio of not more than one-for-10,000, inclusive, with the exact ratio to be set at a whole number within this range to be determined by our board of directors and authorized our board of directors to implement any such reverse stock split by filing any such amendment with the Registrar of Corporations of the Republic of the Marshall Islands.
On November 7, 2017, we entered into a Common Stock Purchase Agreement, or the First Purchase Agreement, with Crede CG III, Ltd., or Crede CG, pursuant to which we agreed to sell up to $25 million of our common shares to Crede CG over a period of 24 months, subject to certain limitations. On December 14, 2017 the First Purchase Agreement was completed.
On November 13, 2017, we entered into a Note Purchase Agreement with Crede Capital Group LLC, or Crede, pursuant to which we issued an unsecured promissory note in the original principal amount of $12.5 million with a single revolving option for additional $5.0 million that we exercised on November 20, 2017. As of December 31, 2018, the promissory note has been settled.
On November 24, 2017, we acquired for $3.6 million all of the outstanding shares of PCH77 Shipping Company Limited, a Marshall Islands company that owned a new building contract for M/T Eco California, a high specification 50,000 dwt Medium Range ("MR") product/chemical tanker delivered from Hyundai in South Korea in January 2019 from an entity affiliated with Mr. Evangelos Pistiolis. The abovementioned transaction was approved by a special committee of our board of directors, or the Transaction Committee, of which all of the directors were independent. In the course of its deliberations, the Transaction Committee hired and obtained a fairness opinion from an independent financial advisor. Upon its delivery, the vessel was be employed under a time charter with Shell for a firm duration of two years with a charterer's option to extend for one additional year. The rate of the charter consists of a fixed amount per day plus a 50% profit share for earned rates over the fixed amount.
On December 11, 2017, we entered into a Common Stock Purchase Agreement, or the Second Purchase Agreement, with Crede CG pursuant to which we agreed to sell up to $25 million of our common shares to Crede CG over a period of 24 months, subject to certain limitations. We received proceeds, amounting to $14.8 million pursuant to sales of our common stock under the Second Purchase Agreement and we issued 402,500 common shares. We terminated the Second Crede Purchase Agreement on May 23, 2018.
On December 14, 2017, we entered into a Note Purchase Agreement with Crede, pursuant to which we issued an unsecured promissory note in the original principal amount of $12,500,000 with revolving options for two additional $5.0 million notes to Crede.
On January 2, 2018, the Compensation Committee recommended to our board of directors and the board of directors approved an award of $2.25 million, in cash as incentive compensation to Mr. Evangelos Pistiolis, or his nominee, to be distributed at his own discretion amongst executives.
On January 2, 2018, the Compensation Committee recommended to our board of directors and the board of directors approved an award of $1.25 million in cash as incentive compensation to CSM.
On January 5, 2018, we entered into an Amendment to the Note Purchase Agreement with Crede, pursuant to which we issued an unsecured promissory note in the original principal amount of $5.369 million with a single revolving option for an additional $4.631 million. On February 9, 2018 the Note Purchase Agreement was further amended to increase the last revolving option to $6.4 million and on the same date we exercised the said option in full.
On January 31, 2018, we acquired:

100% of the issued and outstanding shares of PCH Dreaming Inc., a Marshall Islands company that had entered into a new building contract for a high specification 50,000 dwt Medium Range ("MR") product/chemical tanker, M/T Eco Marina Del Ray, delivered from Hyundai Mipo Dockyard Co., Ltd. in South Korea in March 2019. We acquired the shares from an entity affiliated with our Chief Executive Officer for an aggregate purchase price of $3.95 million.
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100% of the issued and outstanding shares of South California Inc., a Marshall Islands company that has entered into a new building contract for a high specification, scrubber-equipped, 157,000 dwt Suezmax Crude Oil Carrier (M/T Eco Bel Air) delivered from Hyundai Samho Heavy Industries Co. Ltd. in South Korea in April 2019. We acquired the shares from an entity affiliated with our Chief Executive Officer for an aggregate purchase price of $8.95 million.

100% of the issued outstanding shares of Malibu Warrior Inc., a Marshall Islands company that has entered into a new building contract for a high specification, scrubber-equipped, 157,000 dwt Suezmax Crude Oil Carrier (M/T Eco Beverly Hills) delivered from Hyundai Samho Heavy Industries Co. Ltd. in South Korea and in May 2019. We acquired the shares from an entity affiliated with our Chief Executive Officer for an aggregate purchase price of $8.95 million.

10% of the issued and outstanding shares of Eco Seven Inc., a Marshall Islands company that owned M/T Stena Elegance, a high specification 50,000 dwt MR product/chemical tanker delivered in February 2017 from Hyundai Vinashin. We acquired the shares from an entity affiliated with our Chief Executive Officer for an aggregate purchase price of $1.6 million.  As a result of the transaction we own 100% of the issued and outstanding shares of Eco Seven Inc.
Each of the acquisitions was approved by a special committee of our board of directors, (the "Transaction Committee"), of which all of the directors were independent. In the course of its deliberations, the Transaction Committee hired and obtained an opinion on the fairness of the consideration of this transaction from two independent financial advisors.
On February 20, 2018 we appointed AST as our new transfer agent and registrar. All of our directly held common shares have been transferred from Computershare to AST's platform, with no action required by any shareholder regarding the change in our transfer agent. (AST can be reached as follows: American Stock Transfer & Trust Company, 55 Challenger Road Ridgefield Park, NJ 07660, Office: 201-806-4181).
On March 12, 2018 our 50% owned subsidiaries, City of Athens and Eco Nine entered into a loan agreement with ABN Amro Bank for a senior debt facility of up to $35.9 million to fund, the delivery of M/T Eco Holmby Hills and M/T Eco Palm Springs ($17.9 million for each vessel).
On March 15, 2018, our 50% owned subsidiary City of Athens took delivery of M/T Eco Holmby Hills, a 50,000 dwt newbuilding product/chemical tanker constructed at the Hyundai Mipo Vinashin shipyard. On March 20, 2018 the vessel commenced its time charter agreement with Clearlake Shipping Pte Ltd.
On March 26, 2018, we effected a 1-for-10 reverse stock split.
In April of 2018, we extended the firm period of the time charter of M/T Eco Fleet with BP Shipping Limited for six months.
On May 25, 2018, we entered into an Equity Distribution Agreement, or the Equity Distribution Agreement, with Maxim Group LLC, or Maxim, as sales agent, under which we were permitted to offer and sell, from time to time through Maxim, up to $14.25 million of our common shares, par value $0.01 per share. On July 23, 2018, we terminated the Equity Distribution Agreement.
On May 23, 2018, we took delivery of our 50% owned 49,703 dwt newbuilding product/chemical tanker M/T Eco Palm Springs, constructed at the Hyundai Mipo Vinashin shipyard and on May 26, 2018 the vessel commenced its three year time charter employment with Clearlake Shipping Pte Ltd.
In June of 2018, we entered into an interest rate swap agreement, or IRS, in order to hedge our exposure to changes in the interest rate of our Alpha Bank facility. Furthermore in June of 2018, our unconsolidated 50% subsidiaries City of Athens Inc. and Eco Nine Inc. entered into two separate IRSs in order to hedge their exposure to changes in the interest rates of their ABN Amro Bank facilities. As a result of these new IRSs both we and our unconsolidated 50% subsidiaries had, as of the date of the IRS, fully hedged our exposure to fluctuations in interest rates in relation to all post-delivery debt facilities then outstanding.
On June 29, 2018, we entered into a SLB and a 5 year time charter with Cargill, for our vessel M/T Eco Marina Del Ray.
On September 7, 2018 we took delivery of M/T Eco Palm Desert, a 50,000 dwt newbuilding product/chemical tanker constructed at the Hyundai Mipo Vinashin shipyard.
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On October 24, 2018, we entered into a Securities Purchase Agreement with one institutional investor, pursuant to which we sold 100,000 of our common shares in a registered direct offering. We also issued warrants to purchase up to 175,000 shares at an exercise price of $30 per share. Maxim Group LLC acted as the exclusive placement agent for the offering.
In October 2018, we agreed to enter into a three year time charter employment with Clearlake Shipping Pte Ltd for our product/chemical tanker M/T Eco Fleet.
In November 2018, we agreed a new time charter employment contract for 2 years with BP Shipping Ltd for our product/chemical tanker M/T Eco Revolution to commence in January 2019.
On December 21, 2018 we entered into an SLB with Bank of Communications Financial Leasing Company ("BoComm Leasing"), a non-affiliated party, for M/T Nord Valiant and M/T Eco California. Consummation of the SLB took place on January 17, 2019 for M/T Nord Valiant and on January 30, 2019 for M/T Eco California. Following the sale, we bareboat chartered back M/T Nord Valiant for five years and for the M/T Eco California for seven years at a bareboat hire of $5,875 per day and $6,550 per day respectively. As part of this transaction, we have continuous options, after the third year, to buy back the vessels at purchase prices stipulated in the bareboat agreement depending on when the option is exercised. The gross proceeds from the sale were $21.7 million for M/T Nord Valiant and $24.1 million for M/T Eco California. We used $18.5 million of the SLB proceeds to prepay in full the outstanding loan on M/T Nord Valiant (Tranche C of the ABN Facility).
On December 3, 2018 we entered into an SLB with China Merchants Bank Financial Leasing ("CMBFL"), a non-affiliated party, for M/T Eco Bel Air and M/T Eco Beverly Hills. Consummation of the SLB took place in April and May 2019 respectively. Following the sale, we bareboat chartered back the vessels for a period of seven years at a bareboat hire of $1.5 million per quarter per vessel. As part of this transaction, we have continuous options, after the third year, to buy back the vessels at purchase prices stipulated in the bareboat agreement depending on when the option is exercised. The gross proceeds from the sale were $91.4 million for both vessels.
On January 11, 2019, we entered into a warrant exchange agreement with the sole holder of the 2018 Warrants for the reduction of the exercise price of said warrants from $30.0 to $20.40. On the same date 300,000 2018 Warrants were exercised into 15,000 common shares. On February 5, 2019, we entered an amendment of the 2018 Warrants for the reduction of the exercise price of said warrants from $20.40 to $14.00. On the same date 714,285 2018 Warrants were exercised into 35,714 common shares. Between February 21 and February 25, 2019 the remaining 932,715 2018 Warrants were exercised into 46,636 common shares.
On January 30, 2019, we took delivery of M/T Eco California. On February 4, 2019 the vessel commenced its' time charter agreement with Shell Tankers Singapore Private Limited ("Shell").
On March 11, 2019, we received written notification from Nasdaq, indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement for the Nasdaq Capital Market, set forth in Nasdaq Listing Rule 5450(a)(1). We regained compliance on September 9, 2019.
On March 13, 2019, we took delivery of M/T Eco Marina Del Ray. On March 18, 2019 the vessel commenced its time charter agreement with Cargill and concurrently agreements were consummated for the vessel's SLB to Cargill.
On April 1, 2019, we announced the sale of 27,129 newly issued Series E Preferred Shares at a price of $1,000 per share to Family Trading, in exchange for the full and final settlement of the loan facility between us and Family Trading dated December 23, 2015, as amended.  For more information please see "Description of share capital" below.
On April 5, 2019, we announced the delivery of the 157,000 dwt newbuilding Suezmax vessel M/T Eco Bel Air, constructed at the Hyundai Samho shipyard in South Korea.
On May 9, 2019, we announced the delivery of the 157,000 dwt newbuilding Suezmax vessel M/T Eco Beverly Hills, constructed at the Hyundai Samho shipyard in South Korea.
On July 15, 2019 we entered into SLBs with Oriental Fleet International Company Limited, a non-affiliated party, for M/T Stenaweco Excellence, and on August 30, 2019 for M/T Stenaweco Energy and M/T Stenaweco Evolution. The sale of the M/T Stenaweco Excellence took place on July 15, 2019 and the sales of the M/T Stenaweco Energy and M/T Stenaweco Evolution took place on November 20, 2019. Prior to the aforementioned sale and lease backs, on November 20, 2019, we exercised the purchase options on the operating leases of the M/T Stenaweco Energy and M/T Stenaweco Evolution for a total of $47.9 million. Following the sales, we bareboat chartered back the three vessels for periods of ten years at bareboat hire rates comprising of financing principal based on straight-line amortization with a balloon payment at maturity plus interest based on the three months Libor plus 3.90% per day. As part of this transaction, we have continuous options, after the third year, to buy back the vessels at purchase prices stipulated in the bareboat agreements depending on when the option is exercised and at the end of the ten-year period we have an obligation to purchase the vessels. The gross proceeds from the sale of the M/T Stenaweco Excellence were $25.6 million and the total gross proceeds for the M/T Stenaweco Energy and M/T Stenaweco Evolution were $45.8 million.
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From July 25, 2019 to April 10, 2020, we redeemed 33,798 of Series E Preferred Shares for $38.9 million.
On July 31, 2019, all outstanding 2014 Warrants issued on July 11, 2014 expired.
On August 22, 2019, we effected a 1-for-20 reverse stock split of our common shares. There was no change in the number of our authorized common shares. All share amounts in this report, not including amounts incorporated by reference, have been retroactively adjusted to reflect this reverse stock split.
On September 13, 2019, we closed an underwritten public offering of an aggregate of 1,580,000 common shares (or pre-funded warrants to purchase common shares in lieu thereof, the Pre-Funded Warrants), warrants, or the Traditional Warrants, to purchase up to 1,790,000 of our common shares and an overallotment option of up to 237,000 common shares, together the September 2019 Transaction. This resulted in gross proceeds of $10.5 million before deducting underwriting discounts, commissions and other offering expenses. The gross proceeds include the partial exercise of 85,000 common shares of the underwriter's over-allotment option granted in connection with the offering. From September 13 to December 31, 2019, 1,245,089 common shares were issued pursuant to the cashless exercise of 1,778,700 Traditional Warrants. The Traditional Warrants expired on December 31, 2019.
On October 14, 2019, we entered into a deed of Amendment for the AT Bank Bridge Facility Note dated March 22, 2019 in the amount of $10.5 million, or the AT Note, which among other things, extended the maturity date of the AT Bank Bridge Note for one year to March 31, 2021.
On November 6, 2019, we entered into a placement agent agreement with Maxim Group LLC relating to the sale of our securities, or the November 2019 Placement Agent Agreement.  Pursuant to the November 2019 Placement Agent Agreement, we entered into the Securities Purchase Agreement, or the November 2019 Purchase Agreement, with certain institutional investors in connection with a registered direct offering of an aggregate of 4,200,000 of our common shares at a public offering price of $2.00 per share, registered on our Registration Statement on Form F-3 (333-215577), or the November 2019 Registered Offering.  Concurrently with the November 2019 Registered Offering and pursuant to the November 2019 Purchase Agreement, we also commenced a private placement whereby we issued and sold Class A warrants to purchase up to 4,200,000 of our common shares, or the Class A Warrants, and Class B warrants to purchase up to 4,200,000 of our common shares, or the Class B Warrants. The Class A Warrants and Class B Warrants were registered via a registration statement in form F1 that became effective on January 21, 2020.
On December 18, 2019, we acquired interests in two companies that each were the sole purchaser in a new building contract. We purchased 100% of the issued and outstanding shares of Santa Catalina Inc., a Marshall Islands company that had entered into a new building contract for a high specification scrubber-equipped, 50,000 dwt MR product/chemical tanker to be named Eco Los Angeles delivered on February 10, 2020 from Hyundai Mipo Dockyard Co., Ltd. in South Korea. We acquired the shares from an entity affiliated with our Chief Executive Officer for an aggregate purchase price of $7.2 million. We also purchased 100% of the issued and outstanding shares of Santa Monica Inc., a Marshall Islands company that had entered into a new building contract for a high specification scrubber-equipped, 50,000 dwt MR product/chemical named Eco City of Angels delivered on February 17, 2020 from Hyundai Mipo Dockyard Co., Ltd. in South Korea. We acquired the shares from an entity affiliated with our Chief Executive Officer for an aggregate purchase price of $7.2 million. Following their delivery, both vessels entered into time charters with Trafigura Maritime Logistics Pte Ltd ("Trafigura") for a firm duration of three years, with charterer's option to extend for two additional years.
On December 26, 2019, we received a written notification from Nasdaq indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer meet the minimum bid price requirement under Nasdaq rules. Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance is 180 days, or until June 23, 2020. We intend to monitor the closing bid price of our common shares between now and June 23, 2020 and are considering our options, including a reverse stock split, in order to regain compliance with the Nasdaq Capital Market minimum bid price requirement.  We can cure this deficiency if the closing bid price of our common shares is $1.00 per share or higher for at least ten consecutive business days during the grace period.
Recent Developments
On January 3, 2020, we announced that we agreed to sell two MR1 Product Tankers, the M/T Eco Fleet and the M/T Eco Revolution (each weighing 39,000 dwt) to unaffiliated third parties.  On January 14, 2020, the M/T Eco Revolution was delivered to its buyer and we received gross proceeds of $23.0 million, part of which were used to prepay in full the outstanding amount of $15.1 million under tranche A of our loan facility with ABN AMRO, or the ABN Facility.  On January 21, 2020, the M/T Eco Fleet was delivered to its buyer and we received $21.0 million, part of which were used to prepay in full the outstanding amount of $14.4 million under tranche B of the ABN Facility, resulting in the full prepayment of the ABN Facility.
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On February 10 and February 17, 2020 we took delivery of M/T Eco Los Angeles and M/T Eco City of Angels from the Hyundai Mipo Dockyard Co., Ltd. in South Korea respectively.
Between January 22 and February 21, 2020, all of the Class A Warrants (4,200,000 warrants) were exercised on a cashless basis into 1,680,000 of our common shares.
On February 12, 2020, we entered into an Equity Distribution Agreement with Maxim Group LLC, as sales agent, under which we may offer and sell, from time to time through Maxim, up to $5.0 million of its common shares.  We completed the offering on March 4, 2020 and sold a total of 14,637,118 common shares.
On February 17, 2020, we announced the issuance of 16,004 Series E Preferred Shares to Family Trading, as settlement of the consideration outstanding for the purchase of the M/T Eco City of Angels and M/T Eco Los Angeles from Mr. Pistiolis, our President, Chief Executive Officer and Director, and for dividends payable to Family Trading Inc. under already outstanding Series E Preferred Shares.
On February 21, 2020, we announced that our 50% owned subsidiaries which own M/T Holmby Hills and M/T Palm Springs entered into agreements to sell both vessels to unaffiliated third parties . On March 30, 2020, we announced the delivery of M/T Holmby Hills to an unaffiliated party.
On February 6, 2020, we announced that we agreed to sell two MR2 Product Tankers, the M/T Stenaweco Elegance and the M/T Palm Desert (each weighing 50,000 dwt) to unaffiliated third parties. On February 25, 2020, we announced the closing of the sale of the M/T Stenaweco Elegance.
On March 11, 2020, we entered into an Equity Distribution Agreement with Maxim Group LLC, as sales agent, under which we may offer and sell, from time to time through Maxim, up to $5.0 million of its common shares.  We completed the offering on March 27, 2020 and sold a total of 52,692,690 common shares.
On February 6, 2020, we announced that we agreed to sell two MR2 Product Tankers, the M/T Stenaweco Elegance and the M/T Palm Desert (each weighing 50,000 dwt) to unaffiliated third parties. On March 23, 2020, we announced the conclusion of the sale of the M/T Palm Desert.
On March 30, 2020 we entered into a placement agent agreement with Maxim Group LLC relating to the sale of our securities, or the March 2020 PAA.  Pursuant to the March 2020 PAA, we entered into a securities purchase agreement, or the March 2020 SPA, with certain institutional investors in connection with a registered direct offering of 40,000,000 of our common shares at a public offering price of $0.20 per share, or the March 2020 Registered Direct Offering. The aggregate gross proceeds of the Registered Direct Offering was $8.0 million and it closed on April 1, 2020.
B.
Business Overview
We are an international owner and operator of modern, fuel efficient eco tanker vessels focusing on the transportation of crude oil, petroleum products (clean and dirty) and bulk liquid chemicals. Our fleet has a total capacity of 714,000 deadweight tonnes ("dwt"). As of the date of this report, our fleet consists of eight 50,000 dwt product/chemical tankers, the M/T Stenaweco Energy, M/T Stenaweco Evolution, M/T Nord Valiant, M/T Stenaweco Excellence, the M/T Eco California, the M/T Eco Marina Del Ray, The M/T Eco Los Angeles and the M/T Eco City of Angels and two 157,000 dwt Suezmax tankers, the M/T Eco Bel Air and M/T Eco Beverly Hills and we also own 50% interest in one 50,000 dwt product/chemical tanker, the M/T Palm Springs, which we have agreed to sell subject to customary closing conditions. All of our vessels are IMO certified and are capable of carrying a wide variety of oil products including chemical cargos which we believe make our vessels attractive to a wide base of charterers. All of the vessels in our fleet are sold and leased back.
For more information, please see "Item 4. Information on the Company—A. History and Development of the Company—Recent Developments."
We intend to continue to review the market in order to identify potential acquisition targets in line with our strategy.
We believe we have established a reputation in the international ocean transport industry for operating and maintaining vessels with high standards of performance, reliability and safety. We have assembled a management team comprised of executives who have extensive experience operating large and diversified fleets of tankers and who have strong ties to a number of national, regional and international oil companies, charterers and traders.
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Our Fleet
The following tables present our fleet list as of the date of this report:
MR Tanker vessels on SLBs (treated as financings):
Name
Deadweight
Charterer
End of firm period
Charterer's Optional Periods
Gross Rate fixed period/ options
M/T Stenaweco Energy
50,000
Stena Weco A/S
February 2021
1+1 years
$15,616 / $17,350 / $18,100
M/T Stenaweco Evolution
50,000
Stena Weco A/S
October 2021
1+1 years
$15,516 / $17,200 / $18,000
M/T Stenaweco Excellence
50,000
Stena Weco A/S
November 2020
1+1 years
$16,200 / $17,200 / $18,000
M/T Nord Valiant
50,000
DS Norden A/S
August 2021
1+1 years
$16,800 / $17,600 / $18,400
M/T Eco California
50,000
Shell Tankers Singapore Private Limited
January 2021
1 year
$13,750 plus 50% profit share/ $13,950 plus 50% profit share
M/T Eco Marina Del Ray
50,000
Cargill
March 2024
-
$15,100
M/T Eco Los Angeles
50,000
Trafigura
February 2023
1+1 years
$17,500 / $18,750 / $20,000
M/T Eco City of Angels
50,000
Trafigura
February 2023
1+1 years
$17,500 / $18,750 / $20,000



Suezmax Vessels on SLBs (treated as financings):
Name
Deadweight
Charterer
End of firm period
Charterer's Optional Periods
Gross Rate fixed period/ options
M/T Eco Bel Air
157,000
BP Shipping Limited
April 2022
1+1 years
$24,500 / $27,500 / $29,000
M/T Eco Beverly Hills
157,000
BP Shipping Limited
May 2022
1+1 years
$24,500 / $27,500 / $29,000



Joint Venture MR Tanker fleet (50% owned):

Name
Deadweight
Charterer
End of firm period
Charterer's Optional Periods
Gross Rate fixed period/ options
M/T Eco Palm Springs*
50,000
Clearlake Shipping Pte Ltd
May 2021
1+1 years
$14,750 up to May 2020 and $15,175 thereafter / $15,550 / $16,550

* We have agreed to sell this vessel subject to customary closing conditions.


All the vessels in our fleet are equipped with engines of modern design and with improvements in the hull, propellers and other parts of the vessel to decrease fuel consumption and reduce emissions. Vessels with this combination of technologies, introduced from certain shipyards, are commonly referred to as eco vessels. We believe that recent advances in shipbuilding design and technology should make these latest generation vessels more fuel-efficient than older vessels in the global fleet that compete with our vessels for charters, providing us with a competitive advantage.  Furthermore, all of our vessels are fitted with ballast water treatment equipment and five of our vessels have scrubbers installed.
Management of our Fleet
Our Fleet Manager provides all operational, technical and commercial management services for our fleet. Please see "Item 18. Financial Statements—Note 5—Transactions with Related Parties".
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Officers, Crewing and Employees
As of the date of this annual report we employ directly only one shore-based employee. Our executive officers and a number of administrative employees are provided according to an agreement with Central Mare. Please see "Item 18. Financial Statements—Note 5—Transactions with Related Parties". In addition, our Fleet Manager is responsible for recruiting, mainly through a crewing agent, the senior officers and all other crew members for our vessels. We believe the streamlining of crewing arrangements will ensure that all our vessels will be crewed with experienced seamen that have the qualifications and licenses required by international regulations and shipping conventions.
The International Shipping Industry
The seaborne transportation industry is a vital link in international trade, with ocean going vessels representing the most efficient and often the only method of transporting large volumes of basic commodities and finished products. Demand for tankers is dictated by world oil demand and trade, which is influenced by many factors, including international economic activity; geographic changes in oil production, processing, and consumption; oil price levels; inventory policies of the major oil and oil trading companies; and strategic inventory policies of countries such as the United States, China and India.
Shipping demand, measured in tonne-miles, is a product of (a) the amount of cargo transported in ocean going vessels, multiplied by (b) the distance over which this cargo is transported. The distance is the more variable element of the tonne-mile demand equation and is determined by seaborne trading patterns, which are principally influenced by the locations of production and consumption. Seaborne trading patterns are also periodically influenced by geo-political events that divert vessels from normal trading patterns, as well as by inter-regional trading activity created by commodity supply and demand imbalances. Tonnage of oil shipped is primarily a function of global oil consumption, which is driven by economic activity as well as the long-term impact of oil prices on the location and related volume of oil production. Tonnage of oil shipped is also influenced by transportation alternatives (such as pipelines) and the output of refineries.
Demand for tankers and tonnage of oil shipped is primarily a function of global oil consumption, which is driven by economic activity, as well as the long-term impact of oil prices on the location and related volume of oil production. Global oil demand returned to limited growth in 2010 and has since been expanding at a modest pace, as a steady rise in Asia has outweighed decreasing demand in Europe and in the United States. According to the International Energy Agency, global oil demand for 2019 has risen to approximately 100.1 million barrels/day compared to 99.2 million barrels/day during 2018.
We strategically monitor developments in the tanker industry on a regular basis and, subject to market demand, will seek to enter into shorter or longer time or bareboat charters according to prevailing market conditions.
We will compete for charters on the basis of price, vessel location, size, age and condition of the vessel, as well as on our reputation as an operator. We will arrange our time charters and bareboat charters through the use of brokers, who negotiate the terms of the charters based on market conditions. We will compete primarily with owners of tankers in the handymax and Suezmax class sizes. Ownership of tankers is highly fragmented and is divided among major oil companies and independent vessel owners.
Seasonality
We operate our tankers in markets that have historically exhibited seasonal variations in demand and, therefore, charter rates. This seasonality may affect operating results. However, to the extent that our vessels are chartered at fixed rates on a long-term basis, seasonal factors will not have a significant direct effect on our business.
Risk of Loss and Liability Insurance
General
The operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, piracy incidents, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon shipowners, operators and bareboat charterers of any vessel trading in the exclusive economic zone of the United States for certain oil pollution accidents in the United States, has made liability insurance more expensive for shipowners and operators trading in the United States market. We carry insurance coverage as customary in the shipping industry. However, not all risks can be insured, specific claims may be rejected, and we might not be always able to obtain adequate insurance coverage at reasonable rates.
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Hull and Machinery Insurance
We procure hull and machinery insurance, protection and indemnity insurance, which includes environmental damage and pollution insurance and war risk insurance and freight, demurrage and defense insurance for our fleet. We generally do not maintain insurance against loss of hire (except for certain charters for which we consider it appropriate), which covers business interruptions that result in the loss of use of a vessel.
Protection and Indemnity Insurance
Protection and indemnity insurance is provided by mutual protection and indemnity associations, or "P&I Associations," and covers our third-party liabilities in connection with our shipping activities. This includes third-party liability and other related expenses of injury or death of crew, passengers and other third parties, loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances and salvage, towing and other related costs, including wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or "clubs."
Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident. The 13 P&I Associations that comprise the International Group insure approximately 90% of the world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. The International Group's website states that the Pool provides a mechanism for sharing all claims in excess of US$ 10 million up to, currently, approximately US$ 8.2 billion.  As a member of a P&I Association, which is a member of the International Group, we are subject to calls payable to the associations based on our claim records as well as the claim records of all other members of the individual associations and members of the shipping pool of P&I Associations comprising the International Group.
Environmental and Other Regulations in the Shipping Industry
Government regulation and laws significantly affect the ownership and operation of our fleet. We are subject to international conventions and treaties, national, state and local laws and regulations in force in the countries in which our vessels may operate or are registered relating to safety and health and environmental protection including the storage, handling, emission, transportation and discharge of hazardous and non-hazardous materials, and the remediation of contamination and liability for damage to natural resources. Compliance with such laws, regulations and other requirements entails significant expense, including vessel modifications and implementation of certain operating procedures.
A variety of government and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (applicable national authorities such as the United States Coast Guard ("USCG"), harbor master or equivalent), classification societies, flag state administrations (countries of registry) and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or result in the temporary suspension of the operation of one or more of our vessels.
Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations. However, because such laws and regulations frequently change and may impose increasingly stricter requirements, we cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious marine incident that causes significant adverse environmental impact could result in additional legislation or regulation that could negatively affect our profitability.
International Maritime Organization
The International Maritime Organization, the United Nations agency for maritime safety and the prevention of pollution by vessels (the "IMO"), has adopted the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, collectively referred to as MARPOL 73/78 and herein as "MARPOL," the International Convention for the Safety of Life at Sea of 1974 ("SOLAS Convention"), and the International Convention on Load Lines of 1966 (the "LL Convention"). MARPOL establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged forms.  MARPOL is applicable to drybulk, tanker and LNG carriers, among other vessels, and is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage or spilling; Annexes II and III relate to harmful substances carried in bulk in liquid or in packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI was separately adopted by the IMO in September of 1997; new emissions standards, titled IMO-2020, are set to take effect on January 1, 2020.
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In 2012, the IMO's Marine Environmental Protection Committee, or the "MEPC," adopted a resolution amending the International Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals in Bulk, or the "IBC Code." The provisions of the IBC Code are mandatory under MARPOL and the SOLAS Convention. These amendments, which entered into force in June 2014, pertain to revised international certificates of fitness for the carriage of dangerous chemicals in bulk and identifying new products that fall under the IBC Code. We may need to make certain financial expenditures to comply with these amendments.

In 2013, the IMO's Marine Environmental Protection Committee, or the "MEPC," adopted a resolution amending MARPOL Annex I Condition Assessment Scheme, or "CAS." These amendments became effective on October 1, 2014, and require compliance with the 2011 International Code on the Enhanced Programme of Inspections during Surveys of Bulk Carriers and Oil Tankers, or "ESP Code," which provides for enhanced inspection programs. We may need to make certain financial expenditures to comply with these amendments.

Air Emissions
In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels. Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from all commercial vessel exhausts and prohibits "deliberate emissions" of ozone depleting substances (such as halons and chlorofluorocarbons), emissions of volatile compounds from cargo tanks and the shipboard incineration of specific substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions, as explained below.  Emissions of "volatile organic compounds" from certain vessels, and the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls, or "PCBs") are also prohibited.  We believe that all our vessels are currently compliant in all material respects with these regulations.
The Marine Environment Protection Committee, or "MEPC," adopted amendments to Annex VI regarding emissions of sulfur oxide, nitrogen oxide, particulate matter and ozone depleting substances, which entered into force on July 1, 2010.  The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board ships. On October 27, 2016, at its 70th session, the MEPC agreed to implement a global 0.5% m/m sulfur oxide emissions limit (reduced from 3.50%) starting from January 1, 2020.  This limitation can be met by using low-sulfur compliant fuel oil, alternative fuels or certain exhaust gas cleaning systems.  Since the implementation of the cap, ships are required to obtain bunker delivery notes and International Air Pollution Prevention ("IAPP") Certificates from their flag states that specify sulfur content. Additionally, at MEPC 73, amendments to Annex VI to prohibit the carriage of bunkers above 0.5% sulfur on ships were adopted and entered into force on March 1, 2020.  These regulations subject ocean-going vessels to stringent emissions controls, and may cause us to incur substantial costs.
Sulfur content standards are even stricter within certain "Emission Control Areas," or ("ECAs"). As of January 1, 2015, ships operating within an ECA were not permitted to use fuel with sulfur content in excess of 0.1% m/m. Amended Annex VI establishes procedures for designating new ECAs. Currently, the IMO has designated four ECAs, including specified portions of the Baltic Sea area, North Sea area, North American area and United States Caribbean area.  Ocean-going vessels in these areas will be subject to stringent emission controls and may cause us to incur additional costs. Other areas in China are subject to local regulations that impose stricter emission controls.  If other ECAs are approved by the IMO, or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the U.S. Environmental Protection Agency ("EPA") or the states where we operate, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of our operations.
Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for marine diesel engines, depending on their date of installation. At the MEPC meeting held from March to April 2014, amendments to Annex VI were adopted which address the date on which Tier III Nitrogen Oxide (NOx) standards in ECAs will go into effect.  Under the amendments, Tier III NOx standards apply to ships that operate in the North American and U.S. Caribbean Sea ECAs designed for the control of NOx produced by vessels with a marine diesel engine installed and constructed on or after January 1, 2016.  Tier III requirements could apply to areas that will be designated for Tier III NOx in the future. At MEPC 70 and MEPC 71, the MEPC approved the North Sea and Baltic Sea as ECAs for nitrogen oxide for ships built on or after January 1, 2021. The EPA promulgated equivalent (and in some senses stricter) emissions standards in 2010.  As a result of these designations or similar future designations, we may be required to incur additional operating or other costs.
As determined at the MEPC 70, the new Regulation 22A of MARPOL Annex VI became effective as of March 1, 2018 and requires ships above 5,000 gross tonnage to collect and report annual data on fuel oil consumption to an IMO database, with the first year of data collection commencing on January 1, 2019.  The IMO intends to use such data as the first step in its roadmap (through 2023) for developing its strategy to reduce greenhouse gas emissions from ships, as discussed further below.
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As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for ships. All ships are now required to develop and implement Ship Energy Efficiency Management Plans ("SEEMPS"), and new ships must be designed in compliance with minimum energy efficiency levels per capacity mile as defined by the Energy Efficiency Design Index ("EEDI").  Under these measures, by 2025, all new ships built will be 30% more energy efficient than those built in 2014.
We may incur costs to comply with these revised standards. Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems and could adversely affect our business, results of operations, cash flows and financial condition.
Safety Management System Requirements
The SOLAS Convention was amended to address the safe manning of vessels and emergency training drills.  The Convention of Limitation of Liability for Maritime Claims (the "LLMC") sets limitations of liability for a loss of life or personal injury claim or a property claim against ship owners. We believe that our vessels are in substantial compliance with SOLAS and LLMC standards.
Under Chapter IX of the SOLAS Convention, or the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (the "ISM Code"), our operations are also subject to environmental standards and requirements. The ISM Code requires the party with operational control of a vessel to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. We rely upon the safety management system that we and our technical management team have developed for compliance with the ISM Code. The failure of a vessel owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.
The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel's management with the ISM Code requirements for a safety management system. No vessel can obtain a safety management certificate unless its manager has been awarded a document of compliance, issued by each flag state, under the ISM Code. We have obtained applicable documents of compliance for our offices and safety management certificates for all of our vessels for which the certificates are required by the IMO. The document of compliance and safety management certificate are renewed as required.
Regulation II-1/3-10 of the SOLAS Convention governs ship construction and stipulates that ships over 150 meters in length must have adequate strength, integrity and stability to minimize risk of loss or pollution. Goal-based standards amendments in SOLAS regulation II-1/3-10 entered into force in 2012, with July 1, 2016 set for application to new oil tankers and bulk carriers.   The SOLAS Convention regulation II-1/3-10 on goal-based ship construction standards for bulk carriers and oil tankers, which entered into force on January 1, 2012, requires that all oil tankers and bulk carriers of 150 meters in length and above, for which the building contract is placed on or after July 1, 2016, satisfy applicable structural requirements conforming to the functional requirements of the International Goal-based Ship Construction Standards for Bulk Carriers and Oil Tankers ("GBS Standards").
The IMO has also adopted the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers ("STCW").  As of February 2017, all seafarers are required to meet the STCW standards and be in possession of a valid STCW certificate.  Flag states that have ratified SOLAS and STCW generally employ the classification societies, which have incorporated SOLAS and STCW requirements into their class rules, to undertake surveys to confirm compliance.
The IMO's Maritime Safety Committee and MEPC, respectively, each adopted relevant parts of the International Code for Ships Operating in Polar Water (the "Polar Code"). The Polar Code, which entered into force on January 1, 2017, covers design, construction, equipment, operational, training, search and rescue as well as environmental protection matters relevant to ships operating in the waters surrounding the two poles. It also includes mandatory measures regarding safety and pollution prevention as well as recommendatory provisions.  The Polar Code applies to new ships constructed after January 1, 2017, and after January 1, 2018, ships constructed before January 1, 2017 are required to meet the relevant requirements by the earlier of their first intermediate or renewal survey.
Furthermore, recent action by the IMO's Maritime Safety Committee and United States agencies indicates that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. For example, cyber-risk management systems must be incorporated by ship-owners and managers by 2021. This might cause companies to create additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures.  The impact of such regulations is hard to predict at this time.
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Pollution Control and Liability Requirements
The IMO has negotiated international conventions that impose liability for pollution in international waters and the territorial waters of the signatories to such conventions. For example, the IMO adopted an International Convention for the Control and Management of Ships' Ballast Water and Sediments (the "BWM Convention") in 2004. The BWM Convention entered into force on September 9, 2017.  The BWM Convention requires ships to manage their ballast water to remove, render harmless or avoid the uptake or discharge of new or invasive aquatic organisms and pathogens within ballast water and sediments.  The BWM Convention's implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits, and require all ships to carry a ballast water record book and an international ballast water management certificate.
On December 4, 2013, the IMO Assembly passed a resolution revising the application dates of BWM Convention so that the dates are triggered by the entry into force date and not the dates originally in the BWM Convention.  This, in effect, makes all vessels delivered before the entry into force date "existing vessels" and allows for the installation of ballast water management systems on such vessels at the first International Oil Pollution Prevention ("IOPP") renewal survey following entry into force of the convention. The MEPC adopted updated guidelines for approval of ballast water management systems (G8) at MEPC 70. At MEPC 71, the schedule regarding the BWM Convention's implementation dates was also discussed and amendments were introduced to extend the date existing vessels are subject to certain ballast water standards.  Those changes were adopted at MEPC 72.  Ships over 400 gross tons generally must comply with a "D-1 standard," requiring the exchange of ballast water only in open seas and away from coastal waters.  The "D-2 standard" specifies the maximum amount of viable organisms allowed to be discharged, and compliance dates vary depending on the IOPP renewal dates. Depending on the date of the IOPP renewal survey, existing vessels must comply with the D-2 standard on or after September 8, 2019. For most ships, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms.  Ballast water management systems, which include systems that make use of chemical, biocides, organisms or biological mechanisms, or which alter the chemical or physical characteristics of the ballast water, must be approved in accordance with IMO Guidelines (Regulation D-3).  As of October 13, 2019, MEPC 72's amendments to the BWM Convention took effect, making the Code for Approval of Ballast Water Management Systems, which governs assessment of ballast water management systems, mandatory rather than permissive, and formalized an implementation schedule for the D-2 standard. Under these amendments, all ships must meet the D-2 standard by September 8, 2024. All of our vessels comply with this standard.
Once mid-ocean ballast water treatment requirements become mandatory under the BWM Convention, the cost of compliance could increase for ocean carriers and may have a material effect on our operations. However, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and harmful species via such discharges. The U.S., for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternate measure, and to comply with certain reporting requirements.
The IMO adopted the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended by different Protocols in 1976, 1984 and 1992, and amended in 2000 ("the CLC").  Under the CLC and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel's registered owner may be strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain exceptions.  The 1992 Protocol changed certain limits on liability expressed using the International Monetary Fund currency unit, the Special Drawing Rights.  The limits on liability have since been amended so that the compensation limits on liability were raised.  The right to limit liability is forfeited under the CLC where the spill is caused by the shipowner's actual fault and under the 1992 Protocol where the spill is caused by the shipowner's intentional or reckless act or omission where the shipowner knew pollution damage would probably result.  The CLC requires ships over 2,000 tons covered by it to maintain insurance covering the liability of the owner in a sum equivalent to an owner's liability for a single incident.  We have protection and indemnity insurance for environmental incidents.  P&I Clubs in the International Group issue the required Bunkers Convention "Blue Cards" to enable signatory states to issue certificates.  All of our vessels are in possession of a CLC State issued certificate attesting that the required insurance coverage is in force.
The IMO also adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage (the "Bunker Convention") to impose strict liability on ship owners (including the registered owner, bareboat charterer, manager or operator) for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the LLMC).  With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship's bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.
Ships are required to maintain a certificate attesting that they maintain adequate insurance to cover an incident. In jurisdictions, such as the United States where the CLC or the Bunker Convention has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or on a strict-liability basis.
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Anti‑Fouling Requirements

In 2001, the IMO adopted the International Convention on the Control of Harmful Anti‑fouling Systems on Ships, or the "Anti‑fouling Convention." The Anti‑fouling Convention, which entered into force on September 17, 2008, prohibits the use of organotin compound coatings to prevent the attachment of mollusks and other sea life to the hulls of vessels. Vessels of over 400 gross tons engaged in international voyages will also be required to undergo an initial survey before the vessel is put into service or before an International Anti‑fouling System Certificate is issued for the first time; and subsequent surveys when the anti‑fouling systems are altered or replaced. We have obtained Anti‑fouling System Certificates for all of our vessels that are subject to the Anti‑fouling Convention.
Compliance Enforcement
Noncompliance with the ISM Code or other IMO regulations may subject the ship owner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The USCG and European Union authorities have indicated that vessels not in compliance with the ISM Code by applicable deadlines will be prohibited from trading in U.S. and European Union ports, respectively.  As of the date of this report, each of our vessels is ISM Code certified. However, there can be no assurance that such certificates will be maintained in the future.  The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our operations.
United States Regulations
The U.S. Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation and Liability Act
The U.S. Oil Pollution Act of 1990 ("OPA") established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all "owners and operators" whose vessels trade or operate within the U.S., its territories and possessions or whose vessels operate in U.S. waters, which includes the U.S.'s territorial sea and its 200-nautical mile exclusive economic zone around the U.S.  The U.S. has also enacted the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), which applies to the discharge of hazardous substances other than oil, except in limited circumstances, whether on land or at sea.  OPA and CERCLA both define "owner and operator" in the case of a vessel as any person owning, operating or chartering by demise, the vessel.  Both OPA and CERCLA impact our operations.
Under OPA, vessel owners and operators are "responsible parties" and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels, including bunkers (fuel).  OPA defines these other damages broadly to include:
(i) injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;
(ii) injury to, or economic losses resulting from, the destruction of real and personal property;
(iv) loss of subsistence use of natural resources that are injured, destroyed or lost;
(iii) net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources;
 (v) lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and
(vi) net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.
OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs.  Effective November 12, 2019, the USCG adjusted the limits of OPA liability for a tank vessel, other than a single-hull tank vessel, over 3,000 gross tons liability to the greater of $2,300 per gross ton or $19,943,400 (subject to periodic adjustment for inflation).  These limits of liability do not apply if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual relationship) or a responsible party's gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident as required by law where the responsible party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act.
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CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damages for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing the same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5.0 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations.  The limitation on liability also does not apply if the responsible person fails or refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA.
OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort law.  OPA and CERCLA both require owners and operators of vessels to establish and maintain with the USCG evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee. We comply and plan to comply going forward with the USCG's financial responsibility regulations by providing applicable certificates of financial responsibility.
The 2010 Deepwater Horizon oil spill in the Gulf of Mexico resulted in additional regulatory initiatives or statutes, including higher liability caps under OPA, new regulations regarding offshore oil and gas drilling and a pilot inspection program for offshore facilities.  However, several of these initiatives and regulations have been or may be revised.  For example, the U.S. Bureau of Safety and Environmental Enforcement's ("BSEE") revised Production Safety Systems Rule ("PSSR"), effective December 27, 2018, modified and relaxed certain environmental and safety protections under the 2016 PSSR.  Additionally, the BSEE amended the Well Control Rule, effective July 15, 2019, which rolled back certain reforms regarding the safety of drilling operations, and the U.S. President proposed leasing new sections of U.S. waters to oil and gas companies for offshore drilling.  The effects of these changes are currently unknown.  Compliance with any new requirements of OPA and future legislation or regulations applicable to the operation of our vessels could impact the cost of our operations and adversely affect our business.
OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability established under OPA and some states have enacted legislation providing for unlimited liability for oil spills.  Many U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance.  These laws may be more stringent than U.S. federal law.  Moreover, some states have enacted legislation providing for unlimited liability for discharge of pollutants within their waters, although in some cases, states which have enacted this type of legislation have not yet issued implementing regulations defining vessel owners' responsibilities under these laws. We intend to comply with all applicable state regulations in the ports where our vessels call.
We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage, it could have an adverse effect on our business and results of operation.
Other United States Environmental Initiatives
The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990) ("CAA") requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. The CAA also requires states to draft State Implementation Plans, or "SIPs," designed to attain national health-based air quality standards in each state. Although state-specific, SIPs may include regulations concerning emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. Our vessels operating in such regulated port areas with restricted cargoes are equipped with vapor recovery systems that satisfy these existing requirements.
The U.S. Clean Water Act ("CWA") prohibits the discharge of oil, hazardous substances and ballast water in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges.  The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA.  In 2015, the EPA expanded the definition of "waters of the United States" ("WOTUS"), thereby expanding federal authority under the CWA.  Following litigation on the revised WOTUS rule, in December 2018, the EPA and Department of the Army proposed a revised, limited definition of "waters of the United States." The proposed rule was published in the Federal Register on February 14, 2019 and was subject to public comment. On October 22, 2019, the agencies published a final rule repealing the 2015 Rule defining "waters of the United States" and recodified the regulatory text that existed prior to 2015 Rule. The final rule became effective on December 23, 2019. On January 23, 2020, the EPA published the "Navigable Waters Protection Rule," which replaces the rule published on October 22, 2019, and redefines "waters of the United States." The effect of this rule is currently unknown.
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The EPA and the USCG have also enacted rules relating to ballast water discharge, compliance with which requires the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial costs, and/or otherwise restrict our vessels from entering U.S. Waters.  The EPA will regulate these ballast water discharges and other discharges incidental to the normal operation of certain vessels within United States waters pursuant to the Vessel Incidental Discharge Act ("VIDA"), which was signed into law on December 4, 2018 and replaces the 2013 Vessel General Permit ("VGP") program (which authorizes discharges incidental to operations of commercial vessels and contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in U.S. waters, stringent requirements for exhaust gas scrubbers, and requirements for the use of environmentally acceptable lubricants) and current Coast Guard ballast water management regulations adopted under the U.S. National Invasive Species Act ("NISA"), such as mid-ocean ballast exchange programs and installation of approved USCG technology for all vessels equipped with ballast water tanks bound for U.S. ports or entering U.S. waters.  VIDA establishes a new framework for the regulation of vessel incidental discharges under Clean Water Act (CWA), requires the EPA to develop performance standards for those discharges within two years of enactment, and requires the U.S. Coast Guard to develop implementation, compliance and enforcement regulations within two years of EPA's promulgation of standards.  Under VIDA, all provisions of the 2013 VGP and USCG regulations regarding ballast water treatment remain in force and effect until the EPA and U.S. Coast Guard regulations are finalized.  Non-military, non-recreational vessels greater than 79 feet in length must continue to comply with the requirements of the VGP, including submission of a Notice of Intent ("NOI") or retention of a PARI form and submission of annual reports. We have submitted NOIs for our vessels where required.  Compliance with the EPA, U.S. Coast Guard and state regulations could require the installation of ballast water treatment equipment on our vessels or the implementation of other port facility disposal procedures at potentially substantial cost, or may otherwise restrict our vessels from entering U.S. waters.  We believe we would be in compliance with any such regulations as our vessels are fitted with ballast water treatment equipment.
European Union Regulations
In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties. The directive applies to all types of vessels, irrespective of their flag, but certain exceptions apply to warships or where human safety or that of the ship is in danger. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims.  Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April 2015 (amending EU Directive 2009/16/EC) governs the monitoring, reporting and verification of carbon dioxide emissions from maritime transport, and, subject to some exclusions, requires companies with ships over 5,000 gross tonnage to monitor and report carbon dioxide emissions annually, which may cause us to incur additional expenses.
The European Union has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk ships, as determined by type, age and flag as well as the number of times the ship has been detained. The European Union also adopted and extended a ban on substandard ships and enacted a minimum ban period and a definitive ban for repeated offenses. The regulation also provided the European Union with greater authority and control over classification societies, by imposing more requirements on classification societies and providing for fines or penalty payments for organizations that failed to comply. Furthermore, the EU has implemented regulations requiring vessels to use reduced sulfur content fuel for their main and auxiliary engines. The EU Directive 2005/33/EC (amending Directive 1999/32/EC) introduced requirements parallel to those in Annex VI relating to the sulfur content of marine fuels. In addition, the EU imposed a 0.1% maximum sulfur requirement for fuel used by ships at berth in the Baltic, the North Sea and the English Channel (the so called "SOx-Emission Control Area"). As of January 2020, EU member states will also have to ensure that ships in all EU waters, except the SOx-Emission Control Area, use fuels with a 0.5% maximum sulfur content.
International Labour Organization
The International Labor Organization (the "ILO") is a specialized agency of the UN that has adopted the Maritime Labor Convention 2006 ("MLC 2006"). A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance is required to ensure compliance with the MLC 2006 for all ships 500 gross tons or engaged in international trade and flying the flag of a Member and operating from a port, or between ports, in another country.  We believe that all our vessels are in substantial compliance with and are certified to meet MLC 2006.
Greenhouse Gas Regulation
Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions with targets extended through 2020.  International negotiations are continuing with respect to a successor to the Kyoto Protocol, and restrictions on shipping emissions may be included in any new treaty. In December 2009, more than 27 nations, including the U.S. and China, signed the Copenhagen Accord, which includes a non-binding commitment to reduce greenhouse gas emissions.  The 2015 United Nations Climate Change Conference in Paris resulted in the Paris Agreement, which entered into force on November 4, 2016 and does not directly limit greenhouse gas emissions from ships.  The U.S. initially entered into the agreement, but on June 1, 2017, the U.S. President announced that the United States intends to withdraw from the Paris Agreement, which provides for a four-year exit process, meaning that the earliest possible effective withdrawal date cannot be before November 4, 2020. The timing and effect of such action has yet to be determined.
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At MEPC 70 and MEPC 71, a draft outline of the structure of the initial strategy for developing a comprehensive IMO strategy on reduction of greenhouse gas emissions from ships was approved. In accordance with this roadmap, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships.  The initial strategy identifies "levels of ambition" to reducing greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through implementation of further phases of the EEDI for new ships; (2) reducing carbon dioxide emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008 emission levels; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared to 2008 while pursuing efforts towards phasing them out entirely.  The initial strategy notes that technological innovation, alternative fuels and/or energy sources for international shipping will be integral to achieve the overall ambition. These regulations could cause us to incur additional substantial expenses.
The EU made a unilateral commitment to reduce overall greenhouse gas emissions from its member states from 20% of 1990 levels by 2020. The EU also committed to reduce its emissions by 20% under the Kyoto Protocol's second period from 2013 to 2020.  Starting in January 2018, large ships over 5,000 gross tonnage calling at EU ports are required to collect and publish data on carbon dioxide emissions and other information.
In the United States, the EPA issued a finding that greenhouse gases endanger the public health and safety, adopted regulations to limit greenhouse gas emissions from certain mobile sources and proposed regulations to limit greenhouse gas emissions from large stationary sources. However, in March 2017, the U.S. President signed an executive order to review and possibly eliminate the EPA's plan to cut greenhouse gas emissions, and in August 2019, the Administration announced plans to weaken regulation for methane emissions. The EPA or individual U.S. states could enact environmental regulations that would affect our operations.
Any passage of climate control legislation or other regulatory initiatives by the IMO, the EU, the U.S. or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol or Paris Agreement, that restricts emissions of greenhouse gases could require us to make significant financial expenditures which we cannot predict with certainty at this time. Even in the absence of climate control legislation, our business may be indirectly affected to the extent that climate change may result in sea level changes or certain weather events.
Vessel Security Regulations
Since the terrorist attacks of September 11, 2001 in the United States, there have been a variety of initiatives intended to enhance vessel security such as the U.S. Maritime Transportation Security Act of 2002 ("MTSA"). To implement certain portions of the MTSA, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States and at certain ports and facilities, some of which are regulated by the EPA.
Similarly, Chapter XI-2 of the SOLAS Convention imposes detailed security obligations on vessels and port authorities and mandates compliance with the International Ship and Port Facilities Security Code ("the ISPS Code"). The ISPS Code is designed to enhance the security of ports and ships against terrorism. To trade internationally, a vessel must attain an International Ship Security Certificate ("ISSC") from a recognized security organization approved by the vessel's flag state. Ships operating without a valid certificate may be detained, expelled from or refused entry at port until they obtain an ISSC.  The various requirements, some of which are found in the SOLAS Convention, include, for example, on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship's identity, position, course, speed and navigational status; on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore; the development of vessel security plans; ship identification number to be permanently marked on a vessel's hull; a continuous synopsis record kept onboard showing a vessel's history including the name of the ship, the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship's identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and compliance with flag state security certification requirements.
The USCG regulations, intended to align with international maritime security standards, exempt non-U.S. vessels from MTSA vessel security measures, provided such vessels have on board a valid ISSC that attests to the vessel's compliance with the SOLAS Convention security requirements and the ISPS Code. Future security measures could have a significant financial impact on us.  We intend to comply with the various security measures addressed by MTSA, the SOLAS Convention and the ISPS Code.
The cost of vessel security measures has also been affected by the escalation in the frequency of acts of piracy against ships, notably off the coast of Somalia, including the Gulf of Aden and Arabian Sea area.  Substantial loss of revenue and other costs may be incurred as a result of detention of a vessel or additional security measures, and the risk of uninsured losses could significantly affect our business. Costs are incurred in taking additional security measures in accordance with Best Management Practices to Deter Piracy, notably those contained in the BMP4 industry standard.
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Inspection by Classification Societies
The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and SOLAS. Most insurance underwriters make it a condition for insurance coverage and lending that a vessel be certified "in class" by a classification society which is a member of the International Association of Classification Societies, the IACS.  The IACS has adopted harmonized Common Structural Rules, or "the Rules," which apply to oil tankers and bulk carriers contracted for construction on or after July 1, 2015.  The Rules attempt to create a level of consistency between IACS Societies.  All of our vessels are certified as being "in class" by all the applicable Classification Societies (e.g., American Bureau of Shipping, Lloyd's Register of Shipping).
A vessel must undergo annual surveys, intermediate surveys, drydockings and special surveys. In lieu of a special survey, a vessel's machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Every vessel is also required to be drydocked every 30 to 36 months for inspection of the underwater parts of the vessel.  If any vessel does not maintain its class and/or fails any annual survey, intermediate survey, drydocking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in violation of certain covenants in our loan agreements. Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on our financial condition and results of operations.
Customers
Our customers include national, regional and international companies. We have historically derived a significant part of our revenue from a small number of charterers. In 2019, 95% of our net revenue was derived from seven charterers, 34% from Stena Weco A/S, 26% from BP, 13% from Shell, 9% from DS Norden A/S, 7% from Cargill, 4% from Clearlake and 2% from Central Tanker Chartering Inc, while another 5% of our revenue derived from spot (voyage) charters. We strategically monitor developments in the tanker industry on a regular basis and, subject to market demand, seek to adjust the charter hire periods for our vessels according to prevailing market conditions.
C.
Organizational Structure
We are a Marshall Islands corporation with principal executive offices located at 1 Vasilisis Sofias and Megalou Alexandrou Str, 15124 Maroussi, Greece. Our significant wholly-owned subsidiaries as of December 31, 2019 are listed in Exhibit 8.1 to this annual report on Form 20-F.
D.
Property, Plants and Equipment
For a list of the vessels of our fleet, please see "Item 4. Information on the Company—B. Business Overview—Our Fleet" above and for a description of our major encumbrances on our fleet please see "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Debt Facilities".
We do not own any real estate property.
ITEM 4A.
 UNRESOLVED STAFF COMMENTS
None.
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following presentation of management's discussion and analysis is intended to discuss our financial condition, changes in financial condition and results of operations, and should be read in conjunction with our historical consolidated financial statements and their notes included in this annual report.
For a discussion of our results for the year ended December 31, 2018 compared to the year ended December 31, 2017, please see "Item 5 – Operating and Financial Review and Prospects – A. Operating Results – Results for the Year Ended December 31, 2018 Compared to the year ended December 31, 2017" contained in our annual report on Form 20-F for the year ended December 31, 2018, filed with the Securities and Exchange Commission on March 28, 2019.
This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth in "Item 3. Key Information—Risk Factors" and elsewhere in this report.
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A.
Operating Results
Factors Affecting our Results of Operations
We believe that the important measures for analyzing trends in the results of our operations consist of the following:

Calendar days. We define calendar days as the total number of days the vessels were in our possession for the relevant period. Calendar days are an indicator of the size of our fleet during the relevant period and affect both the amount of revenues and expenses that we record during that period.

Available days. We define available days as the number of calendar days less the aggregate number of days that our vessels are off-hire due to scheduled repairs, or scheduled guarantee inspections in the case of newbuildings, vessel upgrades or special or intermediate surveys and the aggregate amount of time that we spend positioning our vessels. Companies in the shipping industry generally use available days to measure the number of days in a period during which vessels should be capable of generating revenues.

Operating days. We define operating days as the number of available days in a period less the aggregate number of days that our vessels are off-hire due to unforeseen technical circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period that our vessels actually generate revenues.

Fleet utilization. We calculate fleet utilization by dividing the number of operating days during a period by the number of available days during that period. The shipping industry uses fleet utilization to measure a company's efficiency in finding suitable employment for its vessels and minimizing the number of days that its vessels are off-hire for reasons other than scheduled repairs or scheduled guarantee inspections in the case of newbuildings, vessel upgrades, special or intermediate surveys and vessel positioning.

TCE Revenues / TCE Rates. We define TCE revenues as revenues minus voyage expenses. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by a charterer under a time charter, as well as commissions. We believe that presenting revenues net of voyage expenses neutralizes the variability created by unique costs associated with particular voyages or the deployment of vessels on the spot market and facilitates comparisons between periods on a consistent basis. We calculate daily TCE rates by dividing TCE revenues by operating days for the relevant time period. TCE revenues include demurrage revenue, which represents fees charged to charterers associated with our spot market voyages when the charterer exceeds the agreed upon time required to load or discharge a cargo.
In the shipping industry, economic decisions are based on vessels' deployment upon anticipated TCE rates, and industry analysts typically measure shipping freight rates in terms of TCE rates. This is because under time-charter and bareboat contracts the customer usually pays the voyage expenses, while under voyage charters the ship-owner usually pays the voyage expenses, which typically are added to the hire rate at an approximate cost. Consistent with industry practice, we use TCE rates because it provides a means of comparison between different types of vessel employment and, therefore, assists our decision-making process.
In evaluating our financial condition, we focus on the below measures to assess our historical operating performance and we use future estimates of the same measures to assess our future financial performance. In assessing the future performance of our fleet, the greatest uncertainty relates to future charter rates at the expiration of a vessel's present period employment, whether under a time charter or a bareboat charter. Decisions about future purchases and sales of vessels are based on the availability of excess internal funds, the availability of financing and the financial and operational evaluation of such actions and depend on the overall state of the shipping market and the availability of relevant purchase candidates.
Time Charter Revenues
Our Time charter revenues are driven primarily by the number of vessels in our fleet, the number of operating days during which our vessels generate revenues and the amount of daily charterhire that our vessels earn under charters, which, in turn, are affected by a number of factors, including our decisions relating to vessel acquisitions and disposals, the amount of time that we spend positioning our vessels, the amount of time that our vessels spend in dry-dock undergoing repairs, maintenance and upgrade work, the duration of the charter, the age, condition and specifications of our vessels, levels of supply and demand in the global transportation market for oil and oil products and other factors affecting spot market charter rates such as vessel supply and demand imbalances.
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Vessels operating on period charters, time charters or bareboat charters provide more predictable cash flows, but can yield lower profit margins than vessels operating in the short-term, or spot, charter market during periods characterized by favorable market conditions. Vessels operating in the spot charter market, either directly or through a pool arrangement, could generate revenues that are less predictable, but could enable us to capture increased profit margins during periods of improvements in charter rates, although we could be exposed to the risk of declining charter rates, which could have a materially adverse impact on our financial performance. If we employ vessels on period charters, future spot market rates may be higher or lower than the rates at which we have employed our vessels on period time charters.
Under a time charter, the charterer typically pays us a fixed daily charter hire rate and bears all voyage expenses, including the cost of bunkers (fuel oil) and port and canal charges. We remain responsible for paying the chartered vessel's operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel, the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses, and we also pay commissions to CSI, one or more unaffiliated ship brokers and to in-house brokers associated with the charterer for the arrangement of the relevant charter.
Under a bareboat charter, the vessel is chartered for a stipulated period of time, which gives the charterer possession and control of the vessel, including the right to appoint the master and the crew. Under bareboat charters, all voyage and operating costs are paid by the charterer.
As of the date of this annual report, we have bareboat chartered-in eight product/chemical tankers and two suezmax crude oil tankers, under our SLB arrangements which are accounted as financing. We may in the future operate vessels in the spot market until the vessels have been chartered under appropriate medium to long-term charters.
Voyage charters
In a voyage charter contract, the charterer hires the vessel to transport a specific agreed-upon cargo for a single voyage, which may contain multiple load ports and discharge ports. The consideration in such a contract is determined on the basis of a freight rate per metric ton of cargo carried or occasionally on a lump sum basis. The charter party generally has a minimum amount of cargo. The charterer is liable for any short loading of cargo or "dead" freight. The voyage contract generally has standard payment terms of 95% freight paid within three days after completion of loading. The voyage charter party generally has a "demurrage" or "despatch" clause. As per this clause, the charterer reimburses us for any potential delays exceeding the allowed laytime as per the charter party clause at the ports visited, which is recorded as demurrage revenue. Conversely, the charterer is given credit if the loading/discharging activities happen within the allowed laytime known as despatch resulting in a reduction in revenue. In a voyage charter contract, the performance obligations begin to be satisfied once the vessel begins loading the cargo. We have determined that our voyage charter contracts consist of a single performance obligation of transporting the cargo within a specified time period. Therefore, the performance obligation is met evenly as the voyage progresses and the revenue is recognized on a straight- line basis over the voyage days from the commencement of the loading of cargo to completion of discharge.
We entered into a voyage charter from January 2019 to May 2019. There were no voyage charters in the years ended December 2017 and 2018.
Voyage Expenses
Voyage expenses primarily consist of port charges, including canal dues, bunkers (fuel costs) and commissions. All these expenses, except commissions, are paid by the charterer under a time charter or bareboat charter contract. The amount of voyage expenses are primarily driven by the routes that the vessels travel, the amount of ports called on, the canals crossed and the price of bunker fuels paid.
Charter Hire Expenses/Operating Lease Expenses
Charter hire expenses represent operating lease payments for vessels we bareboat charter-in via operating lease agreements. Pursuant to the implementation of the new lease accounting standard (ASC 842) effective from January 1, 2019, we are required to present all expenses relating to operating leases in one line item under "Operating lease expenses". Hence for the year ended December 31, 2019 "Operating lease expenses" is equal to the aggregate of "Bareboat charterhire expenses" and "Amortization of prepaid bareboat charter hire", that referred to the same operating leases, as those that were presented under the previous accounting standard (ASC 840) in the years ended December 31, 2017 and 2018.
On January 29, 2015 and March 31, 2015, we entered into SLBs for the M/T Stenaweco Energy and the M/T Stenaweco Evolution, respectively, with a duration of seven years. These SLBs were accounted for as operating leases. On December 18 and 20, 2019 we exercised the purchase options and terminated the operating leases on M/T Stenaweco Energy and M/T Stenaweco Evolution respectively and at the same time we consummated SLB agreements for both vessels with Oriental Fleet International Company Limited ("OFI") that we account for as financings.
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Vessel Operating Expenses
Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the costs of spares and consumable stores, tonnage taxes and value added tax, or VAT, and other miscellaneous expenses. We analyze vessel operating expenses on a U.S. dollar per day basis. Additionally, vessel operating expenses can fluctuate due to factors beyond our control, such as unplanned repairs and maintenance attributable to damages or regulatory compliance and factors which may affect the shipping industry in general, such as developments relating to insurance premiums, or developments relating to the availability of crew.
Dry-docking Costs
Dry-docking costs relate to regularly scheduled intermediate survey or special survey dry-docking necessary to preserve the quality of our vessels as well as to comply with international shipping standards and environmental laws and regulations. Dry-docking costs can vary according to the age of the vessel, the location where the dry-dock takes place, shipyard availability, local availability of manpower and material, and the billing currency of the yard. Please see "Item 18. Financial Statements—Note 2—Significant Accounting Policies." In the case of tankers, dry-docking costs may also be affected by new rules and regulations. For further information please see "Item 4. Information on the Company—B. Business Overview—Environmental Regulations."
Management Fees—Related Parties
As from January 1, 2019, we have outsourced to CSI a related party controlled by the family of Mr. Evangelos Pistiolis, all operational, technical and commercial functions relating to the chartering and operation of our vessels. We outsourced the above functions pursuant to a letter agreement between CSI and Top Ships Inc. and management agreements between CSI and our vessel-owning subsidiaries on the same date, and each new vessel that entered our fleet after that date entered into a management agreement with CSI. See "Item 18. Financial Statements—Note 5—Transactions with Related Parties".
General and Administrative Expenses
Our general and administrative expenses include executive compensation paid to Central Mare for the compensation of our executive officers and a number of administrative staff, office rent, legal and auditing costs, regulatory compliance costs, other miscellaneous office expenses, non-cash stock compensation, and corporate overhead. Central Mare provides the services of the individuals who serve in the position of Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Technical Officer as well as a number of administrative employees. For further information please see "Item 18. Financial Statements—Note 5—Transactions with Related Parties."
A portion of our general and administrative expenses are denominated in Euros and are therefore affected by the conversion rate of the U.S. dollar versus the Euro.
Interest and Finance Costs
We incur interest expense on outstanding indebtedness under our loans and SLBs, which we include in interest and finance costs. We also incur finance costs in establishing those debt facilities and SLBs which are deferred and amortized over the period of the respective facility. The amortization of the finance costs is presented in interest and finance costs.
Inflation
Inflation has not had a material effect on our expenses. In the event that significant global inflationary pressures appear, these pressures would increase our operating, voyage, administrative and financing costs.
Main components of managing our business and main drivers of profitability
The management of financial, general and administrative elements involved in the conduct of our business and ownership of our vessels requires the following main components:

management of our financial resources, including banking relationships, i.e., administration of bank loans and bank accounts;

management of our accounting system and records and financial reporting;

administration of the legal and regulatory requirements affecting our business and assets; and

management of the relationships with our service providers and customers.
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The principal factors that affect our profitability, cash flows and shareholders' return on investment include:

charter rates and periods of charter hire for our tankers;

utilization of our tankers (earnings efficiency);

levels of our tanker's operating expenses and dry-docking costs;

depreciation and amortization expenses;

financing costs; and

fluctuations in foreign exchange rates.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 31, 2018 AND 2019
The following table depicts changes in the results of operations for 2019 compared to 2018.
   
Year Ended December 31,
   
change
 
   
2018
   
2019
   
YE19 v YE18
 
   
($ in thousands)
         
$
%
 
Revenues
   
41,048
     
66,088
     
25,040
     
61
%
Voyage expenses
   
1,020
     
3,038
     
2,018
     
198
%
Operating Lease Expense
   
-
     
7,054
     
7,054
     
100
%
Bareboat charter hire expenses
   
6,282
     
-
     
(6,282
)
   
-100
%
Amortization of prepaid bareboat charter hire
   
1,657
     
-
     
(1,657
)
   
-100
%
Vessel operating expenses
   
14,827
     
22,786
     
7,959
     
54
%
Dry-docking costs
   
-
     
399
     
399
     
100
%
Vessel Depreciation
   
6,389
     
12,392
     
6,003
     
94
%
Management fees-related parties
   
7,765
     
2,443
     
(5,322
)
   
-69
%
                                 
Vessels Impairment charge
   
-
     
12,310
     
12,310
     
100
%
General and administrative expenses
   
6,997
     
1,730
     
(5,267
)
   
-75
%
Operating (loss) income
   
(3,889
)
   
3,936
     
7,825
     
-201
%
Impairment on unconsolidated joint ventures
   
-
     
(3,144
)
   
(3,144
)
   
100
%
Interest and finance costs
   
(9,662
)
   
(18,077
)
   
(8,415
)
   
87
%
Gain on financial instruments
   
1,821
     
1,601
     
(220
)
   
-12
%
Interest income
   
130
     
133
     
3
     
2
%
Equity gain in unconsolidated joint ventures
   
291
     
778
     
487
     
167
%
Other, net
   
180
     
-
     
(180
)
   
-100
%
Total other expenses, net
   
(7,240
)
   
(18,709
)
   
(11,469
)
   
158
%
Net loss
   
(11,129
)
   
(14,773
)
   
(3,644
)
   
33
%

Please see Item 5. "Operating and Financial Review and Prospects—A. Operating Results" in our Annual Report on Form 20-F, filed on March 28, 2019 where the 2017 to 2018 comparative discussion may be found.
Year on Year Comparison of Operating Results

1.
Revenues, Voyage expenses, Other vessel operating expenses and Vessel depreciation
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2019 vs. 2018
Revenues, Voyage expenses, Other vessel operating expenses and Vessel depreciation increased mainly due to the increase in the size of our fleet over the two comparable periods. During the year ended December 31, 2018 we employed 7 vessels, in the same period of 2019 we employed 12 vessels, that resulted in increases in all vessel related revenues and expenses. Eco Fleet was employed under freight voyages during the year ended December 31, 2019 which also contributed to the increase in both revenues and voyage expenses compared to the comparable period where it was employed under time charter only.

2.
Operating lease expenses, Bareboat charter hire expenses and Amortization of prepaid bareboat charter hire
2019 vs. 2018
Pursuant to the implementation of the new lease accounting standard (ASC 842) effective from January 1, 2019, we are required to present all expenses relating to operating leases in one line item under "Operating lease expenses". In the year ended December 31, 2019 "Operating lease expenses" is the aggregation of "Bareboat charterhire expenses" and "Amortization of prepaid bareboat charter hire", that referred to the same operating leases, as those that were presented under the previous accounting standard (ASC 840) in the year ended December 31, 2018. A slight decrease year on year  resulted from the exercise of the purchase options of the two vessels we had under operating leases (M/T Stenaweco Energy and M/T Stenaweco Evolution) and the subsequent lease termination in December 2019.

3.
Management fees—related parties
2019 vs. 2018
During the year ended December 31, 2019, management fees to related parties decreased by $5.3 million, or 69%, compared to the year ended December 31, 2018. This decrease was mainly due to $3.9 million of sale and purchase commissions as per our management agreement with Central Shipping Monaco SAM ("CSM"), a related party affiliated with the family of Mr. Evangelos J. Pistiolis and $1.3 million of cash performance fee granted to CSM, during the year ended December 31, 2018, that were absent in the year ended December 31, 2019. Although our fleet increased in 2019, a decrease in management fees pursuant to the management agreement with our new manager, CSI, (See "Item 18. Financial Statements—Note 5—Transactions with Related Parties") from $923 per day to $550 per day as of January 1, 2019 resulted in the same level of aggregate expenses for the per diem management fees.

4.
General and administrative expenses
2019 vs. 2018
During the year ended December 31, 2019, our general and administrative expenses decreased by $5.3 million, or 75%, compared to the year ended December 31, 2018, mainly attributed to no bonuses paid in 2019 compared to $2.3 million paid in 2018, a decrease of $2.0 million in manager and employee related expenses, following the reduction of the executive compensation paid to Central Mare for the compensation of our executive officers from $0.2 million to $0.03 million per month, a decrease of $0.3 million in legal and consulting fees and expenses, a decrease of $0.3 million in other general and administrative expenses, a decrease of $0.3 million in fixed assets depreciation resulting from an acceleration of the leasehold improvements depreciation in 2018 due to the relocation of our offices to another floor in the building, absent in 2019 and a decrease of $0.1 million in travelling expenses.

5.
Interest and Finance Costs
2019 vs. 2018
During the year ended December 31, 2019, interest and finance costs increased by $8.4 million, or 87%, compared to the year ended December 31, 2018. This increase is mainly attributed to the following (see "Item 18. Financial Statements—Note 8—Debt." for facility definitions):

I.
An increase of $10.2 million in loan interest expense, due to the following:

a.
$6.9 million increase in interest expenses in the year ended December 31, 2019 as a result of our entry into three new SLBs that we have accounted as financings (namely the Cargill, BoComm Leasing and CMBFL SLBs) for the financing of a total of four new vessels delivered during 2019 (namely M/T's: Eco California, Eco Marina Del Rey, Eco Bel Air, Eco Beverly Hills).
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b.
$1.0 million increase in interest expenses during the year ended December 31, 2019 as a result of interest expenses relating to the AT Bank Senior facility (entered into for the financing of M/T Eco Palm Desert delivered in September 2018) for the whole year as compared to four months of interest expenses during 2018.

c.
$0.3 million interest expenses from the OFI Facility for the purchase the M/T Stenaweco Energy and M/T Stenaweco Evolution entered into in November 2019.

d.
$1.4 million increase in interest expense of Top Ships Inc, mainly due to the fact that during the year ended December 31, 2019 we incurred $0.8 million of interest expense from the AT Bank Note, absent in the year ended December 31, 2018. During the year ended December 31, 2019 we had a reduction in imputed capitalized interest of $0.6 million compared to the same period in 2018.

e.
$0.4 million increase in interest expenses as part of the refinancing of Tranche C of the ABN Facility in January 2019 with the BoComm Leasing Facility, which resulted in an increase of the leverage amount by about $3.1 million.

f.
$0.2 million increase in interest expense as part of the refinancing of the NORD/LB facility in July 2019 with the OFI Facility, which resulted in an increase in the leverage amount by about $8.6 million.

II.
An increase of $0.3 million in amortization of finance fees mainly due to the following:

g.
An increase of $0.5 million as a result of the accelerated amortization of the unamortized balance of deferred financing fees of Tranche C of the ABN Facility ($0.3 million) and of the NORD/LB Facility as part of its refinancing in July 2019 ($0.2 million).

h.
An increase of $0.2 million as part of the CMBFL Facility that financed the newbuilding vessels delivered in the second quarter of 2019, M/T Eco Bel Air and M/T Eco Beverly Hills ($0.1 million each).

i.
An offsetting decrease of $0.2 million as a result of the reduced amortization of the AT Bank predelivery facilities' fees for the financing of M/T Eco Palm Desert ($0.1 million) and Eco California ($0.1 million) that were being amortized up to September 2018 and January 2019 respectively.

j.
An offsetting decrease of $0.2 million due to the reduced amortization of the Family Trading facility fees that were being amortized up to March 2019 ($0.3 million decrease), netted by an increase in the amortization of financing fees of the new AT Bank Note that started in March 2019 ($0.1 million increase).

III.
An offsetting decrease of $2.2 million in amortization of debt discount mainly due to the fact that in the year ended December 31, 2019 the debt discount amortization relating to the convertibility features of the Family Trading Loan amounted to $0.3 million, compared to $2.5 million for the same period in 2018, since the facility was terminated in March 2019.

6.
(Loss)/Gain on derivative financial instruments
2019 vs. 2018
During the year ended December 31, 2019, fair value gain on derivative financial instruments decreased by $0.2 million, or 12%, compared to the year ended December 31, 2018, mainly to due to $1.2 million increase in the unrealized losses from the valuation of our interest rate swaps, offset by $0.5 million of gains we recognized from the valuation of our 2014 Warrants, when compared to the same period in 2018, $0.4 million of gains we recognized from the valuation of our Class B Warrants, which didn't exist in 2018 and $0.1 million of realized gains of our interest rate swaps.

7.
Vessels Impairment charge
2019 vs. 2018
The M/T Eco Fleet and M/T Eco Revolution met the criteria to be classified as assets held for sale at December 12, 2019 according to guidance in ASC 360. Consequently, we treated the vessels including their inventories on board as assets held for sale and have classified them as a current asset measured at the lower of the carrying amounts and fair values less costs to sell, resulting in an impairment charge of $6.8 million for the M/T Eco Fleet and $5.5 million for the M/T Eco Revolution.
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8.
Impairment on unconsolidated joint ventures
2019 vs. 2018
In December 2019, we wrote down our Investments in unconsolidated joint ventures to their fair value less costs to sell, resulting in an impairment charge of $3.1 million, pursuant to the Joint Ventures' plan to sell the vessels.
Our Fleet—Illustrative Comparison of Possible Excess of Carrying Value Over Estimated Charter-Free Market Value of Certain Vessels
In Note 2 to our consolidated financial statements included herein we discuss our policy for impairing the carrying values of our vessels. During the past few years, the market values of vessels have experienced particular volatility, with substantial declines in many vessel classes. As a result, the charter-free market value, or basic market value, of certain of our vessels may have declined below those vessels' carrying value. However, we would not impair those vessels' carrying value under our accounting impairment policy due to our belief that future undiscounted cash flows expected to be earned by such vessels over their operating lives would exceed such vessels' carrying amounts. Furthermore during the year ended December 31, 2019 MR2 Product Tanker (i.e. product tankers of abt 50,000 dwt) values have been increasing.
As of December 31, 2019, we believe that the basic charter-free market values of our owned vessels are higher than the vessels carrying value by approximately 18%, except for our two MR1 product tankers, the M/T Eco Fleet and the M/T Eco Revolution that we have classified as held for sale and have written down to their fair values less costs to sell.
Our estimates of basic charter-free market value assume that our vessels are all in good and seaworthy condition without need for repair and if inspected would be certified in class without notations of any kind. Our estimates are based on information available 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 vessels 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 vessels 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 vessels; 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.
As we obtain information from various industry and other sources, our estimates of basic charter-free market values are inherently uncertain. In addition, vessel values are highly volatile; as such, actual results could differ from those estimates.
All of our vessels are currently employed under long-term, time charters, the majority of which are above-market. For more information, see "Business Overview—Our Fleet."  We believe that in a sale of a majority of our vessels with charters attached, we would receive a premium over the vessels' charter-free market value.
We refer you to the risk factor entitled "The international oil tanker industry has experienced volatile charter rates and vessel values and there can be no assurance that these charter rates and vessel values will not decrease in the near future" and the discussion herein under the heading "Risks Related to Our Industry."
Critical Accounting Policies:
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.
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Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting policies that involve a higher degree of judgment and the methods of their application. For a description of all of our significant accounting policies, see Note 2 to our consolidated financial statements included herein.
Vessel depreciation. We record the value of our vessels at their cost (which includes the contract price, pre-delivery costs incurred during the construction of newbuildings, capitalized interest and any material expenses incurred upon acquisition such as initial repairs, improvements and delivery expenses to prepare the vessel for its initial voyage) less accumulated depreciation. We depreciate our vessels on a straight-line basis over their estimated useful lives, estimated to be 25 years from the date of initial delivery from the shipyard. Depreciation is based on cost of the vessel less its residual value which is estimated to be $300 per light-weight ton. A decrease in the useful life of the vessel or in the residual value would have the effect of increasing the annual depreciation charge.
A decrease in the useful life of the vessel may occur as a result of poor vessel maintenance performed, harsh ocean-going and weather conditions that the vessel is subject to, or poor quality of the shipbuilding yard. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, the vessel's useful life is adjusted at the date such regulations become effective. Weak freight markets may result in owners scrapping more vessels and scrapping them earlier due to unattractive returns. An increase in the useful life of the vessel may result from superior vessel maintenance performed, favorable ocean-going and weather conditions the vessel is subjected to, superior quality of the shipbuilding yard, or high freight rates which result in owners scrapping the vessels later due to attractive cash flows.
Impairment of vessels: We evaluate the existence of impairment indicators whenever events or changes in circumstances indicate that the carrying values of our long-lived assets are not recoverable. Such indicators of potential impairment include, vessel sales and purchases, business plans and overall market conditions. If there are indications for impairment present, we determine undiscounted projected net operating cash flows for each vessel and compare it to the vessel's carrying value. If the carrying value of the related vessel exceeds its undiscounted future net cash flows, the carrying value is reduced to its fair value.
The carrying values of our vessels may not represent their fair market value at any point in time since the market prices of second-hand vessels tend to fluctuate with changes in charter rates and the cost of newbuildings. During the past years, the market values of vessels have experienced particular volatility, with substantial declines in many vessel classes. As a result, the charter-free market value, or basic market value, of certain of our vessels may have declined below those vessels' carrying value, even though we would not impair those vessels' carrying value under our accounting impairment policy, due to our belief that future undiscounted cash flows expected to be earned by such vessels over their operating lives would exceed such vessels' carrying amounts.
Although we believe that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are highly subjective. There can be no assurance as to how long charter rates and vessel values will remain at their current levels or whether they will improve or decrease by any significant degree. Charter rates may be at depressed levels for some time, which could adversely affect our revenue and profitability, and future assessments of vessel impairment.
In order to perform the undiscounted cash flow test, we make assumptions about future charter rates, commissions, vessel operating expenses, dry-dock costs, fleet utilization, scrap rates used to calculate estimated proceeds at the end of vessels' useful lives and the estimated remaining useful lives of the vessels. These assumptions are based on historical trends as well as future expectations. The projected net operating cash flows are determined by considering the charter revenues from existing time charters for the fixed fleet days and an estimated daily time charter equivalent for the unfixed days (based on the ten year historical averages of the one-year, three-year and five-year time charter rates) over the remaining useful life of each vessel, which we estimate to be 25 years from the date of initial delivery from the shipyard. Expected outflows for scheduled vessels' maintenance and vessel operating expenses are based on historical data, and adjusted annually assuming an average annual inflation derived from the most recent twenty-year average consumer price index. Effective fleet utilization, average commissions, dry-dock costs and scrap values are also based on historical data.
In 2019 MR2 Product tanker values were increasing and the charter-free market value of each vessel of our fleet was higher than its carrying amount. As such we had no indicators of potential impairment and did not perform the undiscounted cash flow test for our MR2 Product tankers.
In December 2019 we classified our MR1 Product tankers M/T Eco Fleet and M/T Eco Revolution as held for sale and their carrying amount of $55.6 million was written down to their fair value of $43.3 million, resulting in an impairment charge of $12.3 million to reduce their carrying values to the fair values less costs to sell, which was determined using the purchase consideration in the sale agreements with the respective buyers. The vessels were sold on January 21 and January 14, 2020 to an unrelated third party for gross proceeds of $21.0 million and $23.0 million respectively.
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We determined that there are no impairment indications for any other vessels of our fleet. Hence, we didn't write down any other vessels to their fair values.
New accounting pronouncements: See "Item 18. Financial Statements—Note 2—Significant Accounting Policies –Recent Accounting Pronouncements."
B.
Liquidity and Capital Resources
Since our formation, our principal sources of funds have been equity provided by our shareholders through equity offerings or at the market sales, operating cash flow, long-term borrowing including SLBs and short-term borrowings. Our principal use of funds has been capital expenditures to establish and grow our fleet, maintain the quality of our vessels, comply with international shipping standards and environmental laws and regulations and fund working capital requirements.
Our business is capital intensive and its future success will depend on our ability to maintain a high-quality fleet through the acquisition of newer vessels and the selective sale of older vessels. Our practice has been to acquire vessels using a combination of funds received from equity investors and bank debt including SLBs secured by title on our vessels.  Future acquisitions are subject to management's expectation of future market conditions, our ability to acquire vessels on favorable terms and our liquidity and capital resources.
As of December 31, 2019, we had a net indebtedness of $309.0 million, which after excluding unamortized financing fees amounts to total indebtedness $316.6 million. Also as of December 31, 2019, we had remaining contractual commitments for the acquisition of our fleet totaling $64.0 million and available committed undrawn loan balances of $60.2 million. Finally, as of December 31, 2019, our cash and cash equivalent balances amounted to $13.3 million, held in U.S. Dollar accounts, $8.9 million of which are classified as restricted cash.
All the contractual commitments have been settled as of the date of this report through a combination of sources, which include the drawdown of our abovementioned available committed undrawn loans, the issuance of Series E Preferred Shares and funds from the sale of our vessels.
Working Capital Requirements and Sources of Capital
As of December 31, 2019, we had a working capital deficit (current assets less current liabilities) of $17.8 million.
Our operating cash flow for the remainder of 2020 is expected to decrease compared to the same period in 2019, as we have sold the M/T Ecofleet and the M/T Eco Revolution, in January 2020, M/T Stenaweco Elegance in February 2020 and M/T Eco Palm Desert and M/T Holmby Hills (of which we owned a 50% interest) in March 2020 and we have also agreed to sell M/T Palm Springs.  While the addition of the M/T Los Angeles and M/T City of Angels in February 2020 will help increase operating cash flow, the overall effect of the recent vessel sales and purchases on operating cash flow is negative.
As of the date of this report, we estimate the net proceeds from all of the abovementioned vessel sales to amount to $44.5 million after costs and fees relating to the sales and to the prepayment of related debt facilities (including the release of restricted cash relating to loan covenants and time charter termination fees) and we have successfully taken delivery of M/T Los Angeles and M/T City of Angels in February 2020. Also of the date of this report we have collected gross proceeds of $18 million from equity offerings that took place in February and March 2020 (please see "Item 4. Information on the Company—A. History and Development of the Company—Recent Developments."). Hence due to the abovementioned proceeds from the sales of vessels, proceeds from equity offerings and due to the positive cash from operations, in our opinion, will be able to finance our working capital deficit and meet our obligations in the next 12 months.
Cash Flow Information
Cash and cash equivalents and restricted cash were $7.7 million and $13.3 million as of December 31, 2018 and 2019 respectively.
Net Cash from Operating Activities.

Net cash used in operating activities increased by $18.5 million, or 2,581%, for 2019 to $19.2 million, compared to $0.7 million for 2018.
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Non-cash adjustments to reconcile net loss to net cash provided by operating activities for the year ended December 31, 2019 totaled $29.2 million. This consisted mainly of $12.4 million of depreciation expenses, $12.3 million of impairment of vessels held for sale, $3.1 of impairment on unconsolidated joint ventures, $2.1 million of amortization and write offs of deferred financing costs, $1.5 million of non-cash operating lease expenses offset by $1.5 million unrealized gains from the valuation of derivative financial instruments and $0.7 million in gains in unconsolidated joint ventures. The cash inflow from operations was supplemented by a $4.7 million increase in current liabilities.
Non-cash adjustments to reconcile net loss to net cash provided by operating activities for the year ended December 31, 2018 totaled $9.9 million. This consisted mainly of $6.4 million of depreciation expenses; $2.5 million of amortization of debt discounts; $1.7 million of amortization of prepaid bareboat charter hire; $1.3 million of amortization and write offs of deferred financing costs and $0.3 million of depreciation of other fixed assets, offset by $1.8 million unrealized gains from the valuation of derivative financial instruments; $0.3 million in gains in unconsolidated joint ventures and a $0.2 million write-off of short term notes. The cash inflow from operations was supplemented by a $2.5 million increase in current liabilities, offset by a $0.6 million decrease in current assets.
Net Cash from Investing Activities.

Net cash used in investing activities in the year ended December 31, 2019 was $203.3 million, consisting mainly of $155.2 million cash paid for vessels under construction and $48.1 million cash paid for vessel acquisitions.
Net cash used in investing activities in the year ended December 31, 2018 was $68.4 million, consisting mainly of $63.5 million cash paid for vessels under construction, $3.7 million cash paid for investments in unconsolidated joint ventures and $1.2 million cash paid for vessel acquisitions.
Net Cash from Financing Activities.

Net cash provided from financing activities in the year ended December 31, 2019 was $189.7 million, consisting of $253.0 million proceeds from long term debt, $18.9 million of proceeds from issuance of common stock, $6.8 million of proceeds from short term debt and $4.6 million of proceeds from warrants exercised. These inflows were partially offset by $50.5 million scheduled repayments and prepayments of long term debt, $20.3 million of short term debt prepayments, $14.3 million redemptions of Series E Shares, $6.6 million payments of financing costs and $1.9 million of equity offering related costs.
Net cash provided from financing activities in the year ended December 31, 2018 was $44.8 million, consisting of $32.8 million of proceeds from short term debt, $28.5 million proceeds from long term debt, $26.2 million of proceeds from related party debt (Family Trading Facility), $5.8 million of proceeds from issuance of common stock and $2.3 million of proceeds from warrants exercised. These inflows were partially offset by $22.3 million in excess of purchase price over book value of vessels, $10.2 million of scheduled debt repayments, $9.0 million of short term debt prepayments, $5.7 million prepayments of short term notes, $1.7 million payments of financing costs, $1.4 million prepayments of related party debt (Family Trading Facility) and $0.5 million of equity offering related costs.
Please see Item 5. "Operating and Financial Review and Prospects—A. Operating Results" in our Annual Report on Form 20-F, filed on March 28, 2019 where the 2017 cash flow information may be found.
Debt Facilities
Please see "Item 18. Financial Statements—Note 8—Debt." for more detailed information.
ABN Amro Facility
On July 9, 2015, we entered into a credit facility with ABN Amro Bank N.V. of Holland, or ABN Amro, for $42.0 million, or the ABN Amro facility, for the financing of the vessels M/T Eco Fleet and M/T Eco Revolution. This facility was amended on September 28, 2015 and was increased to $44.4 million, with all other terms remaining the same except for the margin which was increased by 0.15%.  On August 1, 2016, we amended the ABN Facility to increase the borrowing limit to $64.4 million and added Tranche C to the loan.  Tranche C was secured by M/T Nord Valiant.  Apart from the inclusion of M/T Nord Valiant as a collateralized vessel and the reduction of the margin to 3.75% (applicable only to Tranche C), no other material changes were made to the ABN Facility.
We drew down $21.0 million under the ABN Amro facility on July 13, 2015 to finance the last shipyard installment of M/T Eco Fleet and another $1.2 million on September 30, 2015. Furthermore, we drew down $22.2 million under the ABN facility on January 15, 2016 to finance the last shipyard installment of M/T Eco Revolution.  Finally, on August 5, 2016 we drew down $20.0 million under the Tranche C of the ABN facility to partly finance the last shipyard installments of M/T Nord Valiant.
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On November 16, 2018 we amended the ABN Facility to increase the borrowing limit by $5.0 million.  This additional amount was subsequently drawn-down and applied towards capital expenditures under our newbuilding program. Apart from the introduction of a new repayment schedule reflecting the increased facility principal, all other material terms remained the same.
The ABN Amro facility bore interest at LIBOR plus a margin of 3.90%, except for the Tranche C part of the facility that bore interest at LIBOR plus a margin of 3.75%.  The applicable LIBOR as of December 31, 2019 was 1.99%.  Tranche C of the ABN Facility was fully prepaid on January 17, 2019 using $18.5 million of proceeds from the BoComm Leasing Sale and Leaseback. The remaining ABN Facility was prepaid on January 14 and January 21, 2020 in connection with the sale of the M/T Eco Fleet and M/T Eco Revolution using $29.4 million of the proceeds from the sale.
NORD/LB Facility
On May 11, 2016, we entered into a credit facility with Norddeutsche Landesbank Girozentrale, or NORD/LB Bank, of Germany for $23.1 million, or the NORD/LB Facility, for the financing of the vessel M/T Stenaweco Excellence. The NORD/LB Facility was repayable in 12 consecutive quarterly installments.  We drew down $23.1 million under the NORD/LB Facility on May 13, 2016 to finance the last shipyard installment of the M/T Stenaweco Excellence.
The NORD/LB facility bore interest at LIBOR plus a margin of 3.43%. On July 15, 2019 we sold and leased back the M/T Stenaweco Excellence to Oriental Fleet International Company Limited, a non-affiliated party, and fully prepaid the outstanding amount of the NORD/LB facility.
Alpha Bank Facility
On July 20, 2016, Eco Seven, a company that was later acquired by us, entered into a credit facility with Alpha Bank SA. of Greece, or Alpha Bank, for $23.3 million, or the Alpha Facility, for the financing of the vessel M/T Stenaweco Elegance.  The Alpha Facility was repayable in 12 consecutive quarterly installments.  We drew down $23.3 million under the Alpha facility on February 24, 2017 to finance the last shipyard installment of M/T Stenaweco Elegance.
The Alpha Facility bore interest at LIBOR plus a margin of 3.50%. The applicable LIBOR as of December 31, 2019 was about 1.79%.  On February 21, 2020, we sold M/T Stenaweco Elegance to a non-affiliated party, and fully prepaid the outstanding principal of the Alpha Bank Facility that amounted to $19.0 million.
Alpha Bank Top-Up Facility
On April 23, 2019, we entered into a credit facility with Alpha Bank for $1.5 million, or the Alpha Top-Up Facility. This facility was subsequently drawn-down and applied towards capital expenditures under our newbuilding program. The Alpha Top-Up Facility was repayable in 8 consecutive quarterly installments commencing in July 2019. This facility was secured by way of a third mortgage over M/T Stenaweco Elegance.
The Alpha Bank Top-Up Facility bore interest at LIBOR plus a margin of 4.25%. The applicable LIBOR as of December 31, 2019 was about 1.77%. On February 21, 2020 we sold the M/T Stenaweco Elegance to a non-affiliated party, and fully prepaid the outstanding principal of the Alpha Bank Top-Up Facility that amounted to $0.9 million.
AT Bank Senior Facility
On September 5, 2017, we entered into a credit facility with Amsterdam Trade Bank N.V. of Holland, or AT Bank, for $23.5 million to fund the delivery of M/T Eco Palm Desert, or the AT Bank Senior Facility, delivered in September 7, 2018.  An amount of $8.9 million from the AT Bank Senior Facility was applied towards repayment of the AT Bank Predelivery Facility on September 4, 2018.  The AT Bank Senior Facility is repayable in 20 consecutive quarterly installments.
The AT Bank Senior Facility bore interest at LIBOR plus a margin of 4% and a commitment fee of 2% per annum was payable quarterly in arrears over the committed and undrawn portion of the facility, starting from the date of signing the commitment letter. On June 1, 2018, we signed a supplemental agreement with AT Bank that resulted in the decrease of the commitment fee from 2% to 1.3%, effective from March 6, 2018. The applicable LIBOR as of December 31, 2019 was 1.90%.
On March 19, 2020, we sold the M/T Eco Palm Desert to a non-affiliated party, and fully prepaid the outstanding principal of the AT Bank Facility.
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AT Bank Bridge Note
On January 28, 2019, we entered into a credit facility with AT Bank for $10.5 million for general corporate purposes, or the AT Bank Bridge Facility. This facility was drawn down in full and the proceeds were used to repay the AT Bank Second Predelivery Facility.  The facility was repayable on February 28, 2020.  The AT Bank Bridge Facility contained restrictions on us from providing guarantees other than for financing of new vessels and from paying any dividends or distributing any of its capital or redeeming any of its shares.
The AT Bank Bridge Facility bore interest at LIBOR plus a margin of 6.00% and a commitment fee of 2.25% per annum was payable quarterly in arrears over the committed and undrawn portion of the facility, starting from the date of signing the commitment letter. On March 22, 2019 the AT Bank Bridge Facility was converted into a note and on October 14, 2019 its maturity was extended to March 31, 2021 with all other terms remaining the same, or the AT Bank Bridge Note.
The applicable LIBOR as of December 31, 2019 was 1.90%. On March 19, 2020, we sold the M/T Eco Palm Desert to a non-affiliated party, and fully prepaid the outstanding principal of AT Bank Bridge Note.
AT Bank Predelivery Facility
On September 5, 2017, we entered into a credit facility with AT Bank for $8.9 million for the pre-delivery financing of M/T Eco Palm Desert, or the AT Bank Predelivery Facility.  This facility was drawn down in five tranches and financed in full the last five pre-delivery instalments of M/T Eco Palm Desert due for payment between August 2017 and May 2018.  The AT Bank Predelivery Facility was repaid from the proceeds of the AT Bank Senior Facility on September 4, 2018.
AT Bank Second Predelivery Facility
On June 1, 2018, we entered into a credit facility with AT Bank for $10.1 million for the pre-delivery financing of M/T Eco California, or the AT Bank Second Predelivery Facility. This facility was drawn down in five tranches and financed in full the last five pre-delivery instalments of M/T Eco California due for payment between June and December 2018. The AT Bank Second Predelivery Facility was repaid on January 28, 2019, upon delivery of the vessel, from the proceeds of the AT Bank Bridge Facility.
Alpha Bank Predelivery Facility
On July 11, 2018, we entered into a credit facility with Alpha Bank for $10.1 million for the pre-delivery financing of M/T Eco Marina Del Ray, or the Alpha Bank Predelivery Facility.  This facility could be drawn down in five tranches to finance in full the last five pre-delivery instalments of M/T Eco Marina Del Ray due between July 2018 and February 2019.  The facility was repayable on delivery of the vessel in March 2019.  The Alpha Bank Predelivery Facility was fully repaid on March 13, 2019 with part of the proceeds from the Cargill Sale and Leaseback.
Financings Committed under Sale and Leaseback Agreements
All the below SLBs contain, customary covenants and event of default clauses, including cross-default provisions and restrictive covenants and performance requirements including (i) a ratio of total net debt to the aggregate market value of our fleet, current or future, of no more than 75% and (ii) minimum free liquidity of $0.75 million per collateralized vessel, $0.5 million per bareboated chartered-in vessel and $1.0 million per Suezmax vessel at the guarantors level.
Additionally, all of the SLBs contain restrictions on the relative shipowning company incurring further indebtedness or guarantees and paying dividends, if such dividend payment would result in an event of default or termination event under the SLB agreements.
All of the below SLBs are secured mainly by the following:

Ownership of the vessel financed;

Assignment of insurance and earnings of the vessel financed;

Specific assignment of any time charters of the vessel financed with duration of more than 12 months;
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Corporate guarantee of Top Ships Inc.;

Pledge of the shares of the relative shipowning subsidiary;

Pledge over the earnings account of the vessel financed.
Cargill Sale and Leaseback
On June 29, 2018, we entered into a SLB and a five-year time charter with Cargill International SA, or Cargill, a non-affiliated party, for its newbuilding vessel M/T Eco Marina Del Ray (Hull No 8242) delivered in March 2019.  Consummation of the SLB took place on the vessel's delivery date.  Following the sale, we have bareboat chartered back the vessel at a bareboat hire of $8,600 per day and simultaneously the vessel commenced its five-year time charter with Cargill.  As part of this transaction, we have the obligation to buy back the vessel at the end of the five-year period for $22.6 million. The gross proceeds from the sale were $32.3 million.
Bank of Communications Financial Leasing Company ("BoComm Leasing") Sale and Leaseback
On December 21, 2018, we entered into a SLB with BoComm Leasing, a non-affiliated party, for M/T Nord Valiant and M/T Eco California.  Consummation of the SLB took place on January 17, 2019 for M/T Nord Valiant and on January 31, 2019 for M/T Eco California. Following the sale, we bareboat chartered back M/T Nord Valiant for five years and M/T Eco California for seven years at a bareboat hire of $5,875 per day and $6,550 per day, respectively. As part of this transaction, we have continuous options, after the third year, to buy back the vessels at purchase prices stipulated in the bareboat agreement depending on when the option is exercised.  The gross proceeds from the SLBs were $21.6 million for M/T Nord Valiant and $24.1 million for M/T Eco California.
The SLB with BoComm Leasing contains a covenant requiring that there is no change of control of the Company, save with the prior written consent of BoComm Leasing.
China Merchants Bank Financial Leasing Co. Ltd. ("CMBFL") Sale and Leaseback
On December 3, 2018, we entered into an SLB with CMBFL, a non-affiliated party, for M/T Eco Bel Air and M/T Eco Beverly Hills.  Consummation of the SLB took place on April 4 and May 9, 2019, respectively. Following the sale, we bareboat chartered back the vessels for a period of seven years at a bareboat hire of $1.4 million per quarter per vessel. As part of this transaction, we have continuous options, after the third year, to buy back the vessels at purchase prices stipulated in the bareboat agreement depending on when the option is exercised. The gross proceeds from the sale were $91.4 million for both vessels.
The SLB with CMBLF contains a representation that should be always in effect throughout the sale and leaseback period requiring the Top Ships Inc. to remain listed on the Nasdaq exchange and requiring that there is no change in the controlling shareholder of the Top Ships Inc.  Violation of this ongoing representation would result in a covenant breach.
Oriental Fleet International Company Limited ("OFI") Sale and Leaseback
On July 8, 2019, we entered into sale and leaseback agreements with OFI, a non-affiliated party, for M/T Stenaweco Excellence, M/T Stenaweco Energy and M/T Stenaweco Evolution, respectively. The sales of the three vessels were concluded on July 15, November 18 and November 20, 2019, respectively.  Following the sales, we have bareboat chartered back the vessels for a period of ten years at bareboat hire rates based on a straight-line amortization plus interest based on the three months LIBOR plus 3.90%.
The amortizations of the OFI facility are as follows:

for M/T Stenaweco Excellence: 120 consecutive monthly installments of $160,000 commencing from draw down, and a balloon payment of $6.4 million payable together with the last installment,

for M/T Stenaweco Energy: 120 consecutive monthly installments of $131,000 commencing from draw down, and a balloon payment of $5.7 million payable together with the last installment,

for M/T Stenaweco Evolution: 120 consecutive monthly installments of $153,000 commencing from draw down, and a balloon payment of $6.1 million payable together with the last installment,
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As part of this transaction, we have continuous options, after the third year, to buy back the vessels at purchase prices stipulated in the bareboat agreements depending on when the option is exercised and at the end of the ten-year period, we have an obligation to buy back the vessels at a cost represented by the balloon payment.  The gross proceeds from the sale of the M/T Stenaweco Excellence were $25.6 million, for M/T Stenaweco Energy $21.3 million and for M/T Stenaweco Evolution $24.4 million.
The SLB with OFI contains a covenant requiring us, throughout the sale and leaseback period, to remain listed on the Nasdaq exchange and requiring that there is no change of control of the Company, save with the prior written consent of OFI.
AVIC International Leasing Co., Ltd ("AVIC") Sale and Leaseback
On September 30, 2019 the owning companies of the M/T Eco Los Angeles and M/T Eco City of Angels entered into an SLB with AVIC, a non-affiliated party, for their newbuilding vessels M/T Eco Los Angeles and M/T Eco City of Angels.  Consummation of the SLB and drawdown of funds took place on the vessels' delivery dates from the shipyard of February 10 and February 17, 2020, respectively. Following the sale, we bareboat chartered back the vessels for a period of ten years at a bareboat hire of $9,435 per day for the first five years and $9,090 per day for the next five years per day per vessel, with a balloon installment of $11.2 million for each vessel on the final charter hire date.  As part of this transaction, we have continuous options, after the second year, to buy back the vessels at purchase prices stipulated in the bareboat agreement depending on when the option is exercised and at the end of the ten year period it has an obligation to buy back the vessels at a cost represented by the balloon payment. The gross proceeds from the sale amounted to $60.2 million for both vessels.
The SLB with AVIC contains a covenant requiring that there is no change of control of the Company, save with the prior written consent of AVIC.
Covenant Compliance
As of December 31, 2019, we were in compliance with all debt covenants with respect to our loans and credit facilities. The fair value of debt outstanding on December 31, 2019, after excluding unamortized financing fees, amounted to $ 319.0 million when valuing the Cargill, BoComm and CMBFL SLBs on the basis of the Commercial Interest Reference Rates as applicable on December 31, 2019.
Operating Leases
Please see "Item 18. Financial Statements—Note 6—Leases." for more detailed information.
Recent Developments
COVID-19 Outbreak
After the balance sheet date, the outbreak of COVID-19, which originated in China in December 2019 and subsequently spread to most developed nations of the world, has resulted in the implementation of numerous actions taken by governments and governmental agencies in an attempt to mitigate the spread of the virus.  These measures have resulted in a significant reduction in global economic activity and extreme volatility in the global financial markets. The reduction of economic activity has significantly reduced the global demand for oil, refined petroleum products and LNG.  We expect that the impact of the COVID-19 virus and the uncertainty in the supply of oil will continue to cause volatility in the commodity markets.  The scale and duration, as well as the impact of these factors remain uncertain but could have a material impact on our earnings, cash flow and financial condition for 2020.
C.
Research and Development, Patents and Licenses, Etc.
Not applicable.
D.
Trend Information
For industry trends, refer to industry disclosure under "Item 4. Information on the Company—B. Business Overview."
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E.
Off-Balance Sheet Arrangements
None.
F.
Tabular Disclosure of Contractual Obligations
The following table sets forth our contractual obligations and their maturity dates as of December 31, 2019 in millions of U.S. dollars:
         
Payments due by period
 
               
1-3
   
3-5
   
More than
 
Contractual Obligations:
 
Total
   
Less than 1 year
   
years
   
years
   
5 years
 
                                   
Long term debt A
 
$
286.2
   
$
18.1
   
$
46.1
   
$
87.1
   
$
134.9
 
Interest related to long term debt B
 
$
80.9
   
$
16.6
   
$
28.6
   
$
21
   
$
14.7
 
Debt related to vessels held for sale C
 
$
30.3
   
$
30.3
   
$
0.0
   
$
0.0
   
$
0.0
 
Interest expense related to vessels held for sale
 
$
0.1
   
$
0.1
   
$
0.0
   
$
0.0
   
$
0.0
 
Vessel Management Fees to CSI D
 
$
11.2
   
$
2.7
   
$
5.6
   
$
2.9
   
$
0.0
 
Vessel acquisitions E
 
$
64.0
   
$
64.0
   
$
0.0
   
$
0.0
   
$
0.0
 
Total
 
$
472.7
   
$
131.8
   
$
80.3
   
$
111.0
   
$
149.6
 

A.
Relates to the principal repayments of our Long term debt (see "Item 18. Financial Statements—Note 8—Debt.").
B.
Relates to estimated interest payments of our Long term debt, based on our average outstanding debt. In the cases there are no Interest Rate Swap agreements in place, we have assumed a LIBOR of 1.5% going forward (see "Item 18. Financial Statements—Note 8—Debt." and "Item 11. Quantitative and qualitative disclosures about market risk—Interest Rate Risk").
C.
Relates to our Debt related to vessels held for sale (see "Item 18. Financial Statements—Note 8—Debt.").
D.
Relates to our obligation for monthly management fees under our letter agreement with CSI for all the vessels in our fleet, excluding vessels held for sale and including the two vessels under constructions as of December 31, 2019. These fees also cover the provision of services rendered in relation to the maintenance of proper books and records and services in relation to financial reporting requirements under SEC and NASDAQ rules. Please see "Item 18. Financial Statements—Note 5—Transactions with Related Parties".
E.
Relates to the remaining payments for the acquisition of our two newbuilding vessels in 2020. Please see "Item 18. Financial Statements—Note 9— Commitments and Contingencies ".
Other Contractual Obligations:
We have entered into separate agreements with Central Mare, a related party affiliated with the family of Mr. Evangelos J. Pistiolis, pursuant to which Central Mare furnishes our four executive officers. These agreements were entered into following the termination of prior employment agreements. Please see "Item 18. Financial Statements—Note 5—Transactions with Related Parties".
Other major capital expenditures will include funding the maintenance program of regularly scheduled intermediate survey or special survey dry-docking necessary to preserve the quality of our vessels and chartered in vessels, as well as to comply with international shipping standards and environmental laws and regulations. Although we have some flexibility regarding the timing of this maintenance, the costs are relatively predictable. Vessels are younger than 15 years are required to undergo in-water intermediate surveys 2.5 years after a special survey dry-docking and that such vessels are to be dry-docked every five years. Vessels 15 years or older are required to undergo drydock intermediate survey every 2.5 years and not use in-water surveys for this purpose.
G.
Safe Harbor
Forward-looking information discussed in Item 5 includes assumptions, expectations, projections, intentions and beliefs about future events. These statements are intended as "forward-looking statements." We caution that assumptions, expectations, projections, intentions and beliefs about future events may and often do vary from actual results and the differences can be material. Please see "Cautionary Statement Regarding Forward-Looking Statements" in this annual report.
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ITEM 6.
 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.
Directors and Senior Management
Set forth below are the names, ages and positions of our directors, executive officers and key employees. Members of our Board of Directors are elected annually on a staggered basis and each director elected holds office for a three-year term.
Officers are elected from time to time by vote of our Board of Directors and hold office until a successor is elected.
Name
 
Age
 
Position
Evangelos J. Pistiolis
   
47
 
Director, President, Chief Executive Officer
Alexandros Tsirikos
   
46
 
Director, Chief Financial Officer
Konstantinos Patis
   
46
 
Chief Technical Officer
Vangelis G. Ikonomou
   
55
 
Chief Operating Officer
Konstantinos Karelas
   
47
 
Independent Non-Executive Director
Stavros Emmanuel
   
77
 
Independent Non-Executive Director
Paolo Javarone
   
46
 
Independent Non-Executive Director
Biographical information with respect to each of our directors and executives is set forth below.
Evangelos J. Pistiolis founded our Company in 2000, is our President and Chief Executive Officer, and has served on our Board of Directors since July 2004. Mr. Pistiolis graduated from Southampton Institute of Higher Education in 1999, where he studied shipping operations and from Technical University of Munich in 1994 with a bachelor's degree in mechanical engineering. His career in shipping started in 1992 when he was involved with the day-to-day operations of a small fleet of drybulk vessels. From 1994 through 1995, he worked at Howe Robinson & Co. Ltd., a London shipbroker specializing in container vessels. While studying at the Southampton Institute of Higher Education, Mr. Pistiolis oversaw the daily operations of Compass United Maritime Container Vessels, a ship management company located in Greece.
Alexandros Tsirikos has served as our Chief Financial Officer since April 1, 2009. Mr. Tsirikos is a U.K. qualified Chartered Accountant (ACA) and has been employed with TOP Ships Inc. since July 2007 as our Corporate Development Officer. Prior to joining TOP Ships Inc., Mr. Tsirikos was a manager with PricewaterhouseCoopers, or PwC, where he worked as a member of the PwC Advisory team and the PwC Assurance team, thereby drawing experience both from consulting as well as auditing. As a member of PwC's Advisory team, he led and participated in numerous projects in the public and the private sectors, including strategic planning and business modeling, investment analysis and appraisal, feasibility studies, costing and project management. As a member of the PwC's Assurance team, Mr. Tsirikos was part of the International Financial Reporting Standards, or IFRS, technical team of PwC Greece and lead numerous IFRS conversion projects for listed companies. He holds a Master's of Science in Shipping Trade and Finance from City University of London and a bachelor's degree with honors in Business Administration from Boston University in the United States. He speaks English, French and Greek.
Konstantinos Patis has served as our Chief Technical Officer since January 2018. Mr. Patis holds a Master's of Science and a Bachelor's degree, both in Marine Engineering from the University of Newcastle upon Tyne in the UK, as well as a Bachelor's degree in Naval Architecture from the Technological Educational Institute of Athens, in Greece. He started his carrier in 1997 acting as a Superintendent Engineer, thereafter as Fleet Manager and from 2014 as Technical Manager in various ship management companies in Greece, like Cyprus Sea Lines, Technomar Shipping, Aeolian Investments, Arion Shipping operating diverse fleets of Tankers, Bulk Carriers and Containers and was involved in the technical supervision, repairs, dry docks and construction of new projects.
Vangelis G. Ikonomou is our Chief Operating Officer. Prior to joining us, Mr. Ikonomou was the Commercial Director of Primal Tankers Inc. From 2000 to 2002, Mr. Ikonomou worked with George Moundreas & Company S.A. where he was responsible for the purchase and sale of second-hand vessels and initiated and developed a shipping industry research department. Mr. Ikonomou worked, from 1993 to 2000, for Eastern Mediterranean Maritime Ltd., a ship management company in Greece, in the commercial as well as the safety and quality departments. Mr. Ikonomou holds a Master's degree in Shipping Trade and Finance from the City University Business School in London, a bachelor's degree in Business Administration from the University of Athens in Greece and a Navigation Officer Degree from the Higher State Merchant Marine Academy in Greece.
Konstantinos Karelas has served on our Board of Directors and has been member of the Audit Committee since April 2014. Since 2008, Mr. Karelas has served as the President and CEO of Europe Cold Storages SA, one of the leading companies in the field of refrigeration logistics.
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Stavros Emmanuel has served on our Board of Directors since December 31, 2017 and has been member of the Audit Committee since December 2018. Captain Stavros Emmanuel has 47 years of experience in the shipping industry and expertise in operation and chartering matters. He obtained a Naval Officers degree from ASDEN Nautical Academy of Aspropyrgos, Greece and earned a Master Mariners degree in 1971. He has worked in various management capacities at Compass United Maritime and Primal Tankers Inc. From 2004 to 2009 he was our the Chief Operating Officer. After leaving us, Captain Stavros Emmanuel has been an independent advisor to various shipping companies.
Paolo Javarone has served on our Board of Directors since September 1, 2014. Mr. Javarone is a member of the Italian Shipbrokers Association. From 2015, Mr. Javarone has been working for Shipping 360 Ltd, a boutique shipbroking company with offices in London and Monaco and before that he has been working since 2000 for Sernavimar S.R.L., one of the most reputable shipbroking houses in Italy, which cooperates with many of the oil major companies and trading associations of the industry. From 1994 to 2000, Mr. Javarone worked for Genoa Sea Brokers in the tanker wing of the company specializing in clean petroleum products and edible markets. Previously, Mr. Javarone worked for S.a.n.a. Eur, a company based in Rome Italy, where he was tasked with supplying energy and offshore supply. Before S.a.n.a., Mr. Javarone worked for Sidermar di Navigazione S.P.A. in the dry cargo field. Mr. Javarone holds a Shipbroker degree from National Agents Association Shipbroking School in Italy and a degree in Shipping Economics and Law from Nautical Maritime School in Italy.
B.
Compensation
On September 1, 2010, we entered into separate agreements with Central Mare, pursuant to which Central Mare furnishes our four executive officers as described below. During the fiscal year ended December 31, 2019, we paid to the members of our senior management and to our director's aggregate compensation of $0.4 million. We do not have a retirement plan for our officers or directors and we did not issue any stock options or other securities to them as part of compensation for the fiscal year ended December 31, 2019.
Under the terms of the agreement for the provision of our Chief Executive Officer, we are obligated to pay annual base salary. The initial term of the agreement expired on August 31, 2014 and is automatically extended for successive one-year terms unless Central Mare or we provide notice of non-renewal at least sixty days prior to the expiration of the then applicable term.
If our Chief Executive Officer's employment is terminated without cause, he is entitled to certain personal and household security costs. If he is removed from our Board of Directors or not re-elected, then his employment terminates automatically without prejudice to Central Mare's rights to pursue damages for such termination. In the event of a change of control, the Chief Executive Officer is entitled to receive a cash payment of ten million Euros. The agreement also contains death and disability provisions. In addition, the Chief Executive Officer is subject to non-competition and non-solicitation undertakings.
Under the terms of the agreement for the provision of our Chief Operating Officer, we are obligated to pay annual base salary and additional incentive compensation as determined by our Board of Directors. The initial term of the agreement expired on August 31, 2011 and is automatically extended for successive one-year terms unless Central Mare or we provide notice of non-renewal at least sixty days prior to the expiration of the then applicable term. In the event of a change of control, he is entitled to receive a cash payment of three years' annual base salary. The agreement also contains death and disability provisions. In addition, our Chief Operating Officer is subject to non-competition and non-solicitation undertakings.
Under the terms of the agreement for the provision of our Chief Financial Officer, we are obligated to pay annual base salary. The initial term of the agreement expired on August 31, 2012, and is automatically extended for successive one-year terms unless Central Mare or we provide notice of non-renewal at least sixty days prior to the expiration of the then applicable term.
If our Chief Financial Officer is removed from our Board of Directors or not re-elected, then his employment terminates automatically without prejudice to Central Mare's rights to pursue damages for such termination. In the event of a change of control, our Chief Financial Officer is entitled to receive a cash payment equal to three years' annual base salary. The agreement also contains death and disability provisions. In addition, our Chief Financial Officer is subject to non-competition and non-solicitation undertakings.
Under the terms of our agreement for the provision of our Chief Technical Officer, we are obligated to pay annual base salary. The initial term of the agreement expired on August 31, 2011, however the agreement is being automatically extended for successive one-year terms unless Central Mare or we provide notice of non-renewal at least sixty days prior to the expiration of the then applicable term. In the event of a change of control, the Chief Technical Officer is entitled to receive a cash payment equal to three years' annual base salary. In addition, our Chief Technical Officer is subject to non-competition and non-solicitation undertakings.
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Equity Incentive Plan
On April 15, 2015, our Board of Directors adopted the 2015 Stock Incentive Plan, or the 2015 Plan, under which our directors, officers, key employees as well as consultants and service providers may be granted non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, unrestricted stock and other-equity based-related awards. However due to the recent reverse stock splits the reserved number of common shares available for issuance has dropped below one and the 2015 Plan is no longer available.
C.
Board Practices
Our Board of Directors is divided into three classes. Members of our Board of Directors are elected annually on a staggered basis, and each director elected holds office for a three-year term. We currently have two executive directors and three independent non-executive directors. The term of our Class I directors, Stavros Emmanuel and Evangelos J. Pistiolis expires at the annual general meeting of shareholders in 2020. The term of our Class II directors, Paolo Javarone and Konstantinos Karelas, expires at the annual general meeting of shareholders in 2021. The term of our Class III director, Alexandros Tsirikos, expires at the annual general meeting of shareholders in 2022.
Committees of our Board of Directors
We currently have an audit committee composed of three independent members, who are responsible for reviewing our accounting controls and recommending to our Board of Directors, the engagement of our outside auditors. Konstantinos Karelas, Paolo Javarone and Stavros Emmanuel (Chairman), whose biographical details are included in Item 6 of this Annual Report, are the members of the audit committee, and our Board of Directors has determined that they are independent under the Nasdaq corporate governance rules.
Our compensation committee and nominating and governance committees are currently composed of the following three members: Konstantinos Karelas, Paolo Javarone and Stavros Emmanuel. The compensation committee carries out our Board of Directors' responsibilities relating to compensation of our executive and non-executive officers and provides such other guidance with respect to compensation matters as the committee deems appropriate. The nominating and governance committee assists our Board of Directors in: (i) identifying, evaluating and making recommendations to our Board of Directors concerning individuals for selections as director nominees for the next annual meeting of stockholders or to otherwise fill vacancies on our Board of Directors; (ii) developing and recommending to our Board of Directors a set of corporate governance guidelines and principles applicable to us; and (iii) reviewing our overall corporate governance and recommending improvements to our Board of Directors from time to time.
As a foreign private issuer, we are exempt from certain Nasdaq requirements that are applicable to U.S. domestic companies. For a listing and further discussion of how our corporate governance practices differ from those required of U.S. companies listed on Nasdaq, please see Item 16G of this Annual Report.
D.
Employees
We have only one direct employee while our four executive officers and a number of administrative employees are furnished to us pursuant to agreements with Central Mare, as described above. Our Fleet Manager ensures that all seamen have the qualifications and licenses required to comply with international regulations and shipping conventions, and that our vessels employ experienced and competent personnel. As of December 31, 2017, 2018 and 2019, we employed 154, 173 and 269 sea going employees, indirectly through our sub-managers.
E.
Share Ownership
The common shares beneficially owned by our directors and senior managers and/or companies affiliated with these individuals are disclosed in "Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders."
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ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
Major Shareholders
The following table sets forth the beneficial ownership of our common shares, as of April 10, 2020, held by: (i) each person or entity that we know beneficially owns 5% or more of our common shares and (ii) all our executive officers, directors and key employees as a group. Beneficial ownership is determined in accordance with the SEC's rules. In computing percentage ownership of each person, common shares subject to options held by that person that are currently exercisable or convertible, or exercisable or convertible within 60 days are deemed to be beneficially owned by that person. These shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person. All of the shareholders, including the shareholders listed in this table, are entitled to one vote for each common share held.
Name and Address of Beneficial Owner(2)
 
Number of Shares Owned
   
Percent of Class
 
Lax Trust (1)
   
17,274,140
     
12.8
%
Executive officers, directors and key employees
   
-
     
-
%
____________

(1)
The above information is derived, in part, from the Schedule 13D/A filed with the SEC on April 10, 2020. The Lax Trust is an irrevocable trust established for the benefit of certain family members of Evangelos J. Pistiolis, our President, Chief Executive Officer and Director. The business address of the Lax Trust is Level 3, 18 Stanley Street, Auckland 1010, New Zealand. The above percentage ownership is based on 134,979,295 common shares outstanding, which is calculated for this Schedule 13D/A purposes by taking the sum of (i) 117,705,155 common shares outstanding, and (ii) 17,274,140 common shares issuable upon the conversion of 10,364 Series E Preferred Shares held by Family Trading, all figures being as of April 10, 2020. The Lax Trust may also be deemed to hold all of the 100,000 outstanding shares of our Series D Preferred Stock.  Each Series D Preferred Share carries 1,000 votes.  By its ownership of 100% of our Series D Preferred Shares, Lax Trust has control over our actions.

(2)
Morgan Stanley, Intracoastal Capital LLC, Hudson Bay Management LP and Sabby Management LLC each reported holdings of 1,685,555 shares, 900,000 shares, 965,076 shares, 799,212 shares, respectively, on Schedule 13G or amendments to Schedule 13G during 2020.  Due to recent issuances and sales of our common shares, we no longer believe these shareholders have at least a 5% interest in the Company based on the number of shares reported on each reporting persons Schedule 13G or any amendments thereto.

As of April 10, 2020, we had one shareholder of record, which was located in the United States and held an aggregate of 117,705,155 our common shares, representing 100% of our outstanding common shares. However, the U.S. shareholder of record is Cede & Co., which held our common shares. We believe that the shares held by Cede & Co. include common shares beneficially owned by both holders in the United States and non-U.S. beneficial owners. We are not aware of any arrangements the operation of which may at a subsequent date result in our change of control.
B.
Related Party Transactions
Please see "Item 18. Financial Statements—Note 5—Transactions with Related Parties."
(a) Central Mare– Executive Officers and Other Personnel Agreements

On September 1, 2010, we entered into separate agreements with Central Mare, a related party affiliated with the family of our President, Chief Executive Officer and Director, Evangelos J. Pistiolis, pursuant to which Central Mare provides us with our executive officers (Chief Executive Officer, Chief Financial Officer, Chief Technical Officer and Chief Operating Officer).

The fees charged by and expenses relating to Central Mare for the years ended December 31, 2017, 2018 and 2019 were $2.3 million, $2.3 million and $0.3 million, respectively.

(b) Central Shipping Monaco SAM ("CSM") – Letter Agreement and Management Agreements

On March 10, 2014, we entered into a letter agreement, or the Letter Agreement, with CSM, a related party affiliated with the family of our President, Chief Executive Officer and Director, Evangelos J. Pistiolis, and on March 10, 2014 and June 18, 2014, we entered into management agreements, or the Management Agreements, between CSM and our vessel-owning subsidiaries, respectively. The Letter Agreement could only be terminated subject to an eighteen-month advance notice, subject to a termination fee equal to twelve months of fees payable under the Letter Agreement.

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Pursuant to the Letter Agreement, as well as the Management Agreements concluded between CSM and our vessel-owning subsidiaries, we paid a technical management fee of $595 per day per vessel for the provision of technical, operation, insurance, bunkering and crew management, commencing three months before the vessel was scheduled to be delivered by the shipyard and a commercial management fee of $328 per day per vessel, commencing from the date the vessel was delivered from the shipyard. In addition, the Management Agreements provided for payment to CSM of: (i) $541 per day for superintendent visits plus actual expenses; (ii) a chartering commission of 1.25% on all freight, hire and demurrage revenues; (iii) a commission of 1.00% on all gross vessel sale proceeds or the purchase price paid for vessels and (iv) a financing fee of 0.2% on derivative agreements and loan financing or refinancing. CSM also performed supervision services for all of our newbuilding vessels while the vessels were under construction, for which we paid CSM the actual cost of the supervision services plus a fee of 7% of such supervision services.

CSM provided, at cost, all accounting, reporting and administrative services. Finally, the Letter Agreement provided for a performance incentive fee for the provision of management services to be determined at our discretion. The Management Agreements had an initial term of five years, after which they would have continued to be in effect until terminated by either party subject to an eighteen-month advance notice of termination. Pursuant to the terms of the Management Agreements, all fees payable to CSM were adjusted annually according to the US Consumer Price Inflation ("CPI") of the previous year and if CPI is less than 2% than a 2% increase was effected.

On January 1, 2019, we terminated the letter agreement with CSM without incurring any penalties

The fees charged by and expenses relating to CSM for the years ended December 31, 2017 and 2018 were $5.6 million and $8.9 million.  For the years ended December 31, 2017 and 2018, CSM charged us newbuilding supervision related pass-through costs amounting to $0.5 million and $1.0 million respectively.

(c)  Central Shipping Inc ("CSI") – Letter Agreement and Management Agreements

On January 1, 2019, we entered into a letter agreement with CSI ("CSI Letter Agreement"), a related party affiliated with the family of Evangelos J. Pistiolis and on the same date we entered into management agreements, or the CSI Management Agreements, between CSI and our vessel-owning subsidiaries respectively. The CSI Letter Agreement can only be terminated subject to an eighteen-month advance notice, subject to a termination fee equal to twelve months of fees payable under the CSI Letter Agreement.

Pursuant to the CSI Letter Agreement, as well as the CSI Management Agreements concluded between CSI and our vessel-owning subsidiaries, we pay a management fee of $550 per day per vessel for the provision of technical, commercial, operation, insurance, bunkering and crew management, commencing three months before the vessel is scheduled to be delivered by the shipyard. In addition, the CSI Management Agreements provide for payment to CSI of: (i) $500 per day for superintendent visits plus actual expenses; (ii) a chartering commission of 1.25% on all freight, hire and demurrage revenues; (iii) a commission of 1.00% on all gross vessel sale proceeds or the purchase price paid for vessels and (iv) a financing fee of 0.2% on derivative agreements and loan financing or refinancing. CSI also performs supervision services for all of our newbuilding vessels while the vessels are under construction, for which we pay CSI the actual cost of the supervision services plus a fee of 7% of such supervision services.

CSI provides, at cost, all accounting, reporting and administrative services. Finally, the CSI Letter Agreement provides for a performance incentive fee for the provision of management services to be determined at our discretion. The CSI Management Agreements have an initial term of five years, after which they will continue to be in effect until terminated by either party subject to an eighteen-month advance notice of termination. Pursuant to the terms of the CSI Management Agreements, all fees payable to CSI are adjusted annually according to the US Consumer Price Inflation ("CPI") of the previous year and if CPI is less than 2% than a 2% increase is effected.

The fees charged by and expenses relating to CSI for the year ended December 31, 2019 was $4.1 million.  For the year ended December 31, 2019, CSI also charged us newbuilding supervision related pass-through costs amounting to $1.0 million.

(d) Family Trading Inc. ("Family Trading") - Revolving Credit Facility and Assumption of Liabilities

As of the date of issuance of this report there have been various amendments and addendums to the Family Trading credit facility, or the Further Amended Family Trading Credit Facility. As of December 31, 2018, the interest and fees due to Family Trading were $1.8 million.

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(e) Issuance of Series E Preferred Shares to Family Trading Inc ("Family Trading")

On March 29, 2019 we entered into a stock purchase agreement with Family Trading pursuant to which we exchanged the outstanding principal, fees and interest of the Further Amended Family Trading Credit Facility with 27,129 Series E Preferred Shares. As of December 31, 2019, pursuant to the terms of the Series E Preferred Shares we owed $1.6 million of dividends to Family Trading.  For more information about Series E Preferred Shares please see section entitled "Description of share capital".

From July 25, 2019 to April 10, 2020, we redeemed 33,798 of Series E Preferred Shares for $38.9 million.

On February 17, 2020, we announced the issuance of 16,004 Series E Preferred Shares to Family Trading, as settlement of the consideration outstanding for the purchase of the M/T Eco City of Angels and M/T Eco Los Angeles from Mr. Pistiolis, our President, Chief Executive Officer and Director, and for dividends payable to Family Trading Inc. under already outstanding Series E Preferred Shares.

(f) Vessel Acquisitions from affiliated entities

From February 20 to November 24, 2017, we entered into a series of transactions with a number of entities affiliated with Evangelos J. Pistiolis that led to the purchase of M/T Eco Palm Desert and M/T Eco California, 90% interest in M/T Stenaweco Elegance and 50% interests in M/T Eco Holmby Hills and M/T Eco Palm Springs. On January 31, 2018, we entered into a series of transactions with a number of entities affiliated with Evangelos J. Pistiolis that led to the purchase of the construction contracts of M/T Eco Marina Del Ray, M/T Eco Bel Air, M/T Eco Beverly Hills and 10% interest in M/T Stenaweco Elegance.  On December 18, 2019, we entered into a series of transactions with two entities affiliated with Evangelos J. Pistiolis that led to the purchase of the newbuilding vessels, M/T Eco Los Angeles and M/T Eco City of Angels. As of December 31, 2019, we owe $14.3 million to the previous owners of the newbuilding vessels.

(g) Charter Party with Central Tankers Chartering Inc ("Central Tankers Chartering")

On September 1, 2017, we entered into a time charter party with Central Tankers Chartering, a related party affiliated with the family of Evangelos J. Pistiolis, for the vessel M/T Eco Palm Desert delivered from Hyundai in September 2018.  The time charter was for a firm period of three years at a daily rate of $14,750 per day with two optional years at daily rates of $15,250 and $15,750, respectively, at Central Tankers Chartering's option.  The time charter carried a 1.25% address commission payable to Central Tankers Chartering.  Total revenue backlog from this time charter for the firm period was $15.9 million, assuming no off-hire days. As of December 31, 2018 the amounts due from Central Tankers Chartering were $0.1 million. In April 2019, we terminated the time charter party with Central Tankers Chartering without incurring any penalties and entered into a time charter agreement with Shell Tankers Singapore Private Limited until September 2020.  The time charter with Shell consists of a fixed amount per day plus a 50% profit share for earned rates over the fixed amount.

C.
Interests of Experts and Counsel
Not applicable.
ITEM 8.
 FINANCIAL INFORMATION.
A.
Consolidated Statements and Other Financial Information
See "Item 18—Financial Statements."
Legal Proceedings
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. We expect that these claims would be covered by insurance, subject to customary deductibles. Those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.
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On August 1, 2017, we received a subpoena from the U.S. Securities and Exchange Commission ("SEC") requesting certain documents and information in connection with offerings we made between February 2017 and August 2017. We provided the requested information to the SEC in response to that subpoena. On September 26, 2018 and on October 5, 2018 we received two additional subpoenas from the SEC requesting certain documents and information in connection with the previous subpoena we received on August 1, 2017. We provided the requested information to the SEC in response to these subpoenas. The SEC investigation is ongoing and we continue to cooperate with the SEC in its investigation. We are unable to predict what action, if any, might be taken by the SEC or its staff as a result of this investigation or what impact, if any, the cost of responding to the SEC's investigation or its ultimate outcome might have on our financial position, results of operations or liquidity.
On August 23, 2017, a purported securities class action complaint was filed in the United States District Court for the Eastern District of New York (No. 2:17-cv-04987(JFB)(SIL)) by Christopher Brady on behalf of himself and all others similarly situated against (among other defendants) us and two of our executive officers. The complaint is brought on behalf of an alleged class of those who purchased our common stock between January 17, 2017 and August 22, 2017, and alleges that we and two of our executive officers violated Sections 9, 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On August 24, 2017, a second purported securities class action complaint was filed in the same court against the same defendants (No. 2:17-cv-05016 (JFB)(SIL)) which makes similar allegations and purports to allege violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. By order dated July 20, 2018, the court consolidated the two actions under docket no. 2:17-cv-04987 and appointed lead plaintiffs for the consolidated action. On September 18, 2018, the plaintiffs filed a consolidated amended complaint. The amended complaint purports to be brought on behalf of shareholders who purchased our common stock between November 23, 2016 and April 3, 2018, makes allegations similar to those made in the original complaints, seeks similar relief as the original actions, and alleges that some or all the defendants violated sections 9, 10(b), 20(a), and/or 20A of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. All defendants filed motions to dismiss the amended complaint on March 25, 2019. Plaintiffs filed a consolidated opposition to defendants' motions to dismiss on May 24, 2019.  Defendants filed replies in further support of the motions to dismiss on June 28, 2019.  In a Memorandum Decision and Order dated August 3, 2019, the Court granted defendants' motions to dismiss under Rule 12(b)(6) and denied Plaintiffs' request for leave to amend. On August 7, 2019, the Court entered judgment dismissing the case. Plaintiffs filed a notice of appeal on August 26, 2019. Plaintiffs/appellants filed their opening brief on the appeal on October 25, 2019.  Defendants/appellees filed their response briefs on November 26 and November 27, 2019, and plaintiffs/appellants filed their reply brief on December 11, 2019.  The Court of Appeals held oral argument on March 10, 2020 and took the matter under advisement. On April 2, 2020, the Court of Appeals issued a summary order affirming the District Court's decision dismissing Plaintiffs' claims and denying leave to amend. The Court of Appeals is scheduled to issue a mandate making the decision effective on April 23, 2020 if Plaintiffs do not file a motion for reargument.  We and our management believe that the allegations in the complaints are without merit and we plan to vigorously defend ourselves against the allegations.
By letter dated January 2, 2019, certain co-defendants in the class action litigation (Kalani Investments Ltd. ("Kalani"), Murchinson Ltd. and Marc Bistricer) requested that we indemnify and hold them harmless against all losses, including reasonable costs of defense, arising from the litigation, pursuant to the provisions of the Common Stock Purchase Agreement between us and Kalani. We acknowledged receipt of this indemnification request by letter dated February 20, 2019, and reserve all of our rights.
Dividend Distribution Policy
The declaration and payment of any future special dividends shall remain subject to the discretion of our Board of Directors and shall be based on general market and other conditions including our earnings, financial strength and cash requirements and availability. Further, until the AT Bank Bridge Facility was fully prepaid in March 2020 we couldn't pay any cash dividends to any class of our common shares.
B.
Significant Changes
All significant changes have been included in the relevant sections.
ITEM 9.
THE OFFER AND LISTING.
Not applicable except for Item 9.A.4. and Item 9.C.
Share History and Markets
Since July 23, 2004, the primary trading market for our common shares has been Nasdaq on which our shares are now listed under the symbol "TOPS."
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ITEM 10.
ADDITIONAL INFORMATION
A.
Share Capital
Not applicable.
B.
Memorandum and Articles of Association
Purpose
Our purpose is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the Marshall Islands Business Corporations Act, or BCA. Our Third Amended and Restated Articles of Incorporation and Amended and Restated By-Laws, as further amended, do not impose any limitations on the ownership rights of our shareholders.
Authorized Capitalization
Our authorized capital stock consists of 1,000,000,000 common shares, par value $0.01 per share, of which  117,705,155  shares were issued and outstanding as of April 10, 2020 and 20,000,000 preferred shares with par value of $0.01 and 100,000 Series D Preferred Shares and 10,364 Series E Preferred Shares are issued and outstanding as of April 10, 2020. Our Board of Directors has the authority to establish such series of preferred stock and with such designations, preferences and relative, participating, optional or special rights and qualifications, limitations or restrictions as shall be stated in the resolution or resolutions providing for the issue of such preferred stock.
On September 14, 2016, we 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 September 22, 2016, by and between us and Computershare Trust Company, N.A., as rights agent (now taken over by our new transfer agent, AST), described below under the section entitled "—Stockholders Rights Agreement". In connection with the Stockholders Rights Agreement, we designated 1,000,000 shares as Series A Participating Preferred Stock, none of which are outstanding as of the date of this annual report.
Description of 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, holders of common shares are entitled to receive ratably all dividends, if any, declared by our Board of Directors out of funds legally available for dividends. Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of our preferred shares having liquidation preferences, if any, the holders of our common shares will be entitled to receive pro rata our remaining assets available for distribution. Holders of our common shares do not have conversion, redemption or preemptive rights to subscribe to any of our securities. The rights, preferences and privileges of holders of our common shares are subject to the rights of the holders of any preferred shares that we may issue in the future.
Description of Preferred Shares
Our Third Amended and Restated Articles of Incorporation authorize our Board of Directors to establish one or more series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including the designation of the series, the number of shares of the series, the preferences and relative, participating, option or other special rights, if any, and any qualifications, limitations or restrictions of such series, and the voting rights, if any, of the holders of the series.
Description of Series B Convertible Preferred Shares
On November 22, 2016, we completed a private placement of up to 3,160 Series B Convertible Preferred Shares for an aggregate principal amount of up to $3.0 million. The investor purchased 1,579 Series B Convertible Preferred Shares at the initial closing of the Transaction and 527 Series B Convertible Preferred Shares on November 28, 2016 for a total of $2.0 million. The investor waived the right to purchase any additional Series B Preferred Shares. The description of the Series B Preferred Shares is incorporated by reference from our registration statement on Form F-3 (333-215577). The description of the Series B Convertible Preferred Shares is subject to and qualified in its entirety by reference to the Securities Purchase Agreement, Certificate of Designation of the Series B Convertible Preferred Shares and Registration Rights Agreement entered into in connection with the private placement. Copies of the Securities Purchase Agreement, Certificate of Designation of the Series B Convertible Preferred Shares and Registration Rights Agreement have been filed as exhibits to our Report on Form 6-K filed with the Commission on November 23, 2016. The waiver agreement was filed as an exhibit to our Report on Form 6-K filed with the Commission on January 10, 2017. We issued 901 common shares in connection with the conversions of all of our Series B Convertible Preferred Shares, and there are currently no Series B Convertible Preferred Shares outstanding. Convertible Preferred Shares, and there are currently no Series B Convertible Preferred Shares outstanding.
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Description of Series C Convertible Preferred Shares
On February 17, 2017, we closed a private placement with a non-U.S. institutional investor for the sale of 7,500 newly issued Series C Convertible Preferred Shares, which are convertible into our common shares, for $7.5 million pursuant to a securities purchase agreement, or the Series C Transaction.  The description of the Series C Preferred Shares is incorporated by reference from our registration statement on Form F-3 (333-215577). The description of the Series C Convertible Preferred Shares is subject to and qualified in its entirety by reference to the Securities Purchase Agreement and Statement of Designations, Preferences and Rights of the Series C Convertible Preferred Shares entered into in connection with the private placement. Copies of the Securities Purchase Agreement and Statement of Designations, Preferences and Rights of the Series C Convertible Preferred Shares have been filed as exhibits to our Report on Form 6-K filed with the Commission on February 21, 2017. We issued 45,232 common shares in connection with the conversions of all our Series C Convertible Preferred Shares, and there are currently no Series C Convertible Preferred Shares outstanding.
Description of Series D Preferred Shares
On May 8, 2017, we issued 100,000 shares of Series D Preferred Shares to Tankers Family Inc., a company controlled by Lax Trust, which is an irrevocable trust established for the benefit of certain family members of Evangelos Pistiolis, for $1,000 pursuant to a stock purchase agreement. Each Series D Preferred Share has the voting power of one thousand (1,000) common shares.
On April 21, 2017, we were informed by ABN Amro Bank that we were in breach of a loan covenant that requires that any member of the family of Mr. Evangelos Pistiolis, maintain an ownership interest (either directly and/or indirectly through companies beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of 30% of our outstanding Common Shares. ABN Amro Bank requested that either the family of Mr. Evangelos Pistiolis maintain an ownership interest of at least 30% of the outstanding common shares or maintain a voting rights interest of above 50% in us. In order to regain compliance with the loan covenant, we issued the Series D Preferred Shares.
The Series D Preferred Stock has the following characteristics:
Conversion. The Series D Preferred Shares are not convertible into common shares.
Voting. Each Series D Preferred Share has the voting power of 1,000 common shares.
Distributions. The Series D Preferred Shares shall have no dividend or distribution rights.
Maturity.  The Series D Preferred Shares shall expire and all outstanding Series D shares shall be redeemed by us for par value on the date that any loan with any financial institution, which requires that any member of the family of Mr. Evangelos J. Pistiolis maintains a specific minimum ownership or voting interest (either directly and/or indirectly through companies or other entities beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of our issued and outstanding common shares, respectively, are fully repaid or reach their maturity date. The Series D Preferred Shares shall not be otherwise redeemable. Currently the SLBs with Bank of Communications Financial Leasing Company, Oriental Fleet International Company Limited and China Merchants Bank Financial Leasing have similar provisions that are satisfied via the existence of the Series D Shares.
Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of our Company, the Series D Preferred Shares shall have a liquidation preference of $0.01 per share.
The description of the Series D Convertible Preferred Shares is subject to and qualified in its entirety by reference to the Securities Purchase Agreement and Certificate of Designation of the Series D Preferred Shares. Copies of the Securities Purchase Agreement and Certificate of Designation of the Series D Preferred Shares have been filed as exhibits to our Report on Form 6-K filed with the Commission on May 8, 2017.
Description of Series E Convertible Preferred Stock
On April 1, 2019, we announced the sale of 27,129 newly issued Series E Preferred Shares at a price of $1,000 per share to Family Trading in exchange for the full and final settlement of the loan facility between our Company and Family Trading dated December 23, 2015, as amended.
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From July 25 to April 10, 2020, we redeemed 33,798 of Series E Preferred Shares for $38.9 million. On February 17, 2020 we issued 16,004 Series E Preferred Shares to Family Trading Inc., as settlement of the consideration outstanding for the purchase of the M/T Eco City of Angels and M/T Eco Los Angeles from parties affiliated with Mr. Pistiolis, and for dividends payable to Family Trading Inc. under already outstanding Series E Preferred Shares.
As of April 10, 2020, there were 10,364 shares of Series E Preferred Shares outstanding.
The Series E Preferred Shares have the following characteristics:
Conversion. Each holder of Series E Preferred Shares, at any time and from time to time, has the right, subject to certain conditions, to convert all or any portion of the Series E Preferred Shares then held by such holder into our common shares at the conversion rate then in effect. Each Series E Preferred Shares is convertible into the number of our common shares equal to the quotient of $1,000 plus any accrued and unpaid dividends divided by the lesser of the following four prices: (i) $20.00, (ii) 80% of the lowest daily VWAP of our common shares over the twenty consecutive trading days expiring on the trading day immediately prior to the date of delivery of a conversion notice, (iii) the conversion price or exercise price per share of any of our then outstanding convertible shares or warrants, (iv) the lowest issuance price of our common shares in any transaction from the date of the issuance the Series E Preferred Shares onwards, but in no event will the conversion price be less than $0.60.
Limitations of Conversion. Holders of the shares of Series E Preferred Shares shall be entitled to convert the Series E Preferred Shares in full, regardless of the beneficial ownership percentage of the holder after giving effect to such conversion.
Voting.  The holders of Series E Preferred Shares are entitled to the voting power of one thousand (1,000) of our common shares.  The holders of Series E Preferred Shares and the holders of our common shares shall vote together as one class on all matters submitted to a vote of our shareholders. The holders of Series E Preferred Shares have no special voting rights and their consent shall not be required for taking any corporate action.
Distributions. Upon any liquidation, dissolution or winding up of our Company, the holders of Series E Preferred Shares shall be entitled to receive the net assets of our Company pari passu with the Common Shares.
Redemption.  We at our option shall have the right to redeem a portion or all of the outstanding Series E Preferred Shares. We shall pay an amount equal to one thousand dollars ($1,000) per each Series E Preferred Shares, or the Liquidation Amount, plus a redemption premium equal to fifteen percent (15%) of the Liquidation Amount being redeemed if that redemption takes place up to and including March 29, 2020 and twenty percent (20%) of the Liquidation Amount being redeemed if that redemption takes place after March 29, 2020, plus an amount equal to any accrued and unpaid dividends on such Preferred Shares (collectively referred to as the "Redemption Amount"). In order to make a redemption, we shall first provide one business day advanced written notice to the holders of our intention to make a redemption, or the Redemption Notice, setting forth the amount it desires to redeem. After receipt of the Redemption Notice, the holders shall have the right to elect to convert all or any portion of its Series E Preferred Shares. Upon the expiration of the one business day period, we shall deliver to each holder the Redemption Amount with respect to the amount redeemed after giving effect to conversions effected during the notice period.
The Series E Preferred Shares shall not be subject to redemption in cash at the option of the holders thereof under any circumstance.
Dividends. The holders of outstanding Series E Preferred Shares shall be entitled to receive out of funds legally available for the purpose, semi-annual dividends payable in cash on the last day of June and December in each year (each such date being referred to herein as a "Semi Annual Dividend Payment Date"), commencing on the first Semi Annual Dividend Payment Date in an amount per share (rounded to the nearest cent) equal to fifteen percent (15%) per year of the liquidation amount of the then outstanding Series E Preferred Shares computed on the basis of a 365-day year and the actual days elapsed.
Accrued but unpaid dividends shall bear interest at fifteen percent (15%). Dividends paid on the Series E Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. Our Board of Directors may fix a record date for the determination of holders of Series E Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.
Ranking. All shares of Series E Preferred Shares shall rank pari passu with all classes of our common shares.
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The description of the Series E Preferred Shares is subject to and qualified in its entirety by reference to the Securities Purchase Agreement and Certificate of Designation of the Series E Preferred Shares. Copies of the Securities Purchase Agreement and Statement of Designation of the Series E Preferred Shares have been filed as exhibits to our Report on Form 6-K filed with the Commission on April 1, 2019.
History
Our predecessor, Ocean Holdings Inc., was formed as a corporation in January 2000 under the laws of the Republic of the Marshall Islands and renamed Top Tankers Inc. in May 2004. In December 2007, Top Tankers Inc. was renamed TOP Ships Inc. Our common shares are currently listed on Nasdaq under the symbol "TOPS."
Shareholder Meetings
Under our Amended and Restated By-Laws, annual shareholder meetings will be held at a time and place selected by our Board of Directors. The meetings may be held in or outside of the Marshall Islands. Special meetings of the shareholders, unless otherwise prescribed by law, may be called for any purpose or purposes at any time exclusively by our Board of Directors. Notice of every annual and special meeting of shareholders shall be given at least 15 but not more than 60 days before such meeting to each shareholder of record entitled to vote thereat.
Directors
Our directors are elected by a plurality of the votes cast at a meeting of the shareholders by the holders of shares entitled to vote in the election. Our Third Amended and Restated Articles of Incorporation and Amended and Restated By-laws, as further amended, prohibit cumulative voting in the election of directors.
Our Board of Directors must consist of at least one member and not more than twelve, as fixed from time to time by the vote of not less than 66 2/3% of the entire board. Each director shall be elected to serve until the third succeeding annual meeting of shareholders and until his successor shall have been duly elected and qualified, except in the event of his death, resignation, removal, or the earlier termination of his term of office. Our Board of Directors has the authority to fix the amounts which shall be payable to the members of our Board of Directors, and to members of any committee, for attendance at any meeting or for services rendered to us.
Classified Board
Our Amended and Restated Articles of Incorporation provide for the division of our Board of Directors into three classes of directors, with each class as nearly equal in number as possible, serving staggered, three-year terms. Approximately one-third of our Board of Directors will be elected each year. This classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of our company. It could also delay shareholders who do not agree with the policies of our Board of Directors from removing a majority of our Board of Directors for two years.
Election and Removal
Our Third Amended and Restated Articles of Incorporation and Amended and Restated By-Laws require parties other than our Board of Directors to give advance written notice of nominations for the election of directors. Our Third Amended and Restated Articles of Incorporation provide that our directors may be removed only for cause and only upon the affirmative vote of the holders of at least 80% of the outstanding shares of our capital stock entitled to vote for those directors. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.
Dissenters' Rights of Appraisal and Payment
Under the BCA, our shareholders have the right to dissent from various corporate actions, including certain mergers or consolidations or sales of all or substantially all of our assets not made in the usual course of our business, and receive payment of the fair value of their shares, subject to exceptions. For example, the right of a dissenting shareholder to receive payment of the fair value of his shares is not available if for the shares of any class or series of shares, which shares at the record date fixed to determine the shareholders entitled to receive notice of and vote at the meeting of shareholders to act upon the agreement of merger or consolidation, were either (1) listed on a securities exchange or admitted for trading on an interdealer quotation system or (2) held of record by more than 2,000 holders. In the event of any further amendment of the articles, a shareholder also has the right to dissent and receive payment for his or her shares if the amendment alters certain rights in respect of those shares. The dissenting shareholder must follow the procedures set forth in the BCA to receive payment. In the event that we and any dissenting shareholder fail to agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings in the High Court of the Republic of the Marshall Islands or in any appropriate court in any jurisdiction in which our shares are primarily traded on a local or national securities exchange. The value of the shares of the dissenting shareholder is fixed by the court after reference, if the court so elects, to the recommendations of a court-appointed appraiser.
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Shareholders' Derivative Actions
Under the BCA, any of our shareholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the shareholder bringing the action is a holder of common shares both at the time the derivative action is commenced and at the time of the transaction to which the action relates. On November 20, 2014, we amended our Amended and Restated By-Laws to provide that unless we consent in writing to the selection of alternative forum, the sole and exclusive forum for (i) any shareholders' derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other of our employees or our shareholders, (iii) any action asserting a claim arising pursuant to any provision of the BCA, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the High Court of the Republic of the Marshall Islands, in all cases subject to the court's having personal jurisdiction over the indispensable parties named as defendants. This provision of our By-Laws does not apply to actions arising under U.S. federal securities laws.
Anti-takeover Provisions of our Charter Documents
Several provisions of our Third Amended and Restated Articles of Incorporation and Amended and Restated By-Laws may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our Board of Directors to maximize shareholder value in connection with any unsolicited offer to acquire us. However, these anti-takeover provisions, which are summarized below, could also discourage, delay or prevent (1) the merger or acquisition of our company by means of a tender offer, a proxy contest or otherwise, that a shareholder may consider in its best interest and (2) the removal of incumbent officers and directors.
Business Combinations
Our Third Amended and Restated Articles of Incorporation include provisions which prohibit us from engaging in a business combination with an interested shareholder for a period of three years after the date of the transaction in which the person became an interested shareholder, unless:

prior to the date of the transaction that resulted in the shareholder becoming an interested shareholder, the Board approved either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder;

upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced;

at or subsequent to the date of the transaction that resulted in the shareholder becoming an interested shareholder, the business combination is approved by the Board and authorized at an annual or special meeting of shareholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested shareholder; and

the shareholder became an interested shareholder prior to the consummation of the initial public offering.
Limited Actions by Shareholders
Our Third Amended and Restated Articles of Incorporation and our Amended and Restated By-Laws provide that any action required or permitted to be taken by our shareholders must be effected at an annual or special meeting of shareholders or by the unanimous written consent of our shareholders.
Our Third Amended and Restated Articles of Incorporation and our Amended and Restated By-Laws provide that only our Board of Directors may call special meetings of our shareholders and the business transacted at the special meeting is limited to the purposes stated in the notice. Accordingly, a shareholder may be prevented from calling a special meeting for shareholder consideration of a proposal over the opposition of our Board of Directors and shareholder consideration of a proposal may be delayed until the next annual meeting.
Blank Check Preferred Stock
Under the terms of our Third Amended and Restated Articles of Incorporation, our Board of Directors has authority, without any further vote or action by our shareholders, to issue up to 20,000,000 shares of blank check preferred stock. Our Board of Directors may issue shares of preferred stock on terms calculated to discourage, delay or prevent a change of control of our company or the removal of our management.
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Super-majority Required for Certain Amendments to Our By-Laws
On February 28, 2007, we amended our by-laws to require that amendments to certain provisions of our by-laws may be made when approved by a vote of not less than 66 2/3% of the entire Board of Directors. These provisions that require not less than 66 2/3% vote of our Board of Directors to be amended are provisions governing: the nature of business to be transacted at our annual meetings of shareholders, the calling of special meetings by our Board of Directors, any amendment to change the number of directors constituting our Board of Directors, the method by which our Board of Directors is elected, the nomination procedures of our Board of Directors, removal of our Board of Directors and the filling of vacancies on our Board of Directors.
Stockholders Rights Agreement
On September 14, 2016, our Board of Directors declared a dividend of one preferred share purchase right, or a Right, for each outstanding common share and adopted a shareholder rights plan, as set forth in the Stockholders Rights Agreement dated as of September 22, 2016, or the Rights Agreement, by and between us and Computershare Trust Company, N.A. (now taken over by our new transfer agent, AST), as rights agent.
The Board adopted the Rights Agreement to protect shareholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires 15% or more of our outstanding common shares without the approval of our Board of Directors. If a shareholder's beneficial ownership of our common shares as of the time of the public announcement of the rights plan and associated dividend declaration is at or above the applicable threshold, that shareholder's then-existing ownership percentage would be grandfathered, but the rights would become exercisable if at any time after such announcement, the shareholder increases its ownership percentage by 1% or more.
The Rights may have anti-takeover effects. The Rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our Board of Directors. As a result, the overall effect of the Rights may be to render more difficult or discourage any attempt to acquire us. Because our Board of Directors can approve a redemption of the Rights for a permitted offer, the Rights should not interfere with a merger or other business combination approved by our Board.
For those interested in the specific terms of the Rights Agreement, we provide the following summary description. Please note, however, that this description is only a summary, and is not complete, and should be read together with the entire Rights Agreement, which is an exhibit to the Form 8-A filed by us on September 22, 2016 and incorporated herein by reference. The foregoing description of the Rights Agreement is qualified in its entirety by reference to such exhibit.
The Rights. The Rights trade with, and are inseparable from, our common shares. The Rights are evidenced only by certificates that represent our common shares. New Rights will accompany any new of our common shares issued after October 5, 2016 until the Distribution Date described below.
Exercise Price. Each Right allows its holder to purchase from us one one-thousandth of a share of Series A Participating Preferred Stock, or a Series A Preferred Share, for $50.00, or the Exercise Price, once the Rights become exercisable. This portion of a Series A Preferred Share will give the shareholder approximately the same dividend, voting and liquidation rights as would one common share. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights.
Exercisability. The Rights are not exercisable until ten days after the public announcement that a person or group has become an "Acquiring Person" by obtaining beneficial ownership of 15% or more of our outstanding common shares.
Certain synthetic interests in securities created by derivative positions—whether or not such interests are considered to be ownership of the underlying common shares or are reportable for purposes of Regulation 13D of the Exchange Act—are treated as beneficial ownership of the number of our common shares equivalent to the economic exposure created by the derivative position, to the extent our actual common shares are directly or indirectly held by counterparties to the derivatives contracts. Swaps dealers unassociated with any control intent or intent to evade the purposes of the Rights Agreement are excepted from such imputed beneficial ownership.
For persons who, prior to the time of public announcement of the Rights Agreement, beneficially own 15% or more of our outstanding common shares, the Rights Agreement "grandfathers" their current level of ownership, so long as they do not purchase additional shares in excess of certain limitations.
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The date when the Rights become exercisable is the "Distribution Date." Until that date, our common share certificates (or, in the case of uncertificated shares, by notations in the book-entry account system) will also evidence the Rights, and any transfer of our common shares will constitute a transfer of Rights. After that date, the Rights will separate from our common shares and will be evidenced by book-entry credits or by Rights certificates that we will mail to all eligible holders of our common shares. Any Rights held by an Acquiring Person are null and void and may not be exercised.
Series A Preferred Share Provisions
Each one one-thousandth of a Series A Preferred Share, if issued, will, among other things:

not be redeemable;

entitle holders to quarterly dividend payments in an amount per share equal to the aggregate per share amount of all cash dividends, and the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in our common shares or a subdivision of the our outstanding common shares (by reclassification or otherwise), declared on our common shares since the immediately preceding quarterly dividend payment date; and

entitle holders to one vote on all matters submitted to a vote of our shareholders.
The value of one one-thousandth interest in a Series A Preferred Share should approximate the value of one common share.
Consequences of a Person or Group Becoming an Acquiring Person.

Flip In.  If an Acquiring Person obtains beneficial ownership of 15% or more of our common shares, then each Right will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares (or, in certain circumstances, cash, property or other of our securities) having a then-current market value of twice the Exercise Price. However, the Rights are not exercisable following the occurrence of the foregoing event until such time as the Rights are no longer redeemable by us, as further described below.
Following the occurrence of an event set forth in preceding paragraph, all Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.

Flip Over. If, after an Acquiring Person obtains 15% or more of our common shares, (i) we merge into another entity; (ii) an acquiring entity merges into us; or (iii) we sell or transfer 50% or more of its assets, cash flow or earning power, then each Right (except for Rights that have previously been voided as set forth above) will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares of the person engaging in the transaction having a then-current market value of twice the Exercise Price.

Notional Shares. Shares held by affiliates and associates of an Acquiring Person, including certain entities in which the Acquiring Person beneficially owns a majority of the equity securities, and Notional Common Shares (as defined in the Rights Agreement) held by counterparties to a Derivatives Contract (as defined in the Rights Agreement) with an Acquiring Person, will be deemed to be beneficially owned by the Acquiring Person.
Redemption. Our Board of Directors may redeem the Rights for $0.01 per Right at any time before any person or group becomes an Acquiring Person. If our Board of Directors redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of the Rights will be to receive the redemption price of $0.01 per Right. The redemption price will be adjusted if we have a stock dividend or a stock split.
Exchange. After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of our outstanding common shares, the Board may extinguish the Rights by exchanging one common share or an equivalent security for each Right, other than Rights held by the Acquiring Person. In certain circumstances, we may elect to exchange the Rights for cash or other of our securities having a value approximately equal to one common share.
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Expiration. The Rights expire on the earliest of (i) September 22, 2026; or (ii) the redemption or exchange of the Rights as described above.
Anti-Dilution Provisions. The Board may adjust the purchase price of the Series A Preferred Shares, the number of Series A Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split, or a reclassification of the Series A Preferred Shares or our common shares. No adjustments to the Exercise Price of less than 1% will be made.
Amendments. The terms of the Rights and the Rights Agreement may be amended in any respect without the consent of the holders of the Rights on or prior to the Distribution Date. Thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the holders of Rights, with certain exceptions, in order to (i) cure any ambiguities; (ii) correct or supplement any provision contained in the Rights Agreement that may be defective or inconsistent with any other provision therein; (iii) shorten or lengthen any time period pursuant to the Rights Agreement; or (iv) make changes that do not adversely affect the interests of holders of the Rights (other than an Acquiring Person or an affiliate or associate of an Acquiring Person).
Taxes. The distribution of Rights should not be taxable for federal income tax purposes. However, following an event that renders the Rights exercisable or upon redemption of the Rights, shareholders may recognize taxable income.
2014 Warrants
Our 2014 Warrants contained certain anti-dilution provisions, which were triggered as a result of reverse stock splits, the Series B Transaction, the Equity Line Offering, the Series C Transaction, the First Purchase Agreement, the Second Purchase Agreement and Amended Family Trading Credit Facility. As of the date of this report, an aggregate 4,621,611 of the 2014 Warrants were exercised for a total issuance of 347,997 common shares and all the 2014 Warrants have expired.
2018 Warrants
On October 26, 2018, we priced a public offering of 100,000 common shares, and warrants to purchase 175,000 common shares, or the 2018 Warrants, at $30.00 per common share and $0.0002 per warrant. The 2018 Warrants had an exercise price of $30.00 per share and expired four months from the date of issuance. Each warrant granted the warrant holder the option to purchase one of our common shares at any time within the abovementioned term. By February 25, 2019, all of the 2018 Warrants had been exercised for 175,000 common shares and gross proceeds of $3.8 million.
Traditional Warrants
On September 13, 2019, we closed an underwritten public offering of an aggregate of 1,580,000 common shares or Pre-Funded Warrants, Traditional Warrants to purchase up to 1,790,000 of our common shares and an overallotment option of up to 237,000 common shares.  Each Traditional Warrant entitled the holder to purchase either 1 common share upon a cash exercise or 0.7 common shares upon a cashless exercise. Each Traditional Warrant had an exercise price of $8.19. The Traditional Warrants expired on December 31, 2019.
From September 13 to December 31, 2019, 1,245,089 common shares were issued pursuant to the cashless exercise of 1,778,700 Traditional Warrants.
2019 Class A Warrants and Class B Warrants
On November 6, 2019, concurrently with the November 2019 Registered Offering described above, we commenced a private placement whereby we issued and sold warrants to purchase up to 8,400,000 of our common shares. One-half of the warrants would have expired on the eight-month anniversary of the date of issuance of the common shares sold under the November 2019 Registered Offering (the Class A Warrants) and one-half of the warrants will expire on the eighteen-month anniversary of the date of issuance of the common shares sold under the November 2019 Registered Offering (the Class B Warrants). Each Class A Warrant was immediately exercisable as of the date of issuance of the common shares sold under the November 2019 Registered Offering (the "Exercise Date") at an exercise price of $2.00 per share, subject to adjustment. In addition, the Class A Warrants could be exercised on a cashless basis beginning on the earlier of (i) 30 days from the closing date and (ii) the trading day on which the aggregate trading volume of our common shares November 6, 2019 is equal to more than three times the number of common shares offered pursuant to the Purchase Agreement (the "Cashless Date") if the VWAP of the common shares on any Trading Day on or after the Cashless Date fails to exceed $3.20 on such date (as may be subject to adjustment). The number of common shares issuable in such cashless exercise were 0.4 of a common share that would be issuable upon exercise of the Class A Warrant in accordance with its terms if such exercise were by means of a cash exercise. No fractional common shares would have been issued in connection with the exercise of a Class A Warrant. In lieu of fractional shares, we would have paid the holder an amount in cash equal to the fractional amount multiplied by the exercise price. The foregoing adjustment to the exercise price of the Class B Warrant is subject to a floor price of $1.00. Between January 22 and February 22, 2020, all of the Class A Warrants (4,200,000) were exercised on a cashless basis into 1,680,000 of our common shares. As of the date of this report the exercise price of the Class B Warrant after adjustments for subsequent equity offerings is $1.00 per share (floor price).
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C.
Material Contracts
We refer you to "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Debt Facilities," "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources— Financing Commitments under Sale and Leaseback Arrangements," "Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions "Item 18. Financial Statements—Note 5—Transactions with related parties", "Item 18. Financial Statements—Note 6—Leases" and "Item 18. Financial Statements—Note 8—Debt " for a discussion of our material agreements that we have entered into outside the ordinary course of our business.
Other than these contracts, we have no other material contracts, other than contracts entered into in the ordinary course of business, to which we are a party.
D.
 Exchange controls
The Marshall Islands impose no exchange controls on non-resident corporations.
E.
Taxation
The following is a discussion of the material Marshall Islands and U.S. federal income tax considerations relevant to a U.S. Holder and a Non-U.S. Holder, each as defined below, with respect to the common shares. This discussion does not purport to deal with the tax consequences of owning common shares to all categories of investors, some of which, such as financial institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, insurance companies, persons holding our common shares as part of a hedging, integrated, conversion or constructive sale transaction or a straddle, traders in securities that have elected the mark-to-market method of accounting for their securities, persons liable for the alternative minimum tax or the "base erosion and anti-avoidance" tax, dealers in securities or currencies, U.S. Holders, as defined below, whose functional currency is not the U.S. dollar, persons required to recognize income for U.S. federal income tax purposes no later than when such income is included on an "applicable financial statement" and investors that own, actually or under applicable constructive ownership rules, 10% or more of our common shares, may be subject to special rules. This discussion deals only with holders who own hold the common shares as a capital asset. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under U.S. federal, state, local or non-U.S. law of the ownership of common shares.
Marshall Islands Tax Consequences
We are incorporated in the Republic of the Marshall Islands. Under current Marshall Islands law, we are not subject to tax on income or capital gains, and no Marshall Islands withholding tax will be imposed upon payments of dividends by us to our shareholders.
U.S. Federal Income Tax Consequences
The following are the material United States federal income tax consequences to us of our activities and to U.S. Holders and non-U.S. Holders, each as defined below, of our common shares. The following discussion of U.S. federal income tax matters is based on the U.S. Internal Revenue Code of 1986, as amended (the "Code"), judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the U.S. Department of the Treasury (the "Treasury Regulations"), all of which are subject to change, possibly with retroactive effect. The discussion below is based, in part, on the description of our business in "Item 4. Information on the Company—B. Business Overview." above and assumes that we conduct our business as described in that section. Except as otherwise noted, this discussion is based on the assumption that we will not maintain an office or other fixed place of business within the United States. References in the following discussion to "we" and "us" are to TOP Ships Inc. and its subsidiaries on a consolidated basis.
U.S. Federal Income Taxation of Our Company
Taxation of Operating Income: In General
Unless exempt from U.S. federal income taxation under the rules discussed below, a foreign corporation is subject to U.S. federal income taxation in respect of any income that is derived from the use of vessels, from the hiring or leasing of vessels for use on a time, voyage or bareboat charter basis, from the participation in a pool, partnership, strategic alliance, joint operating agreement, cost sharing arrangements or other joint venture it directly or indirectly owns or participates in that generates such income, or from the performance of services directly related to those uses, which we refer to as "shipping income," to the extent that the shipping income is derived from sources within the United States. For these purposes, 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States constitutes income from sources within the United States, which we refer to as "U.S.-source shipping income."
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Shipping income attributable to transportation that both begins and ends in the United States is considered to be 100% from sources within the United States. We are not permitted by law to engage in transportation that produces income which is considered to be 100% from sources within the United States.
Shipping income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from sources outside the United States. Shipping income derived from sources outside the United States will not be subject to any U.S. federal income tax.
In the absence of exemption from tax under Section 883 of the Code, our gross U.S.-source shipping income would be subject to a 4% tax imposed without allowance for deductions as described below.
Exemption of Operating Income from U.S. Federal Income Taxation
Under Section 883 of the Code and the regulations thereunder, we will be exempt from U.S. federal income tax on our U.S.-source shipping income if:

(1)
we are organized in a foreign country, or our country of organization, that grants an "equivalent exemption" to corporations organized in the United States; and

(2)
either

A.
more than 50% of the value of our stock is owned, directly or indirectly, by individuals who are "residents" of our country of organization or of another foreign country that grants an "equivalent exemption" to corporations organized in the United States (each such individual a "qualified shareholder" and such individuals collectively, "qualified shareholders"), which we refer to as the "50% Ownership Test," or

B.
our stock is "primarily and regularly traded on an established securities market" in our country of organization, in another country that grants an "equivalent exemption" to U.S. corporations, or in the United States, which we refer to as the "Publicly-Traded Test."
The Marshall Islands and Liberia, the jurisdictions where we and our ship-owning subsidiaries are incorporated, each grant an "equivalent exemption" to U.S. corporations. Therefore, we will be exempt from U.S. federal income tax with respect to our U.S.-source shipping income if either the 50% Ownership Test or the Publicly-Traded Test is met.
Based on information provided in Schedule 13D and Schedule 13G filings with the SEC and ownership certificates that we obtained from certain of our shareholders, we believe that we meet either the Publicly Traded Test or the 50% Ownership Test for the taxable year 2019 and intend to take this position on our U.S. federal income tax return or the 2019 year.  A, as discussed below, this is a factual determination made on an annual basis, and no assurance can be given that we will satisfy the Publicly-Traded Test or the 50% Ownership Test in future taxable years.  We anticipate taking the position on our and our subsidiaries' U.S. federal income tax returns for 2019 that we are exempt under Code section 883 by satisfying the Publicly-Traded Test.
Treasury Regulations provide, in pertinent part, that stock of a foreign corporation will be considered to be "primarily traded" on an established securities market if the number of shares of each class of stock that are traded during any taxable year on all established securities markets in that country exceeds the number of shares in each such class that are traded during that year on established securities markets in any other single country. Our common shares, which are our sole class of issued and outstanding stock, is and we anticipate will continue to be "primarily traded" on the Nasdaq Capital Market.
Under the Treasury Regulations, our common shares will be considered to be "regularly traded" on an established securities market if one or more classes of our stock representing more than 50% of our outstanding shares, by total combined voting power of all classes of stock entitled to vote and total value, is listed on the market, which we refer to as the "listing threshold." Since our common shares, our sole class of issued and outstanding stock, are listed on the Nasdaq Capital Market, we will satisfy the listing threshold.
It is further required that with respect to each class of stock relied upon to meet the listing threshold, (i) such class of stock be traded on the market, other than in minimal quantities, on at least 60 days during the taxable year or one-sixth of the days in a short taxable year, which we refer to as the "trading frequency test"; and (ii) the aggregate number of shares of such class of stock traded on such market is at least 10% of the average number of shares of such class of stock outstanding during such year or as appropriately adjusted in the case of a short taxable year, which we refer to as the "trading volume test." We believe we will satisfy the trading frequency and trading volume tests. Even if this were not the case, the Treasury Regulations provide that the trading frequency and trading volume tests will be deemed satisfied if, as is the case with our common shares, such class of stock is traded on an established securities market in the United States and such stock is regularly quoted by dealers making a market in such stock.
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Notwithstanding the foregoing, the Treasury Regulations provide, in pertinent part, that a class of our stock will not be considered to be "regularly traded" on an established securities market for any taxable year if 50% or more of the vote and value of the outstanding shares of such class of stock are owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the vote and value of the outstanding shares of such class of stock, which we refer to as the "5% Override Rule."
For purposes of being able to determine the persons who own 5% or more of our stock, or "5% Shareholders," the Treasury Regulations permit us to rely on those persons that are identified on Schedule 13G and Schedule 13D filings with the SEC, as having a 5% or more beneficial interest in our common shares. The Treasury Regulations further provide that an investment company identified on a SEC Schedule 13G or Schedule 13D filing which is registered under the Investment Company Act of 1940, as amended, will not be treated as a 5% Shareholder for such purposes.
In the event the 5% Override Rule is triggered, the Treasury Regulations provide that the 5% Override Rule will not apply if we can establish that among the closely-held group of 5% Shareholders, there are sufficient 5% Shareholders that are considered to be qualified shareholders for purposes of Section 883 of the Code to preclude non-qualified 5% Shareholders in the closely-held group from owning 50% or more of each class of our stock for more than half the number of days during such year. To establish and substantiate this exception to the 5% Override Rule, our 5% Shareholders who are qualified shareholders for purposes of Section 883 of the Code must comply with ownership certification procedures attesting that they are residents of qualifying jurisdictions, and each intermediary or other person in the chain of ownership between us and such 5% Shareholder must undertake similar compliance procedures.
For the 2019 taxable year, we believe that the 5% Override Rule was not triggered as less than 50% or more of the vote and value of our common shares was owned by 5% Shareholders on more than half of the days during the taxable year. Therefore, we intend to take the position for U.S. federal income tax reporting purposes that we are not subject to U.S. federal income taxation for the 2019 taxable year because more than 50% of our stock was not owned by non-qualified shareholders that each held 5% or more of our stock.  However, due to the factual nature of the issues, we may not qualify for the benefits of Section 883 of the Code for any future taxable year
Taxation in the Absence of Exemption under Section 883 of the Code
To the extent the benefits of Section 883 of the Code are unavailable, our U.S.-source shipping income, to the extent not considered to be "effectively connected" with the conduct of a U.S. trade or business, as described below, would be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions, which we refer to as the "4% gross basis tax regime." Since under the sourcing rules described above, no more than 50% of our shipping income would be treated as being derived from U.S. sources, the maximum effective rate of U.S. federal income tax on our shipping income would never exceed 2% under the 4% gross basis tax regime.
To the extent the benefits of the exemption under Section 883 of the Code are unavailable and our U.S.-source shipping income is considered to be "effectively connected" with the conduct of a U.S. trade or business, as described below, any such "effectively connected" U.S.-source shipping income, net of applicable deductions, would be subject to the U.S. federal corporate income tax imposed at a rate of 21%. In addition, we may be subject to the 30% "branch profits" tax on earnings effectively connected with the conduct of such U.S. trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of such U.S. trade or business.
Our U.S.-source shipping income would be considered "effectively connected" with the conduct of a U.S. trade or business only if:

We have, or are considered to have, a fixed place of business in the United States involved in the earning of shipping income; and

substantially all of our U.S.-source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States.
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We do not currently have, nor intend to have or permit circumstances that would result in having, any vessel operating to the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of our shipping operations and other activities, we believe that none of our U.S.-source shipping income will be "effectively connected" with the conduct of a U.S. trade or business.
U.S. Taxation of Gain on Sale of Vessels
Regardless of whether we qualify for exemption under Section 883 of the Code, we will not be subject to U.S. federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under U.S. federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by us will be considered to occur outside of the United States.
U.S. Federal Income Taxation of U.S. Holders
As used herein, the term "U.S. Holder" means a beneficial owner of our common shares that

is a U.S. citizen or resident, U.S. corporation or other U.S. entity taxable as a corporation, an estate the income of which is subject to U.S. federal income taxation regardless of its source, or a trust (i) if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) ) the trust has in effect a valid election to be treated as a United States person for U.S. federal income tax purposes;

owns the common shares as a capital asset, generally, for investment purposes; and

owns less than 10% of our common shares for U.S. federal income tax purposes.

If a partnership holds our common shares, the tax treatment of a partner of such partnership will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding our common shares, you are encouraged to consult your tax advisor.
Distributions
Subject to the discussion of passive foreign investment companies, or PFIC, below, any distributions made by us with respect to our common shares to a U.S. Holder will generally constitute dividends to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of such earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder's tax basis in his common shares on a dollar-for-dollar basis and thereafter as capital gain. Because we are not a U.S. corporation, U.S. Holders that are corporations will not be entitled to claim a dividends received deduction with respect to any distributions they receive from us. Dividends paid with respect to our common shares will generally be treated as "passive category income" for purposes of computing allowable foreign tax credits for U.S. foreign tax credit purposes.
Dividends paid on our common shares to a U.S. Holder who is an individual, trust or estate (a "U.S. Non-Corporate Holder") will generally be treated as "qualified dividend income" that is taxable to such U.S. Non-Corporate Holder at preferential tax rates provided that (1) the common shares are readily tradable on an established securities market in the United States (such as the Nasdaq Capital Market on which our common shares are traded); (2) we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (as discussed in more detail below); (3) the U.S. Non-Corporate Holder has owned the common shares for more than 60 days in the 121-day period beginning 60 days before the date on which the common shares become ex-dividend; and (4) the U.S. Non-Corporate Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property.
We believe that we were not a PFIC for our 2014 through 2019 taxable years, and we do not expect to be a PFIC for subsequent taxable years. If we were treated as a PFIC for our 2019 taxable year, any dividends paid by us during 2019 and 2020 will not be treated as "qualified dividend income" in the hands of a U.S. Non-Corporate Holder. Any dividends we pay which are not eligible for the preferential rates applicable to "qualified dividend income" will be taxed as ordinary income to a U.S. Non-Corporate Holder.
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Special rules may apply to any "extraordinary dividend," generally, a dividend paid by us in an amount which is equal to or in excess of 10% of a shareholder's adjusted tax basis in (or, in certain circumstances, fair market value of) a common share or dividends received within a one-year period that, in the aggregate, equal or exceed 20% of a shareholder's adjusted tax basis (or fair market value upon the shareholder's election) in a common share. If we pay an "extraordinary dividend" on our common shares that is treated as "qualified dividend income," then any loss derived by a U.S. Non-Corporate Holder from the sale or exchange of such common shares will be treated as long-term capital loss to the extent of such dividend.
Sale, Exchange or other Disposition of Common shares
Subject to the discussion of our status as a PFIC below, a U.S. Holder generally will recognize taxable gain or loss upon a sale, exchange or other disposition of our common shares in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder's tax basis in such stock. Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder's holding period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated as U.S.-source income or loss, as applicable, for U.S. foreign tax credit purposes. A U.S. Holder's ability to deduct capital losses is subject to certain limitations.
3.8% Tax on Net Investment Income
A U.S. Holder that is an individual, estate, or, in certain cases, a trust, will generally be subject to a 3.8% tax on the lesser of (1) the U.S. Holder's net investment income for the taxable year and (2) the excess of the U.S. Holder's modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals is between $125,000 and $250,000).  A U.S. Holder's net investment income will generally include distributions made by us which constitute a dividend for U.S. federal income tax purposes and gain realized from the sale, exchange or other disposition of our common shares.  This tax is in addition to any income taxes due on such investment income.
If you are a U.S. Holder that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of the 3.8% tax on net investment income to the ownership and disposition of our common shares.
Passive Foreign Investment Company Status and Significant Tax Consequences
Special U.S. federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a PFIC for U.S. federal income tax purposes. In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which such holder held our common shares, either

at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business); or

at least 50% of the average value of the assets held by the corporation during such taxable year produce, or are held for the production of, passive income.
For purposes of determining whether we are a PFIC, we will be treated as earning and owning our proportionate share of the income and assets, respectively, of any of our subsidiary corporations in which we own at least 25% of the value of the subsidiary's stock. Income earned, or deemed earned, by us in connection with the performance of services would not constitute "passive income" for these purposes. By contrast, rental income would generally constitute "passive income" unless we were treated under specific rules as deriving our rental income in the active conduct of a trade or business.
In general, income derived from the bareboat charter of a vessel will be treated as "passive income" for purposes of determining whether we are a PFIC and such vessel will be treated as an asset which produces or is held for the production of "passive income."  On the other hand, income derived from the time charter of a vessel should not be treated as "passive income" for such purpose, but rather should be treated as services income; likewise, a time chartered vessel should generally not be treated as an asset which produces or is held for the production of "passive income."
We believe that we were a PFIC for our 2013 taxable year because we believe that at least 50% of the average value of our assets consisted of vessels which were bareboat chartered and at least 75% of our gross income was derived from vessels on bareboat charter.
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We believe that we were not a PFIC for our 2014 through 2019 taxable years because we had no bareboat chartered vessels and consequently no gross income from vessels on bareboat charter. Furthermore, based on our current assets and activities, we do not believe that we will be a PFIC for the subsequent taxable years. Although there is no legal authority directly on point, and we are not relying upon an opinion of counsel on this issue, our belief is based principally on the position that, for purposes of determining whether we are a passive foreign investment company, the gross income we derive or are deemed to derive from the time chartering and voyage chartering activities of our wholly-owned subsidiaries should constitute services income, rather than rental income. Correspondingly, such income should not constitute passive income, and the assets that we or our wholly-owned subsidiaries own and operate in connection with the production of such income, in particular, the vessels, should not constitute passive assets for purposes of determining whether we were a passive foreign investment company. We believe there is substantial legal authority supporting our position consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, in the absence of any legal authority specifically relating to the statutory provisions governing passive foreign investment companies, the IRS or a court could disagree with our position. In addition, although we intend to conduct our affairs in a manner to avoid being classified as a passive foreign investment company with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future.
If we are a PFIC for any taxable year, a U.S. Holder will be treated as owning his proportionate share of the stock of any of our subsidiaries which is a PFIC.  The PFIC rules discussed below will apply on a company-by-company basis with respect to us and each of our subsidiaries which is treated as a PFIC.
As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a U.S. Holder would be subject to different U.S. federal income taxation rules depending on whether the U.S. Holder makes an election to treat us as a "Qualified Electing Fund," which election is referred to as a "QEF Election." As discussed below, as an alternative to making a QEF Election, a U.S. Holder should be able to make a "mark-to-market" election with respect to our common shares, which election is referred to as a "Mark-to-Market Election". A U.S. Holder holding PFIC shares that does not make either a "QEF Election" or "Mark-to-Market Election" will be subject to the Default PFIC Regime, as defined and discussed below in "Taxation—U.S. Federal Income Taxation of U.S. Holders—Taxation of U.S. Holders Not Making a Timely QEF or "Mark-to-Market" Election."
If we were to be treated as a PFIC, a U.S. Holder would be required to file, with respect to taxable years ending on or after December 31, 2013, IRS Form 8621 to report certain information regarding us.
A U.S. Holder who held our common shares during any period in which we were treated as a PFIC and who neither made a QEF Election nor a Mark-to-Market Election may continue to be subject to the Default PFIC Regime, notwithstanding that we are no longer a PFIC. If you are a U.S. Holder who held our common shares during any period in which we were a PFIC but failed to make either of the foregoing elections, you are strongly encouraged to consult your tax advisor regarding the U.S. federal income tax consequences to you of holding our common shares in periods in which we are no longer a PFIC.
The QEF Election
If a U.S. Holder makes a timely QEF Election, which U.S. Holder we refer to as an "Electing Holder," the Electing Holder must report each year for United States federal income tax purposes his pro rata share of our ordinary earnings and our net capital gain, if any, for our taxable year that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions were made by us to the Electing Holder. The Electing Holder's adjusted tax basis in the common shares will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed will result in a corresponding reduction in the adjusted tax basis in the common shares and will not be taxed again once distributed. An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of our common shares. A U.S. Holder would make a QEF Election with respect to any year that our company is a PFIC by filing one copy of IRS Form 8621 with his United States federal income tax return and a second copy in accordance with the instructions to such form. It should be noted that if any of our subsidiaries is treated as a corporation for U.S. federal income tax purposes, a U.S. Holder must make a separate QEF Election with respect to each such subsidiary.
Taxation of U.S. Holders Making a "Mark-to-Market" Election
Making the Election.  Alternatively, if, as is anticipated, our common shares is treated as "marketable stock," a U.S. Holder would be allowed to make a Mark-to-Market Election with respect to the common shares, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations.  The common shares will be treated as "marketable stock" for this purpose if they are "regularly traded" on a "qualified exchange or other market."  The common shares will be "regularly traded" on a qualified exchange or other market for any calendar year during which they are traded (other than in de minimis quantities) on at least 15 days during each calendar quarter.  A "qualified exchange or other market" means either a U.S. national securities exchange that is registered with the SEC, the Nasdaq Capital Market, or a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located and which satisfies certain regulatory and other requirements.  We believe that the Nasdaq Capital Market should be treated as a "qualified exchange or other market" for this purpose.  However, it should be noted that a separate Mark-to-Market Election would need to be made with respect to each of our subsidiaries which is treated as a PFIC.  The stock of these subsidiaries is not expected to be "marketable stock."  Therefore, a "mark-to-market" election is not expected to be available with respect to these subsidiaries.
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Current Taxation and Dividends.  If the Mark-to-Market Election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the common shares at the end of the taxable year over such U.S. Holder's adjusted tax basis in the common shares.  The U.S. Holder would also be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder's adjusted tax basis in its common shares over their fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the Mark-to-Market Election.  Any income inclusion or loss under the preceding rules should be treated as gain or loss from the sale of common shares for purposes of determining the source of the income or loss.  Accordingly, any such gain or loss generally should be treated as U.S.-source income or loss for U.S. foreign tax credit limitation purposes.  A U.S. Holder's tax basis in his common shares would be adjusted to reflect any such income or loss amount.  Distributions by us to a U.S. Holder who has made a Mark-to-Market Election generally will be treated as discussed above under "Taxation—U.S. Federal Income Taxation of U.S. Holders—Distributions."
Sale, Exchange or Other Disposition.  Gain realized on the sale, exchange, redemption or other disposition of the common shares would be treated as ordinary income, and any loss realized on the sale, exchange, redemption or other disposition of the common shares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Holder.  Any loss in excess of such previous inclusions would be treated as a capital loss by the U.S. Holder.  A U.S. Holder's ability to deduct capital losses is subject to certain limitations.  Any such gain or loss generally should be treated as U.S.-source income or loss for U.S. foreign tax credit limitation purposes.
Taxation of U.S. Holders Not Making a Timely QEF or "Mark-to-Market" Election
Finally, a U.S. Holder who does not make either a QEF Election or a Mark-to-Market Election with respect to any taxable year in which we are treated as a PFIC, or a U.S. Holder whose QEF Election is invalidated or terminated, or a Non-Electing Holder, would be subject to special rules, or the Default PFIC Regime, with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on the common shares in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder's holding period for the common shares), and (2) any gain realized on the sale, exchange, redemption or other disposition of the common shares.
Under the Default PFIC Regime:

the excess distribution or gain would be allocated ratably over the Non-Electing Holder's aggregate holding period for the common shares;

the amount allocated to the current taxable year and any taxable year before we became a PFIC would be taxed as ordinary income; and

the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed tax deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.
Any distributions other than "excess distributions" by us to a Non-Electing Holder will be treated as discussed above under "Taxation—U.S. Federal Income Taxation of U.S. Holders—Distributions."
These penalties would not apply to a pension or profit sharing trust or other tax-exempt organization that did not borrow funds or otherwise utilize leverage in connection with its acquisition of the common shares.  If a Non-Electing Holder who is an individual dies while owning the common shares, such Non-Electing Holder's successor generally would not receive a step-up in tax basis with respect to the common shares.
U.S. Federal Income Taxation of "Non-U.S. Holders"
A beneficial owner of our common shares (other than a partnership) that is not a U.S. Holder is referred to herein as a "Non-U.S. Holder."
Dividends on Common shares
Non-U.S. Holders generally will not be subject to U.S. federal income tax or withholding tax on dividends received from us with respect to our common shares, unless that income is effectively connected with a trade or business conducted by the Non-U.S. Holder in the United States. If the Non-U.S. Holder is entitled to the benefits of a U.S. income tax treaty with respect to those dividends, that income is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States.
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Sale, Exchange or Other Disposition of Common shares
Non-U.S. Holders generally will not be subject to U.S. federal income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of our common shares, unless:

the gain is effectively connected with a trade or business conducted by the Non-U.S. Holder in the United States. If the Non-U.S. Holder is entitled to the benefits of a U.S. income tax treaty with respect to that gain, that gain is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States; or

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

fail to provide an accurate taxpayer identification number;

are notified by the IRS that you have failed to report all interest or dividends required to be shown on your U.S. federal income tax returns; or

in certain circumstances, fail to comply with applicable certification requirements.
Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on an applicable IRS Form W-8.
If you sell your common shares to or through a U.S. office of a broker, the payment of the proceeds is subject to both U.S. backup withholding and information reporting unless you certify that you are a non-U.S. person, under penalties of perjury, or you otherwise establish an exemption. If you sell your common shares through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to you outside the United States, then information reporting and backup withholding generally will not apply to that payment. However, U.S. information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made to you outside the United States, if you sell your common shares through a non-U.S. office of a broker that is a U.S. person or has some other contacts with the United States. Backup withholding tax is not an additional tax. Rather, you generally may obtain a refund of any amounts withheld under backup withholding rules that exceed your U.S. federal income tax liability by filing a refund claim with the IRS.
Individuals who are U.S. Holders (and to the extent specified in applicable Treasury Regulations, certain individuals who are Non-U.S. Holders and certain U.S. entities) who hold "specified foreign financial assets" (as defined in Section 6038D of the Code) are required to file IRS Form 8938 with information relating to the asset for each taxable year in which the aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year (or such higher dollar amount as prescribed by applicable Treasury Regulations). Specified foreign financial assets would include, among other assets, our common shares, unless the shares are held through an account maintained with a U.S. financial institution. Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, in the event an individual U.S. Holder (and to the extent specified in applicable Treasury regulations, an individual Non-U.S. Holder or a U.S. entity) that is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three years after the date that the required information is filed.  U.S. Holders (including U.S. entities) and Non-U.S. Holders are encouraged to consult their own tax advisors regarding their reporting obligations under this legislation.
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F.
Dividends and Paying Agents
Not applicable.
G.
Statement by Experts
Not applicable.
H.
Documents on Display
We file annual reports and other information with the SEC. Our SEC filings are available to the public at the web site maintained by the SEC at http://www.sec.gov, as well as on our website at http://www.topships.org.
I.
Subsidiary Information
Not applicable.
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our Risk Management Policy
Market risks relating to adverse movements in freight rates in the product tanker and crude oil tanker markets are minimized due to the fact that all the vessels in our fleet are under period employment earning fixed time charter rates. Our policy is to continuously monitor our exposure to other business risks, including the impact of changes in interest rates, currency rates, and bunker prices on earnings and cash flows. We assess these risks and, when appropriate, enter into derivative contracts with credit-worthy counterparties to minimize our exposure to the risks. With regard to bunker prices, as our employment policy for our vessels has been and is expected to continue to be with a high percentage of our fleet on period employment, we are not directly exposed with respect to those vessels to increases in bunker fuel prices, as these are the responsibility of the charterer under period charter arrangements.
Interest Rate Risk
As of December 31, 2019 we are exposed to interest rate risk in relation to our floating rate indebtedness only in the OFI facility, the AT Bank Senior Facility and the AT Bank Bridge Note (See "Item 18. Financial Statements—Note 8—Debt"). We may be subject to additional market risks relating to changes in interest rates when we take on additional indebtedness. In order to manage our exposure to changes in interest rates due to this floating rate indebtedness, we enter into interest rate swap ("IRS") agreements.
Set forth below is a table of our interest rate swap arrangements as of December 31, 2019 (in thousands of U.S. dollars).
SWAP
Number (Nr)
Counterparty
Notional amount as of
December 31, 2019
Start Date
End Date
Fixed Rate
Payable
Fair Value – Asset/(Liability)
as of December 31, 2019
1
ABN Amro
14,113
April 13, 2018
July 13, 2021
1.4425%
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2
ABN Amro
14,888
December 21, 2016
January 13, 2022
2.08%
(113)
3
Alpha Bank
19,100
March 29, 2018
February 25, 2025
2.97%
(985)
 
 Total
48,101
     
(1,016)
Under all above IRS transactions, each bank effects quarterly floating-rate payments to us for the relevant amount based on the three-month USD LIBOR, and we effect quarterly payments to each bank on the relevant amount at the respective fixed rates.
As of December 31, 2019, our total indebtedness excluding unamortized financing fees was $316.6 million, of which $48.1 million was covered by the IRS agreements described above and $ 164.0 million refer to the Cargill, Bocomm and CMBFL SLB financing facilities the interest rate of which does not fluctuate. As set forth in the above table, as of December 31, 2019, we paid fixed rates ranging from 1.4425% to 2.97% and received floating rates on the IRSs that are based on three month LIBOR. As of December 31, 2019, our IRS agreements are, on an average basis, above the prevailing three month LIBOR rates over which our loans are priced (please see Please see "Item 18. Financial Statements—Note 15— 15.Financial Instruments." for more details)
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Based on the amount of our floating rate  outstanding indebtedness, not covered by IRSs, as of December 31, 2019, a hypothetical one percentage point increase in the three month U.S. dollar LIBOR would increase our interest rate expense for 2020, on an annualized basis, by approximately $1.0 million. Based on the amount of our outstanding indebtedness, not covered by interest rate swaps, as of December 31, 2018, a hypothetical one percentage point increase in the three month U.S. dollar LIBOR would have increased our interest rate expense for 2019, on an annualized basis, by approximately $0.4 million.
Foreign Exchange Rate Fluctuation
We generate all of our revenues in U.S. dollars but incur certain expenses in currencies other than U.S. dollars, mainly the Euro. During 2019, approximately 97.1% of our expenses were in U.S. Dollars, 2.5% were in Euro and approximately 0.4% were in other currencies than the U.S. dollar or Euro. For accounting purposes, expenses incurred in other currencies are converted into U.S. dollars at the exchange rate prevailing on the date of each transaction. We have not hedged currency exchange risks associated with our expenses and our operating results could be adversely affected as a result. We constantly monitor the U.S. dollar exchange rate and we try to achieve the most favorable exchange rates from the financial institutions we work with.
Based on our total expenses for the year ended December 31, 2019, and using as an average exchange rate of $1.1192 to €1, a 5% decrease in the exchange rate to $1.0633 to €1 would result in an expense saving of approximately $0.08 million.
Based on our total expenses for the year ended December 31, 2018, and using as an average exchange rate of $11.1784 to €1, a 5% decrease in the exchange rate to $1.1195 to €1 would result in an expense saving of approximately $0.08 million.
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not Applicable.
PART II
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Neither we nor any of our subsidiaries have been subject to a material default in the payment of principal, interest, a sinking fund or purchase fund installment or any other material default that was not cured within 30 days.
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
On September 14, 2016, we have adopted a Stockholders Rights Agreement, pursuant to which each of our common shares 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 A Participating Preferred Stock if any third-party seeks to acquire control of a substantial block of our common shares without the approval of our Board of Directors. See "Item 10. Additional Information—B. Memorandum and Articles of Association—Stockholders Rights Agreement" included in this annual report for a description of our Stockholders Rights Agreement.
Please also see "Item 10. Additional Information—B. Memorandum and Articles of Association" for a description of the rights of holders of our Series B and Series C Convertible Preferred Shares, Series D Preferred Shares and Series E Preferred Shares relative to the rights of holders of our common shares.
ITEM 15.
CONTROLS AND PROCEDURES
a)  Disclosure Controls and Procedures
Management, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act, as of December 31, 2019.
The term disclosure controls and procedures are defined under SEC rules as controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
88


Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 31, 2019.
b)  Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act.
Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of Company's management and directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within us have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management with the participation of our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of our internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of its assessment, the Chief Executive Officer and Chief Financial Officer concluded that our internal controls over financial reporting are effective as of December 31, 2019.
c)  Attestation Report of the Registered Public Accounting Firm
This annual report does not contain an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm since under the SEC adopting release implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, companies that are non-accelerated filers are exempt from including auditor attestation reports in their Form 20-Fs.
d) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this annual report that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
89


ITEM 16A.
 AUDIT COMMITTEE FINANCIAL EXPERT
We have established an audit committee composed of three independent members that are responsible for reviewing our accounting controls and recommending to our Board of Directors the engagement of our outside auditors.
We do not believe it is necessary to have a financial expert, as defined in Item 407 of Regulation S-K, because our Board of Directors has determined that the members of the audit committee have the financial experience and other relevant experience necessary to effectively perform the duties and responsibilities of the audit committee.
ITEM 16B.
 CODE OF ETHICS
Our Board of Directors has adopted a Corporate Code of Business Ethics and Conduct that applies to all employees, directors and officers, which complies with applicable guidelines issued by the SEC. The finalized Code of Ethics has been approved by our Board of Directors and was distributed to all employees, directors and officers. We will also provide any person a hard copy of our code of ethics free of charge upon written request. Shareholders may direct their requests to the attention of Mr. Alexandros Tsirikos at our registered address and phone number.
ITEM 16C.
 PRINCIPAL AUDITOR AND SERVICES
Aggregate fees billed to us for the years ended December 2018 and 2019 represent fees billed by our principal accounting firm, Deloitte Certified Public Accountants S.A., an independent registered public accounting firm and member of Deloitte Touche Tohmatsu, Limited. Audit fees represent compensation for professional services rendered for the audit of the consolidated financial statements, fees for the review of interim financial information as well as in connection with the review of registration statements and related consents and comfort letters and any other audit services required for SEC or other regulatory filings. For 2018 and 2019, no other non-audit, tax or other fees were charged.
U.S. dollars in thousands,
Year Ended
 
 
2018
 
2019
 
Audit Fees
   
218.1
     
340.7
 
Our audit committee pre-approves all audit, audit-related and non-audit services not prohibited by law to be performed by our independent auditors and associated fees prior to the engagement of the independent auditor with respect to such services.
ITEM 16D.
 EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F.
 CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G.
 CORPORATE GOVERNANCE
We have certified to Nasdaq that our corporate governance practices are in compliance with, and are not prohibited by, the laws of the Republic of the Marshall Islands. Therefore, we are exempt from many of Nasdaq's corporate governance practices other than the submission of a listing agreement, notification to Nasdaq of non-compliance with Nasdaq corporate governance practices, prohibition on disparate reduction or restriction of shareholder voting rights, and the establishment of an audit committee satisfying Nasdaq Listing Rule 5605(c)(3) and ensuring that such audit committee's members meet the independence requirement of Listing Rule 5605(c)(2)(A)(ii). The practices we follow in lieu of Nasdaq's corporate governance rules applicable to U.S. domestic issuers are as follows:

Majority Independent Board. Nasdaq requires, among other things, that a listed company has a Board of Directors comprised of a majority of independent directors. As permitted under Marshall Islands law, our Board of Directors is comprised of three independent directors and two executive directors.
90



Audit Committee.  Nasdaq requires, among other things, that a listed company has an audit committee with a minimum of three independent members, at least one of whom meets certain standards of financial sophistication. As permitted under Marshall Islands law, our audit committee consists of three independent directors but we do not designate any one audit commit member as meeting the standards of financial sophistication.

As a foreign private issuer, we are not required to hold regularly scheduled board meetings at which only independent directors are present.

In lieu of obtaining shareholder approval prior to the issuance of designated securities, we will comply with provisions of the BCA, which allows our Board of Directors to approve share issuances.
As a foreign private issuer, we are not required to solicit proxies or provide proxy statements to Nasdaq pursuant to Nasdaq corporate governance rules or Marshall Islands law. Consistent with Marshall Islands law and as provided in our bylaws, we will notify our shareholders of meetings between 15 and 60 days before the meeting. This notification will contain, among other things, information regarding business to be transacted at the meeting. In addition, our bylaws provide that shareholders must give us between 120 and 180 days advance notice to properly introduce any business at a meeting of shareholders.
Other than as noted above, we are in compliance with all other Nasdaq corporate governance standards applicable to U.S. domestic issuers.

91


ITEM 16H.
MINE SAFETY DISCLOSURE
Not Applicable.
PART III
ITEM 17.
FINANCIAL STATEMENTS
See Item 18.
ITEM 18.
FINANCIAL STATEMENTS
The financial statements beginning on page F-1 are filed as a part of this annual report.
ITEM 19.
EXHIBITS
Number
Description of Exhibits
 
1.1
   
1.2
   
1.3
   
1.4
   
1.5
   
1.6
   
1.7
   
1.8
   
1.9
   
1.10
   
92


1.11
   
1.12
   
2.1
   
2.2
   
2.3
   
2.4
   
2.5
   
2.6
   
2.7
   
2.8
   
2.9
   
2.10
   
2.11
   
2.12
   
2.13
   
2.14
   
2.15
   
4.1
   
4.2
   
4.3
   
4.4
   
4.5
   
4.6
   
93


4.7
   
4.8
   
4.9
   
4.10
   
4.11
   
4.12
   
4.13
   
4.14
   
4.15
   
4.16
   
4.17
   
4.18
   
4.19
   
4.20

4.21
   
4.22
   
4.23
   
4.24
   
4.25
   
4.26
   
4.27
   
4.28
   
4.29
   
94


4.30
   
4.31
   
4.32
   
4.33
   
4.34
   
4.35
   
4.36
   
4.37
   
4.38

4.39
   
4.40
   
4.41
   
4.42
   
4.43
   
4.44
   
4.45
   
4.46
   
4.47
   
4.48
   
95


4.49
   
4.50
   
4.51
   
4.52
   
4.53
   
4.54
   
4.55
   
4.56
   
4.57
   
4.58
   
4.59
   
4.60
   
4.61
   
8.1
   
12.1
   
12.2
   
13.1
   
13.2
   
15.1
   
101
The following materials from the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2019, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of December 31, 2018 and 2019; (ii) Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2017, 2018 and 2019; (iii) Consolidated Statements of Stockholders' Equity for the years ended December 31, 2017, 2018 and 2019; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2018 and 2019; and (v) Notes to Consolidated Financial Statements



96

(1)
Incorporated by reference to Exhibit 99.2 of the Company's Current Report on Form 6-K, filed on June 24, 2011.
(2)
Incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 6-K, filed on April 18, 2014.
(3)
Incorporated by reference to Exhibit 1.3 of the Company's Annual Report on Form 20-F, filed on April 26, 2016.
(4)
Incorporated by reference to Exhibit 1.4 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(5)
Incorporated by reference to Exhibit 1.5 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(6)
Incorporated by reference to Exhibit 1.6 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(7)
Incorporated by reference to Exhibit 1.7 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(8)
Incorporated by reference to Exhibit 1.8 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(9)
Incorporated by reference to Exhibit 1.9 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(10)
Incorporated by reference to Exhibit 99.2 of the Company's Current Report on Form 6-K, filed on August 22, 2019.
(11)
Incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 6-K filed on March 9, 2007.
(12)
Incorporated by reference to Exhibit 1 of the Company's Current Report on Form 6-K filed on November 28, 2014.
(13)
Incorporated by reference to Exhibit 2.1 of the Company's Annual Report on Form 20-F, filed on June 29, 2009.
(14)
Incorporated by reference to Exhibit 2.2 of the Company's Annual Report on Form 20-F, filed on March 14, 2017.
(15)
Incorporated by reference to Exhibit 4.3 of the Company's Post-Effective Amendment No. 1 to the Registration Statement on Form F-1, filed on May 9, 2016 (File No. 333-194690).
(16)
Incorporated by reference to Exhibit 4.1 of the Company's Pre-Effective Amendment No. 2 to the Registration Statement on Form F-1, filed on May 13, 2014 (File No. 333-194690).
(17)
Incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 6-K, filed on October 24, 2018.
(18)
Incorporated by reference to Exhibit 3 of the Company's Current Report on Form 6-K, filed on September 19, 2019.
(19)
Incorporated by reference to Exhibit 2 of the Company's Current Report on Form 6-K, filed on September 19, 2019.
(20)
Incorporated by reference to Exhibit 3 of the Company's Current Report on Form 6-K, filed on November 7, 2019.
(21)
Incorporated by reference to Exhibit 4 of the Company's Current Report on Form 6-K, filed on November 7, 2019.
(22)
Incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 6-K, filed on September 22, 2016.
97


(23)
Incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 6-K, filed on November 23, 2016.
(24)
Incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 6-K, filed on February 21, 2017.
(25)
Incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 6-K, filed on May 8, 2017.
(26)
Incorporated by reference to Exhibit 99.2 of the Company's Current Report on Form 6-K, filed on April 1, 2019.
(27)
Incorporated by reference to Exhibit 4.1 of the Company's Annual Report on Form 20-F, filed on April 26, 2016.
(28)
Incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 6-K, filed on September 22, 2016.
(29)
Incorporated by reference to Exhibit 4.5 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(30)
Incorporated by reference to Exhibit 4.6 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(31)
Incorporated by reference to Exhibit 4.7 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(32)
Incorporated by reference to Exhibit 4.8 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(33)
Incorporated by reference to Exhibit 10.42 of the Company's Registration Statement on Form F-1, filed on March 19, 2014, as amended (File No. 333-194960).
(34)
Incorporated by reference to Exhibit 10.43 of the Company's Registration Statement on Form F-1, filed on March 19, 2014, as amended (File No. 333-194960).
(35)
Incorporated by reference to Exhibit 4.29 of the Company's Annual Report on Form 20-F, filed on April 29, 2015.
(36)
Incorporated by reference to Exhibit 4.30 of the Company's Annual Report on Form 20-F, filed on April 29, 2015.
(37)
Incorporated by reference to Exhibit 4.33 of the Company's Annual Report on Form 20-F, filed on April 29, 2015.
(38)
Incorporated by reference to Exhibit 4.56 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(39)
Incorporated by reference to Exhibit 4.57 of the Company's Annual Report on Form 20-F, filed on March 29, 2018.
(40)
Incorporated by reference to Exhibit 4.31 of the Company's Annual Report on Form 20-F, filed on April 29, 2015.
(41)
Incorporated by reference to Exhibit 4.32 of the Company's Annual Report on Form 20-F, filed on April 29, 2015.
(42)
Incorporated by reference to Exhibit 4.34 of the Company's Annual Report on Form 20-F, filed on April 29, 2015.
(43)
Incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 6-K, filed on January 11, 2019.
(44)
Incorporated by reference to Exhibit 4.87 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(45)
Incorporated by reference to Exhibit 4.88 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
98


(46)
Incorporated by reference to Exhibit 4.89 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(47)
Incorporated by reference to Exhibit 4.90 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(48)
Incorporated by reference to Exhibit 4.91 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(49)
Incorporated by reference to Exhibit 4.92 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(50)
Incorporated by reference to Exhibit 4.96 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(51)
Incorporated by reference to Exhibit 4.97 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(52)
Incorporated by reference to Exhibit 4.98 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(53)
Incorporated by reference to Exhibit 4.99 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(54)
Incorporated by reference to Exhibit 4.100 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(55)
Incorporated by reference to Exhibit 4.101 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(56)
Incorporated by reference to Exhibit 4.102 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(57)
Incorporated by reference to Exhibit 4.103 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(58)
Incorporated by reference to Exhibit 4.104 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(59)
Incorporated by reference to Exhibit 4.105 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(60)
Incorporated by reference to Exhibit 4.106 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(61)
Incorporated by reference to Exhibit 4.107 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(62)
Incorporated by reference to Exhibit 4.108 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(63)
Incorporated by reference to Exhibit 4.109 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(64)
Incorporated by reference to Exhibit 4.110 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(65)
Incorporated by reference to Exhibit 4.111 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(66)
Incorporated by reference to Exhibit 4.112 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(67)
Incorporated by reference to Exhibit 4.113 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(68)
Incorporated by reference to Exhibit 4.114 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(69)
Incorporated by reference to Exhibit 4.115 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(70)
Incorporated by reference to Exhibit 4.116 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(71)
Incorporated by reference to Exhibit 4.118 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(72)
Incorporated by reference to Exhibit 4.119 of the Company's Annual Report on Form 20-F, filed on March 28, 2019.
(73)
Incorporated by reference to Exhibit 99.1 of the Company's Current Report on Form 6-K, filed on April 1, 2018.


99



SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
 
TOP SHIPS INC.
 
(Registrant)
 
 
Date: April 10, 2020
By:
/s/ Evangelos J. Pistiolis
 
 
Evangelos J. Pistiolis
 
 
President, Chief Executive Officer, and Director



TOP SHIPS INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


 
Page
 
Report of Independent Registered Public Accounting Firm
 
F-2
   
Consolidated Balance sheets as of December 31, 2018 and 2019
F-3
   
Consolidated Statements of Comprehensive loss for the years ended December 31, 2017, 2018 and 2019
F-5
   
Consolidated Statements of Stockholders' equity for the years ended December 31, 2017, 2018 and 2019
F-7
   
Consolidated Statements of Cash flows for the years ended December 31, 2017, 2018 and 2019
F-10
   
Notes to consolidated financial statements
F-12
   









REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Top Ships Inc.,
Majuro, Republic of the Marshall Islands

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Top Ships Inc. and subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of comprehensive loss, mezzanine and stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated 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 consolidated 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte Certified Public Accountants S.A.
Athens, Greece
April 10, 2020

We have served as the Company's auditor since 2006.


F-2




TOP SHIPS INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2018 AND 2019
 
(Expressed in thousands of U.S. Dollars - except share and per share data)

   
December 31,
   
December 31,
 
   
2018
   
2019
 
             
ASSETS
           
             
CURRENT ASSETS:
           
             
Cash and cash equivalents
   
57
     
4,412
 
Trade accounts receivable
   
815
     
642
 
Prepayments and other
   
808
     
628
 
Due from related parties (Note 5)
   
75
     
-
 
Inventories (Note 7)
   
587
     
848
 
Prepaid bareboat charter hire (Note 6)
   
1,656
     
-
 
Assets held for sale (Note 4(c))
   
-
     
43,271
 
Non-current portion of derivative financial instruments (Note 15)
   
-
     
82
 
Restricted cash (Note 8)
   
1,290
     
859
 
      Total current assets
   
5,288
     
50,742
 
                 
FIXED ASSETS:
               
                 
Advances for vessels under construction (Note 4(a))
   
38,744
     
12,241
 
Vessels, net (Note 4(b))
   
180,635
     
353,946
 
Other fixed assets, net
   
669
     
655
 
      Total fixed assets
   
220,048
     
366,842
 
                 
OTHER NON CURRENT ASSETS:
               
                 
     Prepaid bareboat charter hire (Note 6)
   
3,621
     
-
 
Restricted cash (Note 8)
   
6,315
     
8,000
 
Investments in unconsolidated joint ventures (Note 18)
   
22,063
     
19,306
 
Derivative financial instruments (Note 15)
   
1,153
     
-
 
      Total non-current assets
   
33,152
     
27,306
 
                 
      Total assets
   
258,488
     
444,890
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES:
               
                 
Current portion of long-term debt (Note 8)
   
10,210
     
16,908
 
Debt related to vessels held for sale (Note 8)
   
13,416
     
29,977
 
Due to related parties (Note 5)
   
4,223
     
16,592
 
Accounts payable
   
4,098
     
4,460
 
Accrued liabilities
   
2,957
     
4,030
 
Unearned revenue
   
-
     
3,337
 
     Current portion of derivative financial instruments (Note 15)
   
1,915
     
113
 
      Total current liabilities
   
36,819
     
75,417
 
                 
NON-CURRENT LIABILITIES:
               
                 
Non-current portion of long term debt (Note 8)
   
101,358
     
262,122
 
Long term debt from related parties (Note 8)
   
15,671
     
-
 
Non-current portion of derivative financial instruments (Note 15)
   
359
     
1,594
 
           Total non-current liabilities
   
117,388
     
263,716
 
                 
COMMITMENTS AND CONTINGENCIES (Note 9)
               
                 
      Total liabilities
   
154,207
     
339,133
 
                 
MEZZANINE EQUITY:
               
Preferred stock; 0 and 15,724 Series E Shares issued and outstanding at December 31, 2018 and 2019 with $0.01 par value (Note 17)
   
-
     
18,083
 
      Total mezzanine equity
   
-
     
18,083
 
                 
STOCKHOLDERS' EQUITY:
               
                 
Preferred stock, $0.01 par value; 20,000,000 shares authorized; of which 100,000 Series D shares were outstanding at December 31, 2018 and 2019 (Note 10)
   
1
     
1
 
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 1,150,873 and  8,695,348 shares issued and outstanding at December 31, 2018 and 2019 (Note 10)
   
11
     
87
 
Additional paid-in capital
   
412,048
     
411,499
 
Accumulated deficit
   
(307,779
)
   
(322,552
)
Accumulated other comprehensive income
   
-
     
(1,361
)
      Total stockholders' equity
   
104,281
     
87,674
 
                 
      Total liabilities, mezzanine equity and stockholders' equity
   
258,488
     
444,890
 



F-3


TOP SHIPS INC.
     
         
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
     
FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
     
(Expressed in thousands of U.S. Dollars - except share and per share data)
     

   
2017
   
2018
   
2019
 
Revenues (including $0, $1,606 and $1,311 respectively, from related party) (Note 19 & 5)
   
39,363
     
41,048
     
66,088
 
                         
EXPENSES:
                       
Voyage expenses (including $487, $511 and $829 respectively, to related party) (Note 12)
   
999
     
1,020
     
3,038
 
Operating lease expense (Note 2 & 6)
   
-
     
-
     
7,054
 
Bareboat charter hire expenses (Note 6)
   
6,282
     
6,282
     
-
 
Amortization of prepaid bareboat charter hire
   
1,657
     
1,657
     
-
 
Vessel operating expenses (including $136, $187 and $247 respectively, to related party) (Note 12)
   
13,444
     
14,826
     
22,786
 
Dry-docking costs
   
-
     
-
     
399
 
Vessel depreciation (Note 4(b))
   
5,744
     
6,390
     
12,392
 
Management fees-related parties (Note 5)
   
4,730
     
7,765
     
2,443
 
General and administrative expenses
   
5,805
     
6,997
     
1,730
 
Other operating (income) (Note 16)
   
(914
)
   
-
     
-
 
Impairment on vessels (Note 4(c))
   
-
     
-
     
12,310
 
Operating income/(loss)
   
1,616
     
(3,889
)
   
3,936
 
                         
OTHER EXPENSES:
                       
Interest and finance costs (including $504, $1,053 and $948 respectively, to related party) (Note 13)
   
(15,793
)
   
(9,662
)
   
(18,077
)
(Loss)/gain on derivative financial instruments (Note 15)
   
(301
)
   
1,821
     
1,601
 
Interest income
   
13
     
130
     
133
 
Other, net
   
1,120
     
180
     
-
 
Equity (loss)/gain in unconsolidated joint ventures
   
(27
)
   
291
     
778
 
Impairment on unconsolidated joint ventures  (Note 18)
   
-
     
-
     
(3,144
)
Total other expenses, net
   
(14,988
)
   
(7,240
)
   
(18,709
)
                         
Net loss
   
(13,372
)
   
(11,129
)
   
(14,773
)
Less: Deemed dividend for beneficial conversion feature of Series E Shares (Note 17)
   
-
     
-
     
(9,339
)
Less: Deemed dividend equivalent on outstanding Series E Shares related to redemption value (Note 17)
   
-
     
-
     
(2,359
)
Less: Series E Shares Dividend (Note 17)
   
-
     
-
     
(2,650
)
Less: Deemed dividend on Series E Shares realized redemptions (Note 17)
   
-
     
-
     
(1,868
)
Net loss attributable to common shareholders
   
(13,372
)
   
(11,129
)
   
(30,985
)
                         
Attributable to:
                       
Common stock holders
   
(13,404
)
   
(11,134
)
   
(30,985
)
Non-controlling interests
   
32
     
5
     
-
 
                         
Loss per common share, basic and diluted (Note 11)
   
(251
)
   
(12.20
)
   
(10.58
)
                         
Other comprehensive income
                       
Effective portion of changes in fair value of interest swap contracts (Note 15)
   
-
     
-
     
(1,361
)
Total other comprehensive loss
   
(13,404
)
   
(11,134
)
   
(32,346
)
Attributable to:
                       
Common stock holders
   
(13,404
)
   
(11,134
)
   
(32,346
)
Non-controlling interests
   
32
     
5
     
-
 
                         
The accompanying notes are an integral part of these consolidated financial statements.
                       

F-4


TOP SHIPS INC.
CONSOLIDATED STATEMENTS OF MEZZANINE AND STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of U.S. Dollars – except number of shares and per share data)

 
 
Mezzanine Equity
 
Preferred Stock
Common Stock

Accumulated Deficit
     
 
# of Shares
Mezzanine Equity
# of Shares
Par Value
# of Shares*
Par Value*
Additional
Paid-In
Capital*
attributable to common stockholders
Non-controlling interest
Other comprehensive loss
Total
BALANCE, December 31, 2016
-
-
-
-
1
-
328,762
(283,241)
-
-
45,521
Net loss
       
-
-
-
(13,404)
32
 
(13,372)
Issuance of common stock pursuant to convertible related party loans (Note 8)
       
-
-
2,040
-
-
 
2,040
Issuance of common stock pursuant to the Common Stock Purchase Agreement (Note 10)
       
31,639
-
38,389
-
-
 
38,389
Issuance of common stock pursuant to the Crede Common Stock Purchase Agreement (Note 10)
       
357,444
4
28,629
-
-
 
28,633
Issuance of common stock pursuant to Series C convertible preferred shares conversions  (Note 8 and 10)
       
45,232
-
8,213
-
-
 
8,213
Series C convertible preferred stock's beneficial conversion feature (Note 8)
       
-
-
7,500
-
-
 
7,500
Issuance of common stock due to exercise of 2014 Warrants (Note 10)
       
10,963
-
1,540
-
-
 
1,540
Stock-based compensation
       
-
-
(25)
-
-
 
(25)
Non-controlling interest on acquisition of Eco Seven Inc (Note 1)
       
-
-
   
5,278
 
5,278
Reduction of non-controlling interest arising from Company's purchase of additional ownership interest in Eco Seven In. (Note 1)
       
-
-
   
(4,125)
 
(4,125)
Excess of consideration over acquired assets (Note 1)
       
-
-
(12,909)
     
(12,909)
Issuance of common stock pursuant to Series B convertible preferred stock conversions reflected in Mezzanine equity (Note 17)
       
901
-
  1,743
-
-
 
1,743
Issuance of Series D preferred stock (Note 10)
   
 
100,000
 
1
-
-
-
-
-
 
1
Additional paid-in capital  attributed to non-controlling interests
       
-
-
(1,153)
-
-
 
(1,153)
BALANCE, December 31, 2017
-
-
100,000
1
446,180
4
402,729
(296,645)
1,185
-
107,274
Net loss
   
-
-
-
-
-
(11,134)
5
 
(11,129)
Issuance of common stock pursuant to the Crede Common Stock Purchase Agreement (Note 10)
   
-
-
402,500
4
14,785
-
-
 
14,789
Issuance of common stock pursuant to Maxim ATM (Note 10)
   
-
-
124,543
1
2,613
-
-
 
2,614
Issuance of common stock due to exercise of 2018 Warrants (Note 10)
   
-
-
77,650
1
2,177
-
-
 
2,178
Issuance of common stock due to the 2018 Common Stock Offering (Note 10)
   
-
-
100,000
1
2,720
-
-
 
2,721
Purchase of 10% of M/T Stenaweco Elegance (Note 1)
   
-
-
-
-
-
-
(1,190)
 
(1,190)
Stock-based compensation
   
-
-
-
-
(34)
-
-
 
(34)
Family Trading facility beneficial
conversion feature (Note 8)
   
-
-
-
-
15,028
-
-
 
15,028
Elimination of beneficial conversion feature with debt extinguishment (Note 8)
   
-
-
-
-
(3,451)
-
-
 
(3,451)
Deemed dividend due to debt extinguishment of FT facility (Note 8)
   
-
-
-
-
(2,258)
-
-
 
(2,258)
Excess of consideration over acquired assets (Note 1)
   
-
-
-
-
(22,260)
-
-
 
(22,260)
Cancellation of fractional shares due to reverse stock split
           
(1)
     
(1)
BALANCE, December 31, 2018
-
-
100,000
1
1,150,873
11
412,048
(307,779)
-
-
104,281
F-5


Net loss
             
(14,773)
   
(14,773)
   Stock-based compensation
           
 (34)
     
(34)
Issuance of common stock due to exercise of 2018 and 2014 Warrants (Note 10)
       
434,385
                4
4,450
     
4,454
Issuance of common stock pursuant to the September 2019 Common Stock Offering and associated Traditional Warrant exercises (Note 10)
       
 2,910,090
              30
 9,259
     
9,289
Issuance of common stock pursuant to the November 2019 Registered Direct Offering (Note 10)
       
 4,200,000
              42
 7,600
     
7,642
Initial measurement of Class B Warrants  (Note 15)
           
   (997)
     
(997)
Excess of consideration over acquired assets (Note 1 and 5)
           
(6,701)
     
(6,701)
Issuance of Series E Shares (Note 8 and 17)
   28,158
 28,158
               
-
Redemptions on Series E Shares (Note  17)
(12,434)
(14,302)
               
-
Deemed dividend for Series E (Note 17)
 
 9,339
               
 -
Deemed dividend for Series E as part of exchange (Note 8)
           
 (9,570)
     
 (9,570)
Deemed dividend equivalents on Series E Shares related to redemption value (Note 17)
 
 4,227
       
  (4,227)
     
 (4,227)
Repurchase of beneficial conversion feature with debt extinguishment  (Note 8)
           
 (8,518)
     
(8,518)
Beneficial conversion feature of Series E convertible perpetual preferred stock (Note 17)
 
 (9,339)
       
 9,339
     
  9,339
Series E Dividends 2019  (Note 17)
           
 (2,650)
     
  (2,650)
Reversal of equity offering costs accrued not payable
           
 1,500
     
  1,500
Other comprehensive loss
                 
(1,361)
(1,361)
 
BALANCE, December 31, 2019
  15,724
  18,083
 100,000
  1
8,695,348
     87
411,499
(322,552)
 
 (1,361)
87,674

 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
*Adjusted to reflect the reverse stock splits effected in August 2019 (see Note 1 and 10)
 


F-6



TOP SHIPS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
 
(Expressed in thousands of U.S. Dollars)

   
2017
   
2018
   
2019
 
                   
Cash Flows from Operating Activities:
                 
Net loss
   
(13,372
)
   
(11,129
)
   
(14,773
)
Adjustments to reconcile net loss to net cash
                       
provided by operating activities:
                       
Vessel depreciation
   
5,744
     
6,390
     
12,392
 
Other fixed assets depreciation
   
120
     
373
     
50
 
Equity losses/(gains) in unconsolidated joint ventures
   
27
     
(291
)
   
(778
)
Non-cash debt conversion expenses
   
842
     
-
     
-
 
Amortization and write off of deferred financing costs
   
1,640
     
1,305
     
1,812
 
Amortization of debt discount
   
7,500
     
2,504
     
324
 
Stock-based compensation expense
   
(25
)
   
(34
)
   
(34
)
Change in fair value of derivative financial instruments
   
(175
)
   
(1,821
)
   
(1,457
)
Write-off of short term debt
   
(1,118
)
   
(180
)
   
-
 
Non-cash operating lease expense
   
-
     
-
     
1,478
 
Amortization of prepaid bareboat charter hire
   
1,657
     
1,657
     
-
 
Other operating income
   
(914
)
   
-
     
-
 
Impairment on unconsolidated joint ventures
   
-
     
-
     
3,144
 
Impairment on vessels
   
-
     
-
     
12,310
 
(Increase)/Decrease in:
                       
Trade accounts receivable
   
(602
)
   
(194
)
   
173
 
Inventories
   
(62
)
   
58
     
(385
)
Prepayments and other
   
436
     
(380
)
   
180
 
Due from related parties
   
34
     
(75
)
   
75
 
Increase/(Decrease) in:
                       
Due to related parties
   
(1,034
)
   
2,621
     
(1,781
)
Accounts payable
   
(207
)
   
695
     
1,462
 
Accrued liabilities
   
1,196
     
203
     
1,665
 
Unearned revenue
   
(992
)
   
(986
)
   
3,337
 
Net Cash provided by Operating Activities
   
695
     
716
     
19,194
 
                         
Cash Flows used in Investing Activities:
                       
Advances for vessels under construction and capitalized expenses
   
(6,757
)
   
(63,555
)
   
(155,090
)
Vessel acquisitions
   
(34,671
)
   
-
     
(48,140
)
Investments in unconsolidated joint ventures
   
(17,639
)
   
(3,681
)
   
-
 
Purchase of 10% of M/T Stenaweco Elegance
   
-
     
(1,190
)
   
-
 
Acquisitions of other fixed assets, net
   
-
     
-
     
(36
)
Net Cash used in Investing Activities
   
(59,067
)
   
(68,426
)
   
(203,266
)
                         
Cash Flows from Financing Activities:
                       
Proceeds from debt
   
24,849
     
28,500
     
252,969
 
Proceeds from short-term debt
   
68,790
     
32,783
     
6,760
 
Proceeds from related party debt
   
3,148
     
26,152
     
-
 
Principal payments and prepayments of debt
   
(9,546
)
   
(10,221
)
   
(50,466
)
Proceeds from issuance of Series C convertible preferred stock
   
7,500
     
-
     
-
 
Redemption of Series E Shares
   
-
     
-
     
(14,302
)
Prepayment of  related party debt
   
(7,233
)
   
(1,408
)
   
-
 
Prepayment of short term debt
   
-
     
(8,993
)
   
(20,280
)
Prepayment of short term Notes
   
-
     
(5,656
)
   
-
 
Excess of purchase price over book value of vessels
   
(12,909
)
   
(22,260
)
   
-
 
Proceeds from issuance of common stock
   
9,726
     
5,781
     
18,892
 
Proceeds from warrant exercises
   
1,567
     
2,330
     
4,619
 
Equity offering issuance costs
   
(1,342
)
   
(536
)
   
(1,859
)
Payment of financing costs
   
(1,159
)
   
(1,713
)
   
(6,647
)
Derivative financial instrument termination payments
   
-
     
-
     
(5
)
Net Cash provided by Financing Activities
   
83,391
     
44,759
     
189,681
 
                         
Net increase/(decrease) in cash and cash equivalents and restricted cash
   
25,019
     
(22,951
)
   
5,609
 
                         
Cash and cash equivalents and restricted cash at beginning of year
   
5,594
     
30,613
     
7,662
 
                         
Cash and cash equivalents and restricted cash at end of the year
   
30,613
     
7,662
     
13,271
 
                         
Cash breakdown
                       
Cash and cash equivalents
   
24,081
     
57
     
4,412
 
Restricted cash, current
   
1,283
     
1,290
     
859
 
Restricted cash, non-current
   
5,249
     
6,315
     
8,000
 
SUPPLEMENTAL CASH FLOW INFORMATION
                       
                         
Capital expenditures included in Accounts payable/Accrued liabilities/Due to related parties
   
43
     
555
     
533
 
Interest paid, net of capitalized interest
   
5,103
     
6,322
     
14,866
 
Finance fees included in Accounts payable/Accrued liabilities/Due to related parties
   
372
     
2,109
     
759
 
Equity issuance costs included in liabilities
   
1,108
     
117
     
386
 
Shares issued in exchange for converting debt,  interest & finance fees
   
10,890
     
-
     
-
 
Settlement of notes with common stock issued (Note 8 and 10)
   
58,794
     
14,811
     
-
 
Elimination of beneficial conversion feature with debt extinguishment (Note 8)
   
-
     
(3,451
)
   
-
 
Beneficial conversion feature of Series E perpetual convertible preferred stock (Note 17)
   
-
     
-
     
9,339
 
Settlement of related party debt, interest, finance fees and dividends with issuance of Series E Shares   (Note 8 and 17)
   
-
     
-
     
28,158
 
Dividends payable included in Due to related parties (Note 17)
   
-
     
-
     
1,621
 
Excess of consideration over acquired assets (Note 1)
   
-
     
-
     
(6,701
)
Transfer of R.O.U. asset balances after operating lease termination to Vessels, net (Note 4b)
   
-
     
-
     
3,800
 
Carrying value of net assets of companies acquired (Note 1)
   
-
     
-
     
7,649
 
Reversal of equity offering costs not payable
   
-
     
-
     
(1,500
)
 The accompanying notes are an integral part of these consolidated financial statements.
F-7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)


1.
Basis of Presentation and General Information:

The accompanying consolidated financial statements include the accounts of Top Ships Inc. (formerly Top Tankers Inc. and Ocean Holdings Inc.) and its wholly owned subsidiaries (collectively the "Company"). Ocean Holdings Inc. was formed on January 10, 2000, under the laws of Marshall Islands and was renamed to Top Tankers Inc. and Top Ships Inc. in May 2004 and December 2007, respectively. The Company is an international provider of worldwide oil, petroleum products and chemicals transportation services.

As of December 31, 2019, the Company was the sole owner of all outstanding shares of the following subsidiary companies. The following list is not exhaustive as the Company has other subsidiaries relating to vessels that have been sold and that remain dormant for the periods presented in these consolidated financial statements as well as intermediary companies that own shipowning companies that are 100% subsidiaries of the Company.

 
Companies
Date of
Incorporation
Country of
Incorporation
Activity
 
 Top Tanker Management Inc.
May 2004
Marshall Islands
Management company

 
Wholly owned Shipowning Companies ("SPC") with vessels in operation during years ended December 31, 2017, 2018 and 2019
 
Date of
Incorporation
Country of
Incorporation
Vessel
Delivery Date
1
 Monte Carlo 71 Shipping Company Limited
 
June 2014
Marshall Islands
M/T Stenaweco Energy
July  2014
2
 Monte Carlo One Shipping Company Ltd
 
June 2012
Marshall Islands
M/T Stenaweco Evolution
March 2015
3
 Monte Carlo Seven Shipping Company Limited
 
April  2013
Marshall Islands
M/T Stenaweco Excellence
May 2016
4
 Monte Carlo Lax Shipping Company Limited
 
May  2013
Marshall Islands
M/T Nord Valiant
August 2016
5
 Monte Carlo 37 Shipping Company Limited
 
September 2013
Marshall Islands
M/T Eco Fleet
July 2015
6
 Monte Carlo 39 Shipping Company Limited
 
December 2013
Marshall Islands
M/T Eco Revolution
January 2016
7
 Eco Seven Inc.
 
February 2017
Marshall Islands
M/T Stenaweco Elegance
February 2017
8
 Astarte International Inc.
 
April 2017
Marshall Islands
M/T Eco Palm Desert
September 2018

9
 PCH77 Shipping Company Limited
 
September 2017
Marshall Islands
M/T Eco California
January 2019
10
 PCH Dreaming Inc.
 
January 2018
Marshall Islands
M/T Eco Marina Del Ray
March 2019
11
 South California Inc.
 
 
January 2018
Marshall Islands
M/T Eco Bel Air
April 2019
12
 Malibu Warrior Inc.
 
January 2018
Marshall Islands
M/T Eco Beverly Hills
May 2019

 
Wholly owned SPCs with vessels under construction  during year ended December 31, 2019
 
Date of
Incorporation
Country of
Incorporation
Vessel
Scheduled delivery date
13
Santa Catalina Inc.
 
December 2018
Marshall Islands
M/T Eco Los Angeles
February 2020 (delivered)
14
Santa Monica Inc.
 
December 2018
Marshall Islands
M/T Eco City of Angels
February 2020 (delivered)

F-8


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)
As of December 31, 2018 and 2019, the Company was the owner of 50% of outstanding shares of the following companies.

 
SPC
Date of
Incorporation
Country of
Incorporation
Vessel
Built Date
1
 City of Athens Pte. Ltd.
November 2016
Singapore
M/T Eco Holmby Hills
March 2018
2
 Eco Nine Pte. Ltd.
March 2015
Singapore
M/T Eco Palm Springs
May 2018

On February 20, 2017, the Company acquired a 40% ownership interest in Eco Seven Inc. ("Eco Seven"), a Marshall Islands corporation, from Malibu Shipmanagement Co. ("Malibu"), a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, an irrevocable trust established for the benefit of certain family members of Evangelos J. Pistiolis, the Company's President, Chief Executive Officer and Director, for an aggregate purchase price of $6,500, pursuant to a share purchase agreement. On March 30, 2017, the Company acquired another 9% ownership interest in Eco Seven from Malibu for an aggregate purchase price of $1,500. On May 30, 2017, the Company acquired an additional 41% interest in Eco Seven from Malibu, for $6,500, increasing the Company's interest to 90%. The Company controls the board and management of Eco Seven and thus consolidates  Eco Seven in its financial statements from February 20, 2017 onwards. Eco Seven owns M/T Stenaweco Elegance, a 50,000 dwt product/chemical tanker that was delivered from Hyundai Vinashin Shipyard Co., Ltd of Vietnam ("Hyundai") on February 28, 2017.

On March 30, 2017, the Company, acquired a 49% ownership interest in City of Athens Pte. Ltd ("City of Athens") from Fly Free Company, a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, for an aggregate purchase price of $4,200. City of Athens was party to a newbuilding contract for the construction of M/T Eco Holmby Hills, a 50,000 dwt newbuilding product/chemical tanker delivered from Hyundai in March 2018. Furthermore on March 30, 2017, the Company, acquired a 49% ownership interest in Eco Nine Pte. Ltd ("Eco Nine") from Maxima International Co., a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, for an aggregate purchase price of $3,500. Eco Nine was a party to a newbuilding contract for the construction of M/T Eco Palm Springs, a 50,000 dwt newbuilding product/chemical tanker delivered from Hyundai in May 2018. On June 14, 2017 the Company acquired an additional 1% interest in City of Athens and in Eco Nine for an aggregate consideration of $157, increasing the Company's interest in both companies to 50%. The Company accounts for these acquisitions as investments in unconsolidated joint ventures because the Company does not have control over the two abovementioned companies, since they are jointly controlled by the two partners pursuant to a joint venture agreement (Note 18).

On April 26, 2017, the Company acquired a 100% ownership interest in Astarte International Inc. ("Astarte") from Indigo Maritime Ltd, a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, for an aggregate purchase price of $6,000. Astarte was party to a newbuilding contract for the construction of M/T Eco Palm Desert, a 50,000 dwt newbuilding product/chemical tanker delivered from Hyundai in September 2018.

On November 24, 2017, the Company acquired all of the outstanding shares of PCH77 Shipping Company Limited, a Marshall Islands company that owns M/T Eco California, a 50,000 dwt newbuilding product/chemical tanker delivered on January 30, 2018 from Hyundai Mipo Dockyard Co., Ltd. in Korea from an entity affiliated with Evangelos J. Pistiolis. The Company paid $3,600 for the outstanding shares.

On January 31, 2018 the Company acquired:


a.
100% of the issued and outstanding shares of PCH Dreaming Inc., a Marshall Islands company that had entered into a new building contract for a high specification 50,000 dwt Medium Range ("MR") product/chemical tanker (M/T Eco Marina Del Ray or Hull No 8242) under construction at Hyundai Mipo Dockyard Co., Ltd. in South Korea and delivered in March 2019.  The Company acquired the shares from an entity affiliated with the Company's Chief Executive Officer, for an aggregate purchase price of $3,950. The transaction specified that following its delivery, the vessel was going to enter into a time charter with an entity affiliated with the seller for a firm duration of one year at a gross daily rate of $16,000, with a charterer's option to extend for two additional years at $17,000 and $18,000, respectively. In June 2018 the Company cancelled without penalty the abovementioned time charter and entered into a new 5 year time charter with Cargill International SA ("Cargill") at a gross daily rate of $15,100.
F-9


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)


b.
100% of the issued and outstanding shares of South California Inc., a Marshall Islands company that had entered into a new building contract for a high specification, scrubber-equipped, 157,000 dwt Suezmax Crude Oil Carrier (M/T Eco Bel Air or Hull No 874) under construction at Hyundai Samho Heavy Industries Co. Ltd. in South Korea and scheduled for delivery during April 2019. The Company acquired the shares from an entity affiliated with the Company's Chief Executive Officer for an aggregate purchase price of $8,950. The transaction specified that following its delivery, the vessel was going to enter into a time charter with an entity affiliated with the Seller for a firm duration of one year at a gross daily rate of $25,000, with a charterer's option to extend for two additional years at $26,000 and $27,000, respectively. In June 2018 the Company cancelled without penalty the abovementioned time charter and entered into a new 3 year time charter with BP Shipping Limited at a gross daily rate of $24,500, with a charterer's option to extend for two additional years at $28,000 and $29,500, respectively.

c.
100% of the issued outstanding shares of Malibu Warrior Inc., a Marshall Islands company that had entered into a new building contract for a high specification, scrubber-equipped, 157,000 dwt Suezmax Crude Oil Carrier (M/T Beverly Hills or Hull No 875) under construction at Hyundai Samho Heavy Industries Co. Ltd. in South Korea and scheduled for delivery during May 2019. The Company acquired the shares from an entity affiliated with the Company's Chief Executive Officer for an aggregate purchase price of $8,950. The transaction specified that following its delivery, the vessel was going to enter into a time charter with an entity affiliated with the Seller for a firm duration of one year at a gross daily rate of $25,000, with a charterer's option to extend for two additional years at $26,000 and $27,000, respectively. In June 2018 the Company cancelled without penalty the abovementioned time charter and entered into a new 3 year time charter with BP Shipping Limited at a gross daily rate of $24,500, with a charterer's option to extend for two additional years at $28,000 and $29,500, respectively.

d.
10% of the issued and outstanding shares of Eco Seven Inc., the owner of M/T Stena Elegance. The Company acquired the shares from an entity affiliated with the Company's Chief Executive Officer for an aggregate purchase price of $1,600. As a result of the transaction the Company owns 100% of the issued and outstanding shares of Eco Seven Inc.

On December 18, 2019 the Company acquired 100% of the issued and outstanding shares of Santa Catalina Inc. and Santa Monica Inc two Marshall Islands companies that had entered into new building contracts for two high specification 50,000 dwt Medium Range ("MR") product/chemical tankers (M/T Eco Los Angeles and M/T Eco City of Angels) under construction at Hyundai Mipo Dockyard Co., Ltd. in South Korea and delivered in February 2020. The Company acquired the shares from an entity affiliated with the Company's Chief Executive Officer, for an aggregate purchase price of $14,350, $7,515 of which was payable upon purchase of the vessel owning companies and another $6,835 payable upon delivery of the vessels from the shipyard. The transaction specified that following each vessel's delivery, each vessel was going to enter into a time charter with Trafigura Maritime Logistics Pte Ltd ("Trafigura") for a firm duration of three years at a gross daily rate of $17,500, with a charterer's option to extend for two additional years at $18,750 and $20,000, respectively. Both acquired companies had already advanced $7,515 of shipyard installments and $134 of capitalized expenses for the construction of said newbuilding vessels.

Each of the acquisitions was approved by a special committee of the Company's board of directors, (the "Transaction Committee"), of which all of the directors were independent.  The Company accounted for the abovementioned acquisitions as a transfer of assets between entities under common control and has recognized the vessels at their historical carrying amounts at the date of transfer. In the course of its deliberations, the Transaction Committee hired and obtained a fairness opinion from an independent financial advisor.

The amount of the consideration given in excess of the historical carrying value of the net assets acquired is recognized as a reduction to the Company's additional paid in capital and presented as Excess of consideration over the carrying value of acquired assets in the Company's consolidated statement of stockholders' equity for the twelve months ended December 31, 2018 and 2019 respectively. An analysis of the consideration paid is presented in the table below:

As of December 31, 2018:

Consideration in cash
   
23,450
 
Less: Carrying value of net assets of companies acquired
   
1,190
 
Excess of consideration over acquired assets
   
22,260
 

F-10


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

As of December 31, 2019:

Fair Value of consideration
   
14,350
 
Less: Carrying value of net assets of companies acquired
   
7,649
 
Excess of consideration over acquired assets
   
6,701
 

On August 22, 2019 the Company effected a 1-for-20 reverse stock split of its common stock. There was no change in the number of authorized common shares of the Company. All numbers of share and earnings per share amounts in these financial statements have been retroactively adjusted to reflect this reverse stock split.


2.
Significant Accounting Policies:

(a) 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 Top Ships Inc. and its subsidiaries referred to in Note 1. Intercompany balances and transactions have been eliminated on consolidation. Non-controlling interests are stated at the non-controlling interest's proportion of the net assets of the subsidiaries where the Company has less than 100% interest. Subsequent to initial recognition the carrying amount of non-controlling interest is increased or decreased by the non-controlling interest's share of subsequent changes in the equity of such subsidiaries. Total comprehensive income is attributed to a non-controlling interest even if this results in a deficit balance. Changes in the Company's ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Company's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.

(b)   Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Critical estimates mainly include impairment of vessels, vessel useful lives and residual values and fair values of derivative instruments.

(c)   Foreign Currency Translation: The Company's functional currency is the U.S. Dollar because all vessels operate in international shipping markets, and therefore primarily transact business in U.S. Dollars. The Company's books of account are maintained in U.S. Dollars. Transactions involving other currencies during the year are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and liabilities, which are denominated in other currencies are translated to U.S. Dollars based on the year-end exchange rates and any gains and losses are included in the statement of comprehensive loss.

(d)   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.

(e)   Restricted Cash: The Company considers amounts that are pledged, blocked, held as cash collateral, required to be maintained with a specific bank or be maintained by the Company as minimum cash under the terms of a loan agreement, as restricted and these amounts are presented separately on the balance sheets. In the event original maturities are shorter than twelve months, such deposits are presented as current assets while if original maturities are longer than twelve months, such deposits are presented as non-current assets.

(f)   Trade Accounts Receivable, net: The amount shown as trade accounts receivable, net at each balance sheet date, includes estimated recoveries from charterers for hire billings, net of a provision for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually, combined with the application of a historical recoverability ratio, for purposes of determining the appropriate provision for doubtful accounts. The Company assessed that it had no potentially uncollectible accounts and hence formed no provision for doubtful accounts at December 31, 2018 and 2019 respectively.

F-11


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

(g)   Inventories: Inventories consist of lubricants and paints on board the vessels. Inventories are stated at the lower of cost and net realizable value. Cost, which consists of the purchase price, is determined by the first in, first out method.

(h)   Vessel Cost: Vessels are stated at cost, which consists of the contract price, pre-delivery costs and capitalized interest incurred during the construction of new building vessels, and any material expenses incurred upon acquisition (improvements and delivery costs). Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels. Repairs and maintenance are charged to expense as incurred and are included in Vessel operating expenses in the accompanying consolidated statements of comprehensive loss.

(i)  Impairment of Long-Lived Assets: The Company evaluates the existence of impairment indicators whenever events or changes in circumstances indicate that the carrying values of the Company's long lived assets are not recoverable. Such indicators of potential impairment include, vessel sales and purchases, business plans and overall market conditions. If there are indications for impairment present, the Company determines undiscounted projected net operating cash flows for each vessel and compares it to the vessel's carrying value. If the carrying value of the related vessel exceeds its undiscounted future net cash flows, the carrying value is reduced to its fair value, and the difference is recognized as an impairment loss. The impairment tests the Company conducted as of December 31, 2019, showed that there are no impairment indications for any vessels of the Company's fleet other than the Company's two MR1 Tankers (M/T Eco Fleet and M/T Eco Revolution) that were written down to their fair market values less costs to sell.

(j)   Vessel Depreciation: Depreciation is calculated using the straight-line method over the estimated useful life of the vessels, after deducting the estimated salvage value. Each vessel's salvage value is equal to the product of its lightweight tonnage and estimated scrap rate, of $300 per lightweight ton. Management estimates the useful life of the Company's vessels to be 25 years from the date of initial delivery from the shipyard. Second hand vessels are depreciated from the date of their acquisition through their remaining estimated useful life. When regulations place limitations over the ability of a vessel to trade on a worldwide basis, its useful life is adjusted at the date such regulations are adopted.

(k)   Long Lived Assets Held for Sale: The Company classifies vessels as being held for sale when the following criteria are met: (a) management, having the authority to approve the action, commits to a plan to sell the asset, (b) the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets, (c) an active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated, (d) the sale of the asset is probable and transfer of the asset is expected to qualify for recognition as a completed sale, within one year, (e) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, (f) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Long-lived assets classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell. These vessels are not depreciated once they meet the criteria to be classified as held for sale.

Long-lived assets previously classified as held for sale that are classified as held and used are revalued at the lower of (a) the carrying amount of the asset before it was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the asset been continuously classified as held and used and (b) the fair value of the asset at the date that the Company decided not to sell the asset.

(l)  Other Fixed Assets, Net: Other fixed assets, net, consist of furniture, office equipment, and cars, stated at cost, which consists of the purchase/contract price less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful life of the assets as presented below:

Description
 
Useful Life (years)
 
Cars
   
6
 
Office equipment
   
5
 
Furniture and fittings
   
5
 
Computer equipment
   
3
 

F-12


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

(m)   Accounting for Dry-Docking Costs: All dry-docking and special survey costs are expensed in the period incurred.

(n)  Financing Costs: Fees incurred and paid to the lenders for obtaining new loans or refinancing existing ones are recorded as a contra to debt and such fees are amortized to interest and finance costs over the life of the related debt using the effective interest method. Unamortized fees relating to loans repaid or refinanced are expensed when a repayment or refinancing is made and charged to interest and finance costs.

(o)   Accounting for Revenue and Expenses: Revenues are generated from time charter arrangements. A time charter is a contract for the use of a vessel for a specific period of time and a specified daily charter hire rate, which is generally payable monthly in advance. Time charter revenue is only recognized when an agreement exists, the price is fixed, service is provided and the collection of the related revenue is reasonably assured. Revenue is shown net of address commissions, if applicable, payable directly to charterers under the relevant charter agreements. Address commissions represent a common market practice discount (sales incentive) on services rendered by the Company and no identifiable benefit is received in exchange for the consideration provided to the charterer. Commissions on time charter revenues are recognized on a pro rata basis over the duration of the period. Time charter revenue is recognized as earned on a straight-line basis over the term of the relevant time charter starting from the vessel's delivery to the charterer, except for any off-hire period.  Revenue generated from variable lease payments is recognized in the period when changes in the facts and circumstances on which the variable lease payments are based occur. The Company elected to not separate the lease and non-lease components included in the time charter revenue because (i) the pattern of revenue recognition for the lease and non-lease components (included in the daily hire rate) is the same and (ii) the lease component would be classified as an operating lease. The daily hire rate represents the hire rate for a bare boat charter as well as the compensation for expenses incurred running the vessel such as crewing expense, repairs, insurance, maintenance and lubes. Both the lease and non-lease components are earned by passage of time. Under a time charter agreement, vessel operating expenses such as management fees, crew wages, provisions and stores, technical maintenance and insurance expenses and broker's commissions are paid by the vessel owner, whereas voyage expenses such as bunkers, port expenses, agents' fees, and extra war risk insurance are paid by the charterer. Vessel operating expenses are expensed as incurred. Unearned revenue represents cash received prior to year-end related to revenue applicable to periods after December 31 of each year.

When vessels are acquired with time charters attached and the rates on such charters are below or above market on the acquisition date, the Company allocates the total cost between the vessel and the fair value of the attached time charter based on the relative fair values of the vessel and the liability or asset acquired. The fair value of the attached time charter is computed as the present value of the difference between the contractual amount to be received over the term of the time charter and management's estimates of the market time charter rate at the time of acquisition. The fair value of below or above market time charter is recognized as an intangible liability or asset respectively and is amortized over the remaining period of the time charter as an increase or decrease to revenues.

The Company pays commissions to ship brokers associated with arranging the Company's charters. These commissions are recognized over the related charter period and are included in voyage expenses.

Voyage charters

In a voyage charter contract, the charterer hires the vessel to transport a specific agreed-upon cargo for a single voyage, which may contain multiple load ports and discharge ports. The consideration in such a contract is determined on the basis of a freight rate per metric ton of cargo carried or occasionally on a lump sum basis. The charter party generally has a minimum amount of cargo. The charterer is liable for any short loading of cargo or "dead" freight. The voyage contract generally has standard payment terms of 95% freight paid within three days after completion of loading. The voyage charter party generally has a "demurrage" or "despatch" clause. As per this clause, the charterer reimburses the Company for any potential delays exceeding the allowed laytime as per the charter party clause at the ports visited, which is recorded as demurrage revenue. Conversely, the charterer is given credit if the loading/discharging activities happen within the allowed laytime known as despatch resulting in a reduction in revenue. In a voyage charter contract, the performance obligations begin to be satisfied once the vessel begins loading the cargo. The Company determined that its voyage charter contracts consist of a single performance obligation of transporting the cargo within a specified time period. Therefore, the performance obligation is met evenly as the voyage progresses and the revenue is recognized on a straight- line basis over the voyage days from the commencement of the loading of cargo to completion of discharge.

F-13


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

The voyage contracts are considered service contracts which fall under the provisions of ASC 606 because the Company, as the shipowner, retains the control over the operations of the vessel such as directing the routes taken or the vessel speed. The voyage contracts generally have variable consideration in the form of demurrage or despatch.

 In a voyage charter contract, the Company bears all voyage related costs such as fuel costs, port charges and canal tolls. These                       costs are considered contract fulfillment costs because the costs are direct costs related to the performance of the contract and are expected to be recovered. The costs incurred during the period prior to commencement of loading the cargo, primarily bunkers, are deferred as they represent setup costs and recorded as a current asset and are amortized on a straight-line basis as the related performance obligations are satisfied.

(p)  Stock Incentive Plan: All share-based compensation related to the grant of restricted and/or unrestricted shares provided to employees and to non-employee directors as well as to third party consultants and service providers for their services provided is included in "general and administrative expenses" in the consolidated statements of comprehensive loss. The shares that do not contain any future service vesting conditions are considered vested shares and recognized in full on the grant date. The shares that contain a time-based service vesting condition are considered non-vested shares on the grant date and recognized on a straight-line basis over the vesting period. The shares granted to employees or directors and to non-employees, vested and non-vested, are measured at fair value which is equal to the market value of the Company's common stock on the grant date.

 (q)  Earnings / (Loss)  per Share: Basic earnings/(loss) per share are computed by dividing net income or loss available to common stockholders by the weighted average number of common shares  outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised. For purposes of calculating diluted earnings per share the denominator of the diluted earnings per share calculation includes the incremental shares assumed issued under the treasury stock method weighted for the period the non-vested shares were outstanding. The computation of diluted earnings per share also reflects the potential dilution that could occur if warrants to issue common stock were exercised, to the extent that they are dilutive, using the treasury stock method, the potential dilution that could occur if convertible preferred stock were converted, using the if-converted method as well as the potential dilution that could occur if the Company completed all sales pursuant to common stock purchase agreements, using the if-converted method. Finally net income or loss available to common stockholders is reduced to reflect any deemed dividends on convertible preferred stock, weighted for the period the convertible preferred shares were outstanding.

(r)  Derivatives and Hedging, Hedge Accounting:  The Company records every derivative instrument (including certain derivative instruments embedded in other contracts) on the balance sheet as either an asset or liability measured at its fair value, with changes in the derivatives' fair value recognized in earnings unless specific hedge accounting criteria are met.

At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy undertaken for the hedge. The documentation includes identification of the hedging instrument, hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument's effectiveness in offsetting exposure to changes in the hedged item's cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to determine whether they actually have been highly effective throughout the financial reporting periods for which they were designated. Contracts which meet the criteria for hedge accounting are accounted for as cash flow hedges. A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability, or a highly probable forecasted transaction that could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognized directly as a component of "Accumulated other comprehensive income" in equity, while the ineffective portion, if any, is recognized immediately in current period earnings. The Company discontinues cash flow hedge accounting if the hedging instrument expires and it no longer meets the criteria for hedge accounting or designation is revoked by the Company. At that time, any cumulative gain or loss on the hedging instrument recognized in equity is kept in equity until the forecasted transaction occurs. When the forecasted transaction occurs, any cumulative gain or loss on the hedging instrument is recognized in the statement of income. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is transferred to net profit or loss for the year as a component of "Loss on derivatives".

F-14


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

(s)  Financial liabilities: Financial liabilities are classified as either financial liabilities at 'fair value through the profit and loss' ("FVTPL") or 'other financial liabilities'. Financial instruments classified as FVTPL are recognized at fair value in the balance sheet when the Company has an obligation to perform under the contractual provisions of those instruments. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Changes in the financial instruments are recognized in earnings, except in the cases where these financial instruments fall under the guidance in ASC 815-40, where they are initially classified in equity and are initially measured at fair value in permanent equity and subsequent changes in fair value are not subsequently measured. Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortized cost using the effective interest rate method.

(t)  Segment Reporting: The Chief Operating Decision Maker ("CODM"), Mr. Evangelos J. Pistiolis, receives financial information and evaluates the Company's operations by charter revenues and not by the length, type of vessel or type of ship employment for its customers (i.e. time or bareboat charters) or by geographical region as the charterer is free to trade the vessel worldwide and as a result, the disclosure of geographic information is impracticable. The CODM does not use discrete financial information to evaluate the operating results for each such type of charter or vessel. Although revenue can be identified for these types of charters or vessels, management cannot and does not identify expenses, profitability or other financial information for these various types of charters or vessels. As a result, management, including the CODM, reviews operating results solely by revenue per day and operating results of the fleet, and thus the Company has determined that it operates as one reportable segment.

(u)  Sale-leaseback transactions: In accordance with ASC 842, the Company, as seller-lessee, determines whether the transfer of an asset should be accounted for as a sale in accordance with ASC 606 (existence of a contract and satisfaction of performance obligation by transferring of the control of the asset). The existence of an option for the seller-lessee to repurchase the asset precludes the accounting for the transfer of the asset as a sale unless both of the following criteria are met: (1) the exercise price of the option is the fair value of the asset at the time the option is exercised; and (2) there are alternative assets, substantially the same as the transferred asset, readily available in the marketplace; and the classification of the leaseback as a finance lease or a sales-type lease, precludes the buyer-lessor from obtaining control of the asset. If the transfer of the asset meets the criteria of sale, the Company, as seller-lessee recognizes the transaction price for the sale when the buyer-lessor obtains control of the asset, derecognizes the carrying amount of the underlying asset and accounts for the lease in accordance with ASC 842. If the transfer does not meet the criteria of sale, the Company does not derecognize the transferred asset, accounts for any amounts received as a financing arrangement and recognizes the difference between the amount of consideration received and the amount of consideration to be paid as interest.

(v)   Beneficial conversion feature: A beneficial conversion feature is defined as a non-detachable conversion feature that is in the money at the commitment date. The beneficial conversion feature guidance requires recognition of the conversion option's in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as a dividend over either the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the dividend must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.

 (w)  Investments in unconsolidated joint ventures: The Company's investments in unconsolidated joint ventures are accounted for using the equity method of accounting. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and the Company's proportionate share of earnings or losses and distributions. The Company evaluates its investments in unconsolidated joint ventures for impairment when events or circumstances indicate that the carrying value of such investments may have experienced other than temporary decline in value below their carrying value. If the estimated fair value is less than the carrying value and is considered other than a temporary decline, the carrying value is written down to its estimated fair value and the resulting impairment is recorded in the Consolidated Statements of comprehensive loss.

  (x)  Other Comprehensive Income: The Company follows the provisions of guidance regarding reporting comprehensive income which requires separate presentation of certain transactions, such as unrealized gains and losses from effective portion of cash flow hedges, which are recorded directly as components of stockholders' equity

 (y)   Recent Accounting Pronouncements:

New Accounting Pronouncements - Adopted
F-15


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

Financial Instruments - Derivatives Held or Issued: In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities.  ASU 2017-12 amends the current hedge accounting model and requires certain new or modified disclosures to enable entities to better portray the economics of their risk management activities in their financial statements. The Company adopted this ASU for the reporting period commencing on January 1, 2019 and accordingly all relative hedge accounting disclosures have been amended to comply with the new standard (Note 15).

In July 2017, the FASB issued ASU No. 2017-11, "Earnings Per Share, Distinguishing Liabilities from Equity, and Derivatives and Hedging" ("ASU No. 2017-11"), which changes the classification of certain equity-linked financial instruments with down round features. As a result, a free standing equity-linked financial instrument or an embedded conversion option would not be accounted for as a derivative liability at fair value as a result of existence of a down round feature. For freestanding equity classified financial instruments, the amendment requires the entities to recognize the effect of the down round feature when triggered in its earnings per share calculations. The Company adopted this ASU for the reporting period commencing on January 1, 2019 and accordingly all equity-linked financial instruments of the Company have now been reassessed by applying ASU No. 2017-11, however this resulted in no changes to the classification of any of the Company's equity-linked financial instruments (Note 15).

In June 2018, the FASB issued ASU 2018-07, "Compensation–Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting." This ASU expands the scope of Topic 718, which currently only includes share-based payments issued to employees, to also include share-based payments issued to nonemployees for goods and services. Currently, nonemployee awards are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be more reliably measured. Under ASU 2018-07, equity-classified nonemployee awards within the scope of Topic 718 will be measured at grant-date fair value. The ASU simplified the accounting for share-based payments granted to nonemployees for goods and services, therefore guidance on such payments to nonemployees would be mostly aligned with the requirements for share-based payments granted to employees. The Company adopted this ASU for the reporting period commencing on January 1, 2019 with no impact on its financial statements since the Company has no nonemployee share-based payment schemes.

Leases

On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (ASC 842), as amended from time to time, using the modified retrospective transition method. The Company elected to apply the additional and optional transition method to existing leases at the beginning of the period of adoption through a cumulative effect adjustment to the opening retained earnings as of January 1, 2019. The prior period comparative information has not been restated and continues to be reported under the accounting guidance in effect for those periods (ASC 840), including the disclosure requirements. The Company elected to apply the package of practical expedients under ASC 842, which allowed the Company, not to reassess (i) whether any existing contracts, on the date of adoption, contained a lease, (ii) lease classification of existing leases classified as operating leases in accordance with ASC 840 and (iii) initial direct costs for any existing leases. In addition the  Company elected to not separate the lease and non-lease components included in the time charter revenue or operating lease payments.

On adoption of ASC 842, the Company determined that all time charter-out contracts are considered operating leases and therefore fall under the scope of ASC 842 because: (i) the vessel is an identifiable asset; (ii) the Company. As lessor, does not have substantive substitution rights; and (iii) the charterer, as lessee, has the right to control the use of the vessel during the term of the contract and derives the economic benefits from such use. The Company's accounting for time charter out contracts was not impacted by the adoption of ASC 842 as the accounting is consistent with the Company's prior policy.

On January 1, 2019, the Company, as lessee, recognized an operating  lease right-of-use asset and lease liability measured at the present value of outstanding lease payment obligations under ASC 840. In addition the deferred loss, previously described as Prepaid bareboat charter hire income, under ASC 840, amounting to $5,277 on January 1, 2019 was reclassified to the right-of-use asset upon adoption of ASC 842. Furthermore, the Company upon adoption of ASC 842 assumed that it will not exercise the purchase options under its lease contracts.
F-16


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

The following table shows the impact of the adoption of ASC 842 on the Company's current period consolidated balance sheet as compared to the previous lease accounting standard, ASC Topic 840, Leases ("ASC 840") as of January 1, 2019:

 As of January 1, 2019:
 
Under ASC 842
   
Under ASC 840
   
Increase/(decrease)
 
                   
Current assets:
   
-
             
Prepaid bareboat charter hire
   
-
     
1,656
     
(1,656
)
Other noncurrent assets:
   
-
                 
Prepaid bareboat charter hire
   
-
     
3,621
     
(3,621
)
Fixed assets:
                       
Right of use assets from operating leases
   
21,905
     
-
     
21,905
 
Other current liabilities:
                       
Current portion of Operating lease liabilities
   
4,771
     
-
     
4,771
 
Other noncurrent liabilities:
                       
Non-current portion of Operating lease liabilities
   
11,857
     
-
     
11,857
 

The discount rate used to calculate the present value of lease payments was calculated by taking into account the original lease term and lease payments and was estimated to be 9.09% (same as weighted average discount rate), which was the rate inherent in the lease on the lease inception. The cash paid for operating leases with original terms greater than 12 months was $5,576 for the year ended December 31, 2019

Operating lease right of use ("ROU") assets and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made to the lessor prior to lease commencement, less any lease incentives, and initial direct costs incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

All of the Company's Sale and Leasebacks accounted as financings have been re-evaluated under ASC 842 and the Company continues to account for them as financings.

 Accounting standards issued but not yet adopted

The FASB has issued accounting standards that have not yet become effective and may impact the Company's consolidated financial statements or related disclosures in future periods. These standards and their potential impact are discussed below:

Fair Value Measurement Disclosures — In August 2018, the FASB issued ASU No. 2018-13, "Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU No. 2018-13"). ASU No. 2018-13, which is part of the FASB's broader disclosure framework project, modifies and supplements the current U.S. GAAP disclosure requirements pertaining to fair value measurements, with an emphasis on Level 3 disclosures of the valuation hierarchy. ASU No. 2018-13 is effective on January 1, 2020, with early adoption permitted. The adoption of ASU No. 2018-13 is currently not expected to have a material impact on the Company's consolidated financial statements as it relates to disclosure only.

In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326: Financial Instruments - Credit Losses. This update is an amendment to the new credit losses standard, ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, that was issued in June 2016 and clarifies that operating lease receivables are not within the scope of Topic 326.The new credit losses standard amends the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables.  ASU No. 2016-13 is effective on January 1, 2020, with early adoption permitted. The adoption of this ASU is not expected to have a material effect on the Company's consolidated financial statements.
F-17


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)


3.
Going Concern:

At December 31, 2019, the Company had a working capital deficit of $24,675 and cash and cash equivalents of $4,412 and for the year ended December 31, 2019 incurred a net loss of $(14,773) and generated cash flow from operations of $19,194. In addition as of December 31, 2019, the Company had remaining contractual commitments for the vessels it had contracted to acquire totaling $64,048 and available committed undrawn loan facilities of $60,200.

From January 2020 up to the date of issuance of these financial statements  the Company sold four tankers, namely the M/T Eco Fleet, the M/T Eco Revolution, the M/T Stenaweco Elegance and the M/T Eco Palm Desert (see Note 20), which resulted in net aggregate proceeds of $24,798 after costs and fees relating to the sales and to the prepayment of related debt facilities (including the release of restricted cash relating to loan covenants and any time charter termination fees). In addition the Company's 50% owned subsidiaries entered into agreements to each sell its owned vessel and the Company estimates it will receive cash dividends as a result of these sales of $19,696. All the contractual commitments have been settled as of the date of issuance of these financial statements.

The Company believes it has adequate funding through the sources described above as well as the cash generated from sale of common shares subsequent to the year end (refer note 20) and, accordingly, it believes it has the ability to continue as a going concern and finance its obligations as they come due over the next twelve months following the date of the issuance of these financial statements. Consequently, the consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.



4(a)
Advances for vessels acquisitions / under construction:

An analysis of Advances for vessels acquisitions / under construction is as follows:

   
Advances for vessels acquisitions / under construction
 
Balance, December 31, 2017
   
6,757
 
— Advances paid
   
60,731
 
— Capitalized expenses
   
3,346
 
— Transferred to Vessels
   
(32,090
)
Balance, December 31, 2018
   
38,744
 
— Advances paid
   
158,905
 
— Capitalized expenses
   
3,812
 
— Transferred to Vessels, net
   
(189,220
)
Balance, December 31, 2019
   
12,241
 

In the year ended December 31, 2018, Advances for the construction of newbuilding vessels relate to M/T Eco Palm Desert, M/T Eco California, M/T Eco Marina Del Ray, M/T Eco Bel Air and M/T Eco Beverly Hills of $25,347, $14,392, $7,288, $8,531 and $8,519 respectively. On September 7, 2018, the Company took delivery of M/T Eco Palm Desert from Hyundai and hence advances paid and capitalized expenses relating to the vessel were transferred from Advances for vessels acquisitions / under construction to Vessels, net.

On January 30, March 13, April 5 and May 9, 2019, the Company took delivery of M/T Eco California, M/T Eco Marina Del Ray, M/T Eco Bel Air and M/T Eco Beverly Hills respectively from Hyundai (the first two vessels from Hyundai Mipo Dockyard and the second two vessels from Hyundai Samho Dockyard) and hence advances paid and capitalized expenses relating to the vessels were transferred from Advances for vessels acquisitions / under construction to Vessels, net. For the year ended December 31, 2019, the balance of Advances for vessels acquisitions / under construction relate to M/T Eco Los Angeles and M/T Eco City of Angels and consist of $6,169 and $6,072 respectively, out of which $533 and $435 relate to capitalized expenses.
F-18


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)


4(b)
Vessels, net:

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

   
Vessel Cost
   
Accumulated Depreciation
   
Net Book Value
 
Balance, December 31, 2017
   
164,694
     
(9,759
)
   
154,935
 
— Transferred from advances for vessels acquisitions / under construction
   
32,090
     
-
     
32,090
 
— Depreciation
   
-
     
(6,390
)
   
(6,390
)
Balance, December 31, 2018
   
196,784
     
(16,149
)
   
180,635
 
— Transferred from advances for vessels acquisitions / under construction
   
189,220
     
-
     
189,220
 
— Acquisitions
   
51,940
     
-
     
51,940
 
— Impairment
   
(22,254
)
   
9,944
     
(12,310
)
— Transferred to Assets held for sale
   
(43,147
)
   
-
     
(43,147
)
— Depreciation
   
-
     
(12,392
)
   
(12,392
)
Balance, December 31, 2019
   
372,543
     
(18,597
)
   
353,946
 

In 2018 and 2019 the Company took delivery of the following vessels:

Vessel Name
Delivery Date
 
Yard Installments
   
Capitalized Expenses
   
Final Cost
 
M/T Eco Palm Desert
September 7, 2018
   
29,994
     
2,096
     
32,090
 
Subtotal 2018
     
29,994
     
2,096
     
32,090
 
M/T Eco California
January 30, 2019
   
34,313
     
1,270
     
35,583
 
M/T Eco Marina Del Ray
March 13, 2019
   
35,787
     
1,066
     
36,853
 
M/T Eco Bel Air
April 5, 2019
   
57,133
     
1,209
     
58,342
 
M/T Eco Beverly Hills
May 9, 2019
   
57,133
     
1,309
     
58,442
 
Subtotal 2019
     
184,366
     
4,854
     
189,220
 

The Company's vessels have been mortgaged as security under its loan facilities (see Note 9).

On November 18 and November 20, 2019, the Company exercised the purchase options on its operating leases and purchased M/T Stenaweco Energy and M/T Stenaweco Evolution for $23,953 and $24,187 respectively. M/T Stenaweco Energy and M/T Stenaweco Evolution book value has been increased by $2,477 and $1,323 respectively, corresponding to the transfer of the respective ROU asset balances to each vessel upon termination of the lease, as per ASC 842-20-40-2.

4(c) Assets held for sale:

The Company decided to divest from tankers weighing less than 50,000 dwt and hence the M/T Eco Fleet and M/T Eco Revolution met the criteria to be classified as assets held for sale on  December 12, 2019 according to guidance in ASC 360. Consequently the Company has treated the vessels including their inventories on board as Assets held for sale and has classified them as a current asset measured at the lower of the carrying amount and fair value less costs to sell as determined by the Company and supported by an unrelated third party offer to buy the vessels. The related loans are also classified as short term in a separate balance sheet line from the other non-current portion of debt. The Company has recognized an impairment charge of $6,779 for the M/T Eco Fleet and $5,531 for the M/T Eco Revolution to reduce their carrying value to the fair value less costs to sell in the accompanying consolidated statements of comprehensive loss. As of December 31, 2019, the M/T Eco Fleet's new deemed cost and carrying amount after the impairment charge is $20,667 and the new deemed cost and carrying amount of the M/T Eco Revolution is $22,604 including inventories on board of $124. The vessels were sold on January 21 and January 14, 2020 to an unrelated third party for gross proceeds of $21,000 and $23,000 respectively.

F-19


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)


5.
Transactions with Related Parties:

 (a) Central Mare– Executive Officers and Other Personnel Agreements: On September 1, 2010, the Company entered into separate agreements with Central Mare pursuant to which Central Mare provides the Company with its executive officers (Chief Executive Officer, Chief Financial Officer, Chief Technical Officer and Chief Operating Officer).

As of December 31, 2018 the amount due to Central Mare was $51 and as of December 31, 2019 the amount due to Central Mare was $0. These amounts are presented in Due to and from related parties, on the accompanying consolidated balance sheets.

The fees charged by and expenses relating to Central Mare for the years ended December 31, 2017, 2018 and 2019 are as follows:

   
Year Ended December 31,
   
   
2017
   
2018
   
2019
 
Presented in:
Executive officers and other personnel expenses
   
2,400
     
2,400
     
360
 
General and administrative expenses - Statement of comprehensive loss
Amortization of awarded shares*
   
(25
)
   
(34
)
   
(34
)
Management fees - related parties - Statement of comprehensive loss
Total
   
2,375
     
2,366
     
326
   
 *As per the Company's equity incentive plan, or the 2015 plan (currently null and void since due to the recent reverse stock splits of the Company's stock the shares left to be vested are zero), the Company incurred an amortization gain of $25, $34 and $34 relating to the amortization of the original fair value of the equity incentive plan recognized at inception, for the years ended December 31 2017, 2018 and 2019 respectively.

On March 27, 2017 and January 2, 2018, the Company's board of directors granted to the Chief Executive Officer a bonus of $1,500 and $2,250 respectively, to be distributed at his own discretion to other executives and is included in "General and administrative expenses" in the accompanying consolidated statements of comprehensive loss.

 (b) Central Shipping Monaco SAM ("CSM") – Letter Agreement and Management Agreements: On March 10, 2014, the Company entered into a letter agreement, or the Letter Agreement, with CSM, a related party affiliated with the family of the Company's President, Chief Executive Officer and Director, Evangelos J. Pistiolis, and on March 10, 2014 and June 18, 2014 the Company entered into management agreements, or Management Agreements, between CSM and the Company's vessel-owning subsidiaries respectively. The Letter Agreement could only be terminated subject to an eighteen-month advance notice, subject to a termination fee equal to twelve months of fees payable under the Letter Agreement.

Pursuant to the Letter Agreement, as well as the Management Agreements concluded between CSM and the Company's vessel-owning subsidiaries, the Company paid a technical management fee of $595 per day per vessel for the provision of technical, operation, insurance, bunkering and crew management, commencing three months before the vessel was scheduled to be delivered by the shipyard and a commercial management fee of $328 per day per vessel, commencing from the date the vessel was delivered from the shipyard. In addition, the Management Agreements provided for payment to CSM of: (i) $541 per day for superintendent visits plus actual expenses; (ii) a chartering commission of 1.25% on all freight, hire and demurrage revenues; (iii) a commission of 1.00% on all gross vessel sale proceeds or the purchase price paid for vessels and (iv) a financing fee of 0.2% on derivative agreements and loan financing or refinancing. CSM also performed supervision services for all of the Company's newbuilding vessels while the vessels were under construction, for which the Company paid CSM the actual cost of the supervision services plus a fee of 7% of such supervision services.

CSM provided, at cost, all accounting, reporting and administrative services. Finally, the Letter Agreement provided for a performance incentive fee for the provision of management services to be determined at the discretion of the Company. The Management Agreements had an initial term of five years, after which they would have continued to be in effect until terminated by either party subject to an eighteen-month advance notice of termination. Pursuant to the terms of the Management Agreements, all fees payable to CSM were adjusted annually according to the US Consumer Price Inflation ("CPI") of the previous year and if CPI is less than 2% than a 2% increase was effected.

F-20


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

As of December 31, 2018 and 2019 the amounts due to CSM were $2,366 and $0 respectively and are presented in Due to related parties, on the accompanying consolidated balance sheets.

On January 1, 2019, the Company terminated the letter agreement with CSM without incurring any penalties

The fees charged by and expenses relating to CSM for the years ended December 31, 2017 and 2018 are as follows:

F-21

   
Year Ended December 31,
   
   
2017
   
2018
 
Presented in:
Management fees
   
34
     
101
 
Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet
   
2,242
     
2,455
 
Management fees - related parties -Statement of comprehensive loss
Supervision services fees
   
31
     
63
 
Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet
Superintendent fees
   
136
     
187
 
Vessel operating expenses -Statement of comprehensive loss
   
22
     
101
 
Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet
Accounting and reporting cost
   
183
     
233
 
Management fees - related parties -Statement of comprehensive loss
Financing fees
   
139
     
139
 
Net in Current and Non-current portions of long-term debt – Balance sheet
Commission for sale and purchase of vessels
   
1,081
     
3,861
 
Management fees - related parties -Statement of comprehensive loss
Commission on charter hire agreements
   
487
     
511
 
Voyage expenses - Statement of comprehensive loss
Performance incentive fee
   
1,250
     
1,250
 
Management fees - related parties - Statement of comprehensive loss
Total
   
5,605
     
8,901
   

For the years ended December 31, 2017 and 2018, CSM charged the Company newbuilding supervision related pass-through costs amounting to $454 and $958 respectively.

 (c)  Central Shipping Inc ("CSI") – Letter Agreement and Management Agreements: On January 1, 2019, the Company entered into a letter agreement with CSI ("CSI Letter Agreement"), a related party affiliated with the family of Evangelos J. Pistiolis and on the same date the Company entered into management agreements, or Management Agreements, between CSI and the Company's vessel-owning subsidiaries respectively. The CSI Letter Agreement can only be terminated subject to an eighteen-month advance notice, subject to a termination fee equal to twelve months of fees payable under the CSI Letter Agreement.

Pursuant to the CSI Letter Agreement, as well as the Management Agreements concluded between CSI and the Company's vessel-owning subsidiaries, the Company pays a management fee of $550 per day per vessel for the provision of technical, commercial, operation, insurance, bunkering and crew management, commencing three months before the vessel is scheduled to be delivered by the shipyard. In addition, the Management Agreements provide for payment to CSI of: (i) $500 per day for superintendent visits plus actual expenses; (ii) a chartering commission of 1.25% on all freight, hire and demurrage revenues; (iii) a commission of 1.00% on all gross vessel sale proceeds or the purchase price paid for vessels and (iv) a financing fee of 0.2% on derivative agreements and loan financing or refinancing. CSI also performs supervision services for all of the Company's newbuilding vessels while the vessels are under construction, for which the Company pays CSI the actual cost of the supervision services plus a fee of 7% of such supervision services.

F-22


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

CSI provides, at cost, all accounting, reporting and administrative services. Finally, the CSI Letter Agreement provides for a performance incentive fee for the provision of management services to be determined at the discretion of the Company. The management agreements have an initial term of five years, after which they will continue to be in effect until terminated by either party subject to an eighteen-month advance notice of termination. Pursuant to the terms of the management agreements, all fees payable to CSI are adjusted annually according to the US Consumer Price Inflation ("CPI") of the previous year and if CPI is less than 2% than a 2% increase is effected.

As of December 31, 2019 the amount due to CSI is $621 and is presented in Due to related parties, on the accompanying consolidated balance sheets.

The fees charged by and expenses relating to CSI for the year ended December 31, 2019 are as follows:

F-23

 
Year Ended December 31,
 
 
2019
Presented in:
Management fees
109
Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet
2,237
Management fees - related parties -Statement of comprehensive loss
Supervision services fees
55
Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet
Superintendent fees
247
Vessel operating expenses -Statement of comprehensive loss
172
Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet
Accounting and reporting cost
240
Management fees - related parties -Statement of comprehensive loss
 
Financing fees
263
Net in Current and Non-current portions of long-term debt – Balance sheet
Commission on charter hire agreements
829
Voyage expenses - Statement of comprehensive loss
Total
4,152
 

For the year ended December 31, 2019, CSI charged the Company newbuilding supervision related pass-through costs amounting to $985, which are not included in the table above and are presented within Vessels, net / Advances for vessels acquisitions / under construction in the Company's accompanying consolidated balance sheet.

(d) Family Trading Inc. ("Family Trading") - Revolving Credit Facility and Assumption of Liabilities: As of the date of issuance of these financial statements there have been various amendments and addendums to the Family Trading credit facility ("Further Amended Family Trading Credit Facility") (see Note 8). As of December 31, 2018 the interest and fees due to Family Trading were $1,806, representing $301 of interest payable, $5 of commitment fees payable and $1,500 of arrangement fees payable and are presented in Due to related parties, on the accompanying consolidated balance sheets.

(e) Issuance of Series E Shares to Family Trading Inc ("Family Trading"): On March 29, 2019 the Company entered into a stock purchase agreement with Family Trading pursuant to which the Company exchanged the outstanding principal, fees and interest of the Further Amended Family Trading Credit Facility with 27,129 Series E Shares (defined below, also see Note 8 and 10). As of December 31, 2019 dividends due to Family Trading were $1,621 and are presented in Due to related parties, on the accompanying consolidated balance sheets.

(f) Vessel Acquisitions from affiliated entities: From February 20 to November 24, 2017 the Company entered into a series of transactions with a number of entities affiliated with Evangelos J. Pistiolis that led to the purchase of M/T Eco Palm Desert and M/T Eco California, 90% interest in M/T Stenaweco Elegance and 50% interests in M/T Eco Holmby Hills and M/T Eco Palm Springs. On January 31, 2018 the Company entered into a series of transactions with a number of entities affiliated with Evangelos J. Pistiolis that led to the purchase of the construction contracts of M/T Eco Marina Del Ray, M/T Eco Bel Air, M/T Eco Beverly Hills and 10% interest in M/T Stenaweco Elegance. On December 18, 2019 the Company entered into a series of transactions with two entities affiliated with Evangelos J. Pistiolis that led to the purchase of the newbuilding vessels, M/T Eco Los Angeles and M/T Eco City of Angels (see Notes 1, 3 and 4). As of December 31, 2019 the Company owes $14,350 to the previous owners of the newbuilding vessels presented in Due to related parties in the accompanying consolidated balance sheets.

F-24


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

(g) Charter Party with Central Tankers Chartering Inc ("Central Tankers Chartering"): On September 1, 2017 the Company entered into a time charter party with Central Tankers Chartering, a related party affiliated with the family of Evangelos J. Pistiolis, for the vessel M/T Eco Palm Desert delivered from Hyundai in September 2018. The time charter was for a firm period of three years at a daily rate of $14,750 with two optional years at daily rates of $15,250 and $15,750 respectively, at Central Tankers Chartering's option. The time charter carried a 1.25% address commission payable to Central Tankers Chartering. Total revenue backlog from this time charter for the firm period was $15,949, assuming no off-hire days. As of December 31, 2018 the amounts due from Central Tankers Chartering were $75 and are presented in Due from related parties, on the accompanying consolidated balance sheets. In April 2019 the Company terminated the time charter party with Central Tankers Chartering without incurring any penalties and entered into a time charter agreement with Shell Tankers Singapore Private Limited ("Shell") until September 2020. The time charter with Shell consists of a fixed amount per day plus a 50% profit share for earned rates over the fixed amount.


6.
Leases

A. Lease arrangements, under which the Company acts as the lessee

Bareboat Chartered-in Vessels:

On January 29, 2015 and March 31, 2015, the Company sold and leased back M/T Stenaweco Energy and M/T Stenaweco Evolution respectively. The vessels were chartered back on a bareboat basis for 7 years at a bareboat hire of $8,586 and $8,625 per day respectively. In addition, the Company had the option to buy back each vessel from the end of year 3 up to the end of year 7 at purchase prices stipulated in the bareboat agreement depending on when the option is exercised. On December, 18 and December, 20 2019 the Company exercised the purchase options and terminated the operating leases on its two bareboat chartered in vessels. The purchase option prices paid amounted to $23,871 and $24,063 for the M/T Stenaweco Energy the M/T Stenaweco Evolution respectively, not including fees and expenses related to the transfer of ownership.

B. Lease arrangements, under which the Company acts as the lessor

Charter agreements:

During  the year ended December 31, 2019, the Company operated four vessels (M/T Stenaweco Energy, M/T Stenaweco Evolution, M/T Stenaweco Excellence and M/T Stenaweco Elegance) under time charters with Stena Bulk A/S, three vessels (M/T Eco Revolution, M/T Eco Bel Air and M/T ECO Beverly Hills) under time charters with BP Shipping Limited, two vessels (M/T Eco Palm Desert and M/T Eco California) under time charters with Shell Tankers Singapore Private Limited, one vessel (M/T Nord Valiant) under time charter with Dampskibsselskabet Norden A/S, one vessel (M/T Ecofleet) under time charter with Clearlake Shipping Pte Ltd and one vessel (M/T Marina Del Ray) under time charter with Cargill.

Furthermore the Company has entered into time charter parties for its newbuilding vessels (M/T Eco Los Angeles and M/T Eco City of Angels) with Trafigura.

Future minimum time-charter receipts of the Company's vessels in operation as of December 31, 2019, based on commitments relating to non-cancellable time charter contracts as of December 31, 2019, are as follows (excluding vessels held for sale):

Year ending December 31,
Time Charter receipts
2020
60,369
2021
33,938
2022
11,270
2023
5,512
2024
1,178
Total
112,267

F-25


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

Future minimum time-charter receipts of the Company's vessels under construction as of December 31, 2019, are as follows (based on estimated delivery dates):

Year ending December 31,
Time Charter receipts
2020
 11,043
2021
 12,776
2022
 12,776
2023
 1,733
Total
 38,328

In arriving at the minimum future charter revenues, an estimated 20 days off-hire time to perform scheduled dry-docking in the year the drydocking is expected on each vessel has been deducted, and it has been assumed that no additional off-hire time is incurred, although there is no assurance that such estimate will be reflective of the actual off-hire in the future.


7.
Inventories:

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

 
December 31, 2018
December 31, 2019
Lubricants
522
751
Consumable stores
65
97
Total
587
848


8.
Debt:

The amounts in the accompanying consolidated balance sheets are analyzed as follows (facility names defined below):

Bank / Vessel(s)
 
December 31,
 
   
2018
   
2019
 
Total long term debt:
           
ABN Facility (M/T Eco Fleet, M/T Eco Revolution and M/T Nord Valiant)
   
52,288
     
-
 
NORD/LB Facility (M/T Stenaweco Excellence)
   
18,071
     
-
 
Alpha Bank Facility (M/T Stenaweco Elegance), including Alpha Bank Top-Up Facility
   
20,550
     
20,075
 
AT Bank Facility (M/T Eco Palm Desert)
   
23,175
     
21,875
 
AT Bank Bridge Note (Top Ships)
   
-
     
10,500
 
OFI Facility (M/T Stenaweco Energy, M/T Stenaweco Evolution and M/T Stenaweco Excellence)
   
-
     
69,849
 
CMBFL Facility (M/T Eco Bel Air and M/T Eco Beverly Hills)
   
-
     
88,560
 
BoComm Leasing Facility (M/T Nord Valiant and M/T Eco California)
   
-
     
44,466
 
Cargill Facility (M/T Eco Marina Del Ray)
   
-
     
30,962
 
Total long term debt
   
114,084
     
286,287
 
Less: Deferred finance fees
   
(2,516
)
   
(7,257
)
Total long term debt net of deferred finance fees
   
111,568
     
279,030
 
                 
Presented:
               
Current portion of long term debt
   
10,210
     
16,908
 
Long term debt
   
101,358
     
262,122
 
                 
Long term debt from related parties:
               
Family Trading Facility
   
24,744
     
-
 
Less: Debt discounts
   
(9,073
)
   
-
 
Long term debt from related parties net of debt discounts
   
15,671
     
-
 
                 
Short Term Debt:
               
AT Bank second predelivery facility (M/T Eco California)
   
10,140
     
-
 
Alpha Bank predelivery facility (M/T Eco Marina Del Ray)
   
3,380
     
-
 
Less: Deferred finance fees
   
(104
)
   
-
 
Short term debt net of deferred finance fees
   
13,416
     
-
 
                 
Debt related to Vessels held for sale:
               
ABN Facility (M/T Eco Fleet and M/T Eco Revolution)
   
-
     
30,300
 
Less: Deferred finance fees
   
-
     
(323
)
Debt related to Vessels held for sale net of deferred finance fees
   
-
     
29,977
 
                 
Total Debt net of deferred finance fees and debt discounts
   
140,655
     
309,007
 

F-26


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

(A). LONG-TERM DEBT

ABN Amro Facility

On July 9, 2015, the Company entered into a credit facility with ABN Amro Bank N.V. of Holland ("ABN Amro") for $42,000 ("the ABN Amro facility") for the financing of the vessels M/T Eco Fleet and M/T Eco Revolution ($21,000 per financed vessel). This facility was amended on September 28, 2015 and was increased to $44,400 ($22,200 per vessel), with all other terms remaining the same except for the margin which was increased by 0.15%. The credit facility was repayable in 4 consecutive quarterly installments of $500, 4 consecutive quarterly installments of $512.5, 4 consecutive quarterly installments of $525 and 12 consecutive quarterly installments of $387.5 for each of the financed vessels, commencing on October 13, 2015 for M/T Eco Fleet and on April 15, 2016 for M/T Eco Revolution plus a balloon installment of $11,400 for each of the financed vessels, payable together with the last installment in July 2021 and in January 2022, respectively. On August 1, 2016, the Company amended the ABN Facility to increase the borrowing limit to $64,400 and added another tranche to the loan, "Tranche C", which was secured by M/T Nord Valiant. Tranche C was repayable in 12 consecutive quarterly installments of $550 each and 12 consecutive quarterly installments of $363 each, commencing on November 2016, plus a balloon installment of $9,050 payable together with the last installment in August 2022. Apart from the inclusion of M/T Nord Valiant as a collateralized vessel and the reduction of the margin to 3.75% (applicable only to Tranche C), no other material changes were made to the ABN Facility.

The Company drew down $21,000 under the ABN Amro facility on July 13, 2015 to finance the last shipyard installment of M/T Eco Fleet and another $1,200 on September 30, 2015. Furthermore, the Company drew down $22,200 under the ABN facility on January 15, 2016 to finance the last shipyard installment of M/T Eco Revolution. Finally, on August 5, 2016 the Company drew down $20,000 under the Tranche C of the ABN facility to partly finance the last shipyard installments of M/T Nord Valiant.

The facility contained various covenants, including (i) an asset cover ratio of 130%, (ii) a ratio of total net debt to the aggregate market value of the Company's fleet, current or future, of no more than 75% and (iii) minimum free liquidity of $750 per collateralized vessel. Additionally, the facility contained restrictions on the shipowning company incurring further indebtedness or guarantees. It also restricted the shipowning company from paying dividends if such a payment would result in an event of default or in a breach of covenants under the loan agreement.

The facility was secured as follows:


First priority mortgage over M/T Eco Fleet, M/T Eco Revolution and M/T Nord Valiant;

Assignment of insurance and earnings of the mortgaged vessels;

Specific assignment of any time charters with duration of more than 12 months;

Corporate guarantee of Top Ships Inc.;

Pledge of the shares of the shipowning subsidiaries;

Pledge over the earnings account of the vessels.

On April 21, 2017, the Company was informed by ABN Amro that it was in breach of a loan covenant that required that any member of the family of Mr. Evangelos J. Pistiolis maintain an ownership interest (either directly and/or indirectly through companies beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of 30% of the Company's outstanding common shares. ABN Amro requested that either the family of Mr. Evangelos J. Pistiolis maintains an ownership interest of at least 30% of the outstanding common shares or maintains a voting rights interest of above 50% in the Company. In order to regain compliance with the loan covenant, the Company issued the Series D preferred shares (see Note 10).  On July 28, 2017 ABN Amro by way of a supplemental agreement removed the loan covenant that required that any member of the family of Mr. Evangelos J. Pistiolis maintained an ownership interest of 30% of the Company's issued and outstanding common shares and replaced it with a covenant that states that no other party other than a member of the family of Mr. Evangelos J. Pistiolis (either directly and/or indirectly through companies beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) acquired a voting interest of more than 50% of the Company's share capital, without ABN Amro's prior written approval.

F-27


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

On November 16, 2018 the Company amended the ABN Facility to increase the borrowing limit by $5,000. This additional amount was subsequently drawn-down and applied towards capital expenditures under the Company's newbuilding program and was allocated to the mortgaged vessels as follows: $750 to M/T Eco Fleet, $750 to M/T Eco Revolution and $3,500 to M/T Nord Valiant. Apart from the introduction of a new repayment schedule reflecting the increased facility principal, all other material terms remained the same. As per the new repayment schedule the quarterly installments were increased by $25, $25 and $100 for M/T Eco Fleet, M/T Eco Revolution and M/T Nord Valiant respectively and their respective balloon installments were increased by $475, $425 and $2,000, respectively.

The ABN Amro facility bore interest at LIBOR plus a margin of 3.90%, except for the Tranche C part of the facility that bore interest at LIBOR plus a margin of 3.75%. The applicable LIBOR as of December 31, 2019 was 1.99%. Tranche C of the ABN Facility was fully prepaid on January 17, 2019 using $18,550 of proceeds from the BoComm Leasing Sale and Leaseback (see below). The remaining ABN Facility was prepaid on January 14 and January 21, 2020 in connection with the sale of the M/T Eco Fleet and M/T Eco Revolution using $29,475 of the proceeds from the sale.

NORD/LB Facility

On May 11, 2016, the Company entered into a credit facility with Norddeutsche Landesbank Girozentrale ("NORD/LB Bank") of Germany for $23,185 ("the NORD/LB facility") for the financing of the vessel M/T Stenaweco Excellence. The credit facility was repayable in 12 consecutive quarterly installments of $511 and 16 consecutive quarterly installments of $473, commencing in August 2016, plus a balloon installment of $9,480 payable together with the last installment in May 2023.

The Company drew down $23,185 under the NORD/LB facility on May 13, 2016 to finance the last shipyard installment of the M/T Stenaweco Excellence.

The facility contained various covenants, including (i) an asset cover ratio of 125% for the first three years and 143% thereafter, (ii) a ratio of total net debt to the aggregate market value of the Company's fleet, current or future, of no more than 75% and (iii) minimum free liquidity of $750 per collateralized vessel and $500 per bareboated chartered-in vessel. Additionally, the facility contained restrictions on the shipowning company incurring further indebtedness or guarantees. It also restricted the shipowning company from paying dividends if such a payment would result in an event of default or in a breach of covenants under the loan agreement.

The facility was secured as follows:

 First priority mortgage over M/T Stenaweco Excellence;
 Assignment of insurance and earnings of the mortgaged vessel;
 Specific assignment of any time charters with duration of more than 12 months;
 Corporate guarantee of Top Ships Inc.;
 Pledge of the shares of the shipowning subsidiary;
 Pledge over the earnings account of the vessel.

On May 16, 2017 NORD/LB by way of a supplemental agreement provided a waiver until December 31, 2017 for the breach of the loan covenant that requires that any member of the family of Mr. Evangelos J. Pistiolis maintained an ownership interest (either directly and/or indirectly through companies beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of 20% of the Company's issued and outstanding common shares. In addition NORD/LB agreed to reduce the abovementioned minimum percentage to 10%. On January 8, 2018 NORD/LB agreed to replace said covenant with a covenant that states that no other party other than a member of the family of Mr. Evangelos J. Pistiolis (either directly and/or indirectly through companies beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) acquires a voting interest of more than 50% of the Company's share capital, without NORD/LB's prior written approval.

F-28


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

The NORD/LB facility bore interest at LIBOR plus a margin of 3.43%. On July 15, 2019 the Company sold and leased back the M/T Stenaweco Excellence to Oriental Fleet International Company Limited (see below), a non-affiliated party, and fully prepaid the outstanding amount of the NORD/LB facility that amounted to $17,047.

Alpha Bank Facility

On July 20, 2016, Eco Seven that was later acquired by the Company entered into a credit facility with Alpha Bank SA. of Greece ("Alpha Bank") for $23,350 ("the Alpha facility") for the financing of the vessel M/T Stenaweco Elegance. The credit facility was repayable in 12 consecutive quarterly installments of $400 and 20 consecutive quarterly installments of $303, commencing in May 2017, plus a balloon installment of $12,500 payable together with the last installment in February 2025.

The Company drew down $23,350 under the Alpha facility on February 24, 2017 to finance the last shipyard installment of the M/T Stenaweco Elegance.

On August 1, 2017, Alpha Bank by way of a supplemental agreement removed the loan covenant that required that any member of the family of Mr. Evangelos J. Pistiolis maintains an ownership interest of 40% of the Company's issued and outstanding common shares and replaced it with a covenant that states that no other party other than a member of the family of Mr. Evangelos J. Pistiolis (either directly and/or indirectly through companies beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) acquires a voting interest of more than 50% of the Company's share capital, without Alpha Bank's prior written approval.

The facility contained various covenants, including (i) an asset cover ratio of 125%, (ii) a ratio of total net debt to the aggregate market value of the Company's fleet, current or future, of no more than 75%, (iii) minimum free liquidity of $750 per collateralized vessel, (iv) EBITDA was required to be greater than 120% of fixed charges and (v) market value adjusted net worth was required to be greater than or equal to $20,000. It also restricted the shipowning company from incurring further indebtedness or guarantees and from paying dividends if such a payment would result in an event of default or in a breach of covenants under the loan agreement.

The facility was secured as follows:

 First priority mortgage over M/T Stenaweco Elegance;
 Assignment of insurance and earnings of the mortgaged vessel;
 Specific assignment of any time charters with duration of more than 12 months;
 Corporate guarantee of Top Ships Inc.;
 Pledge of the shares of the shipowning subsidiary;
 Pledge over the earnings account of the vessel.

The Alpha facility bore interest at LIBOR plus a margin of 3.50%. The applicable LIBOR as of December 31, 2019 was about 1.79%. On February 21, 2020 the Company sold the M/T Stenaweco Elegance to a non-affiliated party, and fully prepaid the outstanding principal of the Alpha Bank Facility that amounted to $18,950.

Alpha Bank Top-Up Facility

On April 23, 2019, the Company entered into a credit facility with Alpha Bank for $1,500. This facility was subsequently drawn-down and applied towards capital expenditures under the Company's newbuilding program. The credit facility was repayable in 8 consecutive quarterly installments of $187.5 commencing in July 2019. This facility was secured by way of a third mortgage over M/T Stenaweco Elegance.

The facility principal will be added to the principal balance of the Alpha Bank Facility for all covenant related calculations.
F-29


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

The facility was secured as follows:


Intercreditor deed;

Third preferred ship mortgage over M/T Stenaweco Elegance;

Third priority general assignment of the earnings, insurances and any requisition compensation of M/T Stenaweco Elegance;

Third priority assignment of any time charterparty of M/T Stenaweco Elegance for a period of more than twelve (12) months;

Corporate guarantee of the Company;

Second priority pledge over the earnings account of the vessel;

The Alpha Bank Top-Up Facility bore interest at LIBOR plus a margin of 4.25%. The applicable LIBOR as of December 31, 2019 was about 1.77%. On February 21, 2020 the Company sold the M/T Stenaweco Elegance to a non-affiliated party, and fully prepaid the outstanding principal of the Alpha Bank Top-Up Facility that amounted to $938.

AT Bank Senior Facility

On September 5, 2017, the Company entered into a credit facility with Amsterdam Trade Bank N.V. of Holland ("AT Bank") for $23,500 to fund the delivery of M/T Eco Palm Desert (the "AT Bank Senior Facility"), delivered in September 7, 2018. An amount of $8,993 from the AT Bank Senior Facility was applied towards repayment of the AT Bank Predelivery Facility on September 4, 2018. This facility is repayable in 20 consecutive quarterly installments of $325, commencing three months from draw down, and a balloon payment of $17,000 payable together with the last installment.

The facility contained various covenants, including (i) an asset cover ratio of 115% for the first year, 120% for the second year, 125% for the third year and 140% thereafter, (ii) a ratio of total net debt to the aggregate market value of the Company's fleet, current or future, of no more than 75% and (iii) minimum free liquidity of $750 per collateralized vessel and $500 per bareboat chartered-in vessel. Additionally, the facility contained restrictions on the shipowning company incurring further indebtedness or guarantees and paying dividends.

The facility was secured as follows:

 First priority mortgage over M/T Eco Palm Desert;
 Assignment of insurance and earnings of the mortgaged vessel;
 Specific assignment of any time charters with duration of more than 12 months;
 Corporate guarantee of Top Ships Inc.;
 Pledge of the shares of the shipowning subsidiary;
 Pledge over the earnings account of the vessel.

The AT Bank Senior Facility bore interest at LIBOR plus a margin of 4% and a commitment fee of 2% per annum was payable quarterly in arrears over the committed and undrawn portion of the facility, starting from the date of signing the commitment letter. The Company on June 1, 2018 signed a supplemental agreement with AT Bank that resulted in the decrease of the commitment fee from 2% to 1.3%, effective from March 6, 2018. The applicable LIBOR as of December 31, 2019 was 1.90%.

On March 19, 2020 the Company sold the M/T Eco Palm Desert to a non-affiliated party, and fully prepaid the outstanding principal of the AT Bank Facility that amounted to $21,875.

AT Bank Bridge Note
On January 28, 2019, the Company entered into a credit facility with AT Bank for $10,500 for general corporate purposes (the "AT Bank Bridge Facility"). This facility was drawn down in full and the proceeds were used to repay the AT Bank Second Predelivery Facility. The facility was repayable on February 28, 2020. The facility contained restrictions on the Company from providing guarantees other than for financing of new vessels and from paying any dividends or distributing any of its capital or redeeming any of its shares.
F-30


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)
Furthermore the facility prohibited the Company to pay any principal, accrued fees, interest or commitment fees relating to the Family Trading Facility. Finally the facility also contained some restrictions in the use of proceeds of future issuances of capital and incurrence of unsecured debt.
The facility was secured as follows:

Corporate guarantee of the Company;

Second priority perfected mortgage on M/T Eco Palm Desert Vessel;

Second rank priority assignment of insurance and earnings of the mortgaged vessel;

Second rank priority assignment of any time charters with duration of more than 12 months;

Second priority pledge of the shares of the shipowning subsidiary of the mortgaged vessel;

Second priority pledge over the earnings account of the vessel.

The facility bore interest at LIBOR plus a margin of 6.00% and a commitment fee of 2.25% per annum was payable quarterly in arrears over the committed and undrawn portion of the facility, starting from the date of signing the commitment letter. On March 22, 2019 the AT Bank Bridge Facility was converted into a note and on October 14, 2019 its maturity was extended to March 31, 2021 with all other terms remaining the same.

The applicable LIBOR as of December 31, 2019 was 1.90%. On March 19, 2020 the Company sold the M/T Eco Palm Desert to a non-affiliated party, and fully prepaid the outstanding principal of AT Bank Bridge Note that amounted to $10,500.

(B). SHORT-TERM DEBT

Unsecured Notes

On November 13 and on December 14, 2017 the Company entered into two unsecured notes with Crede Capital Group LLC, an unaffiliated third party (the "Crede Notes") as follows:

Agreement date
 
Amount drawn
   
Interest
   
Amount settled
   
Amounts forgiven
 
November 13, 2017
   
17,500
     
11
     
(17,500
)
   
-
 
December 14, 2017
   
24,269
     
75
     
(24,089
)
   
(180
)
     
41,769
     
86
     
(41,589
)
   
(180
)

The first Crede Note amounted to $12,500 and carried a single revolving option for additional $5,000 that the Company exercised on November 20, 2017, bringing the total drawn amount to $17,500. The second Crede Note amounted to $12,500 and carried revolving options for two additional $5,000 notes. On January 5, 2018, the Company amended the Note Purchase Agreement, pursuant to which the Company issued to Crede a second unsecured promissory note in the amount of $5,369 with a revolving option for an additional $4,631 note. The Company further amended the Note Purchase Agreement on February 8, 2018, pursuant to which the borrowing availability was increased under the agreement and a third unsecured promissory note was issued to Crede in the amount of $6,400.

The proceeds from the sales of the Crede Notes were used for vessel acquisitions and general corporate purposes. The Crede Notes matured 24 months from the date of their issuance and bore interest at a rate of 2.0% per annum for the period of ninety days starting on the issuance date, (ii) 10.0% per annum for the period of ninety days starting on the date that is ninety days immediately following the issuance date and (iii) 15.0% per annum starting on the date that is one hundred eighty days immediately following the issuance date. The Crede Notes carried customary covenants and restrictions, including the covenant that all net proceeds that the Company receives from the sale of any equity securities of the Company shall be utilized exclusively to repay any outstanding amounts under the Crede Notes until the Crede Notes were repaid in full. The Crede Notes also restricted the Company from redeeming, repurchasing or declaring any cash dividend or distribution on any of its capital stock (other than any obligations to do so outstanding as of the issuance dates of the Notes), as long as there were outstanding amounts under the Notes.

F-31


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

As of December 31, 2018, all of the Crede Notes have been repaid in full, by using proceeds from the First and Second Crede Purchase Agreement (see Note 10).

AT Bank Predelivery Facility

On September 5, 2017, the Company entered into a credit facility with AT Bank for $8,993 for the pre-delivery financing of M/T Eco Palm Desert (the "AT Bank Predelivery Facility"). This facility was drawn down in five tranches and financed in full the last five pre-delivery instalments of M/T Eco Palm Desert due for payment between August 2017 and May 2018. The facility was repaid from the proceeds of the AT Bank Senior Facility on September 4, 2018.

The facility contained various covenants, including a ratio of total net debt to the aggregate market value of the Company's fleet, current or future, of no more than 75% and minimum free liquidity of $750 per collateralized vessel and $500 per bareboated chartered-in vessel. Additionally, the facility contained restrictions on the subsidiary that owned the newbuilding contract from incurring further indebtedness or guarantees and from paying any dividends.

The facility was secured as follows:

 Assignment to the bank of the newbuilding contract and of the respective refund guarantee of M/T Eco Palm Desert;
 Corporate guarantee of Top Ships Inc.;
 Pledge of the shares of the subsidiary owning the newbuilding contract;

The AT Bank Predelivery Facility bore interest at LIBOR plus a margin of 8.5% and a commitment fee of 4.25% per annum was payable quarterly in arrears over the committed and undrawn portion of the facility, starting from the date of signing the commitment letter. The Company on June 1, 2018 signed a supplemental agreement with AT Bank that resulted in the decrease of the loan margin to 6.3% from 8.5% and in the decrease of the commitment fee from 4.25% to 0%, effective from March 6, 2018.

AT Bank Second Predelivery Facility
On June 1, 2018, the Company entered into a credit facility with AT Bank for $10,140 for the pre-delivery financing of M/T Eco California (the "AT Bank Second Predelivery Facility"). This facility was drawn down in five tranches and financed in full the last five pre-delivery instalments of M/T Eco California due for payment between June and December 2018. The facility was repaid on January 28, 2019, upon delivery of the vessel, from the proceeds of the AT Bank Bridge Facility.
The facility contained various covenants, including a ratio of total net debt to the aggregate market value of the Company's fleet, current or future, of no more than 75% and minimum free liquidity of $750 per collateralized vessel and $500 per bareboated chartered-in vessel. Additionally, the facility contained restrictions on the subsidiary that owns the newbuilding contract from incurring further indebtedness or guarantees and from paying any dividends.
The facility was secured as follows:


Assignment to the bank of the newbuilding contract and of the respective refund guarantee of M/T Eco California;

Corporate guarantee of Top Ships Inc.;

Pledge of the shares of the subsidiary owning the newbuilding contract;

The AT Bank Second Predelivery Facility bore interest at LIBOR plus a margin of 6.3%, reduced to 6% from September 2018 onwards. The facility bore no commitment fee. The Company drew down the full amount of the facility to finance in full the last five pre-delivery instalments of M/T Eco California due for payment between June and December 2018.
F-32


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

Alpha Bank Predelivery Facility
On July 11, 2018, the Company entered into a credit facility with Alpha Bank for $10,140 for the pre-delivery financing of M/T Eco Marina Del Ray. This facility could be drawn down in five tranches to finance in full the last five pre-delivery instalments of M/T Eco Marina Del Ray due between July 2018 and February 2019. The facility was repayable on delivery of the vessel in March 2019.
The facility contained restrictions on the subsidiary that owns the newbuilding contract from incurring further indebtedness or guarantees and from paying any dividends if the latter would result in an event of default.
The facility was secured as follows:
 Assignment to the bank of the newbuilding contract and of the respective refund guarantee of M/T Eco Marina Del Ray;
 Corporate guarantee of Top Ships Inc.;
 Pledge of the shares of the subsidiary owning the newbuilding contract;

The facility bore interest at LIBOR plus a margin of 4.25% and a commitment fee of 1% per annum was payable quarterly in arrears over the committed and undrawn portion of the facility, starting from the date of signing the commitment letter. The Company drew down $1,690, $1,690, $3,380 and $3,380 under the facility in July 2018, October 2018, January 2019 and February 2019 respectively, to finance four shipyard installments of M/T Eco Marina Del Ray. The Alpha Bank Predelivery Facility was fully repaid on March 13, 2019 with part of the proceeds from the Cargill Sale and Leaseback (see below).

(C). SHORT AND LONG TERM DEBT FROM RELATED PARTIES

Amended Family Trading Credit Facility

On December 23, 2015, the Company entered into an unsecured revolving credit facility with Family Trading ("the Family Trading facility"), a related party owned by the Lax Trust, for up to $15,000 to be used to fund the Company's newbuilding program and working capital relating to the Company's operating vessels. This facility was repayable in cash no later than December 31, 2016, but the Company had the option to extend the facility's repayment up to December 31, 2017. On December 28, 2016 the maturity of the Family Trading facility was extended to January 31, 2017 and on January 27, 2017 the maturity of the Family Trading loan was extended to February 28, 2017 with all terms remaining the same.

On February 21, 2017, the Company amended and restated the Family Trading Credit Facility (the "Amended Family Trading Credit Facility") in order to, among other things, remove any limitation in the use of funds drawn down under the facility, reduce the mandatory cash payment due under the facility when the Company raised capital through the issuance of certain securities, remove the revolving feature of the facility, extend the facility for up to three years and give Family Trading the option to get repaid for any amounts outstanding under the facility in cash or in common shares of the company. Additionally, the interest rate of the facility increased to 10% (from 9%) and the commitment fee decreased to 2.5% (from 5%). Subject to certain adjustments pursuant to the terms of the Amended Family Trading Credit Facility, the number of common shares to be issued as repayment of the amounts outstanding under the facility would be calculated by dividing the amount redeemed by 80% of the lowest daily Volume-Weighted Average Price ("VWAP") of the Company's common shares on the Nasdaq Capital Market during the twenty consecutive trading days ending on the trading day prior to the payment date (the "Applicable Price"), provided, however, that at no time could the Applicable Price be lower than $0.60 per common share (the "Floor Price").

Further, in the case where the Company raised capital (whether publicly or privately) and the Applicable Price was higher than the lowest of (henceforth the "Issuance Price"):


a.
the price per share issued upon an equity offering of the Company;

b.
the exercise price of warrants or options for common shares;

c.
the conversion price of any convertible security into common shares; or

d.
the implied exchange price of the common shares pursuant to an asset to equity or liability to equity swap,

F-33


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

then the Applicable Price would be reduced to the Issuance Price. Finally, in case the Applicable Price was higher than the exercise price of the Company's 2014 Warrants, the Applicable Price would be reduced to the exercise price of such outstanding warrants.

The Company during the year ended December 31, 2017 issued 0.2 common shares as payment for $1,198 of accrued fees and interest under the Amended Family Trading Credit Facility that resulted in additional non-cash debt conversion expenses amounting to $842, included in Interest and finance costs in the accompanying Statement of comprehensive loss.

On September 27, 2018, the Company further amended the Amended Family Trading Credit Facility (the "Amended and Restated Family Trading Credit Facility") in order to, among other things, set the repayment date of the facility to December 31, 2019, increase the maximum borrowing capacity of the facility to $20,000, increase the interest rate to 12%, reduce the commitment fee to 2% and increase the arrangement fee to 5%. On October 30, 2018, the Company entered into an addendum to the Amended and Restated Family Trading Credit Facility in order to, among other things, increase the maximum borrowing capacity of the facility to $25,000. On December 31, 2018 the Company entered into another addendum to the facility in order to, among other things, set the repayment date of the facility to December 31, 2025, increase the maximum borrowing capacity of the facility to $30,000, increase the interest rate to 15% and apply the then applicable arrangement fee rate to the whole principal of the loan.

The Company during year ended December 31, 2018 has drawn $26,152 and repaid $1,408 under the facility. As of December 31, 2018 the facility had an undrawn balance of $4,149.

At each drawdown under the facility, the Company recognized a beneficial conversion feature ("BCF") by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of the Company's common stock per share on the commitment date, to additional paid-in capital. Hence in total the Company recognized $15,028 of debt discount, $2,504 of which was amortized in the year ended December 31, 2018 and is included in "Interest and finance costs" in the accompanying Statement of comprehensive loss. Each successive amendment of the facility resulted in an increase in the borrowing capacity of the facility and therefore affected the fair value of the debt conversion feature, substantially. This resulted in the Company recognizing a debt extinguishment on each amendment date in line with ASC 470-50-40-10. Under the current accounting standard ASC 470-50-40-2, the extinguishment of related party debt is considered a capital transaction and accordingly, no gain or loss on extinguishment is recognized in the statement of comprehensive loss but it is recognized as a deemed dividend in equity amounting to $2,258.

On March 29, 2019 the Company entered into a stock purchase agreement with Family Trading whereupon the outstanding principal of the Further Amended Family Trading Credit Facility amounting to $24,744 and all accrued interest and fees under the facility amounting to $2,385 were exchanged for 27,129 Series E Shares (defined below) and the facility was terminated (see Note 17). The Company accounted for the termination of the facility as a debt extinguishment and in performing the extinguishment calculation, the Company followed the provisions of ASC 470-20-40-3 which states that if a convertible debt instrument containing an embedded beneficial conversion feature is extinguished before conversion, a portion of the reacquisition price should be allocated to the repurchase of the beneficial conversion feature, that in this case was $8,518. Under the current accounting standard ASC 470-50-40-2, the extinguishment of related party debt is considered a capital transaction and accordingly, no gain or loss on extinguishment is recognized in the statement of comprehensive loss but it is recognized as a deemed dividend in equity amounting to $9,570.

Related party interest expense for the year ended December 31, 2017, 2018 and 2019 incurred in connection with this credit facility, amounted to $111, $857 and $928 respectively and is included in "Interest and finance costs" in the accompanying consolidated statements of comprehensive loss. Related party commitment fees for the year ended December 31, 2017, 2018 and 2019 incurred in connection with this credit facility, amounted to $366, $179 and $20 respectively and are included in "Interest and finance costs" in the accompanying consolidated statements of comprehensive loss.

(D) FINANCINGS COMMITTED UNDER SALE AND LEASEBACK AGREEMENTS

All the below sale and leaseback agreements ("SLB"s) contain, customary covenants and event of default clauses, including cross-default provisions and restrictive covenants and performance requirements including (i) a ratio of total net debt to the aggregate market value of the Company's fleet, current or future, of no more than 75% and (ii) minimum free liquidity of $750 per collateralized vessel, $500 per bareboated chartered-in vessel and $1,000 per Suezmax vessel at the guarantors level.

F-34


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

Additionally, all the SLBs contain restrictions on the relative shipowning company incurring further indebtedness or guarantees and paying dividends, if such dividend payment would result in an event of default or termination event under the SLB agreements.

All the below SLBs are secured mainly by the following:

 Ownership of  the vessel financed;
 Assignment of insurance and earnings of the vessel financed;
 Specific assignment of any time charters of the vessel financed with duration of more than 12 months;
 Corporate guarantee of Top Ships Inc.;
 Pledge of the shares of the relative shipowning subsidiary;
 Pledge over the earnings account of the vessel financed.

Cargill Sale and Leaseback

On June 29, 2018 the Company entered into a sale and leaseback agreement ("SLB") and a 5 year time charter with Cargill, a non-affiliated party, for its newbuilding vessel M/T Eco Marina Del Ray (Hull No 8242) delivered in March 2019. Consummation of the SLB took place on the vessel's delivery date. Following the sale, the Company has bareboat chartered back the vessel at a bareboat hire of $8,600 per day and simultaneously the vessel commenced its five year time charter with Cargill. As part of this transaction, the Company has the obligation to buy back the vessel at the end of the five year period for $22,680. The gross proceeds from the sale were $32,387.

The SLB with Cargill is accounted as a financing transaction, as control remains with the Company and the M/T Eco Marina Del Ray will continue to be recorded as an asset on the Company's balance sheet. In addition the Company has an obligation to repurchase the vessel.

Bank of Communications Financial Leasing Company ("BoComm Leasing") Sale and Leaseback

On December 21, 2018 the Company entered into a SLB with BoComm Leasing, a non-affiliated party, for M/T Nord Valiant and M/T Eco California. Consummation of the SLB took place on January 17, 2019 for M/T Nord Valiant and on January 31, 2019 M/T Eco California. Following the sale, the Company has bareboat chartered back M/T Nord Valiant for five years and M/T Eco California for seven years at a bareboat hire of $5,875 per day and $6,550 per day respectively. As part of this transaction, the Company has continuous options, after the third year, to buy back the vessels at purchase prices stipulated in the bareboat agreement depending on when the option is exercised. The gross proceeds from the SLBs were $21,655 for M/T Nord Valiant and $24,140 for M/T Eco California.

The SLB with BoComm Leasing contains a covenant requiring that there is no change of control of the Company, save with the prior written consent of BoComm Leasing.

The SLB with BoComm Leasing is accounted as a financing transaction, as control remains with the Company and M/T Nord Valiant and M/T Eco California will continue to be recorded as an asset on the Company's balance sheet. In addition the Company has continuous options to repurchase the vessels below fair value.

China Merchants Bank Financial Leasing Co. Ltd. ("CMBFL") Sale and Leaseback

On December 3, 2018 the Company entered into an SLB with CMBFL, a non-affiliated party, for M/T Eco Bel Air and M/T Eco Beverly Hills. Consummation of the SLB took place on April 4 and May 9 2019 respectively. Following the sale, the Company has bareboat charter back the vessels for a period of seven years at a bareboat hire of $1,475 per quarter per vessel. As part of this transaction, the Company has continuous options, after the third year, to buy back the vessels at purchase prices stipulated in the bareboat agreement depending on when the option is exercised. The gross proceeds from the sale were $91,412 for both vessels.

The SLB with CMBLF contains a representation that should be always in effect throughout the sale and leaseback period requiring the corporate guarantor (Top Ships Inc) to remain listed in the NASDAQ exchange and requiring that there is no change in the controlling shareholder of the guarantor. Violation of this ongoing representation would result in a covenant breach.

F-35


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

The SLB with CMBLF is accounted as a financing transaction, as control remains with the Company and M/T Eco Bel Air and M/T Eco Beverly Hills will continue to be recorded as an asset on the Company's balance sheet. In addition the Company has continuous options to repurchase the vessels below fair value.

Oriental Fleet International Company Limited ("OFI") Sale and Leaseback

On July 8, 2019 the Company entered into sale and leaseback agreements with OFI, a non-affiliated party, for M/T Stenaweco Excellence and M/T Stenaweco Energy, M/T Stenaweco Evolution respectively. The sales of the three vessels were concluded on July 15, November 18 and November 20, 2019 respectively. Following the sale, the Company has bareboat chartered back the vessels for a period of ten years at bareboat hire rates comprising of financing principal based on straight-line amortization plus interest based on the three months Libor plus 3.90%.

The amortizations of the OFI facility are as follows:


for M/T Stenaweco Excellence: 120 consecutive monthly installments of $160, commencing from draw down, and a balloon payment of $6,400 payable together with the last installment,

for M/T Stenaweco Energy: 120 consecutive monthly installments of $131, commencing from draw down, and a balloon payment of $5,700 payable together with the last installment,

for M/T Stenaweco Evolution: 120 consecutive monthly installments of $153, commencing from draw down, and a balloon payment of $6,100 payable together with the last installment,

As part of this transaction, the Company has continuous options, after the third year, to buy back the vessels at purchase prices stipulated in the bareboat agreements depending on when the option is exercised and at the end of the ten year period it has an obligation to buy back the vessels at a cost represented by the balloon payment. The gross proceeds from the sale of the M/T Stenaweco Excellence were $25,600, for M/T Stenaweco Energy $21,375 and for M/T Stenaweco Evolution $24,400.

The SLB with OFI contains a covenant requiring the Company throughout the sale and leaseback period to remain listed in the NASDAQ exchange and requiring that there is no change of control of the Company, save with the prior written consent of OFI.

The sale and leaseback agreements with OFI was accounted as financing transactions, as control will remain with the Company and the vessels will continue to be recorded as assets on the Company's balance sheet. In addition the Company has the obligation to repurchase the vessels.

Avic International Leasing Co., Ltd ("AVIC") Sale and Leaseback

On September 30, 2019 the owning companies of the M/T Eco Los Angeles and M/T Eco City of Angels entered into an SLB with AVIC, a non-affiliated party, for their newbuilding vessels M/T Eco Los Angeles and M/T Eco City of Angels. Consummation of the SLB and drawdown of funds took place on the vessels delivery dates from the shipyard, namely on February 10 and February 17 2020 respectively. Following the sale, the Company has bareboat chartered back the vessels for a period of ten years at a bareboat hire of $9,435 for the first 5 years and $9,090 for the next 5 years per day per vessel, with a balloon installment of $11,288 for each vessel on the final charter hire date. As part of this transaction, the Company has continuous options, after the second year, to buy back the vessels at purchase prices stipulated in the bareboat agreement depending on when the option is exercised and at the end of the ten year period it has an obligation to buy back the vessels at a cost represented by the balloon payment. The gross proceeds from the sale amounted to $60,200 for both vessels.

The SLB with AVIC contains a covenant requiring that there is no change of control of the Company, save with the prior written consent of AVIC.

The SLB with AVIC will be accounted as a financing transaction, as control will remain with the Company and the vessels will continue to be recorded as an asset on the Company's balance sheet. In addition the Company has the obligation to repurchase the vessels.

F-36


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

As of December 31, 2019 the outstanding amount under the Avic facility was $0.

Scheduled Principal Repayments: The Company's annual principal payments required to be made after December 31, 2019 on its loan obligations, are as follows (including the financings under sale and leaseback agreements but excluding the facilities related to the vessels held for sale and the AVIC facility that was not drawn down as of December 31, 2019):

Years
     
December 31, 2020
   
18,112
 
December 31, 2021
   
28,735
 
December 31, 2022
   
17,390
 
December 31, 2023
   
33,523
 
December 31, 2024
   
53,608
 
December 31, 2025 and thereafter
   
134,919
 
Total
   
286,287
 

As of December 31, 2019, the Company was in compliance with all debt covenants with respect to its loans and credit facilities. The fair value of debt outstanding on December 31, 2019, after excluding unamortized financing fees, amounted to $ 319,091 when valuing the Cargill, BoComm and CMBFL Sale and Leasebacks on the basis of the Commercial Interest Reference Rates ("CIRR"s) as applicable on December 31, 2019, which is considered to be a Level 2 item in accordance with the fair value hierarchy.

Financing Costs: The net additions in deferred financing costs amounted to $3,609 and $6,773 during the years ended December 31, 2018 and 2019 respectively.


9.
Commitments and Contingencies:

Legal proceedings:

Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. As part of the normal course of operations, the Company's customers may disagree on amounts due to the Company under the provision of the contracts which are normally settled through negotiations with the customer. Disputed amounts are normally reflected in revenues at such time as the Company reaches agreement with the customer on the amounts due.

On August 1, 2017, the Company received a subpoena from the U.S. Securities and Exchange Commission ("SEC") requesting certain documents and information in connection with offerings made by the Company between February 2017 and August 2017. The Company provided the requested information to the SEC in response to that subpoena. On September 26, 2018 and on October 5, 2018 the Company received two additional subpoenas from the SEC requesting certain documents and information in connection with the previous subpoena the Company received on August 1, 2017. The Company provided the requested information to the SEC in response to these subpoenas. The SEC investigation is ongoing and the Company continues to cooperate with the SEC in its investigation. The Company is unable to predict what action, if any, might be taken by the SEC or its staff as a result of this investigation or what impact, if any, the cost of responding to the SEC's investigation or its ultimate outcome might have on the Company's financial position, results of operations or liquidity. Hence the Company has not established any provision for losses relating to this matter.

On August 23, 2017, a purported securities class action complaint was filed in the United States District Court for the Eastern District of New York (No. 2:17-cv-04987(JFB)(SIL)) by Christopher Brady on behalf of himself and all others similarly situated against (among other defendants) the Company and two of its executive officers. The complaint is brought on behalf of an alleged class of those who purchased common stock of the Company between January 17, 2017 and August 22, 2017, and alleges that the Company and two of its executive officers violated Sections 9, 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On August 24, 2017, a second purported securities class action complaint was filed in the same court against the same defendants (No. 2:17-cv-05016 (JFB)(SIL)) which makes similar allegations and purports to allege violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. By order dated July 20, 2018, the court consolidated the two actions under docket no. 2:17-cv-04987 and appointed lead plaintiffs for the consolidated action. On September 18, 2018, the plaintiffs filed a consolidated amended complaint. The amended complaint purports to be brought on behalf of shareholders who purchased the common stock of the Company between November 23, 2016 and April 3, 2018, makes allegations similar to those made in the original complaints, seeks similar relief as the original actions, and alleges that some or all the defendants violated sections 9, 10(b), 20(a), and/or 20A of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. All defendants filed motions to dismiss the amended complaint on March 25, 2019. Plaintiffs filed a consolidated opposition to defendants' motions to dismiss on May 24, 2019.  Defendants filed replies in further support of the motions to dismiss on June 28, 2019.  In a Memorandum Decision and Order dated August 3, 2019, the Court granted defendants' motions to dismiss under Rule 12(b)(6) and denied Plaintiffs' request for leave to amend.  On August 7, 2019, the Court entered judgment dismissing the case.  Plaintiffs filed a notice of appeal on August 26, 2019.  Plaintiffs/appellants filed their opening brief on the appeal on October 25, 2019.  Defendants/appellees filed their response briefs on November 26 and November 27, 2019, and plaintiffs/appellants filed their reply brief on December 11, 2019.  The Court of Appeals held oral argument on March 10, 2020 and took the matter under advisement. On April 2, 2020, the Court of Appeals issued a summary order affirming the District Court's decision dismissing Plaintiffs' claims and denying leave to amend. The Court of Appeals is scheduled to issue a mandate making the decision effective on April 23, 2020 if Plaintiffs do not file a motion for reargument. The Company and its management believe that the allegations in the complaints are without merit and plan to vigorously defend themselves against the allegations.

F-37


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

By letter dated January 2, 2019, certain co-defendants in the class action litigation (Kalani Investments Ltd. ("Kalani"), Murchinson Ltd. and Marc Bistricer) requested that the Company indemnify and hold them harmless against all losses, including reasonable costs of defense, arising from the litigation, pursuant to the provisions of the Common Stock Purchase Agreement between the Company and Kalani. The Company acknowledged receipt of this indemnification request by letter dated February 20, 2019, and reserved all of its rights.

Other than the cases mentioned above, the Company is not a party to any material litigation where claims or counterclaims have been filed against the Company other than routine legal proceedings incidental to its business.

Capital Expenditures under the Company's Newbuilding program:

In December 2019 the Company entered into a series of transactions with a number of entities affiliated with Evangelos J. Pistiolis that led to the purchase of a number of newbuilding contracts (please see Note 1 and 5). As a result of these transactions, the Company has remaining contractual commitments for the acquisition of vessels under constructions totaling $64,048, comprising of $ 32,024 and $32,024 pursuant to the newbuilding agreements for M/T Eco Los Angeles and M/T Eco City of Angels respectively (see Note 1). These contractual commitments were paid in the first quarter of 2020 on delivery of the vessels to the Company.

Environmental Liabilities:

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.


10.
Common and Preferred Stock, Additional Paid-In Capital and Dividends:

Reverse stock split: On May 11 2017, June 23 2017, August 3 2017, October 6 2017, March 26 2018 and August 22 2019, the Company effected a 1-for-20, a 1-for-15, a 1-for-30, a 1-for-2, a 1-for-10 and a 1-for-20 reverse stock split of its common stock respectively. There was no change in the number of authorized common shares of the Company. All numbers of share and earnings per share amounts, as well as warrant shares eligible for purchase under the Company's warrants, in these financial statements have been retroactively adjusted to reflect these reverse stock splits.

Series C preferred convertible shares: On February 17, 2017, the Company completed a private placement of 7,500 Series C convertible preferred shares (the "Series C shares") for an aggregate principal amount of $7,500 with Xanthe. Holders of Series C shares had no voting rights. The Company at its option had the right to redeem the outstanding Series C shares at an amount equal to 120% of the Conversion Amount being redeemed. The holders of Series C shares were entitled to receive quarterly dividends at a rate of 8% per annum payable in common shares, except that any dividend not paid in common shares would be payable in cash. During the year ended December 31, 2017 the Company issued 45,232 common shares upon the conversion of 7,500 Series C shares and paid $600 in dividends. Also in consideration for entering into the agreement, the Company issued $113 of its common stock to Xanthe as a commitment fee. As of December 31, 2017 all Series C shares had been converted to common stock.

Series D preferred shares: On May 8, 2017, the Company issued 100,000 shares of Series D preferred shares (the "Series D shares") to Tankers Family Inc., a company controlled by Lax Trust for one thousand dollars ($1,000) pursuant to a stock purchase agreement. The Series D shares are not convertible into common shares and each Series D share has the voting power of 1,000 common shares. The Series D shares have no dividend or distribution rights and shall expire and all outstanding Series D shares shall be redeemed by the Company for par value on the date that any loan with any other financial institution, which contain covenants that require that any member of the family of Mr. Evangelos J. Pistiolis maintain a specific minimum ownership or voting interest (either directly and/or indirectly through companies or other entities beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of the Company's issued and outstanding common shares, respectively, are fully repaid or reach their maturity date. The Series D shares shall not be otherwise redeemable and upon any liquidation, dissolution or winding up of the Company, the Series D shares shall have a liquidation preference of $0.01 per share. The Series D Preferred Shares shall not be otherwise redeemable. Currently the SLBs with Bank of Communications Financial Leasing Company, Oriental Fleet International Company Limited and China Merchants Bank Financial Leasing have similar provisions that are satisfied via the existence of the Series D Shares.

F-38


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

Common stock purchase agreement: On February 2, 2017, the Company, entered into an agreement, as amended four times during 2017, with Kalani, under which the Company could sell up to $40,341 of its common stock to Kalani over a period of 24 months, subject to certain limitations (the "Common stock purchase agreement"). Proceeds from sales of common stock were used for general corporate purposes. Kalani had no right to require any sales and was obligated to purchase the common stock as directed by the Company, subject to certain limitations set forth in the agreement. In consideration for entering into the agreement, the Company issued $606 of its common stock to Kalani as a commitment fee. No warrants, derivatives, or other share classes were associated with this agreement. As of December 31, 2017, the Company had received proceeds (net of 1% commitment fees), amounting to $39,937 and issued 31,638    common shares. On October 12, 2017 the Common stock purchase agreement was completed.

First Crede Purchase Agreement: On November 7, 2017, the Company, entered into an agreement with Crede, pursuant to which the Company could sell up to $25,000 of shares of its common stock, to Crede over a period of 24 months, subject to certain limitations (the "First Crede Purchase Agreement"). In consideration for entering into the First Crede Purchase Agreement, the Company agreed to issue up to $500 of shares of its common stock, to Crede as a commitment fee. Crede had no right to require any sales and was obligated to purchase the common stock as directed by the Company, subject to certain limitations set forth in the agreement. Proceeds from sales of common stock were used for general corporate purposes. No warrants, derivatives, or other share classes were associated with this agreement. As of December 31, 2017, the Company had received proceeds, amounting to $25,000 and issued 269,148 common shares, out of which 7,500 shares refer to commitment fees. On December 14, 2017 the First Crede Purchase Agreement was completed.

Second Crede Purchase Agreement: On December 11, 2017, the Company, entered into a second agreement with Crede, pursuant to which the Company could sell another $25,000 of shares of its common stock, to Crede over a period of 24 months, subject to certain limitations (the "Second Crede Purchase Agreement"). In consideration for entering into the Second Crede Purchase Agreement, the Company agreed to issue up to $500 of shares of its common stock, to Crede as a commitment fee. Crede has no right to require any sales and was obligated to purchase the common stock as directed by the Company, subject to certain limitations set forth in the agreement. Proceeds from sales of common stock were to be used for general corporate purposes. No warrants, derivatives, or other share classes are associated with this agreement. As of December 31, 2018, the Company had received proceeds, amounting to $14,810 and issued 402,500 shares, out of which 5,795 shares refer to commitment fees. The Company terminated the Second Crede Purchase Agreement on May 23, 2018.

Issuance of common stock and warrants as part of the 2018 Common Stock Offering: On October 26, 2018, the Company priced a public offering of 100,000 shares of common stock, and warrants to purchase 175,000 common shares (the "2018 Warrants"), at $30 per common share and $0.0002 per warrant. The 2018 Warrants had an exercise price of $30 per share, were exercisable immediately, and expired four months from the date of issuance. Each warrant granted the warrant holder the option to purchase one common share of the Company at any time within the abovementioned term (American style option). The proceeds from this offering (net of 6.5% placement agent fees), were $2,805. As of December 31, 2019, all 2018 Warrants, namely 3,500,000, have been exercised for gross proceeds of $3,788 and 175,000 common shares were issued pursuant to these exercises (out of which 97,350 were issued during the year ended December 31, 2019). The Company accounted for the 2018 Warrants as equity in accordance with the accounting guidance for derivatives. The accounting guidance provides a scope exception from classifying and measuring as a financial liability a contract that would otherwise meet the definition of a derivative if the contract is both (i) indexed to the entity's own stock and (ii) meets the equity classifications conditions.  The Company concluded these warrants should be equity-classified since they contain no provisions which would require the Company to account for the warrants as a derivative liability, and therefore were initially measured at fair value in permanent equity with subsequent changes in fair value not measured.
On initial recognition the fair value of the 2018 Warrants was $1,671 and was determined using the Black-Scholes methodology. The fair value is considered by the Company to be classified as Level 3 in the fair value hierarchy since it is derived by unobservable inputs. The major unobservable input in connection with the valuation of the Company's 2018 Warrants was the volatility used in the valuation model, which is approximated by using four-month daily historical observations of the Company's share price. The annualized four-month daily historical volatility that has been applied in the warrant valuation was 108%. A 5% increase in the volatility applied would have led to an increase of 3.8% in the fair value of the 2018 Warrants.
Equity distribution agreement: On May 25, 2018, the Company, entered into an equity distribution agreement, or as is commonly known, an at-the-market offering, with Maxim Group LLC ("Maxim"), under which the Company could sell up to $14,250 of its common stock with Maxim acting as a sales agent over a period of 12 months (the "Maxim ATM"). Since Maxim was acting solely as a sales agent, it had no right to require any common stock sales. No warrants, derivatives, or other share classes were associated with this agreement. On July 24, 2018 the Company terminated the Maxim ATM and as of that date the Company had received proceeds (net of 2% fees), amounting to $2,781 and issued 124,543 common shares.

2014 Warrants: On July 31, 2019 the 2014 Warrants expired. From January 1, 2019 up to July 31, 2019 1,268,000 2014 Warrants, were exercised for gross proceeds of $3,161 and 337,035 common shares were issued pursuant to these exercises.

F-39


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

Issuance of common stock and warrants as part of the September 2019 Common Stock Offering: On September 13, 2019, the Company closed an underwritten public offering of an aggregate of 1,580,000 common shares (or pre-funded warrants to purchase common shares in lieu thereof, the Pre-Funded Warrants), warrants, or the Traditional Warrants, to purchase up to 1,790,000 of the Company's common shares and an overallotment option of up to 237,000 common shares, or the September 2019 Transaction. This resulted in gross proceeds of $10,480 before deducting underwriting discounts, commissions and other offering expenses. The gross proceeds include the partial exercise of 85,000 common shares of the underwriter's over-allotment option granted in connection with the offering. From September 13 to December 31, 2019, 1,245,090 common shares were issued pursuant to the cashless exercise of 1,778,700 Traditional Warrants. The Traditional Warrants expired on December 31, 2019.
The Traditional Warrants entitled their holders to purchase either 1 common share upon a cash exercise or 0.7 common shares upon a cashless exercise. Each Traditional Warrants had an exercise price of $8.19 per share and was exercisable from the date of issuance up to December 31, 2019. The Traditional Warrants could have been exercised on a cashless basis beginning on the earlier of (i) 30 days from the closing date and (ii) the trading day on which the aggregate trading volume of the Company's common shares since the date of filing of the registration statement registering the common shares underlining the Traditional Warrants was equal to more than 4.74 million common shares (the "Cashless Date") if the VWAP of the common shares on any trading day on or after the Cashless Date failed to exceed the exercise price. The number of common shares issuable in such cashless exercise was 0.7 of a common share that would be issuable upon exercise of a Traditional Warrant in accordance with its terms if such exercise were by means of a cash exercise.
The Company accounted for the Traditional Warrants as equity in accordance with the accounting guidance for derivatives. The accounting guidance provides a scope exception from classifying and measuring as a financial liability a contract that would otherwise meet the definition of a derivative if the contract is both (i) indexed to the entity's own stock and (ii) meet the equity classifications conditions.  The Company concluded these warrants should be equity-classified since they contain no provisions which would require the Company to account for the warrants as a derivative liability and therefore were initially measured at fair value in permanent equity with subsequent changes in fair value not measured.
On initial recognition the fair value of the Traditional Warrants was $1,139 and was determined using the Black-Scholes methodology. The fair value is considered by the Company to be classified as Level 3 in the fair value hierarchy since it is derived by unobservable inputs. The major unobservable input in connection with the valuation of the Company's Traditional Warrants was the volatility used in the valuation model, which is approximated by using three-month daily historical observations of the Company's share price. The annualized three-month daily historical volatility that has been applied in the warrant valuation was 181%. A 5% increase in the volatility applied would have led to an increase of 10% in the fair value of the Traditional Warrants.
Issuance of common stock and warrants as part of the November 2019 Registered Direct Offering: On November 6, 2019, the Company entered into a placement agent agreement with Maxim Group LLC relating to the sale of the Company's securities, or the Placement Agent Agreement. Pursuant to the Placement Agent Agreement, we entered into the Securities Purchase Agreement, with certain institutional investors in connection with a registered direct offering of an aggregate of 4,200,000 of the Company's common shares at a public offering price of $2.00 per share, registered on the Company's Registration Statement on Form F-3 (333-215577), or the Registered Offering. Concurrently with the Registered Offering and pursuant to the Purchase Agreement, we also commenced a private placement whereby we issued and sold Class A Warrants (or the "Class A Warrants") to purchase up to 4,200,000 of the Company's common shares and Class B Warrants (or the "Class B Warrants") to purchase up to 4,200,000 of the Company's common shares. The November 2019 Registered Direct Offering resulted in gross proceeds of $8,400 before deducting underwriting discounts, commissions and other offering expenses. The Class A Warrants and Class B Warrants were registered via a registration statement in form F1 that became effective on January 21, 2020.
As of December 31, 2019 the Company had 4,200,000 Class A Warrants and 4,200,000 Class B Warrants outstanding. During the year ended December 31, 2019 no Class A Warrants or Class B Warrants were exercised.
The Class A Warrants entitle their holders to purchase either 1 common share upon a cash exercise or 0.4 common shares upon a cashless exercise. Each Class A Warrant has an exercise price of $2.00 per share and is exercisable from the date of issuance up to July 7, 2020. The Class A Warrants may be exercised on a cashless basis beginning on the earlier of (i) 30 days from the closing date and (ii) the trading day on which the aggregate trading volume of the Company's common shares November 6, 2019 is equal to more than three times the number of common shares offered pursuant to the Purchase Agreement (the "Cashless Date") if the VWAP of the common shares on any Trading Day on or after the Cashless Date fails to exceed $3.20 on such date (as may be subject to adjustment). The number of common shares issuable in such cashless exercise is 0.4 of a common share that would be issuable upon exercise of a Class A Warrant in accordance with its terms if such exercise were by means of a cash exercise.
F-40


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

The Company accounted for the Class A Warrants as equity in accordance with the accounting guidance for derivatives. The accounting guidance provides a scope exception from classifying and measuring as a financial liability a contract that would otherwise meet the definition of a derivative if the contract is both (i) indexed to the entity's own stock and (ii) meets the equity classifications conditions.  The Company concluded these warrants should be equity-classified since they contain no provisions which would require the Company to account for the warrants as a derivative liability and therefore were initially measured at fair value in permanent equity with subsequent changes in fair value not measured.
On initial recognition the fair value of the Class A Warrants was $1,343 and was determined using the Black-Scholes methodology. The fair value is considered by the Company to be classified as Level 3 in the fair value hierarchy since it is derived by unobservable inputs. The major unobservable input in connection with the valuation of the Company's Traditional Warrants was the volatility used in the valuation model, which is approximated by using eight-month daily historical observations of the Company's share price. The annualized eight -month daily historical volatility that has been applied in the warrant valuation was 127%. A 5% increase in the volatility applied would have led to an increase of 7.35% in the fair value of the Class A Warrants.
The Class B Warrants entitle their holders to purchase either 1 common share upon a cash exercise. Each Class B Warrant has an exercise price of $2.00 per share and is exercisable from the date of issuance up to May 7, 2021.
The Class B Warrants have a number of round down protection measures embedded in the warrant agreement. These measures provide for a downward adjustment of the exercise price of each warrant in the following cases:


Issuance of common shares: if the Company issues, sells or is deemed to have issued or sold any common shares for a consideration per share less than the exercise price of the Class B Warrants then the latter shall be reduced to match the reduced consideration per share.

Issuance of options or convertible securities: if the Company issues or sells any options at a strike price that is lower than the exercise price of the Class B Warrants then the latter will be reduced to match the strike price of the options. If the Company issues convertible securities that end up converting at a price per share that is lower than the exercise price of the Class B Warrants then the latter will be reduced to match that conversion price per share.

Change in option price or rate of conversion: if the purchase or exercise price provided for in any of the Company's options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any of the Company's convertible securities, or the rate at which any convertible securities of the Company are convertible into or exercisable or exchangeable for common shares increases or decreases at any time, then the Class B Warrants' exercise price will be adjusted to such price, provided that it is lower than the existing at the time Class B Warrants' exercise price.

Other events: if the Company takes any action that results in the dilution of the warrant holder not covered by the abovementioned round down protection measures (including, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company shall determine and implement an appropriate adjustment in the exercise price so as to protect the rights of the warrant holder.

The above list is not exhaustive and for a more comprehensive and complete list of round down protection measures one should read the Class B Warrant agreement.

In connection with the abovementioned round down protection, the change in the conversion price of the Series E shares constituted a "Change in Option Price or Rate of Conversion" (as defined in the Class B Warrant agreement) and that, pursuant to Section 3(f)(iii) of the Class B Warrant agreement, entitles each holder to in any exercise of Class B Warrants, designate the Exercise Price (as defined in the Class B Warrant agreement) as the conversion price at which the Series E Shares are convertible, namely the lesser of: (i) $20.00, (ii) 80% of the lowest daily VWAP of the Company's common shares over the twenty consecutive trading days expiring on the trading day immediately prior to the date of delivery of a conversion notice, (iii) the conversion price or exercise price per share of any of the Company's then outstanding convertible shares or warrants, (iv) the lowest issuance price of the Company's common shares in any transaction from the date of the issuance the Series E Shares onwards, but in no event will the Exercise Price be less than $1.00 (Floor Price). During the year ended December 31, 2019 no Class B Warrants were exercised.

As of December 31, 2019 the Class B Warrants exercise price was $1.00 (floor price).

Accounting Treatment of the Class B Warrants

As of the issuance date the fair value of the 4,200,000 Class B Warrants amounted to $0.3052 per warrant, using the Cox, Ross and Rubinstein Binomial methodology.

F-41


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

The fair value is considered by the Company to be classified as Level 3 in the fair value hierarchy since it is derived by unobservable inputs. The major unobservable input in connection with the valuation of the Company's Class B Warrants was the volatility used in the valuation model. The annualized eighteen-month daily historical volatility that has been applied in the warrant valuation at inception was 134%. A 5% increase in the volatility applied would have led to an increase of 14% in the fair value of the Class B Warrants.

The warrants issued in connection with the Company's follow-on offering provide for physical settlement requiring the Company to deliver shares to the holder of the warrants in exchange of cash. However the warrants provide for a series of round down protection features that in accordance with ASU No. 2017-11 led to their classification as a liability since the settlement amount of the warrants may not equal the difference between the fair value of a fixed number of the Company shares and a fixed strike price. As a result, the fair value of the warrants is classified as a derivative liability and subsequent changes in fair value are recognized in the consolidated statements of comprehensive loss (see Note 15).

Dividends: No dividends were paid to common stock holders in the years ended December 31, 2017, 2018 and 2019. An amount of $600 in common shares was paid to holders of Series C shares during year ended December 31, 2017.


11.
Loss Per Common Share:

All shares issued are included in the Company's common stock and have equal rights to vote and participate in dividends and in undistributed earnings.

The components of the calculation of basic and diluted earnings per share for the years ended December 2017, 2018 and 2019 are as follows:

   
Year Ended December 31,
 
   
2017
   
2018
   
2019
 
Income:
                 
Net loss attributable to common shareholders
   
(13,404
)
   
(11,134
)
   
(30,985
)
                         
Earnings per share:
                       
Weighted average common shares outstanding, basic and diluted
   
53,169
     
909,072
     
2,927,608
 
 Loss per share, basic and diluted
   
(251
)
   
(12.20
)
   
(10.58
)

For the years ended December 31, 2017, 2018 and 2019 no dilutive shares were included in the computation of diluted earnings per share because to do so would have been antidilutive for the period presented.


12.
Voyage and Vessel Operating Expenses and Drydock expenses:

The amounts in the accompanying consolidated statements of comprehensive loss are as follows:

Voyage Expenses
 
Year Ended December 31,
 
   
2017
   
2018
   
2019
 
Port charges / other voyage expenses
   
10
     
1
     
678
 
Bunkers
   
15
     
18
     
830
 
Commissions (including $487, $511 and $829 respectively, to related party)
   
974
     
1,001
     
1,530
 
Total
   
999
     
1,020
     
3,038
 

Vessel Operating Expenses
 
Year Ended December 31,
 
   
2017
   
2018
   
2019
 
Crew wages and related costs
   
9,228
     
10,185
     
15,771
 
Insurance
   
777
     
761
     
1,180
 
Repairs and maintenance (including $136, $187 and $247 respectively, to related party)
   
973
     
1,120
     
1,528
 
Spares and consumable stores
   
2,374
     
2,645
     
4,148
 
Registration and tonnage taxes (Note 16)
   
92
     
115
     
159
 
Total
   
13,444
     
14,826
     
22,786
 

F-42


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)


13.
Interest and Finance Costs:

The amounts in the accompanying consolidated statements of comprehensive loss are analyzed as follows:

Interest and Finance Costs
 
Year Ended December 31,
 
   
2017
   
2018
   
2019
 
Interest on debt (including $138, $874 and $928, respectively, to related party)
   
5,724
     
7,373
     
16,586
 
Bank charges and loan commitment fees (including $366, $179 and $20, respectively, to related party)
   
440
     
262
     
282
 
Amortization and write-off of financing fees
   
1,640
     
1,305
     
1,812
 
Amortization of debt discount
   
7,500
     
2,504
     
324
 
Non-cash debt conversion expenses
   
842
     
-
     
-
 
Total
   
16,146
     
11,444
     
19,004
 
Less interest capitalized
   
(353
)
   
(1,782
)
   
(927
)
Total
   
15,793
     
9,662
     
18,077
 


14.
Income Taxes:

Marshall Islands, Cyprus and Liberia do not impose a tax on international shipping income. Under the laws of Marshall Islands, Cyprus and Liberia, the countries of the companies' incorporation and vessels' registration, the companies are subject to registration and tonnage taxes, which have been included in Vessel operating expenses in the accompanying consolidated statements of comprehensive loss.

The Company and its subsidiaries 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.


15.
Financial Instruments:

The principal financial assets of the Company consist of cash on hand and at banks, restricted cash, prepaid expenses and other receivables. The principal financial liabilities of the Company consist of short and long term loans, accounts payable due to suppliers, amounts due from/to related parties, accrued liabilities, interest rate swaps and warrants granted to third parties.


a)
Interest rate risk: The Company is subject to market risks relating to changes in interest rates relating to debt outstanding under the bank loans on which it pays interest based on LIBOR plus a margin. In order to manage part or whole of its exposure to changes in interest rates due to the floating rate indebtedness, the Company has entered into interest rate swap agreements with ABN Amro Bank and Alpha Bank and might enter into more interest rate swap agreements in the future.


b)
Credit risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash. The Company places its temporary cash investments, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions with which it places its temporary cash investments.


c)
Fair value:

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

Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short term maturities. The Company considers its creditworthiness when determining the fair value of its liquid assets.

The fair value of interest rate swaps is determined using a discounted cash flow method taking into account current and future interest rates and the creditworthiness of both the financial instrument counterparty the Company and, hence, they are considered Level 2 items in accordance with the fair value hierarchy. The Company pays a fixed rate and receives a floating rate for these interest rate swaps. The fair values of these derivatives were derived principally from, or corroborated by, observable market data inputs included quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparables, interest rates, yield curves and other items that allowed values to be determined.
F-43


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

The fair value of warrants is determined using the Cox, Ross and Rubinstein Binomial methodology and hence are considered Level 3 items in accordance with the fair value hierarchy.

The Company follows the accounting guidance for Fair Value Measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities;
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data;
Level 3: Unobservable inputs that are not corroborated by market data.

Interest rate swap agreements
The Company has entered into interest rate swap transactions to manage interest costs and the risk associated with changing interest rates with respect to its variable interest rate credit facilities. These interest rate swaps  are pay-fixed, receive-variable interest rate swaps based on the USD LIBOR swap rate. The Company has entered into the following agreements with ABN Amro Bank and Alpha Bank relating to interest rate swaps, the details of which were as follows:
            
Notional Amount
       
Agreement date
Counterparty
Effective (start) date:
Original Termination Date:
 
As of December 31, 2018
   
As of December 31, 2019
   
Fixed rate
 
June 3, 2016
ABN Amro Bank
April 13, 2018
Ju1y 13, 2021
 
$
15,663
   
$
14,113
     
1.4425
%
December 19, 2016
ABN Amro Bank
December 21, 2016
January 13, 2022
 
$
16,575
   
$
14,888
     
2.0800
%
December 19, 2016
ABN Amro Bank
December 21, 2016
August 10, 2022
 
$
15,050
     
-
     
2.1250
%
March 29, 2018
Alpha Bank
March 29, 2018
February 25, 2025
   
20,700
   
$
19,100
     
2.9700
%
March 29, 2017
NORD/LB BANK
May 17, 2017
May 17, 2023
 
$
18,071
     
-
     
2.1900
%

On January 17, 2019, as part of the prepayment of ABN Facility Tranche C, the Company unwound the interest rate swap with ABN Amro bank dated December 19, 2016 and realized a gain of $213. Furthermore on July 15, 2019, as part of the prepayment of the NORD/LB facility, the Company unwound the interest rate swap with NORD/LB bank dated May 17, 2017 and realized a loss of $205.
2014 Warrant liability
The Company's 2014 Warrant derivatives outstanding as of December 31, 2018, are recorded at their fair values. As of December 31, 2018 the Company's 2014 Warrant derivatives consisted of 424,923 warrant shares outstanding, issued in connection with the Company's follow-on offering that closed on June 11, 2014, as depicted in the following table:
2014 Warrants Outstanding
December 31, 2018
2014 Warrant Shares Outstanding
December 31, 2018
Term
Warrant Exercise Price*
Fair Value – Liability
December 31, 2018
1,976,389
424,923
5 years
$11.60
1,915
* Applying the Variable Exercise Price
On July 31, 2019 the 2014 Warrants expired.
Class B Warrant liability
The Company's Class B Warrant derivatives outstanding as of December 31, 2019, are recorded at their fair values. As of December 31, 2019 the Company's Class B Warrant derivatives consisted of 4,200,000 warrant shares outstanding, issued in connection with the Company's November 2019 Registered Direct Offering that closed on November 7, 2019, as depicted in the following table:
Class B Warrants Outstanding
December 31, 2019
Class B Warrant Shares Outstanding
December 31, 2019
Term
Warrant Exercise Price*
Fair Value – Liability
December 31, 2019
4,200,000
4,200,000
18 months
$1.00
609
* Applying the Floor Price
F-44


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

Recurring fair value measurements
The following table presents the fair value of those financial assets and liabilities measured at fair value on a recurring basis and their locations on the accompanying consolidated balance sheets, analyzed by fair value measurement hierarchy level:
       
Fair Value Measurement at Reporting Date
 
 
 As of December 31, 2018
 
Total
 
Using Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
Significant
Other
Unobservable
Inputs
(Level 3)
 
Non-current asset (Interest Rate Swaps)
   
1,153
     
-
     
1,153
     
-
 
Non-current liability (Interest Rate Swaps)
   
359
     
-
     
359
         
Current liability (2014 Warrants)
C
   
1,915
     
-
     
-
     
1,915
 
As of December 31, 2019
           
Current asset (Interest Rate Swaps)
   
82
     
-
     
82
     
-
 
Current liability (Interest Rate Swaps)
   
113
     
-
     
113
         
Non-current liability (Interest Rate Swaps)
   
985
     
-
     
985
         
Non-current liability (Class B Warrants)
   
609
                     
609
 

The interest rate swaps relating to the ABN Facility (with effective dates April 13, 2018 and December 21, 2016) have been classified in current assets and current liabilities respectively, due to the fact that the mortgaged vessels of the ABN Facility have been classified as held for sale and the facility itself has been classified in current liabilities.

Non-recurring fair value measurements
       
Fair Value Measurement at Reporting Date
 
 
Total
   
Using Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Other
Unobservable
Inputs
(Level 3)
 
As of December 31, 2019
         
Assets held for sale
   
43,271
     
-
     
43,271
     
-
 
Investments in unconsolidated joint ventures
   
19,306
     
-
     
19,306
     
-
 

In accordance with the provisions of relevant guidance, Assets held for sale with a carrying amount of $55,581 were written down to their fair value of $43,271, resulting in an impairment charge of $12,310, which is included in the accompanying consolidated statements of comprehensive loss.

Additionally Investments in unconsolidated joint ventures with a carrying amount of $22,450 were written down to their fair value of $19,306, resulting in an impairment charge of $3,144, which is included in the accompanying consolidated statements of comprehensive loss (see Note 18).

The fair value of the impaired vessels and investments in unconsolidated joint ventures was determined based on a market approach, which was determined using the purchase consideration in the sale agreements with the respective buyers for both the Company's vessels in question and the vessels of the joint venture companies. As a result, the Company has classified these long-lived assets held for sale as Level 2.

F-45


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

The following table sets forth a summary of changes in fair value of the Company's level 3 fair value measurements for the years ended December 31, 2018 and 2019:
Closing balance – December 31, 2017
3,332
Change in fair value of 2014 Warrants, included in (Loss)/gain on derivative financial instruments in the consolidated statements of comprehensive loss
(1,417)
Closing balance – December 31, 2018
1,915
Change in fair value of 2014 Warrants, included in (Loss)/gain on derivative financial instruments in the consolidated statements of comprehensive loss
(1,915)
Initial measurement of Class B Warrants at inception
997
Change in fair value of Class B Warrants, included in (Loss)/gain on derivative financial instruments in the consolidated statements of comprehensive loss
(388)
Closing balance – December 31, 2019
609

Derivative Financial Instruments not designated as hedging instruments – 2014 Warrants:
The major unobservable input in connection with the valuation of the Company's 2014 Warrants was the volatility used in the valuation model, which was approximated by using a six-month daily historical observations of the Company's share price. The annualized six-month daily historical volatility that had been applied in the warrant valuation as of December 31, 2018 was 110%. A 5% increase in the volatility applied would have led to an increase of 2.6% in the fair value of the 2014 Warrants. The fair value of the Company's 2014 Warrants is considered by the Company to be classified as Level 3 in the fair value hierarchy since it is derived by unobservable inputs.
Quantitative information about Level 3 Fair Value Measurements
Derivative type
Fair Value at December 31, 2018
Balance Sheet Location
Valuation Technique
Significant Unobservable Input
 Input Value December
31, 2018
2014 Warrants
1,915
Non-Current liabilities –Derivative financial instruments
Cox, Ross and Rubinstein Binomial
Volatility
110%

Derivative Financial Instruments not designated as hedging instruments – Class B Warrants:
The major unobservable input in connection with the valuation of the Company's Class B Warrants is the volatility used in the valuation model, which is approximated by using an eighteen-month daily historical observations of the Company's share price. The annualized eighteen-month daily historical volatility that has been applied in the warrant valuation as of December 31, 2019 was 132%. A 5% increase in the volatility applied would lead to an increase of 15.2% in the fair value of the Class B Warrants. The fair value of the Company's Class B Warrants is considered by the Company to be classified as Level 3 in the fair value hierarchy since it is derived by unobservable inputs.
Quantitative information about Level 3 Fair Value Measurements
Derivative type
Fair Value at December 31, 2019
Balance Sheet Location
Valuation Technique
Significant Unobservable Input
Input Value December
31, 2019
Class B Warrants
609
Non-Current liabilities –Derivative financial instruments
Cox, Ross and Rubinstein Binomial
Volatility
132%

Location and amounts of derivative financial instruments fair values:
Information on the location and amounts of derivative financial instruments fair values in the balance sheet and derivative financial instrument losses in the statement of comprehensive loss are presented below:

   
Amount of gain/(loss) recognized in Statement of comprehensive
(loss)/gain located in Loss on derivate financial instruments
 
   
2017
   
2018
   
2019
 
Interest rate swaps- change in fair value
   
431
     
404
     
(841
)
Interest rate swaps– realized gain/(loss)
   
(476
)
   
-
     
139
 
2014 Warrants- change in fair value
   
(256
)
   
1,417
     
1,915
 
Class B Warrants- change in fair value
   
-
     
-
     
388
 
Total
   
(301
)
   
1,821
     
1,601
 

F-46


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

Derivative Financial Instruments designated as hedging instruments:
The components of accumulated other comprehensive loss included in the accompanying consolidated balance sheets consist of unrealized losses on cash flow hedges and are analyzed as follows:

   
Unrealized (Loss) on cash
flow hedges
 
Balance, December 31, 2018
   
-
 
Effective portion of changes in fair value of interest swap contracts
   
(1,361
)
Balance, December 31, 2019
   
(1,361
)


16.
Other operating income

During the year ended December 31, 2017 the Company wrote-off $914 of accrued liabilities of vessels sold in 2009, mainly relating to unearned revenue.


17.
Mezzanine Equity

On March 29, 2019, the Company entered into a Stock Purchase Agreement with Family Trading for the sale of 27,129 newly issued perpetual convertible preferred shares (the "Series E Shares") at a price of one thousand dollars ($1,000) per share. The proceeds of the sale were used for the full and final settlement of all amounts due under the Further Amended Family Trading Credit Facility (see Note 8). The issuance of the Series E Shares was approved by a committee of the Company's board of directors, of which all of the directors were independent.

Each holder of Series E Shares, at any time, has the right, subject to certain conditions, to convert all or any portion of the Series E Shares then held by such holder into the Company's common shares at the conversion rate then in effect. Each Series E Share is convertible into the number of the Company's common shares equal to the quotient of one thousand dollars ($1,000) plus any accrued and unpaid dividends divided by the lesser of the following four prices (the "Series E Conversion Price"): (i) $20.00, (ii) 80% of the lowest daily VWAP of the Company's common shares over the twenty consecutive trading days expiring on the trading day immediately prior to the date of delivery of a conversion notice, (iii) the conversion price or exercise price per share of any of the Company's then outstanding convertible shares or warrants, (iv) the lowest issuance price of the Company's common shares in any transaction from the date of the issuance the Series E Shares onwards, but in no event will the Series E Conversion Price be less than $0.60. The holders of each Series E Share are entitled to the voting power of one thousand (1,000) common shares of the Company. Upon any liquidation, dissolution or winding up of the Company, the holders of Series E Shares shall be entitled to receive the net assets of the Company pari passu with the common shareholders. Furthermore the Company at its option shall have the right to redeem a portion or all of the outstanding Series E Shares. The Company shall pay an amount equal to one thousand dollars ($1,000) per each Series E Share (the "Liquidation Amount"), plus a redemption premium equal to fifteen percent (15%) of the Liquidation Amount being redeemed if that redemption takes place up to and including March 29, 2020 and twenty percent (20%) of the Liquidation Amount being redeemed if that redemption takes place after March 29, 2020, plus an amount equal to any accrued and unpaid dividends on such Series E Shares (collectively referred to as the "Redemption Amount").

The Series E Shares shall not be subject to redemption in cash at the option of the holders thereof under any circumstance. Finally the holders of outstanding Series E Shares shall be entitled to receive, semi-annual dividends payable in cash on the last day of June and December in each year (each such date being referred to herein as a "Semi Annual Dividend Payment Date"), commencing on the first Semi Annual Dividend Payment Date, being June 30, 2019 in an amount per share (rounded to the nearest cent) equal to fifteen percent (15%) per year of the liquidation amount of the then outstanding Series E Shares computed on the basis of a 365-day year and the actual days elapsed. Accrued but unpaid dividends shall bear interest at fifteen percent (15%). Dividends will not be payable in cash, if such payment violates any provision of any senior secured facility that the Company has entered or (as the case may be) will enter into, or any senior secured facility for which the Company has provided or (as the case may be) will provide a guarantee, for as long as such provisions, if any, remain in effect. Pursuant to the latter provision, on June 30, 2019, the Company issued 1,029 Series E Shares for the payment of dividends accumulated since the original issuance of the Series E Shares through June 30, 2019 and on December 31, 2019, the Company declared a dividend of $1,621 for the period July 1, 2019 through December 31, 2019, which as of December 31, 2019 remained unpaid and is included in Due to related parties in the accompanying consolidated Balance sheets. During the year ended December 31, 2019 from July 25 to December 2, 2019 the company redeemed 12,434 Series E Shares and paid a total of $14,302 to Family Trading, $1,868 of which refers to the 15% redemption premium embedded in each redemption that the Company classified as deemed dividend. As of December 31, 2019, upon conversion at the Series E Conversion Price ($0.60) of 15,724 Series E Shares outstanding, Family Trading would receive 26,206,667 common shares.

F-47


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

The Company determined that the Series E shares were more akin to equity than debt and that the above identified conversion feature, subject to adjustments, was clearly and closely related to the host instrument, and accordingly bifurcation and classification of the conversion feature as a derivative liability was not required. Given the Series D and Series E preferred stock's holders (Lax Trust) control a majority of the votes, the preferred equity is in essence redeemable at the option of the holder and hence has been classified in Mezzanine equity as per ASC 480-10-S99 "Distinguishing liabilities from Equity – SEC Materials". The Company has adjusted the carrying value of the Convertible Series E shares to the maximum redemption amount, resulting in an increase of $4,227, which has been accounted as deemed dividend.

Pursuant to the issuance of the convertible preferred stock, the Company recognized the beneficial conversion feature by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of the Company's common stock per share on the commitment date, to additional paid-in capital, resulting in a discount of $9,339 on the Series E convertible preferred stock. The Company has amortized the beneficial conversion in full in the period ended December 31, 2019 as the beneficial conversion was immediately exercisable and has been recognized as a deemed dividend and  recorded against additional paid-in-capital, as there is deficit in retained earnings.


18.
Investments in unconsolidated joint ventures

On March 30, 2017, the Company, acquired a 49% ownership interest in City of Athens from Fly Free Company, a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, for an aggregate purchase price of $4,200. City of Athens was party to a newbuilding contract for the construction of M/T Eco Holmby Hills. Furthermore on March 30, 2017, the Company acquired a 49% ownership interest in Eco Nine from Maxima International Co., a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, for an aggregate purchase price of $3,500. Eco Nine was a party to a newbuilding contract for the construction of M/T Eco Palm Springs. On June 14, 2017 the Company acquired an additional 1% interest in City of Athens and in Eco Nine for an aggregate consideration of $157, increasing the Company's interest in both companies to 50%. Fees and costs related to the investments amounting to $353 were accounted for as part of the investment.

On June 30, 2017 the Lax Trust sold its 50% remaining interest in City of Athens and in Eco Nine to Gunvor S.A. ("Gunvor"), a non-affiliated company, and on July 7, 2017 the Company entered into a joint venture agreement with Gunvor. Furthermore, upon the delivery of both vessels, each of the two vessels entered into time charter employments with Clearlake Shipping Pte Ltd, a subsidiary of Gunvor, for three years firm plus two additional optional years. The Company's exposure is limited to its share of the net assets of City of Athens and Eco Nine proportionate to its 50% equity interest in these companies. The Company shares the profits and losses, cash flows and other matters relating to its investments in City of Athens and in Eco Nine in accordance with its ownership percentage. The vessels are managed by CSI, pursuant to management agreements. The Company accounts for investments in joint ventures using the equity method since it has joint control over the investment. The Company was obligated to contribute funds for yard installments in relation to the construction of the vessels of the joint venture companies, as needed and proportionate to its 50% equity interest in these companies.

On March 12, 2018 City of Athens and in Eco Nine entered into a loan agreement with ABN Amro Bank for a senior debt facility of $35,900 to fund, the delivery of M/T Eco Holmby Hills and M/T Eco Palm Springs ($17,948 and $17,952 respectively). The loan was payable in 20 consecutive quarterly installments of $299 per vessel, commencing three months from draw down, and a balloon payment of $11,965 and $11,968 M/T Eco Holmby Hills and M/T Eco Palm Springs respectively, payable together with the last installment. The credit facility bears interest at LIBOR plus a margin of 2.90%. The facility carries customary covenants and restrictions, including the covenant that prohibits City of Athens and Eco Nine to declare any dividends until the second anniversary of the loan agreement.

On March 15, 2018, City of Athens took delivery of M/T Eco Holmby Hills, a 50,000 dwt newbuilding product/chemical tanker constructed at the Hyundai shipyard. On March 20, 2018 the vessel commenced its' time charter agreement with Clearlake Shipping Pte Ltd.

On May 23, 2018, Eco Nine Inc took delivery of M/T Eco Palm Springs, a 50,000 dwt newbuilding product/chemical tanker constructed at the Hyundai shipyard. On May 26, 2018 the vessel commenced its time charter agreement with Clearlake Shipping Pte Ltd.

F-48


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)

During the year ended December 31, 2017 the Company advanced $5,233 to City of Athens and $3,738 to Eco Nine to cover upcoming newbuilding installments and $324 to City of Athens and $135 to Eco Nine respectively to cover predelivery expenses. During the year ended December 31, 2018 the Company advanced $2,243 to Eco Nine Inc to cover upcoming newbuilding installments and another $695 to City of Athens Inc and $744 to Eco Nine Inc respectively to cover predelivery expenses, financing related expenses and to establish debt service reserves. During the year ended December 31, 2019 the Company recorded its proportionate share of City of Athens and Eco Nine's other comprehensive losses of $391 as a decrease to the Company's Investments in unconsolidated joint ventures, with a corresponding increase in other comprehensive loss, in accordance with ASC 323-10-35-18.

A condensed summary of the financial information for equity accounted investments 50% owned by the Company shown on a 100% basis are as follows:

   
December 31, 2018
   
December 31, 2019
 
   
City of Athens
   
Eco Nine
   
City of Athens
   
Eco Nine
 
Current assets
   
898
     
684
     
2,097
     
1,888
 
Non-current assets
   
30,853
     
30,975
     
29,730
     
29,852
 
Current liabilities
   
1,530
     
1,762
     
1,780
     
2,013
 
Long-term liabilities
   
15,627
     
15,900
     
14,996
     
15,414
 
Net operating revenues
   
4,182
     
3,229
     
5,320
     
5,332
 
Net profit
   
396
     
185
     
849
     
706
 
Net profit attributable to the Company
   
198
     
93
     
425
     
353
 

In December 2019, the Company wrote down its Investment in unconsolidated joint ventures to their fair value less costs to sell, resulting in an impairment charge of $3,144, pursuant to the Joint Ventures' plan to sell the vessels. Their fair value was based on a market approach, which was determined using the purchase consideration under in the sale agreements with buyers for the vessels of the joint venture companies. The M/T Holmby Hills was sold on March 26, 2020 and the Company expects the sale of the M/T Palm Springs to be concluded by the end of April 2020.


19.
Revenues

Revenues are comprised of the following:

   
2017
   
2018
   
2019
 
Time charter revenues
   
39,363
     
39,442
     
61,695
 
Time charter revenues from related parties
   
-
     
1,606
     
1,311
 
Voyage charter revenue
   
-
     
-
     
3,082
 
Total
   
39,363
     
41,048
     
66,088
 

The Company typically enters into time charters for periods ranging between three to five years and include a charterer's option to renew for a further two one-year periods at predetermined daily rates. In addition, the time charter agreements may contain variable consideration in terms of profit share. The profit share is paid on a quarterly basis and consists of 50% of the difference (if that is positive) between the average Timecharter equivalent rates for MR2 Product Tankers of a number of publicly listed shipping companies to the agreed base fixed rate of the respective time charter. Due to the volatility of the charter rates, the Company only accounts for the options when the Charterer gives notice that the option will be exercised. In a time charter contract, the vessel is hired by the charterer for a specified period of time in exchange for consideration which is based on a daily hire rate. The charterer has the full discretion over the ports visited, shipping routes and vessel speed. The contract/charter party generally provides typical warranties regarding the speed and performance of the vessel. The charter party generally has some owner protective restrictions such that the vessel is sent only to safe ports by the charterer, subject always to compliance with applicable sanction laws, and carry only lawful or non-hazardous cargo. In a time charter contract, the Company is responsible for all the costs incurred for running the vessel such as crew costs, vessel insurance, repairs and maintenance and lubes. The charterer bears the voyage related costs such as bunker expenses, port charges and canal tolls during the hire period. The charterer generally pays the charter hire in advance of the upcoming contract period.

Included in Voyage charter revenue for the year ended December 31, 2019 is demurrage earned by the Company of $687. As of December 31, 2019, all of the Company's vessels are employed under time charters.

F-49


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2018 AND 2019
AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)


20.
Subsequent Events

On January 14 and January 21, 2020 the Company sold the M/T Eco Revolution and M/T Eco Fleet respectively to unaffiliated third parties for gross proceeds of $23,000 and $21,000 respectively. Part of the aggregate proceeds were used to prepay in full the outstanding amount of the ABN Facility.

From January 16, 2020 to April 10, 2020, we redeemed 21,364 of Series E Shares for $24,568.

On February 10 and February 17, 2020 M/T Eco Los Angeles and M/T Eco City of Angels were delivered from Hyundai Mipo Dockyard Co., Ltd. in South Korea respectively.

Between January 22 and February 21, 2020, all the Class A Warrants (4,200,000 warrants) were exercised on a cashless basis into 1,680,000 of the Company's common shares.

On February 12, 2020, the Company entered into an equity distribution agreement, or the ATM, with Maxim Group LLC, as sales agent, under which the Company is permitted to offer and sell, from time to time through Maxim, up to $5,000 of its common shares. Pursuant to the ATM from February 13 to March 4, 2020 the Company sold 14,637,118 of its common shares, for gross proceeds of $5,000. On March 4, 2020 the ATM was completed.

On February 17, 2020, the Company issued 16,004 Series E Preferred Shares to Family Trading, as settlement of the consideration outstanding for the purchase of the construction new building contracts for the M/T Eco City of Angels and M/T Eco Los Angeles and for Series E Shares dividends payable to Family Trading Inc.

On February 21, 2020, the Company sold the M/T Stenaweco Elegance to unaffiliated third parties for gross proceeds of $33,500, part of which were used to prepay in full the outstanding amount of the Alpha Bank Facility and the Alpha Bank Top-Up Facility. The sale resulted in a gain of approximately $2,000.

On March 19, 2020, the Company sold the M/T Eco Palm Desert to unaffiliated third parties for gross proceeds of $34,800, part of which were used to prepay in full the AT Bank Facility and the AT Bank Bridge Note. The sale resulted in a gain of approximately $3,200.

On March 26, 2020, the M/T Holmby Hills which is 50% owned by the Company was sold to an unaffiliated third party. The Company estimates the sale will result in cash dividends and return of capital amounting to approximately $10,066.

On March 11, 2020, the Company entered into a new equity distribution agreement, or the second ATM, with Maxim Group LLC, as sales agent, under which the Company is permitted to offer and sell, from time to time through Maxim, up to $5,000 of its common shares. Pursuant to the ATM from March 12 to March 27, 2020 the Company sold 52,692,690 of its common shares, for gross proceeds of $5,000.

Coronavirus Outbreak: On March 11, 2020, the World Health Organization declared the 2019 Novel Coronavirus (the "2019-nCoV") outbreak a pandemic. In response to the outbreak, many countries, ports and organizations, including those where we conduct a large part of our operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have and will likely continue to cause severe trade disruptions. The extent to which 2019-nCoV will impact the Company's results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the virus and the actions to contain or treat its impact, among others. Accordingly, an estimate of the impact cannot be made at this time.

On April 1, 2020 the Company closed a registered direct offering of 40,000,000 of its common shares at a public offering price of $0.20 per share. The aggregate gross proceeds of the Registered Offering was $8,000.



F-50
Exhibit 2.15

DESCRIPTION OF THE REGISTRANT'S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

As of December 31, 2019, TOP Ships Inc. (the "Company") had common stock, par value $0.01 per share, and preferred stock purchase rights for each outstanding common share registered under Section 12 of the Securities Exchange Act of 1934, as amended.

The following description sets forth certain material terms and provisions of the Company’s common stock. The following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the applicable provisions of the Company’s Third Amended and Restated Articles of Incorporation (the “Articles of Incorporation”), as amended, and the Amended and Restated By-laws (the “By-laws”), as amended, each of which is incorporated by reference as an exhibit to the Annual Report on Form 20-F of which this Exhibit is a part. We encourage you to refer to our Articles of Incorporation and By-laws for additional information.

DESCRIPTION OF COMMON SHARES

Under our Articles of Incorporation, our authorized capital stock consists of 1,000,000,000 common shares, par value $0.01 per share. The respective number of ordinary shares issued and outstanding as of the last day of the fiscal year for the annual report on Form 20-F to which this description is attached or incorporated by reference as an exhibit is provided on the cover page of such annual report on Form 20-F. Holders of our common shares do not have conversion, redemption or preemptive rights to subscribe to any of our securities. The rights, preferences and privileges of holders of our common shares are subject to the rights of the holders of any preferred shares that we may issue in the future.

Voting Rights

Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Our directors are elected by a plurality of the votes cast at a meeting of the shareholders by the holders of shares entitled to vote in the election. Our Articles of Incorporation and By-laws, as further amended, prohibit cumulative voting in the election of directors.

Our Board of Directors must consist of at least one member and not more than twelve, as fixed from time to time by the vote of not less than 66 2/3% of the entire board. Each director shall be elected to serve until the third succeeding annual meeting of shareholders and until his successor shall have been duly elected and qualified, except in the event of his death, resignation, removal, or the earlier termination of his term of office. Our Board of Directors has the authority to fix the amounts which shall be payable to the members of our Board of Directors, and to members of any committee, for attendance at any meeting or for services rendered to us.

Our Articles of Incorporation provide for the division of our Board of Directors into three classes of directors, with each class as nearly equal in number as possible, serving staggered, three-year terms. Approximately one-third of our Board of Directors will be elected each year. This classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of our company. It could also delay shareholders who do not agree with the policies of our Board of Directors from removing a majority of our Board of Directors for two years.

Dividend Rights

Subject to preferences that may be applicable to any outstanding preferred shares, holders of common shares are entitled to receive ratably all dividends, if any, declared by our Board of Directors out of funds legally available for dividends.

Liquidation Rights

Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of our preferred shares having liquidation preferences, if any, the holders of our common shares will be entitled to receive pro rata our remaining assets available for distribution.

Limitations on Ownership

Our Articles of Incorporation and By-Laws, as further amended, do not impose any limitations on the ownership rights of our shareholders.

Description of Preferred Stock Purchase Rights

On September 14, 2016, our Board of Directors declared a dividend of one preferred share purchase right, or a Right, for each outstanding common share and adopted a shareholder rights plan, as set forth in the Stockholders Rights Agreement dated as of September 22, 2016, or the Rights Agreement, by and between us and Computershare Trust Company, N.A. (now taken over by our new transfer agent, AST), as rights agent.
The Board adopted the Rights Agreement to protect shareholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires 15% or more of our outstanding common shares without the approval of our Board of Directors. If a shareholder's beneficial ownership of our common shares as of the time of the public announcement of the rights plan and associated dividend declaration is at or above the applicable threshold, that shareholder's then-existing ownership percentage would be grandfathered, but the rights would become exercisable if at any time after such announcement, the shareholder increases its ownership percentage by 1% or more.
The Rights may have anti-takeover effects. The Rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our Board of Directors. As a result, the overall effect of the Rights may be to render more difficult or discourage any attempt to acquire us. Because our Board of Directors can approve a redemption of the Rights for a permitted offer, the Rights should not interfere with a merger or other business combination approved by our Board.
For those interested in the specific terms of the Rights Agreement, we provide the following summary description. Please note, however, that this description is only a summary, and is not complete, and should be read together with the entire Rights Agreement, which is an exhibit to the Form 8-A filed by us on September 22, 2016 and incorporated herein by reference. The foregoing description of the Rights Agreement is qualified in its entirety by reference to such exhibit.
The Rights. The Rights trade with, and are inseparable from, our common shares. The Rights are evidenced only by certificates that represent our common shares. New Rights will accompany any new of our common shares issued after October 5, 2016 until the Distribution Date described below.
Exercise Price. Each Right allows its holder to purchase from us one one-thousandth of a share of Series A Participating Preferred Stock, or a Series A Preferred Share, for $50.00, or the Exercise Price, once the Rights become exercisable. This portion of a Series A Preferred Share will give the shareholder approximately the same dividend, voting and liquidation rights as would one common share. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights.
Exercisability. The Rights are not exercisable until ten days after the public announcement that a person or group has become an "Acquiring Person" by obtaining beneficial ownership of 15% or more of our outstanding common shares.
Certain synthetic interests in securities created by derivative positions—whether or not such interests are considered to be ownership of the underlying common shares or are reportable for purposes of Regulation 13D of the Exchange Act—are treated as beneficial ownership of the number of our common shares equivalent to the economic exposure created by the derivative position, to the extent our actual common shares are directly or indirectly held by counterparties to the derivatives contracts. Swaps dealers unassociated with any control intent or intent to evade the purposes of the Rights Agreement are excepted from such imputed beneficial ownership.

For persons who, prior to the time of public announcement of the Rights Agreement, beneficially own 15% or more of our outstanding common shares, the Rights Agreement "grandfathers" their current level of ownership, so long as they do not purchase additional shares in excess of certain limitations.
The date when the Rights become exercisable is the "Distribution Date." Until that date, our common share certificates (or, in the case of uncertificated shares, by notations in the book-entry account system) will also evidence the Rights, and any transfer of our common shares will constitute a transfer of Rights. After that date, the Rights will separate from our common shares and will be evidenced by book-entry credits or by Rights certificates that we will mail to all eligible holders of our common shares. Any Rights held by an Acquiring Person are null and void and may not be exercised.
Series A Preferred Share Provisions
Each one one-thousandth of a Series A Preferred Share, if issued, will, among other things:

not be redeemable;

entitle holders to quarterly dividend payments in an amount per share equal to the aggregate per share amount of all cash dividends, and the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in our common shares or a subdivision of the our outstanding common shares (by reclassification or otherwise), declared on our common shares since the immediately preceding quarterly dividend payment date; and

entitle holders to one vote on all matters submitted to a vote of our shareholders.
The value of one one-thousandth interest in a Series A Preferred Share should approximate the value of one common share.
Consequences of a Person or Group Becoming an Acquiring Person.

Flip In.  If an Acquiring Person obtains beneficial ownership of 15% or more of our common shares, then each Right will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares (or, in certain circumstances, cash, property or other of our securities) having a then-current market value of twice the Exercise Price. However, the Rights are not exercisable following the occurrence of the foregoing event until such time as the Rights are no longer redeemable by us, as further described below.
Following the occurrence of an event set forth in preceding paragraph, all Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.

Flip Over. If, after an Acquiring Person obtains 15% or more of our common shares, (i) we merge into another entity; (ii) an acquiring entity merges into us; or (iii) we sell or transfer 50% or more of its assets, cash flow or earning power, then each Right (except for Rights that have previously been voided as set forth above) will entitle the holder thereof to purchase, for the Exercise Price, a number of our common shares of the person engaging in the transaction having a then-current market value of twice the Exercise Price.

Notional Shares. Shares held by affiliates and associates of an Acquiring Person, including certain entities in which the Acquiring Person beneficially owns a majority of the equity securities, and Notional Common Shares (as defined in the Rights Agreement) held by counterparties to a Derivatives Contract (as defined in the Rights Agreement) with an Acquiring Person, will be deemed to be beneficially owned by the Acquiring Person.
Redemption. Our Board of Directors may redeem the Rights for $0.01 per Right at any time before any person or group becomes an Acquiring Person. If our Board of Directors redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of the Rights will be to receive the redemption price of $0.01 per Right. The redemption price will be adjusted if we have a stock dividend or a stock split.

Exchange. After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of our outstanding common shares, the Board may extinguish the Rights by exchanging one common share or an equivalent security for each Right, other than Rights held by the Acquiring Person. In certain circumstances, we may elect to exchange the Rights for cash or other of our securities having a value approximately equal to one common share.
ExpirationThe Rights expire on the earliest of (i) September 22, 2026; or (ii) the redemption or exchange of the Rights as described above.
Anti-Dilution Provisions. The Board may adjust the purchase price of the Series A Preferred Shares, the number of Series A Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split, or a reclassification of the Series A Preferred Shares or our common shares. No adjustments to the Exercise Price of less than 1% will be made.
AmendmentsThe terms of the Rights and the Rights Agreement may be amended in any respect without the consent of the holders of the Rights on or prior to the Distribution Date. Thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the holders of Rights, with certain exceptions, in order to (i) cure any ambiguities; (ii) correct or supplement any provision contained in the Rights Agreement that may be defective or inconsistent with any other provision therein; (iii) shorten or lengthen any time period pursuant to the Rights Agreement; or (iv) make changes that do not adversely affect the interests of holders of the Rights (other than an Acquiring Person or an affiliate or associate of an Acquiring Person).
Taxes. The distribution of Rights should not be taxable for federal income tax purposes. However, following an event that renders the Rights exercisable or upon redemption of the Rights, shareholders may recognize taxable income.
Marshall Islands Company Considerations

Our corporate affairs are governed by our Articles of Incorporation and By-laws and by the BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. While the BCA also provides that it is to be interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and we cannot predict whether Marshall Islands courts would reach the same conclusions as courts in the United States. As a result, you may have more difficulty protecting your interests in the face of actions by our management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction which has developed a substantial body of case law. The following table provides a comparison between the statutory provisions of the BCA and the General Corporation Law of the State of Delaware relating to shareholders’ rights.

 
   
Marshall Islands
 
Delaware
Shareholder Meetings
Held at a time and place as designated in the bylaws.
 
May be held at such time or place as designated in the certificate of incorporation or the bylaws, or if not so designated, as determined by the board of directors.
   
Special meetings of the shareholders may be called by the board of directors or by such person or persons as may be authorized by the articles of incorporation or by the bylaws.
 
Special meetings of the shareholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws.
   
May be held within or without the Marshall Islands.
 
May be held within or without Delaware.
   





   
Marshall Islands
 
Delaware
Notice:   Notice:
     
Whenever shareholders are required to take any action at a meeting, written notice of the meeting shall be given which shall state the place, date and hour of the meeting and, unless it is an annual meeting, indicate that it is being issued by or at the direction of the person calling the meeting. Notice of a special meeting shall also state the purpose for which the meeting is called.
 
Whenever shareholders are required to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, and the means of remote communication, if any.
   
A copy of the notice of any meeting shall be given personally, sent by mail or by electronic mail not less than 15 nor more than 60 days before the meeting.
 
Written notice shall be given not less than 10 nor more than 60 days before the meeting.
 
Shareholders’ Voting Rights
Unless otherwise provided in the articles of incorporation, any action required to be taken at a meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by all the shareholders entitled to vote with respect to the subject matter thereof, or if the articles of incorporation so provide, by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
 
Any action required to be taken at a meeting of shareholders may be taken without a meeting if a consent for such action is in writing and is signed by shareholders having not fewer than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
 
   
Any person authorized to vote may authorize another person or persons to act for him by proxy.
 
Any person authorized to vote may authorize another person or persons to act for him by proxy.
 
Unless otherwise provided in the articles of incorporation or bylaws, a majority of shares entitled to vote constitutes a quorum. In no event shall a quorum consist of fewer than one-third of the shares entitled to vote at a meeting.
 
For stock corporations, the certificate of incorporation or bylaws may specify the number of shares required to constitute a quorum but in no event shall a quorum consist of less than one-third of shares entitled to vote at a meeting. In the absence of such specifications, a majority of shares entitled to vote shall constitute a quorum.
   
When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.
 
When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.
   
The articles of incorporation may provide for cumulative voting in the election of directors.
 
The certificate of incorporation may provide for cumulative voting in the election of directors.

 



Marshall Islands
 
Delaware
   
Merger or Consolidation
   
     
Any two or more domestic corporations may merge into a single corporation if approved by the board and if authorized by a majority vote of the holders of outstanding shares at a shareholder meeting.
 
Any two or more corporations existing under the laws of the state may merge into a single corporation pursuant to a board resolution and upon the majority vote by shareholders of each constituent corporation at an annual or special meeting.
     
Any sale, lease, exchange or other disposition of all or substantially all the assets of a corporation, if not made in the corporation’s usual or regular course of business, once approved by the board, shall be authorized by the affirmative vote of two-thirds of the shares of those entitled to vote at a shareholder meeting.
 
Every corporation may at any meeting of the board sell, lease or exchange all or substantially all of its property and assets as its board deems expedient and for the best interests of the corporation when so authorized by a resolution adopted by the holders of a majority of the outstanding stock of the corporation entitled to vote.
   
Any domestic corporation owning at least 90% of the outstanding shares of each class of another domestic corporation may merge such other corporation into itself without the authorization of the shareholders of any corporation.
 
Any corporation owning at least 90% of the outstanding shares of each class of another corporation may merge the other corporation into itself and assume all of its obligations without the vote or consent of shareholders; however, in case the parent corporation is not the surviving corporation, the proposed merger shall be approved by a majority of the outstanding stock of the parent corporation entitled to vote at a duly called shareholder meeting.
   
Any mortgage, pledge of or creation of a security interest in all or any part of the corporate property may be authorized without the vote or consent of the shareholders, unless otherwise provided for in the articles of incorporation.
 
Any mortgage or pledge of a corporation’s property and assets may be authorized without the vote or consent of shareholders, except to the extent that the certificate of incorporation otherwise provides.
 
Directors
The board of directors must consist of at least one member.
 
The board of directors must consist of at least one member.
   
The number of board members may be changed by an amendment to the bylaws, by the shareholders, or by action of the board under the specific provisions of a bylaw.
 
The number of board members shall be fixed by, or in a manner provided by, the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change in the number shall be made only by an amendment to the certificate of incorporation.
     
If the board is authorized to change the number of directors, it can only do so by a majority of the entire board and so long as no decrease in the number shall shorten the term of any incumbent director.
 
If the number of directors is fixed by the certificate of incorporation, a change in the number shall be made only by an amendment of the certificate.
   
Removal:
 
Removal:
     
Any or all of the directors may be removed for cause by vote of the shareholders.
 
Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares entitled to vote unless the certificate of incorporation otherwise provides.
   
If the articles of incorporation or the bylaws so provide, any or all of the directors may be removed without cause by vote of the shareholders.
 
In the case of a classified board, shareholders may effect removal of any or all directors only for cause.
 


Marshall Islands
 
Delaware

Dissenters’ Rights of Appraisal
Shareholders have a right to dissent from any plan of merger, consolidation or sale of all or substantially all assets not made in the usual course of business, and receive payment of the fair value of their shares. However, the right of a dissenting shareholder under the BCA to receive payment of the appraised fair value of his shares shall not be available for the shares of any class or series of stock, which shares or depository receipts in respect thereof, at the record date fixed to determine the shareholders entitled to receive notice of and to vote at the meeting of the shareholders to act upon the agreement of merger or consolidation, were either (i) listed on a securities exchange or admitted for trading on an interdealer quotation system or (ii) held of record by more than 2,000 holders. The right of a dissenting shareholder to receive payment of the fair value of his or her shares shall not be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the shareholders of the surviving corporation.
 
Appraisal rights shall be available for the shares of any class or series of stock of a corporation in a merger or consolidation, subject to limited exceptions, such as a merger or consolidation of corporations listed on a national securities exchange in which listed stock is offered for consideration is (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders.
   
A holder of any adversely affected shares who does not vote on or consent in writing to an amendment to the articles of incorporation has the right to dissent and to receive payment for such shares if the amendment:
 
 
   
    Alters or abolishes any preferential right of any outstanding shares having preference; or
 
 
   
    Creates, alters, or abolishes any provision or right in respect to the redemption of any outstanding shares; or
 
 
   
    Alters or abolishes any preemptive right of such holder to acquire shares or other securities; or
 
 
 
 
    Excludes or limits the right of such holder to vote on any matter, except as such right may be limited by the voting rights given to new shares then being authorized of any existing or new class.
 
 
 
Shareholder’s Derivative Actions
An action may be brought in the right of a corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates or of a beneficial interest in such shares or certificates. It shall be made to appear that the plaintiff is such a holder at the time of bringing the action and that he was such a holder at the time of the transaction of which he complains, or that his shares or his interest therein devolved upon him by operation of law.
 
In any derivative suit instituted by a shareholder of a corporation, it shall be averred in the complaint that the plaintiff was a shareholder of the corporation at the time of the transaction of which he complains or that such shareholder’s stock thereafter devolved upon such shareholder by operation of law.
   
A complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort.
 
Other requirements regarding derivative suits have been created by judicial decision, including that a shareholder may not bring a derivative suit unless he or she first demands that the corporation sue on its own behalf and that demand is refused (unless it is shown that such demand would have been futile).
   
Such action shall not be discontinued, compromised or settled, without the approval of the High Court of the Republic of the Marshall Islands.
 
 
   
Reasonable expenses including attorney’s fees may be awarded if the action is successful.
 
 
   



Marshall Islands
 
Delaware
A corporation may require a plaintiff bringing a derivative suit to give security for reasonable expenses if the plaintiff owns less than 5% of any class of outstanding shares or holds voting trust certificates or a beneficial interest in shares representing less than 5% of any class of such shares and the shares, voting trust certificates or beneficial interest of such plaintiff has a fair value of  $50,000 or less.
 
 

Exhibit 4.46
EXECUTION VERSION
NOTE PURCHASE DEED – DEED OF AMENDMENT
DEED OF AMENDMENT dated ____ October 2019
BETWEEN:
(1)
TOP SHIPS INC. (as Issuer);
(2)
AMSTERDAM TRADE BANK N.V. (as Security Agent);
(3)
AMSTERDAM TRADE BANK N.V. (as Agent and Registrar);
(4)
AMSTERDAM TRADE BANK N.V. (as Note Purchaser);
(5)
ASTARTE INTERNATIONAL INC. (as Guarantor); and
(6)
SANTA CATALINA INC. (incorporated in the Republic of the Marshall Islands with registered number 99145) and SANTA MONICA MARINE INC. (incorporated in the Republic of the Marshall Islands with registered number 99146) (each a New Guarantor and, together, the New Guarantors).
(each a Party and together the Parties).
WHEREAS
A.
Pursuant to a Note Purchase Deed between the Issuer, the Security Agent, the Agent, the Registrar, the Note Purchaser and the Guarantor originally dated 21 March 2019 (as amended and restated from time to time) (the Note Purchase Deed), the Issuer issued US$10,500,000 in principal amount of floating rate notes (the Notes) to the Note Purchaser. The Note Purchaser holds all the Notes as at the date of this Deed of Amendment.
B.
The Parties have agreed to give effect to the amendments and waiver set out in this Deed of Amendment including, without limitation, the extension of the Final Maturity Date of the Notes by 12 months and the assumption by the New Guarantors of joint and several obligations together with the Guarantor under the Note Purchase Deed.
IT IS AGREED as follows:
1
Definitions and interpretation
1.1
Unless expressly defined otherwise herein, terms defined in the Note Purchase Deed have the same meaning when used in this Deed of Amendment.
1.2
The provisions of clause 1.1 (Definitions and interpretation) of the Note Purchase Deed apply to this Deed of Amendment as though they were set out in full in this Deed of Amendment.
1.3
The Note Purchaser hereby confirms that it is the holder of all the Notes and it hereby agrees to, and (where applicable) hereby directs the Security Agent, the Agent and Registrar to (and each of the Security Agent, Agent and Registrar does so), give effect to the amendments and grant the waiver set out in this Deed of Amendment.
2
Amendment and Waiver
2.1
With effect from the date of this Deed of Amendment, but subject to the satisfaction of the condition precedent in clause 5.1(x), the definition of Final Maturity Date shall be deleted and replaced with the following, and such term shall be construed accordingly for all purposes in the Finance Documents with effect from the date of this Deed of Amendment:
1


EXECUTION VERSION
Final Maturity Date means 31 March 2021 or such other date as agreed by the Issuer and Amsterdam Trade Bank N.V.”
2.2
Each of the Parties (other than the Issuer) consents to the raising by the Issuer of, cumulatively, up to US$15,000,000 (the Permitted Fundraising Limit) in additional equity capital from its shareholders in one or more fundraisings at any time on or after 30 June 2019 (each, a Permitted Fundraising) and, in respect of any Permitted Fundraising only (and subject always to the Permitted Fundraising Limit), waives the obligation of the Issuer under clause 8.2(b) (Mandatory Redemption) of the Note Purchase Deed to make any prepayment of the Notes in consequence, or using the proceeds, of such Permitted Fundraising. For the avoidance of doubt, any raising of equity capital by the Issuer that exceeds the Permitted Fundraising Limit, or that occurred prior to 30 June 2019, must comply with clause 8.2(b) (Mandatory Redemption) of the Note Purchase Deed, and is not waived by this clause.
2.3
Each of the Parties (other than the Issuer) consents to the application of the net proceeds of any such Permitted Fundraising (subject always to the Permitted Fundraising Limit) towards the prepayment of the Family Trading Facility (or any other Financial Indebtedness owing by the Issuer to Family Trading Inc. or an Affiliate of Family Trading Inc.), or towards any dividend or other payment in respect of any preferred shares of the Issuer held or acquired by Family Trading Inc. (or an Affiliate of Family Trading Inc.) and/or towards the Issuer’s general corporate purposes (including, without limitation, the funding of additional vessel acquisitions).
2.4
The Guarantor consents to the amendments and waiver given pursuant to this Deed of Amendment and hereby waives all defences to which it might otherwise be entitled as a result of the entry into and the performance of the terms of this Deed of Amendment. This waiver of defences is in addition to and without prejudice to the provisions of clause 14.4 (Waiver of Defences) of the Note Purchase Deed.
3
Guarantee and Indemnity
3.1
Guarantee and indemnity Each New Guarantor, jointly and severally with the other New Guarantor and the Guarantor, irrevocably and unconditionally:

(a)
guarantees to the Security Agent (as trustee for the Finance Parties) and the other Finance Parties punctual performance by each other Obligor of all such Obligor’s obligations under the Finance Documents;

(b)
undertakes with the Security Agent (as trustee for the Finance Parties) and the other Finance Parties that whenever another Obligor (other than the Charterer) does not pay any amount when due under or in connection with any Finance Document, it shall immediately on demand pay that amount as if it was the principal obligor; and

(c)
agrees with the Security Agent (as trustee for the Finance Parties) and the other Finance Parties that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation indemnify that Finance Party immediately on demand against any cost, loss or liability it incurs as a result of another Obligor (other than the Charterer) not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by such Obligor under any Finance Document on the date when it would have been due. The amount payable under this indemnity will not exceed the amount that would have been payable under this clause 3.1 if the amount claimed had been recoverable on the basis of a guarantee.
3.2
Continuing guarantee
This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor (other than the Charterer) under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.
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EXECUTION VERSION

3.3
Reinstatement
If any discharge, release or arrangement (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is made by a Finance Party in whole or in part on the basis of any payment, security or other disposition which is avoided or must be restored in insolvency, liquidation, administration or otherwise, without limitation, then the liability of the New Guarantors under this clause 3 will continue or be reinstated as if the discharge, release or arrangement had not occurred.
3.4
Waiver of defences
The obligations of each New Guarantor under this clause 3 will not be affected by an act, omission, matter or thing (whether or not known to it or any Finance Party) which, but for this clause 3, would reduce, release or prejudice any of its obligations under this clause 3 including (without limitation):

(a)
any time, waiver or consent granted to, or composition with, any Obligor or other person;

(b)
the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any other Obligor;

(c)
the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor 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;

(d)
any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;

(e)
any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any 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;

(f)
any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or

(g)
any insolvency or similar proceedings.
3.5
New Guarantor’s intent
Without prejudice to the generality of clause 3.4, each New Guarantor expressly confirms that it intends that this guarantee shall extend from time to time to any (however fundamental) variation, increase, extension or addition of or to any of the Finance Documents and/or any facility or amount made available under any of the Finance Documents.
3.6
Immediate recourse
Each New Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from such New Guarantor under this clause 3. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.
3.7
Appropriations
Until all amounts which may be or become payable by the Obligors (other than the Charterer) under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:
3


EXECUTION VERSION


(a)
refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and the New Guarantors shall not be entitled to the benefit of the same; and

(b)
hold in an interest-bearing suspense account any moneys received from a New Guarantor or on account of a New Guarantor’s liability under this clause 3.
3.8
Deferral of New Guarantor’s rights

(a)
Until all amounts which may be or become payable by the Obligors (other than the Charterer) under or in connection with the Finance Documents have been irrevocably paid in full and unless the Agent otherwise directs, each New Guarantor will not exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents or by reason of any amount being payable, or liability arising, under this clause 3:

(i)
to be indemnified by another Obligor;

(ii)
to claim any contribution from any other guarantor of any Obligor’s obligations under the Finance Documents;

(iii)
to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Finance Party;

(iv)
to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which a New Guarantor has given a guarantee, undertaking or indemnity under this clause 3;

(v)
to exercise any right of set-off against any other Obligor; and/or (vi)to claim or prove as a creditor of any other Obligor in competition with any Finance Party.

(b)
If a New Guarantor receives any benefit, payment or distribution in relation to such rights it will promptly pay an equal amount to the Agent for application in accordance with the Payment Mechanics. This only applies until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full.
3.9
Additional security
This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Finance Party.
3.10
Deemed obligations of New Guarantors

(a)
Each of the New Guarantors agrees to be bound by the terms and conditions of the Note Purchase Deed applicable to the Guarantor and the Obligors mutatis mutandis as if it were a party to the Note Purchase Deed in each such capacity with effect from the date of this Deed of Amendment, save in relation to the creation or maintenance of any Security Interest on the basis that the obligations of the New Guarantors arising pursuant to this Deed of Amendment are not intended by the Parties to be, and are not, Secured Obligations.

(b)
Subject as provided in clause 3.10(a), all of the representations and warranties set out in this Schedule 3 (Representations and Warranties of the Obligors) of the Note Purchase
4


EXECUTION VERSION

Deed are deemed to be made by each New Guarantor on the date of this Deed of Amendment. The Repeating Representations are deemed to be made by each New Guarantor on the first day of each Interest Period.

(c)
Each representation or warranty deemed to be made by each New Guarantor after the date of this Deed of Amendment shall be deemed to be made by reference to the facts and circumstances existing at the date the representation or warranty is deemed to be made.
4
Continuing obligations
4.1
The provisions of the Note Purchase Deed and the other Finance Documents will, save to the extent amended and waived pursuant to this Deed of Amendment, continue and remain in full force and effect.
5
Miscellaneous
5.1
On or prior to the date of this Deed of Amendment, each of the New Guarantors shall have provided to the Agent, or its duly authorised representative, all of the documents and evidence listed below in form and substance satisfactory to the Agent:
(i)          A copy of the constitutional documents of each New Guarantor;
(ii)          A copy of a resolution of the board of directors of each New Guarantor (or, if applicable and duly evidenced, any committee of such board empowered to approve and authorise the following matters): (A) approving the terms of, and the transactions contemplated by, this Deed of Amendment and resolving that it will execute, deliver and perform its obligations hereunder; (B) authorising a specified person or persons to execute this Deed of Amendment on its behalf; and (C) authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with this Deed of Amendment;
(iii)          A specimen of the signature of each person authorised by the resolution referred to in (ii) above;
(iv)          A copy of a resolution signed by all the holders of the issued shares in each New Guarantor approving the terms of, and the transactions contemplated by, this Deed of Amendment;
(v)          A copy of a resolution of the board of directors of each corporate shareholder of each New Guarantor and each other relevant entity approving the terms of the resolution referred to in sub-clause (iv) above;
(vi)          A certificate of each New Guarantor (signed by an authorised signatory) confirming that guaranteeing the Notes and entering into this Deed of Amendment would not cause any borrowing, guarantee, security or similar limit or restriction binding on it to be exceeded;
(vii)          A copy of any power of attorney under which any person is appointed by any New Guarantor to execute this Deed of Amendment on its behalf;
(viii)          A certificate of an authorised signatory of each New Guarantor certifying that each copy document relating to it is correct, complete and in full force and effect and has not been amended or superseded and that any such resolutions or power of attorney have not been revoked;
(ix)          A goodstanding certificate from the Marshall Islands competent authority in respect of each New Guarantor;
5


EXECUTION VERSION

(x)          Evidence that the existing Mortgages and related Registry filings have been amended to reflect the maturity date extension of the Notes as effected pursuant to Clause 2.1 of this Deed of Amendment; and
(xi)          Duly executed process agent appointment letter in respect of the New Guarantors.
5.2
The Agent and the Issuer designate this Deed of Amendment to be a Finance Document.
5.3
Any term of this Deed of Amendment may be amended only with the consent of the Parties or waived only with the consent of the Parties (other than the party seeking the waiver) and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
5.4
If, at any time, any provision of this Deed of Amendment is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
5.5
No term of this Deed of Amendment is enforceable under the Contracts (Rights of Third Parties) Act 1999 by anyone other than a party to this Deed of Amendment.
6
Counterparts
This Deed of Amendment may be executed in any number of counterparts. This has the same effect as if the signatures on the counterparts were on a single copy of this Deed of Amendment.
7
Governing law
This Deed of Amendment and all non-contractual obligations arising in any way whatsoever out of or in connection with this Deed of Amendment shall be governed by, and construed and take effect in accordance with, English law.
8
Jurisdiction
8.1
Jurisdiction of English courts

(a)
The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Deed of Amendment or any non-contractual obligations connected with it (including a dispute regarding the existence, validity or termination of this Deed of Amendment) (a Dispute).

(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.

(c)
Notwithstanding clause 8.1(a) above, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.
8.2
Service of process
Without prejudice to any other mode of service allowed under any relevant law, each New Guarantor:

(a)
irrevocably appoints:
Top Properties (London) Limited
247 Gray’s Inn Road
6


EXECUTION VERSION

London WC1X 8QZ
United Kingdom
as that New Guarantor’s English process agent as its agent for service of process in relation to any proceedings before the English courts in connection with this Deed of Amendment and any Finance Document;

(b)
agrees that failure by an agent for service of process to notify the relevant New Guarantor of the process will not invalidate the proceedings concerned; and

(c)
if any person appointed as process agent for a New Guarantor is unable for any reason to act as agent for service of process, that New Guarantor must immediately (and in any event within ten days of such event taking place) appoint another agent on terms acceptable to the Agent. Failing this, the Agent may appoint another agent for this purpose.
IN WITNESS WHEREOF the parties hereto have caused this Deed of Amendment to be executed and delivered as a deed at the date and year first written above.
THE ISSUER
EXECUTED and DELIVERED as a DEED by
TOP SHIPS INC.
acting by:
in the presence of:
)
)
)
)
……………………………………………….
Attorney-in-fact


……………………………
Witness name:
Address:
Occupation:
7


EXECUTION VERSION

THE SECURITY AGENT
EXECUTED and DELIVERED as a DEED by
AMSTERDAM TRADE BANK N.V.
acting by:
)
)
)
)
……………………………………………….
Authorised signatory

……………………………………………….
Authorised signatory




THE AGENT AND THE REGISTRAR
EXECUTED and DELIVERED as a DEED by
AMSTERDAM TRADE BANK N.V.
acting by:
)
)
)
)
……………………………………………….
Authorised signatory

……………………………………………….
Authorised signatory




THE NOTE PURCHASER
EXECUTED and DELIVERED as a DEED by
AMSTERDAM TRADE BANK N.V.
acting by:
)
)
)
)
……………………………………………….
Authorised signatory

……………………………………………….
Authorised signatory




THE GUARANTOR
EXECUTED and DELIVERED as a DEED by
ASTARTE INTERNATIONAL INC.
acting by:
in the presence of:
)
)
)
)
……………………………………………….
Attorney-in-fact



……………………………
Witness name:
Address:
Occupation:
8


EXECUTION VERSION

THE NEW GUARANTORS
EXECUTED and DELIVERED as a DEED by
SANTA CATALINA INC.
acting by:
in the presence of:
)
)
)
)
……………………………………………….
Attorney-in-fact


……………………………
Witness name:
Address:
Occupation:

EXECUTED and DELIVERED as a DEED by
SANTA MONICA MARINE INC.acting by:
in the presence of:
)
)
)
)
……………………………………………….
Attorney-in-fact

……………………………
Witness name:
Address:
Occupation:

Exhibit 4.49


SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this "Agreement") is entered into as of December 18, 2019, by and between Hollywood Hills Inc., a Marshall Islands corporation (the "Seller"), and Top Ships Inc., a Marshall Islands corporation (the "Buyer"). The Seller and the Buyer are sometimes referred to in this Agreement as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, the Seller owns five hundred (500) shares, no par value, of capital stock (the "Shares"), representing all of the issued and outstanding shares of capital stock of Santa Catalina Inc. (the “Company”);
WHEREAS, the Seller has entered into a shipbuilding contract, dated December 2, 2018, as the same has been amended or supplemented from time to time, with Hyundai Mipo Dockyard Co. Ltd., having its principal place of business at 100 Bangeojinsunhwan-Doro, Dong-Gu, Ulsan, Korea, for the construction and purchase of one 50,000 DWT Class Product / Chemical Tanker, identified by Hull No. 2749 (the "Shipbuilding Contract"); and
WHEREAS, the Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, all of the issued and outstanding capital stock of the Company (the “Investment Shares”), on the terms and conditions herein contained.
WHEREAS, the disinterested directors of the board of directors of the Buyer (the “Board”) has unanimously determined that this Agreement and the transactions contemplated hereby and thereby are fair to and in the best interests of the Buyer and the shareholders of the Buyer (other than the Seller and its affiliates).
NOW, THEREFORE, in consideration of the respective representations, warranties and agreements contained herein and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE INVESTMENT SHARES; CLOSING
Section 1.1          Purchase and Sale of the Investment Shares. At the Closing (as defined below), subject to the terms and conditions herein contained, the Seller shall sell, convey, transfer, assign and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller, the Investment Shares, together with all rights and interests associated therewith.
Section 1.2          Purchase Price. In consideration of the sale, conveyance, transfer, assignment and delivery of the Investment Shares at Closing, the Buyer shall deliver to the Seller the aggregate purchase price of 7.175 Million U.S. Dollars (US$7,175,000) (the "Purchase Price"), by wire transfer or by delivery of other immediately available funds to the below account:
CREDIT SUISSE AG
ZURICH, 8070, CH
ACCOUNT HOLDER: CENTRAL MARE INC.
ACCOUNT NUMBER:2193917-9
IBAN (USD):CH37 0483 5219 3917 9200 0
SWIFT CODE:CRESCHZZ80A

Such Purchase Price shall be payable in two installments, 3.758 Million U.S. Dollars (US$3,757,500) shall be payable upon Closing (“First Installment”) and 3.417 Million U.S. Dollars (US$3,417,500) shall be payable upon delivery of tanker with Hull No. 2749 (“Second Installment”). All accrued and unpaid expenses relating to the construction and financing of said tanker will be borne by the Buyer. In case the tanker is not delivered within ten days of its contractual delivery date, or the tanker’s condition doesn’t exactly reflect the intended condition described in Article I, sections 1, 2 and 3 of the shipbuilding contract, or DNV GL Classification Society doesn’t classify the tanker or validate that its design is in accordance with DNV GL standards, then the Buyer won’t be obligated to pay the Second Installment and the Seller will be obligated to return the funds of the First Installment to the Buyer.

Section 1.3          Closing. The consummation of the purchase and sale of the Shares (the “Closing”) shall take place at the Representative Office of Top Ships Inc, 1 Vas. Sofias and Meg. Alexandrou Str 15124 Maroussi, Greece, on the date hereof or on such later date as may be mutually agreed upon by the Parties, but in no event later than December 18, 2019 (the “Closing Date”).
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Section 1.4          Deliverables. On the Closing Date, subject to the terms and conditions herein contained, (i) the Seller shall deliver to the Buyer the Investment Shares free and clear of any and all charges, claims, conditions, encumbrances, equitable interests, liens, mortgages, options, pledges, rights of refusal, security interests or restrictions of any kind, including any restrictions on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership, in each case of any nature whatsoever (not including any restrictions on the resale of the Investment Shares under the Securities Act of 1933, as amended (the "Securities Act") or under applicable state securities laws) (collectively, "Liens"), in certificated form, registered in the name of the Buyer or its designated nominee (or, if applicable, stock powers duly executed in blank, proper form for transfer), together with any necessary assignment documents in form and substance as reasonably requested by the Buyer; and (ii) the Buyer shall pay the Purchase Price to the Seller.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that the statements in the following sections of this Article II are true and correct as of the date of this Agreement and as of the Closing Date:
Section 2.1          Organization and Good Standing. Each of the Seller and the Company is duly organized, validly existing and in good standing under the laws of the Republic of the Marshall Islands and has all requisite corporate power and authority to own, lease, operate and hold its respective properties and assets and to conduct its respective business as is now conducted and as currently contemplated to be conducted, and is authorized to do business in all jurisdictions material to the conduct of its respective business. The Seller has heretofore delivered to the Buyer complete and correct copies of the Articles of Incorporation, Bylaws or other charter documents ("Constitutional Documents") of the Company, in each case, as currently in effect, together with copies of all minutes of meetings and resolutions of shareholders and directors of the Company (the "Company Corporate Records"). The Company Corporate Records are accurate in all material respects and all corporate proceedings and actions reflected therein have been conducted or taken in compliance with all applicable laws and in compliance with the Company's Constitutional Documents. The Company is not in default under or in violation of its Constitutional Documents.
Section 2.2          Authority and Enforceability. The Seller has the full legal right and requisite corporate power and authority and has taken all action necessary in order to execute, deliver and perform fully its obligations under this Agreement and to consummate the transactions contemplated herein. This Agreement has been duly and validly authorized, executed and delivered by the Seller and constitutes a valid and binding obligation of the Seller, enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defense.
Section 2.3          Consents and Approvals; No Violation. Neither the execution and delivery of this Agreement by the Seller nor the consummation of the transactions contemplated by this Agreement will (i) conflict with or result in any breach of any provision of the Constitutional Documents of the Seller or the Company; (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any national, federal, regional, state, multi-state, municipal or other governmental authority of any nature, including any court, subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any regulatory or taxing authority (any such governmental authority or body, a "Governmental Body"), other than those that have been made or obtained; (iii) cause the Seller or the Company to violate or contravene any provision of law, any rule or regulation of any Governmental Body, or any order, writ, judgment, injunction, decree, determination or award, binding upon or applicable to the Seller or the Company or their respective assets; (iv) result in a default (or give rise to any right of amendment, termination, cancellation, consent, acceleration or loss of a material benefit) under the terms, conditions or provisions of any loan or credit agreement, note, bond, mortgage, indenture, lease, sublease, license, obligation, commitment, purchase order or other agreement, commitment, instrument, permit, concession, or obligation, written or oral (each, a "Contract") to which the Seller or the Company or any of their respective assets may be bound, except in such cases where the requisite waivers or consents have been obtained; or (v) result in the creation of any Lien upon any of the properties or assets of the Seller or the Company under the terms, conditions or provisions of any Contract, instrument or other obligation to which the Seller or the Company or any of their respective assets may be bound or affected.
Section 2.4          Capitalization. The Company is authorized to issue five hundred (500) shares, without par value, of capital stock. The Shares represent all of the issued and outstanding shares of capital stock of the Company. All of the Shares are duly authorized, validly issued, fully paid and non-assessable and are owned legally by the Seller. Other than this Agreement, there is no subscription, option, warrant, preemptive right, call right or other right, agreement or commitment of any nature relating to the voting, issuance, sale, delivery or transfer (including any right of conversion or exchange or right of first refusal under any outstanding security or other instruments) by the Seller of the Investment Shares, and there is no obligation on the part of the Seller to grant, extend or enter into any of the foregoing. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to the Investment Shares or any other equity or voting interests in the Company. No claim has been made or, to the knowledge of the Seller, threatened against the Seller or the Company asserting that any person other than the Seller or its sole shareholder is the holder or beneficial owner of the Investment Shares or any other equity or voting interests in the Company.
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Section 2.5          Ownership of the Investment Shares. The Seller is the sole legal owner and holder of, and has good, valid and marketable title to, the Investment Shares to be sold pursuant to this Agreement, free and clear of any Liens. At the Closing, the Seller will transfer, assign and deliver good and marketable title to the Investment Shares to the Buyer, free and clear of all Liens.
Section 2.6          No Other Business. Since its formation, the Company has not incurred any liabilities or obligations or conducted any business other than the items listed on Schedule 2.6 hereto.
Section 2.7          Contracts. The Company is not a party to any Contract other than the Shipbuilding Contract and the Time Charter (both as defined in Schedule 2.6). The Company has good and valid title to the Shipbuilding Contract, free and clear of any Liens. The Company has advanced two contract price installments amounting to $3,757,500 under the Shipbuilding Contract (true and complete evidence of which has been provided by the Seller to the Buyer). The Company is not in default under the Shipbuilding Contract, nor does an event exist which, with the giving of notice or lapse of time or both, would constitute such a default. To the Seller's knowledge, all other parties to the Shipbuilding Contract are in compliance with the terms thereof. The Shipbuilding Contract is in full force and effect and is enforceable against the Company and the other parties thereto in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defense. No consent (including the consent of any Governmental Body) or other action is required in order for the Shipbuilding Contract to remain in full force and effect, and for the Company to fully exercise its rights thereunder, following the Closing. The Seller has delivered or made available to the Buyer true and complete copies, including all amendments and supplements thereof, of the Shipbuilding Contract.
Section 2.8          No Litigation. There is no action, suit, claim, investigation, litigation, legal, administrative, arbitration or other proceeding pending against the Seller or the Company, or, to the knowledge of the Seller, threatened against the Seller or the Company, nor is the Seller or the Company subject to or bound by any outstanding order, judgment, injunction, award or decree of any Governmental Body, relating to the Seller or the Company or any of their respective properties or assets or which questions the validity of this Agreement or any of the transactions contemplated hereby or any action taken or to be taken pursuant hereto or which seeks to prohibit, enjoin or otherwise challenge any of the transactions contemplated hereby.
Section 2.9          No Unlawful Payments. Neither the Seller nor the Company, nor any director, shareholder, officer, agent, employee or other person associated with or acting on behalf of the Seller or the Company, as applicable, has: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; or (iii) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any supplier, customer, licensor, contractor, politician, government employee or other person.
Section 2.10          Bank Accounts. Set forth on Schedule A is a complete and accurate list of all bank accounts, savings deposits, money-market accounts, certificates of deposit, safety deposit boxes, and similar investment accounts with banks or other financial institutions maintained by or on behalf of the Company showing the depository bank or institution address, appropriate bank contact personnel, account number and names of signatories.
Section 2.11          Full Disclosure. No representation or warranty by the Seller in this Agreement and no statement contained in any document or other other writing furnished or to be furnished to the Buyer pursuant to the provisions hereof, when considered with all other such documents or writings, contain or will contain any untrue statement of material fact or omits or will omit to state any material fact necessary in order to make the statements made herein or therein not misleading.
Section 2.12          Adequate Information. The Seller (i) has sufficient knowledge and experience in business, financial and investment matters so as to be able to evaluate the risks and merits of the sale of the Investment Shares and of protecting its own interests in connection with the sale of the Investment Shares; (ii) is a sophisticated person with respect to the sale of the Investment Shares; (iii) has adequate information concerning the business and financial condition, prospects and plans of the Company to make an informed decision regarding the sale of the Investment Shares; and (iv) has independently and without reliance upon the Buyer, and based on such information as the Seller has deemed appropriate, made its own analysis and decision to enter into this Agreement. The Seller acknowledges that the Buyer has not given the Seller any investment advice or opinion on whether the sale of the Investment Shares is prudent or suitable and the Seller is not relying on any representation or warranty by the Buyer except as expressly set forth in this Agreement.
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Section 2.13          No General Solicitation. Neither the Seller nor any nominee thereof has offered any Investment Shares by any means of general solicitation or advertising (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio; or (ii) any seminar or meeting whose attendees have been invited by general solicitation or advertising.
Section 2.14          No Brokers or Finders. No broker or finder has been engaged by the Seller in connection with the transactions contemplated in this Agreement, and no commission, finder's fees or other similar compensation or remuneration is payable to any person as a result of the Seller's actions in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated herein.
Section 2.15          Exemption from Registration. The Investment Shares are being offered and sold pursuant to an exemption from the registration requirements of the Securities Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements in the following sections of this Article III are true and correct as of the date of this Agreement and as of the Closing Date:

Section 3.1          Organization, Good Standing. The Buyer is duly organized, validly existing and in good standing under the laws of the Republic of the Marshall Islands, and has all corporate power and authority to own, lease, operate and hold its properties and assets and to conduct its business as is now conducted and as currently contemplated to be conducted, and is authorized to do business in all jurisdictions material to the conduct of its business.
Section 3.2          Authority and Enforceability. The Buyer has the full legal right and requisite corporate power and authority and has taken all action necessary in order to execute, deliver and perform fully its obligations under this Agreement and to consummate the transactions contemplated herein. This Agreement has been duly and validly authorized, executed and delivered by the Buyer and constitutes the valid and binding obligation of the Buyer, enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defense.
Section 3.3          Consents and Approvals; No Violation. Neither the execution and delivery of this Agreement by the Buyer nor the consummation of the transactions contemplated by this Agreement will (i) conflict with or result in any breach of any provision of the Buyer's Constitutional Documents; (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Body, other than those that have been made or obtained; (iii) cause the Buyer to violate or contravene any provision of law, any rule or regulation of any Governmental Body, or any order, writ, judgment, injunction, decree, determination or award, binding upon or applicable to the Buyer or its assets; (iv) result in a default (or give rise to any right of amendment, termination, cancellation, consent, acceleration or loss of a material benefit) under the terms, conditions or provisions of any Contract to which the Buyer or any of its assets may be bound, except in such cases where the requisite waivers or consents have been obtained; or (v) result in the creation of any Lien upon any of the properties or assets of the Buyer under the terms, conditions or provisions of any Contract, instrument or other obligation to which the Buyer or any of its assets may be bound or affected.
Section 3.4          No Litigation. There is no action, suit, claim, investigation, litigation, legal, administrative, arbitration or other proceeding pending against the Buyer other than publicly disclosed or, to the knowledge of the Buyer, threatened against the Buyer, nor is the Buyer subject to or bound by any outstanding orders, judgments, injunctions, awards or decrees of any Governmental Body, other than publicly disclosed, which questions the validity of this Agreement or any of the transactions contemplated hereby or any action taken or to be taken pursuant hereto or which seeks to prohibit, enjoin or otherwise challenge any of the transactions contemplated hereby.
Section 3.5          No Registration. The Investment Shares purchased by the Buyer pursuant to this Agreement are being acquired for investment purposes only and not with a view to any public distribution thereof in violation of any securities laws, and the Buyer shall not offer to sell or otherwise dispose of the Investment Shares so acquired by it in violation of any of the registration requirements of the Securities Act. The Buyer acknowledges that it is able to fend for itself, can bear the economic risk of its investment in the Investment Shares, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in all of the Investment Shares. The Buyer understands that, when issued to the Buyer at the Closing, none of the Investment Shares will be registered pursuant to the Securities Act and that all of the Investment Shares will constitute "restricted securities" under the federal securities laws of the United States. Each certificate for Investment Shares shall bear the following legend:
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"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND COMPLIANCE WITH SUCH STATE LAWS OR (II) AN APPLICABLE EXEMPTION THEREFROM AND AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED."
Section 3.6          Independent Investigation. The Buyer has had the opportunity to conduct to its own satisfaction independent investigation, review and analysis of the business, operations, assets, liabilities, results of operations, financial condition and prospects of the Company and, in making the determination to proceed with the transactions contemplated hereby, has relied solely on the results of its own independent investigation and the representations and warranties of the Seller set forth in Article II hereof and the other information provided by the Seller.
Section 3.7          No Brokers or Finders. No broker or finder has been engaged by the Buyer in connection with the transactions contemplated in this Agreement, and no commission, finder's fees or other similar compensation or remuneration is payable to any person as a result of the Buyer's actions in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated herein.
ARTICLE IV
COVENANTS
Section 4.1          Conduct of Business Pending Closing. The Buyer and the Seller agree that between the date of the execution of this Agreement and the Closing Date, (i) the Seller shall, or shall cause the Company to, conduct the business and maintain and preserve the assets of the Company in the ordinary course of business; (ii) the Buyer and the Seller shall use their reasonable efforts to cause all of the representations and warranties in Article II and Article III hereof, as applicable to such Party, to continue to be true and correct; and (iii) the Company shall not incur any debt, or enter into any other Contract, without the Buyer's prior written approval.
Section 4.2          Further Assurances. The Seller shall execute, acknowledge and deliver or cause to be executed, acknowledged and delivered to the Buyer such certificates, assignments or other instruments of ownership, transfer, assignment and conveyance, in form and substance reasonably satisfactory to Buyer, as shall be necessary to vest in the Buyer all of the right, title and interest in and to the Investment Shares undertaken to be sold to the Buyer by the Seller pursuant to this Agreement, free and clear of all Liens, debts, dues and duties of whatsoever nature, and any other document reasonably requested by the Buyer in connection with this Agreement.
Section 4.3          Governmental Filings. As promptly as practicable after the execution of this Agreement, each Party shall, in cooperation with the other, file any reports or notifications that may be required to be filed by it under applicable law, if any.
Section 4.4          Further Consents. After the Closing Date, the Seller shall obtain any consents or approvals or assist in any filings reasonably required in connection with the transactions contemplated hereby that are requested by Buyer and that have not been previously obtained or made.
Section 4.5          Public Announcements. Neither Party shall, without the prior approval of the other Party, issue, or permit any of its partners, stockholders, directors, officers, employees, members, managers, agents to issue, any press release or other public announcement with respect to this Agreement or the transactions contemplated hereby, except as may be required by law or any Governmental Body to which the relevant Party is accountable.
Section 4.6          Share Certificates of the Seller. The Seller covenants and agrees that, for so long as the Seller holds any shares of capital stock of the Company in bearer form, the Seller shall retain the share certificate evidencing such ownership in its sole possession.
ARTICLE V
CONDITIONS TO CLOSING
Section 5.1          Conditions to Obligations of Seller. At the Closing, the obligation of the Seller to sell the Investment Shares to the Buyer is subject to the fulfillment at the Closing of the following conditions:
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(a)          Accuracy of Buyer Representations and Warranties; Compliance. The representations and warranties of the Buyer contained in Article III of this Agreement shall be true and correct in all material respects at and as of the Closing Date as though then made, and Buyer shall have performed and complied in all material respects with all conditions and agreements required by this Agreement to be performed and complied with by it on or prior to the Closing Date.
(b)          Legal Investment. On the Closing Date, the purchase and sale of the Investment Shares shall be permitted by the laws and regulations of each relevant jurisdiction.
(c)          No Actions Pending. There shall be no suit, action, investigation, inquiry or other proceeding by any Governmental Body or other person or entity pending or threatened in writing that challenges, or has the effect of interfering with, the validity or legality of the transactions contemplated in this Agreement.
Section 5.2          Conditions to Obligations of Buyer. The obligation of the Buyer to purchase the Investment Shares from the Seller is subject to the fulfillment at the Closing of the following conditions:
(a)          Accuracy of Seller Representations and Warranties; Compliance. The representations and warranties of the Seller contained in Article II of this Agreement shall be true and correct in all material respects at and as of the Closing Date as though then made, and the Seller shall have performed and complied in all material respects, with all conditions and agreements required by this Agreement to be performed and complied with by it on or prior to the Closing Date.
(b)          Legal Investment. On the Closing Date, the purchase and sale of the Investment Shares shall be permitted by the laws and regulations of each relevant jurisdiction.
(c)          No Actions Pending. There shall be no suit, action, investigation, inquiry or other proceeding by any Gove mental Body or other person or entity pending or threatened in writing, other than publicly disclosed, that challenges, or has the effect of interfering with, the validity or legality of the transactions contemplated in this Agreement.
(d)          No Material Adverse Change. Between the date of the execution of this Agreement and the Closing Date, there shall not have been any material adverse change in the condition, financial or otherwise, or the business affairs or assets, of the Company.
ARTICLE VI
MISCELLANEOUS
Section 6.1          Termination. This Agreement may be terminated at any time prior to the Closing Date:
(a)          by the mutual written agreement of the Seller and the Buyer;
(b)          by the Buyer if any of the conditions set forth in Section 5.1 hereof shall have become incapable of fulfillment, by reason other than the Buyer's negligent or willful failure to perform or observe in any material respect any of the covenants or agreements set forth herein to be performed or observed by the Buyer, and such conditions shall not have been waived by the Buyer;
(c)          by the Seller if any of the conditions set forth in Section 5.2 hereof shall have become incapable of fulfillment, by reason other than the Seller's negligent or willful failure to perform or observe in any material respect any of the covenants or agreements set forth herein to be performed or observed by the Seller, and such conditions shall not have been waived by the Seller; or
(d)          by either Party by written notice thereof to the other Party, if the Closing contemplated hereby shall not have been consummated on or before January 31, 2020.
Section 6.2          No further Liability. Subject to Section 6.4, if this Agreement is terminated in accordance with Section 6.1 hereof, (i) neither Party shall have any further obligation or liability under this Agreement, other than by reason of a breach or default by a Party hereunder; and (ii) any monies, instruments or documents of any Party held in escrow or transferred to the other Party in connection with the transactions contemplated herein with respect to which the Closing shall not have occurred shall be immediately returned to such Party. For the avoidance of doubt, any such termination shall not have any effect whatsoever on any transactions contemplated herein with respect to which the Closing has occurred.
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Section 6.3          Indemnification. Each Party shall indemnify, defend and hold harmless the other Party, its managers, directors, officers, members, partners, shareholders, employees, attorneys, accountants, agents and representatives and their successors and assigns from and against all liabilities, losses, damages or expenses (including, without limitation, reasonable attorney's fees and disbursements) based upon or arising out of (i) any inaccuracy or breach of any representation or warranty of such indemnifying Party herein, and (ii) any breach of any covenant or agreement of such indemnifying Party herein.
Section 6.4          Survival. The representations, warranties, covenants and agreements of each of the Parties under this Agreement shall survive the Closing. Furthermore, Section 6.2 and Section 6.3 hereof shall survive the termination of this Agreement.
Section 6.5          Expenses. Each of the Parties agrees to pay its own expenses incident to this Agreement and the performance of its obligations hereunder, except as provided in Section 6.3.
Section 6.6          Assignment. This Agreement shall be binding on and inure to the benefit of the Parties hereto and their respective successors and permitted assigns, provided, however, that a party may not assign this Agreement without the prior written consent of the other party.
Section 6.7          Notices. Any notice, request, instruction or other document to be given hereunder by any Party to the other shall be in writing and delivered by hand or by an courier service or shall be sent by facsimile or electronic mail to the address for such Party set forth below:
If to the Seller:
Hollywood Hills Inc.
1 Vas. Sofias and Meg. Alexandrou St
15124 Maroussi, Greece
Facsimile: +302108128320
Email: louka@loukapartners.com
   
If to the Buyer:
Top Ships Inc.
c/o Top Ships Inc.
1 Vas. Sofias-and Meg Alexandrou Str
15124 Maroussi, Greece
Attention: Alexandros Tsirikos
Facsimile: +30210 8056441
Email: atsirikos@topships.org
   
With a copy (which shall not
constitute notice) to:
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
Attention: Gary J. Wolfe, Esq.
Facsimile: (212) 901-2110
Email: wolfe@sewkis.com

or to such other place and with such other copies as either Party may designate as to itself by written notice to the other. All such notices, requests, instructions or other documents shall be deemed to have been delivered (i) in the case of personal delivery or delivery by courier, on the date of such delivery, (ii) in the case of delivery by facsimile transmission or electronic mail, when receipt is acknowledged and (iii) in the case of mailing, on the third business day after the posting thereof. Whenever any notice is required to be given by law or this Agreement, a written waiver thereof signed by the Party entitled to such notice, whether before or after the time stated at which such notice is required to be given, shall be deemed equivalent to the giving of such notice.
Section 6.8          Entire Agreement; Amendments and Waivers. This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties. No supplement, modification, amendment or waiver of this Agreement shall be binding unless executed in writing by each Party to the Agreement. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.
Section 6.9          Headings. Headings contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provision hereof.
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Section 6.10          Further Assurances. From and after the Closing, upon the request of a Party, the other Party will execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.
Section 6.11          Choice of Law. This Agreement shall be construed and interpreted, and the rights of the Parties determined, in accordance with the laws of the State of New York, without regard to principles of conflicts of law.
Section 6.12          Jurisdiction. Each of the Seller and the Buyer (i) irrevocably submits to the co-exclusive jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in New York County for the purposes of any suit, action or proceeding arising out of or relating to this Agreement and (ii) waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceedings in improper.  Each of the Seller and the Buyer consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such Party at the address set forth in Section 6.7 and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 6.12 shall affect or limit any right to serve process in any other manner permitted by law.
Section 6.13          WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN.
Section 6.14          Remedies. In addition to any remedies either Party may have in law, each Party shall be entitled to apply to any court of competent jurisdiction (without posting bond or other security) to enjoin any actual or threatened breach or default under this Agreement and shall also be entitled to seek specific performance of this Agreement. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any Party at law or in equity or otherwise.
Section 6.15        Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.
Section 6.16          No Third Party Beneficiary Rights. No provisions of this Agreement are intended, nor will be interpreted, to provide or create any third party beneficiary rights or other rights of any kind in any client, customer, affiliate, stockholder, member, or partner of any Party hereto or any other person or entity unless specifically provided otherwise herein, and, except as so provided, all provisions hereof will be personal solely between the Parties hereto.
Section 6.17          Counterparts. This Agreement may be executed in two or more counterparts, and all such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. Facsimile or portable document format (PDF) signatures shall be treated as original signatures for all purposes hereunder.
(Signature Page Follows)

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first written above.
 
BUYER:
   
 
TOP SHIPS INC
   
 
By:
 
 
Name:
Alexander Tsirikos
 
Title:
Director
     
     
     
 
SELLER
   
 
HOLLYWOOD HILLS INC.
     
 
By:
 
 
Name:
Dimosthenis Eleftheriadis
 
Title:
Director
     
     


(Signature Page to Share Purchase Agreement)


Schedule A

[Bank Accounts of the Company]



SCHEDULE 2.6

1. Shipbuilding Contract with Hyundai Mipo dated December 2, 2018 by and among the Company and Hyundai Mipo Dockyard Co. Ltd., for the construction of the vessel (the “Shipbuilding Contract”); and

2. Shell Time 4 time charter party, dated January 14, 2019, with contract with Trafigura Maritime Logistics Pte Ltd. 4 of Singapore (the “Time Charter”).

Exhibit 4.50


SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this "Agreement") is entered into as of December 18, 2019, by and between Hollywood Hills Inc., a Marshall Islands corporation (the "Seller"), and Top Ships Inc., a Marshall Islands corporation (the "Buyer"). The Seller and the Buyer are sometimes referred to in this Agreement as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, the Seller owns five hundred (500) shares, no par value, of capital stock (the "Shares"), representing all of the issued and outstanding shares of capital stock of Santa Monica Marine Inc. (the “Company”);
WHEREAS, the Seller has entered into a shipbuilding contract, dated December 3, 2018, as the same has been amended or supplemented from time to time, with Hyundai Mipo Dockyard Co. Ltd., having its principal place of business at 100 Bangeojinsunhwan-Doro, Dong-Gu, Ulsan, Korea, for the construction and purchase of one 50,000 DWT Class Product / Chemical Tanker, identified by Hull No. 2750 (the "Shipbuilding Contract"); and
WHEREAS, the Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, all of the issued and outstanding capital stock of the Company (the “Investment Shares”), on the terms and conditions herein contained.
WHEREAS, the disinterested directors of the board of directors of the Buyer (the “Board”) has unanimously determined that this Agreement and the transactions contemplated hereby and thereby are fair to and in the best interests of the Buyer and the shareholders of the Buyer (other than the Seller and its affiliates).
NOW, THEREFORE, in consideration of the respective representations, warranties and agreements contained herein and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE INVESTMENT SHARES; CLOSING
Section 1.1          Purchase and Sale of the Investment Shares. At the Closing (as defined below), subject to the terms and conditions herein contained, the Seller shall sell, convey, transfer, assign and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller, the Investment Shares, together with all rights and interests associated therewith.
Section 1.2          Purchase Price. In consideration of the sale, conveyance, transfer, assignment and delivery of the Investment Shares at Closing, the Buyer shall deliver to the Seller the purchase price of 7.175 Million U.S. Dollars (US$7,175,000) (the "Purchase Price"), by wire transfer or by delivery of other immediately available funds to the below account:
CREDIT SUISSE AG
ZURICH, 8070, CH
ACCOUNT HOLDER: CENTRAL MARE INC.
ACCOUNT NUMBER:2193917-9
IBAN (USD):CH37 0483 5219 3917 9200 0
SWIFT CODE:CRESCHZZ80A

Such Purchase Price shall be payable in two installments, 3.758 Million U.S. Dollars (US$3,757,500) shall be payable upon Closing (“First Installment”) and 3.417 Million U.S. Dollars (US$3,417,500) shall be payable upon delivery of tanker with Hull No. 2750 (“Second Installment”). All accrued and unpaid expenses relating to the construction and financing of said tanker will be borne by the Buyer. In case the tanker is not delivered within ten days of its contractual delivery date, or the tanker’s condition doesn’t exactly reflect the intended condition described in Article I, sections 1, 2 and 3 of the shipbuilding contract, or DNV GL Classification Society doesn’t classify the tanker or validate that its design is in accordance with DNV GL standards, then the Buyer won’t be obligated to pay the Second Installment and the Seller will be obligated to return the funds of the First Installment to the Buyer.

Section 1.3          Closing. The consummation of the purchase and sale of the Shares (the “Closing”) shall take place at the Representative Office of Top Ships Inc, 1 Vas. Sofias and Meg. Alexandrou Str 15124 Maroussi, Greece, on the date hereof or on such later date as may be mutually agreed upon by the Parties, but in no event later than December 18, 2019 (the “Closing Date”).
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Section 1.4          Deliverables. On the Closing Date, subject to the terms and conditions herein contained, (i) the Seller shall deliver to the Buyer the Investment Shares free and clear of any and all charges, claims, conditions, encumbrances, equitable interests, liens, mortgages, options, pledges, rights of refusal, security interests or restrictions of any kind, including any restrictions on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership, in each case of any nature whatsoever (not including any restrictions on the resale of the Investment Shares under the Securities Act of 1933, as amended (the "Securities Act") or under applicable state securities laws) (collectively, "Liens"), in certificated form, registered in the name of the Buyer or its designated nominee (or, if applicable, stock powers duly executed in blank, proper form for transfer), together with any necessary assignment documents in form and substance as reasonably requested by the Buyer; and (ii) the Buyer shall pay the Purchase Price to the Seller.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that the statements in the following sections of this Article II are true and correct as of the date of this Agreement and as of the Closing Date:
Section 2.1          Organization and Good Standing. Each of the Seller and the Company is duly organized, validly existing and in good standing under the laws of the Republic of the Marshall Islands and has all requisite corporate power and authority to own, lease, operate and hold its respective properties and assets and to conduct its respective business as is now conducted and as currently contemplated to be conducted, and is authorized to do business in all jurisdictions material to the conduct of its respective business. The Seller has heretofore delivered to the Buyer complete and correct copies of the Articles of Incorporation, Bylaws or other charter documents ("Constitutional Documents") of the Company, in each case, as currently in effect, together with copies of all minutes of meetings and resolutions of shareholders and directors of the Company (the "Company Corporate Records"). The Company Corporate Records are accurate in all material respects and all corporate proceedings and actions reflected therein have been conducted or taken in compliance with all applicable laws and in compliance with the Company's Constitutional Documents. The Company is not in default under or in violation of its Constitutional Documents.
Section 2.2          Authority and Enforceability. The Seller has the full legal right and requisite corporate power and authority and has taken all action necessary in order to execute, deliver and perform fully its obligations under this Agreement and to consummate the transactions contemplated herein. This Agreement has been duly and validly authorized, executed and delivered by the Seller and constitutes a valid and binding obligation of the Seller, enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defense.
Section 2.3          Consents and Approvals; No Violation. Neither the execution and delivery of this Agreement by the Seller nor the consummation of the transactions contemplated by this Agreement will (i) conflict with or result in any breach of any provision of the Constitutional Documents of the Seller or the Company; (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any national, federal, regional, state, multi-state, municipal or other governmental authority of any nature, including any court, subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any regulatory or taxing authority (any such governmental authority or body, a "Governmental Body"), other than those that have been made or obtained; (iii) cause the Seller or the Company to violate or contravene any provision of law, any rule or regulation of any Governmental Body, or any order, writ, judgment, injunction, decree, determination or award, binding upon or applicable to the Seller or the Company or their respective assets; (iv) result in a default (or give rise to any right of amendment, termination, cancellation, consent, acceleration or loss of a material benefit) under the terms, conditions or provisions of any loan or credit agreement, note, bond, mortgage, indenture, lease, sublease, license, obligation, commitment, purchase order or other agreement, commitment, instrument, permit, concession, or obligation, written or oral (each, a "Contract") to which the Seller or the Company or any of their respective assets may be bound, except in such cases where the requisite waivers or consents have been obtained; or (v) result in the creation of any Lien upon any of the properties or assets of the Seller or the Company under the terms, conditions or provisions of any Contract, instrument or other obligation to which the Seller or the Company or any of their respective assets may be bound or affected.
Section 2.4          Capitalization. The Company is authorized to issue five hundred (500) shares, without par value, of capital stock. The Shares represent all of the issued and outstanding shares of capital stock of the Company. All of the Shares are duly authorized, validly issued, fully paid and non-assessable and are owned legally by the Seller. Other than this Agreement, there is no subscription, option, warrant, preemptive right, call right or other right, agreement or commitment of any nature relating to the voting, issuance, sale, delivery or transfer (including any right of conversion or exchange or right of first refusal under any outstanding security or other instruments) by the Seller of the Investment Shares, and there is no obligation on the part of the Seller to grant, extend or enter into any of the foregoing. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to the Investment Shares or any other equity or voting interests in the Company. No claim has been made or, to the knowledge of the Seller, threatened against the Seller or the Company asserting that any person other than the Seller or its sole shareholder is the holder or beneficial owner of the Investment Shares or any other equity or voting interests in the Company.
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Section 2.5          Ownership of the Investment Shares. The Seller is the sole legal owner and holder of, and has good, valid and marketable title to, the Investment Shares to be sold pursuant to this Agreement, free and clear of any Liens. At the Closing, the Seller will transfer, assign and deliver good and marketable title to the Investment Shares to the Buyer, free and clear of all Liens.
Section 2.6          No Other Business. Since its formation, the Company has not incurred any liabilities or obligations or conducted any business other than the items listed on Schedule 2.6 hereto.
Section 2.7          Contracts. The Company is not a party to any Contract other than the Shipbuilding Contract and the Time Charter (both as defined in Schedule 2.6). The Company has good and valid title to the Shipbuilding Contract, free and clear of any Liens. The Company has advanced two contract price installments amounting to $3,757,500 under the Shipbuilding Contract (true and complete evidence of which has been provided by the Seller to the Buyer). The Company is not in default under the Shipbuilding Contract, nor does an event exist which, with the giving of notice or lapse of time or both, would constitute such a default. To the Seller's knowledge, all other parties to the Shipbuilding Contract are in compliance with the terms thereof. The Shipbuilding Contract is in full force and effect and is enforceable against the Company and the other parties thereto in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defense. No consent (including the consent of any Governmental Body) or other action is required in order for the Shipbuilding Contract to remain in full force and effect, and for the Company to fully exercise its rights thereunder, following the Closing. The Seller has delivered or made available to the Buyer true and complete copies, including all amendments and supplements thereof, of the Shipbuilding Contract.
Section 2.8          No Litigation. There is no action, suit, claim, investigation, litigation, legal, administrative, arbitration or other proceeding pending against the Seller or the Company, or, to the knowledge of the Seller, threatened against the Seller or the Company, nor is the Seller or the Company subject to or bound by any outstanding order, judgment, injunction, award or decree of any Governmental Body, relating to the Seller or the Company or any of their respective properties or assets or which questions the validity of this Agreement or any of the transactions contemplated hereby or any action taken or to be taken pursuant hereto or which seeks to prohibit, enjoin or otherwise challenge any of the transactions contemplated hereby.
Section 2.9          No Unlawful Payments. Neither the Seller nor the Company, nor any director, shareholder, officer, agent, employee or other person associated with or acting on behalf of the Seller or the Company, as applicable, has: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; or (iii) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any supplier, customer, licensor, contractor, politician, government employee or other person.
Section 2.10          Bank Accounts. Set forth on Schedule A is a complete and accurate list of all bank accounts, savings deposits, money-market accounts, certificates of deposit, safety deposit boxes, and similar investment accounts with banks or other financial institutions maintained by or on behalf of the Company showing the depository bank or institution address, appropriate bank contact personnel, account number and names of signatories.
Section 2.11          Full Disclosure. No representation or warranty by the Seller in this Agreement and no statement contained in any document or other other writing furnished or to be furnished to the Buyer pursuant to the provisions hereof, when considered with all other such documents or writings, contain or will contain any untrue statement of material fact or omits or will omit to state any material fact necessary in order to make the statements made herein or therein not misleading.
Section 2.12          Adequate Information. The Seller (i) has sufficient knowledge and experience in business, financial and investment matters so as to be able to evaluate the risks and merits of the sale of the Investment Shares and of protecting its own interests in connection with the sale of the Investment Shares; (ii) is a sophisticated person with respect to the sale of the Investment Shares; (iii) has adequate information concerning the business and financial condition, prospects and plans of the Company to make an informed decision regarding the sale of the Investment Shares; and (iv) has independently and without reliance upon the Buyer, and based on such information as the Seller has deemed appropriate, made its own analysis and decision to enter into this Agreement. The Seller acknowledges that the Buyer has not given the Seller any investment advice or opinion on whether the sale of the Investment Shares is prudent or suitable and the Seller is not relying on any representation or warranty by the Buyer except as expressly set forth in this Agreement.
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Section 2.13          No General Solicitation. Neither the Seller nor any nominee thereof has offered any Investment Shares by any means of general solicitation or advertising (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio; or (ii) any seminar or meeting whose attendees have been invited by general solicitation or advertising.
Section 2.14          No Brokers or Finders. No broker or finder has been engaged by the Seller in connection with the transactions contemplated in this Agreement, and no commission, finder's fees or other similar compensation or remuneration is payable to any person as a result of the Seller's actions in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated herein.
Section 2.15          Exemption from Registration. The Investment Shares are being offered and sold pursuant to an exemption from the registration requirements of the Securities Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements in the following sections of this Article III are true and correct as of the date of this Agreement and as of the Closing Date:

Section 3.1          Organization, Good Standing. The Buyer is duly organized, validly existing and in good standing under the laws of the Republic of the Marshall Islands, and has all corporate power and authority to own, lease, operate and hold its properties and assets and to conduct its business as is now conducted and as currently contemplated to be conducted, and is authorized to do business in all jurisdictions material to the conduct of its business.
Section 3.2          Authority and Enforceability. The Buyer has the full legal right and requisite corporate power and authority and has taken all action necessary in order to execute, deliver and perform fully its obligations under this Agreement and to consummate the transactions contemplated herein. This Agreement has been duly and validly authorized, executed and delivered by the Buyer and constitutes the valid and binding obligation of the Buyer, enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defense.
Section 3.3          Consents and Approvals; No Violation. Neither the execution and delivery of this Agreement by the Buyer nor the consummation of the transactions contemplated by this Agreement will (i) conflict with or result in any breach of any provision of the Buyer's Constitutional Documents; (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Body, other than those that have been made or obtained; (iii) cause the Buyer to violate or contravene any provision of law, any rule or regulation of any Governmental Body, or any order, writ, judgment, injunction, decree, determination or award, binding upon or applicable to the Buyer or its assets; (iv) result in a default (or give rise to any right of amendment, termination, cancellation, consent, acceleration or loss of a material benefit) under the terms, conditions or provisions of any Contract to which the Buyer or any of its assets may be bound, except in such cases where the requisite waivers or consents have been obtained; or (v) result in the creation of any Lien upon any of the properties or assets of the Buyer under the terms, conditions or provisions of any Contract, instrument or other obligation to which the Buyer or any of its assets may be bound or affected.
Section 3.4          No Litigation. There is no action, suit, claim, investigation, litigation, legal, administrative, arbitration or other proceeding pending against the Buyer other than publicly disclosed or, to the knowledge of the Buyer, threatened against the Buyer, nor is the Buyer subject to or bound by any outstanding orders, judgments, injunctions, awards or decrees of any Governmental Body, other than publicly disclosed, which questions the validity of this Agreement or any of the transactions contemplated hereby or any action taken or to be taken pursuant hereto or which seeks to prohibit, enjoin or otherwise challenge any of the transactions contemplated hereby.
Section 3.5          No Registration. The Investment Shares purchased by the Buyer pursuant to this Agreement are being acquired for investment purposes only and not with a view to any public distribution thereof in violation of any securities laws, and the Buyer shall not offer to sell or otherwise dispose of the Investment Shares so acquired by it in violation of any of the registration requirements of the Securities Act. The Buyer acknowledges that it is able to fend for itself, can bear the economic risk of its investment in the Investment Shares, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in all of the Investment Shares. The Buyer understands that, when issued to the Buyer at the Closing, none of the Investment Shares will be registered pursuant to the Securities Act and that all of the Investment Shares will constitute "restricted securities" under the federal securities laws of the United States. Each certificate for Investment Shares shall bear the following legend:
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"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND COMPLIANCE WITH SUCH STATE LAWS OR (II) AN APPLICABLE EXEMPTION THEREFROM AND AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED."
Section 3.6          Independent Investigation. The Buyer has had the opportunity to conduct to its own satisfaction independent investigation, review and analysis of the business, operations, assets, liabilities, results of operations, financial condition and prospects of the Company and, in making the determination to proceed with the transactions contemplated hereby, has relied solely on the results of its own independent investigation and the representations and warranties of the Seller set forth in Article II hereof and the other information provided by the Seller.
Section 3.7          No Brokers or Finders. No broker or finder has been engaged by the Buyer in connection with the transactions contemplated in this Agreement, and no commission, finder's fees or other similar compensation or remuneration is payable to any person as a result of the Buyer's actions in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated herein.
ARTICLE IV
COVENANTS
Section 4.1          Conduct of Business Pending Closing. The Buyer and the Seller agree that between the date of the execution of this Agreement and the Closing Date, (i) the Seller shall, or shall cause the Company to, conduct the business and maintain and preserve the assets of the Company in the ordinary course of business; (ii) the Buyer and the Seller shall use their reasonable efforts to cause all of the representations and warranties in Article II and Article III hereof, as applicable to such Party, to continue to be true and correct; and (iii) the Company shall not incur any debt, or enter into any other Contract, without the Buyer's prior written approval.
Section 4.2          Further Assurances. The Seller shall execute, acknowledge and deliver or cause to be executed, acknowledged and delivered to the Buyer such certificates, assignments or other instruments of ownership, transfer, assignment and conveyance, in form and substance reasonably satisfactory to Buyer, as shall be necessary to vest in the Buyer all of the right, title and interest in and to the Investment Shares undertaken to be sold to the Buyer by the Seller pursuant to this Agreement, free and clear of all Liens, debts, dues and duties of whatsoever nature, and any other document reasonably requested by the Buyer in connection with this Agreement.
Section 4.3          Governmental Filings. As promptly as practicable after the execution of this Agreement, each Party shall, in cooperation with the other, file any reports or notifications that may be required to be filed by it under applicable law, if any.
Section 4.4          Further Consents. After the Closing Date, the Seller shall obtain any consents or approvals or assist in any filings reasonably required in connection with the transactions contemplated hereby that are requested by Buyer and that have not been previously obtained or made.
Section 4.5          Public Announcements. Neither Party shall, without the prior approval of the other Party, issue, or permit any of its partners, stockholders, directors, officers, employees, members, managers, agents to issue, any press release or other public announcement with respect to this Agreement or the transactions contemplated hereby, except as may be required by law or any Governmental Body to which the relevant Party is accountable.
Section 4.6          Share Certificates of the Seller. The Seller covenants and agrees that, for so long as the Seller holds any shares of capital stock of the Company in bearer form, the Seller shall retain the share certificate evidencing such ownership in its sole possession.
ARTICLE V
CONDITIONS TO CLOSING
Section 5.1          Conditions to Obligations of Seller. At the Closing, the obligation of the Seller to sell the Investment Shares to the Buyer is subject to the fulfillment at the Closing of the following conditions:
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(a)          Accuracy of Buyer Representations and Warranties; Compliance. The representations and warranties of the Buyer contained in Article III of this Agreement shall be true and correct in all material respects at and as of the Closing Date as though then made, and Buyer shall have performed and complied in all material respects with all conditions and agreements required by this Agreement to be performed and complied with by it on or prior to the Closing Date.
(b)          Legal Investment. On the Closing Date, the purchase and sale of the Investment Shares shall be permitted by the laws and regulations of each relevant jurisdiction.
(c)          No Actions Pending. There shall be no suit, action, investigation, inquiry or other proceeding by any Governmental Body or other person or entity pending or threatened in writing that challenges, or has the effect of interfering with, the validity or legality of the transactions contemplated in this Agreement.
Section 5.2          Conditions to Obligations of Buyer. The obligation of the Buyer to purchase the Investment Shares from the Seller is subject to the fulfillment at the Closing of the following conditions:
(a)          Accuracy of Seller Representations and Warranties; Compliance. The representations and warranties of the Seller contained in Article II of this Agreement shall be true and correct in all material respects at and as of the Closing Date as though then made, and the Seller shall have performed and complied in all material respects, with all conditions and agreements required by this Agreement to be performed and complied with by it on or prior to the Closing Date.
(b)          Legal Investment. On the Closing Date, the purchase and sale of the Investment Shares shall be permitted by the laws and regulations of each relevant jurisdiction.
(c)          No Actions Pending. There shall be no suit, action, investigation, inquiry or other proceeding by any Gove mental Body or other person or entity pending or threatened in writing, other than publicly disclosed, that challenges, or has the effect of interfering with, the validity or legality of the transactions contemplated in this Agreement.
(d)          No Material Adverse Change. Between the date of the execution of this Agreement and the Closing Date, there shall not have been any material adverse change in the condition, financial or otherwise, or the business affairs or assets, of the Company.
ARTICLE VI
MISCELLANEOUS
Section 6.1          Termination. This Agreement may be terminated at any time prior to the Closing Date:
(a)          by the mutual written agreement of the Seller and the Buyer;
(b)          by the Buyer if any of the conditions set forth in Section 5.1 hereof shall have become incapable of fulfillment, by reason other than the Buyer's negligent or willful failure to perform or observe in any material respect any of the covenants or agreements set forth herein to be performed or observed by the Buyer, and such conditions shall not have been waived by the Buyer;
(c)          by the Seller if any of the conditions set forth in Section 5.2 hereof shall have become incapable of fulfillment, by reason other than the Seller's negligent or willful failure to perform or observe in any material respect any of the covenants or agreements set forth herein to be performed or observed by the Seller, and such conditions shall not have been waived by the Seller; or
(d)          by either Party by written notice thereof to the other Party, if the Closing contemplated hereby shall not have been consummated on or before January 31, 2020.
Section 6.2          No further Liability. Subject to Section 6.4, if this Agreement is terminated in accordance with Section 6.1 hereof, (i) neither Party shall have any further obligation or liability under this Agreement, other than by reason of a breach or default by a Party hereunder; and (ii) any monies, instruments or documents of any Party held in escrow or transferred to the other Party in connection with the transactions contemplated herein with respect to which the Closing shall not have occurred shall be immediately returned to such Party. For the avoidance of doubt, any such termination shall not have any effect whatsoever on any transactions contemplated herein with respect to which the Closing has occurred.
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Section 6.3          Indemnification. Each Party shall indemnify, defend and hold harmless the other Party, its managers, directors, officers, members, partners, shareholders, employees, attorneys, accountants, agents and representatives and their successors and assigns from and against all liabilities, losses, damages or expenses (including, without limitation, reasonable attorney's fees and disbursements) based upon or arising out of (i) any inaccuracy or breach of any representation or warranty of such indemnifying Party herein, and (ii) any breach of any covenant or agreement of such indemnifying Party herein.
Section 6.4          Survival. The representations, warranties, covenants and agreements of each of the Parties under this Agreement shall survive the Closing. Furthermore, Section 6.2 and Section 6.3 hereof shall survive the termination of this Agreement.
Section 6.5          Expenses. Each of the Parties agrees to pay its own expenses incident to this Agreement and the performance of its obligations hereunder, except as provided in Section 6.3.
Section 6.6          Assignment. This Agreement shall be binding on and inure to the benefit of the Parties hereto and their respective successors and permitted assigns, provided, however, that a party may not assign this Agreement without the prior written consent of the other party.
Section 6.7          Notices. Any notice, request, instruction or other document to be given hereunder by any Party to the other shall be in writing and delivered by hand or by an courier service or shall be sent by facsimile or electronic mail to the address for such Party set forth below:
If to the Seller:
Hollywood Hills Inc.
1 Vas. Sofias and Meg. Alexandrou St
15124 Maroussi, Greece
Facsimile: +302108128320
Email: louka@loukapartners.com
   
If to the Buyer:
Top Ships Inc.
c/o Top Ships Inc.
1 Vas. Sofias-and Meg Alexandrou Str
15124 Maroussi, Greece
Attention: Alexandros Tsirikos
Facsimile: +30210 8056441
Email: atsirikos@topships.org
   
With a copy (which shall not
constitute notice) to:
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
Attention: Gary J. Wolfe, Esq.
Facsimile: (212) 901-2110
Email: wolfe@sewkis.com

or to such other place and with such other copies as either Party may designate as to itself by written notice to the other. All such notices, requests, instructions or other documents shall be deemed to have been delivered (i) in the case of personal delivery or delivery by courier, on the date of such delivery, (ii) in the case of delivery by facsimile transmission or electronic mail, when receipt is acknowledged and (iii) in the case of mailing, on the third business day after the posting thereof. Whenever any notice is required to be given by law or this Agreement, a written waiver thereof signed by the Party entitled to such notice, whether before or after the time stated at which such notice is required to be given, shall be deemed equivalent to the giving of such notice.
Section 6.8          Entire Agreement; Amendments and Waivers. This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties. No supplement, modification, amendment or waiver of this Agreement shall be binding unless executed in writing by each Party to the Agreement. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.
Section 6.9          Headings. Headings contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provision hereof.
7

Section 6.10          Further Assurances. From and after the Closing, upon the request of a Party, the other Party will execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.
Section 6.11          Choice of Law. This Agreement shall be construed and interpreted, and the rights of the Parties determined, in accordance with the laws of the State of New York, without regard to principles of conflicts of law.
Section 6.12          Jurisdiction. Each of the Seller and the Buyer (i) irrevocably submits to the co-exclusive jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in New York County for the purposes of any suit, action or proceeding arising out of or relating to this Agreement and (ii) waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceedings in improper.  Each of the Seller and the Buyer consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such Party at the address set forth in Section 6.7 and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 6.12 shall affect or limit any right to serve process in any other manner permitted by law.
Section 6.13          WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN.
Section 6.14          Remedies. In addition to any remedies either Party may have in law, each Party shall be entitled to apply to any court of competent jurisdiction (without posting bond or other security) to enjoin any actual or threatened breach or default under this Agreement and shall also be entitled to seek specific performance of this Agreement. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any Party at law or in equity or otherwise.
Section 6.15          Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.
Section 6.16          No Third Party Beneficiary Rights. No provisions of this Agreement are intended, nor will be interpreted, to provide or create any third party beneficiary rights or other rights of any kind in any client, customer, affiliate, stockholder, member, or partner of any Party hereto or any other person or entity unless specifically provided otherwise herein, and, except as so provided, all provisions hereof will be personal solely between the Parties hereto.
Section 6.17          Counterparts. This Agreement may be executed in two or more counterparts, and all such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. Facsimile or portable document format (PDF) signatures shall be treated as original signatures for all purposes hereunder.
(Signature Page Follows)
8

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first written above.
 
BUYER:
   
 
TOP SHIPS INC
   
 
By:
 
 
Name:
Alexander Tsirikos
 
Title:
Director
     
     
     
 
SELLER
   
 
HOLLYWOOD HILLS INC.
     
 
By:
 
 
Name:
Dimosthenis Eleftheriadis
 
Title:
Director
     
     


(Signature Page to Share Purchase Agreement)


Schedule A

[Bank Accounts of the Company]



SCHEDULE 2.6

1.          Shipbuilding Contract with Hyundai Mipo dated December 3, 2018 by and among the Company and Hyundai Mipo Dockyard Co. Ltd., for the construction of the vessel (the “Shipbuilding Contract”); and

2.          Shell Time 4 time charter party, dated January 14, 2019, with contract with Trafigura Maritime Logistics Pte Ltd. 4 of Singapore (the “Time Charter”).

Exhibit 4.51






























Additional Clauses to
Bareboat Charter Party dated                                              2019
between
ORIENTAL FLEET TANKER 12 LIMITED
(东方富利 TANKER12 有限公司)
as owners
and
MONTE CARLO 71 SHIPPING COMPANY LIMITED
as charterers
in respect of
one (1) d/w 50,000 product oil/chemical tanker
named "STENAWECO ENERGY"
with IMO No. 9683984

H O N G K O N G




Contents

32.
Definitions
1
33.
Charter Period
21
34.
Cancellation
21
35.
Conditions Precedent and Conditions Subsequent
22
36.
Delivery
23
37.
Charterhire
24
38.
Possession of Vessel
29
39.
Insurance
29
40.
Termination and Redelivery; War; Total Loss
36
41.
Fees and Expenses; Indemnities;
42
42.
No Waiver of Rights
44
43.
Mortgage and assignment
44
44.
Notices
45
45.
Termination Events
46
46.
Representations and Warranties
50
47.
Charterers' undertakings
53
48.
Purchase Option
59
49.
Purchase Obligation
61
50.
Sale of the Vessel by Purchase Option and Purchase Obligation
61
51.
No Set-off or Tax deduction; FATCA Provisions
63
52.
Increased Costs
65
53.
Governing Law and Jurisdiction
66
54.
Miscellaneous
67
Execution page
68
Schedule 1 : Certificate of Delivery and Acceptance
70
Schedule 2 : Charterhire Schedule
71
Schedule 3 : Collateral Owners, Collateral Charterers and Collateral Vessels
92


i

32.
DEFINITIONS
32.1
In this Charter the following terms shall have the meanings ascribed to them below:
Account Bank means Alpha Bank AE or any other bank or financial institution reasonably acceptable to the Security Trustee with which the Earnings Account is at any time held.
Account Pledge means the pledge over Earnings Account (ΕΝΕΧΥΡΟ ΕΠΙΛΟΓΑΡΙΑΣΜΟΥ ΕΣΟΔΩΝ (ENEXYRO EPI LOGARIASMOU ESODON)) executed or to be executed by the Charterers and the Owners and the Collateral Owners in the agreed form.
Addendum No.1 means an addendum no.1 to the MOA dated on or about the date thereof between the Charterers as sellers and the Owners as buyers.
Affiliate means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.
Approved Commercial Managers means Central Shipping and/or any other first class reputable ship management company acceptable to the Security Trustee who may be appointed as commercial manager of the Vessel.
Approved Managers means together, the Approved Commercial Managers and the Approved Technical Managers.
Approved Technical Managers means Central Shipping, Central Mare and/or any other first class reputable ship management company acceptable to the Security Trustee who may be appointed as technical manager of the Vessel.
Approved Valuer means Clarksons Platou, Braemar, Arrow, Howe Robinson, Maersk or any other firm or firms of independent sale and purchase shipbroker proposed by the Charterers and agreed by the Owners.
Assigned Property has the meaning given to that term in the Charterer's Assignment.
Authorisation means:

(a)
an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation, lodgement or registration; or

(b)
in relation to anything which will be fully or partly prohibited or restricted by law if a Governmental Agency intervenes or acts in any way within a specified period after lodgement, filing, registration or notification, the expiry of that period without intervention or action.
Balloon Payment means the balloon payment in the amount of which is 20% of the MOA Purchase Price, being the amount payable by the Charterers to the Owners on the last Payment Date.
Banking Day has the meaning given to that term in the MOA.
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Breakfunding Costs means all breakfunding costs and expenses incurred or payable by the Owners when a repayment or prepayment under the relevant funding arrangement entered into by the Owners for the purpose of financing and/or refinancing the Financing Principal do not fall on a Payment Date (excluding any costs incurred in unwinding any associated interest rate or currency swaps or currency futures transactions entered into by the Owners).
Business Day means a day (other than a Saturday or Sunday):

(a)
in relation to the definition of Quotation Day and to any day on which LIBOR is to be determined, on which banks and the relevant financial markets are open for general business in London;

(b)
in relation to any date for payment of amounts under the Transaction Documents, on which banks and the relevant financial markets are open for general business in Hong Kong, London, Shanghai, Piraeus and the principal financial centre of the country of the currency of payment; and

(c)
in relation to any other matter, on which banks are open for general business in Hong Kong, Shanghai and Piraeus.
Business Ethics Law means any laws, regulations and/or other legally binding requirements or determinations in relation to bribery, corruption, fraud, money-laundering, terrorism, collusion bid-rigging or anti-trust, human rights violations) (including forced labour and human trafficking) which are applicable to either Party or any other Security Party or to any jurisdiction where activities are performed and which shall include: (a) the United Kingdom Bribery Act 2010; and (b) the United States Foreign Corrupt Practices Act 1977.
Call Option Agreement means the call option agreement dated 30 December 2014 made between the Original Sellers (as owners) and the Charterers (as option holder) pursuant to the Existing Charter, as may be supplemented, amended or otherwise modified from time to time (including all side letters and other agreements relating thereto).
Cancelling Date means 15 December 2019 (or such later date as may be agreed by the Charterers and the Owners).
Central Mare means Central Mare Inc., a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 32656.
Central Shipping means Central Shipping Inc., a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 98339.
Certificate of Delivery and Acceptance means a certificate substantially in the form set out in Schedule 1 to be signed by the Owners and the Charterers upon Delivery.
Change of Control occurs when, at any time, without the prior written consent of the Owners:

(a)
the Guarantor ceases to control the Charterers; or
2


(b)
the Substantial Shareholder ceases to control the Guarantor or the Charterers,
and for the purpose of this Charter and the other Transaction Documents, control of one person (the first person) by another person (the second person) or the first person being controlled by the second person means that the second person (whether directly or indirectly and whether by the ownership of share capital, the possession of voting power, contract or otherwise) has the power to appoint and/or remove all or a majority of the members of the board of directors or other governing body of the first person or otherwise controls or has the power of control over the affairs and policies of the first person.
Charterer's Assignment means the charterer's assignment executed or to be executed by the Charterers and the Security Trustee in respect of the Vessel, pursuant to which the Charterers shall, inter alia, assign their rights under the Assigned Property in favour of the Security Trustee in the agreed form.
Charterhire means:

(a)
in respect of the Commencement Date, the Upfront Charterhire;

(b)
in respect of a Payment Date, the aggregate of the amount of (i) the Fixed Charterhire and (ii) the Variable Charterhire, payable under this Charter on that Payment Date; and

(c)
in respect of the last Payment Date, the aggregate of the amount of (i) the Balloon Payment, (ii) the Fixed Charterhire and (iii) the Variable Charterhire, payable under this Charter on that Payment Date.
Charterhire Principal means the amount, at any point in time, calculated as the aggregate outstanding amount of the Fixed Charterhire and the Balloon Payment, less any payment of the Fixed Charterhire and the Balloon Payment received by the Owners under this Charter, as more particularly set out in the column entitled "Charterhire Principal" in the Charterhire Schedule, as the same may from time to time be adjusted in accordance with this Charter.
Charterhire Schedule means the charterhire schedule set out in Schedule 2 (as the same may from time to time be amended or replaced including without limitation by each Revised Charterhire Schedule).
Charter Period means the period commencing on the Commencement Date and described in Clause 33.3 unless terminated earlier in accordance with the provisions of this Charter.
Classification Society means DNV-GL or such other first class international classification society being a member of International Association of Classification Society approved in writing by the Owners and their financiers (if any).
Code means the US Internal Revenue Code of 1986, as amended from time to time.
Collateral Charter means, in relation to each Collateral Vessel, the bareboat charterparty in respect of that Collateral Vessel entered or to be entered into between the relevant Collateral Owner (as owners) and the Collateral Charterer (as charterers),
3

as may be supplemented, amended or otherwise modified from time to time (including all side letters and other agreements relating thereto), and Collateral Charters means both of them.
Collateral Charterers means together, the collateral charterers described in Schedule 3, and Collateral Charterer means either of them.
Collateral Owners means together, the collateral owners described in Schedule 3, and Collateral Owner means either of them.
Collateral Security Parties means together, in relation to each Collateral Vessel, the parties defined as Collateral Security Parties under the relevant Collateral Charter, and Collateral Security Party means any of them.
Collateral Security Documents means together, in relation to each Collateral Vessel, the documents defined as Security Documents under the relevant Collateral Charter, and Collateral Security Document means any of them.
Collateral Transaction Documents means together, in relation to each Collateral Vessel, the relevant Collateral Charter, the relevant Collateral Security Documents and any other documents defined as a Transaction Document under that Collateral Charter, and Collateral Transaction Document means any of them.
Collateral Vessels means together, the vessels described in Schedule 3, and Collateral Vessel means either of them.
Commencement Date means the date on which Delivery takes place.
Creditor Parties means together, the Owners, the Collateral Owners and the Security Trustee, and Creditor Party means any of them.
Deed of Charge means the deed of charge over the shares in the Charterers granted by the Guarantor in favour of the Security Trustee in such form as may be acceptable to the Security Trustee.
Default Rate means the percentage sum of the Interest Rate plus two per cent. (2%) per annum.
Delivery means the delivery of the Vessel from the Owners to the Charterers pursuant to this Charter on the Commencement Date.
Dollars, $ and US$ mean the lawful currency for the time being of the US.
Earnings means all moneys whatsoever which are now, or later become, due or payable to the Charterers and which arise out of the use or operation of the Vessel, including:

(a)
all freight, hire and passage moneys, compensation payable in the event of requisition of the Vessel for hire, remuneration for salvage and towage services, demurrage and detention moneys and damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Vessel;
4


(b)
if and whenever the Vessel is employed on terms whereby any moneys falling within paragraph (a) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Vessel; and

(c)
all other payments or proceeds of any kind whatsoever relating to the Vessel as would be deemed "earnings" under GAAP or other applicable accounting principles.
Earnings Account means an account in the name of the Charterers with the Account Bank as follows:

Beneficiary Bank:
Alpha Bank AE
 
Shipping Finance Division
 
93, Akti Miaouli
 
185-38 Piraeus Greece
Swift Code:
CRBAGRAAXXX
Beneficiary Name:
Monte Carlo 71 Shipping Company Limited
Account Number:
960 01 5006 026516
IBAN:
GR21 0140 9600 9600 1500 6026 516

or such other account (with the Account Bank or another office of the Account Bank) as the Security Trustee may from time to time designate and into which all Earnings shall be paid for the purpose of this Charter and the Charterer's Assignment.
Environmental Claim means:

(a)
any claim which relates to the Vessel or its passengers or cargo from time to time 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 in relation to the Vessel or its passengers or cargo from time to time which relates to an Environmental Incident or an alleged Environmental Incident,
and claim means a claim for damages, compensation, fines, penalties or any other payment; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.
Environmental Incident means:

(a)
any release of Environmentally Sensitive Material from the Vessel;

(b)
any incident in which Environmentally Sensitive Material is released from a vessel other than the Vessel and which involves a collision between the Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Vessel is actually liable to be arrested, attached, detained or injuncted and/or the Vessel and/or the Owners and/or the Charterers and/or any other operator or manager of the Vessel is at fault or otherwise liable to any legal or administrative action; or
5


(c)
any other incident involving the Vessel in which Environmentally Sensitive Material is released otherwise than from the Vessel and in connection with which the Vessel is actually arrested and/or where the Owners and/or the Charterers and/or any other operator or manager of the Vessel is at fault or otherwise liable to any legal or administrative action.
Environmental Law means any law relating to pollution or protection of the environment, to the carriage or actual or threatened releases of Environmentally Sensitive Material.
Environmentally Sensitive Material means oil, oil products and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous.
Existing Charter means a bareboat charter dated 30 December 2014 made between the Original Sellers (as owners) and the Charterers (as charterers), together with all supplements and amendments to it.
Existing Mortgage means the first preferred Marshall Islands ship mortgage dated 29 January 2015 and executed by the Original Sellers (as owner) in favour of the Existing Mortgagee, together with all supplements and amendments to it.
Existing Mortgagee means CIT Finance LLC.
Existing Security Documents means collectively:

(a)
in relation to the Existing Mortgagee:

(i)
the Existing Mortgage;

(ii)
the manager's undertaking dated 29 January 2015 and made between Central Shipping Monaco SAM in favour of the Existing Mortgagee;

(iii)
the manager's undertaking dated 29 January 2015 and made between Central Mare in favour of the Existing Mortgagee; and

(iv)
the manager's undertaking dated 29 January 2015 and made between Epsilon Hellas (Overseas) Ltd. in favour of the Existing Mortgagee; and

(b)
in relation to the Original Sellers:

(i)
the Existing Charter;

(ii)
the general assignment dated 29 January 2015 and made between the Charterers (as assignor) and the Original Sellers (as assignee);

(iii)
the pledge of share certificate dated 29 January 2015 and made between the Guarantor (as pledgor) and the Original Sellers (as pledgee);
6


(iv)
the charterparty assignment dated 29 January 2015 and made between the Charterers (as charterer) and the Original Sellers (as owner);

(v)
the manager's undertaking dated 29 January 2015 and executed by Central Shipping Monaco SAM in favour of the Original Sellers;

(vi)
the manager's undertaking dated 29 January 2015 and executed by Central Mare in favour of the Original Sellers; and

(vii)
the manager's undertaking dated 29 January 2015 and made between Epsilon Hellas (Overseas) Ltd. in favour of the Original Sellers,
and in each case, together with all supplements and amendments to it.
FATCA means:

(a)
sections 1471 to 1474 of the Code or any associated regulations;

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

(c)
any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraph (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 this Charter or the Transaction Documents required by or under FATCA.
FATCA Exempt Party means a Relevant Party that it is entitled under FATCA to receive payments free from any FATCA Deduction.
FATCA FFI means a foreign financial institution as defined in section 1471(d)(4) of the Code which, if a Relevant Party is not a FATCA Exempt Party, could be required to make a FATCA Deduction.
FATCA Non-Exempt Party means any Relevant Party who is not a FATCA Exempt Party.
FATCA Payment means the increase in a payment made by a Security Party to the Owners under Clause 51.2.2.
Fee Letter means the fee letter dated on or about the date hereof setting out the Handling Fee payable by the Charterers to the Owners.
Finance Party Quiet Enjoyment Letter means, if requested by the Sub-Charterer, a quiet enjoyment letter in relation to the Vessel issued or to be issued the Mortgagee in favour of the Sub-Charterer and acknowledged by the Owners, the Charterers and the Sub-Charterer in form and substance acceptable to the Mortgagee, the Owners, the Charterers and the Sub-Charterer.
7

Financial Indebtedness means, in relation to a person (the debtor), a liability of the debtor (whether present or future, actual or contingent):

(a)
moneys borrowed;

(b)
any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;

(c)
any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d)
the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with GAAP as at the date of this Agreement, be treated as a balance sheet liability (other than any liability in respect of a lease or hire purchase contract which would, in accordance with GAAP in force prior to 1 January 2019, have been treated as an operating lease);

(e)
receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

(f)
any amount raised under any other transaction (including any forward sale or purchase agreement) of a type not referred to in any other paragraph of this definition having the commercial effect of a borrowing;

(g)
any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that derivative transaction, that amount) shall be taken into account);

(h)
any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

(i)
the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (h) above.
Financial Instruments means any mortgage, deed of covenants, the general assignment or such other financial security instruments granted to the Owners' financiers as security for the obligations of the Owners in relation to financing and/or refinancing the acquisition of the Vessel.
Financing Principal means the amount which is the lower of US$21,375,000 and 75% of the MOA Purchase Price, as the same may from time to time be adjusted in accordance with this Charter.
First MOA means the memorandum of agreement for sale and purchase of the Vessel made or to be made between the Original Sellers (as sellers) and the Charterers (as buyers) pursuant to the Call Option Agreement, as may be supplemented, amended or otherwise modified from time to time (including all side letters and other agreements relating thereto).
8

Fixed Charterhire means, on each Payment Date, the corresponding monthly instalment as set out in the column entitled "Fixed Charterhire" in Schedule 2, as the same may from time to time be adjusted in accordance with this Charter.
GAAP means, in relation to each of the Charterers and the Guarantor, generally accepted accounting principles, standards and practices in the US.
Governmental Agency means any government or any governmental agency, semi-governmental or judicial entity or authority (including any stock exchange or any self-regulatory organisation established under statute).
Group means the Guarantor and its Subsidiaries.
Guarantee means the guarantee executed by the Guarantor in favour of the Owners on or about the date hereof guaranteeing inter alia the obligations of the Charterers under this Charter.
Guarantor means Top Ships Inc., a corporation incorporated in the Republic of the Marshall Islands with registration no. 3571.
Handling Fee means an irrevocable and non-refundable handling fee in the amount set out in the Fee Letter payable by the Charterers to the Owners in accordance with the Fee Letter.
Hire Calculation Period means the period of time commencing from the Commencement Date until the date that is the second (2nd) Payment Date and each period of one (1) month thereafter from the last day of the preceding Hire Calculation Period; provided that if a Hire Calculation Period would otherwise expire on a day which is beyond the last day of the Charter Period, that Hire Calculation Period shall be shortened to expire on the last day of the Charter Period.
Holding Company means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.
Hong Kong means the Hong Kong Special Administrative Region of the People's Republic of China.
Insurances means:

(a)
all policies and contracts of insurance, including entries of the Vessel in any protection and indemnity or war risks association, which are effected in respect of the Vessel or otherwise in relation to it whether before, on or after the date of this Charter; and

(b)
all rights, proceeds and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium and any rights in respect of any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Charter.
Interest Rate means the sum of LIBOR plus the Margin.
9

ISM Code means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation Assembly as Resolutions A.741 (18) and A.788 (19), as the same may be amended or supplemented from time to time (and the terms safety management system, Safety Management Certificate and Document of Compliance have the same meanings as are given to them in the ISM Code).
ISPS Code means the International Ship and Port Security Code as adopted by the Conference of Contracting Governments to the Safety of Life at Sea Convention 1974 on 13 December 2002 and incorporated as Chapter XI-2 of the Safety of Life at Sea Convention 1974, as the same may be supplemented or amended from time to time.
Legal Opinion means:

(a)
any legal opinion delivered pursuant to Clause 5 of Part B and Clause 2 of Part D of Addendum No.1; or

(b)
any legal opinion which the Creditor Parties may obtain or arrange with respect to the Charterers or any other Security Parties.
Legal Reservations means:

(a)
the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors;

(b)
the time barring of claims under the Limitation Act (1980) and the Foreign Limitation Periods Act 1984, the possibility that an undertaking to assume liability for, or indemnify a person against, non-payment of any stamp duty may be void or the defences of set-off or counter-claim;

(c)
similar principles, rights and defences under the laws of any Relevant Jurisdiction; and
any reservations or qualifications as to matters of law (but excluding at all times any reservations or qualifications as to matters of fact) referred to in any Legal Opinion.
LIBOR means:

(a)
the applicable Screen Rate as of 11:00 a.m. (London time) on the Quotation Day for Dollars and for a period of three (3) months; or

(b)
as otherwise determined pursuant to Clause 37.8.
Major Casualty means any casualty to the Vessel in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds US$1,000,000 or the equivalent in any other currency.
Management Agreements means together:
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(a)
in relation to commercial, technical and crew management of the Vessel, the ship management agreement dated 1 January 2019 and made between the Charterers and Central Shipping; and

(b)
in relation to the technical management of the Vessel, the sub-management agreement dated 1 January 2019 and made between Central Shipping and Central Mare,
together with all supplements and amendments to them.
Manager's Undertakings means the letters of undertaking executed by the Approved Managers and any other named assured or co-assured of the Vessel in favour of the Security Trustee subordinating their respective rights against the Vessel and the Charterers to the rights of the Creditor Parties and their financiers (if any) in an agreed form.
Margin means 3.9% per annum.
Market Disruption Event means:

(a)
at or about noon (London time) on the Quotation Day for the relevant Hire Calculation Period the relevant Screen Rate is not available and none or only one of leading banks in the London interbank market supplies a rate to the Owners to determine LIBOR for dollars for the relevant Hire Calculation Period; or

(b)
before close of business in Hong Kong on the Quotation Day for the relevant Hire Calculation Period, the cost to the Owners of funding the Charterhire Principal from whatever source it may select would be in excess of LIBOR.
Market Value means, in relation to the Vessel, at a relevant date, one (1) valuation obtained by the Charterers (or failing which obtained by the Owners) and prepared:

(a)
on a date no earlier than thirty (30) days prior to the relevant date;

(b)
by one (1) Approved Valuer;

(c)
with or without physical inspection of the Vessel;

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

(e)
if a range of valuation is given by the Approved Valuer, the lower end of the range shall apply,
with the expenses of all such valuations being borne by the Charterers.
Market Value at Closing means, in relation to the Vessel, on the MOA Delivery Date, the arithmetic average of two (2) valuations obtained by the Owners and prepared:

(a)
on a date no earlier than fifteen (15) days prior to the MOA Delivery Date;
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(b)
by two (2) Approved Valuers respectively, one (1) appointed by the Owners and one (1) appointed by the Charterers;

(c)
with or without physical inspection of the Vessel;

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

(e)
if a range of valuation is given by an Approved Valuer, the lower end of the range shall apply for that Approved Valuer,
with the expenses of all such valuations being borne by the Charterers.
MARPOL Protocol means Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as amended in 1978 and 1997).
Material Adverse Effect means, in the reasonable opinion of the Owners, a material adverse effect on:

(a)
the business, operations, property, condition (financial or otherwise) or prospects of the Charterers or any other Security Party;

(b)
the ability of the Charterers or any other Security Party to perform its material obligations under any Transaction Document to which it is a party;

(c)
the validity, legality or enforceability of any Transaction Document or the rights or remedies of the Owners or any other Creditor Party under any of the Transaction Documents; or

(d)
the validity, legality or enforceability of, or the effectiveness or priority and ranking of any Security Interests granted pursuant to any of the Security Documents.
MOA means the memorandum of agreement dated on or about the date hereof as supplemented by Addendum No.1 between the Charterers as sellers and the Owners as buyers in relation to the sale and purchase of the Vessel, as may be supplemented, amended or otherwise modified from time to time (including all side letters and other agreements relating thereto).
MOA Delivery means the actual delivery of the Vessel by the Charterers as sellers to and the actual acceptance of the Vessel by the Owners as buyers under and in accordance with the provisions of the MOA.
MOA Delivery Date means the date of MOA Delivery.
MOA PDA means the protocol of delivery and acceptance to be executed and delivered by the Charterers as sellers and the Owners as buyers pursuant to the MOA.
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MOA Purchase Price means the amount which is the lower of US$28,500,000 and the Market Value at Closing of the Vessel, being the purchase price of the Vessel paid by the Owners (as buyers) to the Charterers (as sellers) under the MOA.
Mortgagee has the meaning given to that term in Clause 43.1.
Net Average Market Value has the meaning given to that term in Clause 40.6(a).
Net Sale Proceeds has the meaning given to that term in Clause 40.6(b)(i).
Original Financial Statements means, in relation to the Guarantor, the audited consolidated financial statements of the Group for the financial year ended 31 December 2018.
Original Sellers means ECO Energy LLC, a limited liability company incorporated in the Republic of the Marshall Islands.
Owners Account means an account of the Owners with Bank of China (Hong Kong) Limited or such other account as the Owners may from time to time designate and notified to the Charterer and into which all Charterhire and all other sums payable under this Charter by the Charterers to the Owners shall be paid in accordance with this Charter.
Owners Quiet Enjoyment Letter means, if requested by the Sub-Charterer, a quiet enjoyment letter in relation to the Vessel issued or to be issued by the Owners in favour of the Sub-Charterer and acknowledged by the Charterers and the Sub-Charterer in form and substance acceptable to the Owners, the Charterers and the Sub-Charterer.
Parties means together, the Owners and the Charterers.
Payment Date means each of the Commencement Date, the date falling on the 10th day of the month falling immediately after the Commencement Date and the dates falling on the 10th day of each month commencing thereafter and (in the case of the last Payment Date) the date on which (i) the Balloon Payment, the last instalment of the Fixed Charterhire and the last instalment of the Variable Charterhire are to be paid by the Charterers to the Owners pursuant to Clause 37.2(b) and (ii) the Purchase Obligation Price is to be paid by the Charterers to the Owners pursuant to Clause 49.
Permitted Security Interests means:

(a)
Security Interests created by a Transaction Document or a Financial Instrument;

(b)
prior to Delivery, Security Interests created by the Existing Security Documents;

(c)
liens for unpaid master's and crew's wages in accordance with the ordinary course of operation of the Vessel or in accordance with usual reputable maritime practice;

(d)
liens for salvage;
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(e)
liens for master's disbursements incurred in the ordinary course of trading;

(f)
any other liens arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel where the Charterers are contesting the claim giving rise to such lien in good faith by appropriate steps and for the payment of which adequate reserves have been made in case the Charterers finally have to pay such claim so long as any such proceedings shall not, and may reasonably be considered unlikely to, lead to the arrest, sale, forfeiture or loss of the Vessel or any interest in the Vessel;

(g)
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 Charterers are prosecuting or defending such action in good faith by appropriate steps;

(h)
Security Interests arising by operation of law in respect of taxes which are not overdue or for payment of taxes which are overdue for payment but which are being contested by the Charterers in good faith by appropriate steps and in respect of which adequate reserves have been made; and

(i)
such other Security Interests as permitted in writing by the Owners and/or the Security Trustee.
Purchase Obligation means the purchase obligation imposed on the Charterers by the Owners pursuant to Clause 49.
Purchase Obligation Date means the date on which the Owners shall transfer the legal and beneficial interest in the Vessel to the Charterers, and the Charterers shall purchase the Vessel, being the last day of the Charter Period which is also the last Payment Date.
Purchase Obligation Price means the relevant price payable under this Charter in the amount of US$1 and payable under Clause 49.
Purchase Option means the purchase option granted by the Owners to the Charterers pursuant to Clause 48.1.
Purchase Option Date means the date specified in the Purchase Option Notice as being the date on which the Owners shall sell and transfer the legal and beneficial interest in the Vessel to the Charterers, and the Charterers shall purchase and accept the same.
Purchase Option Notice means the notice given pursuant to Clause 48.3 and containing the details specified in Clause 48.5.
Purchase Option Price means the relevant price payable under this Charter in US$ in the amount set out in Clause 48.4, as the same may from time to time be adjusted in accordance with this Charter.
Quotation Day means:
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(a)
in relation to the first Hire Calculation Period for which the Interest Rate for that Hire Calculation Period is to be determined, five (5) Business Days before the first day of that period; and

(b)
in relation to any other period for which an Interest Rate is to be determined, fourteen (14) Business Days before the first day of that period (or such later date as the Owners may agree),
and in each case, unless market practice differs in the London interbank market for that currency, in which case the Quotation Day for that currency will be determined by the Owners in accordance with market practice in the London interbank market (and if quotations would normally be given on more than one day, the Quotation Day will be the last of those days).
Relevant Jurisdictions means together, in relation to a Security Party:

(a)
its jurisdiction of incorporation;

(b)
any jurisdiction where any property owned by it and charged under a Transaction Document is situated;

(c)
any jurisdiction where it conducts its business; and

(d)
any jurisdiction whose laws govern the perfection of any of the Transaction Documents entered into by it creating a Security Interest,
and Relevant Jurisdiction means any of them.
Relevant Party means any of the parties to this Charter and the Transaction Documents.
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.
Restricted Countries means those countries subject to country-wide or territory-wide Sanctions and/or trade embargoes, in particular but not limited to pursuant to the US's Office of Foreign Asset Control of the US Department of Treasury (OFAC).
Restricted Person means a person, entity or any other parties (i) located, domiciled, resident or incorporated in Restricted Countries, and/or (ii) subject to any sanction administrated by the United Nations, the European Union, the US and the US Department of Treasury's Office of Foreign Assets Control (OFAC), the United Kingdom, Her Majesty's Treasury (HMT) and the Foreign and Commonwealth Office of the United Kingdom, the People's Republic of China and/or (iii) owned or controlled by or affiliated with persons, entities or any other parties as referred to in (i) and (ii).
Sanctions means any sanctions, embargoes, freezing provisions, prohibitions or other restrictions relating to trading, doing business, investment, exporting, financing or making assets available (or other activities similar to or connected with any of the foregoing) imposed by law or regulation of the United Nations, the United Kingdom,
15

the US (including, without limitation, OFAC), the People's Republic of China or the Council of the European Union.
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 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 Owners may specify another page or service displaying the relevant rate after consultation with the Charterers.
Security Documents means the Guarantee, the Charterer's Assignment, the Account Pledge, the Deed of Charge, the Manager's Undertakings, the Trust Deed, the Collateral Security Documents of both Collateral Vessels and any other security documents granted as security for the obligations of the Charterers under or in connection with this Charter.
Security Interest means a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
Security Parties means together:

(a)
the Charterers, the Guarantor, the Approved Managers and any party providing security to the Owners and/or the Security Trustee for the Charterers' obligations under this Charter pursuant to a Security Document; and

(b)
the Collateral Security Parties of both Collateral Vessels,
and Security Party means any of them.
Security Perfection Requirements means:

(a)
delivery of the original share certificates for the shares held by the Guarantor in the Company and the ancillary documents to be delivered under the Deed of Charge;

(b)
service by the Greek court bailiff of an original signed Account Pledge on the Account Bank and the Charterers;

(c)
execution of all notices, acknowledgments and consents as required under the Transaction Documents; and

(d)
any other Authorisations of the Transaction Documents as may be required or recommended in any Legal Opinion.
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Security Trustee means ORIENTAL FLEET TANKER 11 LIMITED (东 方富利 TANKER11 有限公司), a corporation incorporated in the Republic of the Marshall Islands with registration no. 101325.
Sub-Charter means the time charterparty dated 17 July 2014 as supplemented by an addendum no.2 dated 3 March 2015, an addendum no.3 dated 25 November 2016 and an addendum no.4 dated 28 December 2017 made between the Charterers and Stena Bulk A/S (CVR no. 33396953) (previously Stena Weco A/S) or any contract of affreightment, or any demise charterparty, or any other time or voyage charterparty exceeding eighteen (18) months' duration (whether by virtue of any optional extensions or otherwise) entered into between the Charterers and a Sub-Charterer for the chartering of the Vessel by the Charterers to such Sub-Charterer during the Charter Period, as the same may at any time be supplemented, amended or extended.
Sub-Charterer means Stena Bulk A/S (CVR no. 33396953) (previously Stena Weco A/S) or any other person entering into a contract of affreightment, or any demise charterparty, or any time or voyage charterparty exceeding eighteen (18) months' duration (whether by virtue of any optional extensions or otherwise) with the Charterers for the chartering of the Vessel by the Charterers to such person.
Subsidiary means in relation to any company or corporation, a company or corporation:

(a)
which is controlled, directly or indirectly, by the first mentioned company or corporation;

(b)
more than half the issued equity share capital of which is beneficially owned, directly or indirectly, by the first mentioned company or corporation; or

(c)
which is a Subsidiary of another Subsidiary of the first mentioned company or corporation,
and for this purpose, a company or corporation shall be treated as being controlled by another if that other company or corporation is able to direct its affairs and/or to control the composition of its board of directors or equivalent body.
Substantial Shareholder means The Lax Trust of Level 3, 18 Stanley Street, Auckland 1010, New Zealand.
Surplus Retention Proceeds has the meaning given to that term in Clause 40.6(c)(i).
Surplus Sale Proceeds has the meaning given to that term in Clause 40.6(b)(iv).
Termination Event means any event described in Clause 45.
Termination Sum means, in respect of any date, the aggregate of:

(a)
the Purchase Option Price applicable on the relevant date as if that relevant date is a Purchase Option Date; and

(b)
(i) the Breakfunding Costs and (ii) any costs incurred and expenses incurred by the Owners and any other Creditor Parties (and their financiers (if any)) in
17

locating, repossessing or recovering the Vessel or collecting any payments due under this Charter or in obtaining the due performance of the obligations of the Charterers under this Charter or the other Transaction Documents and any default interest in relation thereto.
Total Loss means:

(a)
actual, constructive, compromised, agreed or arranged total loss of the Vessel;

(b)
any expropriation, requisition or acquisition of the Vessel, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration (excluding a requisition for hire); or

(c)
any arrest, capture, seizure, confiscation or detention of the Vessel (including any hijacking or theft but excluding any event specified in paragraph (b) of this definition), which is effected by any Governmental Agency or by any person or persons claiming to be or to represent a Governmental Agency or other persons unless it is redelivered within three (3) months to the full control of the Owners or the Charterers.
Transaction Documents means together, the Existing Charter, the Call Option Agreement, the First MOA, this Charter, the MOA, the Fee Letter, the Security Documents and the Collateral Transaction Documents, and Transaction Document means any of them.
Trust Deed means a trust deed executed by the Owners, the Collateral Owners, the Charterers, the Collateral Charterers, the Guarantor, Central Shipping, Central Mare and the Security Trustee on or about the date hereof pursuant to which the Security Trustee has agreed to declare that it holds the Trust Property (as defined therein) on trust for the benefit of the Creditor Parties.
Upfront Charterhire means the non-refundable upfront charterhire in the amount of which is the lower of US$7,125,000 and 25% of the MOA Purchase Price, being the excess amount of the MOA Purchase Price over the Financing Principal payable by the Charterers on the Commencement Date, which shall be deducted by the Owners from the MOA Purchase Price paid by the Owners (as buyers) to the Charterers (as sellers) under the MOA, as more particularly set out in the column entitled "Upfront Charterhire" in the Charterhire Schedule, as the same may from time to time be adjusted in accordance with this Charter.
US means the United States of America. US Tax Obligor means:

(a)
the Charterers, if they are resident for tax purposes in the US; or

(b)
any other Security Parties some or all of whose payments under the Transaction Documents are from sources within the US for US federal income tax purposes.
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Variable Charterhire means, on each Payment Date, an amount equal to interest accrued on such amount of Charterhire Principal at the Interest Rate during the relevant Hire Calculation Period, which in each case shall accrue and be calculated on the actual number of days such Charterhire Principal was outstanding during such period and on the basis of a year of three hundred and sixty (360) days.
32.2
In this Charter:

(a)
agreed form means, in relation to a document, such document in a form agreed in writing between (i) the Owners or the Security Trustee and (ii) the Charterers;

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

(c)
company includes any partnership, joint venture and unincorporated association;

(d)
consent includes an Authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalisation;

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

(f)
continuing means, in relation to any Termination Event, a Termination Event which has not been waived by the Owners or remedied to the satisfaction of the Owners;

(g)
document includes a deed; also a letter, fax or telex;

(h)
expense means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;

(i)
including shall be construed as including without limitation (and cognate expressions shall be construed similarly);

(j)
indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

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

(l)
legal or administrative action means any legal proceeding or arbitration and any administrative or regulatory action or investigation;

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

(n)
months shall be construed in accordance with Clause 32.3;
19


(o)
person includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium, partnership or other entity (whether or not having separate legal personality);

(p)
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;

(q)
protection and indemnity risks means the usual risks covered by the UK P&I Club or any other protection and indemnity association which is a member of the International Group of P&I Clubs acceptable to the Owners and the Security Trustee including pollution risks, extended passenger cover and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of Clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), Clause 8 of the Institute Time Clauses (Hulls)(1/10/83) or Clause 8 of the Institute Time clauses (Hulls) (1/11/1995) or the Institute Amended Running Down clause (1/10/71) or any equivalent provision;

(r)
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;

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

(t)
a provision of law is a reference to that provision as amended or re-enacted; and

(u)
a time of day is a reference to Hong Kong time.
32.3
Meaning of month
A period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(a)
(subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;

(b)
if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and

(c)
if a Hire Calculation Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Hire Calculation Period is to end.
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The above rules will only apply to the last month of any period.
32.4
In this Charter:

(a)
references to a Transaction Document or any other document being in the form of a particular appendix or to any document referred to in the recitals include references to that form with any modifications to that form which the Owners and/or the Security Trustee approve;

(b)
references to, or to a provision of, a Transaction Document or any other document are references to it as amended or supplemented, whether before the date of this Charter or otherwise;

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

(d)
references to Clauses, Sub-Clauses and Schedules are to be construed as references to clauses and sub-clauses of, and schedules to, this Charter; and

(e)
words denoting the singular number shall include the plural and vice versa, and words importing a gender include every gender.
32.5
Headings
In interpreting a Transaction Document or any provision of a Transaction Document, all clauses, sub-clauses and other headings in that and any other Transaction Document shall be entirely disregarded.
33.
CHARTER PERIOD
33.1
The Charter Period shall commence on the Commencement Date.
33.2
Notwithstanding the foregoing and subject to the terms herein, this Charter shall be in full force and effect and valid, binding and enforceable against the Parties with effect from the date hereof.
33.3
The Charter Period shall, subject to the terms of this Charter, continue for a period from the Commencement Date to and including the date falling one hundred and nineteen (119) months after the second (2nd) Payment Date.
34.
CANCELLATION
If, prior to any payment (i) being due or payable or (ii) having been made by the Owners under the MOA, a Termination Event occurs and is continuing, then this Charter shall immediately terminate and be cancelled without the need for either of the Owners or the Charterers to take any action whatsoever, provided that the Owners shall be entitled to retain all fees paid by the Charterers pursuant to Clause 41.1 (and without prejudice to Clause 41.1 but if such fees have not been paid but are due and payable, the Charterers shall forthwith pay such fees to the Owners in accordance with Clause 41.1). Such payment shall not be construed as a penalty but shall
21

represent an agreed estimate of the losses and damage incurred by the Owners in entering into this Charter and shall therefore be paid as compensation to the Owners.
35.
CONDITIONS PRECEDENT AND CONDITIONS SUBSEQUENT
35.1
The obligation of the Owners to charter the Vessel to the Charterers hereunder is subject to and conditional upon:

(a)
no Termination Event having occurred which is continuing;

(b)
no other event has occurred which with the giving of notice or lapse of time would, if not remedied, constitute a Termination Event;

(c)
the representations and warranties contained in Clause 46 being true and correct in all aspects on the date hereof by reference to the facts and circumstances then existing;

(d)
the Charterers (as sellers) and the Owners having duly executed and entered into the MOA;

(e)
the MOA Delivery occurring on or before the Cancelling Date;

(f)
the Owners having received from the Charterers:

(i)
on the date of this Charter, the documents or evidence set out in Part AI of Addendum No.1 in form and substance satisfactory to them;

(ii)
no less than fourteen (14) days prior to Delivery, the documents or evidence set out in Part AII of Addendum No.1 in form and substance satisfactory to them;

(iii)
no less than seven (7) Banking Days prior to Delivery, the documents or evidence set out in Part AIII of Addendum No.1 in form and substance satisfactory to them;

(iv)
no less than three (3) Banking Days prior to Delivery (or such later date as the Owners may agree), the documents or evidence set out in Part AIV of Addendum No.1 in form and substance satisfactory to them;

(v)
no less than one (1) Banking Day prior to Delivery, the documents or evidence set out in Part BI of Addendum No.1 in form and substance satisfactory to them; and

(vi)
on or before Delivery, the documents or evidence set out in Part BII of Addendum No.1 in form and substance satisfactory to them.
35.2
The obligation of the Owners to continue chartering the Vessel to the Charterers hereunder is subject to and conditional upon the Owners having received from the Charterers on or before such dates as specified in Parts C and D of Addendum No.1 the documents or evidence set out in Parts C and D of Addendum No.1 in form and substance satisfactory to them.
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35.3
Upon the requirements of Clause 35.1 and Clause 35.2 being fulfilled or waived to the satisfaction of the Owners, the Owners shall give notice thereof to the Charterers.
35.4
The conditions precedent set out in Clause 35.1 and the conditions subsequent set out in Clause 35.2 are for the sole benefit of the Owners and may be waived in whole or in part, with or without conditions without prejudicing the right of the Owners to require fulfilment of such conditions in whole or in part at any time thereafter.
36.
DELIVERY
36.1
Subject to the requirements of Clause 35.1 being fulfilled or waived to the satisfaction of the Owners, on delivery to and acceptance by the Charterers of the Vessel from the Original Sellers under the First MOA, on delivery to and acceptance by the Owners of the Vessel from the Charterers as sellers under the MOA and subject to the provisions of this Clause 36.1, the Vessel shall be deemed to have been delivered to, and accepted (without reservation) by, the Charterers under this Charter (irrespective of whether the Charterers shall become and be entitled to the possession and use of the Vessel).
36.2
On Delivery, as evidence of the commencement of the Charter Period, the Charterers and the Owners shall sign the Certificate of Delivery and Acceptance. Without prejudice to this Clause, the Charterers shall be deemed to have accepted the Vessel under this Charter, and the commencement of the Charter Period having started, on Delivery even if, for whatever reason, the Certificate of Delivery and Acceptance is not signed but Delivery has occurred.
36.3
Without prejudice and notwithstanding the provisions of this Clause, the Charterers shall not be entitled for any reason whatsoever to refuse to accept delivery of the Vessel under this Charter once the Vessel has been delivered to and accepted by (a) the Charterers from the Original Sellers under the First MOA and (b) the Owners from the Charterer as sellers under the MOA, and the Owners shall not be liable for any losses, cost or expenses whatsoever or howsoever arising including without limitation, any loss of profit or any loss or otherwise and whether before or after Delivery:

(a)
resulting directly or indirectly from any defect or alleged defect in the Vessel or any failure of the Vessel; or

(b)
arising from any delay in the commencement of the Charter Period or any failure of the Charter Period to commence unless such delay or failure results solely from a failure by the Owners to pay the MOA Purchase Price pursuant to, and in accordance with, the terms of the MOA.
36.4
The Owners will not and shall not be obliged to deliver the Vessel to the Charterers with any bunkers and unused lubricating oils and greases in storage tanks and unopened drums of the Vessel, but the Vessel shall be delivered with whatever is onboard when delivered by the Original Sellers (as sellers) to the Charterers (as buyers) under the First MOA and the Charterers (as sellers) to the Owners (as buyers) under the MOA.
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36.5
The Charterers hereby acknowledge and agree that the Owners are not the manufacturer or original supplier of the Vessel and that the Owners make no condition, term, representation or warranty, express or implied (and whether statutory or otherwise) as to the Owners' title to the Vessel or as to the seaworthiness, merchantability, condition, design, operation, performance, quality, capacity or fitness for use or as to the eligibility of the Vessel for any particular trade or operation or any other condition, term, representation or warranty whatsoever, express or implied, with respect to the Vessel. Acceptance of delivery by the Charterers or (as the case may be) deemed delivery of the Vessel to the Charterers under this Charter shall be conclusive proof evidencing that, for the purposes of the obligations and liabilities of the Owners hereunder or in connection herewith, the Vessel is at that time seaworthy, in accordance with the provisions of this Charter, in good working order and repair and without defect or inherent vice whether or not discoverable by the Charterers and free and clear of all liens, Security Interests and debts of whatsoever nature save for the Security Interests granted pursuant to the Security Documents.
36.6
Notwithstanding and without prejudice to the foregoing Clause 36.5, the Charterers hereby waive all of their rights in respect of any condition, term, representation or warranty express or implied (and whether statutory or otherwise) on the part of the Owners and all of their claims against the Owners howsoever and whatsoever that may arise in respect of the Vessel or the Owners' title thereto, or all of their rights therein or arising out of the operation of the Vessel or the chartering thereof under this Charter (including in respect of the seaworthiness or otherwise of the Vessel).
36.7
The Charterers agree that the Owners shall be under no liability to supply any replacement Vessel or any piece or part thereof during any period when the Vessel is unusable and shall not be liable to the Charterers or any other person as a result of the Vessel being unusable.
37.
CHARTERHIRE
37.1
In consideration of the Owners agreeing to charter the Vessel to the Charterers under this Charter at the request of the Charterers, the Charterers hereby irrevocably and unconditionally agree to pay to the Owners the Charterhire in respect of the chartering of the Vessel during the Charter Period. An indicative Charterhire Schedule setting out the amount of the Upfront Charterhire, the Balloon Payment and the Fixed Charterhire is set out in Schedule 2. The Charterers hereby agree with the Owners and acknowledge that the Charterhire as set out in Schedule 2 shall be calculated on the basis that the Financing Principal is in the amount of US$21,375,000.
37.2
Subject to the terms of this Clause, each instalment of the Fixed Charterhire and the Variable Charterhire shall be paid on each Payment Date on the following basis:

(a)
the first instalment of the Charterhire shall be paid on the Commencement Date and shall comprise the Charterhire payable in advance in respect of the period from the Commencement Date up to and including the date falling on the 10th day of the month falling immediately after the Commencement Date; and
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(b)
thereafter each instalment of Charterhire shall be paid on the date falling one (1) month thereafter and shall comprise the Charterhire payable in advance in mrespect of each such one (1) month's period, PROVIDED THAT:

(i)
the Charterers shall pay Variable Charterhire on the second (2nd) Payment Date which has accrued on the Charterhire Principal in respect of the shortened Hire Calculation Period commencing from the Commencement Date and up to the second (2nd) Payment Date on a pro-rata basis; and

(ii)
on the last Payment Date the Charterers shall pay to the Owners the Balloon Payment together with the last instalment of Fixed Charterhire and the last instalment of Variable Charterhire which together shall comprise the Charterhire payable in arrears in respect of the one (1) month's period from the second (2nd) last Payment Date to the last Payment Date,
and in each case Charterhire shall be paid in same day available funds by no later than 4:00 p.m. (Hong Kong time) and the Charterers shall provide evidence of payment for the Owners' tracking of the relevant remittance. Payment of Charterhire shall be deemed earned when paid and shall not be refundable.
37.3
The Vessel shall not at any time be deemed off-hire and the Charterers' obligation to pay all Charterhire and other amounts payable in this Charter shall be paid in Dollars and shall be absolutely and unconditionally payable under any and all circumstances and shall not be affected by any circumstances of any nature whatsoever including but not limited to:

(a)
any set off, counterclaim, recoupment, defence, claim or other right which the Charterers may at any time have against the Owners or any other person for any reason whatsoever including, without limitation, any act, omission or breach on the part of the Owners under this Charter or any other agreement at any time existing between the Owners and the Charterers;

(b)
any change, extension, indulgence or other act or omission in respect of any indebtedness or obligation of the Charterers, or any sale, exchange, release or surrender of, or other dealing in, any security for any such indebtedness or obligation;

(c)
any title defect or Security Interest or any dispossession of the Vessel by title paramount or otherwise, unless caused by the fault or gross negligence of the Owners and/or the Security Trustee;

(d)
any defect in the seaworthiness, condition, value, design, merchantability, operation or fitness for use of the Vessel or the ineligibility of the Vessel for any particular trade;

(e)
any damage (including damage resulting in a Total Loss) to or forfeiture or court marshall's or other sale of the Vessel;
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(f)
any libel, attachment, levy, detention, sequestration or taking into custody of the Vessel or any restriction or prevention of or interference with or interruption or cessation in, the use or possession thereof by the Charterers;

(g)
any insolvency, bankruptcy, reorganization, arrangement, readjustment, dissolution, liquidation or similar proceedings by or against the Charterers;

(h)
any invalidity, unenforceability, lack of due authorization or other defect, or any failure or delay in performing or employing with any of the terms and provisions of this Charter or any of the Transaction Documents by any party to this Charter or any other person;

(i)
any enforcement or attempted enforcement by any of the Owners or the other Creditor Parties of their rights under this Charter or any of the Transaction Documents executed or to be executed pursuant to this Charter; or

(j)
any loss of use of the Vessel due to deficiency or default or strike of officers or crew, fire, breakdown, damage, accident, defective cargo or any other cause which would or might but for this provision have the effect of terminating or in any way affecting any obligation of the Charterers under this Charter.
37.4
Time of payment of Charterhire and other payments by the Charterers shall be of the essence of this Charter.
37.5
All payments of Charterhire and any moneys payable hereunder shall be made in Dollars.
37.6
All Charterhire and any other moneys payable hereunder shall be payable by the Charterers to the Owners Account.
37.7
Payment of Charterhire shall be at the Charterers' risk until receipt by the Owners of the payment into the Owners Account.
37.8  (a)  If a Market Disruption Event occurs in relation to any Charterhire for any HireCalculation Period, then the Interest Rate for the relevant period shall be the rate per annum which is the sum of:

(i)
the Margin; and

(ii)
the rate notified to the Charterers by the Owners in writing as soon as practicable and in any event before interest is due to be paid in respect of that Hire Calculation Period, to be that which expresses as a percentage rate per annum the cost to the Owners of funding the Charterhire for such period from whatever comparable source it may select, provided that the Owners shall use their reasonable endeavours to provide or procure the provision of the evidence of such rate.

(b)
If a Market Disruption Event occurs and the Owners or the Charterers so require, the Owners and the Charterers shall enter into negotiations (for a period of not more than thirty (30) days) with a view to agreeing a substitute basis for determining the rate of interest.
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(c)
Any alternative basis agreed pursuant to paragraph 37.8(b) above shall, with the prior consent of the Owners and the Charterers, be binding on both the Owners and the Charterers.
37.9
All stamp duty, value added tax, withholding or other taxes and import and export duties and all other similar types of charges which may be levied or assessed on or in connection with:

(a)
the operation of this Charter in respect of the hire and all other payments to be made pursuant to this Charter and the remittance thereof to the Owners; and

(b)
the import, export, purchase, delivery and re-delivery of the Vessel,
shall be borne by the Charterers. The Charterers shall pay, if applicable, value added tax and other similar tax levied on any Charterhire and other payments payable under this Charter by addition to, and at the time of payment of, such amounts.
37.10
If requested by the Charterers, the Owners will use their reasonable endeavours to change their jurisdiction of incorporation to another jurisdiction reasonable designated by the Charterers, provided that:

(a)
the new jurisdiction of incorporation of the Owners are acceptable to their financiers (if any);

(b)
the Charterers shall be responsible for preparing all application, registration and other documents required for the change of jurisdiction of incorporation in form and substance acceptable to the Owners;

(c)
the new jurisdiction of incorporation of the Owners is acceptable to the then current flag state of the Vessel for the purpose of maintaining the registration of the Vessel under that flag state in form and substance acceptable to the Owners;

(d)
the Charterers shall be responsible for preparing all application, registration and other documents required for registration of the Owners as foreign maritime entity in other relevant jurisdiction for the purpose of maintaining the registration of the Vessel under the then current flag state in form and substance acceptable to the Owners;

(e)
if a change of flag state is required as a result of the change of jurisdiction of incorporation of the Owners, such change of jurisdiction of incorporation of the Owners shall be subject to the prior written consent of the Owners and the Owners' financiers (if any), and the Charterers shall be responsible for registration of the Vessel in such new flag state and pay to the Owners or their financier (if any) upon demand the legal fees, registration fees and other duties (including any duties payable by the Owners and the Owners' financiers (if any)) imposed by the new registry or any taxing authority therein in connection with the preparation, negotiation and registration of such new mortgage, other Financial Instruments (including any amendment or supplement thereto) and satisfactory legal opinions in favour of the Owners and/or their financier (if any); and
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(f)
all other fees, costs, expenses, payments, taxes, charges and liabilities whatsoever incurred by the Owners and/or their financiers (if any) relating to, arising out of or in connection with such change shall be borne by the Charterers.
37.11
Any payment of the Termination Sum shall be made together with any other amount payable under this Charter.
37.12
If the Charterers fail to make any payment due under this Charter on the due date, they shall pay interest on such late payment at the Default Rate from the date on which such payment became due until the date one (1) day prior to the date of payment thereof.
37.13
All default interest and any other payments under this Charter or any other Transaction Documents which are of an annual or periodic nature shall accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a 360 day year.
37.14
Any payment, which is due to be made on a day which is not a Business Day, shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not). If the last Payment Date is not a Business Day, any payment under the Transaction Documents which is due to be made on that day shall be made on the preceding Business Day.
37.15  (a)  Without prejudice to Clause 37.2, the Charterers may prepay the Charterhire Principal at any time during the Charter Period (being at least $1,000,000 or an integral multiple thereof) together with any Breakfunding Cost and expenses reasonably incurred by the Owners and the other Creditor Parties under this Charter and the other Transaction Documents in connection with or as a result of such prepayment, PROVIDED THAT (i) the Charterers shall only be entitled to prepay the Charterhire Principal once a year and the aggregate amount of all prepayments during the Charter Period shall not exceed $5,000,000 under this Clause 37.15 and (ii) the Owners shall have received from the Charterers not less than sixty (60) days' notice of their intention to make such prepayment, specifying the amount to be prepaid and the proposed date of such prepayment. Any amount prepaid pursuant to this Clause 37.15(a) shall be applied towards reducing the instalments of Fixed Charterhire (for the avoidance of doubt, excluding the Balloon Payment) falling on or after the date of such prepayment by the amount of such prepayment on a pro-rata basis.

(b)
The Charterers shall not prepay all or any part of the Charterhire except at the times and in the manner expressly provided for in this Charter.
37.16
If the Financing Principal is less than US$21,375,000 or upon any prepayment made by the Charterers under Clause 37.15, the Owners shall provide the Charterers with a revised Schedule 2. The revised Schedule 2 shall be based on the actual amount of the Financing Principal and determination of the corresponding Upfront Charterhire with reference to the Market Value at Closing of the Vessel and taking account any prepayment under Clause 37.15 (each revised Schedule 2 referred to in this Clause 37.16 and throughout this Charter is a Revised Charterhire Schedule).
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37.17
Each Revised Charterhire Schedule issued pursuant to Clause 37.16 shall (i) be deemed incorporated into this Charter in substitution for the then current Schedule 2, (ii) save for manifest error, be conclusive and binding on the Owners and the Charterers and at any time, the latest Revised Charterhire Schedule incorporated pursuant hereto and (iii) for the purposes of this Charter, be conclusive evidence of the rate of Charterhire, Charterhire Principal and the Purchase Option Price payable under this Charter and shall for all purposes be treated as if it had been attached as the Charterhire Schedule ab initio.
38.
POSSESSION OF VESSEL
38.1
The Charterers shall not, without the prior written consent of the Owners and the Security Trustee, assign, mortgage or pledge the Vessel or any interest therein and shall not permit the creation of any Security Interest thereon other than Permitted Security Interests.
38.2
The Charterers shall promptly notify any party (as the Owners may request) in writing that the Vessel is the property of the Owners and the Charterers shall provide the Owners with a copy of such written notification and satisfactory evidence of that such party has received such written notification.
38.3
If the Vessel is arrested, seized, impounded, forfeited, detained or taken out of their possession or control (whether or not pursuant to any distress, execution or other legal process), the Charterers shall procure the immediate release of the Vessel (whether by providing bail or procuring the provision of security or otherwise do such lawful things as the circumstances may require) and shall immediately notify the Owners of such event and shall indemnify the Owners against all losses, costs or charges incurred by the Owners by reason thereof in re-taking possession or otherwise in re-acquiring the Vessel.
38.4
The Charterers shall pay and discharge or cause any Sub-Charterers of the Vessel to pay and discharge all obligations and liabilities whatsoever which have given or may give rise to liens on or claims enforceable against the Vessel and take all reasonable steps to prevent a threatened arrest of the Vessel.
39.
INSURANCE
39.1
The Charterers shall procure that such insurances are effected in form and substance satisfactory to the Owners, the Security Trustee and their financiers (if any):

(a)
in Dollars;

(b)
in the case of hull and machinery (and increased value insurance), fire and usual marine risks and war risks to cover an amount not less than the greater of (i) the Market Value of the Vessel for the time being and (ii) one hundred and twenty per cent. (120%) of the Charterhire Principal then outstanding;

(c)
in the case of oil pollution liability risks for the Vessel, for an aggregate amount equal to the highest level of cover from time to time available under protection and indemnity club entry and in the international marine insurance market and for an amount of not less than US$1,000,000,000;
29


(d)
in relation to protection and indemnity risks (including freight, demurrage and defence cover) in respect of the full tonnage of the Vessel;

(e)
in relation to such other insurances reasonably required by the Owners, the Security Trustee and/or their financiers (if any) but excluding loss of hire and contingent liability insurance; and

(f)
through approved brokers or with first class international insurers and/or underwriters acceptable to the Owners and the Security Trustee or, in the case of war risks and protection and indemnity risks, UK P& I Club or any other approved war risks and protection and indemnity risks association which is a member of the International Group of P&I Clubs acceptable to the Owners and the Security Trustee,
and shall pay the Owners, the Security Trustee and their financiers (if any) the cost (as conclusively certified by the Owners, the Security Trustee and such financiers) of (i) an innocent owner's interest insurance, (ii) an innocent owner's interest insurance - additional perils (pollution), (iii) a mortgagee's interest insurance and (iv) a mortgagee's interest insurance - additional perils (pollution), in each case in an amount not less than one hundred twenty percent (120%) of the Charterhire Principal then outstanding.
39.2
In addition to the terms set out in Clause 13(a), to the extent required and acceptable to the relevant insurers and protection and indemnity club, the Charterers shall procure that the obligatory insurances shall:

(a)
subject always to paragraph (ii), name the Security Trustee, the Charterers and, subject to execution of the Manager's Undertakings, the Approved Managers as the only named assureds unless the interest of every other named assured or co-assured is limited:

(i)
in respect of any obligatory insurances for hull and machinery and war risks;

(A)
to any provable out-of-pocket expenses that they have incurred and which form part of any recoverable claim on underwriters; and

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

(ii)
in respect of any obligatory insurances for protection and indemnity risks, to any recoveries they are entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against them;
and every other named assured or co-assured has undertaken in writing to the Security Trustee and their financiers (in such form as they reasonably require) that any deductible shall be apportioned between the Charterers and every other named assured or co-assured in proportion to the gross claims made or
30

paid by each of them and that they shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee and their financiers (if any) in accordance with the terms of the loss payable clause, to collect or recover any moneys which at any time become payable in respect of the obligatory insurances;

(b)
subject to Clause 43, whenever a financier (if any) of the Owners requires:

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

(ii)
in relation to protection and indemnity risks, name (or be amended to name) such financier as additional insured or co-assured for its rights and interests to the extent permissible under the relevant protection and indemnity club rules; and

(iii)
name such financier (as applicable) and the Security Trustee (as applicable) as respectively the first ranking loss payee and the second ranking loss payee (and in the absence of such financier, as first ranking loss payee) in accordance with the terms of the relevant loss payable clauses approved by such financier and the Security Trustee with such directions for payment in accordance with the terms of such relevant loss payable clause, as the Security Trustee and their financiers (if any) may specify;

(c)
provide that all payments by or on behalf of the insurers under the obligatory insurances to the Owners, the Security Trustee and/or their financiers (as applicable) shall be made without set-off, counterclaim or deductions or condition whatsoever;

(d)
provide that such obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Owners, the Security Trustee or their financiers (if any);

(e)
provide that the Owners, the Security Trustee and/or their financiers (if any) may make proof of loss if the Charterers fail to do so; and

(f)
provide that if any obligatory insurance is cancelled, or if any substantial change is made in the coverage which adversely affects the interest of the Owners, the Security Trustee and/or their financiers (if any), or if any obligatory insurance is allowed to lapse for non-payment of premium, such cancellation, change or lapse shall not be effective with respect to the Owners, the Security Trustee and/or their financiers (if any) for fourteen (14) days) after receipt by the Owners, the Security Trustee and/or their financiers (if any) of prior written notice from the insurers of such cancellation, change or lapse.
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39.3
The Charterers shall:

(a)
at least fourteen (14) days prior to Delivery, notify in writing the Owners and the Security Trustee of the terms and conditions of all Insurances and the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Charterers have arranged all Insurances;

(b)
at least fourteen (14) days before the expiry of any obligatory insurance notify the Owners and the Security Trustee (copied to their financiers (if any)) of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Charterers propose to renew that obligatory insurance and of the proposed terms of renewal and obtain the Owners' and the Security Trustee's approval to such matters;

(c)
at least seven (7) days before the expiry of any obligatory insurance, procure that such obligatory insurance is renewed or to be renewed on its expiry date in accordance with the provisions of this Charter;

(d)
procure that the approved brokers and/or the war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal or the effective date of the new insurance and protection and indemnity cover notify the Owners and the Security Trustee (copied to their financiers (if any)) in writing of the terms and conditions of the renewal; and

(e)
as soon as practicable after the expiry of any obligatory insurance, deliver to the Owners and the Security Trustee a letter of undertaking as required by this Charter in respect of such Insurances for the Vessel as renewed pursuant to Clause 39.3(c) together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Security Trustee and/or their financiers (if any).
39.4
The Charterers shall ensure that all insurance companies, underwriters, and (if any) insurance brokers provide the Owners and the Security Trustee with all policies, cover notes and certificates of entry relating to the obligatory insurances which they are to effect or renew and of a letter or letters or undertaking in such form as may be required by the Owners, the Security Trustee and their financiers (if any) and including undertakings by the insurance companies and/or underwriters that:

(a)
they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of this Charter, the other Transaction Documents and the Financial Instruments;

(b)
they will hold the benefit of such policies and such insurances, to the order of the Owners, the Security Trustee and/or such financiers and/or such other party in accordance with the said loss payable clause;

(c)
they will advise the Owners, the Security Trustee and such financiers promptly of any material change to the terms of the obligatory insurances of which they are aware;
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(d)
following a written application from the Owners, the Security Trustee and/or such financiers not later than one (1) month before the expiry of the obligatory insurances they will notify the Owners, the Security Trustee and such financiers not less than fourteen (14) days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from the Charterers and, in the event of their receiving instructions to renew, they will promptly notify the Owners, the Security Trustee and such financiers of the terms of the instructions; and

(e)
if any of the obligatory insurances form part of any fleet cover, the Charterers shall procure that the insurance broker(s), or leading insurer, as the case may be, undertake to the Owners, the Security Trustee and such financiers that such insurance broker or insurer(s) will not set off against any sum recoverable in respect of a claim relating to the Vessel under such obligatory insurances any premiums due in respect of any other vessel under any fleet cover of which the Vessel forms a part or any premium due for other insurances, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums, and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of the Vessel forthwith upon being so requested by the Owners, the Security Trustee and/or such financiers and where practicable.
39.5
The Charterers shall ensure that any protection and indemnity and/or war risks associations in which the Vessel is entered provides the Owners, the Security Trustee and such financiers with:

(a)
a copy of the certificate of entry for the Vessel as soon as such certificate of entry is issued;

(b)
a letter or letters of undertaking in such form as may be required by the Owners the Security Trustee and their financiers (if any) or in such association's standard form; and

(c)
a copy of each of (i) a certificate of insurance or other financial security in respect of civil liability for oil pollution damage, (ii) a certificate of insurance or other financial security in respect of civil liability for bunker oil pollution damage, (iii) (if the Vessel trades or enters into US waters) a certificate issued pursuant to s1016(a) Oil Pollution Act 1990 and s108(a) Comprehensive Environmental Response, Compensation and Liability Act 1980, as amended, in accordance with US Coast Guard Regulations, 33 CFR Part 138 and (iv) a certificate of insurance or other financial security in respect of shipowners' liability as required under the Maritime Labour Convention.
39.6
The Charterers shall ensure that all policies relating to obligatory insurances are deposited with the approved brokers through which the insurances are effected or renewed.
39.7
The Charterers shall procure that all premiums or other sums payable in respect of the obligatory insurances are punctually paid and produce all relevant receipts when so required by the Owners and the Security Trustee.
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39.8
The Charterers shall ensure that any guarantees required by a protection and indemnity or war risks association are promptly issued and remain in full force and effect.
39.9
The Charterers shall neither do nor omit to do (nor permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in part; and, in particular:

(a)
the Charterers shall procure that all necessary action is taken and all requirements are complied with which may from time to time be applicable to the obligatory insurances, and (without limiting the obligations contained in this Clause) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Owners and the Security Trustee have not given their prior approval (unless such exclusions or qualifications are made in accordance with the rules of UK P&I Club or any other protection and indemnity association which is a member of the International Group of P&I Clubs acceptable to the Owners and the Security Trustee);

(b)
the Charterers shall not make or permit any changes relating to the classification or classification society or manager or operator of the Vessel unless such changes have first been approved by the underwriters of the obligatory insurances and the Owners and the Security Trustee;

(c)
prior to permitting the Vessel to enter the US Exclusive Economic Zone, the Charterers shall comply with all regulations in force of the US Oil Pollution Act 1990 which apply to the Vessel including, if necessary, obtaining within the time limits set by the US Coast Guard, a Certificate of Financial Responsibility, a copy of which shall be lodged with the Owners and the Security Trustee prior to engaging in any such voyage; and

(d)
the Charterers shall not employ the Vessel, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.
39.10
The Charterers shall not make or agree to any material alteration to the terms of any obligatory insurance nor waive any right relating to any obligatory insurance without the prior written consent of the Owners, the Security Trustee and their financiers (if any).
39.11
The Charterers shall not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty without the Owners' and the Security Trustee's approval, and shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.
39.12
The Charterers shall provide the Owners and the Security Trustee upon written request, copies of:
34


(a)
all communications between the Charterers and:

(i)
the approved brokers (if applicable); and

(ii)
the approved protection and indemnity and/or war risks associations; and

(iii)
the first class international insurers and/or underwriters, which relate directly or indirectly to:

(A)
the Charterers' obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and

(B)
any credit arrangements made between the Charterers and any of the persons referred to in paragraphs (i) or (ii) relating wholly or partly to the effecting or maintenance of the obligatory insurances;

(b)
any material communication with all parties involved in case of a claim under any of the Vessel's insurances.
39.13
The Charterers shall promptly provide the Owners, the Security Trustee and/or their financiers (or any persons which they may designate) with:

(a)
any information which the Owners, the Security Trustee and/or such financiers (or such designated persons) request for the purpose of:

(i)
obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurance effected or proposed to be effected; and/or

(ii)
effecting, maintaining or renewing any such insurances as are referred to in Clauses 13(a) and 39.1 or dealing with or considering any matters relating to any such insurances;

(b)
any information and documents reasonably requested by the Owners, the Security Trustee in connection with a claim under any of the Vessel's insurances exceeding the Major Casualty amount; and

(c)
if the Owners, the Security Trustee consider it necessary to obtain information in connection with a claim under any of the Vessel's insurances which does not exceed the Major Casualty amount, such information and documents.
39.14
If one or more of the obligatory insurances are not effected and maintained with first class international insurers or are effected with an insurance or captive Subsidiary of the Owners, the Security Trustee or the Charterers, then the Charterers shall procure, at their own expense, that the relevant insurers maintain in full force and effect facultative reinsurances with reinsurers and through brokers, in each case, of recognised standing and acceptable in all respects to the Owners and the Security Trustee. Any reinsurance policy shall include, if and when permitted by law, a cut-through clause in a form acceptable to the Owners and the Security Trustee. The
35

Charterers shall procure that underwriters of the primary insurances assign each reinsurance to the relevant financiers in full, if required.
39.15
The Charterers shall be solely responsible for and indemnify the Owners in respect of all loss or damage to the Vessel (insofar as the Owners shall not be reimbursed by the proceeds of any insurance in respect thereof) however caused occurring at any time or times before physical possession thereof is retaken by the Owners, reasonable wear and tear to the Vessel only excepted.
39.16
The Charterers shall:

(a)
if so requested by the Owners, the Security Trustee and/or their financiers, reimburse the Owners, the Security Trustee and/or such financiers the costs for obtaining a detailed report signed by an independent firm of marine insurance brokers appointed by the Owners, the Security Trustee and/or such financiers dealing with the Insurances and stating the opinion of such firm as to the adequacy of the Insurances; and

(b)
procure that there is delivered to the insurance brokers described in Clause 39.16(a) such information in relation to the Insurances as such brokers may require.
39.17
If the Charterers fail to comply with any of the provisions of this Clause 39, the Owners and the Security Trustee shall be entitled (but not bound) to effect and subsequently to maintain all such Insurances upon the Vessel as they may think fit in order to procure the compliance with such provisions or alternatively, to require the Vessel (at the Charterers' risk) to remain in, or to proceed to and remain in a port designated by the Owners, the Security Trustee and/or such financiers until such provisions are fully complied with.
40.
TERMINATION AND REDELIVERY; WAR; TOTAL LOSS
40.1
Upon the occurrence of a Termination Event which is continuing:

(a)
the Owners shall notify the Charterers of occurrence of the same (the Termination Event Notice) whereupon the Charterers may:

(i)
in relation to a Termination Event under Clause 45(a), (c) or (g), within three (3) Business Days of the date of the Termination Event Notice, provide to the Owners a written notice advising the Owners of their intention to terminate this Charter and shall promptly pay the Termination Sum to the Owners by no later than the end of such three (3) Business Days period; or

(ii)
in relation to any other Termination Event, within thirty (30) days of the date of the Termination Event Notice, provide to the Owners a written notice advising the Owners of their intention to terminate this Charter and shall promptly pay the Termination Sum to the Owners by no later than the end of such thirty (30) days period; and

(b)
if the Charterers do not notify the Owners of their intention to terminate this Charter pursuant to Clause 40.1(a) within three (3) Business Days or thirty
36

(30) days (as the case may be) of the date of the Termination Event Notice then the Owners may be entitled, provided the Termination Event is continuing, by notice to the Charterers to terminate this Charter at any time thereafter, and the Charterers shall immediately pay to the Owners the Termination Sum, whereupon the Owners shall sell, transfer and redeliver, at the cost and expense of the Charterers, the Vessel to the Charterers.
40.2
The Owners shall notify the Charterers in writing if they intend to terminate this Charter in accordance with paragraph (f) of Clause 26 (War) and the Charterers shall pay the Termination Sum to the Owners within ten (10) Business Days upon receipt of such written notification from the Owners whereupon the Owners shall, at the cost and expense of the Charterers, sell the Vessel to the Charterers in accordance with Clause 40.4.
40.3
It is hereby agreed by the Parties that payment of the Termination Sum pursuant to Clause 40.1 or 40.2 (as the case may be) shall not be construed as a penalty but shall represent an agreed estimate of the loss and damage suffered by the Owners in purchasing the Vessel and entering into this Charter upon the terms and conditions contained herein, in each case, at the request of the Charterers and shall therefore be paid as compensation to the Owners for early termination and acquisition of the Vessel by the Charterers.
40.4
Concurrently with the irrevocable payment of the Termination Sum in full pursuant to the terms of this Charter, this Charter shall terminate and the Owners shall (save in the event of Total Loss) transfer the legal and beneficial ownership of the Vessel to the Charterers or their nominees free from any registered mortgages incurred or permitted by the Owners (save for those liens, Security Interests and debts incurred by the Charterers or arising out of or in connection with this Charter and any other Permitted Security Interests) and shall execute (i) a bill of sale, (ii) a commercial invoice, (iii) a protocol of delivery and acceptance evidencing such transfer and (iv) such other additional documents as may be necessary for the purpose of registering the Vessel at its intended flag state upon such transfer, provided that the Charterers shall notify the Owners of any such additional documents no later than five (5) Business Days (or such other mutually agreed date) prior to such transfer, each in such form as may be required by the Charterers' intended flag state.
40.5
If the Charterers fail to make any payment or make only a partial payment of the Termination Sum on the due date in accordance with Clause 40.1 or 40.2 (as the case may be), Clauses 37.12 and 37.13 shall apply. In addition, the Charterers agree that should the Termination Sum not be paid in full on the due date for payment under the terms of this Charter:

(a)
the Charterers' right to possess and operate the Vessel shall immediately cease and the Charterers shall, upon the Owners' request, be obliged to immediately (and at the Charterers' own cost) redeliver the Vessel to the Owners at such ready and nearest safe port as the Owners may require; and

(b)
without limiting the generality of the foregoing or any other rights of the Owners, the Owners may, at their own option subject to Clause 40.6, sell the Vessel free of any charter, lease or other engagement concerning the Vessel
37

for such price and on such terms and conditions as it may, in its absolute discretion, think fit.
40.6
If the Termination Sum has not been paid in full on the due date for payment under the terms of this Charter, the Owners shall have the Vessel valued in Dollars by three (3) Approved Valuers appointed by the Owners and:

(a)
if the average value of the three (3) valuations quoted by such three Approved Valuers (after offsetting all costs and expenses incidental to such valuations of the Vessel) (the Net Average Market Value) is higher than the Termination Sum, the Owners may, at their sole discretion:

(i)
appoint one or more of such Approved Valuers to sell the Vessel at the highest price that they could obtain. The Charterers shall also have the right to recommend a buyer for the Vessel and, if the Owners determine to sell the Vessel, they shall sell the Vessel to the buyer recommended by the Charterers if that buyer offers the same or higher price for the Vessel upon not less favourable terms than the other buyers recommended by such Approved Valuers; or

(ii)
retain the Vessel;

(b)
if the Owners sell the Vessel in accordance with Clause 40.5(b) and paragraph (a)(i) above:

(i)
the Owners shall have the right to deduct an amount equal to the aggregate of the expenses, disbursements, taxes, costs and losses whatsoever as may have been incurred by the Owners in respect of the sale of the Vessel (the Net Sale Proceeds) from the gross proceeds of the sale of the Vessel;

(ii)
an amount equal to the Termination Sum shall be deducted from the Net Sale Proceeds;

(iii)
if the Net Sale Proceeds are insufficient to satisfy all amounts due and payable from the Charterers to the Owners hereunder, the Charterers shall immediately pay the shortfall to the Owners upon demand by the Owners; and

(iv)
any surplus (the Surplus Sale Proceeds) in the Net Sale Proceeds after deducting the Termination Sum pursuant to sub-paragraph (ii) above shall be distributed by the Owners in accordance with Clause 40.7;

(c)
if the Owners elect to retain the Vessel in accordance with paragraph (a)(ii) above:

(i)
in the case of the Net Average Market Value of the Vessel is higher than the Termination Sum, the Owners shall offset the Termination Sum against the Net Average Market Value of the Vessel and distribute the difference between the Net Average Market Value of the Vessel and the Termination Sum (the Surplus Retention Proceeds) in accordance with Clause 40.7; and
38


(ii)
in the case of the Net Average Market Value is less than the Termination Sum, the Charterers shall immediately pay the shortfall to the Owners upon demand by the Owners; and

(d)
the Charterers shall have the right to pay the Termination Sum and purchase the Vessel pursuant to Clause 40.1 or 40.2 (as the case may be) prior to any agreement has been entered into by the Owners for a sale of the Vessel under Clause 40.5(b) and paragraph (a)(i) above, upon which, Clause 40.4 shall apply.
40.7
The Surplus Retention Proceeds or the Surplus Sale Proceeds (as the case may be) shall be applied by the Owners (and the Charterers hereby authorise and instruct the Owners to so apply such amounts) as follows:

(a)
(in the case of a Termination Event (as defined in the relevant Collateral Charter) has occurred under either Collateral Charter) in or towards payment of the Termination Sum (as defined in that Collateral Charter) to which that Collateral Vessel relates, together with any fees or charges incurred under that Collateral Charter. If a Termination Event (as defined in each Collateral Charter) has occurred under both Collateral Charters and the Surplus Retention Proceeds or the Surplus Sale Proceeds (as the case may be) are insufficient to discharge the Termination Sum (as defined in each Collateral Charter) under both Collateral Charters, the Owners shall apply the Surplus Retention Proceeds or the Surplus Sale Proceeds (as the case may be) in or towards payment pro rata of any Termination Sum (as defined in each Collateral Charter) under the Collateral Charters;

(b)
(where such conditions are satisfied save for the charter free market value of either Collateral Vessel being below the asset coverage ratio stated in clause 47.1(n) of the relevant Collateral Charter) in or towards payment of an additional cash deposit in an amount required to maintain the asset coverage ratio stated in clause 47.1(n) of that Collateral Charter, and if the remaining Surplus Retention Proceeds or remaining Surplus Sale Proceeds (as the case may be) are insufficient to maintain the asset coverage ratio stated in clause 47.1(n) of both Collateral Charters, the Owners shall apply the remaining Surplus Retention Proceeds or remaining Surplus Sale Proceeds (as the case may be) in or towards payment pro rata of the additional cash deposit required to maintain the asset coverage ratio stated in clause 47.1(n) of the Collateral Charters; and

(c)
(in the case of there being a surplus remaining after the application of the amounts in paragraphs (a) and (b) above) direct to or to the order of the Charterers, provided that no Termination Event shall have occurred and be continuing.
40.8
Without limiting the generality of the foregoing or any other rights of the Creditor Parties, upon the occurrence of a Termination Event which is continuing, the Owners shall have the sole and exclusive right and power to do any of the following:

(a)
settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to or pertaining to the Vessel and this Charter;
39


(b)
make proof of loss, appear in and prosecute any action arising from any policy or policies of insurance maintained pursuant to this Charter, and settle, adjust or compromise any claims for loss, damage or destruction under, or take any other action in respect of, any such policy or policies; and

(c)
terminate any management agreement with any manager (including any Approved Manager) of the Vessel and appoint a substitute manager in its sole discretion.
40.9
The Charterers hereby undertake to indemnify the Owners against any claims incurred in relation to the Vessel as a result of the Charterers' action or performance prior to such transfer of ownership. Any taxes, notarial, consular and other costs, charges and expenses connected with closing of the Owners' register shall be for the Charterers' account.
40.10
Without prejudice to Clause 15, if the Charterers are required to redeliver the Vessel to the Owners pursuant to the terms of this Charter, the Charterers shall ensure that the Vessel shall, at the time of redelivery to the Owners:

(a)
be in an equivalent class as she was as at the Commencement Date without any recommendation or condition, and with valid, unextended certificates for not less than six (6) months;

(b)
have passed her 5-year and if applicable, 10-year special surveys, and subsequent second intermediate survey and drydock at the Charterers' time and expense without any condition or outstanding issue and to the satisfaction of the Classification Society;

(c)
have her survey cycles up to date and trading and class certificate valid for at least six (6) months;

(d)
be redelivered to the Owners together with all spare parts and spare equipment as were on board at the time of Delivery, and any such spare parts and spare equipment on board at the time of re-delivery shall be taken over by the Owners free of charge;

(e)
be free of any cargo and Security Interest (save for the Security Interests granted pursuant to the Financial Instruments and the Security Documents); and

(f)
be free of any charter (unless the Owners wish to retain the continuance of any then existing charter).
40.11
The Owners shall, at the time of the redelivery of the Vessel, take over all bunkers, unused lubricating oil, unbroached provisions, paints, ropes and other consumable stores (excluding spare parts) in the Vessel at the Owners' cost at the original purchase price as evidenced by copies of invoices certified by a director of the Charterers and on a "first in, first out" basis.
40.12
If the Vessel, for any reason, becomes a Total Loss, in consideration of (i) the Owners agreeing to enter into this Charter at the request of the Charterers and purchasing the Vessel from the Charterers as sellers under the MOA, and (ii) without prejudice to the
40

rest of this Clause, the Owners agreeing to assign their interest in the Insurances to the Charterers upon receiving full payment of the Termination Sum (in any circumstance where the Owners have not yet received any insurance proceeds of the Vessel at such time), the Charterers shall pay the Termination Sum to the Owners on the earlier of:

(a)
the date falling (in the case of paragraph (a) or (b) of the definition of Total Loss) one hundred and twenty (120) days or (in the case of paragraph (c) of the definition of Total Loss) thirty (30) days after such Total Loss has occurred; and

(b)
the date of receipt by the Security Trustee and/or their financiers (if any), in accordance with the terms of the relevant loss payable clause) of the proceeds of insurance relating to such Total Loss,
provided that it is hereby agreed that any insurance proceeds in respect of the Vessel received by the Security Trustee shall be applied in or towards discharging the Charterers' obligation to pay the Termination Sum to the Owners and any interest accrued thereon (and such application shall be deemed satisfaction of the Charterers' obligation to pay the Termination Sum to the extent satisfied) and in the event that the insurance proceeds received from the insurers exceed the Termination Sum due (and any interest accrued thereon), the excess shall be firstly paid towards satisfying any amounts outstanding and owing by the Charterers or the other Security Parties to the other Creditor Parties and thereafter paid to the Charterers.
For the avoidance of doubt, in the event that the Vessel becomes a Total Loss:

(i)
payment of Charterhire, and all other sums payable hereunder during such period shall continue to be made by the Charterers in accordance with the terms of this Charter unless and until the Owners receive the Termination Sum;

(ii)
should insurance proceeds be received by the Security Trustee from the insurers, the Charterers' obligations to pay the Termination Sum shall be accordingly reduced by such insurance proceeds but in the event that such insurance proceeds be less than the amount of the Termination Sum together with any interest accrued thereon, the Charterers remain obliged to pay to the Owners the balance so that the full amount of the Termination Sum together with any interest accrued thereon due are received by the Owners;

(iii)
the Vessel continues to be insured in accordance with the terms of this Charter and as may be required by any other agreements relating to the ownership, operation, management, chartering or financing of the Vessel; and

(iv)
the obligation of the Charterers to pay the Termination Sum shall remain unaffected and exist regardless of whether any of the insurers have agreed or refused to meet or have disputed in good faith, the claim for Total Loss.
40.13
For the purpose of this Charter, a Total Loss shall be deemed to have occurred:

(a)
in the case of an actual loss of the Vessel, on the date on which it occurred or, if that is unknown, the date when the Vessel was last heard of; or
41


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

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

(ii)
the date of any compromise, arrangement or agreement made by or on behalf of the Owners with the insurers in which the insurers agree to treat the Vessel as a total loss.
40.14
The Owners shall have no obligation to supply to the Charterers with a replacement vessel following the occurrence of a Total Loss.
41.
FEES AND EXPENSES; INDEMNITIES;
41.1
Fees
In consideration of the Owners entering into this Charter, the Charterers shall pay the Owners or their nominee the Handling Fee as set out in the Fee Letter. The Charterers shall pay and hereby irrevocably agree to pay to the Owners any and all fees payable under this Clause 41.1 or under the Fee Letter, regardless of whether the MOA, this Charter or any other Transaction Document is cancelled or terminated for any reason whatsoever.
41.2
Without prejudice to any other rights of the Owners hereunder, the Charterers shall promptly pay to the Owners within ten (10) Business Days of demand on a full indemnity basis all costs, charges and expenses incurred by the Creditor Parties in collecting any Charterhire or other payments not paid on the due date under this Charter and in remedying any other failure of the Charterers to observe the terms and conditions of this Charter.
41.3
All costs (including, but not limited to, legal costs, fees for insurance opinions, valuation and inspection) and expenses reasonably incurred by the Creditor Parties in the preparation, negotiation, documentation, printing and execution of all documentation in relation to this Charter and the Transaction Documents and all legal costs, expenses and other disbursements reasonably incurred by the Creditor Parties' legal counsels in connection with the same, shall be for the account of the Charterers and the Charterers shall pay such costs and expenses promptly within ten (10) Business Days of demand.
41.4
All costs and expenses incurred by the Owners in relation to the acquisition and registration of the Vessel by the Owners in the Owners' name in the flag state stated in Box 5 together with any and all fees (including but not limited to any vessel registration and tonnage fees) payable by the Owners to such flag state to maintain and/or renew such registration shall be for the account of the Charterers and the Charterers shall pay such costs and expenses promptly within ten (10) Business Days of demand.
41.5
In addition to the foregoing and to the extent not already addressed by the foregoing, the Charterers agree at all times during this Charter to indemnify and keep indemnified the Creditor Parties against:
42


(a)
all costs and expenses whatsoever reasonably incurred in connection with this Charter and any other Transaction Document or the Vessel, and any costs, charges, or expenses reasonably incurred which the Charterers have agreed to pay under this Charter and any other Transaction Document and shall be claimed or assessed against or paid by the Creditor Parties save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(b)
any tax (except income tax) imposed on, or suffered by, any Creditor Party, excluding:

(i)
any tax imposed on and calculated by reference to the net income actually received or receivable by such Creditor Party (but, for the avoidance of doubt, not including any sum deemed for the purposes of tax to be received or receivable by such Creditor Party but not actually receivable) by the jurisdiction in which such Creditor Party is incorporated; or

(ii)
any loss or liability that is compensated for by an increased payment under Clause 51.2.2;

(c)
all losses, costs, charges, expenses, fees, payments, liabilities, penalties, fines, damages or other sanctions of a monetary nature (collectively, for the purposes of this Clause 41.5, Losses) suffered or incurred by the Creditor Parties and arising directly or indirectly in any manner out of the design, manufacture, delivery, non-delivery, purchase, importation, registration, ownership, chartering, sub-chartering, possession, control, use, operation, condition, maintenance, repair, replacement, refurbishment, modification, overhaul, insurance, sale or other disposal, return or storage of or loss of or damage to the Vessel or otherwise in connection with the Vessel (whether or not in the control or possession of the Charterers), any and all claims in tort or in contract by any Sub-Charterer from the Charterers nor any Sub-Charterer or any other party contracting with the Charterers or any Sub-Charterer save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(d)
all Losses suffered or incurred by the Creditor Parties which result directly or indirectly from claims which may at any time be made on the ground that any design, article or material of or in the Vessel or the operation or use thereof constitutes or is alleged to constitute an infringement of patent or copyright or registered design or other intellectual property right or any other right whatsoever save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(e)
all Losses suffered or incurred by the Owners in preventing or attempting to prevent the arrest, confiscation, seizure, taking in execution, impounding, forfeiture or detention of the Vessel, or in securing the release of the Vessel therefrom save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(f)
all Losses suffered or incurred by the Owners with respect to or as a direct result of the presence, escape, seepage, spillage, leaking, discharge or migration from the Vessel of oil or any other hazardous substance, including
43

without limitation, any claims asserted or arising under the US Oil Pollution Act of 1990 (as same may be amended and/or re-enacted from time to time hereafter) or similar legislation, regardless of whether or not caused by or within the control of the Charterers save for (in each case) resulting from the wilful misconduct of the Creditor Parties; and

(g)
any Losses incurred or suffered by the Owners in liquidating, employing or prepaying funds acquired or borrowed to purchase or finance or refinance the Vessel (excluding any costs incurred in unwinding any associated interest rate or currency swaps or currency futures transactions entered into by the Owners) following any default in payment hereunder or the occurrence of any Termination Event.
41.6
If, under any applicable law, whether as a result of judgment against the Charterers or the liquidation of the Charterers or for any other reason, any payment to be made by the Charterers under or in connection with this Charter is made or is recovered in a currency other than the currency (the currency of obligation) in which it is payable pursuant to this Charter then, to the extent that the payment (when converted into the currency of obligation at the rate of exchange on the date for the determination of liabilities permitted by the applicable law) falls short of the amount unpaid under this Charter, the Charterers shall as a separate and independent obligation, fully indemnify the Creditor Parties against the amount of the shortfall; and for the purposes of this sub-clause rate of exchange means the best rate at which the Creditor Parties are able on the relevant date to purchase the currency of obligation with the other currency.
41.7
The Charterers hereby irrevocably agree to indemnify and hold harmless the Owners against any claim, expense, liability or loss to fund the acquisition of the Vessel pursuant to the MOA.
41.8
The indemnities contained in this Clause 41, and each other indemnity contained in this Charter, shall survive any termination or other ending of this Charter and any breach by, or repudiation by, the Charterers of this Charter.
42.
NO WAIVER OF RIGHTS
42.1
No neglect, delay or indulgence on the part of either Party in enforcing the terms and conditions of this Charter shall prejudice the strict rights of that party or be construed as a waiver thereof nor shall any single or partial exercise of any right of either Party preclude any other or further exercise thereof.
42.2
No right or remedy conferred upon either Party by this Charter shall be exclusive of any other right or remedy provided for herein or by law and all such rights and remedies shall be cumulative.
43.
MORTGAGE AND ASSIGNMENT
43.1
At all times during the term of this Charter, the Owners and the other Creditor Parties shall have the right to create a mortgage or as the case may be, mortgages, over the Vessel in favour of any lender, bank or financial institution, or agent or trustee or an Affiliate of the Owners (the Mortgagee) and to assign all the rights, title, interests and benefit in and to this Charter, the other Transaction Documents, the Insurances, the
44

Requisition Compensation and/or all or any Security Interest under the Security Documents to the Mortgagee as security for any loan or other facilities for the purpose of financing and/or refinancing the acquisition of the Vessel. In the event that the Vessel is transferred by the Owners to the Charterers or their nominee in accordance with this Charter, the Owners shall ensure that the mortgage(s) and assignment created pursuant to this Clause 43 be fully discharged prior to such transfer, provided that the Owners shall, upon written request of the Sub-Charterer:

(a)
issue the Owners' Quiet Enjoyment Letter upon the request of the Sub-Charterer; and

(b)
use their best endeavours to procure the issuance of the Finance Party Quiet Enjoyment Letter simultaneous with the Owners' execution of any such ship mortgage.
All fees and expenses incurred by the Owners and their financiers in connection with the financing and/or refinancing referred to above shall be borne by the Owners. For the avoidance of doubt, the Owners shall not be responsible for any fees and expenses (including legal fees) incurred by the Charterers, the Sub-Charterer or any other party in connection with the financing and/or refinancing referred to above.
43.2
The Charterers agree with the Owners to:

(a)
cooperate with the Owners to execute or enter into any such documents as the Owners' financiers may reasonably require under and in connection with the financing and/or refinancing of the Vessel;

(b)
acknowledge and agree to be bound by and if required, to ensure that any other applicable charterers consent and agree to be bound by, the notice of any assignment of this Charter, the other Transaction Documents and/or all or any Security Interest under the Security Documents executed in favour of the Mortgagee in the manner as required by the Mortgagee; and

(c)
comply, and provide such information and documents to enable the Owners to comply, with all such instructions or directions in regard to the employment, insurances, operation, repairs and maintenance of the Vessel as reasonably laid down in the Financial Instruments or as may be reasonably directed from time to time during the currency of this Charter by the mortgage(s) in conformity with the Financial Instruments.
44.
NOTICES
44.1
Any communication to be made under or in connection with the Transaction Documents shall be made in writing and, unless otherwise stated, may be given in person, by post, fax or email.
44.2
Except as otherwise provided for in this Charter, all notices or other communications under or in respect of the Transaction Documents shall be in writing and shall be made or given to such party at the address, facsimile number or email address appearing below (or at such other address, facsimile number or email address as such party may hereafter specify for such purposes to the other by notice in writing):
45


(a)
in the case of the Owners:

Address:
c/o Oriental Fleet International Company Limited
50/F, COSCO Tower
183 Queen's Road Central
Hong Kong

Attention:
Belinda Lou / Thomas Xing / Xu Ying

Email:
lou.can@coscoshipping.com /
thomas.xing@ofi.com.hk /
asset@coscoshipping.com

Fax:
+852 2339 1881

(b)
to the Charterers:

Address: c/o
1, Vas. Sofias & Meg.
Alexandrou Str.
15124, Maroussi
Athens, Greece

Attention:
Andreas Louka

Email:
louka@loukapartners.com

Fax:
+30 2108128320
44.3
Any communication or document made or delivered by each Party to the other Party under or in connection with the Transaction Documents will only be effective:

(a)
if by way of fax, when received in legible form;

(b)
if by way of letter, when it has been left at the relevant address to which it has been posted with postage prepaid in an envelope addressed to the relevant party at that address, and, if a particular department or officer is specified as part of its address details provided under Clause 44.2, if addressed to that department or officer; or

(c)
if by way of email, only when received in a legible form by the email address of the person to whom the communication is made.
44.4
All communications and documents delivered pursuant to or otherwise relating to this Charter shall be in English.
45.
TERMINATION EVENTS
Each of the following shall constitute a Termination Event for purposes of this Charter:

(a)
the Charterers or any other Security Party fails to make any payment on its due date under a Transaction Document to which it is a party unless such failure to pay is remedied within a period of three (3) Business Days of such payment becoming due and payable; or

(b)
the Charterers fail to obtain and/or maintain the Insurances required under Clause 39 in accordance with the provisions thereof or any insurer in respect
46

of such Insurances cancels the Insurances or disclaims liability with respect thereto; or

(c)
the Guarantor fails to comply with the financial covenants under clause 14 of schedule 2 to the Guarantee unless such financial covenants are complied with within thirty (30) days of such failure to comply (as evidenced by the financial statements of the Guarantor as of the date of such remedy and a Compliance Certificate delivered by the Guarantor setting out (in reasonable detail) computations as to compliance with clause 14 of schedule 2 to the Guarantee as at the date at which those financial statements were drawn up); or

(d)
the Charterers or any other Security Party commits any other breach of, or omits to observe or perform, any of their other obligations or undertakings in this Charter or any other Transaction Document (other than a breach referred to in paragraph (a), (b) or (c) above or paragraph (q) below) unless such breach or omission is, in the opinion of the Owners, remediable and the Charterers and/or the relevant Security Party shall remedy such breach or omission within ten (10) Business Days of notice thereof from the Owners; or

(e)
any representation or warranty or statement made or deemed to be made by the Charterers or any Security Party in or pursuant to any Transaction Document to which it is a party or in any document or certificate furnished to the Owners and the Security Trustee in connection herewith or if applicable, in the case of the Charterers only, the Certificate of Delivery and Acceptance, proves to be incorrect or misleading in any material respect when it is made or deemed made; or

(f)
any of the following occurs in relation to any Financial Indebtedness of the Charterers or any other Security Party:

(i)
any Financial Indebtedness of the Charterers or any other Security Party is not paid when due nor within any originally applicable grace period; or

(ii)
any Financial Indebtedness of the Charterers or any other Security Party is declared to be or otherwise becomes due and payable, prior to its specified maturity date as a result of any event of default (howsoever described); or

(iii)
any commitment for any Financial Indebtedness of the Charterers or any other Security Party is cancelled or suspended by a creditor of the Charterers or any other Security Party (as the case may be) as a result of an event of default (however described); or

(iv)
any creditor of the Charterers or any other Security Party becomes entitled to declare any Financial Indebtedness of the Charterers or any other Security Party (as the case may be) due and payable prior to its specified maturity as a result of an event of default (howsoever defined),
47

provided that no Termination Event will occur under this paragraph (f) if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (i) to (iv) above is less than $10,000,000 (or its equivalent in any other currency or currencies) in relation to the Guarantor; or

(g)
any of the following events (or any analogous procedure or step is taken in any jurisdiction) occurs in relation to the Charterers or any other Security Party:

(i)
the Charterers or any other Security Party are or are reasonably presumed or deemed to be unable or admits inability to pay their debts as they fall due, suspends making payments on any of their debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of their creditors with a view to rescheduling any of their indebtedness; or

(ii)
the value of their assets is less than their liabilities (taking into account contingent and prospective liabilities);

(iii)
a moratorium is declared in respect of any indebtedness of the Charterers or any other Security Party;

(iv)
the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration, provisional supervision or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of the Charterers or any other Security Party;

(v)
a composition or arrangement with any creditor of the Charterers or any other Security Party, or any assignment for the benefit of creditors generally of the Charterers or any other Security Party or a class of such creditors;

(vi)
the appointment of a liquidator, receiver, administrator, administrative receiver, compulsory manager, provisional supervisor or other similar officer in respect of the Charterers or any other Security Party or any of its assets; or

(vii)
enforcement of any Security over any assets of the Charterers or any other Security Party; or

(viii)
any expropriation, attachment, sequestration, distress or execution (or any analogous process in any jurisdiction) affects any asset or assets of the Charterers or any other Security Party which has or, in the opinion of the Owners, is likely to have a Material Adverse Effect; or

(h)
the Charterers or any other Security Party suspends or ceases or threatens to suspend or cease carrying on all or a material part of their business; or

(i)
any consent, approval, Authorisation, license or permit necessary to enable the Charterers to operate or charter the Vessel or the Charterers to sell the Vessel or to enable them to comply with any provision of this Charter or the MOA, as
48

the case may be, to ensure that the obligations of the Charterers are legal, valid, binding or enforceable is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent, approval, Authorisation, license or permit is not fulfilled unless such event is, in the opinion of the Owners, remediable and the Charterers shall remedy such event within ten (10) Business Days of the occurrence of such event; or

(j)
any event or circumstance occurs which has or, in the reasonable opinion of the Owners, is likely to have, a Material Adverse Effect; or

(k)
this Charter or any other Transaction Document or any Security Interest created by a Transaction Document:

(i)
is cancelled, terminated, rescinded or suspended or otherwise ceases to remain in full force and effect for any reason or no longer constitutes legal, valid, binding and enforceable obligations of any party to that document for any reason whatsoever; or

(ii)
is amended or varied without the prior written consent of the Owners and the Security Trustee, except for any amendment or variation which is expressly permitted by this Charter or any other relevant Transaction Document; or

(l)
a Security Party rescinds or purports to rescind or repudiates or purports to repudiate a Transaction Document to which it is a party or any other party of any of those Transaction Documents evidences an intention to repudiate or rescind any of those Transaction Documents; or

(m)
it is or has become unlawful for the Charterers or any other Security Party to perform any of their obligations under the Transaction Documents to which they are a party or any Security Interest created or expressed to be created or evidenced by the Security Documents to which they are a party ceases to be effective with the ranking and priority it is expressed to have; or

(n)
the Vessel is not delivered latest by the Cancelling Date; or

(o)
the occurrence of a Change of Control; or

(p)
the occurrence of any of the following events:

(i)
a default under the MOA which is not waived by the Owners; or

(ii)
a default or termination event or the equivalent under any Collateral Transaction Documents which is not waived by the relevant Collateral Owner; or

(q)
in the event that a shortfall occurs in the Market Value of the Vessel together with the security value of any additional cash deposit or other security provided as required under Clause 47.1(n), the Charterers have not:

(i)
provided or procured the provision of additional cash deposit or other security in a form and in an amount acceptable to the Owners; or
49


(ii)
prepaid so much of the Charterhire Principal to cover such shortfall,

within thirty (30) days in accordance with Clause 47.1(n).
46.
REPRESENTATIONS AND WARRANTIES
The Charterers represent and warrant to the Owners as of the date hereof, and on each Payment Date henceforth until the last day of the Charter Period, as follows:

(a)
each Security Party is a limited liability company duly incorporated and validly existing and, where applicable, in good standing under the laws of its jurisdiction of incorporation, organisation or formation (as the case may be) with power to own its assets, carry on its business as it is being conducted, enter into the Transaction Documents and to exercise its rights and perform its obligations under the Transaction Documents and all corporate and other action required to authorise its execution of the Transaction Documents and its performance of its obligations thereunder have been duly taken;

(b)  (i)  the obligations expressed to be assumed by each Security Party in the Transaction Documents to it is a party constitute, subject to the Legal Reservations, its legal and valid obligations, binding on it in accordance with the terms of the Transaction Documents and no limit on any of its powers will be exceeded as a result of the sale, leasing, borrowings, granting of security or giving of guarantees contemplated by the Transaction Documents or the performance by it of any of its obligations thereunder; and

(ii)
without limiting the generality of paragraph (b)(i) above, subject to the Security Perfection Requirements, each Security Document to which each Security Party is a party creates the Security Interests which it purports to create and such Security Interests are valid and effective;

(c)
the execution of the Transaction Documents by each Security Party and its exercise of its rights and performance of its obligations under any of such Transaction Documents do not constitute and will not result in any breach of or conflict with, any agreement or treaty to which it is a party;

(d)
all Authorisations, consents, approvals, resolutions, licences, exemptions, filings, notarisations or registrations required of each of the Charterers and the other Security Parties:

(i)
to enable them lawfully to enter into, exercise its rights and comply with its obligations in the Transaction Documents to which they are respectively a party;

(ii)
to make the Transaction Documents to which they are respectively a party admissible in evidence in its Relevant Jurisdictions;

(iii)
for them to carry on its business, and which are material; and

(iv)
to enable them to create the Security Interest to be created by them under any Security Document to which they are respectively a party
50

and to ensure that such Security Interest has the priority and ranking it is expressed to have,
have been obtained or effected and are in full force and effect, subject in the case of any Security Document to which it is a party to the Security Perfection Requirements;

(e)
the execution, delivery, and performance of the Transaction Documents to which each Security Party is or shall be a party will not, in each case: (i) violate any law, governmental rule, regulation, order, judgment, award or decree which is binding upon it or any of its assets; (ii) contravene any provision of its constitutional documents; (iii) contravene or result in the breach of any agreement to which such Security Party is a party or by which it or any of its assets or revenues is bound, and (iv) constitute a default under any agreement to which such Security Party is a party or by which it or any of its assets or revenues are bound;

(f)
no third party has any Security Interest, other than the Permitted Security Interests, or any other interest, right or claim over, in or in relation to the Vessel, this Charter or any moneys payable hereunder and/or any of the other Transaction Documents;

(g)
except as specifically referred to in any Legal Opinion, all payments which a Security Party is liable to make under any Transaction Document to which such Security Party is a party may be made by such party without deduction or withholding for or on account of any tax payable under the laws of each Relevant Jurisdiction of such Security Party;

(h)
no legal or administrative action of any kind whatsoever involving a Security Party which has or, in the opinion of the Owners, is likely to have a Material Adverse Effect has been commenced or taken;

(i)
each Security Party has paid all taxes applicable to, or imposed on or in relation to it, its business or if applicable, the Vessel, except for those being contested in good faith with adequate reserves;

(j)
subject to the Legal Reservations:

(i)
the choice of governing law as stated in each Transaction Document to which a Security Party is party to and the agreement by such party to refer disputes to the relevant courts or tribunal as stated in such Transaction Document will be recognised and enforced in the Relevant Jurisdictions of such Security Party; and

(ii)
any arbitral award, ruling or judgment obtained in the Relevant Jurisdictions of such Security Party in relation to such Transaction Documents will be recognised and enforced in the Relevant Jurisdictions of such Security Party;

(k)
no Security Party nor any of their assets are entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding
51

(which shall include, without limitation, suit, attachment prior to judgment, execution or other enforcement);

(l)
the obligations of each Security Party under each Transaction Document to which it is a party, are the direct, general and unconditional obligations of such Security Party and rank at least pari passu with all other present and future unsecured and unsubordinated creditors of such Security Party save for any obligation which is mandatorily preferred by law and not by virtue of any contract;

(m)
no Security Party (other than the Guarantor) is a US Tax Obligor or registered as a non-Hong Kong company under Companies Ordinance (Cap. 622 of the Laws of Hong Kong), and none of them have established a place of business in England or the US;

(n)
no Security Party is a Restricted Person;

(o)
each Security Party is in compliance with all Sanctions laws, and none of them have been or are currently being investigated on compliance with Sanctions, they have received notice or are not aware of any claim, action, suit or proceeding against any of them with respect to Sanctions and they have not taken any action to evade the application of Sanctions;

(p)
neither the Charterers nor any other Security Party is insolvent or in liquidation or administration or subject to any other formal or informal insolvency procedure, and no receiver, administrative receiver, administrator, liquidator, trustee or analogous officer has been appointed in respect of the Charterers or any other Security Party or all or material part of their assets;

(q)
no Termination Event is continuing or might reasonably be expected to result from the entry into and performance of this Charter or any other Transaction Document;

(r)
subject to any qualification (if applicable) set out in such information, any information provided by the Charterers (or on their behalf) to the Owners and the other Creditor Parties was true and accurate in all material respects as at the date it was provided or as the date at which such information was stated;

(s)  (i)  the financial statements of the Guarantor most recently supplied to the Owners (which, at the date of this Charter, are its Original Financial Statements) were prepared in accordance with GAAP consistently applied save to the extent expressly disclosed in such financial statements;

(ii)
the financial statements of the Guarantor most recently supplied to the Owners (which, at the date of this Charter, are its Original Financial Statements) give a true and fair view of (if audited) or fairly and represent (if unaudited) their consolidated financial condition and operations for the period to which they relate, save to the extent expressly disclosed in such financial statements; and
52


(iii)
there has been no material adverse change in the business or consolidated financial condition of the Group since the date of the Guarantor's Original Financial Statements;

(t)
the Charterers are a wholly-owned Subsidiary of the Guarantor, which is ultimately controlled by the Substantial Shareholder;

(u)
no litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency (which, if adversely determined, would have a Material Adverse Effect on any Security Party) have been started or (to the best of the knowledge and belief of such Security Party) threatened against it;

(v)
no judgment or order of a court, arbitral body or agency which might reasonably be expected to have a Material Adverse Effect has been made against any Security Party; and

(w)
each Security Party has complied with all anti-money laundering legislation (to the extent applicable to it) that is relevant in the context of the transactions contemplated by the Transaction Documents to which it is a party.
47.
CHARTERERS' UNDERTAKINGS
The Charterers undertake that they shall comply or procure compliance with the following undertakings commencing from the Commencement Date and up to the last day of the Charter Period:
47.1
General Covenants

(a)
they will keep the Vessel registered in the name of the Owners under the laws and flag of the Republic of the Marshall Islands, and shall not do or permit to be done anything, or omit to do anything which could or might result in:

(i)
such registration being forfeited or imperilled; or

(ii)
the Vessel being required to be registered under any other law or flag
and save with the prior written consent of the Owners and/or their financiers (if any) (such consent not to be unreasonably withheld), the Charterers shall not register the Vessel or permit her registration under any other law or flag;

(b)
they will provide or will procure that each Security Party provides, the Owners with details of any legal or administrative action involving such Security Party or the Vessel or any detention or arrest of the Vessel or any damage to or alteration of the Vessel in excess of the Major Casualty amount as soon as such action is instituted or it becomes apparent to such Security Party that it is likely to be instituted and is likely to have a Material Adverse Effect on the ability of a Security Party to perform their obligations under each Transaction Document to which it is a party;

(c)
they will, and will procure that each other Security Party will obtain and promptly renew or procure the obtainment or renewal of and provide copies of, from time to time, any necessary consents, approvals, Authorisations,
53

licenses or permits of any regulatory body or authority required under any law or regulation of a Relevant Jurisdiction of such Security Party (i) to enable such Security Party to perform its obligations under each Transaction Document to which it is a party (including without limitation to sell, charter and operate the Vessel) and (ii) to ensure the legality, validity, enforceability or admissibility in evidence of any Transaction Document to which such Security Party is subject;

(d)
they will not, and will procure that each other Security Party will not, create, assume or permit to exist any Security Interest of any kind upon any Transaction Document to which such Security Party is a party, and if applicable, the Vessel, in each case other than Permitted Security Interests;

(e)
they will at their own cost, and will procure that each other Security Party will:

(i)
do all that such Security Party can to ensure that any Transaction Document to which such Security Party is a party validly creates the obligations and the Security Interests which Security Party purports to create; and

(ii)
without limiting the generality of paragraph (i) above, where necessary promptly register, file, record or enrol any Transaction Document to which such Security Party is a party with any court or authority in all Relevant Jurisdictions of such Security Party, pay any stamp, registration or similar tax in all Relevant Jurisdictions of such Security Party in respect of any Transaction Document to which such Security Party is a party, give any notice or take any other step which, is or has become necessary or desirable for any such Transaction Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which such Security Party creates;

(f)
they will, and will procure that each other Security Party will:

(i)
notify the Owners as soon as it becomes aware of the occurrence of (A) any Termination Event and (B) any other matters which might lead to an occurrence of any Termination Event; and

(ii)
notify the Owners of any steps or action which they are, or such Security Party is, taking, or considering taking, to remedy or mitigate the effect of such occurrence,
and the Charterers will, if so requested by the Owners, provide any such certificate signed by its director, confirming that there exists no Termination Event;

(g)
they will, and will procure that each other Security Party will, as soon as practicable after receiving the request, provide the Owners with any additional financial or other information relating:
54


(i)
to themselves and/or the Vessel (including, but not limited to the condition and location of the Vessel); or

(ii)
to any other matter relevant to, or to any provision of any Transaction Document to which it is a party;
which may be reasonably requested by the Owners (or their financiers (if any)) at any time;

(h)
they will provide the Owners with all such information as the Owners shall require regarding employment of the Vessel (including cargo, voyage details such as duration, loading port and discharge port) every three (3) months throughout the Charter Period, and engagements, particulars of all towages and salvages of the Vessel, and copies of all charters and other contracts of her employment or otherwise howsoever concerning her;

(i)
without prejudice to Clause 47, comply, or procure compliance, and will procure that each other Security Party and any Approved Manager of the Vessel will comply or procure compliance, with all laws or regulations relating to the Vessel and its ownership, employment, operation, management and registration, including the ISM Code, the ISPS Code, all Environmental Laws and the laws of the Vessel's registry;

(j)
the Vessel shall be classed and maintained in the highest class with the Classification Society upon Delivery and shall be free of all overdue recommendations and requirements and they shall promptly provide class records and inspection reports of the Vessel to the Owners;

(k)
neither the Charterers nor any other Security Party shall enter or be permitted to enter, into any form of merger, sub-division, amalgamation or other reorganisation or change of ownership;

(l)  (i)  they shall permit the Owners (at the expense of the Charterers) by surveyors or other persons appointed by them for such purpose to board the Vessel no more than once per calendar year during the Charter Period or, following the occurrence of a Termination Event which is continuing, at all reasonable times for the purpose of inspecting her, provided that, unless a Termination Event has occurred and is continuing, such inspection shall not unduly disrupt or interfere with the normal daily operations of the Vessel;

(ii)
they shall provide all proper facilities for such inspections; and

(iii)
they shall give the Owners reasonable advance notice of any intended drydocking of the Vessel (whether for the purpose of classification, survey or otherwise);

(m)  (i)  they will ensure that the Market Value of the Vessel shall be tested once every twelve (12) months commencing from the Commencement Date in the absence of a Termination Event, and upon the occurrence
55

of a Termination Event which is continuing, the Market Value of the Vessel shall be tested at any time at the request of the Owners;

(ii)
in the event of the failure or delay of the Charterers to arrange such testing of the Market Value of the Vessel, the Owners shall have the liberty to arrange such testing at such time as the Owners shall require; and

(iii)
they shall pay the amount of the fees and expenses of an Approved Valuer incurred for all such valuations and all legal and other expenses reasonably incurred by the Owners in connection with any matter arising out of this Clause;

(n)
they will ensure that the Market Value of the Vessel shall at all times be equal to or greater than one hundred and twenty per cent. (120%) of the Charterhire Principal, however, if the Owners notify the Charterers that the Market Value of the Vessel has fallen below one hundred and twenty per cent. (120%) of the Charterhire Principal, the Charterers shall, unless otherwise agreed by the Owners, within thirty (30) days of the Owners' receipt of the relevant valuation of the Vessel, provide additional cash deposit or other security in a form and in an amount acceptable to the Owners or prepay the Charterhire Principal to cover the shortfall. Any amount prepaid pursuant to this Clause 47.1(n) shall be applied towards reducing the instalments of Fixed Charterhire (for the avoidance of doubt, excluding the Balloon Payment) falling on or after the date of such prepayment by the amount of such prepayment on a pro-rata basis;

(o)
they will notify the Owners promptly of:

(i)
any Environmental Claim made against the Charterers in connection with the Vessel, or any Environmental Incident, arrest or detention of the Vessel, any exercise or purported exercise of any lien on the Vessel or its Earnings or any requisition of the Vessel for hire; and

(ii)
any casualty or occurrence as a result of which the Vessel has become or is, by the passing of time or otherwise, likely to become, a Major Casualty;

(p)  (i)  they shall not permit any chartering of the Vessel on a time charter basis of one (1) calendar year or more unless the Charterers shall have provided the Owners with prior written notice of such chartering together with detailed information about the intended Sub-Charterer, the proposed terms of the intended Sub-Charter and such further information as the Owners may reasonably request; and

(ii)
except with the prior written consent of the Owners (and then only subject to such terms as the Owners may impose), they shall not let the Vessel:

(A)
on demise charter for any period;
56


(B)
on terms whereby more than two (2) months' hire (or the equivalent) is payable in advance; or

(C)
on any terms other than arms' length terms;

(q)
they shall comply, and shall procure that each other Security Party complies, with:

(i)
all applicable laws to which it may be subject (including, but not limited to, Business Ethics Laws, anti-bribery and corruption laws and anti-money lending laws); and

(ii)
all laws and regulations in respect of Sanctions, and in particular, they shall effect and maintain a sanctions compliance policy to ensure compliance with all such laws and regulations implemented from time to time;

(r)
the Vessel shall not be employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel shall not be used by or for the benefit for any party which is a target of Sanctions, or trade to any Restricted Country; or (ii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation;

(s)
they will, and will procure that each other Security Party will, promptly notify the Owners and provide all information in relation to its business and operations which may be relevant for the purposes of ascertaining whether they are in compliance with all laws and regulations relating to Sanctions, and in particular, they shall notify the Owners in writing immediately upon being aware that any of its shareholders or directors, officers of employees is a Restricted Person or has otherwise become a target of Sanctions;

(t)
they shall not appoint or permit to be appointed any manager of the Vessel unless it is an Approved Manager appointed on terms acceptable to the Owners and their financiers (if any) and such Approved Manager has (prior to accepting its appointment) entered into a Manager's Undertaking;

(u)
they shall notify the Owners in writing as soon as they become aware that the Charterers are likely to, or will receive, any tax credit in relation to any payments made by any Sub-Charterer to it;

(v)
save with the prior written consent of the Owners, they shall ensure that no Change of Control occurs;

(w)
they shall, at their own expense, replace, renew or substitute any equipment of the Vessel as shall be so damaged or worn as to be unfit for use. Title to any part replaced, renewed or substituted shall remain with the Owners;

(x)
save with the prior written consent of the Owners, there shall not be any transfer or disposal of:

(i)
the legal or beneficial shareholding of the Charterers; or
57


(ii)
the legal or beneficial shareholding of the Guarantor,
unless following such transfer or disposal, the Guarantor remains ultimately or indirectly controlled by the Substantial Shareholder;

(y)
they shall not create, incur, assume, suffer to exist or in any manner become or remain liable for any Financial Indebtedness, other than:

(i)
Financial Indebtedness normally associated with the day to day operation of the Vessel, or otherwise in the normal course of business;

(ii)
Financial Indebtedness under the Transaction Documents; and

(iii)
Financial Indebtedness, including:

(A)
all shareholder's and intercompany loans, which by its terms is subordinate and subject in right of payment to the prior payment in full of the Financial Indebtedness under or pursuant to the Transaction Documents, as provided in paragraph (z) below;

(B)
all shareholder's and intercompany advances, which upon occurrence of a Termination Event which is continuing, shall be subordinated and subject in right of payment to the prior payment in full of the Financial Indebtedness under or pursuant to the Transaction Documents, as provided in paragraph (aa) below,
or in any case, as otherwise evidenced by a subordination deed in form and substance satisfactory to the Owners; and

(z)
they acknowledge to and undertake with the Owners that all shareholder's and intercompany loans from time to time made by the Guarantor or any other member of the Group to the Charterers:

(i)
are and shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterers under this Charter and the other Transaction Documents;

(ii)
shall not be repaid or be subject to payment of interest (although interest may accrue);

(iii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterers; and

(iv)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim;

(aa)
they acknowledge to and undertake with the Owners that all shareholder's and intercompany advances from time to time made by the Guarantor or any other member of the Group to the Charterers:
58


(i)
shall be non-interest bearing;

(ii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterers;

(iii)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim; and

(iv)
upon occurrence of a Termination Event which is continuing:

(A)
shall not be repaid; and

(B)
shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterers under this Charter and the other Transaction Documents;

(bb)
they shall not declare or pay any dividends unless no Termination Event has occurred or will occur as a result of such declaration or payment;

(cc)
they shall, and shall procure that each other Security Parties will, ensure that all the Security Perfection Requirements have been or will be done or obtained (as the case may be) no later than the latest date permitted by applicable law and in any event by such date as the Owners and the Security Trustee may specify;

(dd)
they shall, and shall procure that each other Security Parties will, conduct their respective business in compliance with applicable anti-corruption laws; and

(ee)
they shall provide the documents and evidence specified in Clause 35.2 in form and substance satisfactory to the Owners as soon as the same become available, but in any event before the relevant date as specified in Parts C and D of Addendum No.1.
48.
PURCHASE OPTION
48.1
Subject to Clause 48.2, the Owners hereby grant to the Charterers a purchase option to require the Owners to sell all of the Owners' beneficial and legal right, title and interest in the Vessel and all belonging to her, to the Charterers at the Purchase Option Price upon the terms and conditions of this Charter.
48.2
Subject to the other terms and conditions of this Charter, the Purchase Option shall only be exercisable by the Charterers on or after the third (3rd) anniversary date of the Commencement Date provided that no Termination Event has occurred and is continuing.
48.3
The Purchase Option may be exercised by the Charterers by giving the Owners at least ninety (90) days' prior written notice of their intention to exercise the Purchase Option such that the Purchase Option Notice shall accordingly be given to the Owners no later than the date falling ninety (90) days' prior to the intended Purchase Option Date (unless otherwise agreed by the Owners in their absolute discretion).
59

48.4
The Purchase Option Price shall be the aggregate of (but in each case, not double-counting):

(a)
any Charterhire due and payable on the Purchase Option Date and any default interest payable under Clause 37.12;

(b)
if the Purchase Option Date is a Payment Date, the Charterhire Principal corresponding to that Payment Date in Schedule 2, or if the Purchase Option Date is not a Payment Date, all Charterhire Principal corresponding to the Payment Date in Schedule 2 immediately preceding the Purchase Option Date (in each case, the Relevant Charterhire Principal);

(c)
if the Purchase Option Date is not a Payment Date, any Breakfunding Costs;

(d)
all costs (including, but not limited to, legal costs) and expenses reasonably incurred by the Owners under this Charter and the other Transaction Documents in connection with or as a result of the exercise of the Purchase Option by the Charterers; and

(e)
an early termination fee calculated at the following percentage of the Relevant Charterhire Principal:
If the Purchase Option
Percentage of
Date occurs after
Relevant Charterhire Principal
the following anniversary of
 
the Commencement Date
 
   
After 3rd anniversary
2%
After 4th anniversary
1.5%
After 5th anniversary
1%
After 6th anniversary
0.5%
After 7th anniversary
0%

48.5  (a)  The Purchase Option Notice shall be signed by a duly authorised officer or attorney of the Charterers and shall contain the following information:

(i)
the Purchase Option Date; and

(ii)
the Relevant Charterhire Principal portion of the Purchase Option Price payable on the Purchase Option Date as determined in accordance with Clause 48.4(b).

(b)
Upon receipt of a duly signed and completed Purchase Option Notice in accordance with Clause 48.5(a), the Owners shall notify the Charterers of the Purchase Option Price in writing as soon as practicable.
48.6
The Charterers may serve a Purchase Option Notice throughout the duration of the Charter Period and is irrevocable once given.
48.7
Upon the exercise of the Purchase Option, the Owners and the Charterers shall thereupon perform their respective obligations referred to in Clause 50 and the
60

Purchase Option Price and other costs and expenses reasonably incurred for the sale of the Vessel shall be paid by the Charterers on the Purchase Option Date.
49.
PURCHASE OBLIGATION
In consideration of the Owners granting the Charterers the Purchase Option, the Charterers hereby agree that they are obliged and required to purchase all of the Owners' beneficial and legal right, title and interest in the Vessel and all belonging to her on the last day of the Charter Period whereupon the Owners and the Charterers shall perform their obligations referred to in Clause 50 and the Charterers shall be obliged to pay the Purchase Obligation Price on the Purchase Obligation Date unless the Charter is terminated before the natural expiration of this Charter or the Owners and the Charterers agree otherwise or the Purchase Option was exercised pursuant to Clause 48.
50.
SALE OF THE VESSEL BY PURCHASE OPTION AND PURCHASE OBLIGATION

(a)
Completion of the exercise of the Purchase Option or the performance of the Purchase Obligation (as the case may be) shall take place on the Relevant Date whereupon the Owners will sell to the Charterers (or their nominee), and the Charterers (or their nominee) will purchase from the Owners, all the legal and beneficial interest and title in the Vessel, for the Relevant Price on an "as is where is" basis and on the following terms and conditions:

(i)
the Charterers expressly agree and acknowledge that, no condition, warranty or representation of any kind is or has been given by or on behalf of the Owners in respect of the Vessel or any part thereof, and accordingly the Charterers confirm that that they have not, in entering into this Charter, relied on any condition, warranty or representation by the Owners or any person on the Owners' behalf, express or implied, whether arising by law or otherwise in relation to the Vessel or any part thereof, including, without limitation, warranties or representations as to the description, suitability, quality, merchantability, fitness for any purpose, value, state, condition, appearance, safety, durability, design or operation of any kind or nature of the Vessel or any part thereof, and the benefit of any such condition, warranty or representation by the Owners is hereby irrevocably and unconditionally waived by the Charterers to the extend permissible under applicable law, the Charterers hereby also waives any rights which they may have in tort in respect of any the matters referred to above and irrevocably agree that the Owners shall have no greater liability in tort in respect of any such matter than they would have in contract after taking account of all of the foregoing exclusions. No third parties making any representation or warranty relating to the Vessel or any part thereof are the agents of the Owners nor has any such third party authority to bind the Owners thereby. Notwithstanding anything contained above, nothing contained herein is intended to obviate, remove or waive any rights or warranty or other claims relating thereto which the Charterers (or their nominee) or the Owners
61

may have against the manufacturer or supplier of the Vessel or any third party;

(ii)
the Vessel shall, on completion of sale, be free from any registered mortgages incurred by the Owners (where any mortgages, liens, Security Interests and debts arising out of or in connection with this Charter or the other Transaction Documents shall be released prior to (or simultaneously with) the transfer and/or release of the Relevant Price by the Charterers (as buyers) to the Owners (as sellers));

(iii)
the Relevant Price shall be paid by (or on behalf of) the Charterers to the Owners on the Relevant Date together with unpaid amounts of Charterhire but only up to and including the Relevant Date, and other moneys owing by or accrued or due from the Charterers under this Charter on or prior to such Relevant Date which remain unpaid; and

(iv)
upon the Relevant Price together with the other moneys described under paragraph (iii) above being fully and irrevocably paid to the Owners on, and in accordance with, the terms set forth in this Charter, the Owners agree (at the cost of the Charterers) to enter into (A) a bill of sale, (B) a commercial invoice, (C) a protocol of delivery and acceptance and (D) such other additional documents as may be necessary for the purpose of registering the Vessel at its intended flag state upon such transfer, provided that the Charterers shall notify the Owners of any such additional documents no later than five (5) Business Days (or such other mutually agreed date) prior to such transfer, each in such form as may be required by the Charterers' intended flag state.

(b)
For the purposes of this Clause 50:

(i)
Relevant Date means:

(A)
in relation to the exercise of the Purchase Option, the Purchase Option Date; and

(B)
in relation to the performance of the Purchase Obligation, the Purchase Obligation Date.

(ii)
Relevant Price means:

(A)
in relation to the exercise of the Purchase Option, the Purchase Option Price; and

(B)
in relation to the performance of the Purchase Obligation, the Purchase Obligation Price.
62

51.
NO SET-OFF OR TAX DEDUCTION; FATCA PROVISIONS
51.1
General

(a)
All Charterhire and any payment made from the Charterers to enable the Owners to pay all amounts under a Transaction Document shall be paid punctually:

(i)
without any form of set-off, cross-claim or condition and in the case of Charterhire, without previous demand; and

(ii)
free and clear of any tax deduction or withholding unless required by law.

(b)
Without prejudice to Clause 51.1(a), if the Owners are required by law to make a tax deduction from any payment:

(i)
the Owners shall notify the Charterers as soon as they become aware of the requirement; and

(ii)
the amount due in respect of the payment shall be increased by the amount necessary to ensure that the Owners receive and retain (free from any liability relating to the tax deduction) a net amount which, after the tax deduction, is equal to the full amount which they would otherwise have received.

(c)
In this Charter, tax deduction means any deduction or withholding for or on account of any present or future tax, other than a FATCA Deduction.
51.2
FATCA provisions
51.2.1
FATCA Information

(a)
Subject to paragraph (c) below, each Relevant Party shall, within ten (10) Business Days of a reasonable request by another Relevant Party:

(i)
confirm to that other Relevant Party whether it is:

(A)
a FATCA Exempt Party; or

(B)
not a FATCA Exempt Party;

(ii)
supply to that other Relevant Party (with a copy to all other Relevant Parties) such forms, documentation and other information relating to its status under FATCA as that other Relevant Party reasonably requests for the purpose of that other Relevant Party's compliance with FATCA; and

(iii)
supply to that other Relevant Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Relevant Party's compliance with any other law, regulation, or exchange of information regime.
63


(b)
If a Relevant Party confirms to another Relevant Party under paragraph (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 Relevant Party shall so notify all other Relevant Parties reasonably promptly.

(c)
Paragraph (a) above shall not oblige any Relevant Party to do anything, and paragraph (a)(iii) above shall not oblige any other Relevant Party to do anything, which would or might in its reasonable opinion constitute a breach of:

(i)
any law or regulation;

(ii)
any fiduciary duty; or

(iii)
any duty of confidentiality.

(d)
If a Relevant Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with paragraph (a)(i) or (ii) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such Relevant Party shall be treated for the purposes of the Transaction Documents (and payments made under them) as if it is not a FATCA Exempt Party until such time as the Relevant Party in question provides the requested confirmation, forms, documentation or other information.
51.2.2
FATCA Deduction and gross up by Security Parties

(a)
If a Security Party is required to make a FATCA Deduction, that Security Party shall make that FATCA Deduction and any payment required in connection with that FATCA Deduction within the time allowed and in the minimum amount required by FATCA.

(b)
If a FATCA Deduction is required to be made by a Security Party, the amount of the payment due from that Security Party shall be increased to an amount which (after making any FATCA Deduction) leaves an amount equal to the payment which would have been due if no FATCA Deduction had been required.

(c)
The Charterers shall promptly upon becoming aware that a Security Party must make a FATCA Deduction (or that there is any change in the rate or the basis of a FATCA Deduction) notify the Owners accordingly.

(d)
Within thirty (30) days of making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the Security Party making that FATCA Deduction or payment shall deliver to the Owners evidence reasonably satisfactory to the Owners that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the relevant governmental or taxation authority.
64

51.2.3
FATCA Deduction by the Owners
The Owners may make any FATCA Deduction it is required by FATCA to make, and any payment required in connection with that FATCA Deduction, and the Owners shall not 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. If the Owners become aware that they must make a FATCA Deduction in respect of a payment to another Relevant Party (or that there is any change in the rate or the basis of such FATCA Deduction) it shall notify that Relevant Party.
51.2.4
FATCA Mitigation
Notwithstanding any other provision to this Charter, if a FATCA Deduction is or will be required to be made by any party under Clause 51.2 in respect of a payment to the Owners as a result of the Owners not being a FATCA Exempt Party, the Owners shall have the right to transfer their interest in the Vessel (and this Charter) to any person nominated by the Owners and all costs in relation to such transfer shall be for the account of the Owners.
52.
INCREASED COSTS

52.1
This Clause 52.1 applies if the Owners notify the Charterers that they consider that as a result of:

(a)
the introduction or alteration after the date of this Charter of a law or an alteration after the date of this Charter in the manner in which a law is interpreted or applied (disregarding any effect which relates to the application to payments under this Charter of a tax on the Owners' overall net income); or

(b)
complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Owners allocates capital resources to their obligations under this Charter) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Charter,
the Owners has incurred or will incur an increased cost.
52.2
In this Clause 52.1, increased cost means, in relation to the Owners (without any double counting):

(a)
an additional or increased cost incurred as a result of, or in connection with, the Owners having entered into, or being a party to, this Charter, of funding the acquisition of the Vessel pursuant to the MOA or performing their obligations under this Charter;

(b)
an additional or increased cost incurred by the financiers of the Owners (if any) as a result of, or in connection with, the financiers of the Owners (if any) having entered into, or being a party to, the financing arrangements with the Owners and the relevant Financial Instruments in each case relating to the funding of the acquisition of the Vessel pursuant to the MOA;
65


(c)
a reduction in the amount of any payment to the Owners under this Charter or in the effective return which such a payment represents to the Owners or their financiers (if any) on their capital;

(d)
a reduction in the amount of any payment to the financiers of the Owners (if any) under their financing arrangements and relevant Financial Instruments or in the effective return which such a payment represents to the financiers of the Owners (if any) or on their capital in each case relating to the funding of the acquisition of the Vessel pursuant to the MOA;

(e)
any other additional or increased cost of funding or financing the acquisition of the Vessel pursuant to the MOA; and

(f)
a liability to make a payment, or a return foregone, which is calculated by reference to any amounts received or receivable by the Owners under this Charter,
and for the purposes of this Clause 52.2 the Owners may in good faith allocate or spread costs and/or losses among their assets and liabilities (or any class of their assets and liabilities) on such basis as they consider appropriate.
52.3
Subject to the terms of Clause 52.1, the Charterers shall pay to the Owners, within three (3) Business Days of the Owners' demand, the amounts which the Owners from time to time notify the Charterers to be necessary to compensate the Owners for the increased cost.
52.4
Clause 53.3 above does not apply to the extent any increased cost is:

(a)
attributable to a tax deduction required by law to be made by a Security Party;

(b)
attributable to a FATCA Deduction required to be made by a Relevant Party or the Owners;

(c)
compensated for by Clause 41.5(b) (or would have been compensated for under Clause 41.5(b) but was not so compensated solely because any of the exclusions in Clause 41.5(b) applied); or

(d)
attributable to the wilful breach by the Owners of any law or regulation.
53.
GOVERNING LAW AND JURISDICTION
53.1
This Charter and any non-contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with English law and any Dispute arising out of or in connection with this Charter shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory re-enactment or modification thereof save to the extent necessary to give effect to the provisions of this Clause.
53.2
The arbitration reference shall be to three (3) arbitrators:

(a)
A Party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other Party requiring the
66

other Party to appoint its own arbitrator within fourteen (14) calendar days of that notice, and stating it will appoint its arbitrator as sole arbitrator unless the other Party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified.

(b)
If the other Party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the Party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other Party, appoint its arbitrator as sole arbitrator and shall advise the other Party accordingly. The award of a sole arbitrator shall be binding on both Parties as if he/she had been appointed by agreement.

(c)
Where each Party appoints its own arbitrator, then the two (2) arbitrators so appointed may proceed with the arbitration and at any time thereafter appoint a third arbitrator so long as they do so before any substantive hearing or forthwith in the event that they cannot agree on any matter relating to the arbitration. If the said two arbitrators do not appoint a third within fourteen (14) days of one calling upon the other to do so, or if they are in disagreement as to the third arbitrator, either arbitrator or a Party shall apply to the London Maritime Arbitrators Association (LMAA) for the appointment of the third arbitrator.

(d)
The language used in the arbitration shall be English. The arbitration shall be conducted in accordance with the LMAA Terms current at the time when the arbitration proceedings are commenced.

(e)
Nothing herein shall prevent the Parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator and, if necessary, for the LMAA to exercise its statutory power to appoint the sole arbitrator if the Parties cannot agree on the appointment.
53.3
In this Clause 53, proceedings means proceedings of any kind, including an application for a provisional or protective measure and a Dispute means any dispute arising out of or in connection with this Charter (including a dispute relating to the existence, validity or termination of this Charter) or any non-contractual obligation arising out of or in connection with this Charter.
54.
MISCELLANEOUS
54.1
The Charterers waive any rights of sovereign immunity which they or any of their properties may enjoy in any jurisdiction and subjects itself to civil and commercial law with respect to their obligations under this Charter.
54.2
No term of this Charter is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not Party.
54.3
This Charter and each Transaction Document may be executed in any number of counterparts and by the different Parties or thereto on separate counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Charter or that Transaction Document, as the case may be.
67


Execution page
This Charter has been entered into on the date stated at the beginning of this Charter.
THE OWNERS
   
     
SIGNED for and on behalf of
)
 
ORIENTAL FLEET TANKER 12
)
 
LIMITED
)
 
(东方富利 TANKER12 有限公司)
)
 
by                       , Director
)
 
in the presence of:
)
 

68


THE CHARTERERS
   
     
SIGNED for and on behalf of
)
 
MONTE CARLO 71 SHIPPING
)
 
COMPANY LIMITED
)
 
by
)
 
Attorney-in-Fact
)
 
in the presence of:
)
 


69

Schedule 1: Certificate of Delivery and Acceptance
Each of ORIENTAL FLEET TANKER 12 LIMITED (东方富利 TANKER12 有限公司 ), a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 101326 (the Owners) and MONTE CARLO 71 SHIPPING COMPANY LIMITED, a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 69834 (the Charterers) hereby acknowledge that at _________________ hours on _____________________________  , there was delivered to, and accepted by, the Charterers the Vessel known as STENAWECO ENERGY, registered in the name of the Owners under the laws and flag of the Republic of the Marshall Islands with Official Number 5270 and IMO number 9683984 under a bareboat charter dated _________________  (together with all supplements and amendments to it, the Charter) and made between the Owners and the Charterers and that Delivery (as defined in the Charter) thereupon took place and that, accordingly, the Vessel is and will be subject to all the terms and conditions contained in the Charter.
The Charterers warrant that the representations and warranties made by them in Clause 46 of the Charter remain correct and that no Termination Event (as defined in the Charter) has occurred and is continuing at the date of this Certificate of Delivery and Acceptance.
Signed by
)
 
[name of authorised signatory],
)
 
[title of authorised signatory]
)
 
duly authorised for and on behalf of
)
 
ORIENTAL FLEET TANKER 12
)
 
LIMITED (东方富利 TANKER12
)
 
限公司) as Owners
)
 
     
     
Signed by
)
 
[name of authorised signatory],
)
 
[title of authorised signatory]
)
 
duly authorised for and on behalf of
)
 
MONTE CARLO 71 SHIPPING
)
 
COMPANY LIMITED
)
 
as Charterers
)
 

70


Schedule 2: Charterhire Schedule
Estimated Financing Principal: US$21,375,000
Monthly
Period
Commencement
Date /
Payment Date)
Charterhire
(US$)
Charterhire Principal
(US$)
   
Upfront
Charterhire /
Balloon
Payment
Fixed
Charterhire
(being 1/120 of
Financing
Principal less
Balloon
Payment)
Aggregate Outstanding
Fixed Charterhire and
Balloon Payment
 
1st Payment Date
(Commencement
Date)
Upfront
Charterhire:
7,125,000
130,625
21,244,375
1
2nd Payment Date
(the date falling on
the 10th day of the
month falling
immediately after
Commencement
Date)
 
130,625
21,113,750
2
3rd Payment Date
(the date falling on
the 10th day of the
second (2nd) month
falling immediately
after
Commencement
Date)
 
130,625
20,983,125
3
4th Payment Date
(the date falling on
the 10th day of the
third (3rd) month
falling immediately
after
Commencement
Date)
 
130,625
20,852,500
4
5th Payment Date
(the date falling on
the 10th day of the
fourth (4th) month
falling immediately
after
Commencement
Date)
 
130,625
20,721,875
71


5
6th Payment Date
(the date falling on
the 10th day of the
fifth (5th) month
falling immediately
after
Commencement
Date)
 
130,625
20,591,250
6
7th Payment Date
(the date falling on
the 10th day of the
sixth (6th) month
falling immediately
after
Commencement
Date)
 
130,625
20,460,625
7
8th Payment Date
(the date falling on
the 10th day of the
seventh (7th) month
falling immediately
after
Commencement
Date)
 
130,625
20,330,000
8
9th Payment Date
(the date falling on
the 10th day of the
eighth (8th) month
falling immediately
after
Commencement
Date)
 
130,625
20,199,375
9
10th Payment Date
(the date falling on
the 10th day of the
ninth (9th) month
falling immediately
after
Commencement
Date)
 
130,625
20,068,750
10
11th Payment Date
(the date falling on
the 10th day of the
tenth (10th) month
falling immediately
after
Commencement
Date)
 
130,625
19,938,125
72


11
12th Payment Date
(the date falling on
the 10th day of the
 eleventh (11th)
month falling
immediately after
Commencement
Date)
 
130,625
19,807,500
12
13th Payment Date
(the date falling on
the 10th day of the
twelve (12th) month
falling immediately
after
Commencement
Date)
 
130,625
19,676,875
13
14th Payment Date
(the date falling on
the 10th day of the
thirteenth (13th)
month falling
immediately after
Commencement
Date)
 
130,625
19,546,250
14
15th Payment Date
(the date falling on
the 10th day of the
fourteenth (14th)
month falling
immediately after
Commencement
Date)
 
130,625
19,415,625
15
16th Payment Date
(the date falling on
the 10th day of the
fifteenth (15th)
month falling
immediately after
Commencement
Date)
 
130,625
19,285,000
16
17th Payment Date
(the date falling on
the 10th day of the
sixteenth (16th)
month falling
immediately after
Commencement
Date)
 
130,625
19,154,375
73


17
18th Payment Date
(the date falling on
the 10th day of the
seventeenth (17th)
month falling
immediately after
Commencement
Date)
 
130,625
19,023,750
18
19th Payment Date
(the date falling on
the 10th day of the
eighteenth (18th)
month falling
immediately after
Commencement
Date)
 
130,625
18,893,125
19
20th Payment Date
(the date falling on
the 10th day of the
nineteenth (19th)
month falling
immediately after
Commencement
Date)
 
130,625
18,762,500
20
21st Payment Date
(the date falling on
the 10th day of the
twentieth (20th)
month falling
immediately after
Commencement
Date)
 
130,625
18,631,875
21
22nd Payment Date
(the date falling on
the 10th day of the
twenty-first (21st)
month falling
immediately after
Commencement
Date)
 
130,625
18,501,250
22
23rd Payment Date
(the date falling on
the 10th day of the
twenty-second (22nd)
month falling
immediately after
Commencement
Date)
 
130,625
18,370,625
74


23
24th Payment Date
(the date falling on
the 10th day of the
twenty-third (23rd)
month falling
immediately after
Commencement
Date)
 
130,625
18,240,000
24
25th Payment Date
(the date falling on
the 10th day of the
twenty-fourth (24th)
month falling
immediately after
Commencement
Date)
 
130,625
18,109,375
25
26th Payment Date
(the date falling on
the 10th day of the
twenty-fifth (25th)
month falling
immediately after
Commencement
Date)
 
130,625
17,978,750
26
27th Payment Date
(the date falling on
the 10th day of the
twenty-sixth (26th)
month falling
immediately after
Commencement
Date)
 
130,625
17,848,125
27
28th Payment Date
(the date falling on
the 10th day of the
twenty-seventh
(27th) month falling
immediately after
Commencement
Date)
 
130,625
17,717,500
28
29th Payment Date
(the date falling on
the 10th day of the
twenty-eighth (28th)
month falling
immediately after
Commencement
Date)
 
130,625
17,586,875
75


29
30th Payment Date
(the date falling on
the 10th day of the
 twenty-ninth (29th)
month falling
immediately after
Commencement
Date)
 
130,625
17,456,250
30
31st Payment Date
(the date falling on
the 10th day of the
thirtieth (30th)
month falling
immediately after
Commencement
Date)
 
130,625
17,325,625
31
32nd Payment Date
(the date falling on
the 10th day of the
thirty-first (31st)
month falling
immediately after
Commencement
Date)
 
130,625
17,195,000
32
33rd Payment Date
(the date falling on
the 10th day of the
thirty-second (32nd)
month falling
immediately after
Commencement
Date)
 
130,625
17,064,375
33
34th Payment Date
(the date falling on
the 10th day of the
thirty-third (33rd)
month falling
immediately after
Commencement
Date)
 
130,625
16,933,750
34
35th Payment Date
(the date falling on
the 10th day of the
thirty-fourth (34th)
month falling
immediately after
Commencement
Date)
 
130,625
16,803,125
76


35
36th Payment Date
(the date falling on
the 10th day of the
thirty-fifth (35th)
month falling
immediately after
Commencement
Date)
 
130,625
16,672,500
36
37th Payment Date
(the date falling on
the 10th day of the
thirty-sixth (36th)
month falling
immediately after
Commencement
Date)
 
130,625
16,541,875
37
38th Payment Date
(the date falling on
the 10th day of the
thirty-seventh (37th)
month falling
immediately after
Commencement
Date)
 
130,625
16,411,250
38
39th Payment Date
(the date falling on
the 10th day of the
thirty-eighth (38th)
month falling
immediately after
Commencement
Date)
 
130,625
16,280,625
39
40th Payment Date
(the date falling on
the 10th day of the
thirty-ninth (39th)
month falling
immediately after
Commencement
Date)
 
130,625
16,150,000
40
41st Payment Date
(the date falling on
the 10th day of the
fortieth (40th) month
falling immediately
after
Commencement
Date)
 
130,625
16,019,375
77


41
42nd Payment Date
(the date falling on
the 10th day of the
 forty-first (41st)
month falling
immediately after
Commencement
Date)
 
130,625
15,888,750
42
43rd Payment Date
(the date falling on
the 10th day of the
forty-second (42nd)
month falling
immediately after
Commencement
Date)
 
130,625
15,758,125
43
44th Payment Date
(the date falling on
the 10th day of the
forty-third (43rd)
month falling
immediately after
Commencement
Date)
 
130,625
15,627,500
44
45th Payment Date
(the date falling on
the 10th day of the
forty-fourth (44th)
month falling
immediately after
Commencement
Date)
 
130,625
15,496,875
45
46th Payment Date
(the date falling on
the 10th day of the
forty-fifth (45th)
month falling
immediately after
Commencement
Date)
 
130,625
15,366,250
46
47th Payment Date
(the date falling on
the 10th day of the
forty-sixth (46th)
month falling
immediately after
Commencement
Date)
 
130,625
15,235,625
78


47
48th Payment Date
(the date falling on
the 10th day of the
forty-seventh (47th)
month falling
immediately after
Commencement
Date)
 
130,625
15,105,000
48
49th Payment Date
(the date falling on
the 10th day of the
forty-eighth (48th)
month falling
immediately after
Commencement
Date)
 
130,625
14,974,375
49
50th Payment Date
(the date falling on
the 10th day of the
forty-ninth (49th)
month falling
immediately after
Commencement
Date)
 
130,625
14,843,750
50
51st Payment Date
(the date falling on
the 10th day of the
fiftieth (50th) month
falling immediately
after
Commencement
Date)
 
130,625
14,713,125
51
52nd Payment Date
(the date falling on
the 10th day of the
fifty-first (51st)
month falling
immediately after
Commencement
Date)
 
130,625
14,582,500
52
53rd Payment Date
(the date falling on
the 10th day of the
fifty-second (52nd)
month falling
immediately after
Commencement
Date)
 
130,625
14,451,875
79


53
54th Payment Date
(the date falling on
the 10th day of the
fifty-third (53rd)
month falling
immediately after
Commencement
Date)
 
130,625
14,321,250
54
55th Payment Date
(the date falling on
the 10th day of the
fifty-fourth (54th)
month falling
immediately after
Commencement
Date)
 
130,625
14,190,625
55
56th Payment Date
(the date falling on
the 10th day of the
fifty-fifth (55th)
month falling
immediately after
Commencement
Date)
 
130,625
14,060,000
56
57th Payment Date
(the date falling on
the 10th day of the
fifty-sixth (56th)
month falling
immediately after
Commencement
Date)
 
130,625
13,929,375
57
58th Payment Date
(the date falling on
the 10th day of the
fifty-seventh (57th)
month falling
immediately after
Commencement
Date)
 
130,625
13,798,750
58
59th Payment Date
(the date falling on
the 10th day of the
fifty-eighth (58th)
month falling
immediately after
Commencement
Date)
 
130,625
13,668,125
80


59
60th Payment Date
(the date falling on
the 10th day of the
fifty-ninth (59th)
month falling
immediately after
Commencement
Date)
 
130,625
13,537,500
60
61st Payment Date
(the date falling on
the 10th day of the
sixtieth (60th) month
falling immediately
after
Commencement
Date)
 
130,625
13,406,875
61
62nd Payment Date
(the date falling on
the 10th day of the
sixty-first (61st)
month falling
immediately after
Commencement
Date)
 
130,625
13,276,250
62
63rd Payment Date
(the date falling on
the 10th day of the
sixty-second (62nd)
month falling
immediately after
Commencement
Date)
 
130,625
13,145,625
63
64th Payment Date
(the date falling on
the 10th day of the
sixty-third (63rd)
month falling
immediately after
Commencement
Date)
 
130,625
13,015,000
64
65th Payment Date
(the date falling on
the 10th day of the
sixty-fourth (64th)
month falling
immediately after
Commencement
Date)
 
130,625
12,884,375
81


65
66th Payment Date
(the date falling on
the 10th day of the
sixty-fifth (65th)
month falling
immediately after
Commencement
Date)
 
130,625
12,753,750
66
67th Payment Date
(the date falling on
the 10th day of the
sixty-sixth (66th)
month falling
immediately after
Commencement
Date)
 
130,625
12,623,125
67
68th Payment Date
(the date falling on
the 10th day of the
sixty-seventh (67th)
month falling
immediately after
Commencement
Date)
 
130,625
12,492,500
68
69th Payment Date
(the date falling on
the 10th day of the
sixty-eighth (68th)
month falling
immediately after
Commencement
Date)
 
130,625
12,361,875
69
70th Payment Date
(the date falling on
the 10th day of the
sixty-ninth (69th)
month falling
immediately after
Commencement
Date)
 
130,625
12,231,250
70
71st Payment Date
(the date falling on
the 10th day of the
seventieth (70th)
month falling
immediately after
Commencement
Date)
 
130,625
12,100,625
82


71
72nd Payment Date
(the date falling on
the 10th day of the
seventy-first (71st)
month falling
immediately after
Commencement
Date)
 
130,625
11,970,000
72
73rd Payment Date
(the date falling on
the 10th day of the
seventy-second
(72nd) month falling immediately after
Commencement
Date)
 
130,625
11,839,375
73
74th Payment Date
(the date falling on
the 10th day of the
seventy-third (73rd)
month falling
immediately after
Commencement
Date)
 
130,625
11,708,750
74
75th Payment Date
(the date falling on
the 10th day of the
seventy-fourth
(74th) month falling
immediately after
Commencement
Date)
 
130,625
11,578,125
75
76th Payment Date
(the date falling on
the 10th day of the
seventy-fifth (75th)
month falling
immediately after
Commencement
Date)
 
130,625
11,447,500
76
77th Payment Date
(the date falling on
the 10th day of the
seventy-sixth (76th)
month falling
immediately after
Commencement
Date)
 
130,625
11,316,875
83


77
78th Payment Date
(the date falling on
the 10th day of the
seventy-seventh
(77th) month falling
immediately after
Commencement
Date)
 
130,625
11,186,250
78
79th Payment Date
(the date falling on
the 10th day of the
seventy-eighth
(78th) month falling
immediately after
Commencement
Date)
 
130,625
11,055,625
79
80th Payment Date
(the date falling on
the 10th day of the
seventy-ninth (79th)
month falling
immediately after
Commencement
Date)
 
130,625
10,925,000
80
81st Payment Date
(the date falling on
the 10th day of the
eightieth (80th)
month falling
immediately after
Commencement
Date)
 
130,625
10,794,375
81
82nd Payment Date
(the date falling on
the 10th day of the
eighty-first (81st)
month falling
immediately after
Commencement
Date)
 
130,625
10,663,750
82
83rd Payment Date
(the date falling on
the 10th day of the
eighty-second (82nd)
month falling
immediately after
Commencement
Date)
 
130,625
10,533,125
84


83
84th Payment Date
 (the date falling on
the 10th day of the
eighty-third (83rd)
month falling
immediately after
Commencement
Date)
 
130,625
10,402,500
84
85th Payment Date
(the date falling on
the 10th day of the
eighty-fourth (84th)
month falling
immediately after
Commencement
Date)
 
130,625
10,271,875
85
86th Payment Date
(the date falling on
the 10th day of the
eighty-fifth (85th)
month falling
immediately after
Commencement
Date)
 
130,625
10,141,250
86
87th Payment Date
(the date falling on
the 10th day of the
eighty-sixth (86th)
month falling
immediately after
Commencement
Date)
 
130,625
10,010,625
87
88th Payment Date
(the date falling on
the 10th day of the
eighty-seventh
(87th) month falling
immediately after
Commencement
Date)
 
130,625
9,880,000
88
89th Payment Date
(the date falling on
the 10th day of the
eighty-eighth (88th)
month falling
immediately after
Commencement
Date)
 
130,625
9,749,375
85


89
90th Payment Date
(the date falling on
the 10th day of the
eighty-ninth (89th)
month falling
immediately after
Commencement
Date)
 
130,625
9,618,750
90
91st Payment Date
(the date falling on
the 10th day of the
ninetieth (90th)
month falling
immediately after
Commencement
Date)
 
130,625
9,488,125
91
92nd Payment Date
(the date falling on
the 10th day of the
ninety-first (91st)
month falling
immediately after
Commencement
Date)
 
130,625
9,357,500
92
93rd Payment Date
(the date falling on
the 10th day of the
ninety-second
(92nd) month falling
immediately after
Commencement
Date)
 
130,625
9,226,875
93
94th Payment Date
(the date falling on
the 10th day of the
ninety-third (93rd)
month falling
immediately after
Commencement
Date)
 
130,625
9,096,250
94
95th Payment Date
(the date falling on
the 10th day of the
ninety-fourth (94th)
month falling
immediately after
Commencement
Date)
 
130,625
8,965,625
86


95
96th Payment Date
(the date falling on
the 10th day of the
ninety-fifth (95th)
month falling
immediately after
Commencement
Date)
 
130,625
8,835,000
96
97th Payment Date
(the date falling on
the 10th day of the
ninety-sixth (96th)
month falling
immediately after
Commencement
Date)
 
130,625
8,704,375
97
98th Payment Date
(the date falling on
the 10th day of the
ninety-seventh
(97th) month falling
immediately after
Commencement
Date)
 
130,625
8,573,750
98
99th Payment Date
(the date falling on
the 10th day of the
ninety-eighth (98th)
month falling
immediately after
Commencement
Date)
 
130,625
8,443,125
99
100th Payment Date
(the date falling on
the 10th day of the
ninety-ninth (99th)
month falling
immediately after
Commencement
Date)
 
130,625
8,312,500
100
101st Payment Date
(the date falling on
the 10th day of the
one hundredth
(100th) month
falling immediately
after
Commencement
Date)
 
130,625
8,181,875
87


101
102nd Payment Date
(the date falling on
the 10th day of the
one hundred and
first (101st) month
falling immediately
after
Commencement
Date)
 
130,625
8,051,250
102
103rd Payment Date
(the date falling on
the 10th day of the
one hundred and
second (102nd)
month falling
immediately after
Commencement
Date)
 
130,625
7,920,625
103
104th Payment Date
(the date falling on
the 10th day of the
one hundred and
third (103rd) month
falling immediately
after
Commencement
Date)
 
130,625
7,790,000
104
105th Payment Date
(the date falling on
the 10th day of the
one hundred and
fourth (104th) month
falling immediately
after
Commencement
Date)
 
130,625
7,659,375
105
106th Payment Date
(the date falling on
the 10th day of the
one hundred and
fifth (105th) month
falling immediately
after
Commencement
Date)
 
130,625
7,528,750
106
107th Payment Date
(the date falling on
the 10th day of the
one hundred and
sixth (106th) month
falling immediately
after
Commencement
Date)
 
130,625
7,398,125
88


107
108th Payment Date
(the date falling on
the 10th day of the
one hundred and
seventh (107th)
month falling
immediately after
Commencement
Date)
 
130,625
7,267,500
108
109th Payment Date
(the date falling on
the 10th day of the
one hundred and
eighth (108th)
month falling
immediately after
Commencement
Date)
 
130,625
7,136,875
109
110th Payment Date
(the date falling on
the 10th day of the
one hundred and
ninth (109th) month
falling immediately
after
Commencement
Date)
 
130,625
7,006,250
110
111th Payment Date
(the date falling on
the 10th day of the
one hundred and
tenth (110th) month
falling immediately
after
Commencement
Date)
 
130,625
6,875,625
111
112nd Payment Date
(the date falling on
the 10th day of the
one hundred and
eleventh (110th)
month falling
immediately after
Commencement
Date)
 
130,625
6,745,000
89


112
113rd Payment Date
(the date falling on
the 10th day of the
one hundred and
twelve (112th)
month falling
immediately after
Commencement
Date)
 
130,625
6,614,375
113
114th Payment Date
(the date falling on
the 10th day of the
one hundred and
thirteenth (113th)
month falling
immediately after
Commencement
Date)
 
130,625
6,483,750
114
115th Payment Date
(the date falling on
the 10th day of the
one hundred and
fourteenth (114th)
month falling
immediately after
Commencement
Date)
 
130,625
6,353,125
115
116th Payment Date
(the date falling on
the 10th day of the
one hundred and
fifteenth (115th)
month falling
immediately after
Commencement
Date)
 
130,625
6,222,500
116
117th Payment Date
(the date falling on
the 10th day of the
one hundred and
sixteenth (116th)
month falling
immediately after
Commencement
Date)
 
130,625
6,091,875
117
118th Payment Date
(the date falling on
the 10th day of the
one hundred and
seventeenth (117th)
month falling
immediately after
Commencement
Date)
 
130,625
5,961,250
90


118
119th Payment Date
(the date falling on
the 10th day of the
one hundred and
eighteenth (118th)
month falling
immediately after
Commencement
Date)
 
130,625
5,830,625
119
120th Payment Date
(the date falling on
the 10th day of the
one hundred
nineteenth (119th)
month falling
immediately after
Commencement
Date)
Balloon
Payment:
5,700,000
130,625
0
91


Schedule 3: Collateral Owners, Collateral Charterers and Collateral Vessels
Collateral Owners
Collateral Charterers
Collateral Vessels
     
Name: Oriental Fleet TANKER 11 Limited (东方富利 TANKER11 有限公司)
Place of Incorporation:
Republic of the Marshall Islands
Registration No.: 101325 ("Collateral Owner A")
Name: Monte Carlo Seven Shipping Company Limited
Place of Incorporation:
Republic of the Marshall Islands
Registration No.: 60933 ("Collateral Charterer A")
One (1) d/w 50,000 product oil/chemical tanker named "Stenaweco Excellence" registered in the name of Collateral Owner A under the laws and flag of the Republic of Liberia with Official Number 16739
("Collateral Vessel A")
Name: Oriental Fleet TANKER 13 Limited (东方富利 TANKER13 有限公司)
Place of Incorporation:
Republic of the Marshall Islands
Registration No.: 101327 ("Collateral Owner B")
Name: Monte Carlo One Shipping Company Limited
Place of Incorporation:
Republic of the Marshall Islands
Registration No.: 55324 ("Collateral Charterer B")
One (1) d/w 50,000 product oil/chemical tanker named "Stenaweco Evolution" presently registered in the name of Eco Evolution LLC under the laws and flag of the Republic of the Marshall Islands with Official Number 5271, which on delivery to Collateral Owner B will be registered under the laws and flag of the Republic of the Marshall Islands with Official Number 5271
("Collateral Vessel B")
92


Dated 2019

TOP SHIPS INC.
as Guarantor
and
ORIENTAL FLEET TANKER 12 LIMITED
(东方富利 TANKER12 有限公司)
as Owner
Guarantee
in respect of one (1) d/w 50,000 product oil/chemical tanker
named "STENAWECO ENERGY" with IMO No. 9683984



H O N G K O N G




Table of Content
Clause
Page No.
1.
Definitions and interpretation
1
2.
Guarantee and Indemnity
3
3.
Preservation of Rights
3
4.
Representations and Warranties
5
5.
Covenants
6
6.
Continuing Guarantee
6
7.
Payments
6
8.
Subordination
7
9.
Currency Conversion and Currency Indemnity
7
10.
Suspense Account
8
11.
Set-off
8
12.
Guarantor to comply with Charter
8
13.
Miscellaneous
8
14.
Assignments and Transfers
9
15.
Notices
9
16.
Governing Law and Jurisdiction
11
Schedule 1 : Representations and Warranties
13
Schedule 2 : Covenants
18
Schedule 3 : Form of Compliance Certificate
26
Guarantee – Execution Page (1/2)
28
i

This Guarantee is made by way of deed on 2019. Between:
(1)
TOP SHIPS INC., a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 3571, as guarantor (the Guarantor); and
(2)
ORIENTAL FLEET TANKER 12 LIMITED (东方富利 TANKER12 有限公 司), a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 101326, as owner (the Owner).
Recitals:
(A)
The Owner and the Charterer (as defined below) are parties to a bareboat charter party dated on or about the date hereof (as amended and/or supplemented from time to time, the Charter), pursuant to which the Owner has agreed to charter the Vessel (as defined below) to the Charterer subject to the terms and conditions specified therein.
(B)
As a condition precedent to the obligations of the Owner under the Charter, the Guarantor is required to execute this Guarantee.
It is agreed as follows:
1.
Definitions and interpretation
1.1
Unless the context otherwise requires, words or expressions defined in the Charter (whether specifically or by reference) shall have the same meanings in this Guarantee and this construction shall survive the termination of the Charter. Where a word or phrase is defined in the Charter and this Guarantee, the definition in this Guarantee shall prevail.
1.2
In this Guarantee, the following words and expressions shall, except where the context otherwise requires, have the following respective meanings:
Bankruptcy includes a liquidation, receivership or administration and any form of suspension of payments, arrangement with creditors or reorganisation under any corporate or insolvency law of any country.
Charterer means MONTE CARLO 71 SHIPPING COMPANY LIMITED, a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 69834.
Compliance Certificate means a certificate substantially in the form set out in Schedule 3 (Form of Compliance Certificate) which is delivered from time to time to the Owner under Clause 12 (Compliance Certificate) of Schedule 2 (Covenants).
Guarantee means this deed of guarantee and indemnity (including the Recitals).
Guaranteed Obligations means all present and future payment and performance obligations of any of the Security Parties due, owing or incurred under any of the Transaction Documents to the Owner, in each case (i) which are (or which are expressed to be) now or at any time hereafter due to be performed and (ii) including as a consequence of any breach, non-performance, disclaimer or repudiation by any of the Security Parties (or by a liquidator, receiver, administrative receiver, administrator
1

or any similar officer in respect of any of the Security Parties) of any of such obligations of any of the Security Parties, in each case together with:

(a)
all costs, charges and expenses incurred by the Owner in connection with the protection, preservation or enforcement of its rights under any of the Transaction Documents; and

(b)
all indebtedness, moneys, obligations and liabilities due, owing or incurred in respect of any variations of the Transaction Documents or the obligations and liabilities imposed under such documents.
Parties means together, the parties to this Guarantee (each, a Party).
Security Perfection Requirements means, in respect of the Transaction Documents to which the Guarantor is a party:

(a)
execution of all notices, acknowledgments and consents as required under those Transaction Documents; and

(b)
any other Authorisations of those Transaction Documents as may be required or recommended in any Legal Opinion.
Vessel means one (1) d/w 50,000 product oil/chemical tanker named "STENAWECO ENERGY" with IMO No. 9683984.
1.3
Unless otherwise specified and except where the context otherwise requires, any reference in this Guarantee to:

(a)
the singular includes the plural and vice versa;

(b)
any person shall be construed so as to include its successors and permitted assigns and permitted transferees in accordance with their respective interests;

(c)
any document (including the Charter, this Guarantee, and each other Transaction Document) shall be construed as a reference to such document as amended, restated, supplemented, varied or novated from time to time in accordance with its terms (to the extent that such document is at the relevant time in effect);

(d)
any provision of law shall be construed as a reference to that provision as amended, supplemented, varied, re-enacted, replaced or restated from time to time;

(e)
any applicable law includes, without limitation, (i) applicable laws, acts, codes, conventions, decrees, decree-laws, legislation, statutes, treaties and similar instruments, (ii) applicable final judgments, orders, determinations or awards of any court from which there is no right of appeal (or, if there is a right of appeal, such appeal is not prosecuted within the allowable time) and (iii) applicable directives, guidance, guidelines, notices, orders, regulations and rules of any governmental, judicial or regulatory authority (whether or not having the force of law but with which, if not having the force of law, compliance is customary);

(f)
a Clause shall be construed as a reference to a clause of this Guarantee;
2


(g)
continuing shall, in relation to a Termination Event, be construed as a reference to a Termination Event which persists and has not been waived or remedied in accordance with the terms of the Charter;

(h)
a person shall be construed as a reference to any association, company, corporation, firm, governmental, judicial or regulatory authority, individual, joint venture, partnership (including any limited partnership and any limited liability partnership) or trust (in each case whether or not having separate legal personality);

(i)
a successor shall be construed so as to mean a successor in title of a person and any person who under the applicable laws of its jurisdiction of incorporation or domicile has assumed the rights and obligations of such person or to which, under such laws or by agreement or otherwise, such rights and obligations have been transferred; and

(j)
the winding-up, dissolution, administration or re-organisation of a person shall be construed so as to include any equivalent or analogous proceedings under the applicable law of the jurisdiction in which such person is incorporated or formed or any jurisdiction in which such person carries on business including the seeking of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors.
1.4
Clause headings shall be ignored in the interpretation of this Guarantee.
2.
Guarantee and Indemnity
2.1
In consideration of the Owner entering into the Charter, the Guarantor irrevocably and unconditionally guarantees to the Owner the due payment and prompt performance by the Charterer and the other Security Parties of the Guaranteed Obligations when due in accordance with the Charter and the other Transaction Documents.
2.2
The Guarantor further irrevocably and unconditionally undertakes to pay to the Owner, on the Owner's demand, any such amount which is not paid by the Charterer or the other Security Parties when due and payable under the Charter, the Collateral Charters and the other Transaction Documents.
2.3
The Guarantor as principal obligor and as a separate and independent obligation and liability from its obligations and liabilities under Clauses 2.1 and 2.2 agrees to indemnify and keep indemnified the Owner, in full and on demand, from and against all and any losses, costs, claims, liabilities, damages, demands and expenses suffered or incurred by the Owner arising out of, or in connection with, any failure of the Charterer or any other Security Party to perform or discharge any of the Guaranteed Obligations.
2.4
The Owner may serve more than one demand under this Clause 2.
3.
Preservation of Rights
3.1
The obligations of the Guarantor contained in this Guarantee shall be in addition to and independent of every other security which the Owner may at any time hold in
3

respect of the Charterer's or any other Security Party's obligations under any Transaction Document.
3.2
The Guarantor shall be liable under this Guarantee as a principal and independent debtor and accordingly it shall not have, as regards this Guarantee, any of the rights or defences of a surety. Neither the obligations of the Guarantor contained in this Guarantee nor the rights, powers and remedies conferred upon the Owner by this Guarantee or by law shall be discharged, impaired or otherwise affected by:

(a)
the winding-up, dissolution, administration or reorganisation of the Charterer or any other Security Party or any other person or any change in its status, function, control or ownership;

(b)
any of the obligations of the Charterer or any other Security Party or any other person under any Transaction Document being or becoming illegal, invalid, void, voidable, unenforceable, ineffective or of limited force and effect in any respect;

(c)
any time or other indulgence being granted or agreed to be granted to either the Charterer or any other Security Party or any other person in respect of any of its obligations under any Transaction Document;

(d)
any amendment to, or any variation, waiver or release of, the Charter or the other Transaction Documents or any obligation of either the Charterer or any other Security Party or any other person under any Transaction Document;

(e)
any failure to take, or fully to take, any security contemplated by any Transaction Document or otherwise agreed to be taken in respect of any Security Party's obligations under any Transaction Document;

(f)
any failure to realise or fully to realise the value of, or any release, discharge, exchange or substitution of, any security taken in respect of any of either the Charterer's or any other Security Party's obligations under any Transaction Document;

(g)
any purported obligation of either the Charterer or any other Security Party or any other person to the Owner (or any security for that obligation) becoming wholly or in part void, invalid, illegal or unenforceable for any reason, including negligence; and

(h)
any other act, event or omission which, but for this Clause 3.2, might operate to discharge, impair or otherwise affect any of the obligations of the Guarantor contained in this Guarantee or any of the rights, powers or remedies conferred upon the Owner by this Guarantee, the Charter or any other Transaction Document or by law.
3.3
Any settlement, discharge or release between the Guarantor and the Owner in relation to this Guarantee shall be conditional upon no right, security, disposition or payment to or in favour of the Owner by any Security Party or any other person being avoided, set aside, reduced or ordered to be refunded as a result of the operation of any applicable law and if any such right, security, disposition or payment is so avoided, set aside, reduced or ordered to be refunded, the liability of the Guarantor shall continue and the Owner shall be entitled to recover under this Guarantee the value or
4

amount of that right, security, disposition or payment, in each case as if any such settlement, discharge or release had not occurred.
3.4
The Owner shall not be obliged before exercising any of the rights, powers or remedies conferred upon it by this Guarantee or by law:

(a)
to take any action or obtain judgment in any court against the Charterer or any other Security Party;

(b)
to make or file any claim or proof in a winding-up or dissolution of either of the Charterer or any other Security Party; or

(c)
to enforce or seek to enforce any security taken in respect of the Charterer's or any other Security Party's obligations under the Charter or any other Transaction Document.
3.5
The Guarantor agrees that, for so long as the Charterer or any other Security Party is under any actual or contingent obligation under the Charter or any other Transaction Document, the Guarantor shall not exercise any right which the Guarantor may at any time have by reason of this Guarantee or the performance by it of its obligations under this Guarantee:

(a)
to be indemnified by the Charterer or any other Security Party or to receive any collateral from the Charterer or any other Security Party in respect of the Guarantor's obligations under this Guarantee;

(b)
to claim any contribution from any other guarantor of the Charterer's or any other Security Party's obligations under the Charter or any other Transaction Document;

(c)
to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any of the Owner's rights under the Charter or any Transaction Document or of any other guarantee or security taken pursuant to, or in connection with, the Charter or any other Transaction Document;

(d)
to claim or prove in a liquidation or other insolvency proceeding of the Charterer or any other Security Party or any co-surety in competition with the Owner; and/or

(e)
receive, claim or have the benefit of any payment, distribution or security from or on account of the Charterer or any other Security Party, or exercise any right of set-off against the Charterer or any other Security Party.
4.
Representations and Warranties
The Guarantor acknowledges that the Owner has entered into the Charter and the other Transaction Documents on the basis of, and in full reliance on the representations and warranties expressed to be made by it and set out in Schedule 1 (Representations and Warranties) to this Guarantee on the date hereof and on each Payment Date under the Charter. The Guarantor covenants that on each of such dates, each of the representations and warranties set forth in Schedule 1 (Representations and Warranties) to this Guarantee is true and correct and not misleading in any material respects.
5

5.
Covenants
The Guarantor hereby covenants in favour of the Owner in the terms of the undertakings expressed to be made by it and set out in Schedule 2 (Covenants) to this Guarantee.
6.
Continuing Guarantee
The obligations of the Guarantor contained in this Guarantee shall constitute and be continuing obligations notwithstanding any settlement of account or other matter or thing whatsoever, and shall not be considered as satisfied or discharged by any intermediate payment, satisfaction or settlement of any part of the Guaranteed Obligations and shall continue in full force and effect until all of the Guaranteed Obligations (whether actual or contingent) have been irrevocably and unconditionally paid and discharged in full.
7.
Payments
7.1 All payments to be made by the Guarantor under this Guarantee shall be made in the currency in which the corresponding payment obligation of the Charterer is due and payable under the Charter or each other applicable Transaction Document (as the case may be) and in immediately available, freely transferable, cleared funds to such account of the Owner with such bank as the Owner shall from time to time have specified for this purpose.
7.2
All payments to be made by the Guarantor under this Guarantee shall be made without set-off or counterclaim and without any deduction or withholding whatsoever. If the Guarantor is obliged by law to make any deduction or withholding from any such payment, the amount due from the Guarantor in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Owner receives a net amount equal to the amount that the Owner would have received had no such deduction or withholding been required to be made.
7.3
The Guarantor agrees that:

(a)
if any payment received by the Owner in respect of moneys owing or due and payable by the Guarantor is avoided on the subsequent insolvency or liquidation of the Guarantor, under any laws relating to insolvency or liquidation, that payment does not discharge or diminish the liability of the Guarantor under this Guarantee, which continues to apply as if that payment at all times remained owing; and

(b)
if the Guarantor has not paid to the Owner the full amount of all sums due under this Guarantee, the Owner may (for the purpose of enabling the Owner to sue the Guarantor and/or any other guarantor of the liabilities which are hereby guaranteed or to prove in its or their liquidation or in any similar proceedings for any moneys due and unpaid by the Guarantor to the Owner) at any time place and keep for such time as it may think fit any moneys received under this Guarantee, or under such other guarantees or from any other person, to the credit of an account or accounts (bearing interest at a commercial rate) without any obligation on the part of the Owner to apply the same or any part thereof in or towards the discharge of the indebtedness and liabilities of the Guarantor to the Owner.
6

7.4
All moneys received by the Owner pursuant to this Guarantee after the occurrence of a Termination Event which is continuing shall be held by the Owner in trust and applied by the Owner in the following order:

(a)
firstly, to pay or retain all costs and expenses of whatever nature incurred by the Owner under the Transaction Documents;

(b)
secondly, to be applied in and towards payment of the Guaranteed Obligations (whether the same are due and payable or not); and

(c)
fifthly, the surplus (if any) shall be paid to the Guarantor or such other person as may for the time being be entitled thereto.
8.
Subordination
All rights which the Guarantor at any time has (whether in respect of this Guarantee or any other Transaction Document) against the Charterer, any other Security Party or their respective assets shall be fully subordinated to the rights of the Owner under the Transaction Documents; and in particular after a Termination Event has occurred and is continuing under the Charter and the Owner has, by notice to the Guarantor, brought this Clause 8 into operation, which notice shall take effect immediately, the Guarantor shall not:

(a)
claim, or in a Bankruptcy of the Charterer or any other Security Party prove for, any amount payable to the Guarantor by the Charterer or any other Security Party, whether in respect of this Guarantee or any other Transaction Document;

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

(c)
claim to set-off any such amount against any amount payable by the Guarantor to the Charterer or any other Security Party; or

(d)
claim any subrogation or other right in respect of any Transaction Document or any sum received or recovered by either the Charterer or any other Security Party under a Transaction Document.
9.
Currency Conversion and Currency Indemnity

(a)
The Owner may convert any money received or realised by it under or pursuant to this Guarantee which is not in the currency in which the relevant sum is due and payable under each applicable Transaction Document from that currency into the currency in which such sum is due at the rate of exchange on the relevant date of the conversion.

(b)
If, under any applicable law, whether as a result of judgment against the Guarantor or the liquidation of the Guarantor or for any other reason, any payment to be made by the Guarantor under or in connection with this Guarantee is made or is recovered in a currency other than the currency (the currency of obligation) in which it is payable pursuant to this Guarantee then, to the extent that the payment (when converted into the currency of obligation at the rate of exchange on the date for the determination of liabilities permitted by the applicable law) falls short of the amount unpaid under this Guarantee,
7

the Guarantor shall as a separate and independent obligation, fully indemnify the Owner against the amount of the shortfall.

(c)
For the purposes of this Clause 9, rate of exchange means the best rate at which the Owner is able on the relevant date to purchase the currency of obligation with the other currency.
10.
Suspense Account
If the Guarantor has not paid to the Owner the full amount of all sums due under this Guarantee, all moneys received, recovered or realised by the Owner under or pursuant to this Guarantee (including the proceeds of any conversion of currency) may in its discretion (for inter alia the purpose of claiming or proving in a Bankruptcy of the Charterer or any other Security Party) be credited to and held in any suspense or impersonal account pending their application from time to time in or towards the discharge of the Guarantor's obligations under this Guarantee.
11.
Set-off
If the Guarantor has not paid to the Owner the full amount of all sums due under this Guarantee, the Owner may (but shall not be obliged to) set-off any obligation in respect of Guaranteed Obligations which are due and payable by the Guarantor against any obligation (contingent or otherwise) owed by the Owner to the Guarantor (regardless of the place of payment, or currency of either obligation) and apply any credit balance to which the Guarantor is entitled on any account with the Owner in payment of the Guaranteed Obligations. The Owner may, at the cost of the Guarantor, effect such currency exchanges as it considers are appropriate to implement such set-off.
12.
Guarantor to comply with Charter
The Guarantor agrees with the Owner to comply with all provisions of the Charter which are applicable to itself in the same way as if those provisions had been set out (with any necessary modifications) in this Guarantee.
13.
Miscellaneous
13.1
This Guarantee may be executed in any number of counterparts and on separate counterparts, each of which when executed shall constitute an original, but all counterparts shall together constitute one and the same instrument.
13.2
Any amendment, supplement or variation to any Transaction Document to which the Guarantor is a party must be in writing and executed by each party thereto.
13.3
The Guarantor may not terminate this Guarantee by notice to the Owner or otherwise until the Guaranteed Obligations are irrevocably paid to the Owner in full.
13.4
Neither the failure to exercise, nor the delay in any exercise of, nor the single or partial exercise of, any right, power or remedy by the Owner under or in relation to any Transaction Document to which the Guarantor is a party shall (a) operate as a waiver of such right, power or remedy, (b) prevent any further or other exercise of such right, power or remedy or (c) prevent the exercise of any other right, power or remedy. The rights, powers and remedies of the Owner provided in any Transaction
8

Document to which the Guarantor is a party are cumulative and not exclusive of any rights, powers or remedies provided by law.
13.5
Any waiver or consent given by a party under or in relation to any Transaction Document to which the Guarantor is a party must, in order to be effective, be in writing and shall only be effective in the specific circumstances in which it is given.
13.6
If at any time any provision of any Transaction Document to which the Guarantor is a party is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of that Transaction Document nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired.
13.7
Any certificate or determination by the Owner as to any rate of interest or as to any other amount payable under and pursuant to any Transaction Document to which the Guarantor is a party shall, in the absence of manifest error, be conclusive and binding on Guarantor.
13.8
A person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of any term of this Guarantee.
13.9
The Guarantor shall pay to the Owner on demand all fees, costs and expenses (including legal, survey and other costs) payable or incurred by the Owner in connection with the enforcement of or preservation of the Owner's rights under each Transaction Document to which the Guarantor is a party. All amounts payable pursuant to this Clause 13 shall be paid in the currency in which they are incurred to the Owner.
14.
Assignments and Transfers
14.1
This Guarantee shall be binding upon and inure to the benefit of each Party and its respective successors, permitted assigns and permitted transferees.
14.2
The Guarantor shall not assign, transfer (whether voluntarily or involuntarily, by operation of law or otherwise) or create or permit to exist any Security Interest over, any of its rights or obligations under this Guarantee.
15.
Notices
15.1
Communications in writing
Any communication to be made under or in connection with the Transaction Documents to which the Guarantor is a party shall be made in writing and, unless otherwise stated, may be given in person, by post, fax or email.
15.2
Addresses
Except as otherwise provided for in this Guarantee, all notices or other communications under or in respect of the Transaction Documents to which the Guarantor is a party to either party thereto shall be in writing and shall be made or given to such party at the address, facsimile number or email address appearing below
9


(or at such other address, facsimile number or email address as such party may hereafter specify for such purposes to the other by notice in writing):

(a)
In the case of the Guarantor:

Address:
1, Vas. Sofias & Meg.
Alexandrou Str.
15124, Maroussi, Athens, Greece

Attention:
Andreas Louka

Email:
louka@loukapartners.com

Fax:
+30 2108128320


(b)
In the case of the Owner:

Address:
c/o Oriental Fleet International Company Limited
50/F, COSCO Tower
183 Queen's Road Central
Hong Kong

Attention:
Belinda Hou / Thomas Xing / Xu Ying

Email:
lou.can@coscoshipping.com / thomas.xing@ofi.com.hk / asset@coscoshipping.com

Fax:
+852 2339 1881
15.3
Delivery
15.3.1
Any communication or document made or delivered by a Party to the other Party under or in connection with the Transaction Documents to which the Guarantor is a party will only be effective:

(a)
if by way of fax, when received in legible form;

(b)
if by way of letter, when it has been left at the relevant address to which it has been posted with postage prepaid in an envelope addressed to the relevant party at that address, and, if a particular department or officer is specified as part of its address details provided under Clause 15.2 (Addresses), if addressed to that department or officer; or

(c)
if by way of email, only when received in a legible form by the email address of the person to whom the communication is made.
15.3.2
All communications and documents delivered pursuant to or otherwise relating to the Transaction Documents to which the Guarantor is a party shall be either in English or Chinese or accompanied by a certified English or Chinese translation.
15.4
Validity of demands
A demand under this Guarantee shall be valid notwithstanding that it is served:

(a)
on the date on which the amount to which it relates is due and payable by the Charterer or any other Security Party under an applicable Transaction Document (as the case may be); or
10


(b)
at the same time as the service of a notice under the applicable Transaction Document;
and a demand under this Guarantee may refer to all amounts payable under or in connection with the Transaction Documents to which the Charterer or any other Security Party is a party without specifying a particular sum or aggregate sum.
16.
Governing Law and Jurisdiction
16.1
This Guarantee and any non-contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with English law and any Dispute arising out of or in connection with this Guarantee shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory re-enactment or modification thereof save to the extent necessary to give effect to the provisions of this Clause.
16.2
The arbitration reference shall be to three arbitrators:

(a)
A Party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other Party requiring the other Party to appoint its own arbitrator within fourteen (14) calendar days of that notice, and stating it will appoint its arbitrator as sole arbitrator unless the other Party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified.

(b)
If the other Party does not appoint its own arbitrator and gives notice that it has done so within the fourteen (14) days specified, the Party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other Party, appoint its arbitrator as sole arbitrator and shall advise the other Party accordingly. The award of a sole arbitrator shall be binding on both Parties as if he/she had been appointed by agreement.

(c)
Where each Party appoints its own arbitrator, then the two (2) arbitrators so appointed may proceed with the arbitration and at any time thereafter appoint a third arbitrator so long as they do so before any substantive hearing or forthwith in the event that they cannot agree on any matter relating to the arbitration. If the said two arbitrators do not appoint a third within fourteen (14) days of one calling upon the other to do so, or if they are in disagreement as to the third arbitrator, either arbitrator or a Party shall apply to the London Maritime Arbitrators Association (LMAA) for the appointment of the third arbitrator.

(d)
The language used in the arbitration shall be English. The arbitration shall be conducted in accordance with the LMAA Terms current at the time when the arbitration proceedings are commenced.

(e)
Nothing herein shall prevent the Parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator.
16.3
In this Clause 16, proceedings means proceedings of any kind, including an application for a provisional or protective measure and a Dispute means any dispute arising out of or in connection with this Guarantee (including a dispute relating to the
11

existence, validity or termination of this Guarantee) or any non-contractual obligation arising out of or in connection with this Guarantee.
16.4
The Guarantor waives any rights of sovereign immunity which it or any of its properties may enjoy in any jurisdiction and subjects itself to civil and commercial law with respect to its obligations under this Guarantee.
[Schedules and execution pages to follow]
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Schedule 1: Representations and Warranties
1.
Status

(a)
It is a company duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation.

(b)
It has the power to own its assets and carry on its business as it is being conducted.

(c)
It has read and understood the terms of this Guarantee, the Charter and the other Transaction Documents to which the Charterer or any other Security Party is a party and has taken appropriate legal advice as to the extent of its obligations and liabilities under the Transaction Documents to which the Guarantor is a party.

(d)
The Charterer is a wholly-owned Subsidiary of the Guarantor, which is ultimately controlled by the Substantial Shareholder.

(e)
It is a publicly listed entity on the NASDAQ stock exchange under the symbol "TOPS".
2.
Compliance with anti-money laundering legislation
It has complied with all anti-money laundering legislation (to the extent applicable to it) that is relevant in the context of the transactions contemplated by the Transaction Documents to which it is a party.
3.
Binding obligations

(a)
The obligations expressed to be assumed by it in the Transaction Documents to which it is a party are, subject to the Legal Reservations, legal, valid, binding and enforceable obligations.

(b)
Without limiting the generality of paragraph (a) above, subject to the Security Perfection Requirements, each Security Document to which it is a party creates the Security Interests which it purports to create and such Security Interests are valid and effective.
4.
Non-conflict with other obligations
The entry into and performance by it of, and the transactions contemplated by, the Transaction Documents to which it is a party does not and will not conflict with:

(a)
any law or regulation applicable to it;

(b)
its constitutional documents; or

(c)
any agreement or instrument binding upon it or any of its assets,
nor result in the existence of, or oblige it to create, any Security Interest over any of its assets.
13

5.
Power and authority
It has the power to enter into, perform and deliver, and has taken (or will, prior to its execution thereof, take) all necessary action to authorise its entry into, performance and delivery of, the Transaction Documents to which it is a party.
6.
Validity and admissibility in evidence
All Authorisations, consents, approvals, resolutions, licences, exemptions, filings, notarisations or registrations required:

(a)
to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Transaction Documents to which it is a party;

(b)
to make the Transaction Documents to which it is a party admissible in evidence in its Relevant Jurisdictions;

(c)
for it to carry on its business, and which are material; and

(d)
to enable it to create the Security Interest to be created by it under any Security Document to which it is a party and to ensure that such Security Interest has the priority and ranking it is expressed to have,
have been obtained or effected and are in full force and effect, subject in the case of any Security Document to which it is a party to the Security Perfection Requirements.
7.
Governing law and enforcement
Subject to the Legal Reservations:

(a)
the choice of each relevant law as the governing law of the Transaction Documents to which it is a party to and the agreement by such party to refer disputes to the relevant courts or tribunal as stated in such Transaction Document will be recognised and enforced in its Relevant Jurisdictions; and

(b)
any arbitral award, ruling or judgment obtained in each Relevant Jurisdiction in relation to the Transaction Documents to which it is a party will be recognised and enforced in its Relevant Jurisdictions.
8.
Deduction of Tax
Except as specifically referred to in any Legal Opinion, it is not required under the law of each of its Relevant Jurisdictions or at its address specified in the Transaction Documents to which it is a party to make any deduction for or on account of any tax from any payment of interest it may make under the Transaction Documents to which it is a party.
9.
Financial statements

(a)
Its financial statements most recently supplied to the Owner (which, at the date of this Guarantee, are its Original Financial Statements) were prepared in accordance with GAAP consistently applied save to the extent expressly disclosed in such financial statements.
14


(b)
Its financial statements most recently supplied to the Owner (which, at the date of this Guarantee, are its Original Financial Statements) give a true and fair view of (if audited) or fairly represent (if unaudited) its consolidated financial condition and operations for the period to which they relate, save to the extent expressly disclosed in such financial statements.

(c)
There has been no material adverse change in its business or consolidated financial condition since the date of its Original Financial Statements.
10.
No filing or stamp taxes
Except as specifically referred to in any Legal Opinions, under the law of its Relevant Jurisdictions it is not necessary that any Transaction Document to which it is a party be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to those Transaction Document or the transactions contemplated by those Transaction Document.
11.
No default

(a)
No Termination Event has occurred and is continuing or might reasonably be expected to result from the entry into or performance of, or the transactions contemplated by, any Transaction Document to which it is a party.

(b)
No other event or circumstance has occurred and is continuing which (with the expiry of a grace period, the giving of notice or any combination of the foregoing) constitutes a default under any deed or instrument which is binding on the Guarantor, or to which its assets are subject, which might have a Material Adverse Effect on the Guarantor's ability to perform its obligations under any Transaction Document to which it is a party.
12.
No breach of laws
It has not breached any law or regulation which breach has or is reasonably likely to result in a Material Adverse Effect on the Guarantor.
13.
No misleading information

(a)
All information provided by it or on its behalf in relation to the negotiation and preparation of any Transaction Document to which it is a party was true, complete and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated and was not misleading in any respect.

(b)
All financial projections provided by it or on its behalf have been prepared on the basis of recent historical information and on the basis of reasonable assumptions.

(c)
Nothing has occurred or been omitted from the information so provided and no information has been given or withheld that results in the information provided by it or on its behalf being untrue or misleading in any material respect.
15

14.
Pari passu ranking
Its payment obligations under Transaction Documents to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
15.
No proceedings

(a)
No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency (which, if adversely determined, would have a Material Adverse Effect on the Guarantor) have been started or (to the best of its knowledge and belief) threatened against it.

(b)
No judgment or order of a court, arbitral body or agency which might reasonably be expected to have a Material Adverse Effect has been made against it.
16.
No immunity
It is subject to civil commercial law with respect to its obligations under the Transaction Documents to which it is a party and neither it nor any of its assets is entitled to any right of immunity and the entry into and performance by it of the Transaction Documents to which it is a party constitute private and commercial acts.
17.
Taxation

(a)
It has complied in all material respects with all tax laws and regulations applicable to it and its business.

(b)
It is not materially overdue in the filing of any tax returns and is not overdue in the payment of any amount in respect of tax.

(c)
No claims or investigations are being made or conducted against it with respect to taxes.

(d)
It is resident for tax purposes only in its jurisdiction of incorporation except (i) the taxes that are being contested in good faith by appropriate proceedings and for which the Guarantor has set aside on its books adequate reserves and (ii) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
18.
Disclosure of material facts
It is not aware of any material facts or circumstances which have not been disclosed to the Owner and which might, if disclosed, have adversely affected the decision of a person considering whether or not to enter into the transactions of the nature contemplated by the Transaction Documents.
19.
Place of Business and Non-Hong Kong company
It is not registered as a non-Hong Kong company under the Companies Ordinance (Cap. 622 of the Laws of Hong Kong), and it has not established a place of business in England.
16

20.
Transaction Documents
It is aware of and approves the terms of the Charter and each of the other Transaction Documents.
21.
Sanctions

(a)
No Security Party is a Restricted Person.

(b)
Each Security Party is in compliance with all Sanctions laws, and none of them have been or are currently being investigated on compliance with Sanctions, they have not received notice or are aware of any claim, action, suit or proceeding against any of them with respect to Sanctions and they have not taken any action to evade the application of Sanctions.
22.
Authorised signatories
Any person specified as its authorised signatory under Addendum No.1 or paragraph (f) of Clause 16 (Information: miscellaneous) of Schedule 2 (Covenants) is authorised to sign all documents and notices on its behalf.
17


Schedule 2: Covenants
The Guarantor hereby undertakes in favour of the Owner that as at the date hereof and at all times throughout the Charter Period:
1.
Status

(a)
It will maintain its existence as a company duly incorporated and validly existing under the laws of its jurisdiction of incorporation.

(b)
It will remain a publicly listed entity on the NASDAQ stock exchange under the symbol "TOPS".
2.
Authorisations and Compliance with applicable law

(a)
It shall promptly:

(i)
obtain, comply with and do all that is necessary to maintain in full force and effect; and

(ii)
supply copies to the Owner of,
all consents, licences, approvals, permits or Authorisations of or registrations or filings required (A) to enable it to perform its obligations under the Transaction Documents to which it is a party and (B) to ensure the legality, validity, enforceability or admissibility in evidence in each of its Relevant Jurisdictions of any Transaction Document to which it is subject.

(b)
It shall comply in all respects with all laws to which it may be subject.

(c)
It shall ensure that all the Security Perfection Requirements have been or will be done or obtained (as the case may be) no later than the latest date permitted by applicable law and in any event by such date as the Owner may specify.
3.
Compliance with obligations
It will comply with and perform all the obligations expressed to be assumed by it in each Transaction Document to which it is a party and with all laws applicable to it in connection with the transactions contemplated by those Transaction Documents.
4.
No prejudice to interests
It will not (otherwise than as expressly contemplated by this Guarantee) do anything or take any action or knowingly omit to take any action which has or is likely to have the effect of prejudicing the right, title and interest of any Security Party or the Owner in relation to the Vessel, the Insurances, the Charter, any other Transaction Document or any other trust property.
5.
Exercise of rights
It will not, without first obtaining the Owner's prior written consent, seek to recover, whether directly or by set-off, lien, counterclaim or otherwise, nor accept any money or other property, nor exercise any rights, in respect of any sum or security which may
18

be or become due to the Guarantor in respect of the Guaranteed Obligations by the Charterer or any third party.
6.
Further assurance
At no cost to the Owner, it will take all such actions and do all such things the Owner may from time to time require so as to establish, maintain, perfect, preserve and/or protect the right, title and interest of the Owner in relation to this Guarantee or any other Transaction Documents to which it is a party, against, and in priority to, the claims of any other person having regard to customary and available practice and procedures accepted and adopted by international financiers.
7.
Pari passu ranking
It will ensure that its payment obligations under each Transaction Document to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law.
8.
Negative pledge
Except as expressly permitted by the Charter or the other Transaction Documents, it will not:

(a)
sell, transfer or otherwise dispose of its right, title and interest in and to any collateral which is the subject of security created under any Transaction Document;

(b)
create, incur, assume or permit or cause to exist any Security Interest over its right, title and interest in and to any collateral which is the subject of security created under any Transaction Document; or

(c)
consent to the taking of any such action described in the preceding two paragraphs by any other person (whether pursuant to the terms of the Transaction Documents or otherwise),
in each case without the prior written consent of the Owner.
9.
Security Parties
It will ensure that:

(a)
the Charterer and each of the Security Parties maintains its existence as a company duly incorporated and validly existing and, where applicable, in good standing under the laws of its jurisdiction of incorporation in compliance with all applicable law; and

(b)
the Charterer and each of the Security Parties is managed and administered in the manner that is required by the Transaction Documents.
10.
Subordination

(a)
Pursuant to paragraph (z)(iii) of Clause 47.1 (General Covenants) of the Charter, the Guarantor acknowledges to and undertakes with the Owner that, at all times throughout the Charter Period, all shareholder's and intercompany
19

loans from time to time made by the Guarantor or any other member of the Group to the Charterer:

(i)
are and shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterer under the Charter and the other Transaction Documents;

(ii)
shall not be repaid or be subject to any payment of interest (although interest may accrue);

(iii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterer; and

(iv)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim.

(b)
Pursuant to paragraph (aa)(iv) of Clause 47.1 (General Covenants) of the Charter, the Guarantor acknowledges to and undertakes with the Owner that, at all times throughout the Charter Period, all shareholder's and intercompany advances from time to time made by the Guarantor or any other member of the Group to the Charterer:

(i)
shall be non-interest bearing;

(ii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterers;

(iii)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim; and

(iv)
upon occurrence of a Termination Event which is continuing:

(A)
shall not be repaid; and

(B)
shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterers under this Charter and the other Transaction Documents.
11.
Financial Statements
It shall supply to the Owner:

(a)
as soon as the same become available, but in any event within 120 days after the end of each of its financial years, its audited consolidated financial statements for that financial year; and

(b)
as soon as the same become available, but in any event within 75 days after the end of each half of each of its financial years, its unaudited consolidated financial statements for that financial half year.
12.
Compliance Certificate

(a)
It shall supply to the Owner, with each set of financial statements delivered pursuant to paragraphs (a) and (b) of Clause 11 (Financial Statements) of this
20

Schedule, a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 14 (Financial Covenants) of this Schedule as at the date at which those financial statements were drawn up.

(b)
Each Compliance Certificate delivered pursuant to paragraph (a) above shall be signed by its director or its chief financial officer.
13.
Requirements as to financial statements

(a)
Each set of financial statements delivered by it pursuant to Clause 11 (Financial statements) shall be certified by (its director or its chief financial officer) as giving a true and fair view of (in the case of any such financial statements which are audited) or fairly representing (in the case of any such financial statements which are unaudited) its consolidated financial condition and operations as at the date of and for the period in relation to which those financial statements were drawn up.

(b)
It shall procure that each set of financial statements delivered pursuant to Clause 11 (Financial Statements) of this Schedule is in the English language and prepared using GAAP, the accounting practices and financial reference periods consistent with those applied in the preparation of its Original Financial Statements unless, in relation to any set of financial statements, it notifies the Owner that there has been a change in GAAP, the accounting practices or financial reference periods and its auditors deliver to the Owner:

(i)
a description of any change necessary for those financial statements to reflect the GAAP, the accounting practices and financial reference periods upon which its Original Financial Statements were prepared; and

(ii)
sufficient information, in form and substance as may be reasonably required by the Owner, to enable the Owner to determine whether Clause 14 (Financial Covenants) of this Schedule has been complied with and make an accurate comparison between the financial position indicated in those financial statements and its Original Financial Statements.
Any reference in this Guarantee and the other Transaction Documents to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which its Original Financial Statements were prepared.
14.
Financial Covenants

(a)
The Guarantor undertakes that it shall ensure at all times:

(i)
Leverage Ratio shall not at any time exceed 75%; and

(ii)
Free Liquidity shall not be less than the aggregate of the following:

(A)
US$1,000,000 times number of Fleet Vessels which are Suezmax vessels;
21


(B)
US$750,000 times number of Fleet Vessels which are MR tankers; and

(C)
US$500,000 times number of MR tankers are bareboat chartered-in to a member of the Group.

(b)
The financial covenants set out in paragraph (a) shall be tested by reference to the financial statements and Compliance Certificates delivered by the Guarantor pursuant to Clause 11 (Financial Statements), Clause 12 (Compliance Certificate) and Clause 13 (Requirements as to financial statements) of this Schedule in respect of the Relevant Period.

(c)
In this Clause:

(i)
Cash means, at any time, the aggregate at such time of the amounts categorised as Cash and Cash Equivalent in the Guarantor's consolidated financial statements.

(ii)
Cash Equivalent Investments means investments that are short term investments (excluding equity investments) which are readily convertible into cash without incurring any significant premium or penalty.

(iii)
Consolidated Total Debt in respect of the Guarantor means at any time the aggregate amount of all obligations of the Group which would, in accordance with GAAP, be considered as consolidated total debt of the Group.

(iv)
Consolidated Total Net Debt in respect of the Guarantor means at any time Consolidated Total Debt less Cash and Cash Equivalent and Restricted Cash.

(v)
Fleet Vessel means, at any time, each vessel registered in the name of a member of the Group as owner.

(vi)
Free Liquidity means, at any time, any unrestricted Cash and Cash Equivalent of the Guarantor which is not subject to any security interest adjusted to include any Cash held under any minimum liquidity requirements and debt service accounts.

(vii)
Joint Venture Vessel means any vessel registered in the name of an owner whose shareholding is owned by the Guarantor by 50% or more.

(viii)
Leverage Ratio means, the ratio (expressed as a percentage) of:

(1)
the Consolidated Total Net Debt; and

(2)
the aggregate Market Value of all Fleet Vessels, including 50% of Joint Venture Vessels.
22


(ix)
Market Value means, in relation to a Fleet Vessel and a Joint Venture Vessel, at a relevant date, one (1) valuation obtained by the Charterer (or failing which the Owner) and prepared:

(1)
on a date no earlier than thirty (30) days prior to the relevant date;

(2)
by one (1) Approved Valuer;

(3)
with or without physical inspection of such Fleet Vessel or Joint Venture Vessel;

(4)
on the basis of a sale for prompt delivery for cash on normal arm's length commercial terms as between a willing seller and a willing buyer, free of any existing charter or other contract of employment; and

(5)
if a range of valuation is given by the Approved Valuer, the lower end of the range shall apply,
with the expenses of all such valuations being borne by the Charterer.

(x)
Relevant Period means each period of six (6) months immediately prior to the date of computation.

(xi)
Restricted Cash means, at any time, the aggregate at such time of the amounts categorised as Restricted Cash in the Guarantor's consolidated financial statements.
15.
Notification
It shall promptly and diligently:

(a)
notify the Owner as soon as it becomes aware of the occurrence of:

(i)
any Termination Event; and

(ii)
any other matters which might lead to an occurrence of any Termination Event; and

(b)
notify the Owner of any steps or action which it is taking, or is considering taking, to remedy or mitigate the effect of such occurrence.
16.
Information: miscellaneous
It shall supply to the Owner:

(a)
all documents dispatched by it to its shareholders (or any class of them) or its creditors generally at the same time as they are despatched (other than any document which is required to be filed by the Guarantor in accordance with the rules of, and has been filed and posted onto any electronic website maintained by, any stock exchange on which shares in or other securities of the Guarantor are listed);
23


(b)
promptly, any announcement, notice or other document relating specifically to the Guarantor posted onto any electronic website maintained by any stock exchange on which shares in or other securities of the Guarantor are listed or any electronic website required by any such stock exchange to be maintained by or on behalf of the Guarantor;

(c)
promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against it, and which might, if adversely determined, have a Material Adverse Effect;

(d)
promptly upon becoming aware of them, details of any judgment or order of a court, arbitral body or agency which is made against it, and which might have a Material Adverse Effect;

(e)
promptly, such information regarding its consolidated financial condition, business and operations as the Owner may reasonably request;

(f)
promptly, notice of any change in its authorised signatories signed by its director accompanied by specimen signatures of any new authorised signatories; and

(g)
promptly, such information and records regarding the Shares as the Chargee may reasonably request.
17.
Taxes
It shall:

(a)
file or cause to be filed all tax returns required to be filed in all jurisdictions in which it is situated or carries on business or otherwise is subject to taxation; and

(b)
pay all taxes shown to be due and payable on such returns or any assessments made against it, except to the extent these are contested in good faith and by appropriate means where such payment may be lawfully withheld and for which adequate reserves have been established by it taking into account the amount of taxes payable.
18.
No merger
Neither the Guarantor nor any other Security Party shall enter or be permitted to enter into any form of merger, sub-division, amalgamation or other reorganisation or change of ownership.
19.
Change of Control

(a)
Save with the prior written consent of the Owner, it shall ensure that no Change of Control occurs.

(b)
Save with the prior written consent of the Owner, there shall not be any transfer or disposal of:
24


(i)
the legal or beneficial shareholding of the Charterer; or

(ii)
the legal or beneficial shareholding of the Guarantor,
unless following such transfer or disposal, the Guarantor remains ultimately or indirectly controlled by the Substantial Shareholder.
20.
Sanctions

(a)
It shall comply, and shall procure that each other Security Party complies, with all laws and regulations in respect of Sanctions, and in particular, it shall ensure that the Charterer shall effect and maintain a sanctions compliance policy to ensure compliance with all such laws and regulations implemented from time to time.

(b)
It will ensure that the Vessel shall not be employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel shall not be used by or for the benefit for any party which is a target of Sanctions, or trade to any Restricted Country; or (ii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation.

(c)
It will, and will procure that each other Security Party will, promptly notify the Owner and provide all information in relation to its business and operations which may be relevant for the purposes of ascertaining whether it is in compliance with all laws and regulations relating to Sanctions, and in particular, it shall notify the Owner in writing immediately upon being aware that any of its shareholders or directors, officers of employees is a Restricted Person or has otherwise become a target of Sanctions.
25


Schedule 3: Form of Compliance Certificate
From:
TOP SHIPS INC.
a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 3571
(as Guarantor)
With copy to:
Monte Carlo 71 Shipping Company Limited
a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 69834
(as Charterer)
To:
Oriental Fleet TANKER 12 Limited
(东方富利 TANKER12 有限公司)
a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 101326
(as Owner)
Dated: []
Dear Sirs
Monte Carlo 71 Shipping Company Limited
Bareboat Charter dated [] 2019
(as amended and/or supplemented from time to time, the "Charter")
in respect of one (1) d/w 50,000 product oil/chemical tanker
named "STENAWECO ENERGY" with IMO No. 9683984
1.
We refer to the Charter and the Guarantee (as defined in the Charter). This is a Compliance Certificate. Terms defined in the Charter and the Guarantee have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.
2.
We confirm to the Owner that as at the date of [the audited consolidated financial statements of the Group in respect of the financial year ended on [?] / the consolidated financial statements of the Group in respect of the financial period ended on [?]]:

(a)
we are in compliance with the covenants and undertakings in Clause 14 (Financial Covenants) of Schedule 2 to of the Guarantee;

(b)
Consolidated Total Net Debt is [?] and Market Value of the Fleet Vessels including 50% of Joint Venture Vessels is [] and therefore Leverage Ratio is [] and does not exceed 75%;

(c)
Free Liquidity is US$[], which is not less than US$[], being the aggregate of the following:

(i)
US$[], which is calculated by US$1,000,000 times the number of Fleet Vessels which are Suezmax vessels, being [];
26



(ii)
US$[], which is calculated by US$750,000 times the number of Fleet Vessels which are MR tankers, being []; and

(iii)
US$[], which is calculated by US$500,000 times the number of MR tankers are bareboat chartered-in to a member of the Group, being [].

3.
We set out below calculations establishing the figures in paragraph 2:

[].
4.
We also confirm that no Termination Event is continuing which has not been waived as at the date of this Compliance Certificate.
Yours faithfully
For and on behalf of
TOP SHIPS INC.
   
Name:
 
Title: [Director/Chief Financial Officer]
 



27


Guarantee – Execution Page (1/2)
This Guarantee has been entered into on the date stated at the beginning of this Guarantee. This Guarantee has been executed and entered into by the Guarantor as a deed and is intended to be and is delivered by it as a deed.
SIGNED as a deed by
TOP SHIPS INC.
under a power of attorney
dated 4 July 2019
in the presence of:
, Attorney for
)
)
)
)
)
)
28

Guarantee – Execution Page (2/2)
SIGNED for and on behalf of
)
 
)
ORIENTAL FLEET TANKER 12 LIMITED
)
(东方富利 TANKER12 有限公司)
)
 
)
by                                            , Director
)
)
)
in the presence of:
)

29

Exhibit 4.52


































Additional Clauses to
Bareboat Charter Party dated                                                     2019
between
ORIENTAL FLEET TANKER 13 LIMITED
(东方富利 TANKER13 有限公司)
as owners
and
MONTE CARLO ONE SHIPPING COMPANY LIMITED
as charterers
in respect of
one (1) d/w 50,000 product oil/chemical tanker
named "STENAWECO EVOLUTION"
with IMO No. 9687942
HONG KONG



Contents
32.
Definitions
1
33.
Charter Period
2121
34.
Cancellation
2122
35.
Conditions Precedent and Conditions Subsequent
2222
36.
Delivery
2323
37.
Charterhire
2425
38.
Possession of Vessel
2929
39.
Insurance
2930
40.
Termination and Redelivery; War; Total Loss
3637
41.
Fees and Expenses; Indemnities;
4242
42.
No Waiver of Rights
4445
43.
Mortgage and assignment
4445
44.
Notices
4546
45.
Termination Events
4647
46.
Representations and Warranties
5050
47.
Charterers' undertakings
5354
48.
Purchase Option
5960
49.
Purchase Obligation
6161
50.
Sale of the Vessel by Purchase Option and Purchase Obligation
6161
51.
No Set-off or Tax deduction; FATCA Provisions
6363
52.
Increased Costs
6565
53.
Governing Law and Jurisdiction
6667
54.
Miscellaneous
6768
Execution page
6869
Schedule 1 : Certificate of Delivery and Acceptance
7071
Schedule 2 : Charterhire Schedule
7172
Schedule 3 : Collateral Owners, Collateral Charterers and Collateral Vessels
91114


32.
DEFINITIONS
32.1
In this Charter the following terms shall have the meanings ascribed to them below:
Account Bank means Alpha Bank AE or any other bank or financial institution reasonably acceptable to the Security Trustee with which the Earnings Account is at any time held.
Account Pledge means the pledge over Earnings Account (ΕΝΕΧΥΡΟ ΕΠΙΛΟΓΑΡΙΑΣΜΟΥ ΕΣΟΔΩΝ (ENEXYRO EPI LOGARIASMOU ESODON)) executed or to be executed by the Charterers and the Owners and the Collateral Owners in the agreed form.
Addendum No.1 means an addendum no.1 to the MOA dated on or about the date thereof between the Charterers as sellers and the Owners as buyers.
Affiliate means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.
Approved Commercial Managers means Central Shipping and/or any other first class reputable ship management company acceptable to the Security Trustee who may be appointed as commercial manager of the Vessel.
Approved Managers means together, the Approved Commercial Managers and the Approved Technical Managers.
Approved Technical Managers means Central Shipping, Central Mare and/or any other first class reputable ship management company acceptable to the Security Trustee who may be appointed as technical manager of the Vessel.
Approved Valuer means Clarksons Platou, Braemar, Arrow, Howe Robinson, Maersk or any other firm or firms of independent sale and purchase shipbroker proposed by the Charterers and agreed by the Owners.
Assigned Property has the meaning given to that term in the Charterer's Assignment.
Authorisation means:

(a)
an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation, lodgement or registration; or

(b)
in relation to anything which will be fully or partly prohibited or restricted by law if a Governmental Agency intervenes or acts in any way within a specified period after lodgement, filing, registration or notification, the expiry of that period without intervention or action.
Balloon Payment means the balloon payment in the amount of which is 20% of the MOA Purchase Price, being the amount payable by the Charterers to the Owners on the last Payment Date.
Banking Day has the meaning given to that term in the MOA.
1

Breakfunding Costs means all breakfunding costs and expenses incurred or payable by the Owners when a repayment or prepayment under the relevant funding arrangement entered into by the Owners for the purpose of financing and/or refinancing the Financing Principal do not fall on a Payment Date (excluding any costs incurred in unwinding any associated interest rate or currency swaps or currency futures transactions entered into by the Owners).
Business Day means a day (other than a Saturday or Sunday):

(a)
in relation to the definition of Quotation Day and to any day on which LIBOR is to be determined, on which banks and the relevant financial markets are open for general business in London;

(b)
in relation to any date for payment of amounts under the Transaction Documents, on which banks and the relevant financial markets are open for general business in Hong Kong, London, Shanghai, Piraeus and the principal financial centre of the country of the currency of payment; and

(c)
in relation to any other matter, on which banks are open for general business in Hong Kong, Shanghai and Piraeus.
Business Ethics Law means any laws, regulations and/or other legally binding requirements or determinations in relation to bribery, corruption, fraud, money-laundering, terrorism, collusion bid-rigging or anti-trust, human rights violations) (including forced labour and human trafficking) which are applicable to either Party or any other Security Party or to any jurisdiction where activities are performed and which shall include: (a) the United Kingdom Bribery Act 2010; and (b) the United States Foreign Corrupt Practices Act 1977.
Call Option Agreement means the call option agreement dated 30 December 2014 made between the Original Sellers (as owners) and the Charterers (as option holder) pursuant to the Existing Charter, as may be supplemented, amended or otherwise modified from time to time (including all side letters and other agreements relating thereto).
Cancelling Date means 15 December 2019 (or such later date as may be agreed by the Charterers and the Owners).
Central Mare means Central Mare Inc., a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 32656.
Central Shipping means Central Shipping Inc., a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 98339.
Certificate of Delivery and Acceptance means a certificate substantially in the form set out in Schedule 1Schedule 1 to be signed by the Owners and the Charterers upon Delivery.
Change of Control occurs when, at any time, without the prior written consent of the Owners:

(a)
the Guarantor ceases to control the Charterers; or

2


(b)
the Substantial Shareholder ceases to control the Guarantor or the Charterers,
and for the purpose of this Charter and the other Transaction Documents, control of one person (the first person) by another person (the second person) or the first person being controlled by the second person means that the second person (whether directly or indirectly and whether by the ownership of share capital, the possession of voting power, contract or otherwise) has the power to appoint and/or remove all or a majority of the members of the board of directors or other governing body of the first person or otherwise controls or has the power of control over the affairs and policies of the first person.
Charterer's Assignment means the charterer's assignment executed or to be executed by the Charterers and the Security Trustee in respect of the Vessel, pursuant to which the Charterers shall, inter alia, assign their rights under the Assigned Property in favour of the Security Trustee in the agreed form.
Charterhire means:

(a)
in respect of the Commencement Date, the Upfront Charterhire;

(b)
in respect of a Payment Date, the aggregate of the amount of (i) the Fixed Charterhire and (ii) the Variable Charterhire, payable under this Charter on that Payment Date; and

(c)
in respect of the last Payment Date, the aggregate of the amount of (i) the Balloon Payment, (ii) the Fixed Charterhire and (iii) the Variable Charterhire, payable under this Charter on that Payment Date.
Charterhire Principal means the amount, at any point in time, calculated as the aggregate outstanding amount of the Fixed Charterhire and the Balloon Payment, less any payment of the Fixed Charterhire and the Balloon Payment received by the Owners under this Charter, as more particularly set out in the column entitled "Charterhire Principal" in the Charterhire Schedule, as the same may from time to time be adjusted in accordance with this Charter.
Charterhire Schedule means the charterhire schedule set out in Schedule 2Schedule 2 (as the same may from time to time be amended or replaced including without limitation by each Revised Charterhire Schedule).
Charter Period means the period commencing on the Commencement Date and described in Clause 33.3 unless terminated earlier in accordance with the provisions of this Charter.
Classification Society means DNV-GL or such other first class international classification society being a member of International Association of Classification Society approved in writing by the Owners and their financiers (if any).
Code means the US Internal Revenue Code of 1986, as amended from time to time.
Collateral Charter means, in relation to each Collateral Vessel, the bareboat charterparty in respect of that Collateral Vessel entered or to be entered into between the relevant Collateral Owner (as owners) and the Collateral Charterer (as charterers),

3

as may be supplemented, amended or otherwise modified from time to time (including all side letters and other agreements relating thereto), and Collateral Charters means both of them.
Collateral Charterers means together, the collateral charterers described in Schedule 3, and Collateral Charterer means either of them.
Collateral Owners means together, the collateral owners described in Schedule 3, and Collateral Owner means either of them.
Collateral Security Parties means together, in relation to each Collateral Vessel, the parties defined as Collateral Security Parties under the relevant Collateral Charter, and Collateral Security Party means any of them.
Collateral Security Documents means together, in relation to each Collateral Vessel, the documents defined as Security Documents under the relevant Collateral Charter, and Collateral Security Document means any of them.
Collateral Transaction Documents means together, in relation to each Collateral Vessel, the relevant Collateral Charter, the relevant Collateral Security Documents and any other documents defined as a Transaction Document under that Collateral Charter, and Collateral Transaction Document means any of them.
Collateral Vessels means together, the vessels described in Schedule 3, and Collateral Vessel means either of them.
Commencement Date means the date on which Delivery takes place.
Creditor Parties means together, the Owners, the Collateral Owners and the Security Trustee, and Creditor Party means any of them.
Deed of Charge means the deed of charge over the shares in the Charterers granted by the Guarantor in favour of the Security Trustee in such form as may be acceptable to the Security Trustee.
Default Rate means the percentage sum of the Interest Rate plus two per cent. (2%) per annum.
Delivery means the delivery of the Vessel from the Owners to the Charterers pursuant to this Charter on the Commencement Date.
Dollars, $ and US$ mean the lawful currency for the time being of the US.
Earnings means all moneys whatsoever which are now, or later become, due or payable to the Charterers and which arise out of the use or operation of the Vessel, including:

(a)
all freight, hire and passage moneys, compensation payable in the event of requisition of the Vessel for hire, remuneration for salvage and towage services, demurrage and detention moneys and damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Vessel;

4


(b)
if and whenever the Vessel is employed on terms whereby any moneys falling within paragraph (a) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Vessel; and

(c)
all other payments or proceeds of any kind whatsoever relating to the Vessel as would be deemed "earnings" under GAAP or other applicable accounting principles.
Earnings Account means an account in the name of the Charterers with the Account Bank as follows:
Beneficiary Bank:
Alpha Bank AE
 
Shipping Finance Division
 
93, Akti Miaouli
 
185-38 Piraeus Greece
Swift Code:
CRBAGRAAXXX
Beneficiary Name:
Monte Carlo One Shipping Company Limited
Account Number:
960 01 5006 021256
IBAN:
GR21 0140 9600 9600 1500 6021 256
   
or such other account (with the Account Bank or another office of the Account Bank) as the Security Trustee may from time to time designate and into which all Earnings shall be paid for the purpose of this Charter and the Charterer's Assignment.
Environmental Claim means:

(a)
any claim which relates to the Vessel or its passengers or cargo from time to time 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 in relation to the Vessel or its passengers or cargo from time to time which relates to an Environmental Incident or an alleged Environmental Incident,
and claim means a claim for damages, compensation, fines, penalties or any other payment; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.
Environmental Incident means:

(a)
any release of Environmentally Sensitive Material from the Vessel;

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

5


(c)
any other incident involving the Vessel in which Environmentally Sensitive Material is released otherwise than from the Vessel and in connection with which the Vessel is actually arrested and/or where the Owners and/or the Charterers and/or any other operator or manager of the Vessel is at fault or otherwise liable to any legal or administrative action.
Environmental Law means any law relating to pollution or protection of the environment, to the carriage or actual or threatened releases of Environmentally Sensitive Material.
Environmentally Sensitive Material means oil, oil products and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous.
Existing Charter means a bareboat charter dated 30 December 2014 made between the Original Sellers (as owners) and the Charterers (as charterers), together with all supplements and amendments to it.
Existing Mortgage means the first preferred Marshall Islands ship mortgage dated 31 March 2015 and executed by the Original Sellers (as owner) in favour of the Existing Mortgagee, together with all supplements and amendments to it.
Existing Mortgagee means CIT Finance LLC.
Existing Security Documents means collectively:

(a)
in relation to the Existing Mortgagee:

(i)
the Existing Mortgage;

(ii)
the manager's undertaking dated 31 March 2015 and made between Central Shipping Monaco SAM in favour of the Existing Mortgagee;

(iii)
the manager's undertaking dated 31 March 2015 and made between Central Mare in favour of the Existing Mortgagee; and

(iv)
the manager's undertaking dated 31 March 2015 and made between Epsilon Hellas (Overseas) Ltd. in favour of the Existing Mortgagee; and

(b)
in relation to the Original Sellers:

(i)
the Existing Charter;

(ii)
the general assignment dated 31 March 2015 and made between the Charterers (as assignor) and the Original Sellers (as assignee);

(iii)
the pledge of share certificate dated 31 March 2015 and made between the Guarantor (as pledgor) and the Original Sellers (as pledgee);

(iv)
the charterparty assignment dated 31 March 2015 and made between the Charterers (as charterer) and the Original Sellers (as owner);

6


(v)
the manager's undertaking dated 31 March 2015 and executed by Central Shipping Monaco SAM in favour of the Original Sellers;

(vi)
the manager's undertaking dated 31 March 2015 and executed by Central Mare in favour of the Original Sellers; and

(vii)
the manager's undertaking dated 31 March 2015 and made between Epsilon Hellas (Overseas) Ltd. in favour of the Original Sellers,
and in each case, together with all supplements and amendments to it.
 FATCA means:

(a)
sections 1471 to 1474 of the Code or any associated regulations;

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

(c)
any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraph (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 this Charter or the Transaction Documents required by or under FATCA.
FATCA Exempt Party means a Relevant Party that it is entitled under FATCA to receive payments free from any FATCA Deduction.
FATCA FFI means a foreign financial institution as defined in section 1471(d)(4) of the Code which, if a Relevant Party is not a FATCA Exempt Party, could be required to make a FATCA Deduction.
FATCA Non-Exempt Party means any Relevant Party who is not a FATCA Exempt Party.
FATCA Payment means the increase in a payment made by a Security Party to the Owners under Clause 51.2.2.
Fee Letter means the fee letter dated on or about the date hereof setting out the Handling Fee payable by the Charterers to the Owners.
Finance Party Quiet Enjoyment Letter means, if requested by the Sub-Charterer, a quiet enjoyment letter in relation to the Vessel issued or to be issued the Mortgagee in favour of the Sub-Charterer and acknowledged by the Owners, the Charterers and the Sub-Charterer in form and substance acceptable to the Mortgagee, the Owners, the Charterers and the Sub-Charterer.
Financial Indebtedness means, in relation to a person (the debtor), a liability of the debtor (whether present or future, actual or contingent):

7


(a)
moneys borrowed;

(b)
any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;

(c)
any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d)
the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with GAAP as at the date of this Agreement, be treated as a balance sheet liability (other than any liability in respect of a lease or hire purchase contract which would, in accordance with GAAP in force prior to 1 January 2019, have been treated as an operating lease);

(e)
receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

(f)
any amount raised under any other transaction (including any forward sale or purchase agreement) of a type not referred to in any other paragraph of this definition having the commercial effect of a borrowing;

(g)
any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that derivative transaction, that amount) shall be taken into account);

(h)
any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

(i)
the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (h) above.
Financial Instruments means any mortgage, deed of covenants, the general assignment or such other financial security instruments granted to the Owners' financiers as security for the obligations of the Owners in relation to financing and/or refinancing the acquisition of the Vessel.
Financing Principal means the amount which is the lower of US$24,400,000 and 80% of the MOA Purchase Price, as the same may from time to time be adjusted in accordance with this Charter.
First MOA means the memorandum of agreement for sale and purchase of the Vessel made or to be made between the Original Sellers (as sellers) and the Charterers (as buyers) pursuant to the Call Option Agreement, as may be supplemented, amended or otherwise modified from time to time (including all side letters and other agreements relating thereto).
Fixed Charterhire means, on each Payment Date, the corresponding monthly instalment as set out in the column entitled "Fixed Charterhire" in Schedule

8

2Schedule 2, as the same may from time to time be adjusted in accordance with this Charter.
GAAP means, in relation to each of the Charterers and the Guarantor, generally accepted accounting principles, standards and practices in the US.
Governmental Agency means any government or any governmental agency, semi-governmental or judicial entity or authority (including any stock exchange or any self-regulatory organisation established under statute).
Group means the Guarantor and its Subsidiaries.
Guarantee means the guarantee executed by the Guarantor in favour of the Owners on or about the date hereof guaranteeing inter alia the obligations of the Charterers under this Charter.
Guarantor means Top Ships Inc., a corporation incorporated in the Republic of the Marshall Islands with registration no. 3571.
Handling Fee means an irrevocable and non-refundable handling fee in the amount set out in the Fee Letter payable by the Charterers to the Owners in accordance with the Fee Letter.
Hire Calculation Period means the period of time commencing from the Commencement Date until the date that is the second (2nd) Payment Date and each period of one (1) month thereafter from the last day of the preceding Hire Calculation Period; provided that if a Hire Calculation Period would otherwise expire on a day which is beyond the last day of the Charter Period, that Hire Calculation Period shall be shortened to expire on the last day of the Charter Period.
Holding Company means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.
Hong Kong means the Hong Kong Special Administrative Region of the People's Republic of China.
Insurances means:

(a)
all policies and contracts of insurance, including entries of the Vessel in any protection and indemnity or war risks association, which are effected in respect of the Vessel or otherwise in relation to it whether before, on or after the date of this Charter; and

(b)
all rights, proceeds and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium and any rights in respect of any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Charter.
Interest Rate means the sum of LIBOR plus the Margin.
ISM Code means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation

9

Assembly as Resolutions A.741 (18) and A.788 (19), as the same may be amended or supplemented from time to time (and the terms safety management system, Safety Management Certificate and Document of Compliance have the same meanings as are given to them in the ISM Code).
ISPS Code means the International Ship and Port Security Code as adopted by the Conference of Contracting Governments to the Safety of Life at Sea Convention 1974 on 13 December 2002 and incorporated as Chapter XI-2 of the Safety of Life at Sea Convention 1974, as the same may be supplemented or amended from time to time.
Legal Opinion means:

(a)
any legal opinion delivered pursuant to Clause 5 of Part B and Clause 2 of Part D of Addendum No.1; or

(b)
any legal opinion which the Creditor Parties may obtain or arrange with respect to the Charterers or any other Security Parties.
Legal Reservations means:

(a)
the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors;

(b)
the time barring of claims under the Limitation Act (1980) and the Foreign Limitation Periods Act 1984, the possibility that an undertaking to assume liability for, or indemnify a person against, non-payment of any stamp duty may be void or the defences of set-off or counter-claim;

(c)
similar principles, rights and defences under the laws of any Relevant Jurisdiction; and
any reservations or qualifications as to matters of law (but excluding at all times any reservations or qualifications as to matters of fact) referred to in any Legal Opinion.
LIBOR means:

(a)
the applicable Screen Rate as of 11:00 a.m. (London time) on the Quotation Day for Dollars and for a period of three (3) months; or

(b)
as otherwise determined pursuant to Clause 37.8.
Major Casualty means any casualty to the Vessel in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds US$1,000,000 or the equivalent in any other currency.
Management Agreements means together:

10


(a)
in relation to commercial, technical and crew management of the Vessel, the ship management agreement dated 1 January 2019 and made between the Charterers and Central Shipping; and

(b)
in relation to the technical management of the Vessel, the sub-management agreement dated 1 January 2019 and made between Central Shipping and Central Mare,
together with all supplements and amendments to them.
Manager's Undertakings means the letters of undertaking executed by the Approved Managers and any other named assured or co-assured of the Vessel in favour of the Security Trustee subordinating their respective rights against the Vessel and the Charterers to the rights of the Creditor Parties and their financiers (if any) in an agreed form.
Margin means 3.9% per annum.
Market Disruption Event means:

(a)
at or about noon (London time) on the Quotation Day for the relevant Hire Calculation Period the relevant Screen Rate is not available and none or only one of leading banks in the London interbank market supplies a rate to the Owners to determine LIBOR for dollars for the relevant Hire Calculation Period; or

(b)
before close of business in Hong Kong on the Quotation Day for the relevant Hire Calculation Period, the cost to the Owners of funding the Charterhire Principal from whatever source it may select would be in excess of LIBOR.
Market Value means, in relation to the Vessel, at a relevant date, one (1) valuation obtained by the Charterers (or failing which obtained by the Owners) and prepared:

(a)
on a date no earlier than thirty (30) days prior to the relevant date;

(b)
by one (1) Approved Valuer;

(c)
with or without physical inspection of the Vessel;

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

(e)
if a range of valuation is given by the Approved Valuer, the lower end of the range shall apply,
with the expenses of all such valuations being borne by the Charterers.
Market Value at Closing means, in relation to the Vessel, on the MOA Delivery Date, the arithmetic average of two (2) valuations obtained by the Owners and prepared:

(a)
on a date no earlier than fifteen (15) days prior to the MOA Delivery Date;

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(b)
by two (2) Approved Valuers respectively, one (1) appointed by the Owners and one (1) appointed by the Charterers;

(c)
with or without physical inspection of the Vessel;

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

(e)
if a range of valuation is given by an Approved Valuer, the lower end of the range shall apply for that Approved Valuer,
with the expenses of all such valuations being borne by the Charterers.
MARPOL Protocol means Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as amended in 1978 and 1997).
Material Adverse Effect means, in the reasonable opinion of the Owners, a material adverse effect on:

(a)
the business, operations, property, condition (financial or otherwise) or prospects of the Charterers or any other Security Party;

(b)
the ability of the Charterers or any other Security Party to perform its material obligations under any Transaction Document to which it is a party;

(c)
the validity, legality or enforceability of any Transaction Document or the rights or remedies of the Owners or any other Creditor Party under any of the Transaction Documents; or

(d)
the validity, legality or enforceability of, or the effectiveness or priority and ranking of any Security Interests granted pursuant to any of the Security Documents.
MOA means the memorandum of agreement dated on or about the date hereof as supplemented by Addendum No.1 between the Charterers as sellers and the Owners as buyers in relation to the sale and purchase of the Vessel, as may be supplemented, amended or otherwise modified from time to time (including all side letters and other agreements relating thereto).
MOA Delivery means the actual delivery of the Vessel by the Charterers as sellers to and the actual acceptance of the Vessel by the Owners as buyers under and in accordance with the provisions of the MOA.
MOA Delivery Date means the date of MOA Delivery.
MOA PDA means the protocol of delivery and acceptance to be executed and delivered by the Charterers as sellers and the Owners as buyers pursuant to the MOA.

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MOA Purchase Price means the amount which is the lower of US$30,500,000 and the Market Value at Closing of the Vessel, being the purchase price of the Vessel paid by the Owners (as buyers) to the Charterers (as sellers) under the MOA.
Mortgagee has the meaning given to that term in Clause 43.1.
Net Average Market Value has the meaning given to that term in Clause 40.6(a).
Net Sale Proceeds has the meaning given to that term in Clause 40.6(b)(i).
Original Financial Statements means, in relation to the Guarantor, the audited consolidated financial statements of the Group for the financial year ended 31 December 2018.
Original Sellers means ECO Evolution LLC, a limited liability company incorporated in the Republic of the Marshall Islands.
Owners Account means an account of the Owners with Bank of China (Hong Kong) Limited or such other account as the Owners may from time to time designate and notified to the Charterer and into which all Charterhire and all other sums payable under this Charter by the Charterers to the Owners shall be paid in accordance with this Charter.
Owners Quiet Enjoyment Letter means, if requested by the Sub-Charterer, a quiet enjoyment letter in relation to the Vessel issued or to be issued by the Owners in favour of the Sub-Charterer and acknowledged by the Charterers and the Sub-Charterer in form and substance acceptable to the Owners, the Charterers and the Sub-Charterer.
Parties means together, the Owners and the Charterers.
Payment Date means each of the Commencement Date, the date falling on the 10th day of the month falling immediately after the Commencement Date and the dates falling on the 10th day of each month commencing thereafter and (in the case of the last Payment Date) the date on which (i) the Balloon Payment, the last instalment of the Fixed Charterhire and the last instalment of the Variable Charterhire are to be paid by the Charterers to the Owners pursuant to Clause 37.2(b) and (ii) the Purchase Obligation Price is to be paid by the Charterers to the Owners pursuant to Clause 49.
Permitted Security Interests means:

(a)
Security Interests created by a Transaction Document or a Financial Instrument;

(b)
prior to Delivery, Security Interests created by the Existing Security Documents;

(c)
liens for unpaid master's and crew's wages in accordance with the ordinary course of operation of the Vessel or in accordance with usual reputable maritime practice;

(d)
liens for salvage;

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(e)
liens for master's disbursements incurred in the ordinary course of trading;

(f)
any other liens arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel where the Charterers are contesting the claim giving rise to such lien in good faith by appropriate steps and for the payment of which adequate reserves have been made in case the Charterers finally have to pay such claim so long as any such proceedings shall not, and may reasonably be considered unlikely to, lead to the arrest, sale, forfeiture or loss of the Vessel or any interest in the Vessel;

(g)
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 Charterers are prosecuting or defending such action in good faith by appropriate steps;

(h)
Security Interests arising by operation of law in respect of taxes which are not overdue or for payment of taxes which are overdue for payment but which are being contested by the Charterers in good faith by appropriate steps and in respect of which adequate reserves have been made; and

(i)
such other Security Interests as permitted in writing by the Owners and/or the Security Trustee.
Purchase Obligation means the purchase obligation imposed on the Charterers by the Owners pursuant to Clause 4949.
Purchase Obligation Date means the date on which the Owners shall transfer the legal and beneficial interest in the Vessel to the Charterers, and the Charterers shall purchase the Vessel, being the last day of the Charter Period which is also the last Payment Date.
Purchase Obligation Price means the relevant price payable under this Charter in the amount of US$1 and payable under Clause 49.
Purchase Option means the purchase option granted by the Owners to the Charterers pursuant to Clause 48.148.1.
Purchase Option Date means the date specified in the Purchase Option Notice as being the date on which the Owners shall sell and transfer the legal and beneficial interest in the Vessel to the Charterers, and the Charterers shall purchase and accept the same.
Purchase Option Notice means the notice given pursuant to Clause 48.348.3 and containing the details specified in Clause 48.548.5.
Purchase Option Price means the relevant price payable under this Charter in US$ in the amount set out in Clause 48.4, as the same may from time to time be adjusted in accordance with this Charter.
Quotation Day means:

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(a)
in relation to the first Hire Calculation Period for which the Interest Rate for that Hire Calculation Period is to be determined, five (5) Business Days before the first day of that period; and

(b)
in relation to any other period for which an Interest Rate is to be determined, fourteen (14) Business Days before the first day of that period (or such later date as the Owners may agree),
and in each case, unless market practice differs in the London interbank market for that currency, in which case the Quotation Day for that currency will be determined by the Owners in accordance with market practice in the London interbank market (and if quotations would normally be given on more than one day, the Quotation Day will be the last of those days).
Relevant Jurisdictions means together, in relation to a Security Party:

(a)
its jurisdiction of incorporation;

(b)
any jurisdiction where any property owned by it and charged under a Transaction Document is situated;

(c)
any jurisdiction where it conducts its business; and

(d)
any jurisdiction whose laws govern the perfection of any of the Transaction Documents entered into by it creating a Security Interest,
and Relevant Jurisdiction means any of them.
Relevant Party means any of the parties to this Charter and the Transaction Documents.
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.
Restricted Countries means those countries subject to country-wide or territory-wide Sanctions and/or trade embargoes, in particular but not limited to pursuant to the US's Office of Foreign Asset Control of the US Department of Treasury (OFAC).
Restricted Person means a person, entity or any other parties (i) located, domiciled, resident or incorporated in Restricted Countries, and/or (ii) subject to any sanction administrated by the United Nations, the European Union, the US and the US Department of Treasury's Office of Foreign Assets Control (OFAC), the United Kingdom, Her Majesty's Treasury (HMT) and the Foreign and Commonwealth Office of the United Kingdom, the People's Republic of China and/or (iii) owned or controlled by or affiliated with persons, entities or any other parties as referred to in (i) and (ii).
Sanctions means any sanctions, embargoes, freezing provisions, prohibitions or other restrictions relating to trading, doing business, investment, exporting, financing or making assets available (or other activities similar to or connected with any of the foregoing) imposed by law or regulation of the United Nations, the United Kingdom,

15

the US (including, without limitation, OFAC), the People's Republic of China or the Council of the European Union.
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 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 Owners may specify another page or service displaying the relevant rate after consultation with the Charterers.
Security Documents means the Guarantee, the Charterer's Assignment, the Account Pledge, the Deed of Charge, the Manager's Undertakings, the Trust Deed, the Collateral Security Documents of both Collateral Vessels and any other security documents granted as security for the obligations of the Charterers under or in connection with this Charter.
Security Interest means a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
Security Parties means together:

(a)
the Charterers, the Guarantor, the Approved Managers and any party providing security to the Owners and/or the Security Trustee for the Charterers' obligations under this Charter pursuant to a Security Document; and

(b)
the Collateral Security Parties of both Collateral Vessels,
and Security Party means any of them.
Security Perfection Requirements means:

(a)
delivery of the original share certificates for the shares held by the Guarantor in the Company and the ancillary documents to be delivered under the Deed of Charge;

(b)
service by the Greek court bailiff of an original signed Account Pledge on the Account Bank and the Charterers;

(c)
execution of all notices, acknowledgments and consents as required under the Transaction Documents; and

(d)
any other Authorisations of the Transaction Documents as may be required or recommended in any Legal Opinion.

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Security Trustee means ORIENTAL FLEET TANKER 11 LIMITED (东 方富利 TANKER11 有限公司), a corporation incorporated in the Republic of the Marshall Islands with registration no. 101325.
Sub-Charter means the time charterparty dated 17 July 2014 as supplemented by an addendum no.2 dated 25 November 2016 and an addendum no.3 dated 28 December 2017 made between the Charterers and Stena Bulk A/S (CVR no. 33396953) (previously Stena Weco A/S) or any contract of affreightment, or any demise charterparty, or any other time or voyage charterparty exceeding eighteen (18) months' duration (whether by virtue of any optional extensions or otherwise) entered into between the Charterers and a Sub-Charterer for the chartering of the Vessel by the Charterers to such Sub-Charterer during the Charter Period, as the same may at any time be supplemented, amended or extended.
Sub-Charterer means Stena Bulk A/S (CVR no. 33396953) (previously Stena Weco A/S) or any other person entering into a contract of affreightment, or any demise charterparty, or any time or voyage charterparty exceeding eighteen (18) months' duration (whether by virtue of any optional extensions or otherwise) with the Charterers for the chartering of the Vessel by the Charterers to such person.
Subsidiary means in relation to any company or corporation, a company or corporation:

(a)
which is controlled, directly or indirectly, by the first mentioned company or corporation;

(b)
more than half the issued equity share capital of which is beneficially owned, directly or indirectly, by the first mentioned company or corporation; or

(c)
which is a Subsidiary of another Subsidiary of the first mentioned company or corporation,
and for this purpose, a company or corporation shall be treated as being controlled by another if that other company or corporation is able to direct its affairs and/or to control the composition of its board of directors or equivalent body.
Substantial Shareholder means The Lax Trust of Level 3, 18 Stanley Street, Auckland 1010, New Zealand.
Surplus Retention Proceeds has the meaning given to that term in Clause 40.6(c)(i).
Surplus Sale Proceeds has the meaning given to that term in Clause 40.6(b)(iv).
Termination Event means any event described in Clause 4545.
Termination Sum means, in respect of any date, the aggregate of:

(a)
the Purchase Option Price applicable on the relevant date as if that relevant date is a Purchase Option Date; and

(b)
(i) the Breakfunding Costs and (ii) any costs incurred and expenses incurred by the Owners and any other Creditor Parties (and their financiers (if any)) in

17

locating, repossessing or recovering the Vessel or collecting any payments due under this Charter or in obtaining the due performance of the obligations of the Charterers under this Charter or the other Transaction Documents and any default interest in relation thereto.
Total Loss means:

(a)
actual, constructive, compromised, agreed or arranged total loss of the Vessel;

(b)
any expropriation, requisition or acquisition of the Vessel, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration (excluding a requisition for hire); or

(c)
any arrest, capture, seizure, confiscation or detention of the Vessel (including any hijacking or theft but excluding any event specified in paragraph (b) of this definition), which is effected by any Governmental Agency or by any person or persons claiming to be or to represent a Governmental Agency or other persons unless it is redelivered within three (3) months to the full control of the Owners or the Charterers.
Transaction Documents means together, the Existing Charter, the Call Option Agreement, the First MOA, this Charter, the MOA, the Fee Letter, the Security Documents and the Collateral Transaction Documents, and Transaction Document means any of them.
Trust Deed means a trust deed executed by the Owners, the Collateral Owners, the Charterers, the Collateral Charterers, the Guarantor, Central Shipping, Central Mare and the Security Trustee on or about the date hereof pursuant to which the Security Trustee has agreed to declare that it holds the Trust Property (as defined therein) on trust for the benefit of the Creditor Parties.
Upfront Charterhire means the non-refundable upfront charterhire in the amount of which is the lower of US$6,100,000 and 20% of the MOA Purchase Price, being the excess amount of the MOA Purchase Price over the Financing Principal payable by the Charterers on the Commencement Date, which shall be deducted by the Owners from the MOA Purchase Price paid by the Owners (as buyers) to the Charterers (as sellers) under the MOA, as more particularly set out in the column entitled "Upfront Charterhire" in the Charterhire Schedule, as the same may from time to time be adjusted in accordance with this Charter.
US means the United States of America.
US Tax Obligor means:

(a)
the Charterers, if they are resident for tax purposes in the US; or

(b)
any other Security Parties some or all of whose payments under the Transaction Documents are from sources within the US for US federal income tax purposes.

18

Variable Charterhire means, on each Payment Date, an amount equal to interest accrued on such amount of Charterhire Principal at the Interest Rate during the relevant Hire Calculation Period, which in each case shall accrue and be calculated on the actual number of days such Charterhire Principal was outstanding during such period and on the basis of a year of three hundred and sixty (360) days.
32.2
In this Charter:

(a)
agreed form means, in relation to a document, such document in a form agreed in writing between (i) the Owners or the Security Trustee and (ii) the Charterers;

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

(c)
company includes any partnership, joint venture and unincorporated association;

(d)
consent includes an Authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalisation;

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

(f)
continuing means, in relation to any Termination Event, a Termination Event which has not been waived by the Owners or remedied to the satisfaction of the Owners;

(g)
document includes a deed; also a letter, fax or telex;

(h)
expense means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;

(i)
including shall be construed as including without limitation (and cognate expressions shall be construed similarly);

(j)
indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

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

(l)
legal or administrative action means any legal proceeding or arbitration and any administrative or regulatory action or investigation;

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

(n)
months shall be construed in accordance with Clause 32.332.3;

19


(o)
person includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium, partnership or other entity (whether or not having separate legal personality);

(p)
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;

(q)
protection and indemnity risks means the usual risks covered by the UK P&I Club or any other protection and indemnity association which is a member of the International Group of P&I Clubs acceptable to the Owners and the Security Trustee including pollution risks, extended passenger cover and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of Clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), Clause 8 of the Institute Time Clauses (Hulls)(1/10/83) or Clause 8 of the Institute Time clauses (Hulls) (1/11/1995) or the Institute Amended Running Down clause (1/10/71) or any equivalent provision;

(r)
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;

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

(t)
a provision of law is a reference to that provision as amended or re-enacted; and

(u)
a time of day is a reference to Hong Kong time.
32.3
Meaning of month
A period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(a)
(subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;

(b)
if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and

(c)
if a Hire Calculation Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Hire Calculation Period is to end.

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The above rules will only apply to the last month of any period.
32.4
In this Charter:

(a)
references to a Transaction Document or any other document being in the form of a particular appendix or to any document referred to in the recitals include references to that form with any modifications to that form which the Owners and/or the Security Trustee approve;

(b)
references to, or to a provision of, a Transaction Document or any other document are references to it as amended or supplemented, whether before the date of this Charter or otherwise;

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

(d)
references to Clauses, Sub-Clauses and Schedules are to be construed as references to clauses and sub-clauses of, and schedules to, this Charter; and

(e)
words denoting the singular number shall include the plural and vice versa, and words importing a gender include every gender.
32.5
Headings
In interpreting a Transaction Document or any provision of a Transaction Document, all clauses, sub-clauses and other headings in that and any other Transaction Document shall be entirely disregarded.
33.
CHARTER PERIOD
33.1
The Charter Period shall commence on the Commencement Date.
33.2
Notwithstanding the foregoing and subject to the terms herein, this Charter shall be in full force and effect and valid, binding and enforceable against the Parties with effect from the date hereof.
33.3
The Charter Period shall, subject to the terms of this Charter, continue for a period from the Commencement Date to and including the date falling one hundred and nineteen (119) months after the second (2nd) Payment Date.
34.
CANCELLATION
If, prior to any payment (i) being due or payable or (ii) having been made by the Owners under the MOA, a Termination Event occurs and is continuing, then this Charter shall immediately terminate and be cancelled without the need for either of the Owners or the Charterers to take any action whatsoever, provided that the Owners shall be entitled to retain all fees paid by the Charterers pursuant to Clause 41.141.1 (and without prejudice to Clause 41.141.1 but if such fees have not been paid but are due and payable, the Charterers shall forthwith pay such fees to the Owners in accordance with Clause 41.141.1). Such payment shall not be construed as a penalty but shall represent an agreed estimate of the losses and damage incurred by the

21

Owners in entering into this Charter and shall therefore be paid as compensation to the Owners.
35.
CONDITIONS PRECEDENT AND CONDITIONS SUBSEQUENT
35.1
The obligation of the Owners to charter the Vessel to the Charterers hereunder is subject to and conditional upon:

(a)
no Termination Event having occurred which is continuing;

(b)
no other event has occurred which with the giving of notice or lapse of time would, if not remedied, constitute a Termination Event;

(c)
the representations and warranties contained in Clause 4646 being true and correct in all aspects on the date hereof by reference to the facts and circumstances then existing;

(d)
the Charterers (as sellers) and the Owners having duly executed and entered into the MOA;

(e)
the MOA Delivery occurring on or before the Cancelling Date;

(f)
the Owners having received from the Charterers:

(i)
on the date of this Charter, the documents or evidence set out in Part AI of Addendum No.1 in form and substance satisfactory to them;

(ii)
no less than fourteen (14) days prior to Delivery, the documents or evidence set out in Part AII of Addendum No.1 in form and substance satisfactory to them;

(iii)
no less than seven (7) Banking Days prior to Delivery, the documents or evidence set out in Part AIII of Addendum No.1 in form and substance satisfactory to them;

(iv)
no less than three (3) Banking Days prior to Delivery (or such later date as the Owners may agree), the documents or evidence set out in Part AIV of Addendum No.1 in form and substance satisfactory to them;

(v)
no less than one (1) Banking Day prior to Delivery, the documents or evidence set out in Part BI of Addendum No.1 in form and substance satisfactory to them; and

(vi)
on or before Delivery, the documents or evidence set out in Part BII of Addendum No.1 in form and substance satisfactory to them.
35.2
The obligation of the Owners to continue chartering the Vessel to the Charterers hereunder is subject to and conditional upon the Owners having received from the Charterers on or before such dates as specified in Parts C and D of Addendum No.1 the documents or evidence set out in Parts C and D of Addendum No.1 in form and substance satisfactory to them.

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35.3
Upon the requirements of Clause 35.135.1 and Clause 35.2 being fulfilled or waived to the satisfaction of the Owners, the Owners shall give notice thereof to the Charterers.
35.4
The conditions precedent set out in Clause 35.135.1 and the conditions subsequent set out in Clause 35.2 are for the sole benefit of the Owners and may be waived in whole or in part, with or without conditions without prejudicing the right of the Owners to require fulfilment of such conditions in whole or in part at any time thereafter.
36.
DELIVERY
36.1
Subject to the requirements of Clause 35.135.1 being fulfilled or waived to the satisfaction of the Owners, on delivery to and acceptance by the Charterers of the Vessel from the Original Sellers under the First MOA, on delivery to and acceptance by the Owners of the Vessel from the Charterers as sellers under the MOA and subject to the provisions of this Clause 36.1, the Vessel shall be deemed to have been delivered to, and accepted (without reservation) by, the Charterers under this Charter (irrespective of whether the Charterers shall become and be entitled to the possession and use of the Vessel).
36.2
On Delivery, as evidence of the commencement of the Charter Period, the Charterers and the Owners shall sign the Certificate of Delivery and Acceptance. Without prejudice to this Clause, the Charterers shall be deemed to have accepted the Vessel under this Charter, and the commencement of the Charter Period having started, on Delivery even if, for whatever reason, the Certificate of Delivery and Acceptance is not signed but Delivery has occurred.
36.3
Without prejudice and notwithstanding the provisions of this Clause, the Charterers shall not be entitled for any reason whatsoever to refuse to accept delivery of the Vessel under this Charter once the Vessel has been delivered to and accepted by (a) the Charterers from the Original Sellers under the First MOA and (b) the Owners from the Charterer as sellers under the MOA, and the Owners shall not be liable for any losses, cost or expenses whatsoever or howsoever arising including without limitation, any loss of profit or any loss or otherwise and whether before or after Delivery:

(a)
resulting directly or indirectly from any defect or alleged defect in the Vessel or any failure of the Vessel; or

(b)
arising from any delay in the commencement of the Charter Period or any failure of the Charter Period to commence unless such delay or failure results solely from a failure by the Owners to pay the MOA Purchase Price pursuant to, and in accordance with, the terms of the MOA.
36.4
The Owners will not and shall not be obliged to deliver the Vessel to the Charterers with any bunkers and unused lubricating oils and greases in storage tanks and unopened drums of the Vessel, but the Vessel shall be delivered with whatever is onboard when delivered by the Original Sellers (as sellers) to the Charterers (as buyers) under the First MOA and the Charterers (as sellers) to the Owners (as buyers) under the MOA.

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36.5
The Charterers hereby acknowledge and agree that the Owners are not the manufacturer or original supplier of the Vessel and that the Owners make no condition, term, representation or warranty, express or implied (and whether statutory or otherwise) as to the Owners' title to the Vessel or as to the seaworthiness, merchantability, condition, design, operation, performance, quality, capacity or fitness for use or as to the eligibility of the Vessel for any particular trade or operation or any other condition, term, representation or warranty whatsoever, express or implied, with respect to the Vessel. Acceptance of delivery by the Charterers or (as the case may be) deemed delivery of the Vessel to the Charterers under this Charter shall be conclusive proof evidencing that, for the purposes of the obligations and liabilities of the Owners hereunder or in connection herewith, the Vessel is at that time seaworthy, in accordance with the provisions of this Charter, in good working order and repair and without defect or inherent vice whether or not discoverable by the Charterers and free and clear of all liens, Security Interests and debts of whatsoever nature save for the Security Interests granted pursuant to the Security Documents.
36.6
Notwithstanding and without prejudice to the foregoing Clause 36.536.5, the Charterers hereby waive all of their rights in respect of any condition, term, representation or warranty express or implied (and whether statutory or otherwise) on the part of the Owners and all of their claims against the Owners howsoever and whatsoever that may arise in respect of the Vessel or the Owners' title thereto, or all of their rights therein or arising out of the operation of the Vessel or the chartering thereof under this Charter (including in respect of the seaworthiness or otherwise of the Vessel).
36.7
The Charterers agree that the Owners shall be under no liability to supply any replacement Vessel or any piece or part thereof during any period when the Vessel is unusable and shall not be liable to the Charterers or any other person as a result of the Vessel being unusable.
37.
CHARTERHIRE
37.1
In consideration of the Owners agreeing to charter the Vessel to the Charterers under this Charter at the request of the Charterers, the Charterers hereby irrevocably and unconditionally agree to pay to the Owners the Charterhire in respect of the chartering of the Vessel during the Charter Period. An indicative Charterhire Schedule setting out the amount of the Upfront Charterhire, the Balloon Payment and the Fixed Charterhire is set out in Schedule 2Schedule 2. The Charterers hereby agree with the Owners and acknowledge that the Charterhire as set out in Schedule 2 shall be calculated on the basis that the Financing Principal is in the amount of US$24,400,000.
37.2
Subject to the terms of this Clause, each instalment of the Fixed Charterhire and the Variable Charterhire shall be paid on each Payment Date on the following basis:

(a)
the first instalment of the Charterhire shall be paid on the Commencement Date and shall comprise the Charterhire payable in advance in respect of the period from the Commencement Date up to and including the date falling on the 10th day of the month falling immediately after the Commencement Date; and

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(b)
thereafter each instalment of Charterhire shall be paid on the date falling one (1) month thereafter and shall comprise the Charterhire payable in advance in respect of each such one (1) month's period, PROVIDED THAT:

(i)
the Charterers shall pay Variable Charterhire on the second (2nd) Payment Date which has accrued on the Charterhire Principal in respect of the shortened Hire Calculation Period commencing from the Commencement Date and up to the second (2nd) Payment Date on a pro-rata basis; and

(ii)
on the last Payment Date the Charterers shall pay to the Owners the Balloon Payment together with the last instalment of Fixed Charterhire and the last instalment of Variable Charterhire which together shall comprise the Charterhire payable in arrears in respect of the one (1) month's period from the second (2nd) last Payment Date to the last Payment Date,
and in each case Charterhire shall be paid in same day available funds by no later than 4:00 p.m. (Hong Kong time) and the Charterers shall provide evidence of payment for the Owners' tracking of the relevant remittance. Payment of Charterhire shall be deemed earned when paid and shall not be refundable.
37.3
The Vessel shall not at any time be deemed off-hire and the Charterers' obligation to pay all Charterhire and other amounts payable in this Charter shall be paid in Dollars and shall be absolutely and unconditionally payable under any and all circumstances and shall not be affected by any circumstances of any nature whatsoever including but not limited to:

(a)
any set off, counterclaim, recoupment, defence, claim or other right which the Charterers may at any time have against the Owners or any other person for any reason whatsoever including, without limitation, any act, omission or breach on the part of the Owners under this Charter or any other agreement at any time existing between the Owners and the Charterers;

(b)
any change, extension, indulgence or other act or omission in respect of any indebtedness or obligation of the Charterers, or any sale, exchange, release or surrender of, or other dealing in, any security for any such indebtedness or obligation;

(c)
any title defect or Security Interest or any dispossession of the Vessel by title paramount or otherwise, unless caused by the fault or gross negligence of the Owners and/or the Security Trustee;

(d)
any defect in the seaworthiness, condition, value, design, merchantability, operation or fitness for use of the Vessel or the ineligibility of the Vessel for any particular trade;

(e)
any damage (including damage resulting in a Total Loss) to or forfeiture or court marshall's or other sale of the Vessel;

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(f)
any libel, attachment, levy, detention, sequestration or taking into custody of the Vessel or any restriction or prevention of or interference with or interruption or cessation in, the use or possession thereof by the Charterers;

(g)
any insolvency, bankruptcy, reorganization, arrangement, readjustment, dissolution, liquidation or similar proceedings by or against the Charterers;

(h)
any invalidity, unenforceability, lack of due authorization or other defect, or any failure or delay in performing or employing with any of the terms and provisions of this Charter or any of the Transaction Documents by any party to this Charter or any other person;

(i)
any enforcement or attempted enforcement by any of the Owners or the other Creditor Parties of their rights under this Charter or any of the Transaction Documents executed or to be executed pursuant to this Charter; or

(j)
any loss of use of the Vessel due to deficiency or default or strike of officers or crew, fire, breakdown, damage, accident, defective cargo or any other cause which would or might but for this provision have the effect of terminating or in any way affecting any obligation of the Charterers under this Charter.
37.4
Time of payment of Charterhire and other payments by the Charterers shall be of the essence of this Charter.
37.5
All payments of Charterhire and any moneys payable hereunder shall be made in Dollars.
37.6
All Charterhire and any other moneys payable hereunder shall be payable by the Charterers to the Owners Account.
37.7
Payment of Charterhire shall be at the Charterers' risk until receipt by the Owners of the payment into the Owners Account.
37.8
(a) If a Market Disruption Event occurs in relation to any Charterhire for any Hire Calculation Period, then the Interest Rate for the relevant period shall be the rate per annum which is the sum of:

(i)
the Margin; and

(ii)
the rate notified to the Charterers by the Owners in writing as soon as practicable and in any event before interest is due to be paid in respect of that Hire Calculation Period, to be that which expresses as a percentage rate per annum the cost to the Owners of funding the Charterhire for such period from whatever comparable source it may select, provided that the Owners shall use their reasonable endeavours to provide or procure the provision of the evidence of such rate.

(b)
If a Market Disruption Event occurs and the Owners or the Charterers so require, the Owners and the Charterers shall enter into negotiations (for a period of not more than thirty (30) days) with a view to agreeing a substitute basis for determining the rate of interest.

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(c)
Any alternative basis agreed pursuant to paragraph 37.8(b)37.8(b) above shall, with the prior consent of the Owners and the Charterers, be binding on both the Owners and the Charterers.
37.9
All stamp duty, value added tax, withholding or other taxes and import and export duties and all other similar types of charges which may be levied or assessed on or in connection with:

(a)
the operation of this Charter in respect of the hire and all other payments to be made pursuant to this Charter and the remittance thereof to the Owners; and

(b)
the import, export, purchase, delivery and re-delivery of the Vessel,
shall be borne by the Charterers. The Charterers shall pay, if applicable, value added tax and other similar tax levied on any Charterhire and other payments payable under this Charter by addition to, and at the time of payment of, such amounts.
37.10
If requested by the Charterers, the Owners will use their reasonable endeavours to change their jurisdiction of incorporation to another jurisdiction reasonable designated by the Charterers, provided that:

(a)
the new jurisdiction of incorporation of the Owners are acceptable to their financiers (if any);

(b)
the Charterers shall be responsible for preparing all application, registration and other documents required for the change of jurisdiction of incorporation in form and substance acceptable to the Owners;

(c)
the new jurisdiction of incorporation of the Owners is acceptable to the then current flag state of the Vessel for the purpose of maintaining the registration of the Vessel under that flag state in form and substance acceptable to the Owners;

(d)
the Charterers shall be responsible for preparing all application, registration and other documents required for registration of the Owners as foreign maritime entity in other relevant jurisdiction for the purpose of maintaining the registration of the Vessel under the then current flag state in form and substance acceptable to the Owners;

(e)
if a change of flag state is required as a result of the change of jurisdiction of incorporation of the Owners, such change of jurisdiction of incorporation of the Owners shall be subject to the prior written consent of the Owners and the Owners' financiers (if any), and the Charterers shall be responsible for registration of the Vessel in such new flag state and pay to the Owners or their financier (if any) upon demand the legal fees, registration fees and other duties (including any duties payable by the Owners and the Owners' financiers (if any)) imposed by the new registry or any taxing authority therein in connection with the preparation, negotiation and registration of such new mortgage, other Financial Instruments (including any amendment or supplement thereto) and satisfactory legal opinions in favour of the Owners and/or their financier (if any); and

27


(f)
all other fees, costs, expenses, payments, taxes, charges and liabilities whatsoever incurred by the Owners and/or their financiers (if any) relating to, arising out of or in connection with such change shall be borne by the Charterers.
37.11
Any payment of the Termination Sum shall be made together with any other amount payable under this Charter.
37.12
If the Charterers fail to make any payment due under this Charter on the due date, they shall pay interest on such late payment at the Default Rate from the date on which such payment became due until the date one (1) day prior to the date of payment thereof.
37.13
All default interest and any other payments under this Charter or any other Transaction Documents which are of an annual or periodic nature shall accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a 360 day year.
37.14
Any payment, which is due to be made on a day which is not a Business Day, shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not). If the last Payment Date is not a Business Day, any payment under the Transaction Documents which is due to be made on that day shall be made on the preceding Business Day.
37.15
(a) Without prejudice to Clause 37.2, the Charterers may prepay the Charterhire Principal at any time during the Charter Period (being at least $1,000,000 or an integral multiple thereof) together with any Breakfunding Cost and expenses reasonably incurred by the Owners and the other Creditor Parties under this Charter and the other Transaction Documents in connection with or as a result of such prepayment, PROVIDED THAT (i) the Charterers shall only be entitled to prepay the Charterhire Principal once a year and the aggregate amount of all prepayments during the Charter Period shall not exceed $5,000,000 under this Clause 37.15 and (ii) the Owners shall have received from the Charterers not less than sixty (60) days' notice of their intention to make such prepayment, specifying the amount to be prepaid and the proposed date of such prepayment. Any amount prepaid pursuant to this Clause 37.15(a) shall be applied towards reducing the instalments of Fixed Charterhire (for the avoidance of doubt, excluding the Balloon Payment) falling on or after the date of such prepayment by the amount of such prepayment on a pro-rata basis.

(b)
The Charterers shall not prepay all or any part of the Charterhire except at the times and in the manner expressly provided for in this Charter.
37.16
If the Financing Principal is less than US$24,400,000 or upon any prepayment made by the Charterers under Clause 37.15, the Owners shall provide the Charterers with a revised Schedule 2Schedule 2. The revised Schedule 2Schedule 2 shall be based on the actual amount of the Financing Principal and determination of the corresponding Upfront Charterhire with reference to the Market Value at Closing of the Vessel and taking account any prepayment under Clause 37.15 (each revised Schedule 2Schedule 2 referred to in this Clause 37.16 and throughout this Charter is a Revised Charterhire Schedule).

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37.17
Each Revised Charterhire Schedule issued pursuant to Clause 37.16 shall (i) be deemed incorporated into this Charter in substitution for the then current Schedule 2Schedule 2, (ii) save for manifest error, be conclusive and binding on the Owners and the Charterers and at any time, the latest Revised Charterhire Schedule incorporated pursuant hereto and (iii) for the purposes of this Charter, be conclusive evidence of the rate of Charterhire, Charterhire Principal and the Purchase Option Price payable under this Charter and shall for all purposes be treated as if it had been attached as the Charterhire Schedule ab initio.
38.
POSSESSION OF VESSEL
38.1
The Charterers shall not, without the prior written consent of the Owners and the Security Trustee, assign, mortgage or pledge the Vessel or any interest therein and shall not permit the creation of any Security Interest thereon other than Permitted Security Interests.
38.2
The Charterers shall promptly notify any party (as the Owners may request) in writing that the Vessel is the property of the Owners and the Charterers shall provide the Owners with a copy of such written notification and satisfactory evidence of that such party has received such written notification.
38.3
If the Vessel is arrested, seized, impounded, forfeited, detained or taken out of their possession or control (whether or not pursuant to any distress, execution or other legal process), the Charterers shall procure the immediate release of the Vessel (whether by providing bail or procuring the provision of security or otherwise do such lawful things as the circumstances may require) and shall immediately notify the Owners of such event and shall indemnify the Owners against all losses, costs or charges incurred by the Owners by reason thereof in re-taking possession or otherwise in re-acquiring the Vessel.
38.4
The Charterers shall pay and discharge or cause any Sub-Charterers of the Vessel to pay and discharge all obligations and liabilities whatsoever which have given or may give rise to liens on or claims enforceable against the Vessel and take all reasonable steps to prevent a threatened arrest of the Vessel.
39.
INSURANCE
39.1
The Charterers shall procure that such insurances are effected in form and substance satisfactory to the Owners, the Security Trustee and their financiers (if any):

(a)
in Dollars;

(b)
in the case of hull and machinery (and increased value insurance), fire and usual marine risks and war risks to cover an amount not less than the greater of (i) the Market Value of the Vessel for the time being and (ii) one hundred and twenty per cent. (120%) of the Charterhire Principal then outstanding;

(c)
in the case of oil pollution liability risks for the Vessel, for an aggregate amount equal to the highest level of cover from time to time available under protection and indemnity club entry and in the international marine insurance market and for an amount of not less than US$1,000,000,000;

29


(d)
in relation to protection and indemnity risks (including freight, demurrage and defence cover) in respect of the full tonnage of the Vessel;

(e)
in relation to such other insurances reasonably required by the Owners, the Security Trustee and/or their financiers (if any) but excluding loss of hire and contingent liability insurance; and

(f)
through approved brokers or with first class international insurers and/or underwriters acceptable to the Owners and the Security Trustee or, in the case of war risks and protection and indemnity risks, UK P& I Club or any other approved war risks and protection and indemnity risks association which is a member of the International Group of P&I Clubs acceptable to the Owners and the Security Trustee,
and shall pay the Owners, the Security Trustee and their financiers (if any) the cost (as conclusively certified by the Owners, the Security Trustee and such financiers) of (i) an innocent owner's interest insurance, (ii) an innocent owner's interest insurance - additional perils (pollution), (iii) a mortgagee's interest insurance and (iv) a mortgagee's interest insurance - additional perils (pollution), in each case in an amount not less than one hundred twenty percent (120%) of the Charterhire Principal then outstanding.
39.2
In addition to the terms set out in Clause 13(a), to the extent required and acceptable to the relevant insurers and protection and indemnity club, the Charterers shall procure that the obligatory insurances shall:

(a)
subject always to paragraph (ii), name the Security Trustee, the Charterers and, subject to execution of the Manager's Undertakings, the Approved Managers as the only named assureds unless the interest of every other named assured or co-assured is limited:

(i)
in respect of any obligatory insurances for hull and machinery and war risks;

(A)
to any provable out-of-pocket expenses that they have incurred and which form part of any recoverable claim on underwriters; and

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

(ii)
in respect of any obligatory insurances for protection and indemnity risks, to any recoveries they are entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against them;
and every other named assured or co-assured has undertaken in writing to the Security Trustee and their financiers (in such form as they reasonably require) that any deductible shall be apportioned between the Charterers and every other named assured or co-assured in proportion to the gross claims made or

30

paid by each of them and that they shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee and their financiers (if any) in accordance with the terms of the loss payable clause, to collect or recover any moneys which at any time become payable in respect of the obligatory insurances;

(b)
subject to Clause 43, whenever a financier (if any) of the Owners requires:

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

(ii)
in relation to protection and indemnity risks, name (or be amended to name) such financier as additional insured or co-assured for its rights and interests to the extent permissible under the relevant protection and indemnity club rules; and

(iii)
name such financier (as applicable) and the Security Trustee (as applicable) as respectively the first ranking loss payee and the second ranking loss payee (and in the absence of such financier, as first ranking loss payee) in accordance with the terms of the relevant loss payable clauses approved by such financier and the Security Trustee with such directions for payment in accordance with the terms of such relevant loss payable clause, as the Security Trustee and their financiers (if any) may specify;

(c)
provide that all payments by or on behalf of the insurers under the obligatory insurances to the Owners, the Security Trustee and/or their financiers (as applicable) shall be made without set-off, counterclaim or deductions or condition whatsoever;

(d)
provide that such obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Owners, the Security Trustee or their financiers (if any);

(e)
provide that the Owners, the Security Trustee and/or their financiers (if any) may make proof of loss if the Charterers fail to do so; and

(f)
provide that if any obligatory insurance is cancelled, or if any substantial change is made in the coverage which adversely affects the interest of the Owners, the Security Trustee and/or their financiers (if any), or if any obligatory insurance is allowed to lapse for non-payment of premium, such cancellation, change or lapse shall not be effective with respect to the Owners, the Security Trustee and/or their financiers (if any) for fourteen (14) days) after receipt by the Owners, the Security Trustee and/or their financiers (if any) of prior written notice from the insurers of such cancellation, change or lapse.

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39.3
The Charterers shall:

(a)
at least fourteen (14) days prior to Delivery, notify in writing the Owners and the Security Trustee of the terms and conditions of all Insurances and the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Charterers have arranged all Insurances;

(b)
at least fourteen (14) days before the expiry of any obligatory insurance notify the Owners and the Security Trustee (copied to their financiers (if any)) of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Charterers propose to renew that obligatory insurance and of the proposed terms of renewal and obtain the Owners' and the Security Trustee's approval to such matters;

(c)
at least seven (7) days before the expiry of any obligatory insurance, procure that such obligatory insurance is renewed or to be renewed on its expiry date in accordance with the provisions of this Charter;

(d)
procure that the approved brokers and/or the war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal or the effective date of the new insurance and protection and indemnity cover notify the Owners and the Security Trustee (copied to their financiers (if any)) in writing of the terms and conditions of the renewal; and

(e)
as soon as practicable after the expiry of any obligatory insurance, deliver to the Owners and the Security Trustee a letter of undertaking as required by this Charter in respect of such Insurances for the Vessel as renewed pursuant to Clause 39.3(c) together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Security Trustee and/or their financiers (if any).
39.4
The Charterers shall ensure that all insurance companies, underwriters, and (if any) insurance brokers provide the Owners and the Security Trustee with all policies, cover notes and certificates of entry relating to the obligatory insurances which they are to effect or renew and of a letter or letters or undertaking in such form as may be required by the Owners, the Security Trustee and their financiers (if any) and including undertakings by the insurance companies and/or underwriters that:

(a)
they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of this Charter, the other Transaction Documents and the Financial Instruments;

(b)
they will hold the benefit of such policies and such insurances, to the order of the Owners, the Security Trustee and/or such financiers and/or such other party in accordance with the said loss payable clause;

(c)
they will advise the Owners, the Security Trustee and such financiers promptly of any material change to the terms of the obligatory insurances of which they are aware;

32


(d)
following a written application from the Owners, the Security Trustee and/or such financiers not later than one (1) month before the expiry of the obligatory insurances they will notify the Owners, the Security Trustee and such financiers not less than fourteen (14) days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from the Charterers and, in the event of their receiving instructions to renew, they will promptly notify the Owners, the Security Trustee and such financiers of the terms of the instructions; and

(e)
if any of the obligatory insurances form part of any fleet cover, the Charterers shall procure that the insurance broker(s), or leading insurer, as the case may be, undertake to the Owners, the Security Trustee and such financiers that such insurance broker or insurer(s) will not set off against any sum recoverable in respect of a claim relating to the Vessel under such obligatory insurances any premiums due in respect of any other vessel under any fleet cover of which the Vessel forms a part or any premium due for other insurances, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums, and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of the Vessel forthwith upon being so requested by the Owners, the Security Trustee and/or such financiers and where practicable.
39.5
The Charterers shall ensure that any protection and indemnity and/or war risks associations in which the Vessel is entered provides the Owners, the Security Trustee and such financiers with:

(a)
a copy of the certificate of entry for the Vessel as soon as such certificate of entry is issued;

(b)
a letter or letters of undertaking in such form as may be required by the Owners the Security Trustee and their financiers (if any) or in such association's standard form; and

(c)
a copy of each of (i) a certificate of insurance or other financial security in respect of civil liability for oil pollution damage, (ii) a certificate of insurance or other financial security in respect of civil liability for bunker oil pollution damage, (iii) (if the Vessel trades or enters into US waters) a certificate issued pursuant to s1016(a) Oil Pollution Act 1990 and s108(a) Comprehensive Environmental Response, Compensation and Liability Act 1980, as amended, in accordance with US Coast Guard Regulations, 33 CFR Part 138 and (iv) a certificate of insurance or other financial security in respect of shipowners' liability as required under the Maritime Labour Convention.
39.6
The Charterers shall ensure that all policies relating to obligatory insurances are deposited with the approved brokers through which the insurances are effected or renewed.
39.7
The Charterers shall procure that all premiums or other sums payable in respect of the obligatory insurances are punctually paid and produce all relevant receipts when so required by the Owners and the Security Trustee.

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39.8
The Charterers shall ensure that any guarantees required by a protection and indemnity or war risks association are promptly issued and remain in full force and effect.
39.9
The Charterers shall neither do nor omit to do (nor permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in part; and, in particular:

(a)
the Charterers shall procure that all necessary action is taken and all requirements are complied with which may from time to time be applicable to the obligatory insurances, and (without limiting the obligations contained in this Clause) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Owners and the Security Trustee have not given their prior approval (unless such exclusions or qualifications are made in accordance with the rules of UK P&I Club or any other protection and indemnity association which is a member of the International Group of P&I Clubs acceptable to the Owners and the Security Trustee);

(b)
the Charterers shall not make or permit any changes relating to the classification or classification society or manager or operator of the Vessel unless such changes have first been approved by the underwriters of the obligatory insurances and the Owners and the Security Trustee;

(c)
prior to permitting the Vessel to enter the US Exclusive Economic Zone, the Charterers shall comply with all regulations in force of the US Oil Pollution Act 1990 which apply to the Vessel including, if necessary, obtaining within the time limits set by the US Coast Guard, a Certificate of Financial Responsibility, a copy of which shall be lodged with the Owners and the Security Trustee prior to engaging in any such voyage; and

(d)
the Charterers shall not employ the Vessel, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.
39.10
The Charterers shall not make or agree to any material alteration to the terms of any obligatory insurance nor waive any right relating to any obligatory insurance without the prior written consent of the Owners, the Security Trustee and their financiers (if any).
39.11
The Charterers shall not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty without the Owners' and the Security Trustee's approval, and shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.
39.12
The Charterers shall provide the Owners and the Security Trustee upon written request, copies of:

34


(a)
all communications between the Charterers and:

(i)
the approved brokers (if applicable); and

(ii)
the approved protection and indemnity and/or war risks associations; and

(iii)
the first class international insurers and/or underwriters, which relate directly or indirectly to:

(A)
the Charterers' obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and

(B)
any credit arrangements made between the Charterers and any of the persons referred to in paragraphs (i) or (ii) relating wholly or partly to the effecting or maintenance of the obligatory insurances;

(b)
any material communication with all parties involved in case of a claim under any of the Vessel's insurances.
39.13
The Charterers shall promptly provide the Owners, the Security Trustee and/or their financiers (or any persons which they may designate) with:

(a)
any information which the Owners, the Security Trustee and/or such financiers (or such designated persons) request for the purpose of:

(i)
obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurance effected or proposed to be effected; and/or

(ii)
effecting, maintaining or renewing any such insurances as are referred to in Clauses 13(a) and 39.1 or dealing with or considering any matters relating to any such insurances;

(b)
any information and documents reasonably requested by the Owners, the Security Trustee in connection with a claim under any of the Vessel's insurances exceeding the Major Casualty amount; and

(c)
if the Owners, the Security Trustee consider it necessary to obtain information in connection with a claim under any of the Vessel's insurances which does not exceed the Major Casualty amount, such information and documents.
39.14
If one or more of the obligatory insurances are not effected and maintained with first class international insurers or are effected with an insurance or captive Subsidiary of the Owners, the Security Trustee or the Charterers, then the Charterers shall procure, at their own expense, that the relevant insurers maintain in full force and effect facultative reinsurances with reinsurers and through brokers, in each case, of recognised standing and acceptable in all respects to the Owners and the Security Trustee. Any reinsurance policy shall include, if and when permitted by law, a cut-through clause in a form acceptable to the Owners and the Security Trustee. The

35

Charterers shall procure that underwriters of the primary insurances assign each reinsurance to the relevant financiers in full, if required.
39.15
The Charterers shall be solely responsible for and indemnify the Owners in respect of all loss or damage to the Vessel (insofar as the Owners shall not be reimbursed by the proceeds of any insurance in respect thereof) however caused occurring at any time or times before physical possession thereof is retaken by the Owners, reasonable wear and tear to the Vessel only excepted.
39.16
The Charterers shall:

(a)
if so requested by the Owners, the Security Trustee and/or their financiers, reimburse the Owners, the Security Trustee and/or such financiers the costs for obtaining a detailed report signed by an independent firm of marine insurance brokers appointed by the Owners, the Security Trustee and/or such financiers dealing with the Insurances and stating the opinion of such firm as to the adequacy of the Insurances; and

(b)
procure that there is delivered to the insurance brokers described in Clause 39.16(a)39.16(a) such information in relation to the Insurances as such brokers may require.
39.17
If the Charterers fail to comply with any of the provisions of this Clause 39, the Owners and the Security Trustee shall be entitled (but not bound) to effect and subsequently to maintain all such Insurances upon the Vessel as they may think fit in order to procure the compliance with such provisions or alternatively, to require the Vessel (at the Charterers' risk) to remain in, or to proceed to and remain in a port designated by the Owners, the Security Trustee and/or such financiers until such provisions are fully complied with.
40.
TERMINATION AND REDELIVERY; WAR; TOTAL LOSS
40.1
Upon the occurrence of a Termination Event which is continuing:

(a)
the Owners shall notify the Charterers of occurrence of the same (the Termination Event Notice) whereupon the Charterers may:

(i)
in relation to a Termination Event under Clause 45(a), (c) or (g), within three (3) Business Days of the date of the Termination Event Notice, provide to the Owners a written notice advising the Owners of their intention to terminate this Charter and shall promptly pay the Termination Sum to the Owners by no later than the end of such three (3) Business Days period; or

(ii)
in relation to any other Termination Event, within thirty (30) days of the date of the Termination Event Notice, provide to the Owners a written notice advising the Owners of their intention to terminate this Charter and shall promptly pay the Termination Sum to the Owners by no later than the end of such thirty (30) days period; and

(b)
if the Charterers do not notify the Owners of their intention to terminate this Charter pursuant to Clause 40.140.1(a)(a) within three (3) Business Days or

36

thirty (30) days (as the case may be) of the date of the Termination Event Notice then the Owners may be entitled, provided the Termination Event is continuing, by notice to the Charterers to terminate this Charter at any time thereafter, and the Charterers shall immediately pay to the Owners the Termination Sum, whereupon the Owners shall sell, transfer and redeliver, at the cost and expense of the Charterers, the Vessel to the Charterers.
40.2
The Owners shall notify the Charterers in writing if they intend to terminate this Charter in accordance with paragraph (f) of Clause 26 (War) and the Charterers shall pay the Termination Sum to the Owners within ten (10) Business Days upon receipt of such written notification from the Owners whereupon the Owners shall, at the cost and expense of the Charterers, sell the Vessel to the Charterers in accordance with Clause 40.4.
40.3
It is hereby agreed by the Parties that payment of the Termination Sum pursuant to Clause 40.140.1 or 40.2 (as the case may be) shall not be construed as a penalty but shall represent an agreed estimate of the loss and damage suffered by the Owners in purchasing the Vessel and entering into this Charter upon the terms and conditions contained herein, in each case, at the request of the Charterers and shall therefore be paid as compensation to the Owners for early termination and acquisition of the Vessel by the Charterers.
40.4
Concurrently with the irrevocable payment of the Termination Sum in full pursuant to the terms of this Charter, this Charter shall terminate and the Owners shall (save in the event of Total Loss) transfer the legal and beneficial ownership of the Vessel to the Charterers or their nominees free from any registered mortgages incurred or permitted by the Owners (save for those liens, Security Interests and debts incurred by the Charterers or arising out of or in connection with this Charter and any other Permitted Security Interests) and shall execute (i) a bill of sale, (ii) a commercial invoice, (iii) a protocol of delivery and acceptance evidencing such transfer and (iv) such other additional documents as may be necessary for the purpose of registering the Vessel at its intended flag state upon such transfer, provided that the Charterers shall notify the Owners of any such additional documents no later than five (5) Business Days (or such other mutually agreed date) prior to such transfer, each in such form as may be required by the Charterers' intended flag state.
40.5
If the Charterers fail to make any payment or make only a partial payment of the Termination Sum on the due date in accordance with Clause 40.1 or 40.2 (as the case may be), Clauses 37.1237.12 and 37.1337.13 shall apply. In addition, the Charterers agree that should the Termination Sum not be paid in full on the due date for payment under the terms of this Charter:

(a)
the Charterers' right to possess and operate the Vessel shall immediately cease and the Charterers shall, upon the Owners' request, be obliged to immediately (and at the Charterers' own cost) redeliver the Vessel to the Owners at such ready and nearest safe port as the Owners may require; and

(b)
without limiting the generality of the foregoing or any other rights of the Owners, the Owners may, at their own option subject to Clause 40.6, sell the Vessel free of any charter, lease or other engagement concerning the Vessel

37

for such price and on such terms and conditions as it may, in its absolute discretion, think fit.
40.6
If the Termination Sum has not been paid in full on the due date for payment under the terms of this Charter, the Owners shall have the Vessel valued in Dollars by three (3) Approved Valuers appointed by the Owners and:

(a)
if the average value of the three (3) valuations quoted by such three Approved Valuers (after offsetting all costs and expenses incidental to such valuations of the Vessel) (the Net Average Market Value) is higher than the Termination Sum, the Owners may, at their sole discretion:

(i)
appoint one or more of such Approved Valuers to sell the Vessel at the highest price that they could obtain. The Charterers shall also have the right to recommend a buyer for the Vessel and, if the Owners determine to sell the Vessel, they shall sell the Vessel to the buyer recommended by the Charterers if that buyer offers the same or higher price for the Vessel upon not less favourable terms than the other buyers recommended by such Approved Valuers; or

(ii)
retain the Vessel;

(b)
if the Owners sell the Vessel in accordance with Clause 40.5(b) and paragraph (a)(i) above:

(i)
the Owners shall have the right to deduct an amount equal to the aggregate of the expenses, disbursements, taxes, costs and losses whatsoever as may have been incurred by the Owners in respect of the sale of the Vessel (the Net Sale Proceeds) from the gross proceeds of the sale of the Vessel;

(ii)
an amount equal to the Termination Sum shall be deducted from the Net Sale Proceeds;

(iii)
if the Net Sale Proceeds are insufficient to satisfy all amounts due and payable from the Charterers to the Owners hereunder, the Charterers shall immediately pay the shortfall to the Owners upon demand by the Owners; and

(iv)
any surplus (the Surplus Sale Proceeds) in the Net Sale Proceeds after deducting the Termination Sum pursuant to sub-paragraph (ii) above shall be distributed by the Owners in accordance with Clause 40.7;

(c)
if the Owners elect to retain the Vessel in accordance with paragraph (a)(ii) above:

(i)
in the case of the Net Average Market Value of the Vessel is higher than the Termination Sum, the Owners shall offset the Termination Sum against the Net Average Market Value of the Vessel and distribute the difference between the Net Average Market Value of the Vessel and the Termination Sum (the Surplus Retention Proceeds) in accordance with Clause 40.7; and

38


(ii)
in the case of the Net Average Market Value is less than the Termination Sum, the Charterers shall immediately pay the shortfall to the Owners upon demand by the Owners; and

(d)
the Charterers shall have the right to pay the Termination Sum and purchase the Vessel pursuant to Clause 40.140.1 or 40.2 (as the case may be) prior to any agreement has been entered into by the Owners for a sale of the Vessel under Clause 40.5(b) and paragraph (a)(i) above, upon which, Clause 40.4 shall apply.
40.7
The Surplus Retention Proceeds or the Surplus Sale Proceeds (as the case may be) shall be applied by the Owners (and the Charterers hereby authorise and instruct the Owners to so apply such amounts) as follows:

(a)
(in the case of a Termination Event (as defined in the relevant Collateral Charter) has occurred under either Collateral Charter) in or towards payment of the Termination Sum (as defined in that Collateral Charter) to which that Collateral Vessel relates, together with any fees or charges incurred under that Collateral Charter. If a Termination Event (as defined in each Collateral Charter) has occurred under both Collateral Charters and the Surplus Retention Proceeds or the Surplus Sale Proceeds (as the case may be) are insufficient to discharge the Termination Sum (as defined in each Collateral Charter) under both Collateral Charters, the Owners shall apply the Surplus Retention Proceeds or the Surplus Sale Proceeds (as the case may be) in or towards payment pro rata of any Termination Sum (as defined in each Collateral Charter) under the Collateral Charters;

(b)
(where such conditions are satisfied save for the charter free market value of either Collateral Vessel being below the asset coverage ratio stated in clause 47.1(n) of the relevant Collateral Charter) in or towards payment of an additional cash deposit in an amount required to maintain the asset coverage ratio stated in clause 47.1(n) of that Collateral Charter, and if the remaining Surplus Retention Proceeds or remaining Surplus Sale Proceeds (as the case may be) are insufficient to maintain the asset coverage ratio stated in clause 47.1(n) of both Collateral Charters, the Owners shall apply the remaining Surplus Retention Proceeds or remaining Surplus Sale Proceeds (as the case may be) in or towards payment pro rata of the additional cash deposit required to maintain the asset coverage ratio stated in clause 47.1(n) of the Collateral Charters; and

(c)
(in the case of there being a surplus remaining after the application of the amounts in paragraphs (a) and (b) above) direct to or to the order of the Charterers, provided that no Termination Event shall have occurred and be continuing.
40.8
Without limiting the generality of the foregoing or any other rights of the Creditor Parties, upon the occurrence of a Termination Event which is continuing, the Owners shall have the sole and exclusive right and power to do any of the following:

(a)
settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to or pertaining to the Vessel and this Charter;

39


(b)
make proof of loss, appear in and prosecute any action arising from any policy or policies of insurance maintained pursuant to this Charter, and settle, adjust or compromise any claims for loss, damage or destruction under, or take any other action in respect of, any such policy or policies; and

(c)
terminate any management agreement with any manager (including any Approved Manager) of the Vessel and appoint a substitute manager in its sole discretion.
40.9
The Charterers hereby undertake to indemnify the Owners against any claims incurred in relation to the Vessel as a result of the Charterers' action or performance prior to such transfer of ownership. Any taxes, notarial, consular and other costs, charges and expenses connected with closing of the Owners' register shall be for the Charterers' account.
40.10
Without prejudice to Clause 15, if the Charterers are required to redeliver the Vessel to the Owners pursuant to the terms of this Charter, the Charterers shall ensure that the Vessel shall, at the time of redelivery to the Owners:

(a)
be in an equivalent class as she was as at the Commencement Date without any recommendation or condition, and with valid, unextended certificates for not less than six (6) months;

(b)
have passed her 5-year and if applicable, 10-year special surveys, and subsequent second intermediate survey and drydock at the Charterers' time and expense without any condition or outstanding issue and to the satisfaction of the Classification Society;

(c)
have her survey cycles up to date and trading and class certificate valid for at least six (6) months;

(d)
be redelivered to the Owners together with all spare parts and spare equipment as were on board at the time of Delivery, and any such spare parts and spare equipment on board at the time of re-delivery shall be taken over by the Owners free of charge;

(e)
be free of any cargo and Security Interest (save for the Security Interests granted pursuant to the Financial Instruments and the Security Documents); and

(f)
be free of any charter (unless the Owners wish to retain the continuance of any then existing charter).
40.11
The Owners shall, at the time of the redelivery of the Vessel, take over all bunkers, unused lubricating oil, unbroached provisions, paints, ropes and other consumable stores (excluding spare parts) in the Vessel at the Owners' cost at the original purchase price as evidenced by copies of invoices certified by a director of the Charterers and on a "first in, first out" basis.
40.12
If the Vessel, for any reason, becomes a Total Loss, in consideration of (i) the Owners agreeing to enter into this Charter at the request of the Charterers and purchasing the Vessel from the Charterers as sellers under the MOA, and (ii) without prejudice to the

40

rest of this Clause, the Owners agreeing to assign their interest in the Insurances to the Charterers upon receiving full payment of the Termination Sum (in any circumstance where the Owners have not yet received any insurance proceeds of the Vessel at such time), the Charterers shall pay the Termination Sum to the Owners on the earlier of:

(a)
the date falling (in the case of paragraph (a) or (b) of the definition of Total Loss) one hundred and twenty (120) days or (in the case of paragraph (c) of the definition of Total Loss) thirty (30) days after such Total Loss has occurred; and

(b)
the date of receipt by the Security Trustee and/or their financiers (if any), in accordance with the terms of the relevant loss payable clause) of the proceeds of insurance relating to such Total Loss,
provided that it is hereby agreed that any insurance proceeds in respect of the Vessel received by the Security Trustee shall be applied in or towards discharging the Charterers' obligation to pay the Termination Sum to the Owners and any interest accrued thereon (and such application shall be deemed satisfaction of the Charterers' obligation to pay the Termination Sum to the extent satisfied) and in the event that the insurance proceeds received from the insurers exceed the Termination Sum due (and any interest accrued thereon), the excess shall be firstly paid towards satisfying any amounts outstanding and owing by the Charterers or the other Security Parties to the other Creditor Parties and thereafter paid to the Charterers.
For the avoidance of doubt, in the event that the Vessel becomes a Total Loss:
(i) payment of Charterhire, and all other sums payable hereunder during such period shall continue to be made by the Charterers in accordance with the terms of this Charter unless and until the Owners receive the Termination Sum;
(ii) should insurance proceeds be received by the Security Trustee from the insurers, the Charterers' obligations to pay the Termination Sum shall be accordingly reduced by such insurance proceeds but in the event that such insurance proceeds be less than the amount of the Termination Sum together with any interest accrued thereon, the Charterers remain obliged to pay to the Owners the balance so that the full amount of the Termination Sum together with any interest accrued thereon due are received by the Owners;
(iii) the Vessel continues to be insured in accordance with the terms of this Charter and as may be required by any other agreements relating to the ownership, operation, management, chartering or financing of the Vessel; and
(iv) the obligation of the Charterers to pay the Termination Sum shall remain unaffected and exist regardless of whether any of the insurers have agreed or refused to meet or have disputed in good faith, the claim for Total Loss.
40.13
For the purpose of this Charter, a Total Loss shall be deemed to have occurred:

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

41


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

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

(ii)
the date of any compromise, arrangement or agreement made by or on behalf of the Owners with the insurers in which the insurers agree to treat the Vessel as a total loss.
40.14
The Owners shall have no obligation to supply to the Charterers with a replacement vessel following the occurrence of a Total Loss.
41.
FEES AND EXPENSES; INDEMNITIES;
41.1
Fees
In consideration of the Owners entering into this Charter, the Charterers shall pay the Owners or their nominee the Handling Fee as set out in the Fee Letter. The Charterers shall pay and hereby irrevocably agree to pay to the Owners any and all fees payable under this Clause 41.141.1 or under the Fee Letter, regardless of whether the MOA, this Charter or any other Transaction Document is cancelled or terminated for any reason whatsoever.
41.2
Without prejudice to any other rights of the Owners hereunder, the Charterers shall promptly pay to the Owners within ten (10) Business Days of demand on a full indemnity basis all costs, charges and expenses incurred by the Creditor Parties in collecting any Charterhire or other payments not paid on the due date under this Charter and in remedying any other failure of the Charterers to observe the terms and conditions of this Charter.
41.3
All costs (including, but not limited to, legal costs, fees for insurance opinions, valuation and inspection) and expenses reasonably incurred by the Creditor Parties in the preparation, negotiation, documentation, printing and execution of all documentation in relation to this Charter and the Transaction Documents and all legal costs, expenses and other disbursements reasonably incurred by the Creditor Parties' legal counsels in connection with the same, shall be for the account of the Charterers and the Charterers shall pay such costs and expenses promptly within ten (10) Business Days of demand.
41.4
All costs and expenses incurred by the Owners in relation to the acquisition and registration of the Vessel by the Owners in the Owners' name in the flag state stated in Box 5 together with any and all fees (including but not limited to any vessel registration and tonnage fees) payable by the Owners to such flag state to maintain and/or renew such registration shall be for the account of the Charterers and the Charterers shall pay such costs and expenses promptly within ten (10) Business Days of demand.
41.5
In addition to the foregoing and to the extent not already addressed by the foregoing, the Charterers agree at all times during this Charter to indemnify and keep indemnified the Creditor Parties against:

42


(a)
all costs and expenses whatsoever reasonably incurred in connection with this Charter and any other Transaction Document or the Vessel, and any costs, charges, or expenses reasonably incurred which the Charterers have agreed to pay under this Charter and any other Transaction Document and shall be claimed or assessed against or paid by the Creditor Parties save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(b)
any tax (except income tax) imposed on, or suffered by, any Creditor Party, excluding:

(i)
any tax imposed on and calculated by reference to the net income actually received or receivable by such Creditor Party (but, for the avoidance of doubt, not including any sum deemed for the purposes of tax to be received or receivable by such Creditor Party but not actually receivable) by the jurisdiction in which such Creditor Party is incorporated; or

(ii)
any loss or liability that is compensated for by an increased payment under Clause 51.2.2;

(c)
all losses, costs, charges, expenses, fees, payments, liabilities, penalties, fines, damages or other sanctions of a monetary nature (collectively, for the purposes of this Clause 41.541.5, Losses) suffered or incurred by the Creditor Parties and arising directly or indirectly in any manner out of the design, manufacture, delivery, non-delivery, purchase, importation, registration, ownership, chartering, sub-chartering, possession, control, use, operation, condition, maintenance, repair, replacement, refurbishment, modification, overhaul, insurance, sale or other disposal, return or storage of or loss of or damage to the Vessel or otherwise in connection with the Vessel (whether or not in the control or possession of the Charterers), any and all claims in tort or in contract by any Sub-Charterer from the Charterers nor any Sub-Charterer or any other party contracting with the Charterers or any Sub-Charterer save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(d)
all Losses suffered or incurred by the Creditor Parties which result directly or indirectly from claims which may at any time be made on the ground that any design, article or material of or in the Vessel or the operation or use thereof constitutes or is alleged to constitute an infringement of patent or copyright or registered design or other intellectual property right or any other right whatsoever save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(e)
all Losses suffered or incurred by the Owners in preventing or attempting to prevent the arrest, confiscation, seizure, taking in execution, impounding, forfeiture or detention of the Vessel, or in securing the release of the Vessel therefrom save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(f)
all Losses suffered or incurred by the Owners with respect to or as a direct result of the presence, escape, seepage, spillage, leaking, discharge or migration from the Vessel of oil or any other hazardous substance, including

43

without limitation, any claims asserted or arising under the US Oil Pollution Act of 1990 (as same may be amended and/or re-enacted from time to time hereafter) or similar legislation, regardless of whether or not caused by or within the control of the Charterers save for (in each case) resulting from the wilful misconduct of the Creditor Parties; and

(g)
any Losses incurred or suffered by the Owners in liquidating, employing or prepaying funds acquired or borrowed to purchase or finance or refinance the Vessel (excluding any costs incurred in unwinding any associated interest rate or currency swaps or currency futures transactions entered into by the Owners) following any default in payment hereunder or the occurrence of any Termination Event.
41.6
If, under any applicable law, whether as a result of judgment against the Charterers or the liquidation of the Charterers or for any other reason, any payment to be made by the Charterers under or in connection with this Charter is made or is recovered in a currency other than the currency (the currency of obligation) in which it is payable pursuant to this Charter then, to the extent that the payment (when converted into the currency of obligation at the rate of exchange on the date for the determination of liabilities permitted by the applicable law) falls short of the amount unpaid under this Charter, the Charterers shall as a separate and independent obligation, fully indemnify the Creditor Parties against the amount of the shortfall; and for the purposes of this sub-clause rate of exchange means the best rate at which the Creditor Parties are able on the relevant date to purchase the currency of obligation with the other currency.
41.7
The Charterers hereby irrevocably agree to indemnify and hold harmless the Owners against any claim, expense, liability or loss to fund the acquisition of the Vessel pursuant to the MOA.
41.8
The indemnities contained in this Clause 4141, and each other indemnity contained in this Charter, shall survive any termination or other ending of this Charter and any breach by, or repudiation by, the Charterers of this Charter.
42.
NO WAIVER OF RIGHTS
42.1
No neglect, delay or indulgence on the part of either Party in enforcing the terms and conditions of this Charter shall prejudice the strict rights of that party or be construed as a waiver thereof nor shall any single or partial exercise of any right of either Party preclude any other or further exercise thereof.
42.2
No right or remedy conferred upon either Party by this Charter shall be exclusive of any other right or remedy provided for herein or by law and all such rights and remedies shall be cumulative.
43.
MORTGAGE AND ASSIGNMENT
43.1
At all times during the term of this Charter, the Owners and the other Creditor Parties shall have the right to create a mortgage or as the case may be, mortgages, over the Vessel in favour of any lender, bank or financial institution, or agent or trustee or an Affiliate of the Owners (the Mortgagee) and to assign all the rights, title, interests and benefit in and to this Charter, the other Transaction Documents, the Insurances, the

44

Requisition Compensation and/or all or any Security Interest under the Security Documents to the Mortgagee as security for any loan or other facilities for the purpose of financing and/or refinancing the acquisition of the Vessel. In the event that the Vessel is transferred by the Owners to the Charterers or their nominee in accordance with this Charter, the Owners shall ensure that the mortgage(s) and assignment created pursuant to this Clause 4343 be fully discharged prior to such transfer, provided that the Owners shall, upon written request of the Sub-Charterer:
(a) issue the Owners' Quiet Enjoyment Letter upon the request of the Sub-Charterer; and
(b) use their best endeavours to procure the issuance of the Finance Party Quiet Enjoyment Letter simultaneous with the Owners' execution of any such ship mortgage.
All fees and expenses incurred by the Owners and their financiers in connection with the financing and/or refinancing referred to above shall be borne by the Owners. For the avoidance of doubt, the Owners shall not be responsible for any fees and expenses (including legal fees) incurred by the Charterers, the Sub-Charterer or any other party in connection with the financing and/or refinancing referred to above.
43.2
The Charterers agree with the Owners to:

(a)
cooperate with the Owners to execute or enter into any such documents as the Owners' financiers may reasonably require under and in connection with the financing and/or refinancing of the Vessel;

(b)
acknowledge and agree to be bound by and if required, to ensure that any other applicable charterers consent and agree to be bound by, the notice of any assignment of this Charter, the other Transaction Documents and/or all or any Security Interest under the Security Documents executed in favour of the Mortgagee in the manner as required by the Mortgagee; and

(c)
comply, and provide such information and documents to enable the Owners to comply, with all such instructions or directions in regard to the employment, insurances, operation, repairs and maintenance of the Vessel as reasonably laid down in the Financial Instruments or as may be reasonably directed from time to time during the currency of this Charter by the mortgage(s) in conformity with the Financial Instruments.
44.
NOTICES
44.1
Any communication to be made under or in connection with the Transaction Documents shall be made in writing and, unless otherwise stated, may be given in person, by post, fax or email.
44.2
Except as otherwise provided for in this Charter, all notices or other communications under or in respect of the Transaction Documents shall be in writing and shall be made or given to such party at the address, facsimile number or email address appearing below (or at such other address, facsimile number or email address as such party may hereafter specify for such purposes to the other by notice in writing):

45


(a)
in the case of the Owners:
 
Address:
c/o Oriental Fleet International Company Limited
50/F, COSCO Tower
183 Queen's Road Central
Hong Kong
 
Attention:
Belinda Lou / Thomas Xing / Xu Ying
 
Email:
lou.can@coscoshipping.com /
thomas.xing@ofi.com.hk /
asset@coscoshipping.com
 
Fax:
+852 2339 1881


(b)
to the Charterers:
 
Address:
c/o 1, Vas. Sofias & Meg.
Alexandrou Str.
15124, Maroussi
Athens, Greece
 
Attention:
Andreas Louka
 
Email:
louka@loukapartners.com
 
Fax:
+30 2108128320

44.3
Any communication or document made or delivered by each Party to the other Party under or in connection with the Transaction Documents will only be effective:

(a)
if by way of fax, when received in legible form;

(b)
if by way of letter, when it has been left at the relevant address to which it has been posted with postage prepaid in an envelope addressed to the relevant party at that address, and, if a particular department or officer is specified as part of its address details provided under Clause 44.2, if addressed to that department or officer; or

(c)
if by way of email, only when received in a legible form by the email address of the person to whom the communication is made.
44.4
All communications and documents delivered pursuant to or otherwise relating to this Charter shall be in English.
45.
TERMINATION EVENTS
Each of the following shall constitute a Termination Event for purposes of this Charter:

(a)
the Charterers or any other Security Party fails to make any payment on its due date under a Transaction Document to which it is a party unless such failure to pay is remedied within a period of three (3) Business Days of such payment becoming due and payable; or

(b)
the Charterers fail to obtain and/or maintain the Insurances required under Clause 39 in accordance with the provisions thereof or any insurer in respect

46

of such Insurances cancels the Insurances or disclaims liability with respect thereto; or

(c)
the Guarantor fails to comply with the financial covenants under clause 14 of schedule 2 to the Guarantee unless such financial covenants are complied with within thirty (30) days of such failure to comply (as evidenced by the financial statements of the Guarantor as of the date of such remedy and a Compliance Certificate delivered by the Guarantor setting out (in reasonable detail) computations as to compliance with clause 14 of schedule 2 to the Guarantee as at the date at which those financial statements were drawn up); or

(d)
the Charterers or any other Security Party commits any other breach of, or omits to observe or perform, any of their other obligations or undertakings in this Charter or any other Transaction Document (other than a breach referred to in paragraph (a), (b) or (c) above or paragraph (q) below) unless such breach or omission is, in the opinion of the Owners, remediable and the Charterers and/or the relevant Security Party shall remedy such breach or omission within ten (10) Business Days of notice thereof from the Owners; or

(e)
any representation or warranty or statement made or deemed to be made by the Charterers or any Security Party in or pursuant to any Transaction Document to which it is a party or in any document or certificate furnished to the Owners and the Security Trustee in connection herewith or if applicable, in the case of the Charterers only, the Certificate of Delivery and Acceptance, proves to be incorrect or misleading in any material respect when it is made or deemed made; or

(f)
any of the following occurs in relation to any Financial Indebtedness of the Charterers or any other Security Party:

(i)
any Financial Indebtedness of the Charterers or any other Security Party is not paid when due nor within any originally applicable grace period; or

(ii)
any Financial Indebtedness of the Charterers or any other Security Party is declared to be or otherwise becomes due and payable, prior to its specified maturity date as a result of any event of default (howsoever described); or

(iii)
any commitment for any Financial Indebtedness of the Charterers or any other Security Party is cancelled or suspended by a creditor of the Charterers or any other Security Party (as the case may be) as a result of an event of default (however described); or

(iv)
any creditor of the Charterers or any other Security Party becomes entitled to declare any Financial Indebtedness of the Charterers or any other Security Party (as the case may be) due and payable prior to its specified maturity as a result of an event of default (howsoever defined),

47

provided that no Termination Event will occur under this paragraph (f) if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (i) to (iv) above is less than $10,000,000 (or its equivalent in any other currency or currencies) in relation to the Guarantor; or

(g)
any of the following events (or any analogous procedure or step is taken in any jurisdiction) occurs in relation to the Charterers or any other Security Party:

(i)
the Charterers or any other Security Party are or are reasonably presumed or deemed to be unable or admits inability to pay their debts as they fall due, suspends making payments on any of their debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of their creditors with a view to rescheduling any of their indebtedness; or

(ii)
the value of their assets is less than their liabilities (taking into account contingent and prospective liabilities);

(iii)
a moratorium is declared in respect of any indebtedness of the Charterers or any other Security Party;

(iv)
the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration, provisional supervision or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of the Charterers or any other Security Party;

(v)
a composition or arrangement with any creditor of the Charterers or any other Security Party, or any assignment for the benefit of creditors generally of the Charterers or any other Security Party or a class of such creditors;

(vi)
the appointment of a liquidator, receiver, administrator, administrative receiver, compulsory manager, provisional supervisor or other similar officer in respect of the Charterers or any other Security Party or any of its assets; or

(vii)
enforcement of any Security over any assets of the Charterers or any other Security Party; or

(viii)
any expropriation, attachment, sequestration, distress or execution (or any analogous process in any jurisdiction) affects any asset or assets of the Charterers or any other Security Party which has or, in the opinion of the Owners, is likely to have a Material Adverse Effect; or

(h)
the Charterers or any other Security Party suspends or ceases or threatens to suspend or cease carrying on all or a material part of their business; or

(i)
any consent, approval, Authorisation, license or permit necessary to enable the Charterers to operate or charter the Vessel or the Charterers to sell the Vessel or to enable them to comply with any provision of this Charter or the MOA, as

48

the case may be, to ensure that the obligations of the Charterers are legal, valid, binding or enforceable is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent, approval, Authorisation, license or permit is not fulfilled unless such event is, in the opinion of the Owners, remediable and the Charterers shall remedy such event within ten (10) Business Days of the occurrence of such event; or

(j)
any event or circumstance occurs which has or, in the reasonable opinion of the Owners, is likely to have, a Material Adverse Effect; or

(k)
this Charter or any other Transaction Document or any Security Interest created by a Transaction Document:

(i)
is cancelled, terminated, rescinded or suspended or otherwise ceases to remain in full force and effect for any reason or no longer constitutes legal, valid, binding and enforceable obligations of any party to that document for any reason whatsoever; or

(ii)
is amended or varied without the prior written consent of the Owners and the Security Trustee, except for any amendment or variation which is expressly permitted by this Charter or any other relevant Transaction Document; or

(l)
a Security Party rescinds or purports to rescind or repudiates or purports to repudiate a Transaction Document to which it is a party or any other party of any of those Transaction Documents evidences an intention to repudiate or rescind any of those Transaction Documents; or

(m)
it is or has become unlawful for the Charterers or any other Security Party to perform any of their obligations under the Transaction Documents to which they are a party or any Security Interest created or expressed to be created or evidenced by the Security Documents to which they are a party ceases to be effective with the ranking and priority it is expressed to have; or

(n)
the Vessel is not delivered latest by the Cancelling Date; or

(o)
the occurrence of a Change of Control; or

(p)
the occurrence of any of the following events:

(i)
a default under the MOA which is not waived by the Owners; or

(ii)
a default or termination event or the equivalent under any Collateral Transaction Documents which is not waived by the relevant Collateral Owner; or

(q)
in the event that a shortfall occurs in the Market Value of the Vessel together with the security value of any additional cash deposit or other security provided as required under Clause 47.1(n), the Charterers have not:

(i)
provided or procured the provision of additional cash deposit or other security in a form and in an amount acceptable to the Owners; or

49


(ii)
prepaid so much of the Charterhire Principal to cover such shortfall, within thirty (30) days in accordance with Clause 47.1(n).
46.
REPRESENTATIONS AND WARRANTIES
The Charterers represent and warrant to the Owners as of the date hereof, and on each Payment Date henceforth until the last day of the Charter Period, as follows:

(a)
each Security Party is a limited liability company duly incorporated and validly existing and, where applicable, in good standing under the laws of its jurisdiction of incorporation, organisation or formation (as the case may be) with power to own its assets, carry on its business as it is being conducted, enter into the Transaction Documents and to exercise its rights and perform its obligations under the Transaction Documents and all corporate and other action required to authorise its execution of the Transaction Documents and its performance of its obligations thereunder have been duly taken;

(b)
(i) the obligations expressed to be assumed by each Security Party in the Transaction Documents to it is a party constitute, subject to the Legal Reservations, its legal and valid obligations, binding on it in accordance with the terms of the Transaction Documents and no limit on any of its powers will be exceeded as a result of the sale, leasing, borrowings, granting of security or giving of guarantees contemplated by the Transaction Documents or the performance by it of any of its obligations thereunder; and

(ii)
without limiting the generality of paragraph (b)(i) above, subject to the Security Perfection Requirements, each Security Document to which each Security Party is a party creates the Security Interests which it purports to create and such Security Interests are valid and effective;

(c)
the execution of the Transaction Documents by each Security Party and its exercise of its rights and performance of its obligations under any of such Transaction Documents do not constitute and will not result in any breach of or conflict with, any agreement or treaty to which it is a party;

(d)
all Authorisations, consents, approvals, resolutions, licences, exemptions, filings, notarisations or registrations required of each of the Charterers and the other Security Parties:

(i)
to enable them lawfully to enter into, exercise its rights and comply with its obligations in the Transaction Documents to which they are respectively a party;

(ii)
to make the Transaction Documents to which they are respectively a party admissible in evidence in its Relevant Jurisdictions;

(iii)
for them to carry on its business, and which are material; and

(iv)
to enable them to create the Security Interest to be created by them under any Security Document to which they are respectively a party

50

and to ensure that such Security Interest has the priority and ranking it is expressed to have,
have been obtained or effected and are in full force and effect, subject in the case of any Security Document to which it is a party to the Security Perfection Requirements;

(e)
the execution, delivery, and performance of the Transaction Documents to which each Security Party is or shall be a party will not, in each case: (i) violate any law, governmental rule, regulation, order, judgment, award or decree which is binding upon it or any of its assets; (ii) contravene any provision of its constitutional documents; (iii) contravene or result in the breach of any agreement to which such Security Party is a party or by which it or any of its assets or revenues is bound, and (iv) constitute a default under any agreement to which such Security Party is a party or by which it or any of its assets or revenues are bound;

(f)
no third party has any Security Interest, other than the Permitted Security Interests, or any other interest, right or claim over, in or in relation to the Vessel, this Charter or any moneys payable hereunder and/or any of the other Transaction Documents;

(g)
except as specifically referred to in any Legal Opinion, all payments which a Security Party is liable to make under any Transaction Document to which such Security Party is a party may be made by such party without deduction or withholding for or on account of any tax payable under the laws of each Relevant Jurisdiction of such Security Party;

(h)
no legal or administrative action of any kind whatsoever involving a Security Party which has or, in the opinion of the Owners, is likely to have a Material Adverse Effect has been commenced or taken;

(i)
each Security Party has paid all taxes applicable to, or imposed on or in relation to it, its business or if applicable, the Vessel, except for those being contested in good faith with adequate reserves;

(j)
subject to the Legal Reservations:

(i)
the choice of governing law as stated in each Transaction Document to which a Security Party is party to and the agreement by such party to refer disputes to the relevant courts or tribunal as stated in such Transaction Document will be recognised and enforced in the Relevant Jurisdictions of such Security Party; and

(ii)
any arbitral award, ruling or judgment obtained in the Relevant Jurisdictions of such Security Party in relation to such Transaction Documents will be recognised and enforced in the Relevant Jurisdictions of such Security Party;

(k)
no Security Party nor any of their assets are entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding

51

(which shall include, without limitation, suit, attachment prior to judgment, execution or other enforcement);

(l)
the obligations of each Security Party under each Transaction Document to which it is a party, are the direct, general and unconditional obligations of such Security Party and rank at least pari passu with all other present and future unsecured and unsubordinated creditors of such Security Party save for any obligation which is mandatorily preferred by law and not by virtue of any contract;

(m)
no Security Party (other than the Guarantor) is a US Tax Obligor or registered as a non-Hong Kong company under Companies Ordinance (Cap. 622 of the Laws of Hong Kong), and none of them have established a place of business in England or the US;

(n)
no Security Party is a Restricted Person;

(o)
each Security Party is in compliance with all Sanctions laws, and none of them have been or are currently being investigated on compliance with Sanctions, they have received notice or are not aware of any claim, action, suit or proceeding against any of them with respect to Sanctions and they have not taken any action to evade the application of Sanctions;

(p)
neither the Charterers nor any other Security Party is insolvent or in liquidation or administration or subject to any other formal or informal insolvency procedure, and no receiver, administrative receiver, administrator, liquidator, trustee or analogous officer has been appointed in respect of the Charterers or any other Security Party or all or material part of their assets;

(q)
no Termination Event is continuing or might reasonably be expected to result from the entry into and performance of this Charter or any other Transaction Document;

(r)
subject to any qualification (if applicable) set out in such information, any information provided by the Charterers (or on their behalf) to the Owners and the other Creditor Parties was true and accurate in all material respects as at the date it was provided or as the date at which such information was stated;

(s)
(i) the financial statements of the Guarantor most recently supplied to the Owners (which, at the date of this Charter, are its Original Financial Statements) were prepared in accordance with GAAP consistently applied save to the extent expressly disclosed in such financial statements;

(ii)
the financial statements of the Guarantor most recently supplied to the Owners (which, at the date of this Charter, are its Original Financial Statements) give a true and fair view of (if audited) or fairly and represent (if unaudited) their consolidated financial condition and operations for the period to which they relate, save to the extent expressly disclosed in such financial statements; and

52


(iii)
there has been no material adverse change in the business or consolidated financial condition of the Group since the date of the Guarantor's Original Financial Statements;

(t)
the Charterers are a wholly-owned Subsidiary of the Guarantor, which is ultimately controlled by the Substantial Shareholder;

(u)
no litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency (which, if adversely determined, would have a Material Adverse Effect on any Security Party) have been started or (to the best of the knowledge and belief of such Security Party) threatened against it;

(v)
no judgment or order of a court, arbitral body or agency which might reasonably be expected to have a Material Adverse Effect has been made against any Security Party; and

(w)
each Security Party has complied with all anti-money laundering legislation (to the extent applicable to it) that is relevant in the context of the transactions contemplated by the Transaction Documents to which it is a party.
47.
CHARTERERS' UNDERTAKINGS
The Charterers undertake that they shall comply or procure compliance with the following undertakings commencing from the Commencement Date and up to the last day of the Charter Period:
47.1
General Covenants

(a)
they will keep the Vessel registered in the name of the Owners under the laws and flag of the Republic of the Marshall Islands, and shall not do or permit to be done anything, or omit to do anything which could or might result in:

(i)
such registration being forfeited or imperilled; or

(ii)
the Vessel being required to be registered under any other law or flag
and save with the prior written consent of the Owners and/or their financiers (if any) (such consent not to be unreasonably withheld), the Charterers shall not register the Vessel or permit her registration under any other law or flag;

(b)
they will provide or will procure that each Security Party provides, the Owners with details of any legal or administrative action involving such Security Party or the Vessel or any detention or arrest of the Vessel or any damage to or alteration of the Vessel in excess of the Major Casualty amount as soon as such action is instituted or it becomes apparent to such Security Party that it is likely to be instituted and is likely to have a Material Adverse Effect on the ability of a Security Party to perform their obligations under each Transaction Document to which it is a party;

(c)
they will, and will procure that each other Security Party will obtain and promptly renew or procure the obtainment or renewal of and provide copies of, from time to time, any necessary consents, approvals, Authorisations,

53

licenses or permits of any regulatory body or authority required under any law or regulation of a Relevant Jurisdiction of such Security Party (i) to enable such Security Party to perform its obligations under each Transaction Document to which it is a party (including without limitation to sell, charter and operate the Vessel) and (ii) to ensure the legality, validity, enforceability or admissibility in evidence of any Transaction Document to which such Security Party is subject;

(d)
they will not, and will procure that each other Security Party will not, create, assume or permit to exist any Security Interest of any kind upon any Transaction Document to which such Security Party is a party, and if applicable, the Vessel, in each case other than Permitted Security Interests;

(e)
they will at their own cost, and will procure that each other Security Party will:

(i)
do all that such Security Party can to ensure that any Transaction Document to which such Security Party is a party validly creates the obligations and the Security Interests which Security Party purports to create; and

(ii)
without limiting the generality of paragraph (i) above, where necessary promptly register, file, record or enrol any Transaction Document to which such Security Party is a party with any court or authority in all Relevant Jurisdictions of such Security Party, pay any stamp, registration or similar tax in all Relevant Jurisdictions of such Security Party in respect of any Transaction Document to which such Security Party is a party, give any notice or take any other step which, is or has become necessary or desirable for any such Transaction Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which such Security Party creates;

(f)
they will, and will procure that each other Security Party will:

(i)
notify the Owners as soon as it becomes aware of the occurrence of (A) any Termination Event and (B) any other matters which might lead to an occurrence of any Termination Event; and

(ii)
notify the Owners of any steps or action which they are, or such Security Party is, taking, or considering taking, to remedy or mitigate the effect of such occurrence,
and the Charterers will, if so requested by the Owners, provide any such certificate signed by its director, confirming that there exists no Termination Event;

(g)
they will, and will procure that each other Security Party will, as soon as practicable after receiving the request, provide the Owners with any additional financial or other information relating:

54


(i)
to themselves and/or the Vessel (including, but not limited to the condition and location of the Vessel); or

(ii)
to any other matter relevant to, or to any provision of any Transaction Document to which it is a party;
which may be reasonably requested by the Owners (or their financiers (if any)) at any time;

(h)
they will provide the Owners with all such information as the Owners shall require regarding employment of the Vessel (including cargo, voyage details such as duration, loading port and discharge port) every three (3) months throughout the Charter Period, and engagements, particulars of all towages and salvages of the Vessel, and copies of all charters and other contracts of her employment or otherwise howsoever concerning her;

(i)
without prejudice to Clause 47, comply, or procure compliance, and will procure that each other Security Party and any Approved Manager of the Vessel will comply or procure compliance, with all laws or regulations relating to the Vessel and its ownership, employment, operation, management and registration, including the ISM Code, the ISPS Code, all Environmental Laws and the laws of the Vessel's registry;

(j)
the Vessel shall be classed and maintained in the highest class with the Classification Society upon Delivery and shall be free of all overdue recommendations and requirements and they shall promptly provide class records and inspection reports of the Vessel to the Owners;

(k)
neither the Charterers nor any other Security Party shall enter or be permitted to enter, into any form of merger, sub-division, amalgamation or other reorganisation or change of ownership;

(l)
(i) they shall permit the Owners (at the expense of the Charterers) by surveyors or other persons appointed by them for such purpose to board the Vessel no more than once per calendar year during the Charter Period or, following the occurrence of a Termination Event which is continuing, at all reasonable times for the purpose of inspecting her, provided that, unless a Termination Event has occurred and is continuing, such inspection shall not unduly disrupt or interfere with the normal daily operations of the Vessel;

(ii)
they shall provide all proper facilities for such inspections; and

(iii)
they shall give the Owners reasonable advance notice of any intended drydocking of the Vessel (whether for the purpose of classification, survey or otherwise);

(m)
(i) they will ensure that the Market Value of the Vessel shall be tested once every twelve (12) months commencing from the Commencement Date in the absence of a Termination Event, and upon the occurrence

55

of a Termination Event which is continuing, the Market Value of the Vessel shall be tested at any time at the request of the Owners;

(ii)
in the event of the failure or delay of the Charterers to arrange such testing of the Market Value of the Vessel, the Owners shall have the liberty to arrange such testing at such time as the Owners shall require; and

(iii)
they shall pay the amount of the fees and expenses of an Approved Valuer incurred for all such valuations and all legal and other expenses reasonably incurred by the Owners in connection with any matter arising out of this Clause;

(n)
they will ensure that the Market Value of the Vessel shall at all times be equal to or greater than one hundred and twenty per cent. (120%) of the Charterhire Principal, however, if the Owners notify the Charterers that the Market Value of the Vessel has fallen below one hundred and twenty per cent. (120%) of the Charterhire Principal, the Charterers shall, unless otherwise agreed by the Owners, within thirty (30) days of the Owners' receipt of the relevant valuation of the Vessel, provide additional cash deposit or other security in a form and in an amount acceptable to the Owners or prepay the Charterhire Principal to cover the shortfall. Any amount prepaid pursuant to this Clause 47.1(n) shall be applied towards reducing the instalments of Fixed Charterhire (for the avoidance of doubt, excluding the Balloon Payment) falling on or after the date of such prepayment by the amount of such prepayment on a pro-rata basis;

(o)
they will notify the Owners promptly of:

(i)
any Environmental Claim made against the Charterers in connection with the Vessel, or any Environmental Incident, arrest or detention of the Vessel, any exercise or purported exercise of any lien on the Vessel or its Earnings or any requisition of the Vessel for hire; and

(ii)
any casualty or occurrence as a result of which the Vessel has become or is, by the passing of time or otherwise, likely to become, a Major Casualty;

(p)
(i) they shall not permit any chartering of the Vessel on a time charter basis of one (1) calendar year or more unless the Charterers shall have provided the Owners with prior written notice of such chartering together with detailed information about the intended Sub-Charterer, the proposed terms of the intended Sub-Charter and such further information as the Owners may reasonably request; and

(ii)
except with the prior written consent of the Owners (and then only subject to such terms as the Owners may impose), they shall not let the Vessel:

(A)
on demise charter for any period;

56


(B)
on terms whereby more than two (2) months' hire (or the equivalent) is payable in advance; or

(C)
on any terms other than arms' length terms;

(q)
they shall comply, and shall procure that each other Security Party complies, with:

(i)
all applicable laws to which it may be subject (including, but not limited to, Business Ethics Laws, anti-bribery and corruption laws and anti-money lending laws); and

(ii)
all laws and regulations in respect of Sanctions, and in particular, they shall effect and maintain a sanctions compliance policy to ensure compliance with all such laws and regulations implemented from time to time;

(r)
the Vessel shall not be employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel shall not be used by or for the benefit for any party which is a target of Sanctions, or trade to any Restricted Country; or (ii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation;

(s)
they will, and will procure that each other Security Party will, promptly notify the Owners and provide all information in relation to its business and operations which may be relevant for the purposes of ascertaining whether they are in compliance with all laws and regulations relating to Sanctions, and in particular, they shall notify the Owners in writing immediately upon being aware that any of its shareholders or directors, officers of employees is a Restricted Person or has otherwise become a target of Sanctions;

(t)
they shall not appoint or permit to be appointed any manager of the Vessel unless it is an Approved Manager appointed on terms acceptable to the Owners and their financiers (if any) and such Approved Manager has (prior to accepting its appointment) entered into a Manager's Undertaking;

(u)
they shall notify the Owners in writing as soon as they become aware that the Charterers are likely to, or will receive, any tax credit in relation to any payments made by any Sub-Charterer to it;

(v)
save with the prior written consent of the Owners, they shall ensure that no Change of Control occurs;

(w)
they shall, at their own expense, replace, renew or substitute any equipment of the Vessel as shall be so damaged or worn as to be unfit for use. Title to any part replaced, renewed or substituted shall remain with the Owners;

(x)
save with the prior written consent of the Owners, there shall not be any transfer or disposal of:

(i)
the legal or beneficial shareholding of the Charterers; or

57


(ii)
the legal or beneficial shareholding of the Guarantor,
unless following such transfer or disposal, the Guarantor remains ultimately or indirectly controlled by the Substantial Shareholder;

(y)
they shall not create, incur, assume, suffer to exist or in any manner become or remain liable for any Financial Indebtedness, other than:

(i)
Financial Indebtedness normally associated with the day to day operation of the Vessel, or otherwise in the normal course of business;

(ii)
Financial Indebtedness under the Transaction Documents; and

(iii)
Financial Indebtedness, including:

(A)
all shareholder's and intercompany loans, which by its terms is subordinate and subject in right of payment to the prior payment in full of the Financial Indebtedness under or pursuant to the Transaction Documents, as provided in paragraph (z) below;

(B)
all shareholder's and intercompany advances, which upon occurrence of a Termination Event which is continuing, shall be subordinated and subject in right of payment to the prior payment in full of the Financial Indebtedness under or pursuant to the Transaction Documents, as provided in paragraph (aa) below,
or in any case, as otherwise evidenced by a subordination deed in form and substance satisfactory to the Owners; and

(z)
they acknowledge to and undertake with the Owners that all shareholder's and intercompany loans from time to time made by the Guarantor or any other member of the Group to the Charterers:

(i)
are and shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterers under this Charter and the other Transaction Documents;

(ii)
shall not be repaid or be subject to payment of interest (although interest may accrue);

(iii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterers; and

(iv)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim;

(aa)
they acknowledge to and undertake with the Owners that all shareholder's and intercompany advances from time to time made by the Guarantor or any other member of the Group to the Charterers:

58


(i)
shall be non-interest bearing;

(ii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterers;

(iii)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim; and

(iv)
upon occurrence of a Termination Event which is continuing:

(A)
shall not be repaid; and

(B)
shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterers under this Charter and the other Transaction Documents;

(bb)
they shall not declare or pay any dividends unless no Termination Event has occurred or will occur as a result of such declaration or payment;

(cc)
they shall, and shall procure that each other Security Parties will, ensure that all the Security Perfection Requirements have been or will be done or obtained (as the case may be) no later than the latest date permitted by applicable law and in any event by such date as the Owners and the Security Trustee may specify;

(dd)
they shall, and shall procure that each other Security Parties will, conduct their respective business in compliance with applicable anti-corruption laws; and

(ee)
they shall provide the documents and evidence specified in Clause 35.2 in form and substance satisfactory to the Owners as soon as the same become available, but in any event before the relevant date as specified in Parts C and D of Addendum No.1.
48.
PURCHASE OPTION
48.1
Subject to Clause 48.248.2, the Owners hereby grant to the Charterers a purchase option to require the Owners to sell all of the Owners' beneficial and legal right, title and interest in the Vessel and all belonging to her, to the Charterers at the Purchase Option Price upon the terms and conditions of this Charter.
48.2
Subject to the other terms and conditions of this Charter, the Purchase Option shall only be exercisable by the Charterers on or after the third (3rd) anniversary date of the Commencement Date provided that no Termination Event has occurred and is continuing.
48.3
The Purchase Option may be exercised by the Charterers by giving the Owners at least ninety (90) days' prior written notice of their intention to exercise the Purchase Option such that the Purchase Option Notice shall accordingly be given to the Owners no later than the date falling ninety (90) days' prior to the intended Purchase Option Date (unless otherwise agreed by the Owners in their absolute discretion).

59

48.4
The Purchase Option Price shall be the aggregate of (but in each case, not double-counting):

(a)
any Charterhire due and payable on the Purchase Option Date and any default interest payable under Clause 37.12;

(b)
if the Purchase Option Date is a Payment Date, the Charterhire Principal corresponding to that Payment Date in Schedule 2, or if the Purchase Option Date is not a Payment Date, all Charterhire Principal corresponding to the Payment Date in Schedule 2 immediately preceding the Purchase Option Date (in each case, the Relevant Charterhire Principal);

(c)
if the Purchase Option Date is not a Payment Date, any Breakfunding Costs;

(d)
all costs (including, but not limited to, legal costs) and expenses reasonably incurred by the Owners under this Charter and the other Transaction Documents in connection with or as a result of the exercise of the Purchase Option by the Charterers; and

(e)
an early termination fee calculated at the following percentage of the Relevant Charterhire Principal:
If the Purchase Option Date occurs after the following anniversary of the Commencement Date
Percentage of Relevant Charterhire Principal
After 3rd anniversary
2%
After 4th anniversary
1.5%
After 5th anniversary
1%
After 6th anniversary
0.5%
After 7th anniversary
0%
   
48.5
(a) The Purchase Option Notice shall be signed by a duly authorised officer or attorney of the Charterers and shall contain the following information:

(i)
the Purchase Option Date; and

(ii)
the Relevant Charterhire Principal portion of the Purchase Option Price payable on the Purchase Option Date as determined in accordance with Clause 48.4(b).

(b)
Upon receipt of a duly signed and completed Purchase Option Notice in accordance with Clause 48.5(a), the Owners shall notify the Charterers of the Purchase Option Price in writing as soon as practicable.
48.6
The Charterers may serve a Purchase Option Notice throughout the duration of the Charter Period and is irrevocable once given.
48.7
Upon the exercise of the Purchase Option, the Owners and the Charterers shall thereupon perform their respective obligations referred to in Clause 50 and the

60

Purchase Option Price and other costs and expenses reasonably incurred for the sale of the Vessel shall be paid by the Charterers on the Purchase Option Date.
49.
PURCHASE OBLIGATION
In consideration of the Owners granting the Charterers the Purchase Option, the Charterers hereby agree that they are obliged and required to purchase all of the Owners' beneficial and legal right, title and interest in the Vessel and all belonging to her on the last day of the Charter Period whereupon the Owners and the Charterers shall perform their obligations referred to in Clause 50 and the Charterers shall be obliged to pay the Purchase Obligation Price on the Purchase Obligation Date unless the Charter is terminated before the natural expiration of this Charter or the Owners and the Charterers agree otherwise or the Purchase Option was exercised pursuant to Clause 48.
50.
SALE OF THE VESSEL BY PURCHASE OPTION AND PURCHASE OBLIGATION

(a)
Completion of the exercise of the Purchase Option or the performance of the Purchase Obligation (as the case may be) shall take place on the Relevant Date whereupon the Owners will sell to the Charterers (or their nominee), and the Charterers (or their nominee) will purchase from the Owners, all the legal and beneficial interest and title in the Vessel, for the Relevant Price on an "as is where is" basis and on the following terms and conditions:

(i)
the Charterers expressly agree and acknowledge that, no condition, warranty or representation of any kind is or has been given by or on behalf of the Owners in respect of the Vessel or any part thereof, and accordingly the Charterers confirm that that they have not, in entering into this Charter, relied on any condition, warranty or representation by the Owners or any person on the Owners' behalf, express or implied, whether arising by law or otherwise in relation to the Vessel or any part thereof, including, without limitation, warranties or representations as to the description, suitability, quality, merchantability, fitness for any purpose, value, state, condition, appearance, safety, durability, design or operation of any kind or nature of the Vessel or any part thereof, and the benefit of any such condition, warranty or representation by the Owners is hereby irrevocably and unconditionally waived by the Charterers to the extend permissible under applicable law, the Charterers hereby also waives any rights which they may have in tort in respect of any the matters referred to above and irrevocably agree that the Owners shall have no greater liability in tort in respect of any such matter than they would have in contract after taking account of all of the foregoing exclusions. No third parties making any representation or warranty relating to the Vessel or any part thereof are the agents of the Owners nor has any such third party authority to bind the Owners thereby. Notwithstanding anything contained above, nothing contained herein is intended to obviate, remove or waive any rights or warranty or other claims relating thereto which the Charterers (or their nominee) or the Owners

61

may have against the manufacturer or supplier of the Vessel or any third party;

(ii)
the Vessel shall, on completion of sale, be free from any registered mortgages incurred by the Owners (where any mortgages, liens, Security Interests and debts arising out of or in connection with this Charter or the other Transaction Documents shall be released prior to (or simultaneously with) the transfer and/or release of the Relevant Price by the Charterers (as buyers) to the Owners (as sellers));

(iii)
the Relevant Price shall be paid by (or on behalf of) the Charterers to the Owners on the Relevant Date together with unpaid amounts of Charterhire but only up to and including the Relevant Date, and other moneys owing by or accrued or due from the Charterers under this Charter on or prior to such Relevant Date which remain unpaid; and

(iv)
upon the Relevant Price together with the other moneys described under paragraph (iii) above being fully and irrevocably paid to the Owners on, and in accordance with, the terms set forth in this Charter, the Owners agree (at the cost of the Charterers) to enter into (A) a bill of sale, (B) a commercial invoice, (C) a protocol of delivery and acceptance and (D) such other additional documents as may be necessary for the purpose of registering the Vessel at its intended flag state upon such transfer, provided that the Charterers shall notify the Owners of any such additional documents no later than five (5) Business Days (or such other mutually agreed date) prior to such transfer, each in such form as may be required by the Charterers' intended flag state.

(b)
For the purposes of this Clause 50:

(i)
Relevant Date means:

(A)
in relation to the exercise of the Purchase Option, the Purchase Option Date; and

(B)
in relation to the performance of the Purchase Obligation, the Purchase Obligation Date.

(ii)
Relevant Price means:

(A)
in relation to the exercise of the Purchase Option, the Purchase Option Price; and

(B)
in relation to the performance of the Purchase Obligation, the Purchase Obligation Price.

62

51.
NO SET-OFF OR TAX DEDUCTION; FATCA PROVISIONS
51.1
General

(a)
All Charterhire and any payment made from the Charterers to enable the Owners to pay all amounts under a Transaction Document shall be paid punctually:

(i)
without any form of set-off, cross-claim or condition and in the case of Charterhire, without previous demand; and

(ii)
free and clear of any tax deduction or withholding unless required by law.

(b)
Without prejudice to Clause 51.151.1(a), if the Owners are required by law to make a tax deduction from any payment:

(i)
the Owners shall notify the Charterers as soon as they become aware of the requirement; and

(ii)
the amount due in respect of the payment shall be increased by the amount necessary to ensure that the Owners receive and retain (free from any liability relating to the tax deduction) a net amount which, after the tax deduction, is equal to the full amount which they would otherwise have received.

(c)
In this Charter, tax deduction means any deduction or withholding for or on account of any present or future tax, other than a FATCA Deduction.
51.2
FATCA provisions
51.2.1
FATCA Information

(a)
Subject to paragraph (c) below, each Relevant Party shall, within ten (10) Business Days of a reasonable request by another Relevant Party:

(i)
confirm to that other Relevant Party whether it is:

(A)
a FATCA Exempt Party; or

(B)
not a FATCA Exempt Party;

(ii)
supply to that other Relevant Party (with a copy to all other Relevant Parties) such forms, documentation and other information relating to its status under FATCA as that other Relevant Party reasonably requests for the purpose of that other Relevant Party's compliance with FATCA; and

(iii)
supply to that other Relevant Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Relevant Party's compliance with any other law, regulation, or exchange of information regime.

63


(b)
If a Relevant Party confirms to another Relevant Party under paragraph (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 Relevant Party shall so notify all other Relevant Parties reasonably promptly.

(c)
Paragraph (a) above shall not oblige any Relevant Party to do anything, and paragraph (a)(iii) above shall not oblige any other Relevant Party to do anything, which would or might in its reasonable opinion constitute a breach of:

(i)
any law or regulation;

(ii)
any fiduciary duty; or

(iii)
any duty of confidentiality.

(d)
If a Relevant Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with paragraph (a)(i) or (ii) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such Relevant Party shall be treated for the purposes of the Transaction Documents (and payments made under them) as if it is not a FATCA Exempt Party until such time as the Relevant Party in question provides the requested confirmation, forms, documentation or other information.
51.2.2
FATCA Deduction and gross up by Security Parties

(a)
If a Security Party is required to make a FATCA Deduction, that Security Party shall make that FATCA Deduction and any payment required in connection with that FATCA Deduction within the time allowed and in the minimum amount required by FATCA.

(b)
If a FATCA Deduction is required to be made by a Security Party, the amount of the payment due from that Security Party shall be increased to an amount which (after making any FATCA Deduction) leaves an amount equal to the payment which would have been due if no FATCA Deduction had been required.

(c)
The Charterers shall promptly upon becoming aware that a Security Party must make a FATCA Deduction (or that there is any change in the rate or the basis of a FATCA Deduction) notify the Owners accordingly.

(d)
Within thirty (30) days of making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the Security Party making that FATCA Deduction or payment shall deliver to the Owners evidence reasonably satisfactory to the Owners that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the relevant governmental or taxation authority.

64

51.2.3
FATCA Deduction by the Owners
The Owners may make any FATCA Deduction it is required by FATCA to make, and any payment required in connection with that FATCA Deduction, and the Owners shall not 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. If the Owners become aware that they must make a FATCA Deduction in respect of a payment to another Relevant Party (or that there is any change in the rate or the basis of such FATCA Deduction) it shall notify that Relevant Party.
51.2.4
FATCA Mitigation
Notwithstanding any other provision to this Charter, if a FATCA Deduction is or will be required to be made by any party under Clause 51.2 in respect of a payment to the Owners as a result of the Owners not being a FATCA Exempt Party, the Owners shall have the right to transfer their interest in the Vessel (and this Charter) to any person nominated by the Owners and all costs in relation to such transfer shall be for the account of the Owners.
52.
INCREASED COSTS
52.1
This Clause 52.1 applies if the Owners notify the Charterers that they consider that as a result of:

(a)
the introduction or alteration after the date of this Charter of a law or an alteration after the date of this Charter in the manner in which a law is interpreted or applied (disregarding any effect which relates to the application to payments under this Charter of a tax on the Owners' overall net income); or

(b)
complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Owners allocates capital resources to their obligations under this Charter) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Charter,
the Owners has incurred or will incur an increased cost.
52.2
In this Clause 52.1, increased cost means, in relation to the Owners (without any double counting):

(a)
an additional or increased cost incurred as a result of, or in connection with, the Owners having entered into, or being a party to, this Charter, of funding the acquisition of the Vessel pursuant to the MOA or performing their obligations under this Charter;

(b)
an additional or increased cost incurred by the financiers of the Owners (if any) as a result of, or in connection with, the financiers of the Owners (if any) having entered into, or being a party to, the financing arrangements with the Owners and the relevant Financial Instruments in each case relating to the funding of the acquisition of the Vessel pursuant to the MOA;

65


(c)
a reduction in the amount of any payment to the Owners under this Charter or in the effective return which such a payment represents to the Owners or their financiers (if any) on their capital;

(d)
a reduction in the amount of any payment to the financiers of the Owners (if any) under their financing arrangements and relevant Financial Instruments or in the effective return which such a payment represents to the financiers of the Owners (if any) or on their capital in each case relating to the funding of the acquisition of the Vessel pursuant to the MOA;

(e)
any other additional or increased cost of funding or financing the acquisition of the Vessel pursuant to the MOA; and

(f)
a liability to make a payment, or a return foregone, which is calculated by reference to any amounts received or receivable by the Owners under this Charter,
and for the purposes of this Clause 52.252.2 the Owners may in good faith allocate or spread costs and/or losses among their assets and liabilities (or any class of their assets and liabilities) on such basis as they consider appropriate.
52.3
Subject to the terms of Clause 52.152.1, the Charterers shall pay to the Owners, within three (3) Business Days of the Owners' demand, the amounts which the Owners from time to time notify the Charterers to be necessary to compensate the Owners for the increased cost.
52.4
Clause 53.3 above does not apply to the extent any increased cost is:

(a)
attributable to a tax deduction required by law to be made by a Security Party;

(b)
attributable to a FATCA Deduction required to be made by a Relevant Party or the Owners;

(c)
compensated for by Clause 41.5(b) (or would have been compensated for under Clause 41.5(b) but was not so compensated solely because any of the exclusions in Clause 41.5(b) applied); or

(d)
attributable to the wilful breach by the Owners of any law or regulation.
53.
GOVERNING LAW AND JURISDICTION
53.1
This Charter and any non-contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with English law and any Dispute arising out of or in connection with this Charter shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory re-enactment or modification thereof save to the extent necessary to give effect to the provisions of this Clause.
53.2
The arbitration reference shall be to three (3) arbitrators:

(a)
A Party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other Party requiring the

66

other Party to appoint its own arbitrator within fourteen (14) calendar days of that notice, and stating it will appoint its arbitrator as sole arbitrator unless the other Party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified.

(b)
If the other Party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the Party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other Party, appoint its arbitrator as sole arbitrator and shall advise the other Party accordingly. The award of a sole arbitrator shall be binding on both Parties as if he/she had been appointed by agreement.

(c)
Where each Party appoints its own arbitrator, then the two (2) arbitrators so appointed may proceed with the arbitration and at any time thereafter appoint a third arbitrator so long as they do so before any substantive hearing or forthwith in the event that they cannot agree on any matter relating to the arbitration. If the said two arbitrators do not appoint a third within fourteen (14) days of one calling upon the other to do so, or if they are in disagreement as to the third arbitrator, either arbitrator or a Party shall apply to the London Maritime Arbitrators Association (LMAA) for the appointment of the third arbitrator.

(d)
The language used in the arbitration shall be English. The arbitration shall be conducted in accordance with the LMAA Terms current at the time when the arbitration proceedings are commenced.

(e)
Nothing herein shall prevent the Parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator and, if necessary, for the LMAA to exercise its statutory power to appoint the sole arbitrator if the Parties cannot agree on the appointment.
53.3
In this Clause 53, proceedings means proceedings of any kind, including an application for a provisional or protective measure and a Dispute means any dispute arising out of or in connection with this Charter (including a dispute relating to the existence, validity or termination of this Charter) or any non-contractual obligation arising out of or in connection with this Charter.
54.
MISCELLANEOUS
54.1
The Charterers waive any rights of sovereign immunity which they or any of their properties may enjoy in any jurisdiction and subjects itself to civil and commercial law with respect to their obligations under this Charter.
54.2
No term of this Charter is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not Party.
54.3
This Charter and each Transaction Document may be executed in any number of counterparts and by the different Parties or thereto on separate counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Charter or that Transaction Document, as the case may be.

67


Execution page
This Charter has been entered into on the date stated at the beginning of this Charter.
THE OWNERS
SIGNED for and on behalf of
)
   
ORIENTAL FLEET TANKER 13
)
   
LIMITED
)
   
(东方富利 TANKER13 有限公司)
)
   
By                                  , Director
)
   
in the presence of:
)
   

68




THE CHARTERERS

SIGNED for and on behalf of
)
   
MONTE CARLO ONE SHIPPING
)
   
COMPANY LIMITED
)
   
by                                                              ,
)
   
Attorney-in-Fact
)
   
in the presence of:
)
   





69

Schedule 1: Certificate of Delivery and Acceptance
Each of ORIENTAL FLEET TANKER 13 LIMITED (东方富利 TANKER13 有限公司 ), a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 101327 (the Owners) and MONTE CARLO ONE SHIPPING COMPANY LIMITED, a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 55324 (the Charterers) hereby acknowledge that at      hours on , there was delivered to, and accepted by, the Charterers the Vessel known as STENAWECO EVOLUTION, registered in the name of the Owners under the laws and flag of the Republic of the Marshall Islands with Official Number 5271 and IMO number 9687942 under a bareboat charter dated ________________________ (together with all supplements and amendments to it, the Charter) and made between the Owners and the Charterers and that Delivery (as defined in the Charter) thereupon took place and that, accordingly, the Vessel is and will be subject to all the terms and conditions contained in the Charter.
The Charterers warrant that the representations and warranties made by them in Clause 4646 of the Charter remain correct and that no Termination Event (as defined in the Charter) has occurred and is continuing at the date of this Certificate of Delivery and Acceptance.


Signed by
)
   
[name of authorised signatory],
)
   
[title of authorised signatory]
)
   
duly authorised for and on behalf of
)
   
ORIENTAL FLEET TANKER 13
)
   
LIMITED (东方富利 TANKER13 )
)
   
限公司) as Owners
)
   

Signed by
)
   
[name of authorised signatory],
)
   
[title of authorised signatory]
)
   
duly authorised for and on behalf of
)
   
MONTE CARLO ONE SHIPPING
)
   
COMPANY LIMITED
)
   
as Charterers
)
   


70

Schedule 2: Charterhire Schedule
Estimated Financing Principal: US$24,400,000
Monthly Period
Commencement
Date /
Payment Date)
Charterhire
(US$)
Charterhire Principal
(US$)
   
Upfront
Charterhire /
Balloon
Payment
Fixed
Charterhire
(being 1/120 of
Financing
Principal less
Balloon payment)
Aggregate Outstanding
Fixed Charterhire and
Balloon Payment
 
1st Payment Date
(Commencement
Date)
Upfront
Charterhire:
6,100,000
152,500
24,247,500
1
2nd Payment Date
(the date falling on
the 10th day of the
month falling
immediately after
Commencement
Date)
 
152,500
24,095,000
2
3rd Payment Date
(the date falling on
the 10th day of the
second (2nd) month
falling immediately
after
Commencement
Date)
 
152,500
23,942,500
3
4th Payment Date
(the date falling on
the 10th day of the
third (3rd) month
falling immediately
after
Commencement
Date)
 
152,500
23,790,000
4
5th Payment Date (the date falling on the 10th day of the fourth (4th) month falling immediately after Commencement
Date)
 
152,500
23,637,500
5
6th Payment Date
(the date falling on
the 10th day of the
fifth (5th) month
falling immediately
after
Commencement
Date)
 
152,500
23,485,000


71

6
7th Payment Date
(the date falling on
the 10th day of the
sixth (6th) month
falling immediately
after
Commencement
Date)
 
152,500
23,332,500
7
8th Payment Date
(the date falling on
the 10th day of the
seventh (7th) month
falling immediately
after
Commencement
Date)
 
152,500
23,180,000
8
9th Payment Date
(the date falling on
the 10th day of the
eighth (8th) month
falling immediately
after
Commencement
Date)
 
152,500
23,027,500
9
10th Payment Date
(the date falling on
the 10th day of the
ninth (9th) month
falling immediately
after
Commencement
Date)
 
152,500
22,875,000
10
11th Payment Date (the date falling on the 10th day of the tenth (10th) month falling immediately after Commencement
Date)
 
152,500
22,722,500
11
12th Payment Date
(the date falling on
the 10th day of the
eleventh (11th)
month falling
immediately after
Commencement
Date)
 
152,500
22,570,000


72

12
13th Payment Date
(the date falling on
the 10th day of the
twelve (12th) month
falling immediately
after
Commencement
Date)
 
152,500
22,417,500
13
14th Payment Date
(the date falling on
the 10th day of the
thirteenth (13th)
month falling
immediately after
Commencement
Date)
 
152,500
22,265,000
14
15th Payment Date
(the date falling on
the 10th day of the
fourteenth (14th)
month falling
immediately after
Commencement
Date)
 
152,500
22,112,500
15
16th Payment Date
(the date falling on
the 10th day of the
fifteenth (15th)
month falling
immediately after
Commencement
Date)
 
152,500
21,960,000
16
17th Payment Date
(the date falling on
the 10th day of the
sixteenth (16th)
month falling
immediately after
Commencement
Date)
 
152,500
21,807,500
17
18th Payment Date
(the date falling on
the 10th day of the
seventeenth (17th)
month falling
immediately after
Commencement
Date)
 
152,500
21,655,000


73

18
19th Payment Date
(the date falling on
the 10th day of the
eighteenth (18th)
month falling
immediately after
Commencement
Date)
 
152,500
21,502,500
19
20th Payment Date
(the date falling on
the 10th day of the
nineteenth (19th)
month falling
immediately after
Commencement
Date)
 
152,500
21,350,000
20
21st Payment Date
(the date falling on
the 10th day of the
twentieth (20th)
month falling
immediately after
Commencement
Date)
 
152,500
21,197,500
21
22nd Payment Date
(the date falling on
the 10th day of the
twenty-first (21st)
month falling
immediately after
Commencement
Date)
 
152,500
21,045,000
22
23rd Payment Date
(the date falling on
the 10th day of the
twenty-second
(22nd) month falling
immediately after
Commencement
Date)
 
152,500
20,892,500
23
24th Payment Date
(the date falling on
the 10th day of the
twenty-third (23rd)
month falling
immediately after
Commencement
Date)
 
152,500
20,740,000


74

24
25th Payment Date
(the date falling on
the 10th day of the
twenty-fourth (24th)
month falling
immediately after
Commencement
Date)
 
152,500
20,587,500
25
26th Payment Date
(the date falling on
the 10th day of the
twenty-fifth (25th)
month falling
immediately after
Commencement
Date)
 
152,500
20,435,000
26
27th Payment Date
(the date falling on
the 10th day of the
twenty-sixth (26th)
month falling
immediately after
Commencement
Date)
 
152,500
20,282,500
27
28th Payment Date
(the date falling on
the 10th day of the
twenty-seventh
(27th) month falling
immediately after
Commencement
Date)
 
152,500
20,130,000
28
29th Payment Date
(the date falling on
the 10th day of the
twenty-eighth (28th)
month falling
immediately after
Commencement
Date)
 
152,500
19,977,500
29
30th Payment Date
(the date falling on
the 10th day of the
twenty-ninth (29th)
month falling
immediately after
Commencement
Date)
 
152,500
19,825,000


75

30
31st Payment Date
(the date falling on
the 10th day of the
thirtieth (30th)
month falling
immediately after
Commencement
Date)
 
152,500
19,672,500
31
32nd Payment Date
(the date falling on
the 10th day of the
thirty-first (31st)
month falling
immediately after
Commencement
Date)
 
152,500
19,520,000
32
33rd Payment Date
(the date falling on
the 10th day of the
thirty-second (32nd)
month falling
immediately after
Commencement
Date)
 
152,500
19,367,500
33
34th Payment Date
(the date falling on
the 10th day of the
thirty-third (33rd)
month falling
immediately after
Commencement
Date)
 
152,500
19,215,000
34
35th Payment Date
(the date falling on
the 10th day of the
thirty-fourth (34th)
month falling
immediately after
Commencement
Date)
 
152,500
19,062,500
35
36th Payment Date
(the date falling on
the 10th day of the
thirty-fifth (35th)
month falling
immediately after
Commencement
Date)
 
152,500
18,910,000


76

36
37th Payment Date
(the date falling on
the 10th day of the
thirty-sixth (36th)
month falling
immediately after
Commencement
Date)
 
152,500
18,757,500
37
38th Payment Date
(the date falling on
the 10th day of the
thirty-seventh (37th)
month falling
immediately after
Commencement
Date)
 
152,500
18,605,000
38
39th Payment Date (the date falling on the 10th day of the thirty-eighth (38th) month falling immediately after Commencement
Date)
 
152,500
18,452,500
39
40th Payment Date
(the date falling on
the 10th day of the
thirty-ninth (39th)
month falling
immediately after
Commencement
Date)
 
152,500
18,300,000
40
41st Payment Date
(the date falling on
the 10th day of the
fortieth (40th) month
falling immediately
after
Commencement
Date)
 
152,500
18,147,500
41
42nd Payment Date
(the date falling on
the 10th day of the
forty-first (41st)
month falling
immediately after
Commencement
Date)
 
152,500
17,995,000


77

42
43rd Payment Date
(the date falling on
the 10th day of the
forty-second (42nd)
month falling
immediately after
Commencement
Date)
 
152,500
17,842,500
43
44th Payment Date
(the date falling on
the 10th day of the
forty-third (43rd)
month falling
immediately after
Commencement
Date)
 
152,500
17,690,000
44
45th Payment Date
(the date falling on
the 10th day of the
forty-fourth (44th)
month falling
immediately after
Commencement
Date)
 
152,500
17,537,500
45
46th Payment Date
(the date falling on
the 10th day of the
forty-fifth (45th)
month falling
immediately after
Commencement
Date)
 
152,500
17,385,000
46
47th Payment Date
(the date falling on
the 10th day of the
forty-sixth (46th)
month falling
immediately after
Commencement
Date)
 
152,500
17,232,500
47
48th Payment Date
(the date falling on
the 10th day of the
forty-seventh (47th)
month falling
immediately after
Commencement
Date)
 
152,500
17,080,000


78

48
49th Payment Date
(the date falling on
the 10th day of the
forty-eighth (48th)
month falling
immediately after
Commencement
Date)
 
152,500
16,927,500
49
50th Payment Date
(the date falling on
the 10th day of the
forty-ninth (49th)
month falling
immediately after
Commencement
Date)
 
152,500
16,775,000
50
51st Payment Date
(the date falling on
the 10th day of the
fiftieth (50th) month
falling immediately
after
Commencement
Date)
 
152,500
16,622,500
51
52nd Payment Date
(the date falling on
the 10th day of the
fifty-first (51st)
month falling
immediately after
Commencement
Date)
 
152,500
16,470,000
52
53rd Payment Date
(the date falling on
the 10th day of the
fifty-second (52nd)
month falling
immediately after
Commencement
Date)
 
152,500
16,317,500
53
54th Payment Date
(the date falling on
the 10th day of the
fifty-third (53rd)
month falling
immediately after
Commencement
Date)
 
152,500
16,165,000


79

54
55th Payment Date
(the date falling on
the 10th day of the
fifty-fourth (54th)
month falling
immediately after
Commencement
Date)
 
152,500
16,012,500
55
56th Payment Date
(the date falling on
the 10th day of the
fifty-fifth (55th)
month falling
immediately after
Commencement
Date)
 
152,500
15,860,000
56
57th Payment Date
(the date falling on
the 10th day of the
fifty-sixth (56th)
month falling
immediately after
Commencement
Date)
 
152,500
15,707,500
57
58th Payment Date
(the date falling on
the 10th day of the
fifty-seventh (57th)
month falling
immediately after
Commencement
Date)
 
152,500
15,555,000
58
59th Payment Date
(the date falling on
the 10th day of the
fifty-eighth (58th)
month falling
immediately after
Commencement
Date)
 
152,500
15,402,500
59
60th Payment Date
(the date falling on
the 10th day of the
fifty-ninth (59th)
month falling
immediately after
Commencement
Date)
 
152,500
15,250,000


80

60
61st Payment Date
(the date falling on
the 10th day of the
sixtieth (60th) month
falling immediately
after
Commencement
Date)
 
152,500
15,097,500
61
62nd Payment Date
(the date falling on
the 10th day of the
sixty-first (61st)
month falling
immediately after
Commencement
Date)
 
152,500
14,945,000
62
63rd Payment Date
(the date falling on
the 10th day of the
sixty-second (62nd)
month falling
immediately after
Commencement
Date)
 
152,500
14,792,500
63
64th Payment Date
(the date falling on
the 10th day of the
sixty-third (63rd)
month falling
immediately after
Commencement
Date)
 
152,500
14,640,000
64
65th Payment Date
(the date falling on
the 10th day of the
sixty-fourth (64th)
month falling
immediately after
Commencement
Date)
 
152,500
14,487,500
65
66th Payment Date
(the date falling on
the 10th day of the
sixty-fifth (65th)
month falling
immediately after
Commencement
Date)
 
152,500
14,335,000


81

66
67th Payment Date
(the date falling on
the 10th day of the
sixty-sixth (66th)
month falling
immediately after
Commencement
Date)
 
152,500
14,182,500
67
68th Payment Date
(the date falling on
the 10th day of the
sixty-seventh (67th)
month falling
immediately after
Commencement
Date)
 
152,500
14,030,000
68
69th Payment Date
(the date falling on
the 10th day of the
sixty-eighth (68th)
month falling
immediately after
Commencement
Date)
 
152,500
13,877,500
69
70th Payment Date
(the date falling on
the 10th day of the
sixty-ninth (69th)
month falling
immediately after
Commencement
Date)
 
152,500
13,725,000
70
71st Payment Date
(the date falling on
the 10th day of the
seventieth (70th)
month falling
immediately after
Commencement
Date)
 
152,500
13,572,500
71
72nd Payment Date
(the date falling on
the 10th day of the
seventy-first (71st)
month falling
immediately after
Commencement
Date)
 
152,500
13,420,000


82

72
73rd Payment Date
(the date falling on
the 10th day of the
seventy-second
(72nd) month falling
immediately after
Commencement
Date)
 
152,500
13,267,500
73
74th Payment Date
(the date falling on
the 10th day of the
seventy-third (73rd)
month falling
immediately after
Commencement
Date)
 
152,500
13,115,000
74
75th Payment Date
(the date falling on
the 10th day of the
seventy-fourth
(74th) month falling
immediately after
Commencement
Date)
 
152,500
12,962,500
75
76th Payment Date
(the date falling on
the 10th day of the
seventy-fifth (75th)
month falling
immediately after
Commencement
Date)
 
152,500
12,810,000
76
77th Payment Date
(the date falling on
the 10th day of the
seventy-sixth (76th)
month falling
immediately after
Commencement
Date)
 
152,500
12,657,500
77
78th Payment Date
(the date falling on
the 10th day of the
seventy-seventh
(77th) month falling
immediately after
Commencement
Date)
 
152,500
12,505,000


83

78
79th Payment Date
(the date falling on
the 10th day of the
seventy-eighth
(78th) month falling
immediately after
Commencement
Date)
 
152,500
12,352,500
79
80th Payment Date
(the date falling on
the 10th day of the
seventy-ninth (79th)
month falling
immediately after
Commencement
Date)
 
152,500
12,200,000
80
81st Payment Date
(the date falling on
the 10th day of the
eightieth (80th)
month falling
immediately after
Commencement
Date)
 
152,500
12,047,500
81
82nd Payment Date
(the date falling on
the 10th day of the
eighty-first (81st)
month falling
immediately after
Commencement
Date)
 
152,500
11,895,000
82
83rd Payment Date
(the date falling on
the 10th day of the
eighty-second
(82nd) month falling
immediately after
Commencement
Date)
 
152,500
11,742,500
83
84th Payment Date
(the date falling on
the 10th day of the
eighty-third (83rd)
month falling
immediately after
Commencement
Date)
 
152,500
11,590,000


84

84
85th Payment Date
(the date falling on
the 10th day of the
eighty-fourth (84th)
month falling
immediately after
Commencement
Date)
 
152,500
11,437,500
85
86th Payment Date
(the date falling on
the 10th day of the
eighty-fifth (85th)
month falling
immediately after
Commencement
Date)
 
152,500
11,285,000
86
87th Payment Date
(the date falling on
the 10th day of the
eighty-sixth (86th)
month falling
immediately after
Commencement
Date)
 
152,500
11,132,500
87
88th Payment Date
(the date falling on
the 10th day of the
eighty-seventh
(87th) month falling
immediately after
Commencement
Date)
 
152,500
10,980,000
88
89th Payment Date
(the date falling on
the 10th day of the
eighty-eighth (88th)
month falling
immediately after
Commencement
Date)
 
152,500
10,827,500
89
90th Payment Date
(the date falling on
the 10th day of the
eighty-ninth (89th)
month falling
immediately after
Commencement
Date)
 
152,500
10,675,000


85

90
91st Payment Date
(the date falling on
the 10th day of the
ninetieth (90th)
month falling
immediately after
Commencement
Date)
 
152,500
10,522,500
91
92nd Payment Date
(the date falling on
the 10th day of the
ninety-first (91st)
month falling
immediately after
Commencement
Date)
 
152,500
10,370,000
92
93rd Payment Date
(the date falling on
the 10th day of the
ninety-second
(92nd) month falling
immediately after
Commencement
Date)
 
152,500
10,217,500
93
94th Payment Date
(the date falling on
the 10th day of the
ninety-third (93rd)
month falling
immediately after
Commencement
Date)
 
152,500
10,065,000
94
95th Payment Date
(the date falling on
the 10th day of the
ninety-fourth (94th)
month falling
immediately after
Commencement
Date)
 
152,500
9,912,500
95
96th Payment Date
(the date falling on
the 10th day of the
ninety-fifth (95th)
month falling
immediately after
Commencement
Date)
 
152,500
9,760,000


86

96
97th Payment Date
(the date falling on
the 10th day of the
ninety-sixth (96th)
month falling
immediately after
Commencement
Date)
 
152,500
9,607,500
97
98th Payment Date
(the date falling on
the 10th day of the
ninety-seventh
(97th) month falling
immediately after
Commencement
Date)
 
152,500
9,455,000
98
99th Payment Date
(the date falling on
the 10th day of the
ninety-eighth (98th)
month falling
immediately after
Commencement
Date)
 
152,500
9,302,500
99
100th Payment Date
(the date falling on
the 10th day of the
ninety-ninth (99th)
month falling
immediately after
Commencement
Date)
 
152,500
9,150,000
100
101st Payment Date
(the date falling on
the 10th day of the
one hundredth
(100th) month
falling immediately
after
Commencement
Date)
 
152,500
8,997,500
101
102nd Payment Date
(the date falling on
the 10th day of the
one hundred and
first (101st) month
falling immediately
after
Commencement
Date)
 
152,500
8,845,000


87

102
103rd Payment Date
(the date falling on
the 10th day of the
one hundred and
second (102nd)
month falling
immediately after
Commencement
Date)
 
152,500
8,692,500
103
104th Payment Date
(the date falling on
the 10th day of the
one hundred and
third (103rd) month
falling immediately
after
Commencement
Date)
 
152,500
8,540,000
104
105th Payment Date
(the date falling on
the 10th day of the
one hundred and
fourth (104th) month
falling immediately
after
Commencement
Date)
 
152,500
8,387,500
105
106th Payment Date
(the date falling on
the 10th day of the
one hundred and
fifth (105th) month
falling immediately
after
Commencement
Date)
 
152,500
8,235,000
106
107th Payment Date
(the date falling on
the 10th day of the
one hundred and
sixth (106th) month
falling immediately
after
Commencement
Date)
 
152,500
8,082,500
107
108th Payment Date
(the date falling on
the 10th day of the
one hundred and
seventh (107th)
month falling
immediately after
Commencement
Date)
 
152,500
7,930,000


88

108
109th Payment Date (the date falling on the 10th day of the one hundred and
eighth (108th)
month falling
immediately after
Commencement
Date)
 
152,500
7,777,500
109
110th Payment Date
(the date falling on
the 10th day of the
one hundred and
ninth (109th) month
falling immediately
after
Commencement
Date)
 
152,500
7,625,000
110
111th Payment Date
(the date falling on
the 10th day of the
one hundred and
tenth (110th) month
falling immediately
after
Commencement
Date)
 
152,500
 
7,472,500
111
112nd Payment Date
(the date falling on
the 10th day of the
one hundred and
eleventh (110th)
month falling
immediately after
Commencement
Date)
 
152,500
7,320,000
112
113rd Payment Date
(the date falling on
the 10th day of the
one hundred and
twelve (112th)
month falling
immediately after
Commencement
Date)
 
152,500
7,167,500
113
114th Payment Date
(the date falling on
the 10th day of the
one hundred and
thirteenth (113th)
month falling
immediately after
Commencement
Date)
 
152,500
7,015,000


89


 114
115th Payment Date (the date falling on the 10th day of the one hundred and
fourteenth (114th)
month falling
immediately after
Commencement
Date)
 
152,500
6,862,500
 115
116th Payment Date
(the date falling on
the 10th day of the
one hundred and
fifteenth (115th)
month falling
immediately after
Commencement
Date)
 
152,500
 
6,710,000
 
 116
117th Payment Date
(the date falling on
the 10th day of the
one hundred and
sixteenth (116th)
month falling
immediately after
Commencement
Date)
 
152,500
 
6,557,500
 
 117
118th Payment Date
(the date falling on
the 10th day of the
one hundred and
seventeenth (117th)
month falling
immediately after
Commencement
Date)
 
152,500
 
6,405,000
 
 
 
 
 
 118
119th Payment Date
(the date falling on
the 10th day of the
one hundred and
eighteenth (118th)
month falling
immediately after
Commencement
Date)
 
152,500
 
6,252,500
 
119
120th Payment Date
(the date falling on
the 10th day of the
one hundred
nineteenth (119th)
month falling
immediately after
Commencement
Date)
Balloon
Payment:
6,100,000
152,500
 
0
 


90

Schedule 3: Collateral Owners, Collateral Charterers and Collateral Vessels
Collateral Owners
Collateral Charterers
Collateral Vessels
     
Name: Oriental Fleet TANKER 11 Limited (东方富利 TANKER11 有限公司)
Place of Incorporation: Republic of the Marshall Islands
Registration No.: 101325 ("Collateral Owner A")
Name: Monte Carlo Seven Shipping Company Limited Place of Incorporation: Republic of the Marshall Islands
Registration No.: 60933 ("Collateral Charterer A")
One (1) d/w 50,000 product oil/chemical tanker named "Stenaweco Excellence" registered in the name of Collateral Owner A under the laws and flag of the Republic of Liberia with Official Number 16739
("Collateral Vessel A")
Name: Oriental Fleet TANKER 12 Limited (东方富利 TANKER12 有限公司)
Place of Incorporation: Republic of the Marshall Islands
Registration No.: 101326 ("Collateral Owner B")
Name: Monte Carlo 71 Shipping Company Limited Place of Incorporation: Republic of the Marshall Islands
Registration No.: 69834 ("Collateral Charterer B")
One (1) d/w 50,000 product oil/chemical tanker named "Stenaweco Energy" presently registered in the name of Eco Energy LLC under the laws and flag of the Republic of the Marshall Islands with Official Number 5270, which on delivery to Collateral Owner B will be registered under the laws and flag of the Republic of the Marshall Islands with Official Number 5270
("Collateral Vessel B")

91

Dated                                                          2019
TOP SHIPS INC.
as Guarantor
and
ORIENTAL FLEET TANKER 13 LIMITED
(东方富利 TANKER13 有限公 司)
as Owner
Guarantee
in respect of one (1) d/w 50,000 product oil/chemical tanker
named "STENAWECO EVOLUTION" with IMO No. 9687942
HONG KONG

Table of Content

Clause
 
Page No.
     
1.
Definitions and interpretation
1
2.
Guarantee and Indemnity
3
3.
Preservation of Rights
3
4.
Representations and Warranties
5
5.
Covenants
6
6.
Continuing Guarantee
6
7.
Payments
6
8.
Subordination
7
9.
Currency Conversion and Currency Indemnity
7
10.
Suspense Account
8
11.
Set-off
8
12.
Guarantor to comply with Charter
8
13.
Miscellaneous
8
14.
Assignments and Transfers
9
15.
Notices
9
16.
Governing Law and Jurisdiction
11
Schedule 1 : Representations and Warranties
13
Schedule 2 : Covenants
18
Schedule 3 : Form of Compliance Certificate
26
Guarantee – Execution Page (1/2)
28

i

This Guarantee is made by way of deed on                                   2019.
Between:
(1)
TOP SHIPS INC., a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 3571, as guarantor (the Guarantor); and
(2)
ORIENTAL FLEET TANKER 13 LIMITED (东方富利 TANKER13 有限公 司), a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 101327, as owner (the Owner).
Recitals:
(A)
The Owner and the Charterer (as defined below) are parties to a bareboat charter party dated on or about the date hereof (as amended and/or supplemented from time to time, the Charter), pursuant to which the Owner has agreed to charter the Vessel (as defined below) to the Charterer subject to the terms and conditions specified therein.
(B)
As a condition precedent to the obligations of the Owner under the Charter, the Guarantor is required to execute this Guarantee.
It is agreed as follows:
1.
Definitions and interpretation
1.1
Unless the context otherwise requires, words or expressions defined in the Charter (whether specifically or by reference) shall have the same meanings in this Guarantee and this construction shall survive the termination of the Charter. Where a word or phrase is defined in the Charter and this Guarantee, the definition in this Guarantee shall prevail.
1.2
In this Guarantee, the following words and expressions shall, except where the context otherwise requires, have the following respective meanings:
Bankruptcy includes a liquidation, receivership or administration and any form of suspension of payments, arrangement with creditors or reorganisation under any corporate or insolvency law of any country.
Charterer means MONTE CARLO ONE SHIPPING COMPANY LIMITED, a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 55324.
Compliance Certificate means a certificate substantially in the form set out in Schedule 3 (Form of Compliance Certificate) which is delivered from time to time to the Owner under Clause 12 (Compliance Certificate) of Schedule 2 (Covenants).
Guarantee means this deed of guarantee and indemnity (including the Recitals).
Guaranteed Obligations means all present and future payment and performance obligations of any of the Security Parties due, owing or incurred under any of the Transaction Documents to the Owner, in each case (i) which are (or which are expressed to be) now or at any time hereafter due to be performed and (ii) including as a consequence of any breach, non-performance, disclaimer or repudiation by any of the Security Parties (or by a liquidator, receiver, administrative receiver, administrator

1

or any similar officer in respect of any of the Security Parties) of any of such obligations of any of the Security Parties, in each case together with:

(a)
all costs, charges and expenses incurred by the Owner in connection with the protection, preservation or enforcement of its rights under any of the Transaction Documents; and

(b)
all indebtedness, moneys, obligations and liabilities due, owing or incurred in respect of any variations of the Transaction Documents or the obligations and liabilities imposed under such documents.
Parties means together, the parties to this Guarantee (each, a Party).
Security Perfection Requirements means, in respect of the Transaction Documents to which the Guarantor is a party:

(a)
execution of all notices, acknowledgments and consents as required under those Transaction Documents; and

(b)
any other Authorisations of those Transaction Documents as may be required or recommended in any Legal Opinion.
Vessel means one (1) d/w 50,000 product oil/chemical tanker named "STENAWECO EVOLUTION" with IMO No. 9687942.
1.3
Unless otherwise specified and except where the context otherwise requires, any reference in this Guarantee to:

(a)
the singular includes the plural and vice versa;

(b)
any person shall be construed so as to include its successors and permitted assigns and permitted transferees in accordance with their respective interests;

(c)
any document (including the Charter, this Guarantee, and each other Transaction Document) shall be construed as a reference to such document as amended, restated, supplemented, varied or novated from time to time in accordance with its terms (to the extent that such document is at the relevant time in effect);

(d)
any provision of law shall be construed as a reference to that provision as amended, supplemented, varied, re-enacted, replaced or restated from time to time;

(e)
any applicable law includes, without limitation, (i) applicable laws, acts, codes, conventions, decrees, decree-laws, legislation, statutes, treaties and similar instruments, (ii) applicable final judgments, orders, determinations or awards of any court from which there is no right of appeal (or, if there is a right of appeal, such appeal is not prosecuted within the allowable time) and (iii) applicable directives, guidance, guidelines, notices, orders, regulations and rules of any governmental, judicial or regulatory authority (whether or not having the force of law but with which, if not having the force of law, compliance is customary);

(f)
a Clause shall be construed as a reference to a clause of this Guarantee;

2


(g)
continuing shall, in relation to a Termination Event, be construed as a reference to a Termination Event which persists and has not been waived or remedied in accordance with the terms of the Charter;

(h)
a person shall be construed as a reference to any association, company, corporation, firm, governmental, judicial or regulatory authority, individual, joint venture, partnership (including any limited partnership and any limited liability partnership) or trust (in each case whether or not having separate legal personality);

(i)
a successor shall be construed so as to mean a successor in title of a person and any person who under the applicable laws of its jurisdiction of incorporation or domicile has assumed the rights and obligations of such person or to which, under such laws or by agreement or otherwise, such rights and obligations have been transferred; and

(j)
the winding-up, dissolution, administration or re-organisation of a person shall be construed so as to include any equivalent or analogous proceedings under the applicable law of the jurisdiction in which such person is incorporated or formed or any jurisdiction in which such person carries on business including the seeking of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors.
1.4
Clause headings shall be ignored in the interpretation of this Guarantee.
2.
Guarantee and Indemnity
2.1
In consideration of the Owner entering into the Charter, the Guarantor irrevocably and unconditionally guarantees to the Owner the due payment and prompt performance by the Charterer and the other Security Parties of the Guaranteed Obligations when due in accordance with the Charter and the other Transaction Documents.
2.2
The Guarantor further irrevocably and unconditionally undertakes to pay to the Owner, on the Owner's demand, any such amount which is not paid by the Charterer or the other Security Parties when due and payable under the Charter, the Collateral Charters and the other Transaction Documents.
2.3
The Guarantor as principal obligor and as a separate and independent obligation and liability from its obligations and liabilities under Clauses 2.1 and 2.2 agrees to indemnify and keep indemnified the Owner, in full and on demand, from and against all and any losses, costs, claims, liabilities, damages, demands and expenses suffered or incurred by the Owner arising out of, or in connection with, any failure of the Charterer or any other Security Party to perform or discharge any of the Guaranteed Obligations.
2.4
The Owner may serve more than one demand under this Clause 2.
3.
Preservation of Rights
3.1
The obligations of the Guarantor contained in this Guarantee shall be in addition to and independent of every other security which the Owner may at any time hold in

3

respect of the Charterer's or any other Security Party's obligations under any Transaction Document.
3.2
The Guarantor shall be liable under this Guarantee as a principal and independent debtor and accordingly it shall not have, as regards this Guarantee, any of the rights or defences of a surety. Neither the obligations of the Guarantor contained in this Guarantee nor the rights, powers and remedies conferred upon the Owner by this Guarantee or by law shall be discharged, impaired or otherwise affected by:

(a)
the winding-up, dissolution, administration or reorganisation of the Charterer or any other Security Party or any other person or any change in its status, function, control or ownership;

(b)
any of the obligations of the Charterer or any other Security Party or any other person under any Transaction Document being or becoming illegal, invalid, void, voidable, unenforceable, ineffective or of limited force and effect in any respect;

(c)
any time or other indulgence being granted or agreed to be granted to either the Charterer or any other Security Party or any other person in respect of any of its obligations under any Transaction Document;

(d)
any amendment to, or any variation, waiver or release of, the Charter or the other Transaction Documents or any obligation of either the Charterer or any other Security Party or any other person under any Transaction Document;

(e)
any failure to take, or fully to take, any security contemplated by any Transaction Document or otherwise agreed to be taken in respect of any Security Party's obligations under any Transaction Document;

(f)
any failure to realise or fully to realise the value of, or any release, discharge, exchange or substitution of, any security taken in respect of any of either the Charterer's or any other Security Party's obligations under any Transaction Document;

(g)
any purported obligation of either the Charterer or any other Security Party or any other person to the Owner (or any security for that obligation) becoming wholly or in part void, invalid, illegal or unenforceable for any reason, including negligence; and

(h)
any other act, event or omission which, but for this Clause 3.2, might operate to discharge, impair or otherwise affect any of the obligations of the Guarantor contained in this Guarantee or any of the rights, powers or remedies conferred upon the Owner by this Guarantee, the Charter or any other Transaction Document or by law.
3.3
Any settlement, discharge or release between the Guarantor and the Owner in relation to this Guarantee shall be conditional upon no right, security, disposition or payment to or in favour of the Owner by any Security Party or any other person being avoided, set aside, reduced or ordered to be refunded as a result of the operation of any applicable law and if any such right, security, disposition or payment is so avoided, set aside, reduced or ordered to be refunded, the liability of the Guarantor shall continue and the Owner shall be entitled to recover under this Guarantee the value or

4

amount of that right, security, disposition or payment, in each case as if any such settlement, discharge or release had not occurred.
3.4
The Owner shall not be obliged before exercising any of the rights, powers or remedies conferred upon it by this Guarantee or by law:

(a)
to take any action or obtain judgment in any court against the Charterer or any other Security Party;

(b)
to make or file any claim or proof in a winding-up or dissolution of either of the Charterer or any other Security Party; or

(c)
to enforce or seek to enforce any security taken in respect of the Charterer's or any other Security Party's obligations under the Charter or any other Transaction Document.
3.5
The Guarantor agrees that, for so long as the Charterer or any other Security Party is under any actual or contingent obligation under the Charter or any other Transaction Document, the Guarantor shall not exercise any right which the Guarantor may at any time have by reason of this Guarantee or the performance by it of its obligations under this Guarantee:

(a)
to be indemnified by the Charterer or any other Security Party or to receive any collateral from the Charterer or any other Security Party in respect of the Guarantor's obligations under this Guarantee;

(b)
to claim any contribution from any other guarantor of the Charterer's or any other Security Party's obligations under the Charter or any other Transaction Document;

(c)
to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any of the Owner's rights under the Charter or any Transaction Document or of any other guarantee or security taken pursuant to, or in connection with, the Charter or any other Transaction Document;

(d)
to claim or prove in a liquidation or other insolvency proceeding of the Charterer or any other Security Party or any co-surety in competition with the Owner; and/or

(e)
receive, claim or have the benefit of any payment, distribution or security from or on account of the Charterer or any other Security Party, or exercise any right of set-off against the Charterer or any other Security Party.
4.
Representations and Warranties
The Guarantor acknowledges that the Owner has entered into the Charter and the other Transaction Documents on the basis of, and in full reliance on the representations and warranties expressed to be made by it and set out in Schedule 1 (Representations and Warranties) to this Guarantee on the date hereof and on each Payment Date under the Charter. The Guarantor covenants that on each of such dates, each of the representations and warranties set forth in Schedule 1 (Representations and Warranties) to this Guarantee is true and correct and not misleading in any material respects.

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5.
Covenants
The Guarantor hereby covenants in favour of the Owner in the terms of the undertakings expressed to be made by it and set out in Schedule 2 (Covenants) to this Guarantee.
6.
Continuing Guarantee
The obligations of the Guarantor contained in this Guarantee shall constitute and be continuing obligations notwithstanding any settlement of account or other matter or thing whatsoever, and shall not be considered as satisfied or discharged by any intermediate payment, satisfaction or settlement of any part of the Guaranteed Obligations and shall continue in full force and effect until all of the Guaranteed Obligations (whether actual or contingent) have been irrevocably and unconditionally paid and discharged in full.
7.
Payments
7.1
All payments to be made by the Guarantor under this Guarantee shall be made in the currency in which the corresponding payment obligation of the Charterer is due and payable under the Charter or each other applicable Transaction Document (as the case may be) and in immediately available, freely transferable, cleared funds to such account of the Owner with such bank as the Owner shall from time to time have specified for this purpose.
7.2
All payments to be made by the Guarantor under this Guarantee shall be made without set-off or counterclaim and without any deduction or withholding whatsoever. If the Guarantor is obliged by law to make any deduction or withholding from any such payment, the amount due from the Guarantor in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Owner receives a net amount equal to the amount that the Owner would have received had no such deduction or withholding been required to be made.
7.3
The Guarantor agrees that:

(a)
if any payment received by the Owner in respect of moneys owing or due and payable by the Guarantor is avoided on the subsequent insolvency or liquidation of the Guarantor, under any laws relating to insolvency or liquidation, that payment does not discharge or diminish the liability of the Guarantor under this Guarantee, which continues to apply as if that payment at all times remained owing; and

(b)
if the Guarantor has not paid to the Owner the full amount of all sums due under this Guarantee, the Owner may (for the purpose of enabling the Owner to sue the Guarantor and/or any other guarantor of the liabilities which are hereby guaranteed or to prove in its or their liquidation or in any similar proceedings for any moneys due and unpaid by the Guarantor to the Owner) at any time place and keep for such time as it may think fit any moneys received under this Guarantee, or under such other guarantees or from any other person, to the credit of an account or accounts (bearing interest at a commercial rate) without any obligation on the part of the Owner to apply the same or any part thereof in or towards the discharge of the indebtedness and liabilities of the Guarantor to the Owner.

6

7.4
All moneys received by the Owner pursuant to this Guarantee after the occurrence of a Termination Event which is continuing shall be held by the Owner in trust and applied by the Owner in the following order:

(a)
firstly, to pay or retain all costs and expenses of whatever nature incurred by the Owner under the Transaction Documents;

(b)
secondly, to be applied in and towards payment of the Guaranteed Obligations (whether the same are due and payable or not); and

(c)
fifthly, the surplus (if any) shall be paid to the Guarantor or such other person as may for the time being be entitled thereto.
8.
Subordination
All rights which the Guarantor at any time has (whether in respect of this Guarantee or any other Transaction Document) against the Charterer, any other Security Party or their respective assets shall be fully subordinated to the rights of the Owner under the Transaction Documents; and in particular after a Termination Event has occurred and is continuing under the Charter and the Owner has, by notice to the Guarantor, brought this Clause 8 into operation, which notice shall take effect immediately, the Guarantor shall not:

(a)
claim, or in a Bankruptcy of the Charterer or any other Security Party prove for, any amount payable to the Guarantor by the Charterer or any other Security Party, whether in respect of this Guarantee or any other Transaction Document;

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

(c)
claim to set-off any such amount against any amount payable by the Guarantor to the Charterer or any other Security Party; or

(d)
claim any subrogation or other right in respect of any Transaction Document or any sum received or recovered by either the Charterer or any other Security Party under a Transaction Document.
9.
Currency Conversion and Currency Indemnity

(a)
The Owner may convert any money received or realised by it under or pursuant to this Guarantee which is not in the currency in which the relevant sum is due and payable under each applicable Transaction Document from that currency into the currency in which such sum is due at the rate of exchange on the relevant date of the conversion.

(b)
If, under any applicable law, whether as a result of judgment against the Guarantor or the liquidation of the Guarantor or for any other reason, any payment to be made by the Guarantor under or in connection with this Guarantee is made or is recovered in a currency other than the currency (the currency of obligation) in which it is payable pursuant to this Guarantee then, to the extent that the payment (when converted into the currency of obligation at the rate of exchange on the date for the determination of liabilities permitted by the applicable law) falls short of the amount unpaid under this Guarantee,

7

the Guarantor shall as a separate and independent obligation, fully indemnify the Owner against the amount of the shortfall.

(c)
For the purposes of this Clause 9, rate of exchange means the best rate at which the Owner is able on the relevant date to purchase the currency of obligation with the other currency.
10.
Suspense Account
If the Guarantor has not paid to the Owner the full amount of all sums due under this Guarantee, all moneys received, recovered or realised by the Owner under or pursuant to this Guarantee (including the proceeds of any conversion of currency) may in its discretion (for inter alia the purpose of claiming or proving in a Bankruptcy of the Charterer or any other Security Party) be credited to and held in any suspense or impersonal account pending their application from time to time in or towards the discharge of the Guarantor's obligations under this Guarantee.
11.
Set-off
If the Guarantor has not paid to the Owner the full amount of all sums due under this Guarantee, the Owner may (but shall not be obliged to) set-off any obligation in respect of Guaranteed Obligations which are due and payable by the Guarantor against any obligation (contingent or otherwise) owed by the Owner to the Guarantor (regardless of the place of payment, or currency of either obligation) and apply any credit balance to which the Guarantor is entitled on any account with the Owner in payment of the Guaranteed Obligations. The Owner may, at the cost of the Guarantor, effect such currency exchanges as it considers are appropriate to implement such set-off.
12.
Guarantor to comply with Charter
The Guarantor agrees with the Owner to comply with all provisions of the Charter which are applicable to itself in the same way as if those provisions had been set out (with any necessary modifications) in this Guarantee.
13.
Miscellaneous
13.1
This Guarantee may be executed in any number of counterparts and on separate counterparts, each of which when executed shall constitute an original, but all counterparts shall together constitute one and the same instrument.
13.2
Any amendment, supplement or variation to any Transaction Document to which the Guarantor is a party must be in writing and executed by each party thereto.
13.3
The Guarantor may not terminate this Guarantee by notice to the Owner or otherwise until the Guaranteed Obligations are irrevocably paid to the Owner in full.
13.4
Neither the failure to exercise, nor the delay in any exercise of, nor the single or partial exercise of, any right, power or remedy by the Owner under or in relation to any Transaction Document to which the Guarantor is a party shall (a) operate as a waiver of such right, power or remedy, (b) prevent any further or other exercise of such right, power or remedy or (c) prevent the exercise of any other right, power or remedy. The rights, powers and remedies of the Owner provided in any Transaction

8

Document to which the Guarantor is a party are cumulative and not exclusive of any rights, powers or remedies provided by law.
13.5
Any waiver or consent given by a party under or in relation to any Transaction Document to which the Guarantor is a party must, in order to be effective, be in writing and shall only be effective in the specific circumstances in which it is given.
13.6
If at any time any provision of any Transaction Document to which the Guarantor is a party is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of that Transaction Document nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired.
13.7
Any certificate or determination by the Owner as to any rate of interest or as to any other amount payable under and pursuant to any Transaction Document to which the Guarantor is a party shall, in the absence of manifest error, be conclusive and binding on Guarantor.
13.8
A person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of any term of this Guarantee.
13.9
The Guarantor shall pay to the Owner on demand all fees, costs and expenses (including legal, survey and other costs) payable or incurred by the Owner in connection with the enforcement of or preservation of the Owner's rights under each Transaction Document to which the Guarantor is a party. All amounts payable pursuant to this Clause 13 shall be paid in the currency in which they are incurred to the Owner.
14.
Assignments and Transfers
14.1
This Guarantee shall be binding upon and inure to the benefit of each Party and its respective successors, permitted assigns and permitted transferees.
14.2
The Guarantor shall not assign, transfer (whether voluntarily or involuntarily, by operation of law or otherwise) or create or permit to exist any Security Interest over, any of its rights or obligations under this Guarantee.
15.
Notices
15.1
Communications in writing
Any communication to be made under or in connection with the Transaction Documents to which the Guarantor is a party shall be made in writing and, unless otherwise stated, may be given in person, by post, fax or email.
15.2
Addresses
Except as otherwise provided for in this Guarantee, all notices or other communications under or in respect of the Transaction Documents to which the Guarantor is a party to either party thereto shall be in writing and shall be made or given to such party at the address, facsimile number or email address appearing below

9

(or at such other address, facsimile number or email address as such party may hereafter specify for such purposes to the other by notice in writing):

(a)
In the case of the Guarantor:
 
Address:
1, Vas. Sofias & Meg.
Alexandrou Str.
15124, Maroussi, Athens, Greece
 
Attention:
Andreas Louka
 
Email:
louka@loukapartners.com
 
Fax:
+30 2108128320


(b)
In the case of the Owner:
 
Address:
c/o Oriental Fleet International Company Limited
50/F, COSCO Tower
183 Queen's Road Central
Hong Kong
 
Attention:
Belinda Hou / Thomas Xing / Xu Ying
 
Email:
lou.can@coscoshipping.com / thomas.xing@ofi.com.hk / asset@coscoshipping.com
 
Fax:
+852 2339 1881

15.3
Delivery
15.3.1
Any communication or document made or delivered by a Party to the other Party under or in connection with the Transaction Documents to which the Guarantor is a party will only be effective:

(a)
if by way of fax, when received in legible form;

(b)
if by way of letter, when it has been left at the relevant address to which it has been posted with postage prepaid in an envelope addressed to the relevant party at that address, and, if a particular department or officer is specified as part of its address details provided under Clause 15.2 (Addresses), if addressed to that department or officer; or

(c)
if by way of email, only when received in a legible form by the email address of the person to whom the communication is made.
15.3.2
All communications and documents delivered pursuant to or otherwise relating to the Transaction Documents to which the Guarantor is a party shall be either in English or Chinese or accompanied by a certified English or Chinese translation.
15.4
Validity of demands
A demand under this Guarantee shall be valid notwithstanding that it is served:

(a)
on the date on which the amount to which it relates is due and payable by the Charterer or any other Security Party under an applicable Transaction Document (as the case may be); or

10


(b)
at the same time as the service of a notice under the applicable Transaction Document;
and a demand under this Guarantee may refer to all amounts payable under or in connection with the Transaction Documents to which the Charterer or any other Security Party is a party without specifying a particular sum or aggregate sum.
16.
Governing Law and Jurisdiction
16.1
This Guarantee and any non-contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with English law and any Dispute arising out of or in connection with this Guarantee shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory re-enactment or modification thereof save to the extent necessary to give effect to the provisions of this Clause.
16.2
The arbitration reference shall be to three arbitrators:

(a)
A Party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other Party requiring the other Party to appoint its own arbitrator within fourteen (14) calendar days of that notice, and stating it will appoint its arbitrator as sole arbitrator unless the other Party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified.

(b)
If the other Party does not appoint its own arbitrator and gives notice that it has done so within the fourteen (14) days specified, the Party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other Party, appoint its arbitrator as sole arbitrator and shall advise the other Party accordingly. The award of a sole arbitrator shall be binding on both Parties as if he/she had been appointed by agreement.

(c)
Where each Party appoints its own arbitrator, then the two (2) arbitrators so appointed may proceed with the arbitration and at any time thereafter appoint a third arbitrator so long as they do so before any substantive hearing or forthwith in the event that they cannot agree on any matter relating to the arbitration. If the said two arbitrators do not appoint a third within fourteen (14) days of one calling upon the other to do so, or if they are in disagreement as to the third arbitrator, either arbitrator or a Party shall apply to the London Maritime Arbitrators Association (LMAA) for the appointment of the third arbitrator.

(d)
The language used in the arbitration shall be English. The arbitration shall be conducted in accordance with the LMAA Terms current at the time when the arbitration proceedings are commenced.

(e)
Nothing herein shall prevent the Parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator.
16.3
In this Clause 16, proceedings means proceedings of any kind, including an application for a provisional or protective measure and a Dispute means any dispute arising out of or in connection with this Guarantee (including a dispute relating to the

11

existence, validity or termination of this Guarantee) or any non-contractual obligation arising out of or in connection with this Guarantee.
16.4
The Guarantor waives any rights of sovereign immunity which it or any of its properties may enjoy in any jurisdiction and subjects itself to civil and commercial law with respect to its obligations under this Guarantee.


[Schedules and execution pages to follow]
12

Schedule 1: Representations and Warranties
1.
Status

(a)
It is a company duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation.

(b)
It has the power to own its assets and carry on its business as it is being conducted.

(c)
It has read and understood the terms of this Guarantee, the Charter and the other Transaction Documents to which the Charterer or any other Security Party is a party and has taken appropriate legal advice as to the extent of its obligations and liabilities under the Transaction Documents to which the Guarantor is a party.

(d)
The Charterer is a wholly-owned Subsidiary of the Guarantor, which is ultimately controlled by the Substantial Shareholder.

(e)
It is a publicly listed entity on the NASDAQ stock exchange under the symbol "TOPS".
2.
Compliance with anti-money laundering legislation
It has complied with all anti-money laundering legislation (to the extent applicable to it) that is relevant in the context of the transactions contemplated by the Transaction Documents to which it is a party.
3.
Binding obligations

(a)
The obligations expressed to be assumed by it in the Transaction Documents to which it is a party are, subject to the Legal Reservations, legal, valid, binding and enforceable obligations.

(b)
Without limiting the generality of paragraph (a) above, subject to the Security Perfection Requirements, each Security Document to which it is a party creates the Security Interests which it purports to create and such Security Interests are valid and effective.
4.
Non-conflict with other obligations
The entry into and performance by it of, and the transactions contemplated by, the Transaction Documents to which it is a party does not and will not conflict with:

(a)
any law or regulation applicable to it;

(b)
its constitutional documents; or

(c)
any agreement or instrument binding upon it or any of its assets,
nor result in the existence of, or oblige it to create, any Security Interest over any of its assets.

13

5.
Power and authority
It has the power to enter into, perform and deliver, and has taken (or will, prior to its execution thereof, take) all necessary action to authorise its entry into, performance and delivery of, the Transaction Documents to which it is a party.
6.
Validity and admissibility in evidence
All Authorisations, consents, approvals, resolutions, licences, exemptions, filings, notarisations or registrations required:

(a)
to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Transaction Documents to which it is a party;

(b)
to make the Transaction Documents to which it is a party admissible in evidence in its Relevant Jurisdictions;

(c)
for it to carry on its business, and which are material; and

(d)
to enable it to create the Security Interest to be created by it under any Security Document to which it is a party and to ensure that such Security Interest has the priority and ranking it is expressed to have,
have been obtained or effected and are in full force and effect, subject in the case of any Security Document to which it is a party to the Security Perfection Requirements.
7.
Governing law and enforcement
Subject to the Legal Reservations:

(a)
the choice of each relevant law as the governing law of the Transaction Documents to which it is a party to and the agreement by such party to refer disputes to the relevant courts or tribunal as stated in such Transaction Document will be recognised and enforced in its Relevant Jurisdictions; and

(b)
any arbitral award, ruling or judgment obtained in each Relevant Jurisdiction in relation to the Transaction Documents to which it is a party will be recognised and enforced in its Relevant Jurisdictions.
8.
Deduction of Tax
Except as specifically referred to in any Legal Opinion, it is not required under the law of each of its Relevant Jurisdictions or at its address specified in the Transaction Documents to which it is a party to make any deduction for or on account of any tax from any payment of interest it may make under the Transaction Documents to which it is a party.
9.
Financial statements

(a)
Its financial statements most recently supplied to the Owner (which, at the date of this Guarantee, are its Original Financial Statements) were prepared in accordance with GAAP consistently applied save to the extent expressly disclosed in such financial statements.

14


(b)
Its financial statements most recently supplied to the Owner (which, at the date of this Guarantee, are its Original Financial Statements) give a true and fair view of (if audited) or fairly represent (if unaudited) its consolidated financial condition and operations for the period to which they relate, save to the extent expressly disclosed in such financial statements.

(c)
There has been no material adverse change in its business or consolidated financial condition since the date of its Original Financial Statements.
10.
No filing or stamp taxes
Except as specifically referred to in any Legal Opinions, under the law of its Relevant Jurisdictions it is not necessary that any Transaction Document to which it is a party be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to those Transaction Document or the transactions contemplated by those Transaction Document.
11.
No default

(a)
No Termination Event has occurred and is continuing or might reasonably be expected to result from the entry into or performance of, or the transactions contemplated by, any Transaction Document to which it is a party.

(b)
No other event or circumstance has occurred and is continuing which (with the expiry of a grace period, the giving of notice or any combination of the foregoing) constitutes a default under any deed or instrument which is binding on the Guarantor, or to which its assets are subject, which might have a Material Adverse Effect on the Guarantor's ability to perform its obligations under any Transaction Document to which it is a party.
12.
No breach of laws
It has not breached any law or regulation which breach has or is reasonably likely to result in a Material Adverse Effect on the Guarantor.
13.
No misleading information

(a)
All information provided by it or on its behalf in relation to the negotiation and preparation of any Transaction Document to which it is a party was true, complete and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated and was not misleading in any respect.

(b)
All financial projections provided by it or on its behalf have been prepared on the basis of recent historical information and on the basis of reasonable assumptions.

(c)
Nothing has occurred or been omitted from the information so provided and no information has been given or withheld that results in the information provided by it or on its behalf being untrue or misleading in any material respect.

15

14.
Pari passu ranking
Its payment obligations under Transaction Documents to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
15.
No proceedings

(a)
No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency (which, if adversely determined, would have a Material Adverse Effect on the Guarantor) have been started or (to the best of its knowledge and belief) threatened against it.

(b)
No judgment or order of a court, arbitral body or agency which might reasonably be expected to have a Material Adverse Effect has been made against it.
16.
No immunity
It is subject to civil commercial law with respect to its obligations under the Transaction Documents to which it is a party and neither it nor any of its assets is entitled to any right of immunity and the entry into and performance by it of the Transaction Documents to which it is a party constitute private and commercial acts.
17.
Taxation

(a)
It has complied in all material respects with all tax laws and regulations applicable to it and its business.

(b)
It is not materially overdue in the filing of any tax returns and is not overdue in the payment of any amount in respect of tax.

(c)
No claims or investigations are being made or conducted against it with respect to taxes.

(d)
It is resident for tax purposes only in its jurisdiction of incorporation except (i) the taxes that are being contested in good faith by appropriate proceedings and for which the Guarantor has set aside on its books adequate reserves and (ii) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
18.
Disclosure of material facts
It is not aware of any material facts or circumstances which have not been disclosed to the Owner and which might, if disclosed, have adversely affected the decision of a person considering whether or not to enter into the transactions of the nature contemplated by the Transaction Documents.
19.
Place of Business and Non-Hong Kong company
It is not registered as a non-Hong Kong company under the Companies Ordinance (Cap. 622 of the Laws of Hong Kong), and it has not established a place of business in England.

16

20.
Transaction Documents
It is aware of and approves the terms of the Charter and each of the other Transaction Documents.
21.
Sanctions

(a)
No Security Party is a Restricted Person.

(b)
Each Security Party is in compliance with all Sanctions laws, and none of them have been or are currently being investigated on compliance with Sanctions, they have not received notice or are aware of any claim, action, suit or proceeding against any of them with respect to Sanctions and they have not taken any action to evade the application of Sanctions.
22.
Authorised signatories
Any person specified as its authorised signatory under Addendum No.1 or paragraph (f) of Clause 16 (Information: miscellaneous) of Schedule 2 (Covenants) is authorised to sign all documents and notices on its behalf.
17

Schedule 2: Covenants

The Guarantor hereby undertakes in favour of the Owner that as at the date hereof and at all times throughout the Charter Period:
1.
Status

(a)
It will maintain its existence as a company duly incorporated and validly existing under the laws of its jurisdiction of incorporation.

(b)
It will remain a publicly listed entity on the NASDAQ stock exchange under the symbol "TOPS".
2.
Authorisations and Compliance with applicable law

(a)
It shall promptly:

(i)
obtain, comply with and do all that is necessary to maintain in full force and effect; and

(ii)
supply copies to the Owner of,
all consents, licences, approvals, permits or Authorisations of or registrations or filings required (A) to enable it to perform its obligations under the Transaction Documents to which it is a party and (B) to ensure the legality, validity, enforceability or admissibility in evidence in each of its Relevant Jurisdictions of any Transaction Document to which it is subject.

(b)
It shall comply in all respects with all laws to which it may be subject.

(c)
It shall ensure that all the Security Perfection Requirements have been or will be done or obtained (as the case may be) no later than the latest date permitted by applicable law and in any event by such date as the Owner may specify.
3.
Compliance with obligations
It will comply with and perform all the obligations expressed to be assumed by it in each Transaction Document to which it is a party and with all laws applicable to it in connection with the transactions contemplated by those Transaction Documents.
4.
No prejudice to interests
It will not (otherwise than as expressly contemplated by this Guarantee) do anything or take any action or knowingly omit to take any action which has or is likely to have the effect of prejudicing the right, title and interest of any Security Party or the Owner in relation to the Vessel, the Insurances, the Charter, any other Transaction Document or any other trust property.
5.
Exercise of rights
It will not, without first obtaining the Owner's prior written consent, seek to recover, whether directly or by set-off, lien, counterclaim or otherwise, nor accept any money or other property, nor exercise any rights, in respect of any sum or security which may

18

be or become due to the Guarantor in respect of the Guaranteed Obligations by the Charterer or any third party.
6.
Further assurance
At no cost to the Owner, it will take all such actions and do all such things the Owner may from time to time require so as to establish, maintain, perfect, preserve and/or protect the right, title and interest of the Owner in relation to this Guarantee or any other Transaction Documents to which it is a party, against, and in priority to, the claims of any other person having regard to customary and available practice and procedures accepted and adopted by international financiers.
7.
Pari passu ranking
It will ensure that its payment obligations under each Transaction Document to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law.
8.
Negative pledge
Except as expressly permitted by the Charter or the other Transaction Documents, it will not:

(a)
sell, transfer or otherwise dispose of its right, title and interest in and to any collateral which is the subject of security created under any Transaction Document;

(b)
create, incur, assume or permit or cause to exist any Security Interest over its right, title and interest in and to any collateral which is the subject of security created under any Transaction Document; or

(c)
consent to the taking of any such action described in the preceding two paragraphs by any other person (whether pursuant to the terms of the Transaction Documents or otherwise),
in each case without the prior written consent of the Owner.
9.
Security Parties
It will ensure that:

(a)
the Charterer and each of the Security Parties maintains its existence as a company duly incorporated and validly existing and, where applicable, in good standing under the laws of its jurisdiction of incorporation in compliance with all applicable law; and

(b)
the Charterer and each of the Security Parties is managed and administered in the manner that is required by the Transaction Documents.
10.
Subordination

(a)
Pursuant to paragraph (z)(iii) of Clause 47.1 (General Covenants) of the Charter, the Guarantor acknowledges to and undertakes with the Owner that, at all times throughout the Charter Period, all shareholder's and intercompany

19

loans from time to time made by the Guarantor or any other member of the Group to the Charterer:

(i)
are and shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterer under the Charter and the other Transaction Documents;

(ii)
shall not be repaid or be subject to any payment of interest (although interest may accrue);

(iii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterer; and

(iv)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim.

(b)
Pursuant to paragraph (aa)(iv) of Clause 47.1 (General Covenants) of the Charter, the Guarantor acknowledges to and undertakes with the Owner that, at all times throughout the Charter Period, all shareholder's and intercompany advances from time to time made by the Guarantor or any other member of the Group to the Charterer:

(i)
shall be non-interest bearing;

(ii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterers;

(iii)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim; and

(iv)
upon occurrence of a Termination Event which is continuing:

(A)
shall not be repaid; and

(B)
shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterers under this Charter and the other Transaction Documents.
11.
Financial Statements
It shall supply to the Owner:

(a)
as soon as the same become available, but in any event within 120 days after the end of each of its financial years, its audited consolidated financial statements for that financial year; and

(b)
as soon as the same become available, but in any event within 75 days after the end of each half of each of its financial years, its unaudited consolidated financial statements for that financial half year.
12.
Compliance Certificate

(a)
It shall supply to the Owner, with each set of financial statements delivered pursuant to paragraphs (a) and (b) of Clause 11 (Financial Statements) of this

20

Schedule, a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 14 (Financial Covenants) of this Schedule as at the date at which those financial statements were drawn up.

(b)
Each Compliance Certificate delivered pursuant to paragraph (a) above shall be signed by its director or its chief financial officer.
13.
Requirements as to financial statements

(a)
Each set of financial statements delivered by it pursuant to Clause 11 (Financial statements) shall be certified by (its director or its chief financial officer) as giving a true and fair view of (in the case of any such financial statements which are audited) or fairly representing (in the case of any such financial statements which are unaudited) its consolidated financial condition and operations as at the date of and for the period in relation to which those financial statements were drawn up.

(b)
It shall procure that each set of financial statements delivered pursuant to Clause 11 (Financial Statements) of this Schedule is in the English language and prepared using GAAP, the accounting practices and financial reference periods consistent with those applied in the preparation of its Original Financial Statements unless, in relation to any set of financial statements, it notifies the Owner that there has been a change in GAAP, the accounting practices or financial reference periods and its auditors deliver to the Owner:

(i)
a description of any change necessary for those financial statements to reflect the GAAP, the accounting practices and financial reference periods upon which its Original Financial Statements were prepared; and

(ii)
sufficient information, in form and substance as may be reasonably required by the Owner, to enable the Owner to determine whether Clause 14 (Financial Covenants) of this Schedule has been complied with and make an accurate comparison between the financial position indicated in those financial statements and its Original Financial Statements.
Any reference in this Guarantee and the other Transaction Documents to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which its Original Financial Statements were prepared.
14.
Financial Covenants

(a)
The Guarantor undertakes that it shall ensure at all times:

(i)
Leverage Ratio shall not at any time exceed 75%; and

(ii)
Free Liquidity shall not be less than the aggregate of the following:

(A)
US$1,000,000 times number of Fleet Vessels which are Suezmax vessels;

21


(B)
US$750,000 times number of Fleet Vessels which are MR tankers; and

(C)
US$500,000 times number of MR tankers are bareboat chartered-in to a member of the Group.

(b)
The financial covenants set out in paragraph (a) shall be tested by reference to the financial statements and Compliance Certificates delivered by the Guarantor pursuant to Clause 11 (Financial Statements), Clause 12 (Compliance Certificate) and Clause 13 (Requirements as to financial statements) of this Schedule in respect of the Relevant Period.

(c)
In this Clause:

(i)
Cash means, at any time, the aggregate at such time of the amounts categorised as Cash and Cash Equivalent in the Guarantor's consolidated financial statements.

(ii)
Cash Equivalent Investments means investments that are short term investments (excluding equity investments) which are readily convertible into cash without incurring any significant premium or penalty.

(iii)
Consolidated Total Debt in respect of the Guarantor means at any time the aggregate amount of all obligations of the Group which would, in accordance with GAAP, be considered as consolidated total debt of the Group.

(iv)
Consolidated Total Net Debt in respect of the Guarantor means at any time Consolidated Total Debt less Cash and Cash Equivalent and Restricted Cash.

(v)
Fleet Vessel means, at any time, each vessel registered in the name of a member of the Group as owner.

(vi)
Free Liquidity means, at any time, any unrestricted Cash and Cash Equivalent of the Guarantor which is not subject to any security interest adjusted to include any Cash held under any minimum liquidity requirements and debt service accounts.

(vii)
Joint Venture Vessel means any vessel registered in the name of an owner whose shareholding is owned by the Guarantor by 50% or more.

(viii)
Leverage Ratio means, the ratio (expressed as a percentage) of:

(1)
the Consolidated Total Net Debt; and

(2)
the aggregate Market Value of all Fleet Vessels, including 50% of Joint Venture Vessels.

22


(ix)
Market Value means, in relation to a Fleet Vessel and a Joint Venture Vessel, at a relevant date, one (1) valuation obtained by the Charterer (or failing which the Owner) and prepared:

(1)
on a date no earlier than thirty (30) days prior to the relevant date;

(2)
by one (1) Approved Valuer;

(3)
with or without physical inspection of such Fleet Vessel or Joint Venture Vessel;

(4)
on the basis of a sale for prompt delivery for cash on normal arm's length commercial terms as between a willing seller and a willing buyer, free of any existing charter or other contract of employment; and

(5)
if a range of valuation is given by the Approved Valuer, the lower end of the range shall apply,
with the expenses of all such valuations being borne by the Charterer.

(x)
Relevant Period means each period of six (6) months immediately prior to the date of computation.

(xi)
Restricted Cash means, at any time, the aggregate at such time of the amounts categorised as Restricted Cash in the Guarantor's consolidated financial statements.
15.
Notification
It shall promptly and diligently:

(a)
notify the Owner as soon as it becomes aware of the occurrence of:

(i)
any Termination Event; and

(ii)
any other matters which might lead to an occurrence of any Termination Event; and

(b)
notify the Owner of any steps or action which it is taking, or is considering taking, to remedy or mitigate the effect of such occurrence.
16.
Information: miscellaneous
It shall supply to the Owner:

(a)
all documents dispatched by it to its shareholders (or any class of them) or its creditors generally at the same time as they are despatched (other than any document which is required to be filed by the Guarantor in accordance with the rules of, and has been filed and posted onto any electronic website maintained by, any stock exchange on which shares in or other securities of the Guarantor are listed);

23


(b)
promptly, any announcement, notice or other document relating specifically to the Guarantor posted onto any electronic website maintained by any stock exchange on which shares in or other securities of the Guarantor are listed or any electronic website required by any such stock exchange to be maintained by or on behalf of the Guarantor;

(c)
promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against it, and which might, if adversely determined, have a Material Adverse Effect;

(d)
promptly upon becoming aware of them, details of any judgment or order of a court, arbitral body or agency which is made against it, and which might have a Material Adverse Effect;

(e)
promptly, such information regarding its consolidated financial condition, business and operations as the Owner may reasonably request;

(f)
promptly, notice of any change in its authorised signatories signed by its director accompanied by specimen signatures of any new authorised signatories; and

(g)
promptly, such information and records regarding the Shares as the Chargee may reasonably request.
17.
Taxes
It shall:

(a)
file or cause to be filed all tax returns required to be filed in all jurisdictions in which it is situated or carries on business or otherwise is subject to taxation; and

(b)
pay all taxes shown to be due and payable on such returns or any assessments made against it, except to the extent these are contested in good faith and by appropriate means where such payment may be lawfully withheld and for which adequate reserves have been established by it taking into account the amount of taxes payable.
18.
No merger
Neither the Guarantor nor any other Security Party shall enter or be permitted to enter into any form of merger, sub-division, amalgamation or other reorganisation or change of ownership.
19.
Change of Control

(a)
Save with the prior written consent of the Owner, it shall ensure that no Change of Control occurs.

(b)
Save with the prior written consent of the Owner, there shall not be any transfer or disposal of:

24


(i)
the legal or beneficial shareholding of the Charterer; or

(ii)
the legal or beneficial shareholding of the Guarantor,
unless following such transfer or disposal, the Guarantor remains ultimately or indirectly controlled by the Substantial Shareholder.
20.
Sanctions

(a)
It shall comply, and shall procure that each other Security Party complies, with all laws and regulations in respect of Sanctions, and in particular, it shall ensure that the Charterer shall effect and maintain a sanctions compliance policy to ensure compliance with all such laws and regulations implemented from time to time.

(b)
It will ensure that the Vessel shall not be employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel shall not be used by or for the benefit for any party which is a target of Sanctions, or trade to any Restricted Country; or (ii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation.

(c)
It will, and will procure that each other Security Party will, promptly notify the Owner and provide all information in relation to its business and operations which may be relevant for the purposes of ascertaining whether it is in compliance with all laws and regulations relating to Sanctions, and in particular, it shall notify the Owner in writing immediately upon being aware that any of its shareholders or directors, officers of employees is a Restricted Person or has otherwise become a target of Sanctions.
25

Schedule 3: Form of Compliance Certificate

From:
TOP SHIPS INC.
 
a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 3571
 (as Guarantor)
   
With copy to:
Monte Carlo One Shipping Company Limited
 
a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 55324
(as Charterer)
   
To:
Oriental Fleet TANKER 13 Limited
 
(东方富利 TANKER13 有限公司)
 
a corporation incorporated in the Republic of the Marshall Islands with limited liability and registration no. 101327
(as Owner)
   

Dated: [●]
Dear Sirs
Monte Carlo One Shipping Company Limited
Bareboat Charter dated [●] 2019
(as amended and/or supplemented from time to time, the "Charter")
in respect of one (1) d/w 50,000 product oil/chemical tanker
named "STENAWECO EVOLUTION" with IMO No. 9687942

1.
We refer to the Charter and the Guarantee (as defined in the Charter). This is a Compliance Certificate. Terms defined in the Charter and the Guarantee have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.
2.
We confirm to the Owner that as at the date of [the audited consolidated financial statements of the Group in respect of the financial year ended on [●] / the consolidated financial statements of the Group in respect of the financial period ended on [●]]:

(a)
we are in compliance with the covenants and undertakings in Clause 14 (Financial Covenants) of Schedule 2 to of the Guarantee;

(b)
Consolidated Total Net Debt is [.] and Market Value of the Fleet Vessels including 50% of Joint Venture Vessels is [●] and therefore Leverage Ratio is [●] and does not exceed 75%;

(c)
Free Liquidity is US$[●], which is not less than US$[●], being the aggregate of the following:

(i)
US$[●], which is calculated by US$1,000,000 times the number of Fleet Vessels which are Suezmax vessels, being [●];

26


(ii)
US$[●], which is calculated by US$750,000 times the number of Fleet Vessels which are MR tankers, being [●]; and

(iii)
US$[●], which is calculated by US$500,000 times the number of MR tankers are bareboat chartered-in to a member of the Group, being [●].
3.
We set out below calculations establishing the figures in paragraph 2:
[●].
4.
We also confirm that no Termination Event is continuing which has not been waived as at the date of this Compliance Certificate.
Yours faithfully

For and on behalf of
TOP SHIPS INC.



________________________
Name:
Title: [Director/Chief Financial Officer]
27

Guarantee – Execution Page (1/2)

This Guarantee has been entered into on the date stated at the beginning of this Guarantee. This Guarantee has been executed and entered into by the Guarantor as a deed and is intended to be and is delivered by it as a deed.


SIGNED as a deed by
)
 
, Attorney for
)
 
TOP SHIPS INC.
)
 
under a power of attorney
)
 
dated 4 July 2019
)
 
in the presence of:
)
 

28




Guarantee – Execution Page (2/2)


SIGNED for and on behalf of
)
 
ORIENTAL FLEET TANKER 13 LIMITED
)
 
(东方富利 TANKER13 有限公司)
)
 
by                                    , Director
)
 
in the presence of:
)
 






29
Exhibit 4.53





























Additional Clauses to
Bareboat Charter Party dated 2019
between
ORIENTAL FLEET TANKER 11 LIMITED
(东方富利 TANKER11 有限公司)
as owners
and
MONTE CARLO SEVEN SHIPPING COMPANY LIMITED
as charterers
in respect of
one (1) d/w 50,000 product oil/chemical tanker
named "STENAWECO EXCELLENCE"
with IMO No. 9695834
HONG KONG

Contents
32.
Definitions
1
33.
Charter Period
21
34.
Cancellation
21
35.
Conditions Precedent and Conditions Subsequent
21
36.
Delivery
22
37.
Charterhire
23
38.
Possession of Vessel
28
39.
Insurance
29
40.
Termination and Redelivery; War; Total Loss
36
41.
Fees and Expenses; Indemnities;
41
42.
No Waiver of Rights
44
43.
Mortgage and assignment
44
44.
Notices
45
45.
Termination Events
46
46.
Representations and Warranties
49
47.
Charterers' undertakings
52
48.
Purchase Option
59
49.
Purchase Obligation
60
50.
Sale of the Vessel by Purchase Option and Purchase Obligation
60
51.
No Set-off or Tax deduction; FATCA Provisions
62
52.
Increased Costs
64
53.
Governing Law and Jurisdiction
66
54.
Miscellaneous
67
Execution page
68
Schedule 1 : Certificate of Delivery and Acceptance
70
Schedule 2 : Charterhire Schedule
71
Schedule 3 : Collateral Owners, Collateral Charterers and Collateral Vessels
86
   

i

32.
DEFINITIONS
32.1
In this Charter the following terms shall have the meanings ascribed to them below:
Account Bank means Alpha Bank AE or any other bank or financial institution reasonably acceptable to the Security Trustee with which the Earnings Account is at any time held.
Account Pledge means the pledge over Earnings Account (ΕΝΕΧΥΡΟ ΕΠΙΛΟΓΑΡΙΑΣΜΟΥ ΕΣΟΔΩΝ (ENEXYRO EPI LOGARIASMOU ESODON)) executed or to be executed by the Charterers and the Owners and the Collateral Owners in the agreed form.
Addendum No.1 means an addendum no.1 to the MOA dated on or about the date thereof between the Charterers as sellers and the Owners as buyers.
Affiliate means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.
Approved Commercial Managers means Central Shipping and/or any other first class reputable ship management company acceptable to the Security Trustee who may be appointed as commercial manager of the Vessel.
Approved Managers means together, the Approved Commercial Managers and the Approved Technical Managers.
Approved Technical Managers means Central Shipping, Central Mare and/or any other first class reputable ship management company acceptable to the Security Trustee who may be appointed as technical manager of the Vessel.
Approved Valuer means Clarksons Platou, Braemar, Arrow, Howe Robinson, Maersk or any other firm or firms of independent sale and purchase shipbroker proposed by the Charterers and agreed by the Owners.
Assigned Property has the meaning given to that term in the Charterer's Assignment. Authorisation means:

(a)
an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation, lodgement or registration; or

(b)
in relation to anything which will be fully or partly prohibited or restricted by law if a Governmental Agency intervenes or acts in any way within a specified period after lodgement, filing, registration or notification, the expiry of that period without intervention or action.
Balloon Payment means the balloon payment in the amount of which is 20% of the Financing Principal, being the amount payable by the Charterers to the Owners on the last Payment Date.
Breakfunding Costs means all breakfunding costs and expenses incurred or payable by the Owners when a repayment or prepayment under the relevant funding arrangement entered into by the Owners for the purpose of financing and/or

1

refinancing the Financing Principal do not fall on a Payment Date (excluding any costs incurred in unwinding any associated interest rate or currency swaps or currency futures transactions entered into by the Owners).
Business Day means a day (other than a Saturday or Sunday):

(a)
in relation to the definition of Quotation Day and to any day on which LIBOR is to be determined, on which banks and the relevant financial markets are open for general business in London;

(b)
in relation to any date for payment of amounts under the Transaction Documents, on which banks and the relevant financial markets are open for general business in Hong Kong, London, Shanghai, Piraeus and the principal financial centre of the country of the currency of payment; and

(c)
in relation to any other matter, on which banks are open for general business in Hong Kong, Shanghai and Piraeus.
Business Ethics Law means any laws, regulations and/or other legally binding requirements or determinations in relation to bribery, corruption, fraud, money-laundering, terrorism, collusion bid-rigging or anti-trust, human rights violations) (including forced labour and human trafficking) which are applicable to either Party or any other Security Party or to any jurisdiction where activities are performed and which shall include: (a) the United Kingdom Bribery Act 2010; and (b) the United States Foreign Corrupt Practices Act 1977.
Cancelling Date means 31 July 2019 (or such later date as may be agreed by the Charterers and the Owners).
Central Mare means Central Mare Inc., a corporation incorporated under the laws of the Republic of the Marshall Islands with registration no. 32656.
Central Shipping means Central Shipping Inc., a corporation incorporated under the laws of the Republic of the Marshall Islands with registration no. 98339.
Certificate of Delivery and Acceptance means a certificate substantially in the form set out in Schedule 1 to be signed by the Owners and the Charterers upon Delivery.
Change of Control occurs when, at any time, without the prior written consent of the Owners:

(a)
the Guarantor ceases to control the Charterers; or

(b)
the Substantial Shareholder ceases to control the Guarantor or the Charterers,
and for the purpose of this Charter and the other Transaction Documents, control of one person (the first person) by another person (the second person) or the first person being controlled by the second person means that the second person (whether directly or indirectly and whether by the ownership of share capital, the possession of voting power, contract or otherwise) has the power to appoint and/or remove all or a majority of the members of the board of directors or other governing body of the first

2

person or otherwise controls or has the power of control over the affairs and policies of the first person.
Charterer's Assignment means the charterer's assignment executed or to be executed by the Charterers and the Security Trustee in respect of the Vessel, pursuant to which the Charterers shall, inter alia, assign their rights under the Assigned Property in favour of the Security Trustee in the agreed form.
Charterhire means:

(a)
in respect of the Commencement Date, the Upfront Charterhire;

(b)
in respect of a Payment Date, the aggregate of the amount of (i) the Fixed Charterhire and (ii) the Variable Charterhire, payable under this Charter on that Payment Date; and

(c)
in respect of the last Payment Date, the aggregate of the amount of (i) the Balloon Payment, (ii) the Fixed Charterhire and (iii) the Variable Charterhire, payable under this Charter on that Payment Date.
Charterhire Principal means the amount, at any point in time, calculated as the aggregate outstanding amount of the Fixed Charterhire and the Balloon Payment, less any payment of the Fixed Charterhire and the Balloon Payment received by the Owners under this Charter, as more particularly set out in the column entitled "Charterhire Principal" in the Charterhire Schedule, as the same may from time to time be adjusted in accordance with this Charter.
Charterhire Schedule means the charterhire schedule set out in Schedule 2 (as the same may from time to time be amended or replaced including without limitation by each Revised Charterhire Schedule).
Charter Period means the period commencing on the Commencement Date and described in Clause 33.3 unless terminated earlier in accordance with the provisions of this Charter.
Classification Society means American Bureau of Shipping or such other first class international classification society being a member of International Association of Classification Society approved in writing by the Owners and their financiers (if any).
Code means the US Internal Revenue Code of 1986, as amended from time to time.
Collateral Charter means, in relation to each Collateral Vessel, the bareboat charterparty in respect of that Collateral Vessel entered or to be entered into between the relevant Collateral Owner (as owners) and the Collateral Charterer (as charterers), as may be supplemented, amended or otherwise modified from time to time (including all side letters and other agreements relating thereto), and Collateral Charters means both of them.
Collateral Charterers means together, the collateral charterers described in Schedule 3, and Collateral Charterer means either of them.

3

Collateral Owners means together, the collateral owners described in Schedule 3, and Collateral Owner means either of them.
Collateral Security Parties means together, in relation to each Collateral Vessel, the parties defined as Collateral Security Parties under the relevant Collateral Charter, and Collateral Security Party means any of them.
Collateral Security Documents means together, in relation to each Collateral Vessel, the documents defined as Security Documents under the relevant Collateral Charter, and Collateral Security Document means any of them.
Collateral Transaction Documents means together, in relation to each Collateral Vessel, the relevant Collateral Charter, the relevant Collateral Security Documents and any other documents defined as a Transaction Document under that Collateral Charter, and Collateral Transaction Document means any of them.
Collateral Vessels means together, the vessels described in Schedule 3, and Collateral Vessel means either of them.
Commencement Date means the date on which Delivery takes place.
Creditor Parties means together, the Owners, the Collateral Owners and the Security Trustee, and Creditor Party means any of them.
Deed of Charge means the deed of charge over the shares in the Charterers granted by the Guarantor in favour of the Security Trustee in such form as may be acceptable to the Security Trustee.
Default Rate means the percentage sum of the Interest Rate plus two per cent. (2%) per annum.
Delivery means the delivery of the Vessel from the Owners to the Charterers pursuant to this Charter on the Commencement Date.
Dollars, $ and US$ mean the lawful currency for the time being of the US.
Earnings means all moneys whatsoever which are now, or later become, due or payable to the Charterers and which arise out of the use or operation of the Vessel, including:

(a)
all freight, hire and passage moneys, compensation payable in the event of requisition of the Vessel for hire, remuneration for salvage and towage services, demurrage and detention moneys and damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Vessel;

(b)
if and whenever the Vessel is employed on terms whereby any moneys falling within paragraph (a) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Vessel; and

4


(c)
all other payments or proceeds of any kind whatsoever relating to the Vessel as would be deemed "earnings" under GAAP or other applicable accounting principles.
Earnings Account means an account in the name of the Charterers with the Account Bank as follows:
 
Beneficiary Bank:
Alpha Bank AE
   
Shipping Finance Division
   
93, Akti Miaouli
   
185-38 Piraeus Greece
 
Swift Code:
CRBAGRAAXXX
 
Beneficiary Name:
Monte Carlo Seven Shipping Company Limited
 
Account Number:
960 01 5006 021109
 
IBAN:
GR21 0140 9600 9600 1500 6021 109
     
or such other account (with the Account Bank or another office of the Account Bank) as the Security Trustee may from time to time designate and into which all Earnings shall be paid for the purpose of this Charter and the Charterer's Assignment.
Environmental Claim means:

(a)
any claim which relates to the Vessel or its passengers or cargo from time to time 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 in relation to the Vessel or its passengers or cargo from time to time which relates to an Environmental Incident or an alleged Environmental Incident,
and claim means a claim for damages, compensation, fines, penalties or any other payment; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.
Environmental Incident means:

(a)
any release of Environmentally Sensitive Material from the Vessel;

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

(c)
any other incident involving the Vessel in which Environmentally Sensitive Material is released otherwise than from the Vessel and in connection with which the Vessel is actually arrested and/or where the Owners and/or the

5

Charterers and/or any other operator or manager of the Vessel is at fault or otherwise liable to any legal or administrative action.
Environmental Law means any law relating to pollution or protection of the environment, to the carriage or actual or threatened releases of Environmentally Sensitive Material.
Environmentally Sensitive Material means oil, oil products and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous.
Existing Mortgage means the first preferred Liberian ship mortgage dated 20 May 2016 and executed by the Charterers (as owner) in favour of the Existing Mortgagee, together with all supplements and amendments to it.
Existing Mortgagee means Norddeutsche Landesbank Girozentrale. Existing Security Documents means collectively:

(a)
the Existing Mortgage;

(b)
the general assignment dated 20 May 2016 and made between the Charterers (as owner) and the Existing Mortgagee (as security trustee);

(c)
the share security deed dated 11 May 2016 and made between the Guarantor (as shareholder) and the Existing Mortgagee (as security trustee);

(d)
the charterparty assignment dated 20 May 2016 and made between the Charterers (as owner) and the Existing Mortgagee (as security trustee);

(e)
the warranty assignment dated 11 May 2016 and made between the Charterers (as assignor) and the Existing Mortgagee (as security trustee);

(f)
the accounts pledge agreement dated 11 May 2016 and made between, among others, the Charterers (as pledger) and the Existing Mortgagee (as security trustee and original pledgee);

(g)
the master agreement assignment dated 19 May 2016 and made between the Charterers (as assignor) and the Existing Mortgagee (as security trustee);

(h)
the commercial manager's undertaking dated 20 May 2016 and executed by Central Shipping Monaco SAM in favour of the Existing Mortgagee; and

(i)
the technical manager's undertaking dated 20 May 2016 and executed by Central Mare in favour of the Existing Mortgagee ,
and in each case, together with all supplements and amendments to it. FATCA means:

(a)
sections 1471 to 1474 of the Code or any associated regulations;

6


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

(c)
any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraph (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 this Charter or the Transaction Documents required by or under FATCA.
FATCA Exempt Party means a Relevant Party that it is entitled under FATCA to receive payments free from any FATCA Deduction.
FATCA FFI means a foreign financial institution as defined in section 1471(d)(4) of the Code which, if a Relevant Party is not a FATCA Exempt Party, could be required to make a FATCA Deduction.
FATCA Non-Exempt Party means any Relevant Party who is not a FATCA Exempt Party.
FATCA Payment means the increase in a payment made by a Security Party to the Owners under Clause 51.2.2.
Fee Letter means the fee letter dated on or about the date hereof setting out the Handling Fee payable by the Charterers to the Owners.
Finance Party Quiet Enjoyment Letter means, if requested by the Sub-Charterer, a quiet enjoyment letter in relation to the Vessel issued or to be issued the Mortgagee in favour of the Sub-Charterer and acknowledged by the Owners, the Charterers and the Sub-Charterer in form and substance acceptable to the Mortgagee, the Owners, the Charterers and the Sub-Charterer.
Financial Indebtedness means, in relation to a person (the debtor), a liability of the debtor (whether present or future, actual or contingent):

(a)
moneys borrowed;

(b)
any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;

(c)
any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d)
the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with GAAP as at the date of this Agreement, be treated as a balance sheet liability (other than any liability in respect of a lease or hire purchase contract which would, in accordance with GAAP in force prior to 1 January 2019, have been treated as an operating lease);

7


(e)
receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

(f)
any amount raised under any other transaction (including any forward sale or purchase agreement) of a type not referred to in any other paragraph of this definition having the commercial effect of a borrowing;

(g)
any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that derivative transaction, that amount) shall be taken into account);

(h)
any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

(i)
the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (h) above.
Financial Instruments means any mortgage, deed of covenants, the general assignment or such other financial security instruments granted to the Owners' financiers as security for the obligations of the Owners in relation to financing and/or refinancing the acquisition of the Vessel.
Financing Principal means the amount which is the lower of US$25,600,000 and 80% of the MOA Purchase Price, as the same may from time to time be adjusted in accordance with this Charter.
Fixed Charterhire means, on each Payment Date, the corresponding monthly instalment as set out in the column entitled "Fixed Charterhire" in Schedule 2, as the same may from time to time be adjusted in accordance with this Charter.
GAAP means, in relation to each of the Charterers and the Guarantor, generally accepted accounting principles, standards and practices in the US.
Governmental Agency means any government or any governmental agency, semi-governmental or judicial entity or authority (including any stock exchange or any self-regulatory organisation established under statute).
Group means the Guarantor and its Subsidiaries.
Guarantee means the guarantee executed by the Guarantor in favour of the Owners on or about the date hereof guaranteeing inter alia the obligations of the Charterers under this Charter.
Guarantor means Top Ships Inc., a corporation incorporated under the laws of the Republic of the Marshall Islands with registration no. 3571.
Handling Fee means an irrevocable and non-refundable handling fee in the amount set out in the Fee Letter payable by the Charterers to the Owners in accordance with the Fee Letter.

8

Hire Calculation Period means the period of time commencing from the Commencement Date until the date that is the second (2nd) Payment Date and each period of one (1) month thereafter from the last day of the preceding Hire Calculation Period; provided that if a Hire Calculation Period would otherwise expire on a day which is beyond the last day of the Charter Period, that Hire Calculation Period shall be shortened to expire on the last day of the Charter Period.
Holding Company means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.
Hong Kong means the Hong Kong Special Administrative Region of the People's Republic of China.
Insurances means:

(a)
all policies and contracts of insurance, including entries of the Vessel in any protection and indemnity or war risks association, which are effected in respect of the Vessel or otherwise in relation to it whether before, on or after the date of this Charter; and

(b)
all rights, proceeds and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium and any rights in respect of any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Charter.
Interest Rate means the sum of LIBOR plus the Margin.
ISM Code means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation Assembly as Resolutions A.741 (18) and A.788 (19), as the same may be amended or supplemented from time to time (and the terms safety management system, Safety Management Certificate and Document of Compliance have the same meanings as are given to them in the ISM Code).
ISPS Code means the International Ship and Port Security Code as adopted by the Conference of Contracting Governments to the Safety of Life at Sea Convention 1974 on 13 December 2002 and incorporated as Chapter XI-2 of the Safety of Life at Sea Convention 1974, as the same may be supplemented or amended from time to time.
Legal Opinion means:

(a)
any legal opinion delivered pursuant to Clause 5 of Part B and Clause 2 of Part D of Addendum No.1; or

(b)
any legal opinion which the Creditor Parties may obtain or arrange with respect to the Charterers or any other Security Parties.
Legal Reservations means:

(a)
the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to

9

insolvency, reorganisation and other laws generally affecting the rights of creditors;

(b)
the time barring of claims under the Limitation Act (1980) and the Foreign Limitation Periods Act 1984, the possibility that an undertaking to assume liability for, or indemnify a person against, non-payment of any stamp duty may be void or the defences of set-off or counter-claim;

(c)
similar principles, rights and defences under the laws of any Relevant Jurisdiction; and
any reservations or qualifications as to matters of law (but excluding at all times any reservations or qualifications as to matters of fact) referred to in any Legal Opinion.
LIBOR means:

(a)
the applicable Screen Rate as of 11:00 a.m. (London time) on the Quotation Day for Dollars and for a period of three (3) months; or

(b)
as otherwise determined pursuant to Clause 37.8.
Major Casualty means any casualty to the Vessel in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds US$1,000,000 or the equivalent in any other currency.
Management Agreements means together:

(a)
in relation to commercial, technical and crew management of the Vessel, the ship management agreement dated 1 January 2019 and made between the Charterers and Central Shipping; and

(b)
in relation to the technical management of the Vessel, the sub-management agreement dated 1 January 2019 and made between Central Shipping and Central Mare,
together with all supplements and amendments to them.
Manager's Undertakings means the letters of undertaking executed by the Approved Managers and any other named assured or co-assured of the Vessel in favour of the Security Trustee subordinating their respective rights against the Vessel and the Charterers to the rights of the Creditor Parties and their financiers (if any) in an agreed form.
Margin means 3.9% per annum.
Market Disruption Event means:

(a)
at or about noon (London time) on the Quotation Day for the relevant Hire Calculation Period the relevant Screen Rate is not available and none or only one of leading banks in the London interbank market supplies a rate to the

10

Owners to determine LIBOR for dollars for the relevant Hire Calculation Period; or

(b)
before close of business in Hong Kong on the Quotation Day for the relevant Hire Calculation Period, the cost to the Owners of funding the Charterhire Principal from whatever source it may select would be in excess of LIBOR.
Market Value means, in relation to the Vessel, at a relevant date, one (1) valuation obtained by the Charterers (or failing which obtained by the Owners) and prepared:

(a)
on a date no earlier than thirty (30) days prior to the relevant date;

(b)
by one (1) Approved Valuer;

(c)
with or without physical inspection of the Vessel;

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

(e)
if a range of valuation is given by the Approved Valuer, the lower end of the range shall apply,
with the expenses of all such valuations being borne by the Charterers.
Market Value at Closing means, in relation to the Vessel, on the MOA Delivery Date, the arithmetic average of two (2) valuations obtained by the Owners and prepared:

(a)
on a date no earlier than fifteen (15) days prior to the MOA Delivery Date;

(b)
by two (2) Approved Valuers respectively, one (1) appointed by the Owners and one (1) appointed by the Charterers;

(c)
with or without physical inspection of the Vessel;

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

(e)
if a range of valuation is given by an Approved Valuer, the lower end of the range shall apply for that Approved Valuer,
with the expenses of all such valuations being borne by the Charterers.
MARPOL Protocol means Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as amended in 1978 and 1997).
Material Adverse Effect means, in the reasonable opinion of the Owners, a material adverse effect on:

11


(a)
the business, operations, property, condition (financial or otherwise) or prospects of the Charterers or any other Security Party;

(b)
the ability of the Charterers or any other Security Party to perform its material obligations under any Transaction Document to which it is a party;

(c)
the validity, legality or enforceability of any Transaction Document or the rights or remedies of the Owners or any other Creditor Party under any of the Transaction Documents; or

(d)
the validity, legality or enforceability of, or the effectiveness or priority and ranking of any Security Interests granted pursuant to any of the Security Documents.
MOA means the memorandum of agreement dated on or about the date hereof as supplemented by Addendum No.1 between the Charterers as sellers and the Owners as buyers in relation to the sale and purchase of the Vessel, as may be supplemented, amended or otherwise modified from time to time (including all side letters and other agreements relating thereto).
MOA Delivery means the actual delivery of the Vessel by the Charterers as sellers to and the actual acceptance of the Vessel by the Owners as buyers under and in accordance with the provisions of the MOA.
MOA Delivery Date means the date of MOA Delivery.
MOA PDA means the protocol of delivery and acceptance to be executed and delivered by the Charterers as sellers and the Owners as buyers pursuant to the MOA.
MOA Purchase Price means the amount which is the lower of US$32,000,000 and the Market Value at Closing of the Vessel, being the purchase price of the Vessel paid by the Owners (as buyers) to the Charterers (as sellers) under the MOA.
Mortgagee has the meaning given to that term in Clause 43.1.
Net Average Market Value has the meaning given to that term in Clause 40.6(a).
Net Sale Proceeds has the meaning given to that term in Clause 40.6(b)(i).
Original Financial Statements means, in relation to the Guarantor, the audited consolidated financial statements of the Group for the financial year ended 31 December 2018.
Owners Account means an account of the Owners with Bank of China (Hong Kong) Limited or such other account as the Owners may from time to time designate and notified to the Charterer and into which all Charterhire and all other sums payable under this Charter by the Charterers to the Owners shall be paid in accordance with this Charter.
Owners Quiet Enjoyment Letter means, if requested by the Sub-Charterer, a quiet enjoyment letter in relation to the Vessel issued or to be issued by the Owners in favour of the Sub-Charterer and acknowledged by the Charterers and the Sub-

12

Charterer in form and substance acceptable to the Owners, the Charterers and the Sub-Charterer.
Parties means together, the Owners and the Charterers.
Payment Date means each of the Commencement Date, the date falling on the 10th day of the month falling immediately after the Commencement Date and the dates falling on the 10th day of each month commencing thereafter and (in the case of the last Payment Date) the date on which (i) the Balloon Payment, the last instalment of the Fixed Charterhire and the last instalment of the Variable Charterhire are to be paid by the Charterers to the Owners pursuant to Clause 37.2(b) and (ii) the Purchase Obligation Price is to be paid by the Charterers to the Owners pursuant to Clause 49.
Permitted Security Interests means:

(a)
Security Interests created by a Transaction Document or a Financial Instrument;

(b)
prior to Delivery, Security Interests created by the Existing Security Documents;

(c)
liens for unpaid master's and crew's wages in accordance with the ordinary course of operation of the Vessel or in accordance with usual reputable maritime practice;

(d)
liens for salvage;

(e)
liens for master's disbursements incurred in the ordinary course of trading;

(f)
any other liens arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel where the Charterers are contesting the claim giving rise to such lien in good faith by appropriate steps and for the payment of which adequate reserves have been made in case the Charterers finally have to pay such claim so long as any such proceedings shall not, and may reasonably be considered unlikely to, lead to the arrest, sale, forfeiture or loss of the Vessel or any interest in the Vessel;

(g)
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 Charterers are prosecuting or defending such action in good faith by appropriate steps;

(h)
Security Interests arising by operation of law in respect of taxes which are not overdue or for payment of taxes which are overdue for payment but which are being contested by the Charterers in good faith by appropriate steps and in respect of which adequate reserves have been made; and

(i)
such other Security Interests as permitted in writing by the Owners and/or the Security Trustee.
Purchase Obligation means the purchase obligation imposed on the Charterers by the Owners pursuant to Clause 49.

13

Purchase Obligation Date means the date on which the Owners shall transfer the legal and beneficial interest in the Vessel to the Charterers, and the Charterers shall purchase the Vessel, being the last day of the Charter Period which is also the last Payment Date.
Purchase Obligation Price means the relevant price payable under this Charter in the amount of US$1 and payable under Clause 49.
Purchase Option means the purchase option granted by the Owners to the Charterers pursuant to Clause 48.1.
Purchase Option Date means the date specified in the Purchase Option Notice as being the date on which the Owners shall sell and transfer the legal and beneficial interest in the Vessel to the Charterers, and the Charterers shall purchase and accept the same.
Purchase Option Notice means the notice given pursuant to Clause 48.3 and containing the details specified in Clause 48.5.
Purchase Option Price means the relevant price payable under this Charter in US$ in the amount set out in Clause 48.4, as the same may from time to time be adjusted in accordance with this Charter.
Quotation Day means:

(a)
in relation to the first Hire Calculation Period for which the Interest Rate for that Hire Calculation Period is to be determined, five (5) Business Days before the first day of that period; and

(b)
in relation to any other period for which an Interest Rate is to be determined, fourteen (14) Business Days before the first day of that period (or such later date as the Owners may agree),
and in each case, unless market practice differs in the London interbank market for that currency, in which case the Quotation Day for that currency will be determined by the Owners in accordance with market practice in the London interbank market (and if quotations would normally be given on more than one day, the Quotation Day will be the last of those days).
Relevant Jurisdictions means together, in relation to a Security Party:

(a)
its jurisdiction of incorporation;

(b)
any jurisdiction where any property owned by it and charged under a Transaction Document is situated;

(c)
any jurisdiction where it conducts its business; and

(d)
any jurisdiction whose laws govern the perfection of any of the Transaction Documents entered into by it creating a Security Interest,
and Relevant Jurisdiction means any of them.

14

Relevant Party means any of the parties to this Charter and the Transaction Documents.
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.
Restricted Countries means those countries subject to country-wide or territory-wide Sanctions and/or trade embargoes, in particular but not limited to pursuant to the US's Office of Foreign Asset Control of the US Department of Treasury (OFAC).
Restricted Person means a person, entity or any other parties (i) located, domiciled, resident or incorporated in Restricted Countries, and/or (ii) subject to any sanction administrated by the United Nations, the European Union, the US and the US Department of Treasury's Office of Foreign Assets Control (OFAC), the United Kingdom, Her Majesty's Treasury (HMT) and the Foreign and Commonwealth Office of the United Kingdom, the People's Republic of China and/or (iii) owned or controlled by or affiliated with persons, entities or any other parties as referred to in (i) and (ii).
Sanctions means any sanctions, embargoes, freezing provisions, prohibitions or other restrictions relating to trading, doing business, investment, exporting, financing or making assets available (or other activities similar to or connected with any of the foregoing) imposed by law or regulation of the United Nations, the United Kingdom, the US (including, without limitation, OFAC), the People's Republic of China or the Council of the European Union.
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 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 Owners may specify another page or service displaying the relevant rate after consultation with the Charterers.
Security Documents means the Guarantee, the Charterer's Assignment, the Account Pledge, the Deed of Charge, the Manager's Undertakings, the Trust Deed, the Collateral Security Documents of both Collateral Vessels and any other security documents granted as security for the obligations of the Charterers under or in connection with this Charter.
Security Interest means a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
Security Parties means together:

(a)
the Charterers, the Guarantor, the Approved Managers and any party providing security to the Owners and/or the Security Trustee for the

15

Charterers' obligations under this Charter pursuant to a Security Document; and

(b)
the Collateral Security Parties of both Collateral Vessels,
and Security Party means any of them.
Security Perfection Requirements means:

(a)
delivery of the original share certificates for the shares held by the Guarantor in the Company and the ancillary documents to be delivered under the Deed of Charge;

(b)
service by the Greek court bailiff of an original signed Account Pledge on the Account Bank and the Charterers;

(c)
execution of all notices, acknowledgments and consents as required under the Transaction Documents; and

(d)
any other Authorisations of the Transaction Documents as may be required or recommended in any Legal Opinion.
Security Trustee means ORIENTAL FLEET TANKER 11 LIMITED (东方富利 TANKER11 有限公司), a corporation incorporated under the laws of the Republic of the Marshall Islands with registration no. 101325.
Sub-Charter means the time charterparty dated 17 July 2014 as supplemented by the addendum no.1 dated 28 December 2017 made between the Charterers and Stena Bulk A/S (CVR no. 33396953) (previously Stena Weco A/S) or any contract of affreightment, or any demise charterparty, or any other time or voyage charterparty exceeding eighteen (18) months' duration (whether by virtue of any optional extensions or otherwise) entered into between the Charterers and a Sub-Charterer for the chartering of the Vessel by the Charterers to such Sub-Charterer during the Charter Period, as the same may at any time be supplemented, amended or extended.
Sub-Charterer means Stena Bulk A/S (CVR no. 33396953) (previously Stena Weco A/S) or any other person entering into a contract of affreightment, or any demise charterparty, or any time or voyage charterparty exceeding eighteen (18) months' duration (whether by virtue of any optional extensions or otherwise) with the Charterers for the chartering of the Vessel by the Charterers to such person.
Subsidiary means in relation to any company or corporation, a company or corporation:

(a)
which is controlled, directly or indirectly, by the first mentioned company or corporation;

(b)
more than half the issued equity share capital of which is beneficially owned, directly or indirectly, by the first mentioned company or corporation; or

16


(c)
which is a Subsidiary of another Subsidiary of the first mentioned company or corporation,
and for this purpose, a company or corporation shall be treated as being controlled by another if that other company or corporation is able to direct its affairs and/or to control the composition of its board of directors or equivalent body.
Substantial Shareholder means The Lax Trust of Level 3, 18 Stanley Street, Auckland 1010, New Zealand.
Surplus Retention Proceeds has the meaning given to that term in Clause 40.6(c)(i).
Surplus Sale Proceeds has the meaning given to that term in Clause 40.6(b)(iv).
Termination Event means any event described in Clause 45.
Termination Sum means, in respect of any date, the aggregate of:

(a)
the Purchase Option Price applicable on the relevant date as if that relevant date is a Purchase Option Date; and

(b)
(i) the Breakfunding Costs and (ii) any costs incurred and expenses incurred by the Owners and any other Creditor Parties (and their financiers (if any)) in locating, repossessing or recovering the Vessel or collecting any payments due under this Charter or in obtaining the due performance of the obligations of the Charterers under this Charter or the other Transaction Documents and any default interest in relation thereto.
Total Loss means:

(a)
actual, constructive, compromised, agreed or arranged total loss of the Vessel;

(b)
any expropriation, requisition or acquisition of the Vessel, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration (excluding a requisition for hire); or

(c)
any arrest, capture, seizure, confiscation or detention of the Vessel (including any hijacking or theft but excluding any event specified in paragraph (b) of this definition), which is effected by any Governmental Agency or by any person or persons claiming to be or to represent a Governmental Agency or other persons unless it is redelivered within three (3) months to the full control of the Owners or the Charterers.
Transaction Documents means together, this Charter, the MOA, the Fee Letter, the Security Documents and the Collateral Transaction Documents, and Transaction Document means any of them.
Trust Deed means a trust deed executed by the Owners, the Collateral Owners, the Charterers, the Collateral Charterers, the Guarantor, Central Shipping, Central Mare and the Security Trustee on or about the date hereof pursuant to which the Security

17

Trustee has agreed to declare that it holds the Trust Property (as defined therein) on trust for the benefit of the Creditor Parties.
Upfront Charterhire means the non-refundable upfront charterhire in the amount of which is the lower of US$6,400,000 and 20% of the MOA Purchase Price, being the excess amount of the MOA Purchase Price over the Financing Principal payable by the Charterers on the Commencement Date, which shall be deducted by the Owners from the MOA Purchase Price paid by the Owners (as buyers) to the Charterers (as sellers) under the MOA, as more particularly set out in the column entitled "Upfront Charterhire" in the Charterhire Schedule, as the same may from time to time be adjusted in accordance with this Charter.
US means the United States of America.
US Tax Obligor means:

(a)
the Charterers, if they are resident for tax purposes in the US; or

(b)
any other Security Parties some or all of whose payments under the Transaction Documents are from sources within the US for US federal income tax purposes.
Variable Charterhire means, on each Payment Date, an amount equal to interest accrued on such amount of Charterhire Principal at the Interest Rate during the relevant Hire Calculation Period, which in each case shall accrue and be calculated on the actual number of days such Charterhire Principal was outstanding during such period and on the basis of a year of three hundred and sixty (360) days.
32.2
In this Charter:

(a)
agreed form means, in relation to a document, such document in a form agreed in writing between (i) the Owners or the Security Trustee and (ii) the Charterers;

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

(c)
company includes any partnership, joint venture and unincorporated association;

(d)
consent includes an Authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalisation;

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

(f)
continuing means, in relation to any Termination Event, a Termination Event which has not been waived by the Owners or remedied to the satisfaction of the Owners;

(g)
document includes a deed; also a letter, fax or telex;

18


(h)
expense means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;

(i)
including shall be construed as including without limitation (and cognate expressions shall be construed similarly);

(j)
indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

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

(l)
legal or administrative action means any legal proceeding or arbitration and any administrative or regulatory action or investigation;

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

(n)
months shall be construed in accordance with Clause 32.3;

(o)
person includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium, partnership or other entity (whether or not having separate legal personality);

(p)
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;

(q)
protection and indemnity risks means the usual risks covered by the UK P&I Club or any other protection and indemnity association which is a member of the International Group of P&I Clubs acceptable to the Owners and the Security Trustee including pollution risks, extended passenger cover and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of Clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), Clause 8 of the Institute Time Clauses (Hulls)(1/10/83) or Clause 8 of the Institute Time clauses (Hulls) (1/11/1995) or the Institute Amended Running Down clause (1/10/71) or any equivalent provision;

(r)
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;

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

19


(t)
a provision of law is a reference to that provision as amended or re-enacted; and

(u)
a time of day is a reference to Hong Kong time.
32.3
Meaning of month
A period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(a)
(subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;

(b)
if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and

(c)
if a Hire Calculation Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Hire Calculation Period is to end.
The above rules will only apply to the last month of any period.
32.4
In this Charter:

(a)
references to a Transaction Document or any other document being in the form of a particular appendix or to any document referred to in the recitals include references to that form with any modifications to that form which the Owners and/or the Security Trustee approve;

(b)
references to, or to a provision of, a Transaction Document or any other document are references to it as amended or supplemented, whether before the date of this Charter or otherwise;

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

(d)
references to Clauses, Sub-Clauses and Schedules are to be construed as references to clauses and sub-clauses of, and schedules to, this Charter; and

(e)
words denoting the singular number shall include the plural and vice versa, and words importing a gender include every gender.
32.5
Headings
In interpreting a Transaction Document or any provision of a Transaction Document, all clauses, sub-clauses and other headings in that and any other Transaction Document shall be entirely disregarded.

20

33.
CHARTER PERIOD
33.1
The Charter Period shall commence on the Commencement Date.
33.2
Notwithstanding the foregoing and subject to the terms herein, this Charter shall be in full force and effect and valid, binding and enforceable against the Parties with effect from the date hereof.
33.3
The Charter Period shall, subject to the terms of this Charter, continue for a period from the Commencement Date to and including the date falling one hundred and nineteen (119) months after the second (2nd) Payment Date.
34.
CANCELLATION
If, prior to any payment (i) being due or payable or (ii) having been made by the Owners under the MOA, a Termination Event occurs and is continuing, then this Charter shall immediately terminate and be cancelled without the need for either of the Owners or the Charterers to take any action whatsoever, provided that the Owners shall be entitled to retain all fees paid by the Charterers pursuant to Clause 41.1 (and without prejudice to Clause 41.1 but if such fees have not been paid but are due and payable, the Charterers shall forthwith pay such fees to the Owners in accordance with Clause 41.1). Such payment shall not be construed as a penalty but shall represent an agreed estimate of the losses and damage incurred by the Owners in entering into this Charter and shall therefore be paid as compensation to the Owners.
35.
CONDITIONS PRECEDENT AND CONDITIONS SUBSEQUENT
35.1
The obligation of the Owners to charter the Vessel to the Charterers hereunder is subject to and conditional upon:

(a)
no Termination Event having occurred which is continuing;

(b)
no other event has occurred which with the giving of notice or lapse of time would, if not remedied, constitute a Termination Event;

(c)
the representations and warranties contained in Clause 46 being true and correct in all aspects on the date hereof by reference to the facts and circumstances then existing;

(d)
the Charterers (as sellers) and the Owners having duly executed and entered into the MOA;

(e)
the MOA Delivery occurring on or before the Cancelling Date;

(f)
the Owners having received from the Charterers:

(i)
no less than seven (7) days prior to Delivery, the documents or evidence set out in Part AI of Addendum No.1 in form and substance satisfactory to them;

(ii)
no less than seven (7) Business Days prior to Delivery (or such later date as the Owners may agree), the documents or evidence set out in

21

Part AII of Addendum No.1 in form and substance satisfactory to them;

(iii)
no less than three (3) Business Days prior to Delivery (or such later date as the Owners may agree), the documents or evidence set out in Part AIII of Addendum No.1 in form and substance satisfactory to them;

(iv)
no less than one (1) Business Day prior to Delivery, the documents or evidence set out in Part BI of Addendum No.1 in form and substance satisfactory to them; and

(v)
on or before Delivery, the documents or evidence set out in Part BII of Addendum No.1 in form and substance satisfactory to them.
35.2
The obligation of the Owners to continue chartering the Vessel to the Charterers hereunder is subject to and conditional upon the Owners having received from the Charterers on or before such dates as specified in Parts C and D of Addendum No.1 the documents or evidence set out in Parts C and D of Addendum No.1 in form and substance satisfactory to them.
35.3
Upon the requirements of Clause 35.1 and Clause 35.2 being fulfilled or waived to the satisfaction of the Owners, the Owners shall give notice thereof to the Charterers.
35.4
The conditions precedent set out in Clause 35.1 and the conditions subsequent set out in Clause 35.2 are for the sole benefit of the Owners and may be waived in whole or in part, with or without conditions without prejudicing the right of the Owners to require fulfilment of such conditions in whole or in part at any time thereafter.
36.
DELIVERY
36.1
Subject to the requirements of Clause 35.1 being fulfilled or waived to the satisfaction of the Owners, on delivery to and acceptance by the Owners of the Vessel from the Charterers as sellers under the MOA and subject to the provisions of this Clause 36.1, the Vessel shall be deemed to have been delivered to, and accepted (without reservation) by, the Charterers under this Charter (irrespective of whether the Charterers shall become and be entitled to the possession and use of the Vessel).
36.2
On Delivery, as evidence of the commencement of the Charter Period, the Charterers and the Owners shall sign the Certificate of Delivery and Acceptance. Without prejudice to this Clause, the Charterers shall be deemed to have accepted the Vessel under this Charter, and the commencement of the Charter Period having started, on Delivery even if, for whatever reason, the Certificate of Delivery and Acceptance is not signed but Delivery has occurred.
36.3
Without prejudice and notwithstanding the provisions of this Clause, the Charterers shall not be entitled for any reason whatsoever to refuse to accept delivery of the Vessel under this Charter once the Vessel has been delivered to and accepted by the Owners from the Charterer as sellers under the MOA, and the Owners shall not be liable for any losses, cost or expenses whatsoever or howsoever arising including

22

without limitation, any loss of profit or any loss or otherwise and whether before or after Delivery:

(a)
resulting directly or indirectly from any defect or alleged defect in the Vessel or any failure of the Vessel; or

(b)
arising from any delay in the commencement of the Charter Period or any failure of the Charter Period to commence unless such delay or failure results solely from a failure by the Owners to pay the MOA Purchase Price pursuant to, and in accordance with, the terms of the MOA.
36.4
The Owners will not and shall not be obliged to deliver the Vessel to the Charterers with any bunkers and unused lubricating oils and greases in storage tanks and unopened drums of the Vessel, but the Vessel shall be delivered with whatever is onboard when delivered by the Charterers (as sellers) to the Owners (as buyers) under the MOA.
36.5
The Charterers hereby acknowledge and agree that the Owners are not the manufacturer or original supplier of the Vessel and that the Owners make no condition, term, representation or warranty, express or implied (and whether statutory or otherwise) as to the Owners' title to the Vessel or as to the seaworthiness, merchantability, condition, design, operation, performance, quality, capacity or fitness for use or as to the eligibility of the Vessel for any particular trade or operation or any other condition, term, representation or warranty whatsoever, express or implied, with respect to the Vessel. Acceptance of delivery by the Charterers or (as the case may be) deemed delivery of the Vessel to the Charterers under this Charter shall be conclusive proof evidencing that, for the purposes of the obligations and liabilities of the Owners hereunder or in connection herewith, the Vessel is at that time seaworthy, in accordance with the provisions of this Charter, in good working order and repair and without defect or inherent vice whether or not discoverable by the Charterers and free and clear of all liens, Security Interests and debts of whatsoever nature save for the Security Interests granted pursuant to the Security Documents.
36.6
Notwithstanding and without prejudice to the foregoing Clause 36.5, the Charterers hereby waive all of their rights in respect of any condition, term, representation or warranty express or implied (and whether statutory or otherwise) on the part of the Owners and all of their claims against the Owners howsoever and whatsoever that may arise in respect of the Vessel or the Owners' title thereto, or all of their rights therein or arising out of the operation of the Vessel or the chartering thereof under this Charter (including in respect of the seaworthiness or otherwise of the Vessel).
36.7
The Charterers agree that the Owners shall be under no liability to supply any replacement Vessel or any piece or part thereof during any period when the Vessel is unusable and shall not be liable to the Charterers or any other person as a result of the Vessel being unusable.
37.
CHARTERHIRE
37.1
In consideration of the Owners agreeing to charter the Vessel to the Charterers under this Charter at the request of the Charterers, the Charterers hereby irrevocably and unconditionally agree to pay to the Owners the Charterhire in respect of the chartering

23

of the Vessel during the Charter Period. An indicative Charterhire Schedule setting out the amount of the Upfront Charterhire, the Balloon Payment and the Fixed Charterhire is set out in Schedule 2. The Charterers hereby agree with the Owners and acknowledge that the Charterhire as set out in Schedule 2 shall be calculated on the basis that the Financing Principal is in the amount of US$25,600,000.
37.2
Subject to the terms of this Clause, each instalment of the Fixed Charterhire and the Variable Charterhire shall be paid on each Payment Date on the following basis:

(a)
the first instalment of the Charterhire shall be paid on the Commencement Date and shall comprise the Charterhire payable in advance in respect of the period from the Commencement Date up to and including the date falling on the 10th day of the month falling immediately after the Commencement Date; and

(b)
thereafter each instalment of Charterhire shall be paid on the date falling one (1) month thereafter and shall comprise the Charterhire payable in advance in respect of each such one (1) month's period, PROVIDED THAT:

(i)
the Charterers shall pay Variable Charterhire on the second (2nd) Payment Date which has accrued on the Charterhire Principal in respect of the shortened Hire Calculation Period commencing from the Commencement Date and up to the second (2nd) Payment Date on a pro-rata basis; and

(ii)
on the last Payment Date the Charterers shall pay to the Owners the Balloon Payment together with the last instalment of Fixed Charterhire and the last instalment of Variable Charterhire which together shall comprise the Charterhire payable in arrears in respect of the one (1) month's period from the second (2nd) last Payment Date to the last Payment Date,
and in each case Charterhire shall be paid in same day available funds by no later than 4:00 p.m. (Hong Kong time) and the Charterers shall provide evidence of payment for the Owners' tracking of the relevant remittance. Payment of Charterhire shall be deemed earned when paid and shall not be refundable.
37.3
The Vessel shall not at any time be deemed off-hire and the Charterers' obligation to pay all Charterhire and other amounts payable in this Charter shall be paid in Dollars and shall be absolutely and unconditionally payable under any and all circumstances and shall not be affected by any circumstances of any nature whatsoever including but not limited to:

(a)
any set off, counterclaim, recoupment, defence, claim or other right which the Charterers may at any time have against the Owners or any other person for any reason whatsoever including, without limitation, any act, omission or breach on the part of the Owners under this Charter or any other agreement at any time existing between the Owners and the Charterers;

(b)
any change, extension, indulgence or other act or omission in respect of any indebtedness or obligation of the Charterers, or any sale, exchange, release or

24

surrender of, or other dealing in, any security for any such indebtedness or obligation;

(c)
any title defect or Security Interest or any dispossession of the Vessel by title paramount or otherwise, unless caused by the fault or gross negligence of the Owners and/or the Security Trustee;

(d)
any defect in the seaworthiness, condition, value, design, merchantability, operation or fitness for use of the Vessel or the ineligibility of the Vessel for any particular trade;

(e)
any damage (including damage resulting in a Total Loss) to or forfeiture or court marshall's or other sale of the Vessel;

(f)
any libel, attachment, levy, detention, sequestration or taking into custody of the Vessel or any restriction or prevention of or interference with or interruption or cessation in, the use or possession thereof by the Charterers;

(g)
any insolvency, bankruptcy, reorganization, arrangement, readjustment, dissolution, liquidation or similar proceedings by or against the Charterers;

(h)
any invalidity, unenforceability, lack of due authorization or other defect, or any failure or delay in performing or employing with any of the terms and provisions of this Charter or any of the Transaction Documents by any party to this Charter or any other person;

(i)
any enforcement or attempted enforcement by any of the Owners or the other Creditor Parties of their rights under this Charter or any of the Transaction Documents executed or to be executed pursuant to this Charter; or

(j)
any loss of use of the Vessel due to deficiency or default or strike of officers or crew, fire, breakdown, damage, accident, defective cargo or any other cause which would or might but for this provision have the effect of terminating or in any way affecting any obligation of the Charterers under this Charter.
37.4
Time of payment of Charterhire and other payments by the Charterers shall be of the essence of this Charter.
37.5
All payments of Charterhire and any moneys payable hereunder shall be made in Dollars.
37.6
All Charterhire and any other moneys payable hereunder shall be payable by the Charterers to the Owners Account.
37.7
Payment of Charterhire shall be at the Charterers' risk until receipt by the Owners of the payment into the Owners Account.
37.8
(a)  If a Market Disruption Event occurs in relation to any Charterhire for any Hire Calculation Period, then the Interest Rate for the relevant period shall be the rate per annum which is the sum of:

(i)
the Margin; and

25


(ii)
the rate notified to the Charterers by the Owners in writing as soon as practicable and in any event before interest is due to be paid in respect of that Hire Calculation Period, to be that which expresses as a percentage rate per annum the cost to the Owners of funding the Charterhire for such period from whatever comparable source it may select, provided that the Owners shall use their reasonable endeavours to provide or procure the provision of the evidence of such rate.

(b)
If a Market Disruption Event occurs and the Owners or the Charterers so require, the Owners and the Charterers shall enter into negotiations (for a period of not more than thirty (30) days) with a view to agreeing a substitute basis for determining the rate of interest.

(c)
Any alternative basis agreed pursuant to paragraph 37.8(b) above shall, with the prior consent of the Owners and the Charterers, be binding on both the Owners and the Charterers.
37.9
All stamp duty, value added tax, withholding or other taxes and import and export duties and all other similar types of charges which may be levied or assessed on or in connection with:

(a)
the operation of this Charter in respect of the hire and all other payments to be made pursuant to this Charter and the remittance thereof to the Owners; and

(b)
the import, export, purchase, delivery and re-delivery of the Vessel,
shall be borne by the Charterers. The Charterers shall pay, if applicable, value added tax and other similar tax levied on any Charterhire and other payments payable under this Charter by addition to, and at the time of payment of, such amounts.
37.10
If requested by the Charterers, the Owners will use their reasonable endeavours to change their jurisdiction of incorporation to another jurisdiction reasonable designated by the Charterers, provided that:

(a)
the new jurisdiction of incorporation of the Owners are acceptable to their financiers (if any);

(b)
the Charterers shall be responsible for preparing all application, registration and other documents required for the change of jurisdiction of incorporation in form and substance acceptable to the Owners;

(c)
the new jurisdiction of incorporation of the Owners is acceptable to the then current flag state of the Vessel for the purpose of maintaining the registration of the Vessel under that flag state in form and substance acceptable to the Owners;

(d)
the Charterers shall be responsible for preparing all application, registration and other documents required for registration of the Owners as foreign maritime entity in other relevant jurisdiction for the purpose of maintaining the registration of the Vessel under the then current flag state in form and substance acceptable to the Owners;

26


(e)
if a change of flag state is required as a result of the change of jurisdiction of incorporation of the Owners, such change of jurisdiction of incorporation of the Owners shall be subject to the prior written consent of the Owners and the Owners' financiers (if any), and the Charterers shall be responsible for registration of the Vessel in such new flag state and pay to the Owners or their financier (if any) upon demand the legal fees, registration fees and other duties (including any duties payable by the Owners and the Owners' financiers (if any)) imposed by the new registry or any taxing authority therein in connection with the preparation, negotiation and registration of such new mortgage, other Financial Instruments (including any amendment or supplement thereto) and satisfactory legal opinions in favour of the Owners and/or their financier (if any); and

(f)
all other fees, costs, expenses, payments, taxes, charges and liabilities whatsoever incurred by the Owners and/or their financiers (if any) relating to, arising out of or in connection with such change shall be borne by the Charterers.
37.11
Any payment of the Termination Sum shall be made together with any other amount payable under this Charter.
37.12
If the Charterers fail to make any payment due under this Charter on the due date, they shall pay interest on such late payment at the Default Rate from the date on which such payment became due until the date one (1) day prior to the date of payment thereof.
37.13
All default interest and any other payments under this Charter or any other Transaction Documents which are of an annual or periodic nature shall accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a 360 day year.
37.14
Any payment, which is due to be made on a day which is not a Business Day, shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not). If the last Payment Date is not a Business Day, any payment under the Transaction Documents which is due to be made on that day shall be made on the preceding Business Day.
37.15
(a)  Without prejudice to Clause 37.2, the Charterers may prepay the Charterhire Principal at any time during the Charter Period (being at least $1,000,000 or an integral multiple thereof) together with any Breakfunding Cost and expenses reasonably incurred by the Owners and the other Creditor Parties under this Charter and the other Transaction Documents in connection with or as a result of such prepayment, PROVIDED THAT (i) the Charterers shall only be entitled to prepay the Charterhire Principal once a year and the aggregate amount of all prepayments during the Charter Period shall not exceed $5,000,000 under this Clause 37.15 and (ii) the Owners shall have received from the Charterers not less than sixty (60) days' notice of their intention to make such prepayment, specifying the amount to be prepaid and the proposed date of such prepayment. Any amount prepaid pursuant to this Clause 37.15(a) shall be applied towards reducing the instalments of Fixed Charterhire (for the avoidance of doubt,

27

excluding the Balloon Payment) falling on or after the date of such prepayment by the amount of such prepayment on a pro-rata basis.

(b)
The Charterers shall not prepay all or any part of the Charterhire except at the times and in the manner expressly provided for in this Charter.
37.16
If the Financing Principal is less than US$25,600,000 or upon any prepayment made by the Charterers under Clause 37.15, the Owners shall provide the Charterers with a revised Schedule 2. The revised Schedule 2 shall be based on the actual amount of the Financing Principal and determination of the corresponding Upfront Charterhire with reference to the Market Value at Closing of the Vessel and taking account any prepayment under Clause 37.15 (each revised Schedule 2 referred to in this Clause 37.16 and throughout this Charter is a Revised Charterhire Schedule).
37.17
Each Revised Charterhire Schedule issued pursuant to Clause 37.16 shall (i) be deemed incorporated into this Charter in substitution for the then current Schedule 2, (ii) save for manifest error, be conclusive and binding on the Owners and the Charterers and at any time, the latest Revised Charterhire Schedule incorporated pursuant hereto and (iii) for the purposes of this Charter, be conclusive evidence of the rate of Charterhire, Charterhire Principal and the Purchase Option Price payable under this Charter and shall for all purposes be treated as if it had been attached as the Charterhire Schedule ab initio.
38.
POSSESSION OF VESSEL
38.1
The Charterers shall not, without the prior written consent of the Owners and the Security Trustee, assign, mortgage or pledge the Vessel or any interest therein and shall not permit the creation of any Security Interest thereon other than Permitted Security Interests.
38.2
The Charterers shall promptly notify any party (as the Owners may request) in writing that the Vessel is the property of the Owners and the Charterers shall provide the Owners with a copy of such written notification and satisfactory evidence of that such party has received such written notification.
38.3
If the Vessel is arrested, seized, impounded, forfeited, detained or taken out of their possession or control (whether or not pursuant to any distress, execution or other legal process), the Charterers shall procure the immediate release of the Vessel (whether by providing bail or procuring the provision of security or otherwise do such lawful things as the circumstances may require) and shall immediately notify the Owners of such event and shall indemnify the Owners against all losses, costs or charges incurred by the Owners by reason thereof in re-taking possession or otherwise in re-acquiring the Vessel.
38.4
The Charterers shall pay and discharge or cause any Sub-Charterers of the Vessel to pay and discharge all obligations and liabilities whatsoever which have given or may give rise to liens on or claims enforceable against the Vessel and take all reasonable steps to prevent a threatened arrest of the Vessel.

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39.
INSURANCE
39.1
The Charterers shall procure that such insurances are effected in form and substance satisfactory to the Owners, the Security Trustee and their financiers (if any):

(a)
in Dollars;

(b)
in the case of hull and machinery (and increased value insurance), fire and usual marine risks and war risks to cover an amount not less than the greater of (i) the Market Value of the Vessel for the time being and (ii) one hundred and twenty per cent. (120%) of the Charterhire Principal then outstanding;

(c)
in the case of oil pollution liability risks for the Vessel, for an aggregate amount equal to the highest level of cover from time to time available under protection and indemnity club entry and in the international marine insurance market and for an amount of not less than US$1,000,000,000;

(d)
in relation to protection and indemnity risks (including freight, demurrage and defence cover) in respect of the full tonnage of the Vessel;

(e)
in relation to such other insurances reasonably required by the Owners, the Security Trustee and/or their financiers (if any) but excluding loss of hire and contingent liability insurance; and

(f)
through approved brokers or with first class international insurers and/or underwriters acceptable to the Owners and the Security Trustee or, in the case of war risks and protection and indemnity risks, UK P& I Club or any other approved war risks and protection and indemnity risks association which is a member of the International Group of P&I Clubs acceptable to the Owners and the Security Trustee,
and shall pay the Owners, the Security Trustee and their financiers (if any) the cost (as conclusively certified by the Owners, the Security Trustee and such financiers) of (i) an innocent owner's interest insurance, (ii) an innocent owner's interest insurance - additional perils (pollution), (iii) a mortgagee's interest insurance and (iv) a mortgagee's interest insurance - additional perils (pollution), in each case in an amount not less than one hundred twenty percent (120%) of the Charterhire Principal then outstanding.
39.2
In addition to the terms set out in Clause 13(a), to the extent required and acceptable to the relevant insurers and protection and indemnity club, the Charterers shall procure that the obligatory insurances shall:

(a)
subject always to paragraph (ii), name the Security Trustee, the Charterers and, subject to execution of the Manager's Undertakings, the Approved Managers as the only named assureds unless the interest of every other named assured or co-assured is limited:

(i)
in respect of any obligatory insurances for hull and machinery and war risks;

29


(A)
to any provable out-of-pocket expenses that they have incurred and which form part of any recoverable claim on underwriters; and

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

(ii)
in respect of any obligatory insurances for protection and indemnity risks, to any recoveries they are entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against them;
and every other named assured or co-assured has undertaken in writing to the Security Trustee and their financiers (in such form as they reasonably require) that any deductible shall be apportioned between the Charterers and every other named assured or co-assured in proportion to the gross claims made or paid by each of them and that they shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee and their financiers (if any) in accordance with the terms of the loss payable clause, to collect or recover any moneys which at any time become payable in respect of the obligatory insurances;

(b)
subject to Clause 43, whenever a financier (if any) of the Owners requires:

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

(ii)
in relation to protection and indemnity risks, name (or be amended to name) such financier as additional insured or co-assured for its rights and interests to the extent permissible under the relevant protection and indemnity club rules; and

(iii)
name such financier (as applicable) and the Security Trustee (as applicable) as respectively the first ranking loss payee and the second ranking loss payee (and in the absence of such financier, as first ranking loss payee) in accordance with the terms of the relevant loss payable clauses approved by such financier and the Security Trustee with such directions for payment in accordance with the terms of such relevant loss payable clause, as the Security Trustee and their financiers (if any) may specify;

(c)
provide that all payments by or on behalf of the insurers under the obligatory insurances to the Owners, the Security Trustee and/or their financiers (as applicable) shall be made without set-off, counterclaim or deductions or condition whatsoever;

30


(d)
provide that such obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Owners, the Security Trustee or their financiers (if any);

(e)
provide that the Owners, the Security Trustee and/or their financiers (if any) may make proof of loss if the Charterers fail to do so; and

(f)
provide that if any obligatory insurance is cancelled, or if any substantial change is made in the coverage which adversely affects the interest of the Owners, the Security Trustee and/or their financiers (if any), or if any obligatory insurance is allowed to lapse for non-payment of premium, such cancellation, change or lapse shall not be effective with respect to the Owners, the Security Trustee and/or their financiers (if any) for fourteen (14) days) after receipt by the Owners, the Security Trustee and/or their financiers (if any) of prior written notice from the insurers of such cancellation, change or lapse.
39.3
The Charterers shall:

(a)
at least fourteen (14) days prior to Delivery, notify in writing the Owners and the Security Trustee of the terms and conditions of all Insurances and the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Charterers have arranged all Insurances;

(b)
at least fourteen (14) days before the expiry of any obligatory insurance notify the Owners and the Security Trustee (copied to their financiers (if any)) of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Charterers propose to renew that obligatory insurance and of the proposed terms of renewal and obtain the Owners' and the Security Trustee's approval to such matters;

(c)
at least seven (7) days before the expiry of any obligatory insurance, procure that such obligatory insurance is renewed or to be renewed on its expiry date in accordance with the provisions of this Charter;

(d)
procure that the approved brokers and/or the war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal or the effective date of the new insurance and protection and indemnity cover notify the Owners and the Security Trustee (copied to their financiers (if any)) in writing of the terms and conditions of the renewal; and

(e)
as soon as practicable after the expiry of any obligatory insurance, deliver to the Owners and the Security Trustee a letter of undertaking as required by this Charter in respect of such Insurances for the Vessel as renewed pursuant to Clause 39.3(c) together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Security Trustee and/or their financiers (if any).
39.4
The Charterers shall ensure that all insurance companies, underwriters, and (if any) insurance brokers provide the Owners and the Security Trustee with all policies, cover notes and certificates of entry relating to the obligatory insurances which they are to

31

effect or renew and of a letter or letters or undertaking in such form as may be required by the Owners, the Security Trustee and their financiers (if any) and including undertakings by the insurance companies and/or underwriters that:

(a)
they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of this Charter, the other Transaction Documents and the Financial Instruments;

(b)
they will hold the benefit of such policies and such insurances, to the order of the Owners, the Security Trustee and/or such financiers and/or such other party in accordance with the said loss payable clause;

(c)
they will advise the Owners, the Security Trustee and such financiers promptly of any material change to the terms of the obligatory insurances of which they are aware;

(d)
following a written application from the Owners, the Security Trustee and/or such financiers not later than one (1) month before the expiry of the obligatory insurances they will notify the Owners, the Security Trustee and such financiers not less than fourteen (14) days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from the Charterers and, in the event of their receiving instructions to renew, they will promptly notify the Owners, the Security Trustee and such financiers of the terms of the instructions; and

(e)
if any of the obligatory insurances form part of any fleet cover, the Charterers shall procure that the insurance broker(s), or leading insurer, as the case may be, undertake to the Owners, the Security Trustee and such financiers that such insurance broker or insurer(s) will not set off against any sum recoverable in respect of a claim relating to the Vessel under such obligatory insurances any premiums due in respect of any other vessel under any fleet cover of which the Vessel forms a part or any premium due for other insurances, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums, and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of the Vessel forthwith upon being so requested by the Owners, the Security Trustee and/or such financiers and where practicable.
39.5
The Charterers shall ensure that any protection and indemnity and/or war risks associations in which the Vessel is entered provides the Owners, the Security Trustee and such financiers with:

(a)
a copy of the certificate of entry for the Vessel as soon as such certificate of entry is issued;

(b)
a letter or letters of undertaking in such form as may be required by the Owners the Security Trustee and their financiers (if any) or in such association's standard form; and

32


(c)
a copy of each of (i) a certificate of insurance or other financial security in respect of civil liability for oil pollution damage, (ii) a certificate of insurance or other financial security in respect of civil liability for bunker oil pollution damage, (iii) (if the Vessel trades or enters into US waters) a certificate issued pursuant to s1016(a) Oil Pollution Act 1990 and s108(a) Comprehensive Environmental Response, Compensation and Liability Act 1980, as amended, in accordance with US Coast Guard Regulations, 33 CFR Part 138 and (iv) a certificate of insurance or other financial security in respect of shipowners' liability as required under the Maritime Labour Convention.
39.6
The Charterers shall ensure that all policies relating to obligatory insurances are deposited with the approved brokers through which the insurances are effected or renewed.
39.7
The Charterers shall procure that all premiums or other sums payable in respect of the obligatory insurances are punctually paid and produce all relevant receipts when so required by the Owners and the Security Trustee.
39.8
The Charterers shall ensure that any guarantees required by a protection and indemnity or war risks association are promptly issued and remain in full force and effect.
39.9
The Charterers shall neither do nor omit to do (nor permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in part; and, in particular:

(a)
the Charterers shall procure that all necessary action is taken and all requirements are complied with which may from time to time be applicable to the obligatory insurances, and (without limiting the obligations contained in this Clause) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Owners and the Security Trustee have not given their prior approval (unless such exclusions or qualifications are made in accordance with the rules of UK P&I Club or any other protection and indemnity association which is a member of the International Group of P&I Clubs acceptable to the Owners and the Security Trustee);

(b)
the Charterers shall not make or permit any changes relating to the classification or classification society or manager or operator of the Vessel unless such changes have first been approved by the underwriters of the obligatory insurances and the Owners and the Security Trustee;

(c)
prior to permitting the Vessel to enter the US Exclusive Economic Zone, the Charterers shall comply with all regulations in force of the US Oil Pollution Act 1990 which apply to the Vessel including, if necessary, obtaining within the time limits set by the US Coast Guard, a Certificate of Financial Responsibility, a copy of which shall be lodged with the Owners and the Security Trustee prior to engaging in any such voyage; and

(d)
the Charterers shall not employ the Vessel, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory

33

insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.
39.10
The Charterers shall not make or agree to any material alteration to the terms of any obligatory insurance nor waive any right relating to any obligatory insurance without the prior written consent of the Owners, the Security Trustee and their financiers (if any).
39.11
The Charterers shall not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty without the Owners' and the Security Trustee's approval, and shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.
39.12
The Charterers shall provide the Owners and the Security Trustee upon written request, copies of:

(a)
all communications between the Charterers and:

(i)
the approved brokers (if applicable); and

(ii)
the approved protection and indemnity and/or war risks associations; and

(iii)
the first class international insurers and/or underwriters, which relate directly or indirectly to:

(A)
the Charterers' obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and

(B)
any credit arrangements made between the Charterers and any of the persons referred to in paragraphs (i) or (ii) relating wholly or partly to the effecting or maintenance of the obligatory insurances;

(b)
any material communication with all parties involved in case of a claim under any of the Vessel's insurances.
39.13
The Charterers shall promptly provide the Owners, the Security Trustee and/or their financiers (or any persons which they may designate) with:

(a)
any information which the Owners, the Security Trustee and/or such financiers (or such designated persons) request for the purpose of:

(i)
obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurance effected or proposed to be effected; and/or

34


(ii)
effecting, maintaining or renewing any such insurances as are referred to in Clauses 13(a) and 39.1 or dealing with or considering any matters relating to any such insurances;

(b)
any information and documents reasonably requested by the Owners, the Security Trustee in connection with a claim under any of the Vessel's insurances exceeding the Major Casualty amount; and

(c)
if the Owners, the Security Trustee consider it necessary to obtain information in connection with a claim under any of the Vessel's insurances which does not exceed the Major Casualty amount, such information and documents.
39.14
If one or more of the obligatory insurances are not effected and maintained with first class international insurers or are effected with an insurance or captive Subsidiary of the Owners, the Security Trustee or the Charterers, then the Charterers shall procure, at their own expense, that the relevant insurers maintain in full force and effect facultative reinsurances with reinsurers and through brokers, in each case, of recognised standing and acceptable in all respects to the Owners and the Security Trustee. Any reinsurance policy shall include, if and when permitted by law, a cut-through clause in a form acceptable to the Owners and the Security Trustee. The Charterers shall procure that underwriters of the primary insurances assign each reinsurance to the relevant financiers in full, if required.
39.15
The Charterers shall be solely responsible for and indemnify the Owners in respect of all loss or damage to the Vessel (insofar as the Owners shall not be reimbursed by the proceeds of any insurance in respect thereof) however caused occurring at any time or times before physical possession thereof is retaken by the Owners, reasonable wear and tear to the Vessel only excepted.
39.16
The Charterers shall:

(a)
if so requested by the Owners, the Security Trustee and/or their financiers, reimburse the Owners, the Security Trustee and/or such financiers the costs for obtaining a detailed report signed by an independent firm of marine insurance brokers appointed by the Owners, the Security Trustee and/or such financiers dealing with the Insurances and stating the opinion of such firm as to the adequacy of the Insurances; and

(b)
procure that there is delivered to the insurance brokers described in Clause 39.16(a) such information in relation to the Insurances as such brokers may require.
39.17
If the Charterers fail to comply with any of the provisions of this Clause 39, the Owners and the Security Trustee shall be entitled (but not bound) to effect and subsequently to maintain all such Insurances upon the Vessel as they may think fit in order to procure the compliance with such provisions or alternatively, to require the Vessel (at the Charterers' risk) to remain in, or to proceed to and remain in a port designated by the Owners, the Security Trustee and/or such financiers until such provisions are fully complied with.

35

40.
TERMINATION AND REDELIVERY; WAR; TOTAL LOSS
40.1
Upon the occurrence of a Termination Event which is continuing:

(a)
the Owners shall notify the Charterers of occurrence of the same (the Termination Event Notice) whereupon the Charterers may:

(i)
in relation to a Termination Event under Clause 45(a), (c) or (g), within three (3) Business Days of the date of the Termination Event Notice, provide to the Owners a written notice advising the Owners of their intention to terminate this Charter and shall promptly pay the Termination Sum to the Owners by no later than the end of such three (3) Business Days period; or

(ii)
in relation to any other Termination Event, within thirty (30) days of the date of the Termination Event Notice, provide to the Owners a written notice advising the Owners of their intention to terminate this Charter and shall promptly pay the Termination Sum to the Owners by no later than the end of such thirty (30) days period; and

(b)
if the Charterers do not notify the Owners of their intention to terminate this Charter pursuant to Clause 40.1(a) within three (3) Business Days or thirty (30) days (as the case may be) of the date of the Termination Event Notice then the Owners may be entitled, provided the Termination Event is continuing, by notice to the Charterers to terminate this Charter at any time thereafter, and the Charterers shall immediately pay to the Owners the Termination Sum, whereupon the Owners shall sell, transfer and redeliver, at the cost and expense of the Charterers, the Vessel to the Charterers.
40.2
The Owners shall notify the Charterers in writing if they intend to terminate this Charter in accordance with paragraph (f) of Clause 26 (War) and the Charterers shall pay the Termination Sum to the Owners within ten (10) Business Days upon receipt of such written notification from the Owners whereupon the Owners shall, at the cost and expense of the Charterers, sell the Vessel to the Charterers in accordance with Clause 40.4.
40.3
It is hereby agreed by the Parties that payment of the Termination Sum pursuant to Clause 40.1 or 40.2 (as the case may be) shall not be construed as a penalty but shall represent an agreed estimate of the loss and damage suffered by the Owners in purchasing the Vessel and entering into this Charter upon the terms and conditions contained herein, in each case, at the request of the Charterers and shall therefore be paid as compensation to the Owners for early termination and acquisition of the Vessel by the Charterers.
40.4
Concurrently with the irrevocable payment of the Termination Sum in full pursuant to the terms of this Charter, this Charter shall terminate and the Owners shall (save in the event of Total Loss) transfer the legal and beneficial ownership of the Vessel to the Charterers or their nominees free from any registered mortgages incurred or permitted by the Owners (save for those liens, Security Interests and debts incurred by the Charterers or arising out of or in connection with this Charter and any other Permitted Security Interests) and shall execute (i) a bill of sale, (ii) a commercial invoice, (iii) a

36

protocol of delivery and acceptance evidencing such transfer and (iv) such other additional documents as may be necessary for the purpose of registering the Vessel at its intended flag state upon such transfer, provided that the Charterers shall notify the Owners of any such additional documents no later than five (5) Business Days (or such other mutually agreed date) prior to such transfer, each in such form as may be required by the Charterers' intended flag state.
40.5
If the Charterers fail to make any payment or make only a partial payment of the Termination Sum on the due date in accordance with Clause 40.1 or 40.2 (as the case may be), Clauses 37.12 and 37.13 shall apply. In addition, the Charterers agree that should the Termination Sum not be paid in full on the due date for payment under the terms of this Charter:

(a)
the Charterers' right to possess and operate the Vessel shall immediately cease and the Charterers shall, upon the Owners' request, be obliged to immediately (and at the Charterers' own cost) redeliver the Vessel to the Owners at such ready and nearest safe port as the Owners may require; and

(b)
without limiting the generality of the foregoing or any other rights of the Owners, the Owners may, at their own option subject to Clause 40.6, sell the Vessel free of any charter, lease or other engagement concerning the Vessel for such price and on such terms and conditions as it may, in its absolute discretion, think fit.
40.6
If the Termination Sum has not been paid in full on the due date for payment under the terms of this Charter, the Owners shall have the Vessel valued in Dollars by three (3) Approved Valuers appointed by the Owners and:

(a)
if the average value of the three (3) valuations quoted by such three Approved Valuers (after offsetting all costs and expenses incidental to such valuations of the Vessel) (the Net Average Market Value) is higher than the Termination Sum, the Owners may, at their sole discretion:

(i)
appoint one or more of such Approved Valuers to sell the Vessel at the highest price that they could obtain. The Charterers shall also have the right to recommend a buyer for the Vessel and, if the Owners determine to sell the Vessel, they shall sell the Vessel to the buyer recommended by the Charterers if that buyer offers the same or higher price for the Vessel upon not less favourable terms than the other buyers recommended by such Approved Valuers; or

(ii)
retain the Vessel;

(b)
if the Owners sell the Vessel in accordance with Clause 40.5(b) and paragraph (a)(i) above:

(i)
the Owners shall have the right to deduct an amount equal to the aggregate of the expenses, disbursements, taxes, costs and losses whatsoever as may have been incurred by the Owners in respect of the sale of the Vessel (the Net Sale Proceeds) from the gross proceeds of the sale of the Vessel;

37


(ii)
an amount equal to the Termination Sum shall be deducted from the Net Sale Proceeds;

(iii)
if the Net Sale Proceeds are insufficient to satisfy all amounts due and payable from the Charterers to the Owners hereunder, the Charterers shall immediately pay the shortfall to the Owners upon demand by the Owners; and

(iv)
any surplus (the Surplus Sale Proceeds) in the Net Sale Proceeds after deducting the Termination Sum pursuant to sub-paragraph (ii) above shall be distributed by the Owners in accordance with Clause 40.7;

(c)
if the Owners elect to retain the Vessel in accordance with paragraph (a)(ii) above:

(i)
in the case of the Net Average Market Value of the Vessel is higher than the Termination Sum, the Owners shall offset the Termination Sum against the Net Average Market Value of the Vessel and distribute the difference between the Net Average Market Value of the Vessel and the Termination Sum (the Surplus Retention Proceeds) in accordance with Clause 40.7; and

(ii)
in the case of the Net Average Market Value is less than the Termination Sum, the Charterers shall immediately pay the shortfall to the Owners upon demand by the Owners; and

(d)
the Charterers shall have the right to pay the Termination Sum and purchase the Vessel pursuant to Clause 40.1 or 40.2 (as the case may be) prior to any agreement has been entered into by the Owners for a sale of the Vessel under Clause 40.5(b) and paragraph (a)(i) above, upon which, Clause 40.4 shall apply.
40.7
The Surplus Retention Proceeds or the Surplus Sale Proceeds (as the case may be) shall be applied by the Owners (and the Charterers hereby authorise and instruct the Owners to so apply such amounts) as follows:

(a)
(in the case of a Termination Event (as defined in the relevant Collateral Charter) has occurred under either Collateral Charter) in or towards payment of the Termination Sum (as defined in that Collateral Charter) to which that Collateral Vessel relates, together with any fees or charges incurred under that Collateral Charter. If a Termination Event (as defined in each Collateral Charter) has occurred under both Collateral Charters and the Surplus Retention Proceeds or the Surplus Sale Proceeds (as the case may be) are insufficient to discharge the Termination Sum (as defined in each Collateral Charter) under both Collateral Charters, the Owners shall apply the Surplus Retention Proceeds or the Surplus Sale Proceeds (as the case may be) in or towards payment pro rata of any Termination Sum (as defined in each Collateral Charter) under the Collateral Charters;

(b)
(where such conditions are satisfied save for the charter free market value of either Collateral Vessel being below the asset coverage ratio stated in clause

38

47.1(n) of the relevant Collateral Charter) in or towards payment of an additional cash deposit in an amount required to maintain the asset coverage ratio stated in clause 47.1(n) of that Collateral Charter, and if the remaining Surplus Retention Proceeds or remaining Surplus Sale Proceeds (as the case may be) are insufficient to maintain the asset coverage ratio stated in clause 47.1(n) of both Collateral Charters, the Owners shall apply the remaining Surplus Retention Proceeds or remaining Surplus Sale Proceeds (as the case may be) in or towards payment pro rata of the additional cash deposit required to maintain the asset coverage ratio stated in clause 47.1(n) of the Collateral Charters; and

(c)
(in the case of there being a surplus remaining after the application of the amounts in paragraphs (a) and (b) above) direct to or to the order of the Charterers, provided that no Termination Event shall have occurred and be continuing.
40.8
Without limiting the generality of the foregoing or any other rights of the Creditor Parties, upon the occurrence of a Termination Event which is continuing, the Owners shall have the sole and exclusive right and power to do any of the following:

(a)
settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to or pertaining to the Vessel and this Charter;

(b)
make proof of loss, appear in and prosecute any action arising from any policy or policies of insurance maintained pursuant to this Charter, and settle, adjust or compromise any claims for loss, damage or destruction under, or take any other action in respect of, any such policy or policies; and

(c)
terminate any management agreement with any manager (including any Approved Manager) of the Vessel and appoint a substitute manager in its sole discretion.
40.9
The Charterers hereby undertake to indemnify the Owners against any claims incurred in relation to the Vessel as a result of the Charterers' action or performance prior to such transfer of ownership. Any taxes, notarial, consular and other costs, charges and expenses connected with closing of the Owners' register shall be for the Charterers' account.
40.10
Without prejudice to Clause 15, if the Charterers are required to redeliver the Vessel to the Owners pursuant to the terms of this Charter, the Charterers shall ensure that the Vessel shall, at the time of redelivery to the Owners:

(a)
be in an equivalent class as she was as at the Commencement Date without any recommendation or condition, and with valid, unextended certificates for not less than six (6) months;

(b)
have passed her 5-year and if applicable, 10-year special surveys, and subsequent second intermediate survey and drydock at the Charterers' time and expense without any condition or outstanding issue and to the satisfaction of the Classification Society;

39


(c)
have her survey cycles up to date and trading and class certificate valid for at least six (6) months;

(d)
be redelivered to the Owners together with all spare parts and spare equipment as were on board at the time of Delivery, and any such spare parts and spare equipment on board at the time of re-delivery shall be taken over by the Owners free of charge;

(e)
be free of any cargo and Security Interest (save for the Security Interests granted pursuant to the Financial Instruments and the Security Documents); and

(f)
be free of any charter (unless the Owners wish to retain the continuance of any then existing charter).
40.11
The Owners shall, at the time of the redelivery of the Vessel, take over all bunkers, unused lubricating oil, unbroached provisions, paints, ropes and other consumable stores (excluding spare parts) in the Vessel at the Owners' cost at the original purchase price as evidenced by copies of invoices certified by a director of the Charterers and on a "first in, first out" basis.
40.12
If the Vessel, for any reason, becomes a Total Loss, in consideration of (i) the Owners agreeing to enter into this Charter at the request of the Charterers and purchasing the Vessel from the Charterers as sellers under the MOA, and (ii) without prejudice to the rest of this Clause, the Owners agreeing to assign their interest in the Insurances to the Charterers upon receiving full payment of the Termination Sum (in any circumstance where the Owners have not yet received any insurance proceeds of the Vessel at such time), the Charterers shall pay the Termination Sum to the Owners on the earlier of:

(a)
the date falling (in the case of paragraph (a) or (b) of the definition of Total Loss) one hundred and twenty (120) days or (in the case of paragraph (c) of the definition of Total Loss) thirty (30) days after such Total Loss has occurred; and

(b)
the date of receipt by the Security Trustee and/or their financiers (if any), in accordance with the terms of the relevant loss payable clause) of the proceeds of insurance relating to such Total Loss,
provided that it is hereby agreed that any insurance proceeds in respect of the Vessel received by the Security Trustee shall be applied in or towards discharging the Charterers' obligation to pay the Termination Sum to the Owners and any interest accrued thereon (and such application shall be deemed satisfaction of the Charterers' obligation to pay the Termination Sum to the extent satisfied) and in the event that the insurance proceeds received from the insurers exceed the Termination Sum due (and any interest accrued thereon), the excess shall be firstly paid towards satisfying any amounts outstanding and owing by the Charterers or the other Security Parties to the other Creditor Parties and thereafter paid to the Charterers.
For the avoidance of doubt, in the event that the Vessel becomes a Total Loss:

40


(i)
payment of Charterhire, and all other sums payable hereunder during such period shall continue to be made by the Charterers in accordance with the terms of this Charter unless and until the Owners receive the Termination Sum;

(ii)
should insurance proceeds be received by the Security Trustee from the insurers, the Charterers' obligations to pay the Termination Sum shall be accordingly reduced by such insurance proceeds but in the event that such insurance proceeds be less than the amount of the Termination Sum together with any interest accrued thereon, the Charterers remain obliged to pay to the Owners the balance so that the full amount of the Termination Sum together with any interest accrued thereon due are received by the Owners;

(iii)
the Vessel continues to be insured in accordance with the terms of this Charter and as may be required by any other agreements relating to the ownership, operation, management, chartering or financing of the Vessel; and

(iv)
the obligation of the Charterers to pay the Termination Sum shall remain unaffected and exist regardless of whether any of the insurers have agreed or refused to meet or have disputed in good faith, the claim for Total Loss.
40.13
For the purpose of this Charter, a Total Loss shall be deemed to have occurred:

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

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

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

(ii)
the date of any compromise, arrangement or agreement made by or on behalf of the Owners with the insurers in which the insurers agree to treat the Vessel as a total loss.
40.14
The Owners shall have no obligation to supply to the Charterers with a replacement vessel following the occurrence of a Total Loss.
41.
FEES AND EXPENSES; INDEMNITIES;
41.1
Fees
In consideration of the Owners entering into this Charter, the Charterers shall pay the Owners or their nominee the Handling Fee as set out in the Fee Letter. The Charterers shall pay and hereby irrevocably agree to pay to the Owners any and all fees payable under this Clause 41.1 or under the Fee Letter, regardless of whether the MOA, this Charter or any other Transaction Document is cancelled or terminated for any reason whatsoever.
41.2
Without prejudice to any other rights of the Owners hereunder, the Charterers shall promptly pay to the Owners within ten (10) Business Days of demand on a full indemnity basis all costs, charges and expenses incurred by the Creditor Parties in

41

collecting any Charterhire or other payments not paid on the due date under this Charter and in remedying any other failure of the Charterers to observe the terms and conditions of this Charter.
41.3
All costs (including, but not limited to, legal costs, fees for insurance opinions, valuation and inspection) and expenses reasonably incurred by the Creditor Parties in the preparation, negotiation, documentation, printing and execution of all documentation in relation to this Charter and the Transaction Documents and all legal costs, expenses and other disbursements reasonably incurred by the Creditor Parties' legal counsels in connection with the same, shall be for the account of the Charterers and the Charterers shall pay such costs and expenses promptly within ten (10) Business Days of demand.
41.4
All costs and expenses incurred by the Owners in relation to the acquisition and registration of the Vessel by the Owners in the Owners' name in the flag state stated in Box 5 together with any and all fees (including but not limited to any vessel registration and tonnage fees) payable by the Owners to such flag state to maintain and/or renew such registration shall be for the account of the Charterers and the Charterers shall pay such costs and expenses promptly within ten (10) Business Days of demand.
41.5
In addition to the foregoing and to the extent not already addressed by the foregoing, the Charterers agree at all times during this Charter to indemnify and keep indemnified the Creditor Parties against:

(a)
all costs and expenses whatsoever reasonably incurred in connection with this Charter and any other Transaction Document or the Vessel, and any costs, charges, or expenses reasonably incurred which the Charterers have agreed to pay under this Charter and any other Transaction Document and shall be claimed or assessed against or paid by the Creditor Parties save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(b)
any tax (except income tax) imposed on, or suffered by, any Creditor Party, excluding:

(i)
any tax imposed on and calculated by reference to the net income actually received or receivable by such Creditor Party (but, for the avoidance of doubt, not including any sum deemed for the purposes of tax to be received or receivable by such Creditor Party but not actually receivable) by the jurisdiction in which such Creditor Party is incorporated; or

(ii)
any loss or liability that is compensated for by an increased payment under Clause 51.2.2;

(c)
all losses, costs, charges, expenses, fees, payments, liabilities, penalties, fines, damages or other sanctions of a monetary nature (collectively, for the purposes of this Clause 41.5, Losses) suffered or incurred by the Creditor Parties and arising directly or indirectly in any manner out of the design, manufacture, delivery, non-delivery, purchase, importation, registration, ownership, chartering, sub-chartering, possession, control, use, operation, condition,

42

maintenance, repair, replacement, refurbishment, modification, overhaul, insurance, sale or other disposal, return or storage of or loss of or damage to the Vessel or otherwise in connection with the Vessel (whether or not in the control or possession of the Charterers), any and all claims in tort or in contract by any Sub-Charterer from the Charterers nor any Sub-Charterer or any other party contracting with the Charterers or any Sub-Charterer save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(d)
all Losses suffered or incurred by the Creditor Parties which result directly or indirectly from claims which may at any time be made on the ground that any design, article or material of or in the Vessel or the operation or use thereof constitutes or is alleged to constitute an infringement of patent or copyright or registered design or other intellectual property right or any other right whatsoever save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(e)
all Losses suffered or incurred by the Owners in preventing or attempting to prevent the arrest, confiscation, seizure, taking in execution, impounding, forfeiture or detention of the Vessel, or in securing the release of the Vessel therefrom save for (in each case) resulting from the wilful misconduct of the Creditor Parties;

(f)
all Losses suffered or incurred by the Owners with respect to or as a direct result of the presence, escape, seepage, spillage, leaking, discharge or migration from the Vessel of oil or any other hazardous substance, including without limitation, any claims asserted or arising under the US Oil Pollution Act of 1990 (as same may be amended and/or re-enacted from time to time hereafter) or similar legislation, regardless of whether or not caused by or within the control of the Charterers save for (in each case) resulting from the wilful misconduct of the Creditor Parties; and

(g)
any Losses incurred or suffered by the Owners in liquidating, employing or prepaying funds acquired or borrowed to purchase or finance or refinance the Vessel (excluding any costs incurred in unwinding any associated interest rate or currency swaps or currency futures transactions entered into by the Owners) following any default in payment hereunder or the occurrence of any Termination Event.
41.6
If, under any applicable law, whether as a result of judgment against the Charterers or the liquidation of the Charterers or for any other reason, any payment to be made by the Charterers under or in connection with this Charter is made or is recovered in a currency other than the currency (the currency of obligation) in which it is payable pursuant to this Charter then, to the extent that the payment (when converted into the currency of obligation at the rate of exchange on the date for the determination of liabilities permitted by the applicable law) falls short of the amount unpaid under this Charter, the Charterers shall as a separate and independent obligation, fully indemnify the Creditor Parties against the amount of the shortfall; and for the purposes of this sub-clause rate of exchange means the best rate at which the Creditor Parties are able on the relevant date to purchase the currency of obligation with the other currency.

43

41.7
The Charterers hereby irrevocably agree to indemnify and hold harmless the Owners against any claim, expense, liability or loss to fund the acquisition of the Vessel pursuant to the MOA.
41.8
The indemnities contained in this Clause 41, and each other indemnity contained in this Charter, shall survive any termination or other ending of this Charter and any breach by, or repudiation by, the Charterers of this Charter.
42.
NO WAIVER OF RIGHTS
42.1
No neglect, delay or indulgence on the part of either Party in enforcing the terms and conditions of this Charter shall prejudice the strict rights of that party or be construed as a waiver thereof nor shall any single or partial exercise of any right of either Party preclude any other or further exercise thereof.
42.2
No right or remedy conferred upon either Party by this Charter shall be exclusive of any other right or remedy provided for herein or by law and all such rights and remedies shall be cumulative.
43.
MORTGAGE AND ASSIGNMENT
43.1
At all times during the term of this Charter, the Owners and the other Creditor Parties shall have the right to create a mortgage or as the case may be, mortgages, over the Vessel in favour of any lender, bank or financial institution, or agent or trustee or an Affiliate of the Owners (the Mortgagee) and to assign all the rights, title, interests and benefit in and to this Charter, the other Transaction Documents, the Insurances, the Requisition Compensation and/or all or any Security Interest under the Security Documents to the Mortgagee as security for any loan or other facilities for the purpose of financing and/or refinancing the acquisition of the Vessel. In the event that the Vessel is transferred by the Owners to the Charterers or their nominee in accordance with this Charter, the Owners shall ensure that the mortgage(s) and assignment created pursuant to this Clause 43 be fully discharged prior to such transfer, provided that the Owners shall, upon written request of the Sub-Charterer:

(a)
issue the Owners' Quiet Enjoyment Letter upon the request of the Sub-Charterer; and

(b)
use their best endeavours to procure the issuance of the Finance Party Quiet Enjoyment Letter simultaneous with the Owners' execution of any such ship mortgage.
All fees and expenses incurred by the Owners and their financiers in connection with the financing and/or refinancing referred to above shall be borne by the Owners. For the avoidance of doubt, the Owners shall not be responsible for any fees and expenses (including legal fees) incurred by the Charterers, the Sub-Charterer or any other party in connection with the financing and/or refinancing referred to above.
43.2
The Charterers agree with the Owners to:

(a)
cooperate with the Owners to execute or enter into any such documents as the Owners' financiers may reasonably require under and in connection with the financing and/or refinancing of the Vessel;

44


(b)
acknowledge and agree to be bound by and if required, to ensure that any other applicable charterers consent and agree to be bound by, the notice of any assignment of this Charter, the other Transaction Documents and/or all or any Security Interest under the Security Documents executed in favour of the Mortgagee in the manner as required by the Mortgagee; and

(c)
comply, and provide such information and documents to enable the Owners to comply, with all such instructions or directions in regard to the employment, insurances, operation, repairs and maintenance of the Vessel as reasonably laid down in the Financial Instruments or as may be reasonably directed from time to time during the currency of this Charter by the mortgage(s) in conformity with the Financial Instruments.
44.
NOTICES
44.1
Any communication to be made under or in connection with the Transaction Documents shall be made in writing and, unless otherwise stated, may be given in person, by post, fax or email.
44.2
Except as otherwise provided for in this Charter, all notices or other communications under or in respect of the Transaction Documents shall be in writing and shall be made or given to such party at the address, facsimile number or email address appearing below (or at such other address, facsimile number or email address as such party may hereafter specify for such purposes to the other by notice in writing):

(a)
in the case of the Owners:
 
Address:
c/o Oriental Fleet International Company Limited
   
50/F, COSCO Tower
   
183 Queen's Road Central
   
Hong Kong
 
Attention:
Belinda Lou / Thomas Xing / Xu Ying
 
Email:
lou.can@coscoshipping.com /
   
thomas.xing@ofi.com.hk /
   
asset@coscoshipping.com
 
Fax:
+852 2339 1881
     

(b)
to the Charterers:
 
Address:
c/o 1, Vas. Sofias & Meg.
   
Alexandrou Str.
   
15124, Maroussi
   
Athens, Greece
 
Attention:
Andreas Louka
 
Email:
louka@loukapartners.com
 
Fax:
+30 2108128320
     
44.3
Any communication or document made or delivered by each Party to the other Party under or in connection with the Transaction Documents will only be effective:

(a)
if by way of fax, when received in legible form;

45


(b)
if by way of letter, when it has been left at the relevant address to which it has been posted with postage prepaid in an envelope addressed to the relevant party at that address, and, if a particular department or officer is specified as part of its address details provided under Clause 44.2, if addressed to that department or officer; or

(c)
if by way of email, only when received in a legible form by the email address of the person to whom the communication is made.
44.4
All communications and documents delivered pursuant to or otherwise relating to this Charter shall be in English.
45.
TERMINATION EVENTS
Each of the following shall constitute a Termination Event for purposes of this Charter:

(a)
the Charterers or any other Security Party fails to make any payment on its due date under a Transaction Document to which it is a party unless such failure to pay is remedied within a period of three (3) Business Days of such payment becoming due and payable; or

(b)
the Charterers fail to obtain and/or maintain the Insurances required under Clause 39 in accordance with the provisions thereof or any insurer in respect of such Insurances cancels the Insurances or disclaims liability with respect thereto; or

(c)
the Guarantor fails to comply with the financial covenants under clause 14 of schedule 2 to the Guarantee unless such financial covenants are complied with within thirty (30) days of such failure to comply (as evidenced by the financial statements of the Guarantor as of the date of such remedy and a Compliance Certificate delivered by the Guarantor setting out (in reasonable detail) computations as to compliance with clause 14 of schedule 2 to the Guarantee as at the date at which those financial statements were drawn up); or

(d)
the Charterers or any other Security Party commits any other breach of, or omits to observe or perform, any of their other obligations or undertakings in this Charter or any other Transaction Document (other than a breach referred to in paragraph (a), (b) or (c) above or paragraph (q) below) unless such breach or omission is, in the opinion of the Owners, remediable and the Charterers and/or the relevant Security Party shall remedy such breach or omission within ten (10) Business Days of notice thereof from the Owners; or

(e)
any representation or warranty or statement made or deemed to be made by the Charterers or any Security Party in or pursuant to any Transaction Document to which it is a party or in any document or certificate furnished to the Owners and the Security Trustee in connection herewith or if applicable, in the case of the Charterers only, the Certificate of Delivery and Acceptance, proves to be incorrect or misleading in any material respect when it is made or deemed made; or

46


(f)
any of the following occurs in relation to any Financial Indebtedness of the Charterers or any other Security Party:

(i)
any Financial Indebtedness of the Charterers or any other Security Party is not paid when due nor within any originally applicable grace period; or

(ii)
any Financial Indebtedness of the Charterers or any other Security Party is declared to be or otherwise becomes due and payable, prior to its specified maturity date as a result of any event of default (howsoever described); or

(iii)
any commitment for any Financial Indebtedness of the Charterers or any other Security Party is cancelled or suspended by a creditor of the Charterers or any other Security Party (as the case may be) as a result of an event of default (however described); or

(iv)
any creditor of the Charterers or any other Security Party becomes entitled to declare any Financial Indebtedness of the Charterers or any other Security Party (as the case may be) due and payable prior to its specified maturity as a result of an event of default (howsoever defined),
provided that no Termination Event will occur under this paragraph (f) if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (i) to (iv) above is less than $10,000,000 (or its equivalent in any other currency or currencies) in relation to the Guarantor; or

(g)
any of the following events (or any analogous procedure or step is taken in any jurisdiction) occurs in relation to the Charterers or any other Security Party:

(i)
the Charterers or any other Security Party are or are reasonably presumed or deemed to be unable or admits inability to pay their debts as they fall due, suspends making payments on any of their debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of their creditors with a view to rescheduling any of their indebtedness; or

(ii)
the value of their assets is less than their liabilities (taking into account contingent and prospective liabilities);

(iii)
a moratorium is declared in respect of any indebtedness of the Charterers or any other Security Party;

(iv)
the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration, provisional supervision or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of the Charterers or any other Security Party;

47


(v)
a composition or arrangement with any creditor of the Charterers or any other Security Party, or any assignment for the benefit of creditors generally of the Charterers or any other Security Party or a class of such creditors;

(vi)
the appointment of a liquidator, receiver, administrator, administrative receiver, compulsory manager, provisional supervisor or other similar officer in respect of the Charterers or any other Security Party or any of its assets; or

(vii)
enforcement of any Security over any assets of the Charterers or any other Security Party; or

(viii)
any expropriation, attachment, sequestration, distress or execution (or any analogous process in any jurisdiction) affects any asset or assets of the Charterers or any other Security Party which has or, in the opinion of the Owners, is likely to have a Material Adverse Effect; or

(h)
the Charterers or any other Security Party suspends or ceases or threatens to suspend or cease carrying on all or a material part of their business; or

(i)
any consent, approval, Authorisation, license or permit necessary to enable the Charterers to operate or charter the Vessel or the Charterers to sell the Vessel or to enable them to comply with any provision of this Charter or the MOA, as the case may be, to ensure that the obligations of the Charterers are legal, valid, binding or enforceable is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent, approval, Authorisation, license or permit is not fulfilled unless such event is, in the opinion of the Owners, remediable and the Charterers shall remedy such event within ten (10) Business Days of the occurrence of such event; or

(j)
any event or circumstance occurs which has or, in the reasonable opinion of the Owners, is likely to have, a Material Adverse Effect; or

(k)
this Charter or any other Transaction Document or any Security Interest created by a Transaction Document:

(i)
is cancelled, terminated, rescinded or suspended or otherwise ceases to remain in full force and effect for any reason or no longer constitutes legal, valid, binding and enforceable obligations of any party to that document for any reason whatsoever; or

(ii)
is amended or varied without the prior written consent of the Owners and the Security Trustee, except for any amendment or variation which is expressly permitted by this Charter or any other relevant Transaction Document; or

(l)
a Security Party rescinds or purports to rescind or repudiates or purports to repudiate a Transaction Document to which it is a party or any other party of any of those Transaction Documents evidences an intention to repudiate or rescind any of those Transaction Documents; or

48


(m)
it is or has become unlawful for the Charterers or any other Security Party to perform any of their obligations under the Transaction Documents to which they are a party or any Security Interest created or expressed to be created or evidenced by the Security Documents to which they are a party ceases to be effective with the ranking and priority it is expressed to have; or

(n)
the Vessel is not delivered latest by the Cancelling Date; or

(o)
the occurrence of a Change of Control; or

(p)
the occurrence of any of the following events:

(i)
a default under the MOA which is not waived by the Owners; or

(ii)
a default or termination event or the equivalent under any Collateral Transaction Documents which is not waived by the relevant Collateral Owner; or

(q)
in the event that a shortfall occurs in the Market Value of the Vessel together with the security value of any additional cash deposit or other security provided as required under Clause 47.1(n), the Charterers have not:

(i)
provided or procured the provision of additional cash deposit or other security in a form and in an amount acceptable to the Owners; or

(ii)
prepaid so much of the Charterhire Principal to cover such shortfall, within thirty (30) days in accordance with Clause 47.1(n).
46.
REPRESENTATIONS AND WARRANTIES
The Charterers represent and warrant to the Owners as of the date hereof, and on each Payment Date henceforth until the last day of the Charter Period, as follows:

(a)
each Security Party is a limited liability company duly incorporated and validly existing and, where applicable, in good standing under the laws of its jurisdiction of incorporation, organisation or formation (as the case may be) with power to own its assets, carry on its business as it is being conducted, enter into the Transaction Documents and to exercise its rights and perform its obligations under the Transaction Documents and all corporate and other action required to authorise its execution of the Transaction Documents and its performance of its obligations thereunder have been duly taken;

(b)  (i)  the obligations expressed to be assumed by each Security Party in the Transaction Documents to it is a party constitute, subject to the Legal Reservations, its legal and valid obligations, binding on it in accordance with the terms of the Transaction Documents and no limit on any of its powers will be exceeded as a result of the sale, leasing, borrowings, granting of security or giving of guarantees contemplated by the Transaction Documents or the performance by it of any of its obligations thereunder; and

49


(ii)
without limiting the generality of paragraph (b)(i) above, subject to the Security Perfection Requirements, each Security Document to which each Security Party is a party creates the Security Interests which it purports to create and such Security Interests are valid and effective;

(c)
the execution of the Transaction Documents by each Security Party and its exercise of its rights and performance of its obligations under any of such Transaction Documents do not constitute and will not result in any breach of or conflict with, any agreement or treaty to which it is a party;

(d)
all Authorisations, consents, approvals, resolutions, licences, exemptions, filings, notarisations or registrations required of each of the Charterers and the other Security Parties:

(i)
to enable them lawfully to enter into, exercise its rights and comply with its obligations in the Transaction Documents to which they are respectively a party;

(ii)
to make the Transaction Documents to which they are respectively a party admissible in evidence in its Relevant Jurisdictions;

(iii)
for them to carry on its business, and which are material; and

(iv)
to enable them to create the Security Interest to be created by them under any Security Document to which they are respectively a party and to ensure that such Security Interest has the priority and ranking it is expressed to have,
have been obtained or effected and are in full force and effect, subject in the case of any Security Document to which it is a party to the Security Perfection Requirements;

(e)
the execution, delivery, and performance of the Transaction Documents to which each Security Party is or shall be a party will not, in each case: (i) violate any law, governmental rule, regulation, order, judgment, award or decree which is binding upon it or any of its assets; (ii) contravene any provision of its constitutional documents; (iii) contravene or result in the breach of any agreement to which such Security Party is a party or by which it or any of its assets or revenues is bound, and (iv) constitute a default under any agreement to which such Security Party is a party or by which it or any of its assets or revenues are bound;

(f)
no third party has any Security Interest, other than the Permitted Security Interests, or any other interest, right or claim over, in or in relation to the Vessel, this Charter or any moneys payable hereunder and/or any of the other Transaction Documents;

(g)
except as specifically referred to in any Legal Opinion, all payments which a Security Party is liable to make under any Transaction Document to which such Security Party is a party may be made by such party without deduction or

50

withholding for or on account of any tax payable under the laws of each Relevant Jurisdiction of such Security Party;

(h)
no legal or administrative action of any kind whatsoever involving a Security Party which has or, in the opinion of the Owners, is likely to have a Material Adverse Effect has been commenced or taken;

(i)
each Security Party has paid all taxes applicable to, or imposed on or in relation to it, its business or if applicable, the Vessel, except for those being contested in good faith with adequate reserves;

(j)
subject to the Legal Reservations:

(i)
the choice of governing law as stated in each Transaction Document to which a Security Party is party to and the agreement by such party to refer disputes to the relevant courts or tribunal as stated in such Transaction Document will be recognised and enforced in the Relevant Jurisdictions of such Security Party; and

(ii)
any arbitral award, ruling or judgment obtained in the Relevant Jurisdictions of such Security Party in relation to such Transaction Documents will be recognised and enforced in the Relevant Jurisdictions of such Security Party;

(k)
no Security Party nor any of their assets are entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgment, execution or other enforcement);

(l)
the obligations of each Security Party under each Transaction Document to which it is a party, are the direct, general and unconditional obligations of such Security Party and rank at least pari passu with all other present and future unsecured and unsubordinated creditors of such Security Party save for any obligation which is mandatorily preferred by law and not by virtue of any contract;

(m)
no Security Party (other than the Guarantor) is a US Tax Obligor or registered as a non-Hong Kong company under Companies Ordinance (Cap. 622 of the Laws of Hong Kong), and none of them have established a place of business in England or the US;

(n)
no Security Party is a Restricted Person;

(o)
each Security Party is in compliance with all Sanctions laws, and none of them have been or are currently being investigated on compliance with Sanctions, they have received notice or are not aware of any claim, action, suit or proceeding against any of them with respect to Sanctions and they have not taken any action to evade the application of Sanctions;

(p)
neither the Charterers nor any other Security Party is insolvent or in liquidation or administration or subject to any other formal or informal insolvency procedure, and no receiver, administrative receiver, administrator,

51

liquidator, trustee or analogous officer has been appointed in respect of the Charterers or any other Security Party or all or material part of their assets;

(q)
no Termination Event is continuing or might reasonably be expected to result from the entry into and performance of this Charter or any other Transaction Document;

(r)
subject to any qualification (if applicable) set out in such information, any information provided by the Charterers (or on their behalf) to the Owners and the other Creditor Parties was true and accurate in all material respects as at the date it was provided or as the date at which such information was stated;

(s)  (i)  the financial statements of the Guarantor most recently supplied to the Owners (which, at the date of this Charter, are its Original Financial Statements) were prepared in accordance with GAAP consistently applied save to the extent expressly disclosed in such financial statements;

(ii)
the financial statements of the Guarantor most recently supplied to the Owners (which, at the date of this Charter, are its Original Financial Statements) give a true and fair view of (if audited) or fairly and represent (if unaudited) their consolidated financial condition and operations for the period to which they relate, save to the extent expressly disclosed in such financial statements; and

(iii)
there has been no material adverse change in the business or consolidated financial condition of the Group since the date of the Guarantor's Original Financial Statements;

(t)
the Charterers are a wholly-owned Subsidiary of the Guarantor, which is ultimately controlled by the Substantial Shareholder;

(u)
no litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency (which, if adversely determined, would have a Material Adverse Effect on any Security Party) have been started or (to the best of the knowledge and belief of such Security Party) threatened against it;

(v)
no judgment or order of a court, arbitral body or agency which might reasonably be expected to have a Material Adverse Effect has been made against any Security Party; and

(w)
each Security Party has complied with all anti-money laundering legislation (to the extent applicable to it) that is relevant in the context of the transactions contemplated by the Transaction Documents to which it is a party.
47.
CHARTERERS' UNDERTAKINGS
The Charterers undertake that they shall comply or procure compliance with the following undertakings commencing from the Commencement Date and up to the last day of the Charter Period:

52

47.1
General Covenants

(a)
they will keep the Vessel registered in the name of the Owners under the laws and flag of the Republic of Liberia, and shall not do or permit to be done anything, or omit to do anything which could or might result in:

(i)
such registration being forfeited or imperilled; or

(ii)
the Vessel being required to be registered under any other law or flag
and save with the prior written consent of the Owners and/or their financiers (if any) (such consent not to be unreasonably withheld), the Charterers shall not register the Vessel or permit her registration under any other law or flag;

(b)
they will provide or will procure that each Security Party provides, the Owners with details of any legal or administrative action involving such Security Party or the Vessel or any detention or arrest of the Vessel or any damage to or alteration of the Vessel in excess of the Major Casualty amount as soon as such action is instituted or it becomes apparent to such Security Party that it is likely to be instituted and is likely to have a Material Adverse Effect on the ability of a Security Party to perform their obligations under each Transaction Document to which it is a party;

(c)
they will, and will procure that each other Security Party will obtain and promptly renew or procure the obtainment or renewal of and provide copies of, from time to time, any necessary consents, approvals, Authorisations, licenses or permits of any regulatory body or authority required under any law or regulation of a Relevant Jurisdiction of such Security Party (i) to enable such Security Party to perform its obligations under each Transaction Document to which it is a party (including without limitation to sell, charter and operate the Vessel) and (ii) to ensure the legality, validity, enforceability or admissibility in evidence of any Transaction Document to which such Security Party is subject;

(d)
they will not, and will procure that each other Security Party will not, create, assume or permit to exist any Security Interest of any kind upon any Transaction Document to which such Security Party is a party, and if applicable, the Vessel, in each case other than Permitted Security Interests;

(e)
they will at their own cost, and will procure that each other Security Party will:

(i)
do all that such Security Party can to ensure that any Transaction Document to which such Security Party is a party validly creates the obligations and the Security Interests which Security Party purports to create; and

(ii)
without limiting the generality of paragraph (i) above, where necessary promptly register, file, record or enrol any Transaction Document to which such Security Party is a party with any court or authority in all Relevant Jurisdictions of such Security Party, pay any stamp, registration or similar tax in all Relevant Jurisdictions of such Security

53

Party in respect of any Transaction Document to which such Security Party is a party, give any notice or take any other step which, is or has become necessary or desirable for any such Transaction Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which such Security Party creates;

(f)
they will, and will procure that each other Security Party will:

(i)
notify the Owners as soon as it becomes aware of the occurrence of (A) any Termination Event and (B) any other matters which might lead to an occurrence of any Termination Event; and

(ii)
notify the Owners of any steps or action which they are, or such Security Party is, taking, or considering taking, to remedy or mitigate the effect of such occurrence,
and the Charterers will, if so requested by the Owners, provide any such certificate signed by its director, confirming that there exists no Termination Event;

(g)
they will, and will procure that each other Security Party will, as soon as practicable after receiving the request, provide the Owners with any additional financial or other information relating:

(i)
to themselves and/or the Vessel (including, but not limited to the condition and location of the Vessel); or

(ii)
to any other matter relevant to, or to any provision of any Transaction Document to which it is a party;
which may be reasonably requested by the Owners (or their financiers (if any)) at any time;

(h)
they will provide the Owners with all such information as the Owners shall require regarding employment of the Vessel (including cargo, voyage details such as duration, loading port and discharge port) every three (3) months throughout the Charter Period, and engagements, particulars of all towages and salvages of the Vessel, and copies of all charters and other contracts of her employment or otherwise howsoever concerning her;

(i)
without prejudice to Clause 47, comply, or procure compliance, and will procure that each other Security Party and any Approved Manager of the Vessel will comply or procure compliance, with all laws or regulations relating to the Vessel and its ownership, employment, operation, management and registration, including the ISM Code, the ISPS Code, all Environmental Laws and the laws of the Vessel's registry;

(j)
the Vessel shall be classed and maintained in the highest class with the Classification Society upon Delivery and shall be free of all overdue recommendations and requirements and they shall promptly provide class records and inspection reports of the Vessel to the Owners;

54


(k)
neither the Charterers nor any other Security Party shall enter or be permitted to enter, into any form of merger, sub-division, amalgamation or other reorganisation or change of ownership;

(l)  (i)  they shall permit the Owners (at the expense of the Charterers) by surveyors or other persons appointed by them for such purpose to board the Vessel no more than once per calendar year during the Charter Period or, following the occurrence of a Termination Event which is continuing, at all reasonable times for the purpose of inspecting her, provided that, unless a Termination Event has occurred and is continuing, such inspection shall not unduly disrupt or interfere with the normal daily operations of the Vessel;

(ii)
they shall provide all proper facilities for such inspections; and

(iii)
they shall give the Owners reasonable advance notice of any intended drydocking of the Vessel (whether for the purpose of classification, survey or otherwise);

(m)  (i)  they will ensure that the Market Value of the Vessel shall be tested once every twelve (12) months commencing from the Commencement Date in the absence of a Termination Event, and upon the occurrence of a Termination Event which is continuing, the Market Value of the Vessel shall be tested at any time at the request of the Owners;

(ii)
in the event of the failure or delay of the Charterers to arrange such testing of the Market Value of the Vessel, the Owners shall have the liberty to arrange such testing at such time as the Owners shall require; and

(iii)
they shall pay the amount of the fees and expenses of an Approved Valuer incurred for all such valuations and all legal and other expenses reasonably incurred by the Owners in connection with any matter arising out of this Clause;

(n)
they will ensure that the Market Value of the Vessel shall at all times be equal to or greater than one hundred and twenty per cent. (120%) of the Charterhire Principal, however, if the Owners notify the Charterers that the Market Value of the Vessel has fallen below one hundred and twenty per cent. (120%) of the Charterhire Principal, the Charterers shall, unless otherwise agreed by the Owners, within thirty (30) days of the Owners' receipt of the relevant valuation of the Vessel, provide additional cash deposit or other security in a form and in an amount acceptable to the Owners or prepay the Charterhire Principal to cover the shortfall. Any amount prepaid pursuant to this Clause 47.1(n) shall be applied towards reducing the instalments of Fixed Charterhire (for the avoidance of doubt, excluding the Balloon Payment) falling on or after the date of such prepayment by the amount of such prepayment on a pro-rata basis;

(o)
they will notify the Owners promptly of:

55


(i)
any Environmental Claim made against the Charterers in connection with the Vessel, or any Environmental Incident, arrest or detention of the Vessel, any exercise or purported exercise of any lien on the Vessel or its Earnings or any requisition of the Vessel for hire; and

(ii)
any casualty or occurrence as a result of which the Vessel has become or is, by the passing of time or otherwise, likely to become, a Major Casualty;

(p)  (i)  they shall not permit any chartering of the Vessel on a time charter basis of one (1) calendar year or more unless the Charterers shall have provided the Owners with prior written notice of such chartering together with detailed information about the intended Sub-Charterer, the proposed terms of the intended Sub-Charter and such further information as the Owners may reasonably request; and

(ii)
except with the prior written consent of the Owners (and then only subject to such terms as the Owners may impose), they shall not let the Vessel:

(A)
on demise charter for any period;

(B)
on terms whereby more than two (2) months' hire (or the equivalent) is payable in advance; or

(C)
on any terms other than arms' length terms;

(q)
they shall comply, and shall procure that each other Security Party complies, with:

(i)
all applicable laws to which it may be subject (including, but not limited to, Business Ethics Laws, anti-bribery and corruption laws and anti-money lending laws); and

(ii)
all laws and regulations in respect of Sanctions, and in particular, they shall effect and maintain a sanctions compliance policy to ensure compliance with all such laws and regulations implemented from time to time;

(r)
the Vessel shall not be employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel shall not be used by or for the benefit for any party which is a target of Sanctions, or trade to any Restricted Country; or (ii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation;

(s)
they will, and will procure that each other Security Party will, promptly notify the Owners and provide all information in relation to its business and operations which may be relevant for the purposes of ascertaining whether they are in compliance with all laws and regulations relating to Sanctions, and in particular, they shall notify the Owners in writing immediately upon being aware that any of its shareholders or directors, officers of employees is a Restricted Person or has otherwise become a target of Sanctions;

56


(t)
they shall not appoint or permit to be appointed any manager of the Vessel unless it is an Approved Manager appointed on terms acceptable to the Owners and their financiers (if any) and such Approved Manager has (prior to accepting its appointment) entered into a Manager's Undertaking;

(u)
they shall notify the Owners in writing as soon as they become aware that the Charterers are likely to, or will receive, any tax credit in relation to any payments made by any Sub-Charterer to it;

(v)
save with the prior written consent of the Owners, they shall ensure that no Change of Control occurs;

(w)
they shall, at their own expense, replace, renew or substitute any equipment of the Vessel as shall be so damaged or worn as to be unfit for use. Title to any part replaced, renewed or substituted shall remain with the Owners;

(x)
save with the prior written consent of the Owners, there shall not be any transfer or disposal of:

(i)
the legal or beneficial shareholding of the Charterers; or

(ii)
the legal or beneficial shareholding of the Guarantor,
unless following such transfer or disposal, the Guarantor remains ultimately or indirectly controlled by the Substantial Shareholder;

(y)
they shall not create, incur, assume, suffer to exist or in any manner become or remain liable for any Financial Indebtedness, other than:

(i)
Financial Indebtedness normally associated with the day to day operation of the Vessel, or otherwise in the normal course of business;

(ii)
Financial Indebtedness under the Transaction Documents; and

(iii)
Financial Indebtedness, including:

(A)
all shareholder's and intercompany loans, which by its terms is subordinate and subject in right of payment to the prior payment in full of the Financial Indebtedness under or pursuant to the Transaction Documents, as provided in paragraph (z) below;

(B)
all shareholder's and intercompany advances, which upon occurrence of a Termination Event which is continuing, shall be subordinated and subject in right of payment to the prior payment in full of the Financial Indebtedness under or pursuant to the Transaction Documents, as provided in paragraph (aa) below,
or in any case, as otherwise evidenced by a subordination deed in form and substance satisfactory to the Owners; and

57


(z)
they acknowledge to and undertake with the Owners that all shareholder's and intercompany loans from time to time made by the Guarantor or any other member of the Group to the Charterers:

(i)
are and shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterers under this Charter and the other Transaction Documents;

(ii)
shall not be repaid or be subject to payment of interest (although interest may accrue);

(iii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterers; and

(iv)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim;

(aa)
they acknowledge to and undertake with the Owners that all shareholder's and intercompany advances from time to time made by the Guarantor or any other member of the Group to the Charterers:

(i)
shall be non-interest bearing;

(ii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterers;

(iii)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim; and

(iv)
upon occurrence of a Termination Event which is continuing:

(A)
shall not be repaid; and

(B)
shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterers under this Charter and the other Transaction Documents;

(bb)
they shall not declare or pay any dividends unless no Termination Event has occurred or will occur as a result of such declaration or payment;

(cc)
they shall, and shall procure that each other Security Parties will, ensure that all the Security Perfection Requirements have been or will be done or obtained (as the case may be) no later than the latest date permitted by applicable law and in any event by such date as the Owners and the Security Trustee may specify;

(dd)
they shall, and shall procure that each other Security Parties will, conduct their respective business in compliance with applicable anti-corruption laws; and

(ee)
they shall provide the documents and evidence specified in Clause 35.2 in form and substance satisfactory to the Owners as soon as the same become

58

available, but in any event before the relevant date as specified in Parts C and D of Addendum No.1.
48.
PURCHASE OPTION
48.1
Subject to Clause 48.2, the Owners hereby grant to the Charterers a purchase option to require the Owners to sell all of the Owners' beneficial and legal right, title and interest in the Vessel and all belonging to her, to the Charterers at the Purchase Option Price upon the terms and conditions of this Charter.
48.2
Subject to the other terms and conditions of this Charter, the Purchase Option shall only be exercisable by the Charterers on or after the third (3rd) anniversary date of the Commencement Date provided that no Termination Event has occurred and is continuing.
48.3
The Purchase Option may be exercised by the Charterers by giving the Owners at least ninety (90) days' prior written notice of their intention to exercise the Purchase Option such that the Purchase Option Notice shall accordingly be given to the Owners no later than the date falling ninety (90) days' prior to the intended Purchase Option Date (unless otherwise agreed by the Owners in their absolute discretion).
48.4
The Purchase Option Price shall be the aggregate of (but in each case, not double-counting):

(a)
any Charterhire due and payable on the Purchase Option Date and any default interest payable under Clause 37.12;

(b)
if the Purchase Option Date is a Payment Date, the Charterhire Principal corresponding to that Payment Date in Schedule 2, or if the Purchase Option Date is not a Payment Date, all Charterhire Principal corresponding to the Payment Date in Schedule 2 immediately preceding the Purchase Option Date (in each case, the Relevant Charterhire Principal);

(c)
if the Purchase Option Date is not a Payment Date, any Breakfunding Costs;

(d)
all costs (including, but not limited to, legal costs) and expenses reasonably incurred by the Owners under this Charter and the other Transaction Documents in connection with or as a result of the exercise of the Purchase Option by the Charterers; and

(e)
an early termination fee calculated at the following percentage of the Relevant Charterhire Principal:
 
If the Purchase Option Date occurs after the
following anniversary of the Commencement
Date
Percentage of Relevant Charterhire Principal
 
After 3rd anniversary
2%
 
After 4th anniversary
1.5%
 
After 5th anniversary
1%
 
After 6th anniversary
0.5%

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After 7th anniversary
0%
     
48.5  (a)  The Purchase Option Notice shall be signed by a duly authorised officer or attorney of the Charterers and shall contain the following information:

(i)
the Purchase Option Date; and

(ii)
the Relevant Charterhire Principal portion of the Purchase Option Price payable on the Purchase Option Date as determined in accordance with Clause 48.4(b).

(b)
Upon receipt of a duly signed and completed Purchase Option Notice in accordance with Clause 48.5(a), the Owners shall notify the Charterers of the Purchase Option Price in writing as soon as practicable.
48.6
The Charterers may serve a Purchase Option Notice throughout the duration of the Charter Period and is irrevocable once given.
48.7
Upon the exercise of the Purchase Option, the Owners and the Charterers shall thereupon perform their respective obligations referred to in Clause 50 and the Purchase Option Price and other costs and expenses reasonably incurred for the sale of the Vessel shall be paid by the Charterers on the Purchase Option Date.
49.
PURCHASE OBLIGATION
In consideration of the Owners granting the Charterers the Purchase Option, the Charterers hereby agree that they are obliged and required to purchase all of the Owners' beneficial and legal right, title and interest in the Vessel and all belonging to her on the last day of the Charter Period whereupon the Owners and the Charterers shall perform their obligations referred to in Clause 50 and the Charterers shall be obliged to pay the Purchase Obligation Price on the Purchase Obligation Date unless the Charter is terminated before the natural expiration of this Charter or the Owners and the Charterers agree otherwise or the Purchase Option was exercised pursuant to Clause 48.
50.
SALE OF THE VESSEL BY PURCHASE OPTION AND PURCHASE OBLIGATION

(a)
Completion of the exercise of the Purchase Option or the performance of the Purchase Obligation (as the case may be) shall take place on the Relevant Date whereupon the Owners will sell to the Charterers (or their nominee), and the Charterers (or their nominee) will purchase from the Owners, all the legal and beneficial interest and title in the Vessel, for the Relevant Price on an "as is where is" basis and on the following terms and conditions:

(i)
the Charterers expressly agree and acknowledge that, no condition, warranty or representation of any kind is or has been given by or on behalf of the Owners in respect of the Vessel or any part thereof, and accordingly the Charterers confirm that that they have not, in entering into this Charter, relied on any condition, warranty or representation by the Owners or any person on the Owners' behalf, express or implied, whether arising by law or otherwise in relation to the Vessel or any

60

part thereof, including, without limitation, warranties or representations as to the description, suitability, quality, merchantability, fitness for any purpose, value, state, condition, appearance, safety, durability, design or operation of any kind or nature of the Vessel or any part thereof, and the benefit of any such condition, warranty or representation by the Owners is hereby irrevocably and unconditionally waived by the Charterers to the extend permissible under applicable law, the Charterers hereby also waives any rights which they may have in tort in respect of any the matters referred to above and irrevocably agree that the Owners shall have no greater liability in tort in respect of any such matter than they would have in contract after taking account of all of the foregoing exclusions. No third parties making any representation or warranty relating to the Vessel or any part thereof are the agents of the Owners nor has any such third party authority to bind the Owners thereby. Notwithstanding anything contained above, nothing contained herein is intended to obviate, remove or waive any rights or warranty or other claims relating thereto which the Charterers (or their nominee) or the Owners may have against the manufacturer or supplier of the Vessel or any third party;

(ii)
the Vessel shall, on completion of sale, be free from any registered mortgages incurred by the Owners (where any mortgages, liens, Security Interests and debts arising out of or in connection with this Charter or the other Transaction Documents shall be released prior to (or simultaneously with) the transfer and/or release of the Relevant Price by the Charterers (as buyers) to the Owners (as sellers));

(iii)
the Relevant Price shall be paid by (or on behalf of) the Charterers to the Owners on the Relevant Date together with unpaid amounts of Charterhire but only up to and including the Relevant Date, and other moneys owing by or accrued or due from the Charterers under this Charter on or prior to such Relevant Date which remain unpaid; and

(iv)
upon the Relevant Price together with the other moneys described under paragraph (iii) above being fully and irrevocably paid to the Owners on, and in accordance with, the terms set forth in this Charter, the Owners agree (at the cost of the Charterers) to enter into (A) a bill of sale, (B) a commercial invoice, (C) a protocol of delivery and acceptance and (D) such other additional documents as may be necessary for the purpose of registering the Vessel at its intended flag state upon such transfer, provided that the Charterers shall notify the Owners of any such additional documents no later than five (5) Business Days (or such other mutually agreed date) prior to such transfer, each in such form as may be required by the Charterers' intended flag state.

(b)
For the purposes of this Clause 50:

(i)
Relevant Date means:

61


(A)
in relation to the exercise of the Purchase Option, the Purchase Option Date; and

(B)
in relation to the performance of the Purchase Obligation, the Purchase Obligation Date.

(ii)
Relevant Price means:

(A)
in relation to the exercise of the Purchase Option, the Purchase Option Price; and

(B)
in relation to the performance of the Purchase Obligation, the Purchase Obligation Price.
51.
NO SET-OFF OR TAX DEDUCTION; FATCA PROVISIONS
51.1
General

(a)
All Charterhire and any payment made from the Charterers to enable the Owners to pay all amounts under a Transaction Document shall be paid punctually:

(i)
without any form of set-off, cross-claim or condition and in the case of Charterhire, without previous demand; and

(ii)
free and clear of any tax deduction or withholding unless required by law.

(b)
Without prejudice to Clause 51.1(a), if the Owners are required by law to make a tax deduction from any payment:

(i)
the Owners shall notify the Charterers as soon as they become aware of the requirement; and

(ii)
the amount due in respect of the payment shall be increased by the amount necessary to ensure that the Owners receive and retain (free from any liability relating to the tax deduction) a net amount which, after the tax deduction, is equal to the full amount which they would otherwise have received.

(c)
In this Charter, tax deduction means any deduction or withholding for or on account of any present or future tax, other than a FATCA Deduction.
51.2
FATCA provisions
51.2.1
FATCA Information

(a)
Subject to paragraph (c) below, each Relevant Party shall, within ten (10) Business Days of a reasonable request by another Relevant Party:

(i)
confirm to that other Relevant Party whether it is:

62


(A)
a FATCA Exempt Party; or

(B)
not a FATCA Exempt Party;

(ii)
supply to that other Relevant Party (with a copy to all other Relevant Parties) such forms, documentation and other information relating to its status under FATCA as that other Relevant Party reasonably requests for the purpose of that other Relevant Party's compliance with FATCA; and

(iii)
supply to that other Relevant Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Relevant Party's compliance with any other law, regulation, or exchange of information regime.

(b)
If a Relevant Party confirms to another Relevant Party under paragraph (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 Relevant Party shall so notify all other Relevant Parties reasonably promptly.

(c)
Paragraph (a) above shall not oblige any Relevant Party to do anything, and paragraph (a)(iii) above shall not oblige any other Relevant Party to do anything, which would or might in its reasonable opinion constitute a breach of:

(i)
any law or regulation;

(ii)
any fiduciary duty; or

(iii)
any duty of confidentiality.

(d)
If a Relevant Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with paragraph (a)(i) or (ii) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such Relevant Party shall be treated for the purposes of the Transaction Documents (and payments made under them) as if it is not a FATCA Exempt Party until such time as the Relevant Party in question provides the requested confirmation, forms, documentation or other information.
51.2.2
FATCA Deduction and gross up by Security Parties

(a)
If a Security Party is required to make a FATCA Deduction, that Security Party shall make that FATCA Deduction and any payment required in connection with that FATCA Deduction within the time allowed and in the minimum amount required by FATCA.

(b)
If a FATCA Deduction is required to be made by a Security Party, the amount of the payment due from that Security Party shall be increased to an amount which (after making any FATCA Deduction) leaves an amount equal to the payment which would have been due if no FATCA Deduction had been required.

63


(c)
The Charterers shall promptly upon becoming aware that a Security Party must make a FATCA Deduction (or that there is any change in the rate or the basis of a FATCA Deduction) notify the Owners accordingly.

(d)
Within thirty (30) days of making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the Security Party making that FATCA Deduction or payment shall deliver to the Owners evidence reasonably satisfactory to the Owners that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the relevant governmental or taxation authority.
51.2.3
FATCA Deduction by the Owners
The Owners may make any FATCA Deduction it is required by FATCA to make, and any payment required in connection with that FATCA Deduction, and the Owners shall not 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. If the Owners become aware that they must make a FATCA Deduction in respect of a payment to another Relevant Party (or that there is any change in the rate or the basis of such FATCA Deduction) it shall notify that Relevant Party.
51.2.4
FATCA Mitigation
Notwithstanding any other provision to this Charter, if a FATCA Deduction is or will be required to be made by any party under Clause 51.2 in respect of a payment to the Owners as a result of the Owners not being a FATCA Exempt Party, the Owners shall have the right to transfer their interest in the Vessel (and this Charter) to any person nominated by the Owners and all costs in relation to such transfer shall be for the account of the Owners.
52.
INCREASED COSTS
52.1
This Clause 52.1 applies if the Owners notify the Charterers that they consider that as a result of:

(a)
the introduction or alteration after the date of this Charter of a law or an alteration after the date of this Charter in the manner in which a law is interpreted or applied (disregarding any effect which relates to the application to payments under this Charter of a tax on the Owners' overall net income); or

(b)
complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Owners allocates capital resources to their obligations under this Charter) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Charter,
the Owners has incurred or will incur an increased cost.

64

52.2
In this Clause 52.1, increased cost means, in relation to the Owners (without any double counting):

(a)
an additional or increased cost incurred as a result of, or in connection with, the Owners having entered into, or being a party to, this Charter, of funding the acquisition of the Vessel pursuant to the MOA or performing their obligations under this Charter;

(b)
an additional or increased cost incurred by the financiers of the Owners (if any) as a result of, or in connection with, the financiers of the Owners (if any) having entered into, or being a party to, the financing arrangements with the Owners and the relevant Financial Instruments in each case relating to the funding of the acquisition of the Vessel pursuant to the MOA;

(c)
a reduction in the amount of any payment to the Owners under this Charter or in the effective return which such a payment represents to the Owners or their financiers (if any) on their capital;

(d)
a reduction in the amount of any payment to the financiers of the Owners (if any) under their financing arrangements and relevant Financial Instruments or in the effective return which such a payment represents to the financiers of the Owners (if any) or on their capital in each case relating to the funding of the acquisition of the Vessel pursuant to the MOA;

(e)
any other additional or increased cost of funding or financing the acquisition of the Vessel pursuant to the MOA; and

(f)
a liability to make a payment, or a return foregone, which is calculated by reference to any amounts received or receivable by the Owners under this Charter,
and for the purposes of this Clause 52.2 the Owners may in good faith allocate or spread costs and/or losses among their assets and liabilities (or any class of their assets and liabilities) on such basis as they consider appropriate.
52.3
Subject to the terms of Clause 52.1, the Charterers shall pay to the Owners, within three (3) Business Days of the Owners' demand, the amounts which the Owners from time to time notify the Charterers to be necessary to compensate the Owners for the increased cost.
52.4
Clause 53.3 above does not apply to the extent any increased cost is:

(a)
attributable to a tax deduction required by law to be made by a Security Party;

(b)
attributable to a FATCA Deduction required to be made by a Relevant Party or the Owners;

(c)
compensated for by Clause 41.5(b) (or would have been compensated for under Clause 41.5(b) but was not so compensated solely because any of the exclusions in Clause 41.5(b) applied); or

(d)
attributable to the wilful breach by the Owners of any law or regulation.

65

53.
GOVERNING LAW AND JURISDICTION
53.1
This Charter and any non-contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with English law and any Dispute arising out of or in connection with this Charter shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory re-enactment or modification thereof save to the extent necessary to give effect to the provisions of this Clause.
53.2
The arbitration reference shall be to three (3) arbitrators:

(a)
A Party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other Party requiring the other Party to appoint its own arbitrator within fourteen (14) calendar days of that notice, and stating it will appoint its arbitrator as sole arbitrator unless the other Party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified.

(b)
If the other Party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the Party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other Party, appoint its arbitrator as sole arbitrator and shall advise the other Party accordingly. The award of a sole arbitrator shall be binding on both Parties as if he/she had been appointed by agreement.

(c)
Where each Party appoints its own arbitrator, then the two (2) arbitrators so appointed may proceed with the arbitration and at any time thereafter appoint a third arbitrator so long as they do so before any substantive hearing or forthwith in the event that they cannot agree on any matter relating to the arbitration. If the said two arbitrators do not appoint a third within fourteen (14) days of one calling upon the other to do so, or if they are in disagreement as to the third arbitrator, either arbitrator or a Party shall apply to the London Maritime Arbitrators Association (LMAA) for the appointment of the third arbitrator.

(d)
The language used in the arbitration shall be English. The arbitration shall be conducted in accordance with the LMAA Terms current at the time when the arbitration proceedings are commenced.

(e)
Nothing herein shall prevent the Parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator and, if necessary, for the LMAA to exercise its statutory power to appoint the sole arbitrator if the Parties cannot agree on the appointment.
53.3
In this Clause 53, proceedings means proceedings of any kind, including an application for a provisional or protective measure and a Dispute means any dispute arising out of or in connection with this Charter (including a dispute relating to the existence, validity or termination of this Charter) or any non-contractual obligation arising out of or in connection with this Charter.

66

54.
MISCELLANEOUS
54.1
The Charterers waive any rights of sovereign immunity which they or any of their properties may enjoy in any jurisdiction and subjects itself to civil and commercial law with respect to their obligations under this Charter.
54.2
No term of this Charter is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not Party.
54.3
This Charter and each Transaction Document may be executed in any number of counterparts and by the different Parties or thereto on separate counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Charter or that Transaction Document, as the case may be.

67


Execution page
This Charter has been entered into on the date stated at the beginning of this Charter.

THE OWNERS

SIGNED for and on behalf of
)
   
ORIENTAL FLEET TANKER 11
)
   
LIMITED
)
   
(东方富利 TANKER11 有限公司)
)
   
by Li Bing, Director
)
   
in the presence of:
)
   
       




68


THE CHARTERERS

SIGNED for and on behalf of
)
   
MONTE CARLO SEVEN SHIPPING
)
   
COMPANY LIMITED
)
   
by
)
   
Attorney-in-Fact
)
   
in the presence of:
)
   
       

69

Schedule 1: Certificate of Delivery and Acceptance
Each of ORIENTAL FLEET TANKER 11 LIMITED (东方富利 TANKER11 有限公司) (the Owners) and MONTE CARLO SEVEN SHIPPING COMPANY LIMITED (the Charterers) hereby acknowledge that at ___________________ hours on _______________________________ , there was delivered to, and accepted by, the Charterers the Vessel known as STENAWECO EXCELLENCE, registered in the name of the Owners under the laws and flag of the Republic of Liberia with Official Number 16739 and IMO number 9695834 under a bareboat charter dated(together with all supplements and amendments to it, the Charter) and made between the Owners and the Charterers and that Delivery (as defined in the Charter) thereupon took place and that, accordingly, the Vessel is and will be subject to all the terms and conditions contained in the Charter.
The Charterers warrant that the representations and warranties made by them in Clause 46 of the Charter remain correct and that no Termination Event (as defined in the Charter) has occurred and is continuing at the date of this Certificate of Delivery and Acceptance.
Signed by
)
 
[name of authorised signatory],
)
 
[title of authorised signatory]
)
 
duly authorised for and on behalf of
)
 
ORIENTAL FLEET TANKER 11
)
 
LIMITED (东方富利 TANKER11
)
 
限公司) as Owners
)
 
     
     
Signed by
)
 
[name of authorised signatory],
)
 
[title of authorised signatory]
)
 
duly authorised for and on behalf of
)
 
MONTE CARLO SEVEN SHIPPING
)
 
COMPANY LIMITED
)
 
as Charterers
)
 

70

Schedule 2: Charterhire Schedule
Estimated Financing Principal: US$25,600,000
Monthly Period
Commencement Date /
Payment Date)
Charterhire
(US$)
Charterhire Principal (US$)
   
Upfront
Charterhire /
Balloon Payment
Fixed
Charterhire
(being 1/120 of
Financing
Principal less
Balloon
Payment)
Aggregate
Outstanding
Fixed
Charterhire
and Balloon
Payment
 
1st Payment Date
(Commencement Date)
Upfront
Charterhire:
6,400,000
160,000
25,440,000
1
2nd Payment Date (the date falling on the 10th day of the month falling immediately after Commencement Date)
 
160,000
25,280,000
2
3rd Payment Date
(the date falling on the
10th day of the second
(2nd) month falling
immediately after
Commencement Date)
 
160,000
25,120,000
3
4th Payment Date
(the date falling on the
10th day of the third (3rd)
month falling immediately
after Commencement
Date)
 
160,000
24,960,000
4
5th Payment Date
(the date falling on the
10th day of the fourth (4th)
month falling immediately
after Commencement
Date)
 
160,000
24,800,000
5
6th Payment Date
(the date falling on the
10th day of the fifth (5th)
month falling immediately
after Commencement
Date)
 
160,000
24,640,000
6
7th Payment Date
(the date falling on the
10th day of the sixth (6th)
month falling immediately
after Commencement
Date)
 
160,000
24,480,000


71

7
8th Payment Date
(the date falling on the
10th day of the seventh
(7th) month falling
immediately after
Commencement Date)
 
160,000
24,320,000
8
9th Payment Date
(the date falling on the
10th day of the eighth
(8th) month falling
immediately after
Commencement Date)
 
160,000
24,160,000
9
10th Payment Date
(the date falling on the
10th day of the ninth (9th)
month falling immediately
after Commencement
Date)
 
160,000
24,000,000
10
11th Payment Date
(the date falling on the
10th day of the tenth
(10th) month falling
immediately after
Commencement Date)
 
160,000
23,840,000
11
12th Payment Date
(the date falling on the
10th day of the eleventh
(11th) month falling
immediately after
Commencement Date)
 
160,000
23,680,000
12
13th Payment Date
(the date falling on the
10th day of the twelve
(12th) month falling
immediately after
Commencement Date)
 
160,000
23,520,000
13
14th Payment Date
(the date falling on the
10th day of the thirteenth
(13th) month falling
immediately after
Commencement Date)
 
160,000
23,360,000
14
15th Payment Date
(the date falling on the
10th day of the fourteenth
(14th) month falling
immediately after
Commencement Date)
 
160,000
23,200,000
15
16th Payment Date
(the date falling on the
10th day of the fifteenth
(15th) month falling
immediately after
Commencement Date)
 
160,000
23,040,000


72

16
17th Payment Date (the
date falling on the 10th
day of the sixteenth (16th)
month falling immediately
after Commencement
Date)
 
160,000
22,880,000
17
18th Payment Date
(the date falling on the
10th day of the
seventeenth (17th) month
falling immediately after
Commencement Date)
 
160,000
22,720,000
18
19th Payment Date
(the date falling on the
10th day of the eighteenth
(18th) month falling
immediately after
Commencement Date)
 
160,000
22,560,000
19
20th Payment Date
(the date falling on the
10th day of the nineteenth
(19th) month falling
immediately after
Commencement Date)
 
160,000
22,400,000
20
21st Payment Date
(the date falling on the
10th day of the twentieth
(20th) month falling
immediately after
Commencement Date)
 
160,000
22,240,000
21
22nd Payment Date
(the date falling on the
10th day of the twenty-first
(21st) month falling
immediately after
Commencement Date)
 
160,000
22,080,000
22
23rd Payment Date
(the date falling on the
10th day of the twenty-
second (22nd) month
falling immediately after
Commencement Date)
 
160,000
21,920,000
23
24th Payment Date
(the date falling on the
10th day of the twenty-
third (23rd) month falling
immediately after
Commencement Date)
 
160,000
21,760,000
24
25th Payment Date
(the date falling on the
10th day of the twenty-
fourth (24th) month falling
immediately after
Commencement Date)
 
160,000
21,600,000


73

25
26th Payment Date
(the date falling on the
10th day of the twenty-
fifth (25th) month falling
immediately after
Commencement Date)
 
160,000
21,440,000
26
27th Payment Date
(the date falling on the
10th day of the twenty-
sixth (26th) month falling
immediately after
Commencement Date)
 
160,000
21,280,000
27
28th Payment Date
(the date falling on the
10th day of the twenty-
seventh (27th) month falling
immediately after
Commencement Date)
 
160,000
21,120,000
28
29th Payment Date
(the date falling on the
10th day of the twenty-
eighth (28th) month falling
immediately after
Commencement Date)
 
160,000
20,960,000
29
30th Payment Date
(the date falling on the
10th day of the twenty-
ninth (29th) month falling
immediately after
Commencement Date)
 
160,000
20,800,000
30
31st Payment Date
(the date falling on the
10th day of the thirtieth
(30th) month falling
immediately after
Commencement Date)
 
160,000
20,640,000
31
32nd Payment Date
(the date falling on the
10th day of the thirty-first
(31st) month falling
immediately after
Commencement Date)
 
160,000
20,480,000
32
33rd Payment Date
(the date falling on the
10th day of the thirty-
second (32nd) month falling
immediately after
Commencement Date)
 
160,000
20,320,000
33
34th Payment Date
(the date falling on the
10th day of the thirty-third
(33rd) month falling
immediately after
Commencement Date)
 
160,000
20,160,000


74

34
35th Payment Date
(the date falling on the
10th day of the thirty-
fourth (34th) month falling
immediately after
Commencement Date)
 
160,000
20,000,000
35
36th Payment Date
(the date falling on the
10th day of the thirty-fifth
(35th) month falling
immediately after
Commencement Date)
 
160,000
19,840,000
36
37th Payment Date
(the date falling on the
10th day of the thirty-sixth
(36th) month falling
immediately after
Commencement Date)
 
160,000
19,680,000
37
38th Payment Date
(the date falling on the
10th day of the thirty-
seventh (37th) month falling
immediately after
Commencement Date)
 
160,000
19,520,000
38
39th Payment Date
(the date falling on the
10th day of the thirty-
eighth (38th) month falling
immediately after
Commencement Date)
 
160,000
19,360,000
39
40th Payment Date
(the date falling on the
10th day of the thirty-ninth
(39th) month falling
immediately after
Commencement Date)
 
160,000
19,200,000
40
41st Payment Date
(the date falling on the
10th day of the fortieth
(40th) month falling
immediately after
Commencement Date)
 
160,000
19,040,000
41
42nd Payment Date
(the date falling on the
10th day of the forty-first
(41st) month falling
immediately after
Commencement Date)
 
160,000
18,880,000
42
43rd Payment Date
(the date falling on the
10th day of the forty-
second (42nd) month
falling immediately after
Commencement Date)
 
160,000
18,720,000


75

43
44th Payment Date
(the date falling on the
10th day of the forty-third
(43rd) month falling
immediately after
Commencement Date)
 
160,000
18,560,000
44
45th Payment Date
(the date falling on the
10th day of the forty-
fourth (44th) month falling
immediately after
Commencement Date)
 
160,000
18,400,000
45
46th Payment Date
(the date falling on the
10th day of the forty-fifth
(45th) month falling
immediately after
Commencement Date)
 
160,000
18,240,000
46
47th Payment Date
(the date falling on the
10th day of the forty-sixth
(46th) month falling
immediately after
Commencement Date)
 
160,000
18,080,000
47
48th Payment Date
(the date falling on the
10th day of the forty-
seventh (47th) month
falling immediately after
Commencement Date)
 
160,000
17,920,000
48
49th Payment Date
(the date falling on the
10th day of the forty-
eighth (48th) month falling
immediately after
Commencement Date)
 
160,000
17,760,000
49
50th Payment Date
(the date falling on the
10th day of the forty-ninth
(49th) month falling
immediately after
Commencement Date)
 
160,000
17,600,000
50
51st Payment Date
(the date falling on the
10th day of the fiftieth
(50th) month falling
immediately after
Commencement Date)
 
160,000
17,440,000
51
52nd Payment Date
(the date falling on the
10th day of the fifty-first
(51st) month falling
immediately after
Commencement Date)
 
160,000
17,280,000


76

52
53rd Payment Date
(the date falling on the
10th day of the fifty-
second (52nd) month
falling immediately after
Commencement Date)
 
160,000
17,120,000
53
54th Payment Date
(the date falling on the
10th day of the fifty-third
(53rd) month falling
immediately after
Commencement Date)
 
160,000
16,960,000
54
55th Payment Date
(the date falling on the
10th day of the fifty-fourth
(54th) month falling
immediately after
Commencement Date)
 
160,000
16,800,000
55
56th Payment Date
(the date falling on the
10th day of the fifty-fifth
(55th) month falling
immediately after
Commencement Date)
 
160,000
16,640,000
56
57th Payment Date
(the date falling on the
10th day of the fifty-sixth
(56th) month falling
immediately after
Commencement Date)
 
160,000
16,480,000
57
58th Payment Date
(the date falling on the
10th day of the fifty-
seventh (57th) month
falling immediately after
Commencement Date)
 
160,000
16,320,000
58
59th Payment Date
(the date falling on the
10th day of the fifty-eighth
(58th) month falling
immediately after
Commencement Date)
 
160,000
16,160,000
59
60th Payment Date
(the date falling on the
10th day of the fifty-ninth
(59th) month falling
immediately after
Commencement Date)
 
160,000
16,000,000
60
61st Payment Date
(the date falling on the
10th day of the sixtieth
(60th) month falling
immediately after
Commencement Date)
 
160,000
15,840,000


77

61
62nd Payment Date
(the date falling on the
10th day of the sixty-first
(61st) month falling
immediately after
Commencement Date)
 
160,000
15,680,000
62
63rd Payment Date
(the date falling on the
10th day of the sixty-
second (62nd) month
falling immediately after
Commencement Date)
 
160,000
15,520,000
63
64th Payment Date
(the date falling on the
10th day of the sixty-third
(63rd) month falling
immediately after
Commencement Date)
 
160,000
15,360,000
64
65th Payment Date
(the date falling on the
10th day of the sixty-
fourth (64th) month falling
immediately after
Commencement Date)
 
160,000
15,200,000
65
66th Payment Date
(the date falling on the
10th day of the sixty-fifth
(65th) month falling
immediately after
Commencement Date)
 
160,000
15,040,000
66
67th Payment Date
(the date falling on the
10th day of the sixty-sixth
(66th) month falling
immediately after
Commencement Date)
 
160,000
14,880,000
67
68th Payment Date
(the date falling on the
10th day of the sixty-
seventh (67th) month
falling immediately after
Commencement Date)
 
160,000
14,720,000
68
69th Payment Date
(the date falling on the
10th day of the sixty-
eighth (68th) month falling
immediately after
Commencement Date)
 
160,000
14,560,000
69
70th Payment Date
(the date falling on the
10th day of the sixty-ninth
(69th) month falling
immediately after
Commencement Date)
 
160,000
14,400,000


78

70
71st Payment Date
(the date falling on the
10th day of the seventieth
(70th) month falling
immediately after
Commencement Date)
 
160,000
14,240,000
71
72nd Payment Date
(the date falling on the
10th day of the seventy-
first (71st) month falling
immediately after
Commencement Date)
 
160,000
14,080,000
72
73rd Payment Date
(the date falling on the
10th day of the seventy-
second (72nd) month falling
immediately after
Commencement Date)
 
160,000
13,920,000
73
74th Payment Date
(the date falling on the
10th day of the seventy-
third (73rd) month falling
immediately after
Commencement Date)
 
160,000
13,760,000
74
75th Payment Date
(the date falling on the
10th day of the seventy-
fourth (74th) month falling
immediately after
Commencement Date)
 
160,000
13,600,000
75
76th Payment Date
(the date falling on the
10th day of the seventy-
fifth (75th) month falling
immediately after
Commencement Date)
 
160,000
13,440,000
76
77th Payment Date
(the date falling on the
10th day of the seventy-
sixth (76th) month falling
immediately after
Commencement Date)
 
160,000
13,280,000
77
78th Payment Date
(the date falling on the
10th day of the seventy-
seventh (77th) month falling
immediately after
Commencement Date)
 
160,000
13,120,000
78
79th Payment Date
(the date falling on the
10th day of the seventy-
eighth (78th) month falling
immediately after
Commencement Date)
 
160,000
12,960,000


79

79
80th Payment Date
(the date falling on the
10th day of the seventy-
ninth (79th) month falling
immediately after
Commencement Date)
 
160,000
12,800,000
80
81st Payment Date
(the date falling on the
10th day of the eightieth
(80th) month falling
immediately after
Commencement Date)
 
160,000
12,640,000
81
82nd Payment Date
(the date falling on the
10th day of the eighty-first
(81st) month falling
immediately after
Commencement Date)
 
160,000
12,480,000
82
83rd Payment Date
(the date falling on the
10th day of the eighty-
second (82nd) month falling
immediately after
Commencement Date)
 
160,000
12,320,000
83
84th Payment Date
(the date falling on the
10th day of the eighty-
third (83rd) month falling
immediately after
Commencement Date)
 
160,000
12,160,000
84
85th Payment Date
(the date falling on the
10th day of the eighty-
fourth (84th) month falling
immediately after
Commencement Date)
 
160,000
12,000,000
85
86th Payment Date
(the date falling on the
10th day of the eighty-fifth
(85th) month falling
immediately after
Commencement Date)
 
160,000
11,840,000
86
87th Payment Date
(the date falling on the
10th day of the eighty-
sixth (86th) month falling
immediately after
Commencement Date)
 
160,000
11,680,000
87
88th Payment Date
(the date falling on the
10th day of the eighty-
seventh (87th) month falling
immediately after
Commencement Date)
 
160,000
11,520,000


80

88
89th Payment Date
(the date falling on the
10th day of the eighty-
eighth (88th) month falling
immediately after
Commencement Date)
 
160,000
11,360,000
89
90th Payment Date
(the date falling on the
10th day of the eighty-
ninth (89th) month falling
immediately after
Commencement Date)
 
160,000
11,200,000
90
91st Payment Date
(the date falling on the
10th day of the ninetieth
(90th) month falling
immediately after
Commencement Date)
 
160,000
11,040,000
91
92nd Payment Date
(the date falling on the
10th day of the ninety-first
(91st) month falling
immediately after
Commencement Date)
 
160,000
10,880,000
92
93rd Payment Date
(the date falling on the
10th day of the ninety-
second (92nd) month falling
immediately after
Commencement Date)
 
160,000
10,720,000
93
94th Payment Date
(the date falling on the
10th day of the ninety-
third (93rd) month falling
immediately after
Commencement Date)
 
160,000
10,560,000
94
95th Payment Date
(the date falling on the
10th day of the ninety-
fourth (94th) month falling
immediately after
Commencement Date)
 
160,000
10,400,000
95
96th Payment Date
(the date falling on the
10th day of the ninety-fifth
(95th) month falling
immediately after
Commencement Date)
 
160,000
10,240,000
96
97th Payment Date
(the date falling on the
10th day of the ninety-
sixth (96th) month falling
immediately after
Commencement Date)
 
160,000
10,080,000


81

97
98th Payment Date
(the date falling on the
10th day of the ninety-
seventh (97th) month falling
immediately after
Commencement Date)
 
160,000
9,920,000
98
99th Payment Date
(the date falling on the
10th day of the ninety-
eighth (98th) month falling
immediately after
Commencement Date)
 
160,000
9,760,000
99
100th Payment Date
(the date falling on the
10th day of the ninety-
ninth (99th) month falling
immediately after
Commencement Date)
 
160,000
9,600,000
100
101st Payment Date
(the date falling on the
10th day of the one
hundredth (100th) month
falling immediately after
Commencement Date)
 
160,000
9,440,000
101
102nd Payment Date
(the date falling on the
10th day of the one
hundred and first (101st)
month falling immediately
after Commencement
Date)
 
160,000
9,280,000
102
103rd Payment Date
(the date falling on the
10th day of the one
hundred and second
(102nd) month falling
immediately after
Commencement Date)
 
160,000
9,120,000
103
104th Payment Date
(the date falling on the
10th day of the one
hundred and third (103rd)
month falling immediately
after Commencement
Date)
 
160,000
8,960,000
104
105th Payment Date
(the date falling on the
10th day of the one
hundred and fourth (104th)
month falling immediately
after Commencement
Date)
 
160,000
8,800,000


82

105
106th Payment Date
(the date falling on the
10th day of the one
hundred and fifth (105th)
month falling immediately
after Commencement
Date)
 
160,000
8,640,000
106
107th Payment Date
(the date falling on the
10th day of the one
hundred and sixth (106th)
month falling immediately
after Commencement
Date)
 
160,000
8,480,000
107
108th Payment Date
(the date falling on the
10th day of the one
hundred and seventh
(107th) month falling
immediately after
Commencement Date)
 
160,000
8,320,000
108
109th Payment Date
(the date falling on the
10th day of the one
hundred and eighth (108th)
month falling immediately
after Commencement
Date)
 
160,000
8,160,000
109
110th Payment Date
(the date falling on the
10th day of the one
hundred and ninth (109th)
month falling immediately
after Commencement
Date)
 
160,000
8,000,000
110
111th Payment Date
(the date falling on the
10th day of the one
hundred and tenth (110th)
month falling immediately
after Commencement
Date)
 
160,000
7,840,000
111
112nd Payment Date
(the date falling on the
10th day of the one hundred and
eleventh (110th) month falling
immediately after
Commencement Date)
 
160,000
7,680,000


83

112
113rd Payment Date
(the date falling on the
10th day of the one
hundred and
twelve (112th) month falling
immediately after
Commencement Date)
 
160,000
7,520,000
113
114th Payment Date
(the date falling on the
10th day of the one
hundred and thirteenth
(113th) month falling
immediately after
Commencement Date)
 
160,000
7,360,000
114
115th Payment Date
(the date falling on the
10th day of the one
hundred and fourteenth
(114th) month falling
immediately after
Commencement Date)
 
160,000
7,200,000
115
116th Payment Date
(the date falling on the
10th day of the one
hundred and fifteenth
(115th) month falling
immediately after
Commencement Date)
 
160,000
7,040,000
116
117th Payment Date
(the date falling on the
10th day of the one
hundred and sixteenth
(116th) month falling
immediately after
Commencement Date)
 
160,000
6,880,000
117
118th Payment Date
(the date falling on the
10th day of the one
hundred and seventeenth
(117th) month falling
immediately after
Commencement Date)
 
160,000
6,720,000
118
119th Payment Date
(the date falling on the
10th day of the one
hundred and eighteenth
(118th) month falling
immediately after
Commencement Date)
 
160,000
6,560,000


84

   
119
  
120th Payment Date
(the date falling on the
10th day of the one
hundred nineteenth (119th)
month falling immediately
after Commencement
Date)
Balloon Payment:
6,400,000
   
160,000
    
 0


85


Schedule 3: Collateral Owners, Collateral Charterers and Collateral Vessels

Collateral Owners
Collateral Charterers
Collateral Vessels
Name: Oriental Fleet TANKER 12 Limited (东方富利 TANKER12 有限公司)
Place of Incorporation: Republic of the Marshall Islands
Registration No.: 101326 ("Collateral Owner A")
Name: Monte Carlo 71 Shipping Company Limited Place of Incorporation: Republic of the Marshall Islands
Registration No.: 69834 ("Collateral Charterer A")
One (1) d/w 50,000 product oil/chemical tanker named "Stenaweco Energy" presently registered in the name of Eco Energy LLC under the laws and flag of the Republic of the Marshall Islands with Official Number 5270, which on delivery to Collateral Owner A will be registered under the laws and flag of the Republic of the Marshall Islands with Official Number 5270
("Collateral Vessel A")
Name: Oriental Fleet TANKER 13 Limited (东方富利 TANKER13 有限公司)
Place of Incorporation: Republic of the Marshall Islands
Registration No.: 101327 ("Collateral Owner B")
Name: Monte Carlo One Shipping Company Limited Place of Incorporation: Republic of the Marshall Islands
Registration No.: 55324 ("Collateral Charterer B")
One (1) d/w 50,000 product oil/chemical tanker named "Stenaweco Evolution" presently registered in the name of Eco Evolution LLC under the laws and flag of the Republic of the Marshall Islands with Official Number 5271, which on delivery to Collateral Owner B will be registered under the laws and flag of the Republic of the Marshall Islands with Official Number 5271
("Collateral Vessel B")

86


Dated 2019
TOP SHIPS INC.
as Guarantor
and
ORIENTAL FLEET TANKER 11 LIMITED
(东方富利 TANKER11 有限公司)
as Owner
Guarantee
in respect of one (1) d/w 50,000 product oil/chemical tanker
named "STENAWECO EXCELLENCE" with IMO No. 9695834
HONG KONG



Table of Contents

Clause
Page No.
1.
Definitions and interpretation
1
2.
Guarantee and Indemnity
3
3.
Preservation of Rights
3
4.
Representations and Warranties
5
5.
Covenants
6
6.
Continuing Guarantee
6
7.
Payments
6
8.
Subordination
7
9.
Currency Conversion and Currency Indemnity
7
10.
Suspense Account
8
11.
Set-off
8
12.
Guarantor to comply with Charter
8
13.
Miscellaneous
8
14.
Assignments and Transfers
9
15.
Notices
9
16.
Governing Law and Jurisdiction
11
Schedule 1 : Representations and Warranties
13
Schedule 2 : Covenants
18
Schedule 3 : Form of Compliance Certificate
26
Guarantee – Execution Page (1/2)
28

i

This Guarantee is made by way of deed on                                        2019.  
Between:
(1)
TOP SHIPS INC., a corporation incorporated under the laws of the Republic of the Marshall Islands with registration no. 3571, as guarantor (the Guarantor); and
(2)
ORIENTAL FLEET TANKER 11 LIMITED (东方富利 TANKER11 有限公司), a corporation incorporated under the laws of the Republic of the Marshall Islands with registration no. 101325 and registered as a Foreign Maritime Entity under the laws of the Republic of Liberia with registration no. F-915410, as owner (the Owner).
Recitals:
(A)
The Owner and the Charterer (as defined below) are parties to a bareboat charter party dated on or about the date hereof (as amended and/or supplemented from time to time, the Charter), pursuant to which the Owner has agreed to charter the Vessel (as defined below) to the Charterer subject to the terms and conditions specified therein.
(B)
As a condition precedent to the obligations of the Owner under the Charter, the Guarantor is required to execute this Guarantee.
It is agreed as follows:
1.
Definitions and interpretation
1.1
Unless the context otherwise requires, words or expressions defined in the Charter (whether specifically or by reference) shall have the same meanings in this Guarantee and this construction shall survive the termination of the Charter. Where a word or phrase is defined in the Charter and this Guarantee, the definition in this Guarantee shall prevail.
1.2
In this Guarantee, the following words and expressions shall, except where the context otherwise requires, have the following respective meanings:
Bankruptcy includes a liquidation, receivership or administration and any form of suspension of payments, arrangement with creditors or reorganisation under any corporate or insolvency law of any country.
Charterer means MONTE CARLO SEVEN SHIPPING COMPANY LIMITED, a corporation incorporated under the laws of the Republic of the Marshall Islands with registration no. 60933.
Compliance Certificate means a certificate substantially in the form set out in Schedule 3 (Form of Compliance Certificate) which is delivered from time to time to
the Owner under Clause 12 (Compliance Certificate) of Schedule 2 (Covenants).
Guarantee means this deed of guarantee and indemnity (including the Recitals).
Guaranteed Obligations means all present and future payment and performance obligations of any of the Security Parties due, owing or incurred under any of the Transaction Documents to the Owner, in each case (i) which are (or which are expressed to be) now or at any time hereafter due to be performed and (ii) including as a consequence of any breach, non-performance, disclaimer or repudiation by any of the Security Parties (or by a liquidator, receiver, administrative receiver, administrator

1

or any similar officer in respect of any of the Security Parties) of any of such obligations of any of the Security Parties, in each case together with:

(a)
all costs, charges and expenses incurred by the Owner in connection with the protection, preservation or enforcement of its rights under any of the Transaction Documents; and

(b)
all indebtedness, moneys, obligations and liabilities due, owing or incurred in respect of any variations of the Transaction Documents or the obligations and liabilities imposed under such documents.
Parties means together, the parties to this Guarantee (each, a Party).
Security Perfection Requirements means, in respect of the Transaction Documents to which the Guarantor is a party:

(a)
execution of all notices, acknowledgments and consents as required under those Transaction Documents; and

(b)
any other Authorisations of those Transaction Documents as may be required or recommended in any Legal Opinion.
Vessel means one (1) d/w 50,000 product oil/chemical tanker named "STENAWECO EXCELLENCE" with IMO No. 9695834.
1.3
Unless otherwise specified and except where the context otherwise requires, any reference in this Guarantee to:

(a)
the singular includes the plural and vice versa;

(b)
any person shall be construed so as to include its successors and permitted assigns and permitted transferees in accordance with their respective interests;

(c)
any document (including the Charter, this Guarantee, and each other Transaction Document) shall be construed as a reference to such document as amended, restated, supplemented, varied or novated from time to time in accordance with its terms (to the extent that such document is at the relevant time in effect);

(d)
any provision of law shall be construed as a reference to that provision as amended, supplemented, varied, re-enacted, replaced or restated from time to time;

(e)
any applicable law includes, without limitation, (i) applicable laws, acts, codes, conventions, decrees, decree-laws, legislation, statutes, treaties and similar instruments, (ii) applicable final judgments, orders, determinations or awards of any court from which there is no right of appeal (or, if there is a right of appeal, such appeal is not prosecuted within the allowable time) and (iii) applicable directives, guidance, guidelines, notices, orders, regulations and rules of any governmental, judicial or regulatory authority (whether or not having the force of law but with which, if not having the force of law, compliance is customary);

(f)
a Clause shall be construed as a reference to a clause of this Guarantee;

2


(g)
continuing shall, in relation to a Termination Event, be construed as a reference to a Termination Event which persists and has not been waived or remedied in accordance with the terms of the Charter;

(h)
a person shall be construed as a reference to any association, company, corporation, firm, governmental, judicial or regulatory authority, individual, joint venture, partnership (including any limited partnership and any limited liability partnership) or trust (in each case whether or not having separate legal personality);

(i)
a successor shall be construed so as to mean a successor in title of a person and any person who under the applicable laws of its jurisdiction of incorporation or domicile has assumed the rights and obligations of such person or to which, under such laws or by agreement or otherwise, such rights and obligations have been transferred; and

(j)
the winding-up, dissolution, administration or re-organisation of a person shall be construed so as to include any equivalent or analogous proceedings under the applicable law of the jurisdiction in which such person is incorporated or formed or any jurisdiction in which such person carries on business including the seeking of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors.
1.4
Clause headings shall be ignored in the interpretation of this Guarantee.
2.
Guarantee and Indemnity
2.1
In consideration of the Owner entering into the Charter, the Guarantor irrevocably and unconditionally guarantees to the Owner the due payment and prompt performance by the Charterer and the other Security Parties of the Guaranteed Obligations when due in accordance with the Charter and the other Transaction Documents.
2.2
The Guarantor further irrevocably and unconditionally undertakes to pay to the Owner, on the Owner's demand, any such amount which is not paid by the Charterer or the other Security Parties when due and payable under the Charter, the Collateral Charters and the other Transaction Documents.
2.3
The Guarantor as principal obligor and as a separate and independent obligation and liability from its obligations and liabilities under Clauses 2.1 and 2.2 agrees to indemnify and keep indemnified the Owner, in full and on demand, from and against all and any losses, costs, claims, liabilities, damages, demands and expenses suffered or incurred by the Owner arising out of, or in connection with, any failure of the Charterer or any other Security Party to perform or discharge any of the Guaranteed Obligations.
2.4
The Owner may serve more than one demand under this Clause 2.
3.
Preservation of Rights
3.1
The obligations of the Guarantor contained in this Guarantee shall be in addition to and independent of every other security which the Owner may at any time hold in

3

respect of the Charterer's or any other Security Party's obligations under any Transaction Document.
3.2
The Guarantor shall be liable under this Guarantee as a principal and independent debtor and accordingly it shall not have, as regards this Guarantee, any of the rights or defences of a surety. Neither the obligations of the Guarantor contained in this Guarantee nor the rights, powers and remedies conferred upon the Owner by this Guarantee or by law shall be discharged, impaired or otherwise affected by:

(a)
the winding-up, dissolution, administration or reorganisation of the Charterer or any other Security Party or any other person or any change in its status, function, control or ownership;

(b)
any of the obligations of the Charterer or any other Security Party or any other person under any Transaction Document being or becoming illegal, invalid, void, voidable, unenforceable, ineffective or of limited force and effect in any respect;

(c)
any time or other indulgence being granted or agreed to be granted to either the Charterer or any other Security Party or any other person in respect of any of its obligations under any Transaction Document;

(d)
any amendment to, or any variation, waiver or release of, the Charter or the other Transaction Documents or any obligation of either the Charterer or any other Security Party or any other person under any Transaction Document;

(e)
any failure to take, or fully to take, any security contemplated by any Transaction Document or otherwise agreed to be taken in respect of any Security Party's obligations under any Transaction Document;

(f)
any failure to realise or fully to realise the value of, or any release, discharge, exchange or substitution of, any security taken in respect of any of either the Charterer's or any other Security Party's obligations under any Transaction Document;

(g)
any purported obligation of either the Charterer or any other Security Party or any other person to the Owner (or any security for that obligation) becoming wholly or in part void, invalid, illegal or unenforceable for any reason, including negligence; and

(h)
any other act, event or omission which, but for this Clause 3.2, might operate to discharge, impair or otherwise affect any of the obligations of the Guarantor contained in this Guarantee or any of the rights, powers or remedies conferred upon the Owner by this Guarantee, the Charter or any other Transaction Document or by law.
3.3
Any settlement, discharge or release between the Guarantor and the Owner in relation to this Guarantee shall be conditional upon no right, security, disposition or payment to or in favour of the Owner by any Security Party or any other person being avoided, set aside, reduced or ordered to be refunded as a result of the operation of any applicable law and if any such right, security, disposition or payment is so avoided, set aside, reduced or ordered to be refunded, the liability of the Guarantor shall continue and the Owner shall be entitled to recover under this Guarantee the value or

4

amount of that right, security, disposition or payment, in each case as if any such settlement, discharge or release had not occurred.
3.4
The Owner shall not be obliged before exercising any of the rights, powers or remedies conferred upon it by this Guarantee or by law:

(a)
to take any action or obtain judgment in any court against the Charterer or any other Security Party;

(b)
to make or file any claim or proof in a winding-up or dissolution of either of the Charterer or any other Security Party; or

(c)
to enforce or seek to enforce any security taken in respect of the Charterer's or any other Security Party's obligations under the Charter or any other Transaction Document.
3.5
The Guarantor agrees that, for so long as the Charterer or any other Security Party is under any actual or contingent obligation under the Charter or any other Transaction Document, the Guarantor shall not exercise any right which the Guarantor may at any time have by reason of this Guarantee or the performance by it of its obligations under this Guarantee:

(a)
to be indemnified by the Charterer or any other Security Party or to receive any collateral from the Charterer or any other Security Party in respect of the Guarantor's obligations under this Guarantee;

(b)
to claim any contribution from any other guarantor of the Charterer's or any other Security Party's obligations under the Charter or any other Transaction Document;

(c)
to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any of the Owner's rights under the Charter or any Transaction Document or of any other guarantee or security taken pursuant to, or in connection with, the Charter or any other Transaction Document;

(d)
to claim or prove in a liquidation or other insolvency proceeding of the Charterer or any other Security Party or any co-surety in competition with the Owner; and/or

(e)
receive, claim or have the benefit of any payment, distribution or security from or on account of the Charterer or any other Security Party, or exercise any right of set-off against the Charterer or any other Security Party.
4.
Representations and Warranties
The Guarantor acknowledges that the Owner has entered into the Charter and the other Transaction Documents on the basis of, and in full reliance on the representations and warranties expressed to be made by it and set out in Schedule 1 (Representations and Warranties) to this Guarantee on the date hereof and on each Payment Date under the Charter. The Guarantor covenants that on each of such dates, each of the representations and warranties set forth in Schedule 1 (Representations and Warranties) to this Guarantee is true and correct and not misleading in any material respects.

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5.
Covenants
The Guarantor hereby covenants in favour of the Owner in the terms of the undertakings expressed to be made by it and set out in Schedule 2 (Covenants) to this Guarantee.
6.
Continuing Guarantee
The obligations of the Guarantor contained in this Guarantee shall constitute and be continuing obligations notwithstanding any settlement of account or other matter or thing whatsoever, and shall not be considered as satisfied or discharged by any intermediate payment, satisfaction or settlement of any part of the Guaranteed Obligations and shall continue in full force and effect until all of the Guaranteed Obligations (whether actual or contingent) have been irrevocably and unconditionally paid and discharged in full.
7.
Payments
7.1
All payments to be made by the Guarantor under this Guarantee shall be made in the currency in which the corresponding payment obligation of the Charterer is due and payable under the Charter or each other applicable Transaction Document (as the case may be) and in immediately available, freely transferable, cleared funds to such account of the Owner with such bank as the Owner shall from time to time have specified for this purpose.
7.2
All payments to be made by the Guarantor under this Guarantee shall be made without set-off or counterclaim and without any deduction or withholding whatsoever. If the Guarantor is obliged by law to make any deduction or withholding from any such payment, the amount due from the Guarantor in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Owner receives a net amount equal to the amount that the Owner would have received had no such deduction or withholding been required to be made.
7.3
The Guarantor agrees that:

(a)
if any payment received by the Owner in respect of moneys owing or due and payable by the Guarantor is avoided on the subsequent insolvency or liquidation of the Guarantor, under any laws relating to insolvency or liquidation, that payment does not discharge or diminish the liability of the Guarantor under this Guarantee, which continues to apply as if that payment at all times remained owing; and

(b)
if the Guarantor has not paid to the Owner the full amount of all sums due under this Guarantee, the Owner may (for the purpose of enabling the Owner to sue the Guarantor and/or any other guarantor of the liabilities which are hereby guaranteed or to prove in its or their liquidation or in any similar proceedings for any moneys due and unpaid by the Guarantor to the Owner) at any time place and keep for such time as it may think fit any moneys received under this Guarantee, or under such other guarantees or from any other person, to the credit of an account or accounts (bearing interest at a commercial rate) without any obligation on the part of the Owner to apply the same or any part thereof in or towards the discharge of the indebtedness and liabilities of the Guarantor to the Owner.

6

7.4
All moneys received by the Owner pursuant to this Guarantee after the occurrence of a Termination Event which is continuing shall be held by the Owner in trust and applied by the Owner in the following order:

(a)
firstly, to pay or retain all costs and expenses of whatever nature incurred by the Owner under the Transaction Documents;

(b)
secondly, to be applied in and towards payment of the Guaranteed Obligations (whether the same are due and payable or not); and

(c)
fifthly, the surplus (if any) shall be paid to the Guarantor or such other person as may for the time being be entitled thereto.
8.
Subordination
All rights which the Guarantor at any time has (whether in respect of this Guarantee or any other Transaction Document) against the Charterer, any other Security Party or their respective assets shall be fully subordinated to the rights of the Owner under the Transaction Documents; and in particular after a Termination Event has occurred and is continuing under the Charter and the Owner has, by notice to the Guarantor, brought this Clause 8 into operation, which notice shall take effect immediately, the Guarantor shall not:

(a)
claim, or in a Bankruptcy of the Charterer or any other Security Party prove for, any amount payable to the Guarantor by the Charterer or any other Security Party, whether in respect of this Guarantee or any other Transaction Document;

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

(c)
claim to set-off any such amount against any amount payable by the Guarantor to the Charterer or any other Security Party; or

(d)
claim any subrogation or other right in respect of any Transaction Document or any sum received or recovered by either the Charterer or any other Security Party under a Transaction Document.
9.
Currency Conversion and Currency Indemnity

(a)
The Owner may convert any money received or realised by it under or pursuant to this Guarantee which is not in the currency in which the relevant sum is due and payable under each applicable Transaction Document from that currency into the currency in which such sum is due at the rate of exchange on the relevant date of the conversion.

(b)
If, under any applicable law, whether as a result of judgment against the Guarantor or the liquidation of the Guarantor or for any other reason, any payment to be made by the Guarantor under or in connection with this Guarantee is made or is recovered in a currency other than the currency (the currency of obligation) in which it is payable pursuant to this Guarantee then, to the extent that the payment (when converted into the currency of obligation at the rate of exchange on the date for the determination of liabilities permitted by the applicable law) falls short of the amount unpaid under this Guarantee,

7

the Guarantor shall as a separate and independent obligation, fully indemnify the Owner against the amount of the shortfall.

(c)
For the purposes of this Clause 9, rate of exchange means the best rate at which the Owner is able on the relevant date to purchase the currency of obligation with the other currency.
10.
Suspense Account
If the Guarantor has not paid to the Owner the full amount of all sums due under this Guarantee, all moneys received, recovered or realised by the Owner under or pursuant to this Guarantee (including the proceeds of any conversion of currency) may in its discretion (for inter alia the purpose of claiming or proving in a Bankruptcy of the Charterer or any other Security Party) be credited to and held in any suspense or impersonal account pending their application from time to time in or towards the discharge of the Guarantor's obligations under this Guarantee.
11.
Set-off
If the Guarantor has not paid to the Owner the full amount of all sums due under this Guarantee, the Owner may (but shall not be obliged to) set-off any obligation in respect of Guaranteed Obligations which are due and payable by the Guarantor against any obligation (contingent or otherwise) owed by the Owner to the Guarantor (regardless of the place of payment, or currency of either obligation) and apply any credit balance to which the Guarantor is entitled on any account with the Owner in payment of the Guaranteed Obligations. The Owner may, at the cost of the Guarantor, effect such currency exchanges as it considers are appropriate to implement such set-off.
12.
Guarantor to comply with Charter
The Guarantor agrees with the Owner to comply with all provisions of the Charter which are applicable to itself in the same way as if those provisions had been set out (with any necessary modifications) in this Guarantee.
13.
Miscellaneous
13.1
This Guarantee may be executed in any number of counterparts and on separate counterparts, each of which when executed shall constitute an original, but all counterparts shall together constitute one and the same instrument.
13.2
Any amendment, supplement or variation to any Transaction Document to which the Guarantor is a party must be in writing and executed by each party thereto.
13.3
The Guarantor may not terminate this Guarantee by notice to the Owner or otherwise until the Guaranteed Obligations are irrevocably paid to the Owner in full.
13.4
Neither the failure to exercise, nor the delay in any exercise of, nor the single or partial exercise of, any right, power or remedy by the Owner under or in relation to any Transaction Document to which the Guarantor is a party shall (a) operate as a waiver of such right, power or remedy, (b) prevent any further or other exercise of such right, power or remedy or (c) prevent the exercise of any other right, power or remedy. The rights, powers and remedies of the Owner provided in any Transaction

8

Document to which the Guarantor is a party are cumulative and not exclusive of any rights, powers or remedies provided by law.
13.5
Any waiver or consent given by a party under or in relation to any Transaction Document to which the Guarantor is a party must, in order to be effective, be in writing and shall only be effective in the specific circumstances in which it is given.
13.6
If at any time any provision of any Transaction Document to which the Guarantor is a party is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of that Transaction Document nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired.
13.7
Any certificate or determination by the Owner as to any rate of interest or as to any other amount payable under and pursuant to any Transaction Document to which the Guarantor is a party shall, in the absence of manifest error, be conclusive and binding on Guarantor.
13.8
A person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of any term of this Guarantee.
13.9
The Guarantor shall pay to the Owner on demand all fees, costs and expenses (including legal, survey and other costs) payable or incurred by the Owner in connection with the enforcement of or preservation of the Owner's rights under each Transaction Document to which the Guarantor is a party. All amounts payable pursuant to this Clause 13 shall be paid in the currency in which they are incurred to the Owner.
14.
Assignments and Transfers
14.1
This Guarantee shall be binding upon and inure to the benefit of each Party and its respective successors, permitted assigns and permitted transferees.
14.2
The Guarantor shall not assign, transfer (whether voluntarily or involuntarily, by operation of law or otherwise) or create or permit to exist any Security Interest over, any of its rights or obligations under this Guarantee.
15.
Notices
15.1
Communications in writing
Any communication to be made under or in connection with the Transaction Documents to which the Guarantor is a party shall be made in writing and, unless otherwise stated, may be given in person, by post, fax or email.
15.2
Addresses
Except as otherwise provided for in this Guarantee, all notices or other communications under or in respect of the Transaction Documents to which the Guarantor is a party to either party thereto shall be in writing and shall be made or given to such party at the address, facsimile number or email address appearing below

9

(or at such other address, facsimile number or email address as such party may hereafter specify for such purposes to the other by notice in writing):

(a)
In the case of the Guarantor:
 
Address:
1, Vas. Sofias & Meg.
   
Alexandrou Str.
   
15124, Maroussi, Athens, Greece
 
Attention:
Andreas Louka
 
Email:
louka@loukapartners.com
 
Fax:
+30 2108128320
     

(b)
In the case of the Owner:
 
Address:
c/o Oriental Fleet International Company Limited
   
50/F, COSCO Tower
   
183 Queen's Road Central
   
Hong Kong
 
Attention:
Belinda Hou / Thomas Xing / Xu Ying
 
Email:
lou.can@coscoshipping.com / thomas.xing@ofi.com.hk /
   
asset@coscoshipping.com
 
Fax:
+852 2339 1881
     
15.3
Delivery
15.3.1
Any communication or document made or delivered by a Party to the other Party under or in connection with the Transaction Documents to which the Guarantor is a party will only be effective:

(a)
if by way of fax, when received in legible form;

(b)
if by way of letter, when it has been left at the relevant address to which it has been posted with postage prepaid in an envelope addressed to the relevant party at that address, and, if a particular department or officer is specified as part of its address details provided under Clause 15.2 (Addresses), if addressed to that department or officer; or

(c)
if by way of email, only when received in a legible form by the email address of the person to whom the communication is made.
15.3.2
All communications and documents delivered pursuant to or otherwise relating to the Transaction Documents to which the Guarantor is a party shall be either in English or Chinese or accompanied by a certified English or Chinese translation.
15.4
Validity of demands
A demand under this Guarantee shall be valid notwithstanding that it is served:

(a)
on the date on which the amount to which it relates is due and payable by the Charterer or any other Security Party under an applicable Transaction Document (as the case may be); or

10


(b)
at the same time as the service of a notice under the applicable Transaction Document;
and a demand under this Guarantee may refer to all amounts payable under or in connection with the Transaction Documents to which the Charterer or any other Security Party is a party without specifying a particular sum or aggregate sum.
16.
Governing Law and Jurisdiction
16.1
This Guarantee and any non-contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with English law and any Dispute arising out of or in connection with this Guarantee shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory re-enactment or modification thereof save to the extent necessary to give effect to the provisions of this Clause.
16.2
The arbitration reference shall be to three arbitrators:

(a)
A Party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other Party requiring the other Party to appoint its own arbitrator within fourteen (14) calendar days of that notice, and stating it will appoint its arbitrator as sole arbitrator unless the other Party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified.

(b)
If the other Party does not appoint its own arbitrator and gives notice that it has done so within the fourteen (14) days specified, the Party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other Party, appoint its arbitrator as sole arbitrator and shall advise the other Party accordingly. The award of a sole arbitrator shall be binding on both Parties as if he/she had been appointed by agreement.

(c)
Where each Party appoints its own arbitrator, then the two (2) arbitrators so appointed may proceed with the arbitration and at any time thereafter appoint a third arbitrator so long as they do so before any substantive hearing or forthwith in the event that they cannot agree on any matter relating to the arbitration. If the said two arbitrators do not appoint a third within fourteen (14) days of one calling upon the other to do so, or if they are in disagreement as to the third arbitrator, either arbitrator or a Party shall apply to the London Maritime Arbitrators Association (LMAA) for the appointment of the third arbitrator.

(d)
The language used in the arbitration shall be English. The arbitration shall be conducted in accordance with the LMAA Terms current at the time when the arbitration proceedings are commenced.

(e)
Nothing herein shall prevent the Parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator.
16.3
In this Clause 16, proceedings means proceedings of any kind, including an application for a provisional or protective measure and a Dispute means any dispute arising out of or in connection with this Guarantee (including a dispute relating to the

11

existence, validity or termination of this Guarantee) or any non-contractual obligation arising out of or in connection with this Guarantee.
16.4
The Guarantor waives any rights of sovereign immunity which it or any of its properties may enjoy in any jurisdiction and subjects itself to civil and commercial law with respect to its obligations under this Guarantee.
[Schedules and execution pages to follow]

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Schedule 1: Representations and Warranties
1.
Status

(a)
It is a company duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation.

(b)
It has the power to own its assets and carry on its business as it is being conducted.

(c)
It has read and understood the terms of this Guarantee, the Charter and the other Transaction Documents to which the Charterer or any other Security Party is a party and has taken appropriate legal advice as to the extent of its obligations and liabilities under the Transaction Documents to which the Guarantor is a party.

(d)
The Charterer is a wholly-owned Subsidiary of the Guarantor, which is ultimately controlled by the Substantial Shareholder.

(e)
It is a publicly listed entity on the NASDAQ stock exchange under the symbol "TOPS".
2.
Compliance with anti-money laundering legislation
It has complied with all anti-money laundering legislation (to the extent applicable to it) that is relevant in the context of the transactions contemplated by the Transaction Documents to which it is a party.
3.
Binding obligations

(a)
The obligations expressed to be assumed by it in the Transaction Documents to which it is a party are, subject to the Legal Reservations, legal, valid, binding and enforceable obligations.

(b)
Without limiting the generality of paragraph (a) above, subject to the Security Perfection Requirements, each Security Document to which it is a party creates the Security Interests which it purports to create and such Security Interests are valid and effective.
4.
Non-conflict with other obligations
The entry into and performance by it of, and the transactions contemplated by, the Transaction Documents to which it is a party does not and will not conflict with:

(a)
any law or regulation applicable to it;

(b)
its constitutional documents; or

(c)
any agreement or instrument binding upon it or any of its assets,
nor result in the existence of, or oblige it to create, any Security Interest over any of its assets.

13

5.
Power and authority
It has the power to enter into, perform and deliver, and has taken (or will, prior to its execution thereof, take) all necessary action to authorise its entry into, performance and delivery of, the Transaction Documents to which it is a party.
6.
Validity and admissibility in evidence
All Authorisations, consents, approvals, resolutions, licences, exemptions, filings, notarisations or registrations required:

(a)
to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Transaction Documents to which it is a party;

(b)
to make the Transaction Documents to which it is a party admissible in evidence in its Relevant Jurisdictions;

(c)
for it to carry on its business, and which are material; and

(d)
to enable it to create the Security Interest to be created by it under any Security Document to which it is a party and to ensure that such Security Interest has the priority and ranking it is expressed to have,
have been obtained or effected and are in full force and effect, subject in the case of any Security Document to which it is a party to the Security Perfection Requirements.
7.
Governing law and enforcement
Subject to the Legal Reservations:

(a)
the choice of each relevant law as the governing law of the Transaction Documents to which it is a party to and the agreement by such party to refer disputes to the relevant courts or tribunal as stated in such Transaction Document will be recognised and enforced in its Relevant Jurisdictions; and

(b)
any arbitral award, ruling or judgment obtained in each Relevant Jurisdiction in relation to the Transaction Documents to which it is a party will be recognised and enforced in its Relevant Jurisdictions.
8.
Deduction of Tax
Except as specifically referred to in any Legal Opinion, it is not required under the law of each of its Relevant Jurisdictions or at its address specified in the Transaction Documents to which it is a party to make any deduction for or on account of any tax from any payment of interest it may make under the Transaction Documents to which it is a party.
9.
Financial statements

(a)
Its financial statements most recently supplied to the Owner (which, at the date of this Guarantee, are its Original Financial Statements) were prepared in accordance with GAAP consistently applied save to the extent expressly disclosed in such financial statements.

14


(b)
Its financial statements most recently supplied to the Owner (which, at the date of this Guarantee, are its Original Financial Statements) give a true and fair view of (if audited) or fairly represent (if unaudited) its consolidated financial condition and operations for the period to which they relate, save to the extent expressly disclosed in such financial statements.

(c)
There has been no material adverse change in its business or consolidated financial condition since the date of its Original Financial Statements.
10.
No filing or stamp taxes
Except as specifically referred to in any Legal Opinions, under the law of its Relevant Jurisdictions it is not necessary that any Transaction Document to which it is a party be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to those Transaction Document or the transactions contemplated by those Transaction Document.
11.
No default

(a)
No Termination Event has occurred and is continuing or might reasonably be expected to result from the entry into or performance of, or the transactions contemplated by, any Transaction Document to which it is a party.

(b)
No other event or circumstance has occurred and is continuing which (with the expiry of a grace period, the giving of notice or any combination of the foregoing) constitutes a default under any deed or instrument which is binding on the Guarantor, or to which its assets are subject, which might have a Material Adverse Effect on the Guarantor's ability to perform its obligations under any Transaction Document to which it is a party.
12.
No breach of laws
It has not breached any law or regulation which breach has or is reasonably likely to result in a Material Adverse Effect on the Guarantor.
13.
No misleading information

(a)
All information provided by it or on its behalf in relation to the negotiation and preparation of any Transaction Document to which it is a party was true, complete and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated and was not misleading in any respect.

(b)
All financial projections provided by it or on its behalf have been prepared on the basis of recent historical information and on the basis of reasonable assumptions.

(c)
Nothing has occurred or been omitted from the information so provided and no information has been given or withheld that results in the information provided by it or on its behalf being untrue or misleading in any material respect.

15

14.
Pari passu ranking
Its payment obligations under Transaction Documents to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
15.
No proceedings

(a)
No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency (which, if adversely determined, would have a Material Adverse Effect on the Guarantor) have been started or (to the best of its knowledge and belief) threatened against it.

(b)
No judgment or order of a court, arbitral body or agency which might reasonably be expected to have a Material Adverse Effect has been made against it.
16.
No immunity
It is subject to civil commercial law with respect to its obligations under the Transaction Documents to which it is a party and neither it nor any of its assets is entitled to any right of immunity and the entry into and performance by it of the Transaction Documents to which it is a party constitute private and commercial acts.
17.
Taxation

(a)
It has complied in all material respects with all tax laws and regulations applicable to it and its business.

(b)
It is not materially overdue in the filing of any tax returns and is not overdue in the payment of any amount in respect of tax.

(c)
No claims or investigations are being made or conducted against it with respect to taxes.

(d)
It is resident for tax purposes only in its jurisdiction of incorporation except (i) the taxes that are being contested in good faith by appropriate proceedings and for which the Guarantor has set aside on its books adequate reserves and (ii) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
18.
Disclosure of material facts
It is not aware of any material facts or circumstances which have not been disclosed to the Owner and which might, if disclosed, have adversely affected the decision of a person considering whether or not to enter into the transactions of the nature contemplated by the Transaction Documents.
19.
Place of Business and Non-Hong Kong company
It is not registered as a non-Hong Kong company under the Companies Ordinance (Cap. 622 of the Laws of Hong Kong), and it has not established a place of business in England.

16

20.
Transaction Documents
It is aware of and approves the terms of the Charter and each of the other Transaction Documents.
21.
Sanctions

(a)
No Security Party is a Restricted Person.

(b)
Each Security Party is in compliance with all Sanctions laws, and none of them have been or are currently being investigated on compliance with Sanctions, they have not received notice or are aware of any claim, action, suit or proceeding against any of them with respect to Sanctions and they have not taken any action to evade the application of Sanctions.
22.
Authorised signatories
Any person specified as its authorised signatory under Addendum No.1 or paragraph (f) of Clause 16 (Information: miscellaneous) of Schedule 2 (Covenants) is authorised to sign all documents and notices on its behalf.

17

Schedule 2: Covenants
The Guarantor hereby undertakes in favour of the Owner that as at the date hereof and at all times throughout the Charter Period:
1.
Status

(a)
It will maintain its existence as a company duly incorporated and validly existing under the laws of its jurisdiction of incorporation.

(b)
It will remain a publicly listed entity on the NASDAQ stock exchange under the symbol "TOPS".
2.
Authorisations and Compliance with applicable law

(a)
It shall promptly:

(i)
obtain, comply with and do all that is necessary to maintain in full force and effect; and

(ii)
supply copies to the Owner of,
all consents, licences, approvals, permits or Authorisations of or registrations or filings required (A) to enable it to perform its obligations under the Transaction Documents to which it is a party and (B) to ensure the legality, validity, enforceability or admissibility in evidence in each of its Relevant Jurisdictions of any Transaction Document to which it is subject.

(b)
It shall comply in all respects with all laws to which it may be subject.

(c)
It shall ensure that all the Security Perfection Requirements have been or will be done or obtained (as the case may be) no later than the latest date permitted by applicable law and in any event by such date as the Owner may specify.
3.
Compliance with obligations
It will comply with and perform all the obligations expressed to be assumed by it in each Transaction Document to which it is a party and with all laws applicable to it in
connection with the transactions contemplated by those Transaction Documents.
4.
No prejudice to interests
It will not (otherwise than as expressly contemplated by this Guarantee) do anything or take any action or knowingly omit to take any action which has or is likely to have the effect of prejudicing the right, title and interest of any Security Party or the Owner in relation to the Vessel, the Insurances, the Charter, any other Transaction Document or any other trust property.
5.
Exercise of rights
It will not, without first obtaining the Owner's prior written consent, seek to recover, whether directly or by set-off, lien, counterclaim or otherwise, nor accept any money or other property, nor exercise any rights, in respect of any sum or security which may

18

be or become due to the Guarantor in respect of the Guaranteed Obligations by the Charterer or any third party.
6.
Further assurance
At no cost to the Owner, it will take all such actions and do all such things the Owner may from time to time require so as to establish, maintain, perfect, preserve and/or protect the right, title and interest of the Owner in relation to this Guarantee or any other Transaction Documents to which it is a party, against, and in priority to, the claims of any other person having regard to customary and available practice and procedures accepted and adopted by international financiers.
7.
Pari passu ranking
It will ensure that its payment obligations under each Transaction Document to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law.
8.
Negative pledge
Except as expressly permitted by the Charter or the other Transaction Documents, it will not:

(a)
sell, transfer or otherwise dispose of its right, title and interest in and to any collateral which is the subject of security created under any Transaction Document;

(b)
create, incur, assume or permit or cause to exist any Security Interest over its right, title and interest in and to any collateral which is the subject of security created under any Transaction Document; or

(c)
consent to the taking of any such action described in the preceding two paragraphs by any other person (whether pursuant to the terms of the Transaction Documents or otherwise),
in each case without the prior written consent of the Owner.
9.
Security Parties
It will ensure that:

(a)
the Charterer and each of the Security Parties maintains its existence as a company duly incorporated and validly existing and, where applicable, in good standing under the laws of its jurisdiction of incorporation in compliance with all applicable law; and

(b)
the Charterer and each of the Security Parties is managed and administered in the manner that is required by the Transaction Documents.
10.
Subordination

(a)
Pursuant to paragraph (z)(iii) of Clause 47.1 (General Covenants) of the Charter, the Guarantor acknowledges to and undertakes with the Owner that, at all times throughout the Charter Period, all shareholder's and intercompany

19

loans from time to time made by the Guarantor or any other member of the Group to the Charterer:

(i)
are and shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterer under the Charter and the other Transaction Documents;

(ii)
shall not be repaid or be subject to any payment of interest (although interest may accrue);

(iii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterer; and

(iv)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim.

(b)
Pursuant to paragraph (aa)(iv) of Clause 47.1 (General Covenants) of the Charter, the Guarantor acknowledges to and undertakes with the Owner that, at all times throughout the Charter Period, all shareholder's and intercompany advances from time to time made by the Guarantor or any other member of the Group to the Charterer:

(i)
shall be non-interest bearing;

(ii)
are and shall remain unsecured by any Security Interest over the whole or any part of the assets of the Charterers;

(iii)
are not and shall not be capable of becoming subject to any right of set-off or counterclaim; and

(iv)
upon occurrence of a Termination Event which is continuing:

(A)
shall not be repaid; and

(B)
shall be subordinated in all respects to all amounts owing and which may in future become owing by the Charterers under this Charter and the other Transaction Documents.
11.
Financial Statements
It shall supply to the Owner:

(a)
as soon as the same become available, but in any event within 120 days after the end of each of its financial years, its audited consolidated financial statements for that financial year; and

(b)
as soon as the same become available, but in any event within 75 days after the end of each half of each of its financial years, its unaudited consolidated financial statements for that financial half year.
12.
Compliance Certificate

(a)
It shall supply to the Owner, with each set of financial statements delivered pursuant to paragraphs (a) and (b) of Clause 11 (Financial Statements) of this

20

Schedule, a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 14 (Financial Covenants) of this Schedule as at the date at which those financial statements were drawn up.

(b)
Each Compliance Certificate delivered pursuant to paragraph (a) above shall be signed by its director or its chief financial officer.
13.
Requirements as to financial statements

(a)
Each set of financial statements delivered by it pursuant to Clause 11 (Financial statements) shall be certified by (its director or its chief financial officer) as giving a true and fair view of (in the case of any such financial statements which are audited) or fairly representing (in the case of any such financial statements which are unaudited) its consolidated financial condition and operations as at the date of and for the period in relation to which those financial statements were drawn up.

(b)
It shall procure that each set of financial statements delivered pursuant to Clause 11 (Financial Statements) of this Schedule is in the English language and prepared using GAAP, the accounting practices and financial reference periods consistent with those applied in the preparation of its Original Financial Statements unless, in relation to any set of financial statements, it notifies the Owner that there has been a change in GAAP, the accounting practices or financial reference periods and its auditors deliver to the Owner:

(i)
a description of any change necessary for those financial statements to reflect the GAAP, the accounting practices and financial reference periods upon which its Original Financial Statements were prepared; and

(ii)
sufficient information, in form and substance as may be reasonably required by the Owner, to enable the Owner to determine whether Clause 14 (Financial Covenants) of this Schedule has been complied with and make an accurate comparison between the financial position indicated in those financial statements and its Original Financial Statements.
Any reference in this Guarantee and the other Transaction Documents to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which its Original Financial Statements were prepared.
14.
Financial Covenants

(a)
The Guarantor undertakes that it shall ensure at all times:

(i)
Leverage Ratio shall not at any time exceed 75%; and

(ii)
Free Liquidity shall not be less than the aggregate of the following:

(A)
US$1,000,000 times number of Fleet Vessels which are Suezmax vessels;

21


(B)
US$750,000 times number of Fleet Vessels which are MR tankers; and

(C)
US$500,000 times number of MR tankers are bareboat chartered-in to a member of the Group.

(b)
The financial covenants set out in paragraph (a) shall be tested by reference to the financial statements and Compliance Certificates delivered by the Guarantor pursuant to Clause 11 (Financial Statements), Clause 12 (Compliance Certificate) and Clause 13 (Requirements as to financial statements) of this Schedule in respect of the Relevant Period.

(c)
In this Clause:

(i)
Cash means, at any time, the aggregate at such time of the amounts categorised as Cash and Cash Equivalent in the Guarantor's consolidated financial statements.

(ii)
Cash Equivalent Investments means investments that are short term investments (excluding equity investments) which are readily convertible into cash without incurring any significant premium or penalty.

(iii)
Consolidated Total Debt in respect of the Guarantor means at any time the aggregate amount of all obligations of the Group which would, in accordance with GAAP, be considered as consolidated total debt of the Group.

(iv)
Consolidated Total Net Debt in respect of the Guarantor means at any time Consolidated Total Debt less Cash and Cash Equivalent and Restricted Cash.

(v)
Fleet Vessel means, at any time, each vessel registered in the name of a member of the Group as owner.

(vi)
Free Liquidity means, at any time, any unrestricted Cash and Cash Equivalent of the Guarantor which is not subject to any security interest adjusted to include any Cash held under any minimum liquidity requirements and debt service accounts.

(vii)
Joint Venture Vessel means any vessel registered in the name of an owner whose shareholding is owned by the Guarantor by 50% or more.

(viii)
Leverage Ratio means, the ratio (expressed as a percentage) of:

(1)
the Consolidated Total Net Debt; and

(2)
the aggregate Market Value of all Fleet Vessels, including 50% of Joint Venture Vessels.

22


(ix)
Market Value means, in relation to a Fleet Vessel and a Joint Venture Vessel, at a relevant date, one (1) valuation obtained by the Charterer (or failing which the Owner) and prepared:

(1)
on a date no earlier than thirty (30) days prior to the relevant date;

(2)
by one (1) Approved Valuer;

(3)
with or without physical inspection of such Fleet Vessel or Joint Venture Vessel;

(4)
on the basis of a sale for prompt delivery for cash on normal arm's length commercial terms as between a willing seller and a willing buyer, free of any existing charter or other contract of employment; and

(5)
if a range of valuation is given by the Approved Valuer, the lower end of the range shall apply,
with the expenses of all such valuations being borne by the Charterer.

(x)
Relevant Period means each period of six (6) months immediately prior to the date of computation.

(xi)
Restricted Cash means, at any time, the aggregate at such time of the amounts categorised as Restricted Cash in the Guarantor's consolidated financial statements.
15.
Notification
It shall promptly and diligently:

(a)
notify the Owner as soon as it becomes aware of the occurrence of:

(i)
any Termination Event; and

(ii)
any other matters which might lead to an occurrence of any Termination Event; and

(b)
notify the Owner of any steps or action which it is taking, or is considering taking, to remedy or mitigate the effect of such occurrence.
16.
Information: miscellaneous
It shall supply to the Owner:

(a)
all documents dispatched by it to its shareholders (or any class of them) or its creditors generally at the same time as they are despatched (other than any document which is required to be filed by the Guarantor in accordance with the rules of, and has been filed and posted onto any electronic website maintained by, any stock exchange on which shares in or other securities of the Guarantor are listed);

23


(b)
promptly, any announcement, notice or other document relating specifically to the Guarantor posted onto any electronic website maintained by any stock exchange on which shares in or other securities of the Guarantor are listed or any electronic website required by any such stock exchange to be maintained by or on behalf of the Guarantor;

(c)
promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against it, and which might, if adversely determined, have a Material Adverse Effect;

(d)
promptly upon becoming aware of them, details of any judgment or order of a court, arbitral body or agency which is made against it, and which might have a Material Adverse Effect;

(e)
promptly, such information regarding its consolidated financial condition, business and operations as the Owner may reasonably request;

(f)
promptly, notice of any change in its authorised signatories signed by its director accompanied by specimen signatures of any new authorised signatories; and

(g)
promptly, such information and records regarding the Shares as the Chargee may reasonably request.
17.
Taxes
It shall:

(a)
file or cause to be filed all tax returns required to be filed in all jurisdictions in which it is situated or carries on business or otherwise is subject to taxation; and

(b)
pay all taxes shown to be due and payable on such returns or any assessments made against it, except to the extent these are contested in good faith and by appropriate means where such payment may be lawfully withheld and for which adequate reserves have been established by it taking into account the amount of taxes payable.
18.
No merger
Neither the Guarantor nor any other Security Party shall enter or be permitted to enter into any form of merger, sub-division, amalgamation or other reorganisation or change of ownership.
19.
Change of Control

(a)
Save with the prior written consent of the Owner, it shall ensure that no Change of Control occurs.

(b)
Save with the prior written consent of the Owner, there shall not be any transfer or disposal of:

24


(i)
the legal or beneficial shareholding of the Charterer; or

(ii)
the legal or beneficial shareholding of the Guarantor,
unless following such transfer or disposal, the Guarantor remains ultimately or indirectly controlled by the Substantial Shareholder.
20.
Sanctions

(a)
It shall comply, and shall procure that each other Security Party complies, with all laws and regulations in respect of Sanctions, and in particular, it shall ensure that the Charterer shall effect and maintain a sanctions compliance policy to ensure compliance with all such laws and regulations implemented from time to time.

(b)
It will ensure that the Vessel shall not be employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel shall not be used by or for the benefit for any party which is a target of Sanctions, or trade to any Restricted Country; or (ii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation.

(c)
It will, and will procure that each other Security Party will, promptly notify the Owner and provide all information in relation to its business and operations which may be relevant for the purposes of ascertaining whether it is in compliance with all laws and regulations relating to Sanctions, and in particular, it shall notify the Owner in writing immediately upon being aware that any of its shareholders or directors, officers of employees is a Restricted Person or has otherwise become a target of Sanctions.

25


Schedule 3: Form of Compliance Certificate

From:
TOP SHIPS INC.
 
(as Guarantor)
With copy to:
Monte Carlo Seven Shipping Company Limited
 
(as Charterer)
To:
Oriental Fleet TANKER 11 Limited
 
(东方富利 TANKER11 有限公司)
 
(as Owner)
   
Dated: [●]

Dear Sirs
Monte Carlo Seven Shipping Company Limited
Bareboat Charter dated [●] 2019
(as amended and/or supplemented from time to time, the "Charter")
in respect of one (1) d/w 50,000 product oil/chemical tanker
named "STENAWECO EXCELLENCE" with IMO No. 9695834
1.
We refer to the Charter and the Guarantee (as defined in the Charter). This is a Compliance Certificate. Terms defined in the Charter and the Guarantee have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.
2.
We confirm to the Owner that as at the date of [the audited consolidated financial statements of the Group in respect of the financial year ended on [•] / the consolidated financial statements of the Group in respect of the financial period ended on [•]]:

(a)
we are in compliance with the covenants and undertakings in Clause 14 (Financial Covenants) of Schedule 2 to of the Guarantee;

(b)
Consolidated Total Net Debt is [.] and Market Value of the Fleet Vessels including 50% of Joint Venture Vessels is [●] and therefore Leverage Ratio is [●] and does not exceed 75%;

(c)
Free Liquidity is US$[●], which is not less than US$[●], being the aggregate of the following:

(i)
US$[●], which is calculated by US$1,000,000 times the number of Fleet Vessels which are Suezmax vessels, being [●];

(ii)
US$[●], which is calculated by US$750,000 times the number of Fleet Vessels which are MR tankers, being [●]; and

(iii)
US$[●], which is calculated by US$500,000 times the number of MR tankers are bareboat chartered-in to a member of the Group, being [●].

26

3.
We set out below calculations establishing the figures in paragraph 2: [●].
4.
We also confirm that no Termination Event is continuing which has not been waived as at the date of this Compliance Certificate.
Yours faithfully
For and on behalf of
TOP SHIPS INC.
_________________________
Name:
Title: [Director/Chief Financial Officer]

27

Guarantee – Execution Page (1/2)
This Guarantee has been entered into on the date stated at the beginning of this Guarantee. This Guarantee has been executed and entered into by the Guarantor as a deed and is intended to be and is delivered by it as a deed.
SIGNED as a deed by
)
                                           , Attorney for
)
TOP SHIPS INC.
)
under a power of attorney
)
dated                                             2019
)
in the presence of:
)

28

Guarantee – Execution Page (2/2)
SIGNED for and on behalf of
)
 
)
ORIENTAL FLEET TANKER 11 LIMITED
)
(东方富利 TANKER11 有限公司)
)
 
)
by Li Bing, Director
)
 
)
in the presence of:
)


29
Exhibit 4.54


































CONTENTS
   
Page
     
32.
Definitions
1
33.
Interpretations
13
34.
Background
15
35.
Newbuilding construction
15
36.
Delivery
16
37.
Disputes under the shipbuilding contract
17
38.
Terms of delivery
19
39.
Cancellation
20
40.
Conditions precedent
21
41.
Bunkers and luboils
23
42.
Further maintenance and operation
24
43.
Structural changes and alterations
24
44.
Hire
25
45.
Insurance
28
46.
Redelivery
31
47.
Redelivery conditions
32
48.
Owners’ mortgage
33
49.
Diver’s inspection at redelivery
34
50.
Transport documents
34
51.
Charterers’ representations and warranties
34
52.
Charterers’ undertakings
38
53.
Earnings Account
43
54.
Termination Events
43
55.
[Not Used]
48
56.
Name of Vessel
48
57.
Charter Period
49
58.
Transaction fees
49
59.
Early Termination, Purchase Option, Purchase Obligation and transfer of title, partial prepayment
49
60.
Pre-delivery Sales Clause
51
61.
Total Loss
51
62.
Additional payment obligations
52
63.
Stamp duties and taxes
52
64.
Operational notifiable events
52
65.
Further indemnities
53
66.
Set-off
54
67.
Further assurances and undertakings
55



68.
Cumulative rights
55
69.
Day count convention
55
70.
No waiver
55
71.
Entire agreement
55
72.
Invalidity
55
73.
English language
55
74.
No partnership
56
75.
Notices
56
76.
Conflicts
56
77.
Survival of Charterers’ obligations
57
78.
Counterparts
57
79.
Confidentiality
57
80.
Third Parties Act
57
81.
Law and jurisdiction
57
82.
Conditions subsequent
58
83.
FATCA
59
SCHEDULE 1 FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE
61
SCHEDULE 2 FORM OF TITLE TRANSFER PROTOCOL OF DELIVERY AND ACCEPTANCE
62
SCHEDULE 3 HIRE PAYMENT SCHEDULE
63
SCHEDULE 4 SCHEDULE OF PURCHASE OPTION PRICE (EXCLUDING HIRE DUE)
68
SIGNATURE PAGE
69


ADDITIONAL CLAUSES
TO BAREBOAT CHARTER FOR
THE MR TANKER
WITH BUILDER’S HULL NO. 2750
32.
Definitions
In this Charter:
Account Bank” means such bank or financial institution as selected or designated by the Owners from time to time.
Account Charge” means the account security deed in respect of the Earnings Account and all amounts from time to time standing to the credit to the Earnings Account from the Charterers in favour of the Owners.
Accrued Charterhire” has the meaning given to it in Clause 44.1.
Actual Delivery Date” means the date of delivery of the Vessel by the Owners to the Charterers under this Charter.
Affiliate” means, in relation to any entity, a Subsidiary of that entity, a Holding Company of that entity or any other Subsidiary of that Holding Company.
Agreement Term” means the period commencing on the date of this Charter and terminating on the expiration of the Charter Period or such earlier or later date on which all money of any nature owed by the Obligors to the Owners under the Transaction Documents or otherwise in connection with the Vessel have been paid in full to the Owners and no obligations of the Obligors of any nature to the Owners or otherwise in connection with the Transaction Documents or with the Vessel remain unperformed or undischarged.
AML Laws” means as to any person and in relation to money laundering or terrorism, the constitutional or organisational documents of such person, and any treaty, law (including the common law), statute, ordinance, code, rule, regulation, guidelines, licence, permit requirement, order or determination of an arbitrator or a court or other governmental authority and the interpretation or administration thereof, in each case applicable to or binding upon such person or any of its property or to which such person or any of its property is subject.
Applicable Rate” in respect of an Applicable Rate Period, the LIBOR notified by the Owners on the relevant Applicable Rate Determination Date to be (which is expressed as a percentage rate per annum) the rate which applies to all Unpaid Sums (including any Hire) for that Applicable Rate Period.
Applicable Rate Determination Date” means, in respect of an Applicable Rate Period, the day falling five (5) Business Days before the first day of that Applicable Rate Period.
Applicable Rate Period” means each Hire Period, with the first Applicable Rate Period commencing on the first Hire Payment Date.
Approved Broker” means each of Arrow Sale & Purchase (UK) Limited, Braemar ACM Shipbroking, Clarkson Platou, Maersk Broker A/S, Fearnley, SSY, Howe Robinson and any other reputable and independent ship brokers acceptable to the Owners (such acceptance not to be unreasonably withheld or delayed) and appointed by the Owners.


Approved Manager” in relation to the Vessel, means (i) Central Mare in respect of technical management and (ii) Central Shipping Inc. in respect of commercial management or any other management company reasonably acceptable to the Owners (which acceptance shall not be unreasonably delayed) and appointed by the Charterers.
Assumed Owners’ Cost” means US Dollars thirty million one hundred thousand (US$30,100,000).
Balloon Amount” has the meaning given to it in Schedule 3 (Hire Payment Schedule).
Break Costs” means all costs, reasonable losses, premiums or penalties incurred by the Owners as a result of the receipt by the Owners of any payment under or in relation to the Transaction Documents on a day other than the due date for payment of the sum in question.
Builders” means Hyundai Mipo Dockyard Co., Ltd., a company incorporated and existing under the laws of the Republic of Korea.
Building Contract” means the agreement dated 3 December 2018 between the Builder and the Charterers in connection with the construction of the Vessel together with all schedules, addendums and appendices thereto.
Business Day” means a day (other than a Saturday or Sunday) on which banks and financial markets are open for business in Shanghai, Hong Kong and New York and on a day when LIBOR is calculated, London.
Cancellation Date” means 30 June 2020 (for the avoidance of doubt, as the same may be extended from time to time).
Change of Control” means, in relation to the Charterers, the Charterers ceasing to be in the ownership and Control of (either directly or indirectly) the Pistiolis Family either directly or via the Charter Guarantor or, in relation to the Charterers or the Charter Guarantor, any circumstances in which Control of the Charterers or the Charter Guarantor passes from the Pistiolis Family who are in Control of the Charterers and the Charter Guarantor to a person or persons who is not or are not in Control of the Charterer and the Charter Guarantor as at the date of this Charter.
Charter Group” means the Charterers, and the Charter Guarantor, including all of their respective Holding Company (if any) and Subsidiaries from time to time, and a “member of the Charter Group” means any one of them.
Charter Guarantee” means the guarantee made or to be made by the Charter Guarantor in favour of the Owners in respect of the Charterers’ obligations under this Charter.
Charter Guarantor” means TOP SHIPS INC.
Charter Period” means, subject to Clauses 44.3(l) (Hire), 54 (Termination Events), 60 (Sale of the Vessel by the Owners) and 61 (Total Loss), the period of one hundred and twenty (120) months from the Actual Delivery Date.
Charterers’ Assignment” means the deed of assignment executed or to be executed (as the case may be) by the Charterers in favour of the Owners in relation to certain of the Charterers’ rights and interest in and to (amongst other things) the (a) Earnings, (b) Insurances, (c) Requisition Compensation and (d) the Sub-charter.
Classification Society” means the vessel classification society referred to in Box 10 (Classification Society) of this Charter, or DNV GL, Lloyd’s Register of Shipping (LR), Bureau Veritas (BV), ABS, Korean Register of Shipping (KR), China Classification Society (CCS) or such other reputable classification society which the Owners may approve from time to time.
2


Collateral Charter” means the bareboat charterparty entered or to be entered into between the Collateral Charterer and the Collateral Owner in respect of the chartering of the MR Tanker with Hull No.2750.
Collateral Charterer” means Santa Monica Marine Inc., a company incorporated under the laws of the Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro MH 96960, the Republic of the Marshall Islands.
Collateral Obligors” means each Obligor as defined in the Collateral Transaction Documents.
Collateral Owner” means Great Monica Limited, a company incorporated under the laws of Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro MH 96960, the Republic of the Marshall Islands,.
Collateral Transaction Documents” means the Transaction Documents as defined in the Collateral Charter.
Contract Price” has the meaning given to it in the Novation Agreement.
Control” means, in respect of the Charterers and the Charter Guarantor, the power of a person to secure that the affairs of the Charterers and the Charter Guarantor are conducted in accordance with the wishes of that person:

(a)
by means of the holding of shares, or the possession of voting powers in or in relation to the Charterers and the Charter Guarantor; or

(b)
as a result of any powers conferred by the articles of association or any other document regulating the Charterers and the Charter Guarantor.
Cost Balance” means at any relevant time during the Agreement Term, the amount set out under the column titled “Cost Balance” in Schedule 3 corresponding to the Hire Payment Date falling on or immediately preceding such date, which may be revised, updated and replaced from time to time in accordance with Clause 44.3(b) of this Charter.
Default Termination” means a termination of the Charter Period pursuant to the provisions of Clause 54 (Termination Events).
Delivery Conditions” means the conditions set out in Clause 40(b) (Delivery Conditions).
Delivery Date” has the meaning given to it in Clause 36.4.
Disruption Event” means either or both of:

(a)
a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in order for the transactions contemplated by the Transaction Documents to be carried out which disruption is not caused by, and is beyond the control of, any of the Parties; or

(b)
the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:

(i)
from performing its payment obligations under the Transaction Documents; or

(ii)
from communicating with other Parties in accordance with the terms of the Transaction Documents,
3


and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
Earnings” means all hires, freights, pool income and other sums payable to or for the account of the Charterers in respect of the Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of the Vessel.
Earnings Account” means the US Dollar account in the name of the Charterers opened or to be opened with the Account Bank, and includes any sub-account thereof and such account which is designated by the Owners as the earnings account for the purposes of this Charter.
Effective Time” has the meaning given to it in the Novation Agreement.
Environmental Approvals” means any present or future permit, licence, approval, ruling, variance, exemption or other authorisation required under the applicable Environmental Law.
Environmental Claim” means any claim, proceeding or investigation by any person in respect of any Environmental Law.
Environmental Incident” means:

(a)
any release, emission, spill or discharge from the Vessel or into or upon the air, sea, land or soils (including the seabed) or surface water of Environmentally Sensitive Material within or from the Vessel; or

(b)
any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water from a vessel other than the Vessel and which involves a collision between the Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Vessel is actually or potentially liable to be arrested, attached, detained or injuncted and/or the Vessel and/or any Obligor and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

(c)
any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water otherwise than from the Vessel and in connection with which the Vessel is actually or potentially liable to be arrested and/or where any Obligor and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action, other than in accordance with an Environmental Approval.
Environmentally Sensitive Material” means (i) oil and oil products and (ii) any other waste, pollutant, contaminant or other substance (including any liquid, solid, gas, ion, living organism or noise) that may be harmful to human health or other life or the environment or a nuisance to any person or that may make the enjoyment, ownership or other territorial control of any affected land, property or waters more costly for such person to a material degree.
Environmental Law” means any applicable law and regulation in any jurisdiction in which any Obligor conducts business which relates to the pollution or protection of the environment or harm to or the protection of human health or the health of animals or plants.
Environmental Permits” means any authorisation and the filing of any notification, report or assessment required under any Environmental Law for the operation of the business of any Obligor.
4


“Finance Document” means any facility agreement, security document, fee letter and any other document designated as such by the Finance Parties and the Owners and which have been or may be (as the case may be) entered into between the Finance Parties and the Owners for the purpose of, among other things, financing or (as the case may be) refinancing all or any part of the Cost Balance.
“Finance Party” means any bank or financial institution which is or will be party to a Finance Document (other than the Owners and other entities which may have agreed or be intended as debtors and/or obligors thereunder) and “Finance Parties” means two or more of them.
Financial Indebtedness” means any obligation for the payment or repayment of money, whether present or future, actual or contingent, in respect of:

(a)
moneys borrowed;

(b)
any acceptance credit;

(c)
any bond, note, debenture, loan stock or similar instrument;

(d)
any finance, capital lease or operating leases for financing purposes;

(e)
receivables sold or discounted (other than on a non-recourse basis);

(f)
deferred payments for assets or services;

(g)
any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);

(h)
any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing according to the relevant account principles;

(i)
any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

(j)
the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in (a) to (i).
Fixed Hire “ means in respect of each Hire Payment Date, the figure set out in the column ‘Fixed Hire’ in the Hire Payment Schedule against such Hire Payment Date, which may be revised, updated and replaced from time to time in accordance with Clause 44.3(b) of this Charter and in relation to the 120th Payment Date, an amount equal to the Balloon Amount.
GAAP” means generally accepted accounting principles in the United States of America. “Handling Fee” has the meaning given to it in Clause 58.2 (Handling Fee).
Hire Payment Date” means the 10th day of each calendar month (or if such date is not a Business Day, the immediately following Business Day) during each and any Hire Period, save that:

(a)
the first Hire Payment Date shall fall on the Actual Delivery Date; and

(b)
the second Hire Payment Date shall fall on the date which is the 10th day of the next calendar month (or if such date is not a Business Day, the immediately following Business Day) after the calendar month during which the Actual Delivery Date falls.
Hire Payment Schedule” means Schedule 3.
5


Hire Period” means (i) in respect of any Hire Payment Date (other than the last Hire Payment Date), the period commencing on such Hire Payment Date and ending on the next succeeding Hire Payment Date; and (ii) in respect of the last Hire Payment Date, the period commencing on such Hire Payment Date and ending on the last day of the Charter Period.
Holding Company” means, in relation to any entity, any other entity in respect of which it is a Subsidiary.
IAPPC” means a valid international air pollution prevention certificate for the Vessel issued under Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as modified in 1978 and 1997).
Indemnitee” has the meaning given to such term in Clause 65 (Further indemnities). “Initial Conditions” means the conditions set out in Clause 40(a) (Initial Conditions).
Initial Sub-Charter” means the time charter party dated 14 January 2019 between the Charterers and the Initial Sub-Charterer.
Initial Sub-Charterer” means Trafigura Logistics Maritime Pte Ltd.
Innocent Owners’ Interest Insurances” means all policies and contracts of innocent owners’ interest insurance from time to time taken out by the Owners in relation to the Vessel.
Insurances” means all policies and contracts of insurance which are from time to time taken out or entered into by the Charterers in respect of the Vessel or her Earnings or otherwise in connection with the Vessel or her Earnings, with the exception of Loss of Hire and Contingent Liability.
Interpolated Screen Rate” means, in relation to the LIBOR for the Cost Balance or any part of it, the rate which results from interpolating on a linear basis between:

(a)
the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than that relevant period; and

(b)
the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds that relevant period,
each at or about 11:00a.m. London time on the Quotation Day.
ISM Code” means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation Assembly as Resolutions A.741 (18) (as amended by MSC 104 (73)) and A.913(22) (superseding Resolution A.788 (19)), as the same may be amended, supplemented or superseded from time to time (and the terms “safety management system”, “Safety Management Certificate” and “Document of Compliance” have the same meanings as are given to them in the ISM Code).
ISM Company” means, at any given time, the company responsible for the Vessel’s compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.
ISPS Code” means the International Ship and Port Facility Security Code adopted by the International Maritime Organisation (as the same may be amended, supplemented or superseded from time to time).
ISPS Company” means, at any given time, the company responsible for the Vessel’s compliance with the ISPS Code.
ISSC” means a valid international ship security certificate for the Vessel issued under the ISPS Code.
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LIBOR” means the applicable Screen Rate as of the Specified Time for USD and for a period of one month for any Unpaid Sum (including any Fixed Hire) and if that rate is less than zero, LIBOR will be deemed to be zero.
Major Casualty Amount” means seven hundred and fifty thousand US Dollars (US$750,000) or the equivalent in any other currency or currencies.
Management Agreement” means, in relation to the Vessel, the technical and/or commercial ship management agreement and/or layup management agreement executed or to be executed (as the case may be) between the relevant Approved Manager and the Charterers.
Manager’s Undertaking” means the deed of undertaking executed or to be executed by the relevant Approved Manager in favour of the Owners.
Market Value” means, in relation to the Vessel, the value as determined in accordance with Clause 52.30 (Valuation of Market Value).
MARPOL” means the International Convention for the Prevention of Pollution from Ships adopted by the International Maritime Organisation (as the same may be amended, supplemented or superseded from time to time).
Material Adverse Effect” means a material adverse change in, or a material adverse effect on:

(a)
the business or financial condition of the Charter Group taken as a whole;

(b)
the ability of the Charterers to perform and comply with their payment obligations under any Transaction Document or Project Document to which they are a party;

(c)
the validity, legality or enforceability of this Charter, any other Transaction Document or any Project Document; or
which adversely affects the ability of the relevant Obligors to perform their obligations under the Transaction Documents or the Project Documents to which they are a party.
Mortgagees’ Interest Insurances” means all policies and contracts of mortgagees’ interest insurance, mortgagees’ additional perils (oil pollution) insurance and any other insurance from time to time taken out by any Finance Party in relation to the Vessel.
Necessary Authorisations” means all Authorisations of any person including any government or other regulatory authority required by applicable law to enable it to:

(a)
lawfully enter into and perform its obligations under the Transaction Documents and the Project Documents to which it is party;

(b)
ensure the legality, validity, enforceability or admissibility in evidence in England and, if different, its jurisdiction of incorporation, of such Transaction Documents and Project Documents to which it is party; and

(c)
carry on its business from time to time.
Novated Building Contract” means the Building Contract as novated and amended by the Novation Agreement.
Novation Agreement” means the document so entitled made between the Owners, the Charterers and the Builder dated on or about the date hereof.
Obligor” means each of the Charterers, the Charter Guarantor, and any person within the Charterer Group that may be party to a Transaction Document from time to time (other than the Owners and the Account Bank).
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Original Buyer” has the meaning given to it in the Novation Agreement.
Outstanding Indebtedness” means liabilities which:

(a)
the Charterers has, at the date of this Charter or at any later time or times, to the Owners under or in connection with the Transaction Documents or any judgment relating to the Transaction Documents; and

(b)
the Collateral Charterer has, at the date of this Charter or at any later time or times, to the Collateral Owner under or in connection with the Transaction Documents (as defined under the Collateral Charter) or any judgment relating to the Transaction Documents (as defined under the Collateral Charter), and for this purpose, there shall be disregarded any total or partial discharge of these liabilities, or variation of their terms, which is effected by, or in connection with, any bankruptcy, liquidation, arrangement or other procedure under the insolvency laws of any country.
Owners Cost” has the meaning given to it in the Novation Agreement.
Owners’ Cost Payment Date” means the date on which the Owners’ Cost is paid by the Owners (as buyer) to the Charterers (as seller) in accordance with the terms of the Novation Agreement.
Paid Instalments” means, as at a relevant date, the aggregate pre-delivery instalments of the Cost Balance and any other monies paid by the Owners to the Charterers under the Novation Agreement at that date.
Party” means a party to this Charter.
PDA” means the protocol of delivery and acceptance in relation to the Vessel to be executed between the Owners and the Charterers, substantially in the form contained in Schedule 1 (Form of Protocol of Delivery and Acceptance) hereto.
Permitted Security Interest” means:

(a)
any Security Interest created or to be created in accordance with the Security Documents;

(b)
liens for unpaid master’s and crew’s wages in accordance with first class ship ownership and management practice;

(c)
liens for salvage;

(d)
liens for master’s disbursements incurred in the ordinary course of trading;

(e)
any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel and not as a result of any default or omission by the Charterers, provided such liens do not secure amounts more than 21 days overdue (unless the overdue amount is being contested in good faith by appropriate steps);

(f)
any Security Interest arising by operation of law in respect of Taxes which are not overdue for payment or which are being contested in good faith by appropriate steps and in respect of which appropriate reserves have been made;

(g)
any liens securing obligations incurred in the ordinary course of trading and/or operating the Vessel and not more than 21 days overdue; and

(h)
any Security Interest which has the prior written approval of the Owners.
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Pistiolis Family” means Evangelos Pistiolis and his immediate family members.
Potential Termination Event” means an event or circumstance which, with the giving of any notice, the lapse of time, a determination of the Owners or any combination of the foregoing is a Termination Event.
Pre-Approved Flag” means the Marshall Islands or other flag approved by the Owners.
Pre-delivery Termination Sum” means the aggregate sum of all of the Owners’ documented losses as a result of the early termination of this Charter in accordance with Clause 54 (Termination Events) as a result of the occurrence of a Termination Event which is continuing prior to the Delivery Date, which both Parties acknowledge as a genuine and reasonable pre-estimate of the Owners’ losses in the event of such termination and does not impose consequences on the Charterers which are out of proportion to their legitimate interests in the event of such termination and such amount is to be calculated as being the aggregate of the following:

(a)
the Paid Instalments together with any other sums the Owners have paid to or owe to the Builder due to the early termination of this Charter, or the repudiation or termination of the Shipbuilding Contract, or for other reasons caused by the Charterers, together with interest accrued thereon pursuant to Clause 44 (i) up to the date of receipt by the Owners of the Pre-delivery Termination Sum;

(b)
any and all evidenced and documented direct costs, losses, liabilities and expenses incurred or suffered by the Owners as a result of the early termination of this Charter prior to the Delivery Date;

(c)
any properly documented Break Costs incurred (or payable) by the Owners under the Financing Documents, with the exclusion of any SWAP related costs; and

(d)
any sums other than Fixed Hire, due and payable, but unpaid, under this Charter (including for the avoidance of doubt Pre-Delivery Interest) together with interest accrued thereon pursuant to Clause 44 (i) up to the date of receipt by the Owners of the Pre- delivery Termination Sum.
and for the avoidance of doubt there shall be no double counting of any amount that may be counted under any sub-clause (a) to (d) by also counting it as being included in any other sub-clause;
Project Documents” means the Sub-Charter and the Management Agreements;
“Purchase Obligation Date” means the date on which the Owners shall transfer the legal and beneficial interest in the Vessel to the Charterers, and the Charterers shall purchase the Vessel, being the last day of the Charter Period.
“Purchase Obligation Price” means an amount equal to the aggregate as of the Purchase Obligation Date of (i) $100, (ii) the Cost Balance as at the last day of the Agreement Term, (iii) any Break Costs, applicable only if charter is extended or terminated pursuant to Clauses (Hire), (Termination Events), (Sale of the Vessel by the Owners) and (Total Loss) and (iv) all other amounts payable under this Charter and the other Transaction Documents together with any applicable interest thereon.
Purchase Option Price” means the amount due and payable by the Charterers to the Owners pursuant to Clause 59 (Purchase option and transfer of title), being the aggregate of:

(a)
the estimated amount corresponding to the Hire Payment Date in the “Purchase Option Price” column as referenced in Schedule 4 (Schedule of Purchase Option Price) to this Charter, but such amount to be adjusted, revised, updated and replaced from time to time in accordance with the terms of this Charter and confirmed by the Owners (and agreed to by the Charterers) by reference to, among others, the figure to be provided
9


by the Owners upon the fixing of the delivery or closing date in accordance with such early purchase of the Vessel (the “Amount”); and

(b)
all Unpaid Sums due and payable together with interest accrued thereon pursuant to paragraph (j) of Clause 44 (Hire) from the due date for payment thereof up to the date of actual payment,
together with any applicable and documented Break Costs under the financing entered into by Owners, with the exclusion of any SWAP related costs.
Quotation Day” means in relation to any period for which a Variable Hire or an interest rate is to be determined, the day falling five (5) Business Days before the first day of that period.
Reference Banks” shall mean the principal London offices of Citibank N.A., HSBC Bank Plc., JP Morgan Chase Bank, N.A., or such other banks as the Owners may nominate in consultation with the Charterers.
Reference Bank Rate” means the arithmetic mean of the rates (rounded upwards to four (4) decimal places) as supplied to the Owners at their request by the Reference Banks:

(a)
(other than where paragraph (b) below applies) as the rate at which the relevant Reference Bank could borrow funds in the London interbank market in US Dollars for the relevant period, were it to do so by asking for and then accepting interbank offers for deposits in reasonable market size in that currency and for that period; or

(b)
if different, as the rate (if any and applied to the relevant Reference Bank and the relevant period) which contributors to the Screen Rate are asked to submit to the relevant administrator.
Refund Guarantee” has the meaning given to it in the Novation Agreement.
Refund Guarantor” has the meaning given to it in the Novation Agreement.
Refund Guarantee Assignment” has the meaning given to it in the Novation Agreement.
Requisition Compensation” means all compensation or other money which may from time to time be payable to the Charterers as a result of the Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).
Restricted Party” means a person or entity that is (i) listed on, or owned or controlled by a person listed on, or acting on behalf of a person listed on, any Sanctions List; (ii) a national of, located in, incorporated under the laws of, or owned or (directly or indirectly) controlled by, or acting on behalf of, a person located in or organised under the laws of a country or territory that is the target of country-wide or territory-wide Sanctions; or (iii) otherwise a target of Sanctions (“target of Sanctions” signifying a person with whom a US person or other national of Sanctions Authority would be prohibited or restricted by law from engaging in trade, business or other activities).
Sales Clause Termination Sum” means the remaining Handling Fee, plus commitment fee and all third party legal fees as set out in Clause 58.1 (Commitment Fee).
Sanctions” means the economic sanction laws, regulations, embargoes or restrictive measures administered, enacted or enforced by: (i) the United States government; (ii) the United Nations; (iii) the European Union or its Member States, including, without limitation, the United Kingdom; (iv) the People’s Republic of China; or (v) the respective governmental institutions and agencies of any of the foregoing, including, without limitation, the Office of Foreign Assets Control of the US Department of Treasury (“OFAC”), the United States Department of State and Her Majesty’s Treasury (“HMT”); (together, the “Sanctions Authorities”).
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Sanctions List” means the “Specially Designated Nationals and Blocked Persons” list maintained by the OFAC, the Consolidated List of Financial Sanctions Targets and the Investment Ban List maintained by HMT, or any similar list maintained by, or public announcement of Sanctions designation made by, any of the Sanctions Authorities.
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 US Dollars for 1-month period displayed (before any correction, recalculation or republication by the administrator) on page LIBOR01 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 Owner may specify another page or service displaying the relevant rate.
Security Interest” means a mortgage, charge, assignment, pledge, lien, or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
Security Documents” means, in relation to the Vessel, the following:

(a)
the Charter Guarantee;

(b)
the Charterers’ Assignment;

(c)
the Managers’ Undertaking;

(d)
the Account Charge;

(e)
the Shares Pledge;

(f)
the Refund Guarantee Assignment; and

(g)
any other document that may at any time be executed by any person creating, evidencing or perfecting any Security Interest to secure all or part of the Obligors’ obligations under or in connection with the Transaction Documents, 
and “Security Document” means any one of them.
Settlement Date” means, following a Total Loss of the Vessel, the earliest of:

(a)
the date which falls 180 days after the date of occurrence of the Total Loss or, if such date is not a Business Day, the immediately preceding Business Day; and

(b)
the date on which the Owners receive the Total Loss Proceeds in respect of the Total Loss.
SMC” means a valid safety management certificate issued for the Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.
Specified Time” means:

(a)
in connection with determining the Screen Rate, 11:00 a.m. (London time) on the Quotation Day; or

(b)
in connection with determining the Reference Bank Rate, noon (London time) on the Quotation Day.
Sub-charter” means the Initial Sub-Charter or any other sub-charter where approval is needed in accordance with Clause 51.
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Sub-charterers” means the Initial Sub-Charterer or any other Sub-Charterer under a Sub-charter.
Subsidiary” shall have its meaning as defined in the Companies Ordinance (Cap. 622 of the Laws of Hong Kong).
Tax” or “tax” means any present and future tax (including, without limitation, value added tax, consumption tax or any other tax in respect of added value or any income), levy, impost, duty or other charge or withholding of any nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and “Taxes”, “taxes”, “Taxation” and “taxation” shall be construed accordingly.
Termination” means the termination at any time of the chartering of the Vessel under this Charter.
Termination Event” means each of the events specified in paragraph 54.1 of Clause 54 (Termination Events).
Termination Notice” has the meaning given to such term in paragraph (l) of Clause 44 (Hire) and paragraph 54.3 of Clause 54 (Termination Events).
Termination Payment Date” means:

(a)
in respect of a termination of this Charter in accordance with paragraph (l) of Clause 44 (Hire), the date specified in the Termination Notice served on the Charterers pursuant to that Clause having regard to the various remedy periods;

(b)
in respect of a Default Termination, the date specified in the Termination Notice served on the Charterers pursuant to paragraph 54.3 of Clause 54 (Termination Events) in respect of such Default Termination;

(c)
in respect of a Total Loss Termination, the Settlement Date in respect of the Total Loss which gives rise to such Total Loss Termination.
Termination Sum” means the aggregate of:-

(a)
all Fixed Hire due and payable but unpaid under this Charter up to and including the Termination Payment Date (if the Termination Payment Date is not a Hire Payment Date, the Fixed Hire payable shall be reduced pro-rata for the days between preceding Hire Payment Date and the Termination Payment Date;

(b)
the amount of Cost Balance as at the relevant Termination Payment Date;

(c)
all liabilities, costs and expenses (including, without limitation, legal fees) so incurred directly in relation to repossessing the vessel;

(d)
any costs and expenses, relating to Owner’s finance, incurred or suffered by the Owners as a direct result of the Termination Notice.

(e)
any and all Break Costs (excluding swap related expenses); and

(f)
any sums (other than hire) unpaid under this Charter and if such sums due and payable but unpaid then together with interest accrued thereon up to and including the Termination Payment Date.
Third Parties Act” means the Contracts (Rights of Third Parties) Act 1999.
Title Transfer PDA” means the protocol of delivery and acceptance in relation to the Vessel to be executed between the Owners and the Charterers, substantially in the form contained in Schedule 2 (Form of Title Transfer Protocol of Delivery and Acceptance) hereto.
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Total Loss” means during the Charter Period:

(a)
actual or constructive or compromised or agreed or arranged total loss of the Vessel;

(b)
the requisition for title or compulsory acquisition of the Vessel by any government or other competent authority (other than by way of requisition for hire);

(c)
the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture of the Vessel (not falling within paragraph (b) of this definition), unless the Vessel is released and returned to the possession of the Owners or the Charterers within ninety (90) days after the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture in question,
and for the purpose of this Charter, (i) an actual Total Loss of the Vessel shall be deemed to have occurred at the date and time when the Vessel was lost but if the date of the loss is unknown the actual Total Loss shall be deemed to have occurred on the date on which the Vessel was last reported, (ii) a constructive Total Loss shall be deemed to have occurred at the date and time at which a notice of abandonment of the Vessel is given to the insurers of the Vessel and (iii) a compromised, agreed or arranged Total Loss shall be deemed to have occurred on the date of the relevant compromise, agreement or arrangement.
Total Loss Proceeds” means the proceeds of the Insurances or any other compensation of any description in respect of a Total Loss in respect of a Total Loss.
Total Loss Termination” means a termination of the Charter Period pursuant to the provisions of paragraph 61.1 of Clause 61 (Total Loss).
Transaction Documents” means, together, this Charter, the Sub-charter, the Novation Agreement, the Security Documents, the Collateral Transaction Documents and such other documents as maybe designated as such by the Owners from time to time.
Unpaid Sum” means any sum due and payable but unpaid by any Obligor under the Transaction Documents.
US Dollars”, “Dollars”, “USD”, “US$” and “$” each means available and freely transferable and convertible funds in lawful currency of the United States of America.
“US Tax Obligor” means:

(a)
an Obligor which is resident for tax purposes in the United States of America; or

(b)
an Obligor some or all of whose payments under the Transaction Documents to which it is a party are from sources within the United States for US federal income tax purposes.
Valuation Report” means, in relation to the Vessel, a valuation report of the Vessel addressed to the Owners from an Approved Broker.
Vessel” means the 50,000 DWT class product / chemical Tanker currently bearing Builders’ hull number 2750 as more particularly described in Boxes 5 (Vessel’s name, call sign and flag) to 10 (Classification Society) of this Charter.
33.
INTERPRETATIONS

(a)
In this Charter, unless the context otherwise requires, any reference to:

(i)
this Charter include the Schedules hereto and references to Clauses and Schedules are, unless otherwise specified, references to Clauses of and Schedules to this Charter and, in the case of a Schedule, to such Schedule as incorporated in this Charter as substituted from time to time;
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(ii)
any statutory or other legislative provision shall be construed as including any statutory or legislative modification or re-enactment thereof, or any substitution therefor;

(iii)
the term “Vessel” includes any part of the Vessel;

(iv)
the “Owners”, the “Charterers”, any “Obligor”, “Sub-charterer” or any other person include any of their respective successors, permitted assignees and permitted transferees;

(v)
any agreement, instrument or document include such agreement, instrument or document as the same may from time to time be amended, modified, supplemented, novated or substituted;

(vi)
the “equivalent” in one currency (the “first currency”) as at any date of an amount in another currency (the “second currency”) shall be construed as a reference to the amount of the first currency which could be purchased with such amount of the second currency at the spot rate of exchange quoted by the People’s Bank of China at or about 11:00 a.m. two (2) Business Days (being a day other than a Saturday or Sunday on which banks and foreign exchange markets are generally open for business in Beijing) prior to such date for the purpose of the first currency with the second currency for delivery and value on such date;

(vii)
hereof”, “herein” and “hereunder” and other words of similar import means this Charter as a whole (including the Schedules) and not any particular part hereof;

(viii)
law” includes common or customary law and any constitution, decree, judgment, legislation, order, ordinance, regulation, rule, statute, treaty or other legislative measure in any jurisdiction or any present or future directive, regulation, request or requirement, or official or judicial interpretation of any of the foregoing, in each case having the force of law and, if not having the force of law, in respect of which compliance is generally customary;

(ix)
the word “person” or “persons” or to words importing persons include, without limitation, any state, divisions of a state, government, individuals, partnerships, corporations, ventures, government agencies, committees, departments, authorities and other bodies, corporate or unincorporated, whether having distinct legal personality or not;

(x)
the “winding-up”, “dissolution”, “administration”, “liquidation”, “insolvency”, “reorganisation”, “readjustment of debt”, “suspension of payments”, “moratorium” or “bankruptcy” (and their derivatives and cognate expressions) of any person shall each be construed so as to include the others and any equivalent or analogous proceedings or event under the laws of any jurisdiction in which such person is incorporated or any jurisdiction in which such person carries on business;

(xi)
protection and indemnity risks” means the usual risks covered by a protection and indemnity association which is a member of the International Group of P&I Club, including pollution risks, extended passenger cover and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), clause 8 of the Institute Time Clauses (Hull)(1/10/83) or clause 8 of the Institute Time Clauses (Hulls)(1/11/1995) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;
14



(xii)
a Potential Termination Event or Termination Event which is “continuing” is a reference to a Potential Termination Event or Termination Event which is not remedied or waived; and

(xiii)
words denoting the plural number include the singular and vice versa.

(b)
Headings are for the purpose of reference only, have no legal or other significance, and shall be ignored in the interpretation of this Charter.

(c)
A time of day (unless otherwise specified) is a reference to Beijing time.
34.
BACKGROUND

(a)
By a novation agreement (the “Novation Agreement”) of even date herewith made between the Original Buyer, the Owners and the Charterers, the Owners have agreed to purchase the Vessel subject to the terms and conditions therein.

(b)
Accordingly the parties hereby agree that the Owners’ obligation to charter the Vessel to the Charterers under this Charter is subject to the effective transfer of ownership of the Vessel to the Owners pursuant to the Novation Agreement.
35.
NEWBUILDING CONSTRUCTION
35.1

(a)
The Vessel shall be constructed in accordance with the Shipbuilding Contract and in accordance with the Specifications (as defined in the Shipbuilding Contract) annexed thereto. Once the Novated Rights and Obligations (as defined in the Novation Agreement) have been novated to the Owners, the Owners and Charterers shall be deemed to have accepted and agreed to the Shipbuilding Contract and the Specifications in all respects on the understanding that the Vessel is to be built solely for the use of the Charterers.

(b)
In addition to the Buyer’s Supplies, the Charterers or the Charter Guarantor shall, at its sole cost, expense and risk, supply bunkers, fuel, lubricating oil, hydraulic oil and greases for the purpose of trial runs under and in accordance with the Shipbuilding Contract.

(c)
Subject to the terms of the Novation Agreement, the Charterers or its appointed supervisor approved by the Owners (at the Charter Guarantor’s/Charterers’ cost and expense) shall continue to exercise the Other Rights and Obligations (as ‘Buyer’ and as defined in the Novation Agreement) under the Shipbuilding Contract relating to, inter alia:

(i)
Approval of Plans and Drawings;

(ii)
Changes and modifications on the Vessel;

(iii)
Supervision of the Vessel; and

(iv)
Attending all tests and sea trials.
The Charterers or its appointed supervisor shall, at its own cost and expense, duly exercise the Other Rights and Obligations including the above rights (i) to (iv) in accordance with the Shipbuilding Contract in all respects.
35.2
The Vessel shall be constructed in accordance with the Shipbuilding Contract, under the supervision of the Charterers (or its appointed supervisor). Subject to the provisions of clause 3.6(a)(ii) of the Novation Agreement, the Charterers have the right to make changes and modifications to the Vessel in accordance with the Shipbuilding Contract and the Charterers
15


and the Charter Guarantor will procure that the Charterers will not make such changes or modifications to the Vessel without the Owners’ prior written consent where required under clause 3.7 of the Novation Agreement. All documented costs and expenses relating to any such change and modification shall be borne by the Charterers or Charter Guarantor.
35.3
If, on the Delivery Date, there are any amounts due from the Charterers to the Builder under the terms of the Shipbuilding Contact and/or the Novation Agreement (including but not limited to any amounts payable by the Charterers under clause 3.7 of the Novation Agreement and any amounts due for any bunkers, lubes or other costs and expenses incurred as a result of any extras, additions or alteration of the Vessel), then the Charterers shall pay such sums (as evidenced by a commercial invoice from the Builder) to the Builder on or before the Delivery Date (the “Extra SBC Costs”). If any liquidated damages for reasons other than delay are payable by the Builder under the Shipbuilding Contract, these liquidated damages shall be deducted from the Delivery Instalment payable by the Owners (any such deduction shall consequently reduce the Contract Price and the Cost Balance). If any liquidated damages for delay are payable by the Builder under the Shipbuilding Contract, then the Charterers may apply these towards payment of the Extra SBC Costs and any other reasonable, documented and directly incurred expenses as a result of a delay in delivery (including any extra supervision costs incurred in accordance with the applicable supervision contract). Any excess liquidated damages for delay after such prior application by the Charterers shall be used to reduce the Delivery Instalment payable by the Owners as part of the Contract Price (any such deduction shall consequently reduce the Contract Price, the Fixed Hire and Cost Balance accordingly).
36.
DELIVERY
36.1
The Vessel is scheduled to be delivered according to the terms of the Shipbuilding Contract. In case the delivery date under the Shipbuilding Contract is extended or postponed or delayed pursuant to the Shipbuilding Contract then subject to the terms of this Charter, the delivery date under the Charter shall be automatically and accordingly extended or postponed subject to it not being after the Cancellation Date.
36.2
Notwithstanding the foregoing, the obligation of the Owners to charter the Vessel to the Charterers hereunder is conditional upon:

(a)
the delivery of the Vessel to the Owners by the Builder and acceptance of the Vessel by the Owners pursuant to the Shipbuilding Contract; and

(b)
the satisfaction of the conditions precedent set out in Clause 40 below.
36.3
Subject to the Vessel being delivered to, and taken over by, the Owners pursuant to the Shipbuilding Contract and the satisfaction or waiver by the Owners of the conditions precedent set out in Clause 40, then the Charterers shall be deemed to have accepted and taken delivery of the Vessel (without reservation) under this Charter simultaneously with delivery by the Builder to the Owners pursuant to the Shipbuilding Contract whether or not the Charterers takes actual physical possession and/or use of the Vessel on the Delivery Date.
36.4
Subject to Clauses 36.2 and 36.3, the actual date of delivery for the purpose of this Charter shall be the date when the Vessel is delivered by the Builder to the Owners as indicated by the protocol of delivery and acceptance signed and timed by the Owners and the Builder pursuant to the Shipbuilding Contract (the “Delivery Date”) and shall be deemed to be the commencement date for the purposes of this Charter whether or not the Charterers takes actual physical possession and/or use of the Vessel on the Delivery Date.
36.5
Without prejudice to the provisions of Clause 36.4 above, the Owners and the Charterers shall on the Delivery Date sign a protocol of delivery and acceptance in the form attached hereto as Schedule 1.
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37.
DISPUTES UNDER THE SHIPBUILDING CONTRACT
37.1
Dispute under Shipbuilding Contract

Generally

(a)
If there is a dispute under the Shipbuilding Contract, then, unless the Owners have served a Renovation Notice (and without prejudice to (i) any rights Owners may have to serve such a Renovation Notice at any time including pursuant to paragraph (c) below and (ii) the Owners’ rights under Clause 54, the Owners shall enter into immediate consultation with the Charterers and/or the Builder in order to seek to resolve the dispute in an amicable way and the aggregate period of such consultation shall be no more than ten (10) Banking Days (unless otherwise agreed by the Parties). The Owners shall not serve a termination notice under the Shipbuilding Contract without prior consultation with the Charterers.

(b)
In the event that the dispute cannot be resolved during above consultation period and arbitration proceedings have been initiated by any party under the Shipbuilding Contract in respect of such dispute, then the arbitration proceedings shall, subject to paragraph (c) below, be handled in accordance with paragraphs (d) to (h) below.

(c)
Without prejudice to the terms of the Novation Agreement and notwithstanding the fact that arbitration proceedings in accordance with paragraphs (d) to (h) below may have commenced, the Owners shall also have the option to serve a Renovation Notice under the Novation Agreement in the event any (or any combination of) the following circumstances arise prior to the Delivery Date:

(i)
the Refund Guarantee is terminated or otherwise ceases to be in full force and effect for any reason; or

(ii)
the Vessel has not been delivered by the Builder prior to the Cancellation Date.
In the event that a Renovation Notice is served under the Novation Agreement in connection with any of the above events, the Pre-Delivery Termination Sum (if not then already payable) shall be deemed to be payable by the Charterers to the Owners in full within ten (10) days of such Renovation Notice being served.
Termination at Charterers’ request & Builder disputing / Builder termination or disputed tender for delivery

(d)
If:

(i)
the Charterers and/or Charter Guarantor propose to the Owners to terminate the Shipbuilding Contract or reject the Vessel while the Builder disputes the right of the Charter Guarantor, Charterers and/or the Owners to terminate the Shipbuilding Contract or reject the Vessel; or

(ii)
the Builder terminates or purports to terminate the Shipbuilding Contract while the Owners and/or the Charterers and/or the Charter Guarantor disputes such cancellation; or

(iii)
the Builder tenders for delivery of the Vessel while the Owners and/or the Charterers and/or Charter Guarantor disputes such tender for delivery the Charter Guarantor shall, at the Charter Guarantor’s cost and risk (and on behalf of the Owners if a Renovation Notice has not been served and otherwise also on behalf of the Charterers),
the Charterers shall further undertake to (1) lead the defence, claim, counterclaim and/or negotiations (when appropriate and if permitted by the arbitration tribunal); (2) appoint and/or engage and pay for the solicitors and/or counsels and/or experts and/or
17


arbitrator(s) (whether or not such solicitors and/or counsels and/or experts act for the Owners and/or Charterers and/or Charter Guarantor); and (3) deal with the arbitration and/or enforcement and/or settlement under the Shipbuilding Contract (however, any settlement or acknowledgment of the Builder’s demand or claim or waiver of the Owners’ or Charterers’ or Charter Guarantor’s demand or claim shall be subject to the Owners’ prior written consent, which shall not be unreasonably withheld or delayed). All Parties shall provide full assistance and cooperation to each other (including, without limitation, the Owners shall (i) take reasonable steps to enforce the award or settlement agreement against the Builder at the Charter Guarantor’s cost if the Charter Guarantor or Charterers cannot do so by itself and (ii) makes demands under the Refund Guarantee if a Renovation Notice has not been served). In addition, the Owners shall (at Charterers and Charter Guarantor’s direction, cost and risk) bring proceedings under the Refund Guarantee if the Refund Guarantor does not honour a demand under the Refund Guarantee.
Charterers’ wrongful termination, Builder’s justified termination

(e)
Should the cancellation of the Shipbuilding Contract or rejection of the Vessel by the Owners based on Charterers’ proposal or instruction be proven wrongful or the Builder’s cancellation or tender for delivery be proven justified, in whole or in part, by final award and/or settlement agreement (any settlement agreement shall be approved by the Charterers and the Owners (each acting reasonably) and any such approved settlement agreement and/or final award shall be binding upon the Charterers), the Charterers and Charter Guarantor shall indemnify and keep the Owners indemnified against all the liability and compensation that the Owners are ordered to assume/pay to the Builder together with all documented losses, costs, expenses, interests, orders or other sanctions suffered or incurred by the Owners arising directly in any manner out of such wrongful cancellation or rejection of the Vessel by the Owners or justified cancellation or tender for delivery by the Builder.
Charterers’ justified termination, Builder’s wrongful termination

(f)
Should the cancellation of Shipbuilding Contract or rejection of the Vessel by the Charterers and/or Charter Guarantor and/or Owners based on Charterers’ proposal or instruction be proven justified or Builder’s cancellation or tender for delivery be proven wrongful, in whole or in part, by final award and/or settlement agreement (any settlement agreement shall be approved by the Charterers and the Owners (each acting reasonably) and any such approved settlement agreement and/or final award shall be binding upon the Charterers), after receipt of the amount from the Builder and/or Refund Guarantor as ordered by the final award and/or settlement agreement, such amounts shall be applied in accordance with Clause 37.2.
Settlement

(g)
Should any settlement agreement (any settlement agreement shall be approved by the Charterers and the Owners (each acting reasonably)) be reached with the Builder during the arbitration or enforcement proceeding, in respect of any and all amounts and liabilities payable by the Builder under the settlement agreement, the Owners shall and the Charterers and Charter Guarantor shall apply such amounts in accordance with Clause 37.2.

(h)
Any refunds received by the Charter Guarantor or Charterers from the Builder and/or the Refund Guarantor under the Shipbuilding Contract and the Refund Guarantee shall be applied (and the Charter Guarantor shall procure they are applied) in accordance with Clause 37.2 unless a Step-in Notice under clause 3.4(b) of the Novation Agreement has been served by the Owners.
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37.2
Payment Regime
Any amounts (other than amounts received by the Owners from the Charterers as indemnity costs pursuant to clause 37.1(d)) received pursuant to Clause 37.1 (d) and Clause 37.1 (f), (g) and (h) shall be applied promptly in the following order:

(a)
firstly towards payment to the Owners in full of the Pre-delivery Termination Sum, which shall (if already not then payable) be deemed at the time of such receipt to be immediately payable by the Charterers to the Owners;

(b)
secondly in the event that the Owners receive an amount in excess of the Pre-delivery Termination Sum, towards any amounts then outstanding under any Collateral Charter; and

(c)
thirdly any further excess shall be paid over to the Charterers (for the Charterers’ account or the account of the Charter Guarantor at the Charterers’ option).
If the Owners receive an amount which is less than the Pre-delivery Termination Sum, the Charterers or the Charter Guarantor shall immediately pay any shortfall to the Owners, so that the Owners receive the Pre-delivery Termination Sum in full.
37.3
Charterers’ rejection under clause 3.6 (a)(v) of the Novation Agreement
The Charterers shall consult with the Owners in advance in the event that they and/or Charter Guarantor wish to exercise the right under clause 3.6(a)(v) of the Novation Agreement to reject the Vessel and shall provide sufficient evidence to the Owners in support of such decision. Any related dispute shall be determined in accordance with this Clause 37 or as between the Parties hereto, in accordance with Clause 54.
37.4
Owners’ pre-delivery default

(a)
After the Effective Time under the Novation Agreement has occurred, if the Owners fail to pay any instalment to the Builder pursuant to the Shipbuilding Contract and the same failure has not been remedied by the Owners by the date which falls three (3) Banking Days prior to the date upon which the Builder may terminate the Shipbuilding Contract for non-payment, then the Charterers shall be entitled to terminate this Charter upon written notice to the Owners and serve a Renovation Notice in accordance with the terms of the Novation Agreement.

(b)
Upon this Charter being terminated by the Charterers in accordance with Clause 37.4(a) above, the Charterers shall, notwithstanding any such termination of this Charter, be obliged to pay to the Owners, within ten (10) days of any such termination, the Pre-delivery Termination Sum, if any on the date of such termination.
38.
TERMS OF DELIVERY
38.1
The Vessel shall be delivered to the Charterers in her condition as indicated in all the protocols and delivery documents as delivered by the Builder pursuant to Article VII of the Shipbuilding Contract, and the Charterers hereby acknowledge and agree that the Owners make no condition, term, representation, warranty, covenant, agreement or declaration, express or implied (and whether statutory or otherwise) as to the seaworthiness, merchantability, condition, design, operation, performance, class, capacity or fitness for use or as to the eligibility of the Vessel for any particular trade or operation or any other condition, term, representation or warranty whatsoever, express or implied, with respect to the Vessel. Acceptance of delivery by the Charterers or (as the case may be) deemed delivery of the Vessel to the Charterers under this Charter shall be irrevocable, final and conclusive proof and evidence that, for the purposes of the obligations and liabilities of the Owners hereunder or in connection herewith, the Vessel is at that time seaworthy, in accordance with the provisions of this Charter, in good working order and repair.
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38.2
The Charterers hereby waive all their rights in respect of any condition, term, representation or warranty express or implied (and whether statutory or otherwise) on the part of the Owners and all their claims against the Owners howsoever and whenever the same may arise in respect of the Vessel or arising out of the operation or performance of the Vessel and the chartering thereof under this Charter (including in respect of the seaworthiness, condition, design, operation, fitness for use or otherwise with respect to the Vessel). In particular, and without prejudice to the generality of the foregoing, the Owners shall be under no liability whatever and howsoever arising in relation to any injury, death, loss, damage or delay of, or to, or in connection with the Vessel or any person or property whatsoever, whether on board the Vessel or elsewhere, irrespective of whether such injury, death, loss, damage or delay shall arise from the unseaworthiness of or any defect in the Vessel. For the purposes of this Clause “delay” shall include delay in relation to the Vessel. (whether in respect of delivery of the Vessel to the Charterers under this Charter or otherwise) or any other delay whatsoever. The Charterers acknowledge that no representation has been made or will be made by or on behalf of the Owners in relation to the Vessel or any part thereof.
If any of the above mentioned damage, injury, death loss or delay is the consequence of a fault, an act, an omission or a misconduct of the Builder, the Owners shall assign all necessary Owners’ rights (provided that the Owners have such rights and such rights are assignable) to the Charterers (or at the Charterers’ option, to the Charter Guarantor) in order to entitle the Charterers or the Charter Guarantor to exercise any appropriate recourse and/or action against the Builder.
To the extent permissible under applicable law, the Charterers also waives any rights which it may have in tort in respect of any of the matters referred to above in paragraph 1 of this Clause 38.2 excluding tort due to wilful misconduct or gross negligence and irrevocably agrees that the Owners shall have no greater liability in tort in respect of any such matter than it would have in contract after taking account of all the foregoing exclusions. No third party making any representation or warranty relating to the Vessel or any part of the Vessel is the agent or partner of the Owners nor has any such third party authority to bind the Owners thereby.
38.3
The Charterers agree that the Owners shall be under no liability to supply any replacement vessel or any piece or part thereof during any period when the Vessel is unusable or becomes a Total Loss and shall not be liable to the Charterers or any other person as a result of the Vessel being unusable or a Total Loss.
38.4
None of the Owners or their respective shareholders, affiliates, subsidiaries, consultants, agents and their respective shareholders, directors, officers, employees, or representatives shall be liable to the Charterers (including any of its assigns, novatees, successors, shareholders, affiliates, subsidiaries, consultants, agents, managers, clients and their respective shareholders, directors, officers, employees, or representatives) for (i) indirect, special, exemplary, punitive or consequential losses and damages, arising from, or relating to or in connection with this Charter (ii) and to the extent not covered by (i) above, the following, whether direct or indirect loss of profit, loss of production, loss of revenue, loss of time, loss of contracts or otherwise, in each case irrespective of cause (by contract, by law, in tort or otherwise) and notwithstanding the negligence, misconduct or breach (whether contractual, statutory or otherwise) save for (in each case) resulting from the gross negligence of wilful misconduct of such indemnified parties.
39.
CANCELLATION
If, prior to any payment (i) being due and/or payable under the Shipbuilding Contract or (ii) having been made by the Owners under the Shipbuilding Contract, a Termination Event occurs and is continuing, then this Charter shall immediately terminate and be cancelled (with the exception of Clause 65) upon the Owners serving a Termination Notice in accordance with Clause 44 (Hire) and paragraph (c) of Clause 54 (Termination Events), provided that the Owners shall be entitled to retain all fees paid by the Charterers pursuant to Clause 58 (Transaction Fees) (and without prejudice to Clause 58 (Transaction Fees) but if such fees have not been paid but are due and payable, the Charterers shall forthwith pay such fees to the Owners in accordance with Clause 58 (Transaction Fees)) and such payment shall be
20


irrevocable and unconditional and shall not be construed as a penalty but shall represent an agreed estimate of the loss and damage suffered by the Owners in entering into this Charter upon the rems and conditions contained shall therefore be paid as compensation to the Owners.
40.
CONDITIONS PRECEDENT

(a)
Initial Conditions
Notwithstanding anything to the contrary in this Charter, the obligations of the Owners to make any payments to the Builder pursuant to the Building Contract as novated under the Novation agreement, to purchase and take delivery of the Vessel pursuant to the Novated Building Contract and to charter the Vessel to the Charterers under this Charter are subject to and conditional upon the Owners’ receipt of following documents and evidence (in each case in form and substance acceptable to the Owners) on or before the first payment date for making a part payment of the Purchase Price under the Novation Agreement (or such other date as the Owners and the Charterers may agree):

(i)
an original of each of the following:

(A)
the duly executed Charter;

(B)
the duly executed Novation Agreement;

(C)
the following duly executed Security Documents:
(I)         the Charter Guarantee;
(II)        the Charterers’ Assignment;
(III)       the Managers’ Undertaking; and

(D)
all documents required by any of the Security Documents set out in paragraph (C), including but not limited to the notices and acknowledgement required under such Security Documents, except for the letters of undertaking from the insurers, underwriters, protection and indemnity clubs and association which will be provided to the Owners and the acknowledgment by the acknowledgement by the Sub-charterers to the assignment of the Sub-charter, both of which will be required under the Charterers’ Assignment and provided to the Owners in accordance with Clause 82 (Conditions subsequent);

(ii)
certified true copies of the memorandum and articles of association (or equivalent documents) (and all amendments thereto) of each Obligor and any other documents required to be filed or registered or issued under the laws of their jurisdiction of incorporation to establish their incorporation;

(iii)
certified true copies of written resolutions or (as the case may be), resolutions passed at separate meetings, in each case, of the board of directors and (if required by any legal advisors to the Owners) shareholders of each Obligor (or its sole member or general partners), evidencing its approval of the Transaction Documents and the Project Documents to which it is a party and authorising appropriate officers or attorneys to execute the same and to sign all notices required to be given hereunder or thereunder on its behalf or other evidence of such approvals and authorisations as shall be acceptable to the Owners;

(iv)
if applicable, the original power of attorney of each Obligor under which any documents (including the Transaction Documents and Project Documents to which it is a party) are to be executed or transactions undertaken by that party;
21



(v)
a certified list specifying the directors and officers of the Obligor (together with their respective specimen signatures);

(vi)
if applicable, copies of all governmental and other consents, licences, approvals and authorisations as may be necessary to authorise the performance by each Obligor of its obligations under the Transaction Documents and Project Documents to which it is a party, and the execution, validity and enforceability of such Transaction Documents and Project Documents;

(vii)
certified copies of the duly executed Management Agreements, in each case together with all addenda, amendments or supplements;

(viii)
evidence that the fees, costs and expenses then due from the Charterers pursuant to the Novation Agreement, this Charter (including Clauses 62 (Fees and expenses) and 65 (Further indemnities)) have been paid or will be paid at such time as is agreed with the Owners;

(ix)
a legal opinion issued by legal advisers to the Owners in the following jurisdictions, each in form and substance satisfactory to and agreed by the Owners (acting reasonably) (or confirmation satisfactory to the Owners that such an opinion will be given):

(A)
England and Wales; and

(B)
such other jurisdictions as the Owners may reasonably consider necessary.

(b)
Delivery Conditions
Notwithstanding anything to the contrary in this Charter, the obligations of the Owners to purchase and take delivery of the Vessel pursuant to the Novation Agreement and to charter the Vessel to the Charterers under this Charter are subject to and conditional upon the Owners’ receipt of following documents and evidence (in each case in form and substance acceptable to the Owners) on or before the Actual Delivery Date (or such other date as the Owners and the Charterers may agree):

(i)
an original of the Account Charge and all documents required by the Account Charge, including but not limited to the notices and acknowledgement required under the Account Charge;

(ii)
evidence that:

(A)
all the conditions precedents under clause 2 (Conditions Precedent) of the Novation Agreement have been satisfied or, in the Owners’ opinion, will be satisfied on the Actual Delivery Date;

(B)
subject to Clause 82 (Conditions Subsequent), the Vessel is (or will on the Actually Delivery Date) be insured in the manner required by the Transaction Documents;

(iii)
certified copies of:

(A)
the Approved Managers’ current Document of Compliance (as such term is defined pursuant to the ISM Code);

(B)
the Vessel’s current IAPPC;
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(C)
a copy of the Vessel’s classification confirmation certificate evidencing that it is free of all overdue recommendations and requirements from the Classification Society; and (iv)a copy of each of the Collateral Transaction Documents;

(iv)
valuations made in accordance with Clause 52 (dd), dated no more than thirty (30) days prior to the Effective Date;

(v)
evidence that the fees, costs and expenses then due from the Charterers pursuant to the Novation Agreement, this Charter (including Clauses 62 (Fees and expenses) and 65 (Further indemnities)) have been paid or will be paid at such time as is agreed with the Owners;

(vi)
a legal opinion issued by legal advisers to the Owners in the following jurisdictions, each in form and substance satisfactory to and agreed by the Owners (acting reasonably) (or confirmation satisfactory to the Owners that such an opinion will be given):

(A)
a legal opinion of HFW, legal advisors to the Owners on matters relating to English law;

(B)
legal opinions by lawyers appointed by the Owners on matters relating to the laws of the Republic of the Marshall Islands;

(C)
a legal opinion of the jurisdiction in which the account bank is situated; and

(D)
such other jurisdictions as the Owners may reasonably consider necessary; and (viii)such other consent, licence, approval, authorisation or other document, opinion or assurance which are necessary in connection with their entry into and performance of the transactions contemplated by any of the Transaction Documents or for the validity and enforceability thereof (including, without limitation in relation to or for the purposes of any financing by the Owners).

(c)
If the Owners in their sole discretion agree to deliver the Vessel under this Charter to the Charterers before all of the documents and evidence required by this Clause 39 have been delivered to or to the order of the Owners, the Charterers undertake to deliver all outstanding documents and evidence to or to the order of the Owners no later than seven (7) Business Days after the Actual Delivery Date or such other date as specified by the Owners, acting in their sole discretion. The delivery of the Vessel by the Owners to the Charterers under this Charter shall not, unless otherwise notified by the Owners (acting in their sole discretion) to the Charterers in writing, be taken as a waiver of the Owners’ right to require production of all the documents and evidenced required by this Clause 40.
41.
BUNKERS AND LUBOILS
41.1
At delivery the Charterers shall take over all bunkers, lubricating oil, hydraulic oil, greases, water and unbroached stores and provisions in the Vessel without cost.
41.2
To the extent that Clause 46 (Redelivery) applies, at redelivery the Owners shall take over all bunkers, unused lubricating oil, hydraulic oil, greases, water and unbroached provisions and other consumable stores in the Vessel.
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42.
FURTHER MAINTENANCE AND OPERATION
42.1
The good commercial maintenance practice under Clause 10 (Maintenance and Operation) (Part II) of this Charter shall be deemed to include:

(a)
the maintenance and operation of the Vessel by the Charterers in accordance with (as the following are amended from time to time):

(i)
the relevant regulations, requirements and recommendations of the Classification Society;

(ii)
the relevant regulations, requirements and recommendations of the country and flag of the Vessel’s registry;

(iii)
any applicable IMO regulations (including but not limited to the ISM Code, the ISPS Code and MARPOL);

(iv)
all other applicable laws or regulations; and

(v)
Charterers’ current standard operations and maintenance manuals;

(b)
the maintenance and operation of the Vessel by the Charterers taking into account:

(i)
engine manufacturers’ recommended maintenance and service schedules;

(ii)
builder’s operations and maintenance manuals; and

(iii)
recommended maintenance and service schedules of all installed equipment and pipework.
42.2
In addition to the above, the Charterers covenant with the Owners to arrange online access to class records for the Owners as available to the Charterers.
42.3
Any equipment that is found not to be required on board as a result of law or regulation is either to be removed at the Charterers expense or to be maintained in operable condition.
42.4
The title to any equipment:

(a)
placed on board as a result of operational requirements of the Charterers shall automatically be deemed to belong to the Owners (unless hired from or belonging to a third party) immediately upon such placement, and such equipment may only be removed: (A) with the Owners’ prior written consent, (B) at the Charterers’ own expense, and (C) without damage to the Vessel; and

(b)
replaced, renewed or substituted shall remain with the Owners until the part or equipment which replaced it or the new or substitute part or equipment becomes property of the Owners.
42.5
Without prejudice to any other provisions under this Charter, the Charterers shall maintain, use and operate the Vessel with commercially reasonable care as if the Charterers were the owner of the same.
43.
STRUCTURAL CHANGES AND ALTERATIONS
43.1
Unless required by the Classification Society, compulsory legislation or pursuant to the terms of any Sub-charter, the Charterers shall make no material structural changes in the Vessel or material changes in the machinery, engines, appurtenances or spare parts thereof without in each instance first securing the Owners’ consent thereto, such consent not to be unreasonably withheld or delayed, provided that:
24



(a)
any such changes do not have a material adverse effect on the Vessel’s certification or the Vessel’s fitness for purpose;

(b)
any such changes will not materially diminish the value of the Vessel and/or have a material adverse effect on the safety, performance, value or marketability of the Vessel;

(c)
the Charterers shall bear all time, costs and expenses in relation to any such changes;

(d)
the Charterers shall furnish the Owners with:

(i)
copies of all plans in relation to such changes;

(ii)
if applicable, confirmation from the Classification Society that such changes will not adversely affect the class of the Vessel, provided always that such Classification Society agrees to issue such confirmation;

(iii)
one Valuation Report (at the Charterers’ cost) on the Market Value of the Vessel after the implementation of such changes.
43.2
Upon the occurrence of any Termination Event which is continuing, if the Owners decide to retake possession of the Vessel, the Charterers shall at their expense restore the Vessel to its former condition unless the changes made are carried out:

(a)
to improve the performance, operation or marketability of the Vessel; or

(b)
as a result of a regulatory compliance.
43.3
Any improvement, structural changes or new equipment becoming necessary for the continued operation of the Vessel by reason of new class requirements or by compulsory legislation shall be for the Charterers’ account and the Charterers shall not have any right to recover from the Owners any part of the cost for such improvements, changes or new equipment either during the Charter Period or, to the extent that Clause 46 (Redelivery) applies, at redelivery of the Vessel. The Charterers shall give written notice to the Owners of any such improvement, structural changes or new equipment.
44.
HIRE
44.1
In consideration of the Owners’ agreement to charter the Vessel to the Charterers pursuant to the terms hereof, the Charterers agree to pay to the Owners an amount of interest on the Paid Instalments (excluding, for the avoidance of any doubt, the delivery instalment), accruing at the rate of three (3) month LIBOR plus 4.0 per cent. per annum (the “Accrued Charterhire”), with such amount being accrued and payable quarterly in arrears.
44.2
The Accrued Charterhire shall be, for the avoidance of any doubt, non-refundable under all circumstances.
44.3
In consideration of the Owners’ agreement to charter the Vessel to the Charterers pursuant to the terms hereof, the Charterers agree to pay to the Owners the following sums on the relevant dates as follows:

(a)
on each and every Hire Payment Date, pay to the Owners the relevant amount then payable on the corresponding Hire Payment Date (the “Fixed Hire”) as determined by reference to the amount set out opposite such Hire Payment Date under the heading “Fixed Hire” in the hire payment schedule as attached as Schedule 3 (Hire Payment Schedule) hereto (the “Hire Payment Schedule”);

(b)
for the purpose of determining any Monthly Hire payment:

(i)
the Charterers hereby expressly acknowledge that the Hire Payment Schedule in its current form and content as attached hereto (i) is based on the Assumed
25


Owners’ Cost and (ii) on the assumption that no partial pre-payment has been made pursuant to Clause 59(g); and

(ii)
accordingly, should the Parties agree to a change in the Assumed Owners’ Cost or the Charterers make a partial pre-payment, the Owners shall deliver to the Charters an amended Hire Payment Schedule at such time (including, without limitation, the cost Balance) reflecting the resulting pro-rata adjustments for the Charterers’ review and approval, which shall thereafter:

(A)
constitute the current Hire Payment Schedule; and

(B)
save for manifest error, be conclusive evidence of the rate of Fixed Hire payable under this Charter; and

(iii)
for the avoidance of doubt and notwithstanding any provisions in this Clause 44 (Hire), the Charterers’ obligation to pay Monthly Hire as calculated in accordance with the formula set out in Clause 44(b)(ii)(B) above shall remain at all times, whether or not the Owners provide any amended Hire Payment Schedule.

(c)
All payments of Fixed Hire shall be paid in advance on each Hire Payment Date (prior to 16:00, Shanghai time) (in respect of which time is of the essence) with the first (1st) instalment falling due on the Actual Delivery Date.

(d)
Any payment provided herein due on any day which is not a Business Day shall be payable on the following Business Day.

(e)
All payments under this Charter shall be made to the account notified by the Owners to the Charterers prior to the first Hire Payment Date (or such other account as the Owners may thereafter notify the Charterers from time to time) for credit to such account notified by the Owners.

(f)
Following delivery of the Vessel to, and acceptance by, the Charterers under this Charter, the Charterers’ obligation to pay Fixed Hire in accordance with this Clause 44 shall be absolute irrespective of any contingency whatsoever including but not limited to:

(i)
any set-off (save as permitted under Clause 44.1), counterclaim, recoupment, defence or other right which the Charterers may have against the Owners, the Finance Parties or any other third party (unless otherwise agreed between the Owners and the Charterers);

(ii)
any unavailability of the Vessel, for any reason, including but not limited to seaworthiness, condition, design, operation, merchantability or fitness for use or purpose of the Vessel or any apparent or latent defects in the Vessel or its machinery and equipment or the ineligibility of the Vessel for any particular use or trade or for registration of documentation under the laws of any relevant jurisdiction or lack of registration or the absence or withdrawal of any consent required under the applicable law of any relevant jurisdiction for the ownership, chartering, use or operation of the Vessel or any damage to the Vessel;

(iii)
any lack or invalidity of title or any other defect in title;

(iv)
any failure or delay on the part of either party to this Charter, whether with or without fault on its part, in performing or complying with any of the terms, conditions or other provisions of this Charter;

(v)
any insolvency, bankruptcy, reorganisation, arrangement, readjustment of debt, dissolution, administration, liquidation or similar proceedings by or
26


against the Owners or the Charterers or any change in the constitution of the Owners or the Charterers;

(vi)
any invalidity or unenforceability or lack of due authorisation of or any defect in this Charter;

(vii)
any other cause which would but for this provision have the effect of terminating or in any way affecting the obligations of the Charterers hereunder,
it being the intention of the parties that the provisions of this Clause 44, and the obligation of the Charterers to pay Fixed Hire and make any payments under this Charter, shall (save as expressly provided in this Clause 44) survive any frustration and that, save as expressly provided in this Charter, no moneys paid under this Charter by the Charterers to the Owners shall in any event or circumstance be repayable to the Charterers.

(g)
All payments of Fixed Hire and all other Unpaid Sums to the Owners pursuant to this Charter and the other relevant Transaction Documents shall be made in immediately available funds in US Dollars, free and clear of, and without deduction or withholding for or on account of, any Taxes (unless otherwise agreed between the Owners and the Charterers).

(h)
In the event that the Charterers are required by any law or regulation to make any deduction or withholding on account of any taxes which arise as a consequence of any payment due under this Charter, then:

(i)
the Charterers shall notify the Owners promptly after they become aware of such requirement;

(ii)
the Charterers shall remit the amount of such taxes to the appropriate taxation authority within three (3) Business Days or any other applicable shorter time limits and in any event prior to the date on which penalties attach thereto; and

(iii)
such payment shall be increased by such amount as may be necessary to ensure that the Owners receive a net amount which, after deducting or withholding such taxes, is equal to the full amount which the Owners would have received had such payment not been subject to such taxes.

(i)
The Charterers shall forward to the Owners evidence reasonably satisfactory to the Owners that any such taxes have been remitted to the appropriate taxation authority within thirty (30) days of the expiry of any time limit within which such taxes must be so remitted or, if earlier, the date on which such taxes are so remitted.

(j)
Subject to sub-paragraph 54.1)(a) of Clause 54 (Termination Events), if the Charterers fail to pay any amount payable by it under a Transaction Document on its due date, interest shall accrue on a daily basis over the Unpaid Sum from the due date up to the date of actual payment (both before and after judgment) at a rate of 8% per annum.

(k)
In the event that this Charter is terminated for whatever reason, the Charterers’ obligation to pay Fixed Hire, and such other Unpaid Sum which (in each case) has accrued due before, and which remains unpaid, at the date of such termination shall continue notwithstanding such termination.

(l)
In the event that it becomes unlawful or it is prohibited for either the Owners or the Charterers to charter the Vessel pursuant to this Charter, then the Owners and Charterers, if such new or changed law or regulation or such interpretation or application permit, shall notify the other party of the relevant event and negotiate in good faith for a period of thirty (30) days from the date of the receipt of the relevant notice by the other party to agree an alternative. If such agreement is not reached within such thirty (30)-day period, the Charterers agree that, in such circumstances, the
27


Owners shall have the right to terminate this Charter by delivering to the Charterers a Termination Notice, whereupon the Charterers shall be obliged to pay to the Owners the Termination Sum in accordance with paragraph (d) of Clause 54 (Termination Events) and/or such other terms and conditions as may be specified in such Termination Notice.

(m)
Subject to paragraph (o) below, the Charterers shall, within three (3) Business Days of a demand by the Owners, pay to the Owners the amount of any Increased Costs incurred by the Owners as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Charter.

(i)
“Increased Costs” means:

(A)
a reduction in the rate of return from the Fixed Hire or on the Owners’ overall capital;

(B)
an additional or increased cost; or

(C)
a reduction of any amount due and payable under any Transaction Document,
which is incurred or suffered by the Owners to the extent that it is attributable to the Owners having entered into any Transaction Document or funding or performing its obligations under any Transaction Document.

(n)
The Owners shall notify the Charterers of any claim arising from paragraph (m) above (and of the event giving rise to such claim). The Owners shall, as soon as practicable after having made a demand in respect of such claim, provide a certificate confirming the amount of its Increased Costs as well as evidence supporting its calculation.

(o)
Paragraph (m) above does not apply to the extent any Increased Costs is:

(i)
compensated for by a payment made under paragraph (h)(iii) above; or

(ii)
attributable to the wilful breach by the Owners of any law or regulation.
45.
INSURANCE
45.1
During the Agreement Term, the Charterers shall at their expense keep the Vessel insured against fire and usual marine risks (including hull and machinery and excess risks), oil pollution liability risks, war and protection and indemnity risks (and any risks against which it is compulsory to insure for the operation for the Vessel) in US Dollars and in such market and on such terms as the Owners and the Finance Parties (if any) shall in writing approve45 in line with good shipping practise.
45.2
Such insurances shall be arranged by the Charterers to protect the interests of the Owners, the Charterers and (if any) the mortgagee of the Vessel (but if there exists any mortgagee, the Charterers shall request such mortgagee to agree to enter into a quiet enjoyment agreement with the Charterers in such form as the parties may agree but nothing herein shall prohibit the Owners from granting such mortgage in favour of a Finance Party under a Finance Document) or such other relevant Finance Party, and the Charterers shall be at liberty to protect under such insurances the interests of any Approved Manager.
45.3
Insurance policies shall cover the Owners, the Charterers and (if any) the Finance Parties according to their respective interests. Subject to the approval of the Owners (acting on the instructions or with the approval of the Finance Parties (in each case if applicable) and the insurers, the Charterers shall effect all insured repairs and shall undertake settlement and reimbursement from the insurers of all costs in connection with such repairs as well as insured
28


charges, expenses and liabilities to the extent of coverage under the insurances herein provided for.
45.4
The Charterers shall also remain responsible for and to effect repairs and settlement of costs and expenses incurred thereby in respect of all other repairs not covered by the insurances and/or not exceeding any possible franchise(s) or deductibles provided for in the insurances.
45.5
The Charterers shall arrange that, at any time during the Agreement Term, the hull and machinery and war risks insurance shall be in an amount not less than the greater of:

(a)
an amount which equals one hundred and twenty per cent (120%) of the Cost Balance; and

(b)
the current Market Value of the Vessel.
45.6
The terms of the hull and machinery insurance and the identity of the insurers shall be acceptable to the Owners and (if any) the Finance Parties. The Vessel shall be entered in a P&I Club which is a member of the International Group Association on customary terms and shall be covered against liability for pollution claims in an amount not less than one billion US Dollars (US$1,000,000,000). The P&I cover shall be placed with a P&I Club acceptable to the Owners and (if any) the Finance Parties. All insurances shall include customary protection in favour of the Owners and (if any) the Finance Parties as notice of cancellation and exclusion from liability for premiums or calls. The insurance policies or cover notes for the hull and machinery insurance shall name the Owners as co-assured, endorsing its rights and interests. The Owners shall be entered as a member for the P&I cover and war risks insurance.
45.7
The Charterers:

(a)
undertake to place the Insurances in such markets, in such currency, on such terms and conditions, and with such brokers, underwriters and associations as the Owners and, if applicable, the Finance Parties shall have previously approved in writing such approval not be unreasonably withheld; and

(b)
shall not alter the terms of any of the Insurances nor allow any person (except the Approved Manager) to be co-assured under any of the Insurances without the prior written consent of the Owners and, if applicable, the Finance Parties, and will supply the Owners and, if applicable, the Finance Parties from time to time on request with such information as the Owners and, if applicable, any Finance Party may in their discretion require with regard to the Insurances and the brokers, underwriters or associations through or with which the Insurances are placed.
45.8
The Charterers undertake duly and punctually to pay all premiums, calls and contributions, and all other sums at any time payable in connection with the Insurances, and, at their own expense, to arrange and provide any guarantees from time to time required by any protection and indemnity or war risks association. The Charterers shall provide the Owners and/or such Finance Party with (i) copies of all invoices issued by the brokers, underwriters or associations in respect of such premiums calls, contributions and other sums, and (ii) evidence satisfactory to the Owners and/or such Finance Party that such premiums, calls, contributions and other sums have been duly and punctually paid; that any such guarantees have been duly given; and that all declarations and notices required by the terms of any of the Insurances to be made or given by or on behalf of the Charterers to brokers, underwriters or associations have been duly and punctually made or given.
45.9
The Charterers will comply in all respects with all terms and conditions of the Insurances and will make all such declarations to brokers, underwriters and associations as may be required to enable the Vessel to operate in accordance with the terms and conditions of the Insurances. The Charterers will not do, nor permit to be done, any act, nor make, nor permit to be made, any omission, as a result of which any of the Insurances may become liable to be suspended, cancelled or avoided, or may become unenforceable, or as a result of which any sums payable under or in connection with any of the Insurances may be reduced or become liable to be repaid
29


or rescinded in whole or in part. In particular, but without limitation, the Charterers will not permit the Vessel to be employed other than in conformity with the Insurances without first taking out additional insurance cover in respect of that employment in all respects to the satisfaction of the Owners and, if applicable, the Finance Parties, and the Charterers will promptly notify the Owners and, if applicable, the Finance Parties of any new requirement imposed by any broker, underwriter or association in relation to any of the Insurances.
45.10
The Charterers will endeavour and before the expiry of any of the Insurances renew them and shall as soon as reasonably thereafter (but in any event within fifteen (15) days after the relevant renewals) give the Owners and, if applicable, the Finance Parties such details of those renewals as the Owners and, if applicable, the Finance Parties may require.
45.11
The Charterers shall deliver to the Owners and, if applicable, the Finance Parties certified copies (and, if required by the Owners and/or (if applicable) any Finance Parties, the originals) of all policies, certificates of entry (endorsed with the appropriate loss payable clauses as may be required by the Owners and the Finance Parties from time to time) and other documents relating to the Insurances (including, without limitation, receipts for premiums, calls or contributions) and shall procure that letters of undertaking in such form as the Owners and, if applicable, the Finance Parties may approve shall be issued to the Owners and, if applicable, the Finance Parties by the brokers through which the Insurances are placed (or, in the case of protection and indemnity or war risks associations, by their managers). If the Vessel is at any time during the Agreement Term insured under any form of fleet cover, the Charterers shall procure that those letters of undertaking contain confirmation that the brokers, underwriters or association (as the case may be) will not set off claims relating to the Vessel against premiums, calls or contributions in respect of any other vessel or other insurance, and that the insurance cover of the Vessel will not be cancelled by reason of non-payment of premiums, calls or contributions relating to any other vessel or other insurance. Failing receipt of those confirmations, the Charterers will instruct the brokers, underwriters or association concerned to issue a separate policy or certificate for the Vessel in the sole name of the Charterers or of the Charterers’ brokers as agents for the Charterers.
45.12
Upon the Owners’ reasonable request, the Charterers shall provide the Owners and, if applicable, the Finance Parties with full information available to the Charterers regarding any casualty or other accident or damage to the Vessel, including, without limitation, any communication with all parties involved in case of a claim under any of the Insurances.
45.13
The Charterers agree that, at any time after the occurrence of a Termination Event which is continuing, the Owners and, if applicable, the Finance Parties shall be entitled to collect, sue for, recover and give a good discharge for all claims in respect of any of the Insurances; to pay collecting brokers the customary commission on all sums collected in respect of those claims; to compromise all such claims or refer them to arbitration or any other form of judicial or non-judicial determination; and otherwise to deal with such claims in such manner as the Owners and, if applicable, the Finance Parties shall in their discretion think fit.
45.14
Whether or not a Termination Event shall have occurred, the proceeds of any claim under any of the Insurances in respect of a Total Loss shall be paid and applied in accordance with Clause 61 (Total Loss).
45.15
In the event of any claim in respect of any of the Insurances (other than in respect of a Total Loss), if the Charterers shall fail to reach agreement with any of the brokers, underwriters or associations for the immediate restoration of the Vessel, or for payment to third parties, within such time as the Owners and, if applicable, the Finance Parties may stipulate, the Owners and, if applicable, the Finance Parties shall be entitled to require payment to itself. In the event of any dispute arising between the Charterers and any broker, underwriter or association with respect to any obligation to make any payment to the Charterers or to the Owners and/or (if applicable) the Finance Parties under or in connection with any of the Insurances, or with respect to the amount of any such payment, the Owners and/or (if applicable) the Finance Parties shall be entitled to settle that dispute directly with the broker, underwriter or association concerned. Any such settlement shall be binding on the Charterers.
30


45.16

(a)
implement any recommendations contained in the reports issued following the surveys referred to in sub-paragraph Error! Reference source not found. above within the relevant time limits, and provide evidence satisfactory to the Owners and, if applicable, the Finance Parties that the protection and indemnity insurers are satisfied that this has been done; and

(b)
in addition to the foregoing (if such trade is in the United States of America and Exclusive Economic Zone):

(i)
obtain and retain a certificate of financial responsibility under the Act in form and substance satisfactory to the United States Coast Guard and provide the Owners with evidence of the same;

(ii)
procure that the protection and indemnity insurances do not contain a US Trading Exclusion Clause or any other analogous provision and provide the Owners with evidence that this is so; and

(iii)
comply strictly with any operational or structural regulations issued from time to time by any relevant authorities under the Act so that at all times the Vessel falls within the provisions which limit strict liability under the Act for oil pollution.
45.17
The Owners shall be at liberty to, in relation to the Vessel, take out Lessor’s or Innocent Owners’ Interest Insurance and Lessor’s Additional Peril (Pollution) insurance on such terms and conditions as the Owners may from time to time decide. The Charterers shall from time to time upon the Owners’ demand reimburse the Owners for all costs, premiums and expenses paid or incurred by the Owners in connection with such Lessor’s or Innocent Owners’ Interest Insurance and Lessor’s Additional Peril (Pollution) insurance, but only to the extent corresponding to each of the Lessor’s or Owners’ Interest Insurance or Lessor’s Additional Peril (Pollution) insurance for an amount not exceeding one hundred and twenty per cent (120%) of the then current Cost Balance.
45.18
Any Finance Party shall be at liberty to take out a Mortgagees’ Interest Insurance in relation to the Vessel on such terms and conditions as that Finance Party may from time to time decide. The Charterers shall from time to time upon the Owners’ demand reimburse the Owners for all costs, premiums and expenses paid or incurred by the Owners or that Finance Party in connection with such Mortgagees’ Interest Insurance, but only to the extent corresponding to a Mortgagee’s Interest Insurance for an amount not exceeding one hundred and twenty per cent. (120%) of the amount then outstanding under any loan made available by the Finance Parties pursuant to any Finance Documents.
45.19
The Owners shall be at liberty to, in relation to the Vessel, take out freight, demurrage and defence cover on such terms and conditions as the Owners may from time to time decide. The Charterers shall from time to time upon the Owners’ demand reimburse the Owners for all costs, premiums and expenses paid or incurred by the Owners in connection with such cover, but only to the extent corresponding to such cover for an amount not exceeding one hundred and twenty per cent (120%) of the then current Cost Balance.
46.
REDELIVERY
Upon the occurrence of any Termination Event which is continuing, the Owners decide to retake possession of the Vessel pursuant to paragraph (g) of Clause 54 (Termination Events), then the Charterers shall, at their own cost and expense, redeliver or cause to be redelivered the Vessel to the Owners at a safe, ice free port reasonably nominated solely by the Owner where the Vessel would be afloat at all times in a ready safe berth or anchorage, in accordance with Clauses 46 (Redelivery), 47 (Redelivery conditions) and 49 (Diver’s inspection at redelivery).
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47.
REDELIVERY CONDITIONS

(a)
In addition to what has been agreed in Clauses 15 (Redelivery) (Part II) and 46 (Redelivery), the condition of the Vessel shall at redelivery be as follows:

(i)
the Vessel shall be free of any class and statutory recommendations affecting its trading certificates;

(ii)
the Vessel must be redelivered with all equipment and spares or replacement items listed in the delivery inventory carried out pursuant to Clause 9 (Inventories, Oil and Stores) (Part II) and any spare parts on board or on order for any equipment installed on the Vessel following delivery (provided that any such items which are on lease or hire purchase shall be replaced with items of an equivalent standard and condition fair wear and tear excepted); all records, logs, plans, operating manuals and drawings, spare parts onboard shall be included at the time of redelivery in connection with a transfer of the Vessel or such other items as are then in the possession of the Charterers shall be delivered to the Owners;

(iii)
the Vessel must be redelivered with all national and international trading certificates and hull/machinery survey positions for both class and statutory surveys free of any overdue recommendation and qualifications valid and un-extended for a period of at least three (3) months beyond the redelivery date;

(iv)
all of the Vessel’s ballast tank coatings to be maintained in “Fair” (as such term (or its equivalent) may be defined and/or interpreted in the relevant survey report) condition as appropriate for the Vessel’s age at the time of redelivery, fair wear and tear excepted;

(v)
the Vessel shall have passed any flag or class surveys or inspections due within three (3) months after the date of redelivery and have its continuous survey system up to date;

(vi)
the Vessel must be re-delivered with accommodation and common spaces for crew and officers substantially in the same condition as at the Actual Delivery Date, free of damage over and above fair wear and tear, clean and free of infestation and odours; with cargo spaces generally fit to carry the cargoes originally designed and intended for the Vessel; with main propulsion equipment, auxiliary equipment, cargo handling equipment, navigational equipment, etc., in such operating condition as provided for in this Charter;

(vii)
the Vessel shall be free and clear of all liens other than those created by or on the instruction of the Owners;

(viii)
the condition of the cargo holds to be in accordance with the maintenance regime undertaken by the Charterers during the Charter Period since delivery with allowance for legitimate cargoes carried since the last major maintenance programme;

(ix)
at the costs and expenses of the Charterers, a final joint report from the surveyors appointed by the Owners and the Charterers respectively shall be carried out as to the condition of the Vessel and a list of agreed deficiencies if any shall be drawn up;

(x)
the anti-fouling coating system applied at the last scheduled dry-docking shall be in accordance with prevailing regulations at the time of application;

(xi)
the funnel markings and name (unless being maintained by the Owner following redelivery) shall be painted out by the Charterers; and
32




(xii)
recently taken lube oil samples for all major machinery shall be made available within one (1) week of redelivery and results forwarded to Owners’ technical management for review.

(b)
At redelivery, the Charterers shall ensure that the Vessel shall meet the following performance levels (which where relevant shall be determined by reference to the Vessel’s log books):

(i)
all equipment controlling the habitability of the accommodation and service areas to be in proper working order, fair wear and tear excepted; and

(ii)
available deadweight to be within one per cent (1%) of that achieved at delivery (as the same may be adjusted as a result of any upgrading of the Vessel carried out in accordance with this Charter (such adjustment to be agreed between the Owners and Charterers at the time such upgrading work is to be undertaken);

(c)
The Owners and Charterers shall each appoint (at the Charterers’ cost and expense) surveyors for the purpose of determining and agreeing in writing the condition of the Vessel at redelivery.

(d)
If the Vessel is not in the condition or does not meet the performance criteria required by this Clause 47, a list of deficiencies together with the costs of repairing/remedying such deficiencies shall be agreed by the respective surveyors.

(e)
The Charterers shall be obliged to repair any class items restricting the operation or trading of the Vessel prior to redelivery.

(f)
The Charterers shall be obliged to repair/remedy all such other deficiencies as are necessary to put the Vessel into the return condition required by this Clause 47.

(g)
Until such time as any compensatory amount in respect of any repairs/remedial work outstanding as at redelivery has been paid in accordance with the terms of this Charter and the Vessel has been redelivered, the Charterers shall continue to pay the Fixed Hire in accordance with the terms of this Charter.
48.
OWNERS’ MORTGAGE
48.1
If required by the Sub-Charterer, the Owner shall procure, or provide, as the case may be a quiet enjoyment letter in wording to be reasonably agreed between the parties, the Charterers:

(a)
acknowledge that the Owners are entitled and do intend to enter or have entered into certain funding arrangements with the Finance Parties in order to finance part of the Owners’ Cost, which funding arrangements may be secured, inter alia, by ship mortgages over the Vessel and (along with other related matters) the relevant Finance Documents;

(b)
irrevocably consent to any assignment in favour of the Finance Parties pursuant to the relevant Finance Documents of the Charterers’ rights, interests and benefits in and to the Insurances, Earnings, Requisition Compensation and any guarantee in favour of the Charterers for the performance of the obligations of any Sub-charterer under any Sub-charter; and

(c)
without limiting the generality of paragraph 52.14 of Clause 52 (Charterers’ undertakings), undertake to execute, provide or procure the execution or provision (as the case may be) of such further reasonably information or document as are necessary to effect the assignment referred to in paragraph (b) above.

(d)
Without prejudice to the foregoing, the Owners’ may assign, transfer or novate their rights under this Charter without the prior written consent of the Charterers.
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49.
DIVER’S INSPECTION AT REDELIVERY
49.1
Unless the Vessel is returned in dry-dock, a diver’s inspection is required to be performed at the time of redelivery.
49.2
The Charterers shall, at the written request of the Owners, arrange at the Charterers’ time and expense for an underwater inspection by a diver approved by the Classification Society immediately prior to the redelivery.
49.3
A video film of the inspection shall be made. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society.
49.4
If damage to the underwater parts is found, the Charterers shall arrange, at their time and costs, for the Vessel to be dry-docked and repairs carried out to the satisfaction of the Classification Society.
49.5
If the conditions at the port of redelivery are unsuitable for such diver’s inspection, the Charterers shall take the Vessel (in Owners’ time but at Charterers’ expense) to a suitable alternative place nearest to the redelivery port unless an alternative solution is agreed.
All costs relating to any diver’s inspection shall be borne by the Charterers.
50.
TRANSPORT DOCUMENTS
The Charterers shall use their standard documents, waybills and conditions of carriage in the carriage of goods. Such documents, waybills and standard conditions shall comply with compulsory applicable legislation.
51.
CHARTERERS’ REPRESENTATIONS AND WARRANTIES
51.1
The Charterers represent and warrant to the Owners on the date of this Charter and (by reference to the facts and circumstances then pertaining) on, each payment date for making payment of the Paid Instalments, the Actual Delivery Date and each Hire Payment Date as follows (except that (1) the representation and warranty contained in paragraph (g) and (x) below shall only be made on the date of this Charter, each payment date for making payment of the Paid Instalments and on the Actual Delivery Date, and (2) the representations and warranties in paragraph (b) below shall only be made on the date of this Charter):

(a)
Status and due authorisation: each Obligor is a corporation, limited partnership or limited liability company duly incorporated or formed under the laws of its jurisdiction of incorporation or formation (as the case may be) with power to enter into the Transaction Documents and the Project Documents (to which it is a party) and to exercise its rights and perform its obligations under the Transaction Documents and the Project Documents (to which it is a party) and all corporate and other action required to authorise its execution of the Transaction Documents and the Project documents (to which it is a party) and its performance of its obligations thereunder has been duly taken;

(b)
No deductions or withholding: under the laws of the Obligors’ respective jurisdictions of incorporation or formation in force at the date hereof, none of the Obligors will be required to make any deduction or withholding from any payment it may make under any of the Transaction Documents;

(c)
Claims pari passu: under the laws of the Obligors’ respective jurisdictions of incorporation or formation in force at the date hereof, the payment obligations of each Obligor under each Transaction Document to which it is a party, rank at least pari passu with the claims of all other unsecured and unsubordinated creditors of such obligor save for any obligations which are preferred solely by any bankruptcy, insolvency or other similar laws of general application;
34



(d)
No Immunity: in any proceedings taken in any of the Obligors’ respective jurisdictions of incorporation or formation in relation to any of the Transaction Documents, none of the Obligors will be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process;

(e)
Governing law and judgments: in any proceedings taken in any of the Obligors’ jurisdiction of incorporation or formation in relation to any of the Transaction Documents in which there is an express choice of the law of a particular country as the governing law thereof, that choice of law and any judgment or (if applicable) arbitral award obtained in that country will be recognised and enforced;

(f)
Validity and admissibility in evidence: as at the date hereof, all acts, conditions and things required to be done, fulfilled and performed in order (A) to enable each of the Obligors lawfully to enter into, exercise its rights under and perform and comply with the obligations expressed to be assumed by it in the Transaction Documents and the Project Documents to which it is a party, (B) to ensure that the obligations expressed to be assumed by each of the Obligors in the Transaction Documents and the Project Documents are legal, valid and binding, and (C) to make the Transaction Documents and the Project Documents to which it is a party admissible in evidence in the jurisdictions of incorporation or formation of each of the Obligors, have been done, fulfilled and performed;

(g)
No filing or stamp taxes: under the laws of the Obligors’ respective jurisdictions of incorporation or formation in force at the date hereof, it is not necessary that any of the Transaction Documents to which it is a party be filed, recorded or enrolled with any court or other authority in its jurisdiction of incorporation or formation (other than the Registrar of Companies for England and Wales or the relevant maritime registry, to the extent applicable) or that any stamp, registration or similar tax be paid on or in relation to any of the Transaction Document except that the Charterers’ Assignment, the Manager’s Undertakings and the Account Charge shall be filed against the Charterers with the Marshall Islands within one month of the date of execution of such document;

(h)
Binding obligations: the obligations expressed to be assumed by each of the Obligors in the Transaction Documents and the Project Documents to which it is a party are legal and valid obligations, binding on each of them in accordance with the terms of such Transaction Documents and the Project Documents and no limit on any of their powers will be exceeded as a result of the borrowings, granting of security or giving of guarantees contemplated by such Transaction Documents and the Project Documents or the performance by any of them of any of their obligations thereunder;

(i)
No misleading information: to the best of its knowledge, any factual information provided by any Obligor to the Owners in connection with the Transaction Documents was true and accurate in all material respects as at the date it was provided and is not misleading in any material respect;

(j)
No winding-up: none of the Obligors has taken any corporate, limited liability company or limited partnership action nor have any other steps been taken or legal proceedings been started or (to the best of the Charterers’ knowledge and belief) threatened against any Obligor for its winding-up, dissolution, administration or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues which might have a Material Adverse Effect ;

(k)
Solvency:

(i)
None of the Obligors is unable, or admits or has admitted its inability, to pay its debts or has suspended making payments in respect of any of its debts;
35



(ii)
None of the Obligors by reason of actual or anticipated financial difficulties, has commenced, or intends to commence, negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.

(iii)
The value of the assets of each Obligor is not less than the liabilities of such Obligor (as the case may be) (taking into account contingent and prospective liabilities).

(iv)
No moratorium has been, declared in respect of any indebtedness of any Obligor.

(l)
No material defaults:

(i)
Without prejudice to paragraph (ii) below, none of the Obligors are in breach of or in default under any agreement to which it is a party or which is binding on it or any of its assets to an extent or in a manner which might have a Material Adverse Effect.

(ii)
No Potential Termination Event or Termination Event is continuing or might reasonably be expected to result from each Obligor’s entry into and performance of each Transaction Document to which such Obligor is a party;

(m)
No material proceedings: no material action or administrative proceeding of or before any court, arbitral body or agency which is not covered by adequate insurance or which might have a Material Adverse Effect has been started;

(n)
Accounts: all financial statements relating to the Charterers required to be delivered under paragraph 52.1 of Clause 52 (Charterers’ undertakings), were each prepared in accordance with GAAP, (in conjunction with the notes thereto) fairly represent the financial condition of the Charterers at the date as of which they were prepared and the results of their operations during the financial period then ended;

(o)
No obligation to create Security Interest: the execution of the Transaction Documents by the Obligors and their exercise of their rights and performance of their obligations thereunder will not result in the existence of nor oblige any Obligor to create any Security Interest over all or any of their present or future revenues or assets, other than pursuant to the Security Documents to which they are a party;

(p)
No breach: the execution of the Transaction Documents and the Project Documents by each of the Obligors and their exercise of their rights and performance of their obligations under any of the Transaction Documents and the Project Documents to which they are a party do not constitute and will not result in any breach of any agreement or treaty to which any of them is a party;

(q)
Security: each of the Obligors is the legal and beneficial owner of all assets and other property which it purports to charge, mortgage, pledge, assign or otherwise secure pursuant to each Security Document and those Security Documents to which it is a party create and give rise to valid and effective security having the ranking expressed in those Security Documents;

(r)
Necessary authorisations: the Necessary Authorisations required by each Obligor are in full force and effect, and each Obligor is in compliance with the material provisions of each such Necessary Authorisation relating to it and, to the best of its knowledge, none of the Necessary Authorisations relating to it are the subject of any pending or threatened proceedings or revocation;

(s)
No money laundering: the performance of the obligations of the Obligors under the Transaction Documents and the Project Documents, will be for the account of members of the respective Obligor(s) and will not involve any breach by any of them of any law or regulatory measure relating to “money laundering” as defined in Article 1 of the
36


Directive (2005/EC/60) of the European Parliament and of the Council of the European Communities;

(t)
Disclosure of material facts: the Charterers are not aware of any material facts or circumstances which have not been disclosed to the Owners and which might, if disclosed, have reasonably been expected to materially adversely affect the decision of a person considering whether or not to enter into the Transaction Documents.

(u)
Environmental laws:

(i)
Each of the Charter Guarantors is in compliance with paragraph 52.8 of Clause 52 (Charterers’ undertakings) and (to the best of its knowledge and belief) no circumstances have occurred which would prevent such compliance in a manner or to an extent which has or is reasonably likely to have a Material Adverse Effect. No Environmental Claim has been commenced or (to the best of the Charterers’ knowledge and belief) is threatened against any of the Charter Guarantor where that claim has or is reasonably likely, if determined against the Charter Guarantor, to have a Material Adverse Effect.

(v)
Taxation

(i)
No Obligor is materially overdue in the filing of any Tax returns and no Obligor overdue in the payment of any amount in respect of Tax of one million US Dollars (US$1,000,000) (or its equivalent in any other currency) or more, save in the case of Taxes which are being contested in good faith.

(ii)
As far as the Charterers are aware, each of the Obligors (save for the Approved Manager) is resident for Tax purposes only in the jurisdiction of its incorporation.

(w)
No Restricted Party: no Obligor is a Restricted Party nor has any Obligor or any of their respective directors, officers or employees or any person acting on their behalf received notice or are aware of any claim, action, suit, proceeding or investigation against any of them with respect to Sanctions by a Sanctions Authority.

(x)
No Material Adverse Effect: no event or circumstance which has occurred which has a Material Adverse Effect.

(y)
Status of Project Documents: The copies of the Project Documents delivered to the Lender are true and complete copies. The Project Documents constitute legal, valid, binding and enforceable obligations of the parties to them in accordance with their respective terms except insofar as enforcement may be limited by any applicable laws relating to bankruptcy, insolvency, administration and similar laws affecting creditors’ rights generally and by principles of equity. No amendments or additions to the Project Documents have been agreed nor has any party to any Project Document waived any of its respective rights under that Project Document (except as those notified to the Owners in writing and, if consent of the Owners are required pursuant to this Charter, as consented to by the Owners).
51.2
The representation and warranties of the Charterers in this Clause 51 are subject to:

(a)
the principle that equitable remedies are remedies which may be granted or refused at the discretion of the court;

(b)
the limitation of enforcement by laws relating to bankruptcy, insolvency, liquidation, reorganisation, court schemes, moratoria, administration and other laws generally affecting or limiting the rights of creditors;

(c)
the time barring of claims under any applicable limitation acts;
37



(d)
the possibility that a court may strike out provisions for a contract as being invalid for reasons of oppression, undue influence or similar; and

(e)
any other reservations or qualifications of law expressed in any legal opinions obtained by the Owners in connection with the Transaction Documents.
52.
CHARTERERS’ UNDERTAKINGS
The undertaking and covenants in this Clause 52 remain in force for the duration of the Agreement Term.
52.1
Financial statements the Charterers shall and shall procure the Charter Guarantor to each supply to the Owners (i) as soon as the same become available, but in any event within one hundred and eighty (180) days after the end of each of its financial years, its audited consolidated financial statements for that financial year.
52.2
Requirements as to financial statements each set of financial statements delivered to the Owners under paragraph 52.1 of Clause 52 in relation to the Charterers and the Charter Guarantor (each a “Notifying Party”):

(a)
shall be certified by an authorised signatory of the relevant Notifying Party as fairly representing its financial condition as at the date as at which those financial statements were drawn up; and

(b)
shall be prepared in accordance with GAAP.
52.3
Information The Charterers shall supply to the Owners:

(a)
promptly upon becoming aware of them, details of any material litigation, arbitration or administrative proceedings which are current, threatened or pending against the Charterers, and which, if adversely determined, are reasonably likely to have a Material Adverse Effect; and

(b)
promptly, such further information regarding the financial condition, business and operations of the Charterers as the Owners may reasonably request.
52.4
Maintenance of legal validity The Charterers shall comply with the terms of and do all that is necessary to maintain in full force and effect all Necessary Authorisations required in or by the laws and regulations of its jurisdiction of formation or incorporation and all other applicable jurisdictions, to enable it lawfully to enter into and perform its obligations under the Transaction Documents and to ensure the legality, validity, enforceability or admissibility in evidence of the Transaction Documents in its jurisdiction of incorporation or formation and all other applicable jurisdictions.
52.5
Notification of Potential Termination Event The Charterers shall promptly, upon becoming aware of the same, inform the Owners in writing of the occurrence of any Termination Event or Potential Termination Event (and the steps, if any, being taken to remedy this) and, upon receipt of a written request to that effect from the Owners, confirm to the Owners that, save as previously notified to the Owners or as notified in such confirmation, no Termination Event or Potential Termination Event is continuing or if a Termination Event or Potential Termination Event is continuing specifying the steps, if any, being taken to remedy it.
52.6
Claims pari passu The Charterers shall ensure that at all times the claims of the Owners against it under the Transaction Documents rank at least pani passu with the claims of all its other unsecured and subordinated creditors save those whose claims are preferred by any bankruptcy, insolvency, liquidation, winding-up or other similar laws of general application.
52.7
Necessary Authorisations Without prejudice to any specific provision of the Transaction Documents relating to a Necessary Authorisation, the Charterers shall (i) obtain, comply with and do all that is necessary to maintain in full force and effect all Necessary Authorisations if a
38


failure to do the same may cause a Material Adverse Effect; and (ii) promptly upon request, supply certified copies to the Owners of all Necessary Authorisations.
52.8
Compliance with applicable laws The Charterers shall comply with all applicable laws, including Environmental Laws, to which it may be subject (except as regards Restricted Parties to which paragraph 52.9 below applies, and anti-corruption and anti-bribery laws to which paragraph 52.10 below applies) if a failure to do the same may have a Material Adverse Effect.
52.9
No dealings with Restricted Parties The Charterers shall not, and shall not permit or authorise any other person to, directly or indirectly, utilise or employ the Vessel or to use, lend, make payments of, contribute or otherwise make available, all or any part of the proceeds of any transaction(s) contemplated by the Transaction Documents to fund any trade, business or other activities:

(a)
involving or for the benefit of any Restricted Party; and

(b)
in any other manner that would reasonably be expected to result in any Obligor or the Owners or any Finance Party (if applicable) being in breach of any Sanctions or become a Restricted Party.
52.10
Anti-corruption and anti-bribery laws The Charterers shall conduct its business in compliance with applicable anti-corruption and anti-bribery laws.
52.11
Environmental compliance
The Charterers shall:

(a)
comply with any Environmental Law;

(b)
obtain, maintain and ensure compliance with all requisite Environmental Approvals; and

(c)
implement procedures to monitor compliance with and to prevent liability under any Environmental Law,

where failure to do so has or is reasonably likely to have a Material Adverse Effect.
52.12
Environmental Claims The Charterers shall, promptly upon becoming aware of the same, inform the Owners in writing of:

(i)
any Environmental Claim against the Charterers which is current or pending; and

(ii)
any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against the Charterers,
where the claim, if determined against the Charterers, has or is reasonably likely to have a Material Adverse Effect.
52.13
Taxation

(a)
The Charterers shall pay and discharge any Tax imposed upon it or its assets within the time period allowed without incurring penalties unless and only to the extent that:

(i)
such payment is being contested in good faith;

(ii)
adequate reserves are being maintained for such Tax and the costs required to contest them have been disclosed in its latest financial statements; and

(iii)
such payment can be lawfully withheld and failure to pay such Tax does not have or is not reasonably likely to have a Material Adverse Effect.
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(b)
No Obligor may change its residence for Tax purposes.
52.14
Further assurance The Charterers shall, at their own expense, promptly take all such action as the Owners may reasonably require for the purpose of perfecting or protecting any of the Owner’s rights with respect to the security created or evidenced (or intended to be created or evidenced) by the Security Documents.
52.15
Other information The Charterers will promptly supply to the Owners such financial information and explanations as the Owners may from time to time reasonably require in connection with the Charterers.
52.16
Inspection of records The Charterers will permit the inspection of their financial records and accounts relating to the Transaction Documents on reasonable notice from time to time during business hours by the Owners or its nominee.
52.17
Merger and demerger The Charterers shall not enter into any amalgamation, merger, demerger or corporate restructuring without the prior written consent of the Owners (such consent not to be unreasonably withheld or delayed).
52.18
Transfer of assets The Charterers shall not, sell or transfer any of its material assets other than:

(a)
on arm’s length terms to third parties where the net proceeds of sale are used as a prepayment hereunder; or

(b)
on arm’s length terms to its Affiliates, which are and remain members of the Charter Group.
52.19
Change of business The Charterers shall not, without the prior written consent of the Owners, make any substantial change to the general nature of their shipping business from that carried on at the date of this Charter.
52.20
“Know your customer” checks If:

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

(b)
any change in the status of the Charterers after the date of this Charter; or

(c)
a proposed assignment or transfer by Owners of any of its rights and obligations under this Charter,
obliges the Owners to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Charterers shall promptly upon the request of the Owners supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Owners in order for the Owners 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 Transaction Documents.
52.21
Management of the Vessel The Charterers shall ensure that:

(a)
the Vessel is at all times technically and commercially managed by an Approved Manager;

(b)
unless (A) the Charterers have promptly informed the Owners in writing of any proposed change of an Approved Manager, and (B) the Owners have granted its prior written consent (which shall not be unreasonably withheld or delayed) to such proposed change, the Approved Manager shall not be changed to another entity; and
40



(c)
the Approved Managers will provide a written confirmation confirming that, among other things, following the occurrence of Termination Event which is continuing, all claims of the Approved Managers against the Charterers shall be subordinated to the claims of the Owners or the Finance Parties (if applicable) under the Transaction Documents.
52.22
Classification The Charterers shall ensure that the Vessel maintains the highest classification required for the purpose of the relevant trade of the Vessel which shall be with the Vessel’s Classification Society, in each case, free from any material overdue recommendations and adverse notations affecting that the Vessel’s class.
52.23
Certificate of financial responsibility The Charterers shall, if required, obtain and maintain a certificate of financial responsibility in relation to the Vessel which is to call at the United States of America.
52.24
Registration The Charterers shall not change or permit a change to the flag of the Vessel during the duration of this Charter other than to a Pre-Approved Flag, such approval not to be unreasonably withheld or delayed. Any change to the flag of the Vessel shall be at the cost of the Charterers (which shall include any costs of the Finance Parties (if applicable).
52.25
ISM, ISPS and Maritime Labour Convention Compliance The Charterers shall ensure that each ISM Company and ISPS Company complies in all material respects with the ISM Code and the ISPS Code, respectively, or any replacements thereof and in particular (without prejudice to the generality of the foregoing) shall ensure that such company holds (i) a valid and current Document of Compliance issued pursuant to the ISM Code, (ii) a valid and current SMC issued in respect of the Vessel pursuant to the ISM Code, and (iii) an ISSC in respect of the Vessel, and the Charterers shall promptly, upon request, supply the Owners with copies of the same. The Charterers shall at all time comply with the Maritime Labour Convention.
52.26
Chartering-in The Charterers shall not, during the duration of this Charter, without the prior written consent of the Owners, take any vessel on charter or other contract of employment (or agree to do so) except for vessels chartered in by the Charterers on a temporary basis to be provided to any Sub-charterer in order to fulfil its obligations under the relevant Sub-charter (in circumstances where the Vessel is not available for whatever reason).
52.27
Change of control The Charterers shall ensure that during the duration of the Charter Period, no Change of Control shall occur without the prior written consent of the Owners (which shall not be unreasonably withheld or delayed).
52.28
Inspection of Vessel and inspection reports In the absence of a Termination Event, subject to there being no undue interference with the operation of the Vessel:

(a)
the Owners may at the Charterers’ cost arrange for persons appointed by the Owners to board the Vessel once in each calendar year during the Charter Period to inspect the Vessel’s state and condition, and the Charterers will provide commercially reasonable assistance to facilitate such inspection; and

(b)
the Charterers shall, within five (5) Business Days’ of the Owners’ written demand, reimburse the Owners for all costs, fees and expenses reasonably incurred by the Owners in connection with the Owners’ procuring or arranging the procurement of the relevant inspection report as to the condition of the Vessel, provided always however that if a Termination Event has occurred and is continuing, the Owners may at any time and at the Charterers’ cost conduct such inspection and the Charterers shall be deemed to have granted such permission and shall provide such necessary assistance to the Owners in respect of such inspection.
52.29
Sub-charterers The Charterers will, where applicable, use best endeavours and forthwith execute and deliver any and all such other agreements, instruments and documents (including any novation agreement) as may be required by law or deemed necessary or desirable by the Owners to ensure that any Sub-Charter which is in effect on the Actual Delivery Date remains
41


in effect, so that all obligations previously owed by the relevant Sub-charterers to the Charterers under such Sub-Charter shall continue to be owed to the Charterers throughout the term of the Sub-charter.
52.30
Valuation of Market Value

(a)
The Charterers shall procure valuation of the Market Value of the Vessel to be made (and procure the delivery to the Owners of the Valuation Reports issued by the Approved Brokers): (i) within thirty (30) days prior to the Actual Delivery Date, (ii) once every twelve (12) months during the Charter Period (each such Valuation Report to be at the Charterers’ cost); and (ii) at such other times as the Owners may require in their absolute discretion (each such additional Valuation Reports to be at Owners’ cost unless a Termination Event has occurred and is continuing following which such additional Valuation Reports shall be at the cost of the Charterers).

(b)
The Market Value of the Vessel shall be the arithmetic average of desk-top valuations obtained from two (2) Approved Brokers with one selected by the Charterers and the other selected by the Owners prior to the Actual Delivery Date and from one Approved Broker acceptable to the Owners during the Agreement Term (in each such case the Approved Brokers shall be acceptable to the Owners and the expenses of both appointments shall be borne by the Charterers). Each such valuation shall take into account the benefit of this Charter and any Sub-charter (dated no earlier than 30 days from the relevant date) on the basis of a willing buyer and a willing seller at arm’s length.

(c)
If valuation is obtained in accordance with this Clause and the Market Value of the Vessel is less than (i) the Cost Balance for the first 2 years and (ii) 120% of the Purchase Option Price pro rata adjusted for the period after 2 years, of (x) the Cost Balance for the first 2 years after the Actual Delivery Date or (y) the Purchase Option Price for the remainder of the Agreement Term (the “Required LTV Ratio”), the Charterers shall, within 5 days of the issuance of the Valuation Reports (or, if the two Valuation Reports are not issued on the same day, the date of the later Valuation Report), prepay to the Owners in an amount equal to the shortfall as may be necessary to ensure that the Ratio does not exceed the Required LTV Ratio.

(d)
After the prepayment referred to above is completed, the following Fixed Hire, Purchase Option Prices, Cost Balance and Balloon Amount shall be adjusted downwards in the same proportion as the above proportion of the prepayment.
52.31
Sub-Charter Apart from the Initial Sub-Charter, the Charterers shall procure that there shall be no Sub-charter (including but not limited to on a bareboat basis) of the Vessel without the consent of the Owners, such consent not to be unreasonably withheld save that (and subject to the foregoing) any sub-chartering contract of less than twenty four (24) months (including optional extension periods) not made on a bareboat charter basis shall not require the consent of the Owners and further provided that, (i) the Charterers shall use all reasonable endeavours to procure (if required) the consent of the Sub-Charterer to the assignment of any Sub-Charter to the Owners, upon obtaining which (if the same is required) the Charterers shall so assign that contract to the Owners by way of security for the Charterers’ obligations under this Charter; and (ii) all sub-chartering documentation is promptly provided to the Owners, for its information.
52.32
Transactions with Affiliates The Charterers shall procure that all transactions conducted or to be conducted between them and any of the Obligors or any of that Obligor’s Affiliates will be on an arm’s length commercial basis.
52.33
Notification The Charterers shall notify the Owners promptly after they become aware of the expiry or early termination of the Sub-Charter.
52.34
Project Documents

(a)
The Charterers shall:
42



(i)
without affecting its obligations under the applicable provisions of the Transaction Documents, perform and observe its obligations under the Project Documents and use its best endeavours to procure that each of the other parties to the Project Documents performs and observes its obligations under them; and

(ii)
obtain and maintain in force, and promptly furnish certified copies to the Owners of, all licences, authorisations, approvals and consents, and do all other acts and things, which may from time to time be necessary or desirable for the continued due performance of its obligations under the Transaction Documents and the Project Documents or which may be required for the validity, enforceability or admissibility in evidence of the Transaction Documents and the Project Documents;

(b)
The Charterers shall not, without the prior consent of the Owners:

(i)
except as contemplated by this Charter, sell or agree to sell the Vessel (including a sale of the Vessel during her construction by way of an assignment, novation or other transfer of the Building Contract) or convey, assign, transfer, sell or otherwise dispose of or deal with any of its other real or personal property, assets or rights, whether present or future, in connection with the Vessel;

(ii)
waive or fail to enforce any provision of, or agree to any amendment or supplement to, the Building Contract, save to the extent expressly permitted by the terms of any Transaction Document.
53.
EARNINGS ACCOUNT
In addition to Clause 52 (Charterers’ undertakings), the Charterers hereby undertake to the Owners that, throughout the Agreement Term, they will deposit all of the Earnings received by the Charterers into the Earnings Account, free and clear of any costs, fees, expenses, disbursements, withholdings or deductions.
54.
TERMINATION EVENTS
54.1
Each of the following events shall constitute a Termination Event:

(a)
Failure to pay any Obligor fails to pay any amount due from it under any Transaction Document to which they are parties at the time, in the currency and otherwise in the manner specified therein provided that, if an Obligor can demonstrate to the reasonable satisfaction of the Owners that all necessary instructions were given to effect such payment and the non-receipt thereof is attributable solely to an administrative or technical error or an error in the banking system or a Disruption Event, then such payment shall instead be deemed to be due, solely for the purposes of this paragraph, within five (5) Business Days of the date on which it actually fell due under this Charter (if a payment of Hire) and seven (7) Business Days (if a sum payable on demand) ; or

(b)
Misrepresentation any representation or statement made by any Obligor in any Transaction Document to which it is a party or in any notice or other document, certificate or statement delivered by it pursuant thereto or in connection therewith is or proves to have been incorrect or misleading in any material respect, where the circumstances causing the same give rise to a Material Adverse Effect; or

(c)
Specific covenants any Obligor fails duly to perform or comply with any of the obligations expressed to be assumed by or procured by them under paragraphs 52.27, 52.30 and 52.32) of Clause 52 (Charterers’ undertakings) ; or

(d)
Other obligations any of the Obligors fails duly to perform or comply with any of the obligations expressed to be assumed by them in any Transaction Document (other
43


than those referred to in paragraph (c)) and such failure is not remedied within 60 days after the earlier of (A) the Owners having given notice thereof to the relevant Obligor and (B) the Obligor becoming aware of such failure to perform or comply; or

(e)
Cross Default any Financial Indebtedness of any Obligor is not paid when due (or within any applicable grace period) and payable prior to its specified maturity where the aggregate of all such unpaid or accelerated indebtedness of such Obligor is equal to or greater than US Dollars Ten Million (US$10,000,000) or its equivalent in any other currency or currencies and such default is not remedied within 45 days after such default; or

(f)
Insolvency and rescheduling any of the Obligors is unable to pay their debts as they fall due, commences negotiations with any one or more of their creditors with a view to the general readjustment or rescheduling of their indebtedness or makes a general assignment for the benefit of their creditors or a composition with their creditors; or

(g)
Winding-up any of the Obligors files for initiation of formal restructuring proceedings, is wound up or declared bankrupt or take any corporate action or other steps are taken or legal proceedings are started for their winding-up, dissolution, administration or re-organisation or for the appointment of a liquidator, receiver, administrator, administrative receiver, conservator, custodian, trustee or similar officer of them or of any or all of their revenues or assets or any moratorium is declared or sought in respect of any of their indebtedness; or

(h)
Execution or distress

(i)
any Obligor fails to comply with or pays any sum due from them (within 30 days of such amount falling due) under any final judgment or any final order made or given by any court or other official body of a competent jurisdiction in an aggregate in respect of the Obligor equal to or greater than US Dollars Ten Million (US$10,000,000) or its equivalent in any other currency, being a judgment or order against which there is no right of appeal or if a right of appeal exists, where the time limit for making such appeal has expired; or

(ii)
any execution or distress is levied against, or an encumbrancer takes possession of, the whole or any part of, the property, undertaking or assets of any Obligor in an aggregate amount equal to or greater than US Dollars Five Million (US$5,000,000) or its equivalent in any other currency or currencies, other than any execution or distress which is being contested in good faith and which is either discharged within 30 days or in respect of which adequate security has been provided within 30 days to the relevant court or other authority to enable the relevant execution or distress to be lifted or released; or

(i)
Similar event any event occurs which, under the laws of any jurisdiction, has a similar or analogous effect to any of those events mentioned in paragraphs (f), (g) or (h) above; or

(j)
Repudiation any of the Obligors repudiates any Transaction Document to which it is a party or do or cause to be done any act or thing evidencing an intention to repudiate any such Transaction Document; or

(k)
Validity and admissibility at any time any act, condition or thing required to be done, fulfilled or performed in order:

(i)
to enable any of the Obligors lawfully to enter into, exercise their rights under and perform the material obligations expressed to be assumed by them in the Transaction Documents;
44



(ii)
to ensure that the material obligations expressed to be assumed by any of the Obligors in the Transaction Documents are legal, valid and binding;

(iii)
to make the Transaction Documents admissible in evidence in any applicable jurisdiction,
is not done, fulfilled or performed within thirty (30) days after notification from the Owners to the relevant Obligor requiring the same to be done, fulfilled or performed; or

(l)
Illegality at any time:

(i)
it is or becomes unlawful for any of the Obligors to perform or comply with any or all of their obligations under the Transaction Documents to which they are parties;

(ii)
any of the obligations of any of the Obligors under the Transaction Documents to which they are parties are not or cease to be legal, valid and binding; or

(iii)
any Security Interest created or purported to be created by the Security Documents ceases to be legal, valid, binding, enforceable or effective or is alleged by a party to such Security Document (other than the Owners) to be ineffective,
and, in each case, such illegality is not remedied or mitigated to the satisfaction of the Owners within sixty (60) days after it has given notice thereof to the Charterers; or

(m)
Material adverse change at any time there shall occur any event or change which has a Material Adverse Effect in respect of any of the Obligors and such event or change, if capable of remedy, is not so remedied within thirty (30) days of the delivery of a notice confirming such event or change by the Owners to the Charterers; or

(n)
Conditions precedent if any of the conditions set out in Clause 40 (Conditions precedent) is not satisfied by the relevant time or such other time period specified by the Owners in their discretion; or

(o)
Revocation or modification of consents etc. if any Necessary Authorisation which is now or which at any time during the Agreement Term becomes necessary to enable an Obligor to comply with any of its obligations in or pursuant to any of the Transaction Documents or the Project Documents is revoked, withdrawn or withheld, or modified in a manner which the Owners reasonably consider is, or may be, prejudicial to the interests of Owners in a material manner, or if such Necessary Authorisation ceases to remain in full force and effect and not remedied with 20 days; or

(p)
Cessation of business any of the Obligors ceases, or threatens to cease, to carry on all or a substantial part of its business; or

(q)
Curtailment of business if the business of any of the Obligors is wholly or materially curtailed by any intervention by or under authority of any government, or if all or a substantial part of the undertaking, property or assets of the Obligor is seized, nationalised, expropriated or compulsorily acquired by or under authority of any government or any of the Obligors disposes or threatens to dispose of a substantial part of their business or assets; or

(r)
Reduction of capital if any of the Obligors reduces their committed or subscribed capital other than in the course of regular finance or business activity; or

(s)
Environmental matters
45



(i)
any Environmental Claim is pending or made against any Obligors or in connection with the Vessel, where such Environmental Claim has a Material Adverse Effect;

(ii)
any actual Environmental Incident occurs in connection with the Vessel, where such Environmental Incident has a Material Adverse Effect; or

(t)
Loss of property all or a substantial part of the business or assets of any of the Obligors is destroyed, abandoned, seized, appropriated or forfeited for any reason, and such occurrence in the reasonable opinion of the Owners has a Material Adverse Effect; or

(u)
Sanctions any Obligor or any of their directors, officers or employees becomes a Restricted Party and no remedy is available within 60 days or any Sanctions are enacted against the Vessel; or

(v)
Arrest the Vessel is arrested or seized for any reason whatsoever (other than caused solely and directly by any action or omission from the Owners) unless the Vessel is released and returned to the possession of the Charterers within forty five (45) days of such arrest or seizure; or

(w)
Delivery the Vessel has not for any reason been delivered to, and accepted by, the Owners under the Novated Building Contract on or before the Cancellation Date;

(x)
Collateral Charter a “Termination Event” (or any other similar event or circumstance and each as however described) occurs under the Collateral Charter.
54.2
The Owners and the Charterers agree that it is a fundamental term and condition of this Charter that no Termination Event shall occur during the Agreement Term. Without prejudice to the forgoing, a Termination Event which is continuing shall constitute an agreed terminating event, the occurrence of which will entitle the Owners to exercise all or any of the remedies set out below in this Clause 54.
54.3
At any time after occurrence of a Termination Event, the Owners shall be entitled to terminate the Charter forthwith by giving a written notice to the Charterers demanding the Charterers (a) to redeliver the Vessel to Owners and (b) pay the Termination Sum to the Owners in accordance with Clause 54(f) below, within sixty (60) days following the date of the notice (“Termination Notice”). Once the Termination Notice is sent to the Charterers, the Owners shall be entitled to (but not bound and without prejudice to the Charterers’ obligations hereunder) retake possession of the Vessel immediately on the date of the Termination Notice or any other date as specified by the Owners and the Charterers shall, within sixty (60) days following the date of Termination Notice, pay the Termination Sum to the Owners in accordance with Clause 54(f) below. If the Termination Date is not a Payment Date, the Fixed Hire payable, calculated on a pro rata basis between the immediately previous Payment Date and on the immediately following Payment Date shall become immediately due and payable on the Termination Date. In case the Charterers fail to pay the Termination Sum in full within sixty (60) following the date of the Termination Notice the Owners shall be entitled to exercise the remedies as provided in Clause 54(i).
54.4
The Owners may demand that the Charterers pay to the Owners on the Termination Payment Date or such later date as the Owners shall specify (and without prejudice to any other rights, claims or remedies which the Owners may have under this Charter and applicable laws) the Termination Sum. If the Termination Sum paid by the Charterers under this Charter does not cover the Owners’ loss, the Owners shall be entitled to claim further compensation for their losses and for all reasonable expenses incurred together with any interest accrued thereon. The Owners shall not be under any liability whatsoever to the Charterers for loss or damage if any occasioned by the Charterers for the termination of this Charter unless such termination is wrongful.
46


54.5
The Charterers shall pay or reimburse to the Owners on demand all losses suffered by the Owners in connection with such Termination Event and/or termination including, without prejudice to the generality of the foregoing, all liabilities, reasonable costs and expenses so incurred in recovering possession of, and in moving, storing, insuring and maintaining, the Vessel and in carrying out any works or modifications required to cause the Vessel to conform with the provisions of Clause 47 in respect of redelivery under this Charter together with interest thereon from the date on which the relevant loss was suffered by the Owners until the date of payment or reimbursement thereof (both before and after any relevant judgment or winding up of the Charterers) pursuant to this Clause 51.
54.6
Upon receipt of the Termination Notice from the Owners, the Charterers have the obligation to pay the Termination Sum (together with interest at the default rate in accordance with Clause 44.3(j)) for purchasing the Vessel from the Owners within 60 days. Upon receipt of full amount of the Termination Sum, by the Charterers, the Owners will transfer to the Charterers or its nominee all of the Owners’ rights, title and interests in the Vessel on “as is-where is” basis and shall discharge the mortgage as may be created over the Vessel. The Charterers shall not be entitled for any reason whatsoever to claim against the Owners for any losses, or any loss of profit resulting directly or indirectly from any defect or alleged defect in the Vessel. All registration, legal or other expenses whatsoever incurred in respect of the transfer of the title in the Vessel from the Owners to the Charterers or its nominee shall be for the account of the Charterers.
54.7
Any amount due to the Owners under this Clause shall bear interest (before and after any relevant judgment or any winding-up of the Charterers) from the Termination Date to the date of the Owners’ actual receipt thereof.
54.8
Notwithstanding the termination of this Charter pursuant to this Clause, the Charterers shall irrevocably and unconditionally continue to comply with its obligations under this Charter until the Owners have received the Termination Sum and other sum payable by the Charterers to the Owners pursuant to this Charter.
54.9
If the Charterers fail to pay in full the Termination Sum and other sums payable under this Charter upon the Owners’ demand for payment pursuant to this Clause 54 within sixty (60) days following the date of the Termination Notice, the Parties shall first obtain three valuation reports from three independent Approved Valuers (each party appoint one Approved Valuers and the third one to be appointed by the parties jointly)

(a)
if the average of the three assessment of the Fair Market Value of the Vessel at that time is no less than the Termination Sum, Owners shall then proceed to sell the Vessel without delay in the open market appointing as sales brokers, among other parties, at least one of the 3 independent Approved Valuers, free of any charter, lease or other engagement concerning the Vessel for such price and on such terms and conditions as it may, in its absolute discretion, think fit, but in any event within the price ranges provided by the Approved Valuers; or Charterers shall have the right to bring forward a buyer during the time that Owners are circulating the Vessel for sale and in case terms are better, including without limitation, than the sale price, Owner’s shall sell to the party brought forward by Charterers.

(b)
if the average of the three assessments of the Fair Market Value of the Vessel at that time is less than the Termination Sum, then the Owners may, at any time they think fit in its absolute discretion, sell the Vessel in the open market . In any event, the Owners shall, as soon as practicable following the Termination Payment Date, obtain three valuation reports from three independent Approved Valuers of the Fair Market Value of the Vessel and the average of the three report values shall be deducted from the Termination Sum.

(c)
where the Owners elect to sell the Vessel in accordance with Clause 54(i) above, an amount equal to the aggregate of the expenses, disbursements, taxes, costs and losses whatsoever as may have been incurred by the Owners in respect of the sale of
47


the Vessel shall be deducted from the gross proceeds of the sale of the Vessel; the balance of the sale proceeds is referred to hereinafter as the “Net Sale Proceeds”;

(d)
an amount equal to the Termination Sum plus all other amounts due and payable from the Charterers to the Owners hereunder, shall be deducted from the Net Sale Proceeds or the Fair Market Value, as the case maybe. If the Net Sale Proceeds or the Fair Market Value, as the case maybe, are insufficient to satisfy all amounts due and payable from the Charterers to the Owners hereunder, the Charterers shall pay the outstanding balance to the Owners. If there is any amount remaining from the Net Sale Proceeds or the Fair Market Value after the deduction of all the amounts due and payable by the Charterers to the Owners hereunder, the Owners shall pay the difference to the Charterers provided that if the Fair Market Value of the Vessel has been deducted from the Termination Sum in accordance with Clause 54(i)(d) the Owners shall be entitled to any surplus following a subsequent sale of the Vessel.
54.10
Where the Owners intends to sell the Vessel in accordance with Clause 54.9 above, Owners shall notify the Charterers in writing of the potential sale and the potential sale price of the Vessel (the “Proposed Owners’ Sale Price”) whereupon the Charterers (or their nominee) may, within 15 days of such notification, purchase the Vessel and pay an amount which is higher than the Proposed Owners’ Sale Price where the Owners intend to sell the Collateral Vessel at the same time as the Vessel, the Owners shall notifying the Charterers thereof in writing of the potential sale whereupon the Charterers (or their nominee) may, within 15 days of such notification, purchase both the Vessel and the Collateral Vessel and pay an amount which is at least equal to the aggregate of the Termination Sum and the Termination Sum (as defined in the Collateral Charter). If the Charterers notify the Owners that they do not intend to purchase the Vessel or the Charterers do not respond to the Owners within 5 days’ period or the MOA has not been agreed by the Owners and the Charterers’ or their nominee or the deposit has not been remitted the nominated account under the MOA within such 10 days’ period (or such longer period as the Owners may agree), the Owners may sell the Vessel on such terms as the Owners may deem fit.
54.11
Liquidated damages received under the Building Contract

(a)
any liquidated damages received by the Charterers or the Owners for:

(i)
any delays in delivery of the Vessel under the Building Contract shall be for Charterers account; and

(ii)
any physical defects or deficiencies of the Vessel under the Building Contract shall accrue to the account of the Charterers.
54.12
Where the Owners decide to terminate this Charter and retake possession of the Vessel pursuant to this Clause 54, the Owners agree to appoint a reputable ship manager to oversee the operation of the Vessel while it is in the Owners’ possession in accordance with prudent and sound commercial ship practices.
55.
[NOT USED]
56.
NAME OF VESSEL
Provided that the prior written consent has been given by the Owners:
56.1
the name of the Vessel may be chosen by the Charterers; and
56.2
the Vessel may be painted in the colours, display the funnel insignia and fly the house flag as required by the Charterers.
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57.
CHARTER PERIOD
The Charter period under this Charter shall be one hundred and twenty (120) months commencing from the Actual Delivery Date, unless otherwise extended or terminated pursuant to Clauses 44.3(l) (Hire), 54 (Termination Events), 60 (Sale of the Vessel by the Owners) and 61 (Total Loss).
58.
TRANSACTION FEES
58.1
Commitment fee
The Charterers shall pay to the Owners a commitment fee computed and accruing on a daily basis at the rate of 1.00 per cent per annum on amounts owed but not yet due by the Owners in respect of the Cost Balance and any other amounts payable by the Owners under the Novation AGreement.
58.2
Handling fee
A non-refundable handling fee (the “Handling fee”) in the amount of US$602,000 shall be paid by the Charterers to the Owners as follows:

(a)
US$100,000, receipt of which the Owners hereby acknowledge;

(b)
US$201,000 to be paid within five (5) Business Days of the date of this Charter; and

(c)
US$301,000 to be paid on the earlier of the date of Early Termination due to the enactment of the Pre-delivery Sales Clause and the Actual Delivery Date.
59.
EARLY TERMINATION, PURCHASE OPTION, PURCHASE OBLIGATION AND TRANSFER OF TITLE, PARTIAL PREPAYMENT
59.1
Subject to no Termination Events or Total Loss under Clause 61 (Total loss), the Charterers may, at any time from the Actual Delivery Date, by at least 90 days prior written notice to the Owners, declare to the Owners their exercise of the option to purchase the Vessel or to cause their nominee to purchase the Vessel by payment of (i) at any time prior to the second anniversary of the Actual Delivery Date, an amount equal to the Termination Sum as at that date together with a pre-payment fee equal to five (5) per cent of the Assumed Owners’ Cost plus the Sales Clause Termination Sum or (ii) at any time after the second anniversary of the Actual Delivery Date, the corresponding amount equal to the Purchase Option Price as set out under Schedule 4 or if the purchase option is exercised on a date which is not an anniversary date of the Actual Delivery Date, then the Purchase Option Price shall be the sum of the applicable Purchase Option Price from the last occurring anniversary date added to the product of n/365 (where n is the number of days elapsed since the last anniversary date to the proposed Purchase Option Date) and the positive difference between the Purchase Option Price on the next occurring anniversary date after the Purchase Option Date and the Purchase Option Price on the last anniversary date.. To avoid any confusion, the Charter Period will end immediately upon the Purchase Option Price having been paid.
59.2
If the Charterers have not exercised their rights under paragraph 59.1, the Charterers shall be obliged to purchase the Vessel or to cause their nominee to purchase the Vessel at the end of the Charter Period by payment of the Purchase Obligation Price and the Charterers shall pay the Purchase Obligation Price on the Purchase Obligation Date unless this Charter is terminated before the natural expiration of this Charter or the Owners and the Charterers agree otherwise.
59.3
In exchange for the full payment of the Purchase Option Price (in the case of a purchase under paragraph 59.1 above) or the sum stated in paragraph 59.2 above (in the case of a purchase under paragraph 59.2 above) and all sums due and payable to the Owners under the Transaction Documents and subject to compliance with the other conditions set out in this Clause, the Owners shall:
49



(a)
transfer title to and ownership of the Vessel to the Charterers (or their nominee) by delivering to the Charterers (in each case at the Charterers’ costs):

(i)
a duly executed and notarised, legalised and/or apostilled (as applicable) bill of sale; and

(ii)
the Title Transfer PDA; and

(b)
(subject to the prior written consent of any Finance Party or its agent or permitted assigns and transferees (in each case as applicable)) use all reasonable endeavours to procure the deletion of any mortgage or prior Security Interest in relation to the Vessel at the Charterers’ cost,

provided always that prior to such transfer or deletion (as the case may be), the Owners shall have received the letter of indemnity as referred to in paragraph 59.6 below from the Charterers, and the Charterers shall have performed all their obligations in connection herewith and with the Vessel, including without limitation the full payment of all Unpaid Sums, taxes, charges, duties, costs and disbursements (including legal fees) in relation to the Vessel.
59.4
The transfer in accordance with paragraph 59.3 above shall be made in all respects at the Charterers’ expense on an “as is, where is” basis and the Owners shall give the Charterers (or their nominee) no representations, warranties, agreements or guarantees whatsoever concerning or in connection with the Vessel, the Insurances, the Vessel’s condition, state or class or anything related to the Vessel, expressed or implied, statutory or otherwise.
59.5
The Owners shall have no responsibility for the registrability of a bill of sale referred to in paragraph 59.3 above executed by the Owners, as far as such bill of sale is prescribed in a generally acceptable form.
59.6
The Charterers shall, immediately prior to the receipt of the bill of sale, furnish the Owners with a letter of indemnity (in a form satisfactory to the Owners) whereby the Charterers and the Charter Guarantor shall state that, among other things, the Owners has and will have no interest, concern or connection with the Vessel after the date of such letter and that the Charterers and/or the Charter Guarantor shall indemnify the Owners and keep the Owners indemnified forever against any claims made by any person arising in connection with the Vessel.
59.7

(a)
upon at least ninety (90) days’ written notice, the Charterers should have the option for one time only to make a one-off prepayment of up to $3m (in multiples of $1m); and

(b)
any partial prepayment should follow the following mechanism.

(i)
If the partial prepayment is to be exercised on a date falling before the 2nd anniversary of the Delivery Date, then the proportion of the partial prepayment is equal to the amount of the prepayment divided by USD29,000,000.

(ii)
If the partial prepayment is to be exercised on a date falling after the 2nd anniversary of the Delivery Date, then the proportion of the partial prepayment is equal to the amount of the prepayment divided by the Purchase Option Price on that date.

(iii)
After the partial prepayment is completed, the following Fixed Hire, Cost Balance, Purchase Option Prices and Balloon Amount should be adjusted downwards in the same proportion as the above proportion of the partial prepayment.
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60.
PRE-DELIVERY SALES CLAUSE
During the Charter Period, the Owners shall not sell the Vessel unless (i) the Vessel is sold to an Affiliate of the Owners subject to Charterers consent not to be unreasonably withheld, or (ii) such sale is permitted by and made in accordance with Clause 54 (Termination Events) or (iii) with the Charterers’ prior written consent, provided that, in respect of a sale effected under (i) and (iii), such sale shall not increase the obligations of the Obligors under the Transaction Documents and any documentation required in connection with such sale shall be effected at the cost of the Owners. Notwithstanding the foregoing of this clause (except for the sale permitted by and made in accordance with Clause 54 (Termination Events)), this Charter will continue to exist, valid and effective on the same and identical terms (save for logical and consequential amendments).
60.1
For the period starting from the signing of this charter and ending on the actual Delivery Date, the Charterers have the right to sell the Vessel and terminate the Charter provided that a written notice is provided by the Charterers to the Owners at least 90 days prior to the Delivery Date and an amount equal to the Termination Sum as at that date together with a pre-payment fee equal to three (3) percent of the Assumed Owners’ Cost plus the Sales Clause Termination Sum.
60.2
At any time, throughout the period of this charter, the Corporate Guarantor may acquire the beneficial ownership the Charterer.
61.
TOTAL LOSS
61.1
If circumstances exist giving rise to a Total Loss, the Charterers shall promptly notify the Owners of the facts of such Total Loss. If the Charterers wish to proceed on the basis of a Total Loss and advise the Owners thereof, the Owners shall agree to the Vessel being treated as a Total Loss for all purposes of this Charter. The Owners shall thereupon abandon the Vessel to the Charterers and/or execute such documents as may be required to enable the Charterers to abandon the Vessel to insurers and claim a Total Loss. Without prejudice to the obligations of the Charterers to pay to the Owners all monies then due or thereafter to become due under this Charter, if the Vessel shall become a Total Loss during the Charter Period, the Charter Period shall end on the Settlement Date.
61.2
If the Vessel becomes a Total Loss during the Charter Period, the Charterers shall, on the Settlement Date, pay to the Owners the amount calculated in accordance with paragraph 61.3 below.
61.3
On the Settlement Date, the Charterers shall pay to the Owners an amount equal to the Pre-delivery Termination Sum or the Termination Sum as at the Termination Payment Date (provided that such amount payable shall be set off against the Total Loss Proceeds if they are already received by the Owners as referred to under paragraph 61.4 below). The foregoing obligations of the Charterers under this paragraph 61.3 shall apply regardless of whether or not any moneys are payable under any Insurances in respect of the Vessel, regardless of the amount payable thereunder, regardless of the cause of the Total Loss and regardless of whether or not any of the said compensation shall become payable.
61.4
All Total Loss Proceeds shall be paid to such account or accounts as the Owners may direct and shall be applied towards satisfaction of the Termination Sum and any other sums due and payable under the Transaction Documents. To the extent that there is any surplus after such application, such surplus shall be promptly returned to the Charterers.
61.5
The Charterers shall, at the Owners’ request, provide satisfactory evidence, in the reasonable opinion of the Owners, as to the date on which the constructive total loss of the Vessel occurred pursuant to the definition of Total Loss.
61.6
The Charterers shall continue to pay the Advance Hire and the Hire on the days and in the amounts required under this Charter notwithstanding that the Vessel shall become a Total Loss provided always that no further instalments of Hire or the payments of the Advance Hire shall
51


become due and payable after the Charterers have made the payment required by paragraph 61.3 above.
62.
ADDITIONAL PAYMENT OBLIGATIONS
62.1
Subject always to paragraph 62.2, the Charterers shall bear all costs, fees (including legal fees) and disbursements reasonably incurred by the Owners and the Charterers in connection with:

(a)
the negotiation, preparation and execution of this Charter and the other Transaction Documents;

(b)
the delivery of the Vessel under the Novation Agreement and this Charter;

(c)
preparation or procurement of any survey, inspections, tax or insurance advice;

(d)
all legal fees and other expenses reasonably arising out of or in connection with the exercising of the purchase option by the Charterers pursuant to Clause 59 (Purchase Option and Title Transfer) of this Charter; and

(e)
such other activities relevant to the transaction contemplated herein.
62.2
Notwithstanding anything to the contrary, the Charterers shall not bear any costs, fees (including legal fees) and disbursements incurred by the Owners in connection with:

(a)
any financing activities undertaken by the Owners, whether or not such financing activities are undertaken for the purposes of entering into this Charter, the Novation Agreement or any of the Transaction Documents; and

(b)
the incorporation, setting-up or continued operation of any special purpose vehicles or legal entities for the purposes of or in relation to this Charter, the Novation Agreement or any of the Transaction Documents.
63.
STAMP DUTIES AND TAXES
The Charterers shall pay promptly all documented stamp, documentary or other like duties and taxes to which the Charter, the Novation Agreement and the other Transaction Documents may be subject or give rise and shall indemnify the Owners on demand against any and all liabilities with respect to or resulting from any delay on the part of the Charterers to pay such duties or taxes, provided that Owners will procure that their tax residence is at all times in the most tax efficient jurisdiction for this transaction. If the parties determine that there is a more tax efficient jurisdiction, the Owners agree to reasonably consider to move the Owners tax residency to such jurisdiction at Charterers’ cost.
64.
OPERATIONAL NOTIFIABLE EVENTS
The Owners are to be advised as soon the Charterers are aware of the occurrence of any of the following events:

(a)
when a material condition of class is applied by the Classification Society;

(b)
whenever the Vessel is arrested, confiscated, seized, requisitioned, impounded, forfeited or detained by any government or other competent authorities or any other persons;

(c)
whenever a class or flag authority refuses to issue or withdraw trading certification;

(d)
in the event of a fire requiring the use of fixed fire systems or collision / grounding;

(e)
whenever the Vessel is planned for dry-docking in accordance with Clause 10(g) (Part II) and whether routine or emergency;
52



(f)
the Vessel is taken under tow unless in the normal course of shipping operations;

(g)
any death or serious injury on board; or

(h)
any damage to the Vessel the repair costs of which (whether before or after adjudication) are likely to exceed US Dollars Three Million (US$3,000,000).
65.
FURTHER INDEMNITIES
65.1
Whether or not any of the transactions contemplated hereby are consummated, the Charterers shall, in addition to the provisions under Clause 17 (Indemnity) (Part II) of this Charter, indemnify, protect, defend and hold harmless the Owners and their respective officers, directors and employees (collectively, the “Indemnitees”) throughout the Agreement Term from, against and in respect of, any and all liabilities, obligations, losses, damages, penalties, fines, fees, claims, actions, proceedings, judgement, order or other sanction, lien, salvage, general average, suits, costs, expenses and disbursements, including reasonable legal fees and expenses, of whatsoever kind and nature (collectively, the “Expenses”), imposed on, suffered or incurred by or asserted against any Indemnitee, in any way relating to, resulting from or arising out of or in connection with, in each case, directly or indirectly, any one or more of the following:

(a)
this Charter, any of the other Transaction Documents and the Project Documents, and any amendment, supplement or modification thereof or thereto requested by the Charterers;

(b)
the Vessel or any part thereof, including with respect to:

(i)
the ownership of, manufacture, design, possession, use or non-use, operation, maintenance, testing, repair, overhaul, condition, alteration, modification, addition, improvement, storage, seaworthiness, replacement, repair of the Vessel or any part (including, in each case, latent or other defects, whether or not discoverable and any claim for patent, trademark, or copyright infringement and all liabilities, obligations, losses, damages and claims in any way relating to or arising out of spillage of cargo or fuel, out of injury to persons, properties or the environment or strict liability in tort);

(ii)
any claim or penalty arising out of violations of applicable law by the Charterers or any other Sub-charterers;

(iii)
death or property damage of shippers or others;

(iv)
any liens in respect of the Vessel or any part thereof; or

(v)
any registration and/or tonnage fees (whether periodic or not) in respect of the Vessel payable to any registry of ships;

(c)
any breach of or failure to perform or observe, or any other non-compliance with, any covenant or agreement or other obligation to be performed by the Charterers under any Transaction Document to which it is a party or the falsity of any representation or warranty of the Charterers in any Transaction Document to which it is a party or the occurrence of any Termination Event;

(d)
in preventing or attempting to prevent the arrest, confiscation, seizure, taking and execution, requisition, impounding, forfeiture or detention of the Vessel, or in securing or attempting to secure the release of the Vessel in connection with the exercise of the rights of a holder of a lien created by the Charterers;

(e)
incurred or suffered by the Owners in:
53



(i)
procuring the delivery of the Vessel to the Charterers under Clause 35 (Delivery);

(ii)
registering the Vessel at the registry of the Pre-Approved Flag;

(iii)
recovering possession of the Vessel following termination of this Charter under Clause 54 (Termination Events);

(iv)
arranging for a sale of the Vessel in accordance with Clause 60 (Sale of Vessel by the Owners); or

(v)
arranging for a transfer of the title of the Vessel in accordance with paragraph 59.3 of Clause 59 (Purchase Option and transfer of title)

(f)
arising from the Master or officers of the Vessel or the Charterers’ agents signing bills of lading or other documents;

(g)
in connection with:

(i)
the arrest, seizure, taking into custody or other detention by any court or other tribunal or by any governmental entity; or

(ii)
subjection to distress by reason of any process, claim, exercise of any rights conferred by a lien or by any other action whatsoever, of the Vessel which are expended, suffered or incurred as a result of or in connection with any claim or against, or liability of, the Charterers or any other member of the Charterers’ group, together with any costs and expenses or other outgoings which may be paid or incurred by the Owners in releasing the Vessel from any such arrest, seizure, custody, detention or distress.
Provided however that the Owners shall not be entitled to any indemnification or recompense pursuant to this Clause 65 for any liabilities, obligations, losses, damages, penalties, claims, actions, suits, fees, costs, expenses and disbursements incurred by the Owners as a consequence of any (A) wilful breach of this Charter by the Owners, or (B) arrest of the Vessel arising due to any action or omission on the part of the Owners.
65.2
The Charterers shall pay to the Owners promptly on the Owners’ written demand the amount of all costs and expenses (including legal fees) incurred by the Owners in connection with the enforcement of, or the preservation of any rights under, any Transaction Document including (without limitation) (i) any losses, costs and expenses which the Owners may from time to time sustain, incur or become liable for by reason of the Owners being deemed by any court or authority to be an operator, or in any way concerned in the operation, of the Vessel and (ii) collecting and recovering the proceeds of any claim under any of the Insurances.
65.3
Without prejudice to any right to damages or other claim which either party may, at any time, have against the other hereunder, it is hereby agreed and declared that the indemnities of the Owners by the Charterers contained in this Charter shall continue in full force and effect for a period of twenty four (24) months after the Agreement Term.
66.
SET-OFF
66.1
The Owners may set off any matured and/or contingent obligation due from the Charterers under the Transaction Documents (to the extent beneficially owned by the Owners) against any obligation (whether matured or not) owed by the Owners to the Charterers, regardless of the place of payment or currency of either obligation. If the obligations are in different currencies, the Owners may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
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66.2
The Charterers may not set off any matured and/or contingent obligation due from the Owners under the Transaction Documents (to the extent beneficially owned by the Charterers) against any obligation (whether matured or not) owed by the Charterers to the Owners, regardless of the place of payment or currency of either obligation.
67.
FURTHER ASSURANCES AND UNDERTAKINGS
67.1
Each party shall make all applications and execute all other documents and do all other acts and things as may be necessary to implement and to carry out their obligations under, and the intent of, this Charter.
67.2
The parties shall act in good faith to each other in respect of any dealings or matters under, or in connection with, this Charter.
68.
CUMULATIVE RIGHTS
The rights, powers and remedies provided in this Charter are cumulative and not exclusive of any rights, powers or remedies at law or in equity unless specifically otherwise stated.
69.
DAY COUNT CONVENTION
Any interest, commission or fee accruing under a Transaction Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days.
70.
NO WAIVER
No delay, failure or forbearance by a party to exercise (in whole or in part) any right, power or remedy under, or in connection with, this Charter will operate as a waiver. No waiver of any breach of any provision of this Charter will be effective unless that waiver is in writing and signed by the party against whom that waiver is claimed. No waiver of any breach will be, or be deemed to be, a waiver of any other or subsequent breach.
71.
ENTIRE AGREEMENT
71.1
This Charter contains all the understandings and agreements of whatsoever kind and nature existing between the parties in respect of this Charter, the rights, interests, undertakings agreements and obligations of the parties to this Charter and shall supersede all previous and contemporaneous negotiations and agreements.
71.2
This Charter may not be amended, altered or modified except by a written instrument executed by each of the parties to this Charter.
72.
INVALIDITY
If any term or provision of this Charter or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable the remainder of this Charter or application of such term or provision to persons or circumstances (other than those as to which it is already invalid or unenforceable) shall (to the extent that such invalidity or unenforceability does not materially affect the operation of this Charter) not be affected thereby and each term and provision of this Charter shall be valid and be enforceable to the fullest extent permitted by law.
73.
ENGLISH LANGUAGE
All notices, communications and financial statements and reports under or in connection with this Charter and the other Transaction Documents shall be in English language or, if in any other language, shall be accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail.
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74.
NO PARTNERSHIP
Nothing in this Charter creates, constitutes or evidences any partnership, joint venture, agency, trust or employer/employee relationship between the parties, and neither party may make, or allow to be made any representation that any such relationship exists between the parties. Neither party shall have the authority to act for, or incur any obligation on behalf of, the other party, except as expressly provided in this Charter.
75.
NOTICES
75.1
Any notices to be given to the Owners under this Charter shall be sent in writing by registered letter, facsimile or email and addressed to:
c/o AVIC INTERNATIONAL LEASING CO., LTD.

Address:
18/F, CATIC Tower,
212 Jiang Ning Road,
Shanghai 200041, China
The People’s Republic of China

Fax No.:
+86 21 5289 5389

Email:
chenzhengrong@chinaleasing.net

Attention:
Ms. Emily Chen
or to such other address, facsimile number or email address as the Owners may notify to the Charterers in accordance with this Clause 75.
75.2
Any notices to be given to the Charterers under this Charter shall be sent in writing by registered letter, facsimile or email and addressed to the Charterers:
c/o TOP SHIPS INC.

Address:
1 Vas. Sofias & Meg. Alexandrou, Athens 15124 Greece

Telephone No.:
+30 21 081 28 180

Email:
atsirikos@topships.org

Attention:
Alexandros Tsirikos
or to such other address, facsimile number or email address as the Charterers may notify to the Owners in accordance with this Clause 75.
75.3
Any such notice shall be deemed to have reached the party to whom it was addressed, when dispatched and acknowledged received (in case of a facsimile or an email) or when delivered (in case of a registered letter). A notice or other such communication received on a non-working day or after business hours in the place of receipt shall be deemed to be served on the next following working day in such place
76.
CONFLICTS
Unless stated otherwise, in the event of there being any conflict between the provisions of Clauses 32 (Definitions) (Part II) to 75 (Notices) (Part II) and the provisions of Clauses 32 (Definitions) to 82 (Conditions subsequent), the provisions of Clauses 32 (Definitions) to 82 (Conditions subsequent) shall prevail.
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77.
SURVIVAL OF CHARTERERS’ OBLIGATIONS
The termination of this Charter for any cause whatsoever shall not affect the right of the Owners to recover from the Charterers any money due to the Owners on or before the termination in consequence thereof and all other rights of the Owners (including but not limited to any rights, benefits or indemnities which are expressly provided to continue after the termination of this Charter) are reserved hereunder.
78.
COUNTERPARTS
This Charter may be executed in any number of counterparts and any single counterpart or set of counterparts signed, in either case, by all the parties hereto shall be deemed to constitute a full and original agreement for all purposes.
79.
CONFIDENTIALITY
79.1
The Parties shall maintain the information provided in connection with the Transaction Documents strictly confidential and agree to disclose to no person other than:

(a)
its board of directors, employees (only on a need to know basis), and shareholders, professional advisors and rating agencies;

(b)
as may be required to be disclosed under applicable law or stock market or other regulations or for the purpose of legal proceedings;

(c)
in the case of the Owners, to any Finance Party or other actual or potential financier providing funding for the acquisition or refinancing of the Vessel;

(d)
in the case of the Charterers, to any Sub-charterer in respect of obtaining any consent required under the terms of any Sub-charter; and

(e)
the managers, the classification society and flag authorities as may be necessary in connection with the transactions contemplated hereunder.
79.2
Any other disclosure by each Party shall be subject to the prior written consent of the other Party.
80.
THIRD PARTIES ACT
80.1
Any person which is an Indemnitee or a Finance Party from time to time and is not a party to this Charter shall be entitled to enforce such terms of this Charter as provided for in this Charter in relation to the obligations of the Charterers to such Indemnitee or (as the case may be) Finance Party, subject to the provisions of Clause 81 (Law and jurisdiction) and the Third Parties Act. The Third Parties Act applies to this Charter as set out in this Clause 80.
80.2
Save as provided above, a person who is not a party to this Charter has no right under the Third Parties Act to enforce or to enjoy the benefit of any term of this Charter.
81.
LAW AND JURISDICTION
81.1
This Charter and any non-contractual obligations arising from or in connection with it shall in all respects be governed by and interpreted in accordance with English law.
81.2
Any dispute, controversy or claim arising out of or relating to this Charter, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it shall be referred to and finally resolved by London arbitration.
81.3
The law of this Clause 81 shall be English law.
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81.4
Any dispute arising out of or in connection with this Charter shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause.
81.5
The arbitration shall be conducted in accordance with the London Maritime Arbitrations Association (LMAA). Terms current at the time when the arbitration proceedings are commenced.
81.6
The reference shall be to three arbitrators. A party wishing to refer a dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within fourteen (14) calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified.
81.7
If one party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both Parties as if the sole arbitrator had been appointed by agreement.
81.8
In cases where neither the claim nor any counterclaim exceeds the sum of US$50,000 (or such other sum as the parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedures current at the time when the arbitration proceedings are commenced and the number of arbitrators shall be one.
82.
CONDITIONS SUBSEQUENT
82.1
Notwithstanding anything to the contrary in this Charter, the obligations of the Owners to charter, or continue to charter, the Vessel to the Charterers under this Charter shall be subject to the condition that the Owners shall have received the following documents and evidence in form and substance satisfactory to the Owners no later than three (3) Business Days after the Actual Delivery Date:

(a)
a copy of the endorsed policy issued by the insurer in respect of the Vessel;

(b)
a copy of the duly signed letter of undertaking issued by all the relevant underwriters or insurance brokers in respect of the Vessel;

(c)
the Owners shall have received, no later than fourteen (14) calendar days after the Actual Delivery Date, an original of the duly executed acknowledgement by the Sub-charterers in accordance with the Charterers Assignment;

(d)
the Vessel’s transcript of register evidencing that the Vessel is free from any registered Security Interest;

(e)
the Vessel’s current Safety Management Certificate (as such term is defined pursuant to the ISM Code);

(f)
the Approved Manager’s current Document of Compliance (as such term is defined pursuant to the ISM Code);

(g)
the Vessel’s current ISSC;

(h)
the Vessel’s current IAPPC; and

(i)
the Vessel’s classification certificate evidencing that it is free of all recommendations and requirements from the Classification Society.
58


83.
FATCA
83.1
Defined terms
For the purposes of this Clause 83 (FATCA), the following terms shall have the following meanings:
Code” means the United States Internal Revenue Code of 1986, as amended.
FATCA” means sections 1471 through 1474 of the Code and any Treasury regulations thereunder.
FATCA Deduction” means a deduction or withholding from a payment under the Transaction Documents or the Project Documents required by or under FATCA.
FATCA Exempt Party” means a Relevant Party that is entitled under FATCA to receive payments free from any FATCA Deduction.
FATCA FFI” means a foreign financial institution as defined in section 1471(d)(4) of the Code which, if a Relevant Party is not a FATCA Exempt Party, could be required to make a FATCA Deduction.
FATCA Non-Exempt Party” means any Relevant Party who is not a FATCA Exempt Party. “Relevant Party” means any of the parties to the Transaction Documents.
IRS” means the United States Internal Revenue Service or any successor taxing authority or agency of the United States government.
83.2
FATCA Information

(a)
Subject to paragraph (iii) below, each Relevant Party shall, on the date of this Charter, and thereafter within ten (10) Business Days of a reasonable request by another Relevant Party:

(i)
confirm to that other party whether it is a FATCA Exempt Party or is not a FATCA Exempt Party; and

(ii)
supply to the requesting party (with a copy to all other Relevant Parties) such other form or forms (including IRS Form W-8 or Form W-9 or any successor or substitute form, as applicable) and any other documentation and other information relating to its status under FATCA (including its applicable “pass thru percentage” or other information required under FATCA or other official guidance including intergovernmental agreements) as the requesting party reasonably requests for the purpose of the requesting party’s compliance with FATCA.

(b)
If a Relevant Party confirms to any other Relevant Party that it is a FATCA Exempt Party or provides an IRS Form W-8 or W-9 showing 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 so notify all other Relevant Parties reasonably promptly.

(c)
Nothing in this Clause 74 (FATCA) shall oblige any Relevant Party to do anything which would or, in its reasonable opinion, might constitute a breach of any law or regulation, any policy of that party, any fiduciary duty or any duty of confidentiality, or to disclose any confidential information (including, without limitation, its tax returns and calculations); provided, however, that nothing in this paragraph shall excuse any Relevant Party from providing a true, complete and correct IRS Form W-8 or W-9 (or any successor or substitute form where applicable). Any information provided on such
59


IRS Form W-8 or W-9 (or any successor or substitute forms) shall not be treated as confidential information of such party for purposes of this paragraph.

(d)
If a Relevant Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with the provisions of this Charter or the provided information is insufficient under FATCA, 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 Transaction Documents as if it is a FATCA Non-Exempt Party; and

(ii)
if that party failed to confirm its applicable passthru percentage then such party shall be treated for the purposes of this Charter and the Transaction 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 sufficient confirmation, forms, documentation or other information to establish the relevant facts.
83.3
FATCA Deduction and gross-up by Relevant Party

(a)
If the representation made by the Charterers under Clause 48 (Charterers’ representations and warranties) proves to be untrue or misleading such that the Charterers are required to make a FATCA Deduction, the Charterers shall make the FATCA Deduction and any payment required in connection with that FATCA Deduction within the time allowed and in the minimum amount required by FATCA.

(b)
If the Charterers are required to make a FATCA Deduction then the Charterers shall increase the payment due from them to the Owners to an amount which (after making any FATCA Deduction) leaves an amount equal to the payment which would have been due if no FATCA Deduction had been required.

(c)
The Charterers shall promptly upon becoming aware that they must make a FATCA Deduction (or that there is any change in the rate or basis of a FATCA Deduction) notify the Owners accordingly. Within thirty (30) days of the Charterers making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the Charterers shall deliver to the Owners evidence reasonably satisfactory to the Owners that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the relevant governmental or taxation authority.

(d)
If the Owners are required to make a deduction or withholding from a payment under the Finance Documents in respect of FATCA, which deduction or withholding would not have been required if a Relevant Person were not a US Tax Obligor or FATCA FFI, and are required under the Finance Documents (if any) to pay additional amounts in respect of such deduction or withholding, the amount of the payment due from the Charterers shall be increased to an amount which, after any such deduction or withholding and payment of additional amounts, leaves the Owners with an amount equal to the amount which it would have had remaining if it had not been required to pay additional amounts under such Finance Documents.
83.4
FATCA Deduction by Owners
The Owners may make any FATCA Deduction they are required by FATCA to make, and any payment required in connection with that FATCA Deduction, and the Owners shall not be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient for that FATCA Deduction.
60


SCHEDULE 1
FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE
PROTOCOL OF DELIVERY AND ACCEPTANCE
It is hereby certified that pursuant to a bareboat charter dated                                                   and made between [ ] of [ ] (the “Owners”) as owner and [ ] of [ ] (the “Bareboat Charterers”) as bareboat charterer (as maybe amended and supplemented from time to time, the “Bareboat Charter”) in respect of one (1) vessel named [ ] and registered under the laws and flag of the Marshall Islands with IMO number [ ] (the “Vessel”), the Vessel is delivered for charter by the Owner to the Bareboat Charterer, and accepted by the Bareboat Charterer from the Owner at                    hours (Beijing time) on the date hereof in accordance with the terms and conditions of the Bareboat Charter.
IN WITNESS WHEREOF, the Owners and the Bareboat Charterers have caused this PROTOCOL OF DELIVERY AND ACCEPTANCE to be executed by their duly authorised representative on this                    day of                   20[●] in [●].
THE OWNERS
 
THE BAREBOAT CHARTERERS
     
     
     
by:
 
by:
     
     
     
     
     
Name:
 
Name:
     
Title:
 
Title:
     
Date:
 
Date:
61



SCHEDULE 2
FORM OF TITLE TRANSFER PROTOCOL OF DELIVERY AND ACCEPTANCE
PROTOCOL OF DELIVERY AND ACCEPTANCE
Vessel [ ]
[ ] of [ ] (the “Owners”) deliver to [ ] of [ ] (the “Bareboat Charterers”) the Vessel described below and the Bareboat Charterers accept delivery of, title and risk to the Vessel pursuant to the terms and conditions of the bareboat charterer dated                   2019 (as may be amended and supplemented from time to time) and made between (1) the Owners and (2) the Bareboat Charterers.
Name of Vessel:
 
[ ]
     
Flag:
 
Marshall Islands
     
Place of Registration:
 
Marshall Islands
     
IMO Number:
 
[ ]
     
Gross Registered Tonnage:
 
[..]
     
Net Registered Tonnage:
 
[..]
     
Dated:
 
     20[●]
     
At:
 
hours (Hong Kong time)
     
Place of delivery:
   
     
THE OWNER
 
THE BAREBOAT CHARTERER
     
[ ]
 
[ ]
     
     
     
by:
 
by:
     
     
     
     
     
Name:
 
Name:
     
Title:
 
Title:
     
Date:
 
Date:
62



SCHEDULE 3
HIRE PAYMENT SCHEDULE
FIXED HIRE PAYMENT SCHEDULE
Builders Hull number 2750

payment dates
Cost Balance at beginning of applicable term
Fixed Hire
Balloon Amount
10/01/2020
US$ 30,100,000.00
US$ 292,485.00
 
10/02/2020
US$ 29,984,434.99
US$ 273,615.00
 
10/03/2020
US$ 29,875,690.36
US$ 292,485.00
 
10/04/2020
US$ 29,758,806.92
US$ 283,050.00
 
10/05/2020
US$ 29,645,029.06
US$ 292,485.00
 
10/06/2020
US$ 29,526,789.85
US$ 283,050.00
 
10/07/2020
US$ 29,411,692.25
US$ 292,485.00
 
10/08/2020
US$ 29,292,081.55
US$ 292,485.00
 
10/09/2020
US$ 29,171,767.81
US$ 283,050.00
 
10/10/2020
US$ 29,054,650.80
US$ 292,485.00
 
10/11/2020
US$ 28,932,941.50
US$ 283,050.00
 
10/12/2020
US$ 28,814,466.01
US$ 292,485.00
 
10/01/2021
US$ 28,691,344.97
US$ 292,485.00
 
10/02/2021
US$ 28,567,500.25
US$ 264,180.00
 
10/03/2021
US$ 28,454,983.03
US$ 292,485.00
 
10/04/2021
US$ 28,329,749.04
US$ 283,050.00
 
10/05/2021
US$ 28,207,842.51
US$ 292,485.00
 
10/06/2021
US$ 28,081,155.89
US$ 283,050.00
 
10/07/2021
US$ 27,957,835.33
US$ 292,485.00
 
10/08/2021
US$ 27,829,679.24
US$ 292,485.00
 

63



10/09/2021
US$ 27,700,769.87
US$ 283,050.00
 
10/10/2021
US$ 27,575,285.62
US$ 292,485.00
 
10/11/2021
US$ 27,444,881.00
US$ 283,050.00
 
10/12/2021
US$ 27,317,941.22
US$ 292,485.00
 
10/01/2022
US$ 27,186,023.99
US$ 292,485.00
 
10/02/2022
US$ 27,053,331.39
US$ 264,180.00
 
10/03/2022
US$ 26,932,775.55
US$ 292,485.00
 
10/04/2022
US$ 26,798,594.42
US$ 283,050.00
 
10/05/2022
US$ 26,667,978.48
US$ 292,485.00
 
10/06/2022
US$ 26,532,240.94
US$ 283,050.00
 
10/07/2022
US$ 26,400,109.94
US$ 292,485.00
 
10/08/2022
US$ 26,262,797.94
US$ 292,485.00
 
10/09/2022
US$ 26,124,678.85
US$ 283,050.00
 
10/10/2022
US$ 25,990,229.58
US$ 292,485.00
 
10/11/2022
US$ 25,850,508.41
US$ 283,050.00
 
10/12/2022
US$ 25,714,499.62
US$ 292,485.00
 
10/01/2023
US$ 25,573,157.78
US$ 292,485.00
 
10/02/2023
US$ 25,430,985.17
US$ 264,180.00
 
10/03/2023
US$ 25,301,816.42
US$ 292,485.00
 
10/04/2023
US$ 25,158,048.93
US$ 283,050.00
 
10/05/2023
US$ 25,018,101.34
US$ 292,485.00
 
10/06/2023
US$ 24,872,666.25
US$ 283,050.00
 
10/07/2023
US$ 24,731,095.36
US$ 292,485.00
 
10/08/2023
US$ 24,583,973.33
US$ 292,485.00
 
10/09/2023
US$ 24,435,986.55
US$ 283,050.00
 
10/10/2023
US$ 24,291,931.76
US$ 292,485.00
 
10/11/2023
US$ 24,142,228.44
US$ 283,050.00
 

64



10/12/2023
US$ 23,996,502.72
US$ 292,485.00
 
10/01/2024
US$ 23,845,062.94
US$ 292,485.00
 
10/02/2024
US$ 23,692,733.04
US$ 273,615.00
 
10/03/2024
US$ 23,549,393.28
US$ 292,485.00
 
10/04/2024
US$ 23,395,325.50
US$ 283,050.00
 
10/05/2024
US$ 23,245,351.30
US$ 292,485.00
 
10/06/2024
US$ 23,089,496.45
US$ 283,050.00
 
10/07/2024
US$ 22,937,782.64
US$ 292,485.00
 
10/08/2024
US$ 22,780,119.98
US$ 292,485.00
 
10/09/2024
US$ 22,621,530.62
US$ 283,050.00
 
10/10/2024
US$ 22,467,154.97
US$ 292,485.00
 
10/11/2024
US$ 22,306,726.08
US$ 283,050.00
 
10/12/2024
US$ 22,150,559.77
US$ 292,485.00
 
10/01/2025
US$ 21,988,270.02
US$ 281,790.00
 
10/02/2025
US$ 21,835,721.37
US$ 254,520.00
 
10/03/2025
US$ 21,697,125.62
US$ 281,790.00
 
10/04/2025
US$ 21,542,865.69
US$ 272,700.00
 
10/05/2025
US$ 21,392,704.45
US$ 281,790.00
 
10/06/2025
US$ 21,236,655.22
US$ 272,700.00
 
10/07/2025
US$ 21,084,752.20
US$ 281,790.00
 
10/08/2025
US$ 20,926,892.91
US$ 281,790.00
 
10/09/2025
US$ 20,768,105.76
US$ 272,700.00
 
10/10/2025
US$ 20,613,537.57
US$ 281,790.00
 
10/11/2025
US$ 20,452,908.60
US$ 272,700.00
 
10/12/2025
US$ 20,296,547.53
US$ 281,790.00
 
10/01/2026
US$ 20,134,055.37
US$ 281,790.00
 
10/02/2026
US$ 19,970,608.12
US$ 254,520.00
 

65




10/03/2026
US$ 19,822,110.63
US$ 281,790.00
 
10/04/2026
US$ 19,656,829.85
US$ 272,700.00
 
10/05/2026
US$ 19,495,940.58
US$ 281,790.00
 
10/06/2026
US$ 19,328,742.66
US$ 272,700.00
 
10/07/2026
US$ 19,165,987.18
US$ 281,790.00
 
10/08/2026
US$ 18,996,849.88
US$ 281,790.00
 
10/09/2026
US$ 18,826,718.44
US$ 272,700.00
 
10/10/2026
US$ 18,661,107.37
US$ 281,790.00
 
10/11/2026
US$ 18,489,002.52
US$ 272,700.00
 
10/12/2026
US$ 18,321,470.49
US$ 281,790.00
 
10/01/2027
US$ 18,147,369.34
US$ 281,790.00
 
10/02/2027
US$ 17,972,244.87
US$ 254,520.00
 
10/03/2027
US$ 17,813,138.21
US$ 281,790.00
 
10/04/2027
US$ 17,636,049.21
US$ 272,700.00
 
10/05/2027
US$ 17,463,665.46
US$ 281,790.00
 
10/06/2027
US$ 17,284,522.36
US$ 272,700.00
 
10/07/2027
US$ 17,110,139.07
US$ 281,790.00
 
10/08/2027
US$ 16,928,918.03
US$ 281,790.00
 
10/09/2027
US$ 16,746,631.82
US$ 272,700.00
 
10/10/2027
US$ 16,569,188.95
US$ 281,790.00
 
10/11/2027
US$ 16,384,788.34
US$ 272,700.00
 
10/12/2027
US$ 16,205,287.25
US$ 281,790.00
 
10/01/2028
US$ 16,018,747.72
US$ 281,790.00
 
10/02/2028
US$ 15,831,111.77
US$ 263,610.00
 
10/03/2028
US$ 15,654,549.64
US$ 281,790.00
 
10/04/2028
US$ 15,464,773.02
US$ 272,700.00
 
10/05/2028
US$ 15,280,038.75
US$ 281,790.00
 

66



10/06/2028
US$ 15,088,060.86
US$ 272,700.00
 
10/07/2028
US$ 14,901,183.80
US$ 281,790.00
 
10/08/2028
US$ 14,706,979.10
US$ 281,790.00
 
10/09/2028
US$ 14,511,632.91
US$ 272,700.00
 
10/10/2028
US$ 14,321,477.05
US$ 281,790.00
 
10/11/2028
US$ 14,123,864.98
US$ 272,700.00
 
10/12/2028
US$ 13,931,503.44
US$ 281,790.00
 
10/01/2029
US$ 13,731,599.21
US$ 281,790.00
 
10/02/2029
US$ 13,530,519.99
US$ 254,520.00
 
10/03/2029
US$ 13,347,832.53
US$ 281,790.00
 
10/04/2029
US$ 13,144,497.63
US$ 272,700.00
 
10/05/2029
US$ 12,946,565.32
US$ 281,790.00
 
10/06/2029
US$ 12,740,871.87
US$ 272,700.00
 
10/07/2029
US$ 12,540,643.69
US$ 281,790.00
 
10/08/2029
US$ 12,332,564.34
US$ 281,790.00
 
10/09/2029
US$ 12,123,261.95
US$ 272,700.00
 
10/10/2029
US$ 11,919,520.72
US$ 281,790.00
 
10/11/2029
US$ 11,707,790.57
US$ 272,700.00
 
10/12/2029
US$ 11,501,686.08
US$ 281,790.00
 
10/01/2030
 
US$ 11,287,500

In this Schedule 3, the “Balloon Amount” means an amount which does not exceed the lower of (i) US$11,287,500 and (ii) thirty (30) per cent of the Cost Price, and shall be payable in a lump sum on the final Hire Payment Date.

67



SCHEDULE 4
SCHEDULE OF PURCHASE OPTION PRICE (EXCLUDING HIRE DUE)
Purchase Option Date
Purchase Option Price
2nd anniversary
USD27,274,800
3rd anniversary
USD25,704,000
4th anniversary
USD24,021,000
5th anniversary
USD22,185,000
6th anniversary
USD20,360,000
7th anniversary
USD18,380,400
8th anniversary
USD16,116,900
9th anniversary
USD13,974,000

*Subject to the Owners’ confirmation by reference to the figure to be provided by the Owners upon the fixing of the delivery or closing date in accordance with such early purchase of the Vessel.
68


SIGNATURE PAGE
ADDITIONAL CLAUSES
TO BAREBOAT CHARTER FOR
HULL NO. 2750
THE OWNERS
 
THE CHARTERERS
     
     
GREAT MONICA LIMITED
 
SANTA MONICA MARINE INC.
     
     
     
by:
 
by:
     
     
     
     
     
Name:
 
Name:
     
Title:
 
Title:
     
Date:
 
Date:
69


Dated 2019
TOP SHIPS INC.
as Guarantor
and
GREAT MONICA LIMITED
as Owner

 
GUARANTEE AND INDEMNITY
 
 
relating to the obligations of
 
 
SANTA MONICA MARINE INC.
 
HFW
www.hfw.com


TABLE OF CONTENTS
Clause
Page
 
1.
DEFINITIONS AND INTERPRETATION
1
 
2.
GUARANTEE AND INDEMNITY
2
 
3.
CONTINUING SECURITY
3
 
4.
RESTRICTIONS ON GUARANTOR
4
 
5.
PAYMENTS
5
 
6.
NO SET-OFF, COUNTERCLAIM OR TAX DEDUCTION
5
 
7.
DISCHARGE CONDITIONAL
5
 
8.
REPRESENTATIONS AND WARRANTIES
5
 
9.
INFORMATION UNDERTAKINGS
8
 
10.
FINANCIAL COVENANTS
9
 
11.
INDEMNITIES AND EXPENSES
10
 
12.
CHANGES TO THE PARTIES
11
 
13.
SET-OFF
11
 
14.
MISCELLANEOUS
12
 
15.
NOTICES
13
 
16.
GOVERNING LAW AND JURISDICTION
14
 
17.
CONTRACTUAL RECOGNITION OF BAIL-IN
15
 
SCHEDULE 1 FORM OF COMPLIANCE CERTIFICATE
16
EXECUTION PAGES
18



THIS DEED OF GUARANTEE AND INDEMNITY is made on 2019
BETWEEN
(1)
TOP SHIPS INC., a corporation incorporated in the Republic of the Marshall Islands whose registered office is at 1 Vas. Sofias & Meg. Alexandrou, Athens 15124 Greece (the Guarantor); and
(2)
GREAT MONICA LIMITED, a corporation incorporated under the laws of the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro MH96960, the Republic of the Marshall Islands (the Owner which expression includes its successors and assigns).
BACKGROUND
(A)
By a bareboat charter dated 30 September 2019 (as amended and/or supplemented from time to time, the Charter) and entered into between (i) the Owner as owners and (ii) the Santa Monica Marine Inc. as charterer(the Charterer), the Owner agreed to bareboat charter the Vessel to the Charterer pursuant to the terms and conditions contained therein.
(B)
It is one of the conditions precedent to the chartering of the Vessel by the Owner to the Charterer under the Charter that the Assignor enters into this Deed.
(C)
This is the Charter Guarantee relating to the Vessel
IT IS AGREED as follows:
1.
DEFINITIONS AND INTERPRETATION
1.1
Definitions
Words and expressions defined in the Charter shall, unless otherwise expressly provided in this Guarantee or the context otherwise requires, have the same meanings when used in this Guarantee, including the recitals.
1.2
General interpretation
In this Guarantee:

(a)
unless the context otherwise requires, words in the singular include the plural and vice versa;

(b)
references to any document include that document as varied, novated, supplemented, extended or replaced from time to time;

(c)
references to any enactment include re-enactments, amendments and extensions of that enactment;

(d)
references to any person include that person’s successors and permitted assigns and references to a Party mean a party to this Guarantee;

(e)
clause headings are for convenience of reference only and are not to be taken into account in construction;

(f)
unless otherwise specified, references to Clauses and the recitals are respectively to Clauses of and the recitals to this Guarantee;

(g)
any rights in respect of an asset includes:

(i)
all amounts and proceeds paid or payable;



(ii)
all rights to make any demand or claim; and

(iii)
all powers, remedies, causes of action, security, guarantees and indemnities,
in each case in respect of or derived from that asset;

(h)
the term the Security means the Security Interests created by the Transaction Documents to which the Guarantor is at any time a party;

(i)
any words following the terms including, include, in particular or any similar expression shall be construed as illustrative and shall not limit the sense of the words, description, definition, phrase or term preceding those terms; and

(j)
a Potential Termination Event is continuing if it has not been remedied or waived and a Termination Event is continuing it has not been waived.
1.3
Agreement to prevail
This Guarantee shall be read together with the Charter and, in the event of any conflict between the provisions of this Guarantee and the provisions of the Charter, the provisions of the Charter shall prevail.
1.4
Third party rights

(a)
A person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the Third Parties Act) to enforce or enjoy the benefit of any term of this Guarantee.

(b)
Notwithstanding Clause 1.4(a) but subject always to Clause 1.4(c) and the provisions of the Third Parties Act, a person who is not a Party may rely on any clause under this Guarantee which expressly confers rights on them.

(c)
Notwithstanding any term of this Guarantee or any other Transaction Document, the consent of any person who is not a Party is not required to rescind or vary this Guarantee at any time.
2.
GUARANTEE AND INDEMNITY
2.1
Guarantee and indemnity
The Guarantor irrevocably and unconditionally:

(a)
guarantees the due and punctual performance by the Charterer of all its obligations under or pursuant to the Charter and the other Transaction Documents to which the Charterer is a party and the due and punctual payment by the Charterer to the Owner of each and every part of the Outstanding Indebtedness in accordance with the terms of the Transaction Documents;

(b)
undertakes that, if and whenever the Charterer fails to pay on the due date any sum whatsoever due and payable under or pursuant to any Transaction Document, the Guarantor shall pay such sum on demand by the Owner; and

(c)
agrees, as a separate and independent stipulation, that if any amounts intended to be guaranteed by Clause 2.1(a) are not recoverable on the footing of a guarantee, whether by reason of illegality, incapacity, lack or exceeding of powers, ineffectiveness of execution or any other fact or circumstance, whether or not known to the Owner or the Guarantor, then such amounts shall nevertheless be recoverable from the Guarantor as sole or principal debtor by way of indemnity and shall be payable by the Guarantor to the Owner on demand.
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2.2
Default interest
If the Guarantor fails to pay any amount payable by it under this Guarantee on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate of 8% if the overdue amount had, during the period of non-payment, constituted part of the Fixed Hire, each of a duration selected by the Owner (acting reasonably). Any interest accruing under this Clause 2.3 shall be immediately payable by the Guarantor on demand by the Owner. If unpaid, any such interest will be compounded with the overdue amount at the end of each period applicable to that overdue amount but will remain immediately due and payable.
2.3
Nature of guarantee
The guarantee contained in this Clause 2 is a guarantee of payment and performance and not of collection.
2.4
Guarantor as principal debtor
The Guarantor agrees that it is, and will throughout the Agreement Term remain, liable under this Guarantee as a principal debtor and not as a surety only.
2.5
Immediate recourse
The Guarantor waives any rights which it may have to require the Owner first to enforce any of the other Transaction Documents or claim payment from the Charterer or any other person before enforcing any rights of the Owner against the Guarantor under this Guarantee.
3.
CONTINUING SECURITY
3.1
Continuing security; guarantee not affected by other security
This Guarantee and the Security Interest:

(a)
is and shall at all times throughout the Agreement Term remain a continuing security for the payment of the full amount of the Outstanding Indebtedness from time to time;

(b)
shall not be satisfied by any intermediate payment or satisfaction of any part of the Outstanding Indebtedness; and

(c)
shall be in addition to and shall not merge with or be prejudiced or affected by any other security for the Outstanding Indebtedness which has been, or may at any time be, given to the Owner by the Charterer or any other person.
3.2
Waiver of defences
Neither the rights of the Owner nor the obligations of the Guarantor under this Guarantee or any other Transaction Document to which it is at any time a party shall be discharged, impaired or otherwise affected by reason of any of the following, whether or not known to the Guarantor, the Owner or any other person:

(a)
any time or indulgence granted to, or composition with, the Charterer or any other person; or

(b)
any termination, renewal, extension or variation of any credit, accommodation or facility granted by the Owner to the Charterer or any other person or any amendment of, or the making of any supplement to, any Transaction Document or any other document or security; or
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(c)
the taking, variation, compromise, renewal, enforcement, realisation or release of, or refusal or neglect to take, perfect, release or enforce, any rights, remedies or securities against, or granted by, any Obligor or other person; or

(d)
any incapacity, disability, or defect in powers of any Obligor or other person, or any irregular exercise of it by, or lack of authority of, any person purporting to act on behalf of any Obligor or other person; or

(e)
any illegality, invalidity, avoidance or unenforceability on any grounds whatsoever of, or of any obligations of any Obligor or other person under, any Transaction Document or any other document or security; or

(f)
the death, liquidation, administration, insolvency, amalgamation, reorganisation or dissolution, or any change in the constitution, name or style, of any Obligor, the Owner or any other person; or

(g)
any other act, omission, matter or thing which, but for this provision, might operate to exonerate the Guarantor from liability, whether in whole or in part, under this Guarantee.
4.
RESTRICTIONS ON GUARANTOR
4.1
Deferral of Guarantor’s rights
Until the expiry of the Agreement Term, the Guarantor shall not be entitled, nor shall the Guarantor claim, by virtue of any payment made by the Guarantor under this Guarantee:

(a)
to exercise any right of subrogation or indemnity or any other right or remedy in relation to any rights, security or moneys held by or recovered or receivable by the Owner under the Transaction Documents; or

(b)
to exercise any right of set-off or counterclaim against the Charterer or any other Obligor; or

(c)
to exercise any right of contribution from the Charterer or any other Obligor in respect of the Outstanding Indebtedness; or

(d)
to receive, claim or have the benefit of any payment, distribution or security from the Charterer or any other Obligor; or

(e)
unless so directed by the Owner (in which case the Guarantor shall prove in accordance with the Owner’s directions), to rank as a creditor or have any right of proof in the bankruptcy, liquidation or insolvency of the Charterer or any other Obligor in competition with the Owner.
4.2
No security to be taken by the Guarantor
The Guarantor represents and warrants that it has not taken, and undertakes that it will not take, without the prior written consent of the Owner, any security from the Charterer or any other Obligor in respect of the Guarantor’s liability under this Guarantee.
4.3
Application of payments or benefits received by the Guarantor
If the Guarantor is required by the Owner to prove in the bankruptcy, liquidation or insolvency of the Charterer or any other Obligor, or receives any payment, distribution or security from the Charterer or any other Obligor, or exercises any right of set off or counterclaim in respect of any payment made by it under this Guarantee, or otherwise acts in breach of any provision of this Clause 4 (Restrictions On Guarantor), then in each such case the Guarantor shall hold on trust for the Owner and immediately pay or transfer (as may be appropriate) to the Owner any such payment, amount set off, distribution or benefit of such security received by it.
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5.
PAYMENTS
5.1
Place, time and manner of payment
Unless otherwise specified by the Owner, all moneys to be paid by the Guarantor under this Guarantee shall be paid to the Owner in Dollars on the due date and in same day funds to such account as the Owner may from time to time notify the Guarantor.
5.2
Non-Business Days
Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
5.3
Accrual of interest and periodic payments
All payments of interest and other payments of an annual or periodic nature to be made by the Guarantor shall accrue from day to day and be calculated on the basis of the actual number of days elapsed and a 360 day year.
5.4
Application of receipts
Without prejudice to Clause 5.5 (Suspense account), all moneys received or recovered by the Owner pursuant to this Guarantee shall be applied, in the first place, to pay or make good all costs, expenses and liabilities whatsoever incurred by the Owner in or about or incidental to the recovery of such moneys, and the balance shall be applied in accordance with the terms of the Charter.
5.5
Waiver of rights of appropriation
The Guarantor irrevocably waives any rights of appropriation to which it may be entitled in respect of any payment made under this Guarantee.
6.
NO SET-OFF, COUNTERCLAIM OR TAX DEDUCTION
The provisions of Clause 66 (Set-Off) of the Charter shall extend and apply to this Guarantee as if the same were expressly set out in this Guarantee but as if all references in the Charter to a Party included the Guarantor.
7.
DISCHARGE CONDITIONAL
Any release, discharge or settlement between the Guarantor and the Owner in relation to this Guarantee shall be conditional on no right, security, disposition or payment to the Owner by the Guarantor, the Charterer or any other person in respect of the Outstanding Indebtedness being avoided, set aside or ordered to be refunded pursuant to any enactment or law relating to breach of duty by any person, bankruptcy, liquidation, administration, protection from creditors generally or insolvency or for any other reason. If any such right, security, disposition or payment is avoided, set aside or ordered to be refunded, the Owner shall be entitled subsequently to enforce this Guarantee against the Guarantor as if such release, discharge or settlement had not occurred and any such security, disposition or payment had not been made.
8.
REPRESENTATIONS AND WARRANTIES
8.1
Date of representations and warranties
The Guarantor represents and warrants that the following matters are true at the date of this Guarantee.
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8.2
Existence, powers and compliance
The Guarantor:

(a)
is a corporation duly incorporated with limited liability, validly existing and in good standing under the laws of the Republic of the Marshall Islands (its jurisdiction of incorporation);

(b)
has full power to own its property and assets and to carry on its business as it is now being conducted; and

(c)
has complied with all statutory and other requirements relative to its business.
8.3
Capacity and authorisation
The entry into and performance by the Guarantor of this Guarantee and the other Transaction Documents to which it is (or is to become) a party are within the corporate powers of the Guarantor and have been duly authorised by all necessary corporate actions and approvals and no limitation on its powers will be exceeded as a result of the liabilities incurred under this Guarantee. In entering into this Guarantee and the other relevant Transaction Documents the Guarantor is acting on its own account and not as agent or nominee of any person.
8.4
No contravention of laws or contractual restrictions
The entry into and performance by the Guarantor of, and the transactions contemplated by, this Guarantee and the other Transaction Documents to which it is (or is to become) a party and the granting of Security Interest by the Guarantor do not and will not:

(a)
contravene in any respect the constitutional documents of the Guarantor or any law, regulation or contractual restriction binding on the Guarantor or any of its assets; or

(b)
result in the creation or imposition of any Security Interest (other than a Permitted Security Interest) on any of its assets in favour of any party.
8.5
Licences and approvals in force
All licences, authorisations, approvals and consents necessary for the entry into, performance, validity, enforceability or admissibility in evidence of this Guarantee and the other Transaction Documents to which the Guarantor is (or is to become) a party have been obtained and are in full force and effect and there has been no breach of any condition or restriction imposed in this respect.
8.6
Validity and enforceability
When duly executed and delivered, and where applicable registered, this Guarantee and each other Transaction Document to which the Guarantor is (or is to become) a party will:

(a)
constitute the legal, valid and binding obligations of the Guarantor enforceable against it in accordance with its terms; and

(b)
(to the extent that by its terms it purports to do so) create a legal, valid and binding first priority Security Interest in accordance with its terms over all the assets to which by its terms it relates,
except insofar as enforcement may be limited by any applicable laws relating to bankruptcy, insolvency, administration and similar laws affecting creditors’ rights generally and by principles of equity.
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8.7
No third party Security Interests; title
At the time of execution of each Security Document to which the Guarantor is (or is to become) a party, no third party will have any Security Interest (other than a Permitted Security Interest) in any asset over which a Security Interest is to be created pursuant to that Security Document and the Guarantor will be the sole and absolute legal and beneficial owner of that asset.
8.8
Insolvency
No corporate action, legal proceeding or other procedure or step described in Clause 54(a)(vi) (Insolvency and rescheduling) of the Charter or creditors’ process described in Clause 54(a)(vii) (Winding-up) of the Charter has been taken or, to the knowledge of the Guarantor, threatened in relation to any Obligor.
8.9
No litigation current or pending
No litigation, arbitration, tax claim or administrative proceeding is current or pending or (to the knowledge of the Guarantor) threatened, which, if adversely determined, might reasonably be expected to have a Material Adverse Effect.
8.10
Governing law and enforcement
Subject to the Legal Reservations, the choice of English law as the governing law of this Guarantee and each other Transaction Document expressed to be governed by English law to which the Guarantor is (or is to become) a party will be recognised and enforced in the jurisdiction of incorporation of the Guarantor, and any judgment obtained in England in relation to this Guarantee or any such other Transaction Document will be recognised and enforced in that jurisdiction.
8.11
Truth of financial and other information
All factual information furnished in writing to the Owner by or on behalf of the Guarantor in connection with the negotiation and preparation of this Guarantee and the other Transaction Documents was (when given) true and correct in all material respects and there are no other facts or considerations the omission of which would render any such information materially misleading.
8.12
No liability to deduction or withholding
Except in respect of any FATCA Deduction which may be required by Clause 6 (No Set-Off, Counterclaim Or Tax Deduction), all payments to be made by the Guarantor under this Guarantee or any other Transaction Document may be made free and clear of and without deduction or withholding for or on account of any taxes.
8.13
No filing or stamp taxes
Under the law of the Guarantor’s jurisdiction of incorporation it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of this Guarantee or any other Transaction Document to which the Guarantor is (or is to become) a party that this Guarantee or such other Transaction Document (or particulars of it) be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to it executed by the Guarantor at the company’s registration office in its jurisdiction of incorporation (and payment of associated fees), which registration will be made (and such fees paid) promptly after the date of each relevant Security Document.
8.14
Tax compliance
The Guarantor has complied in all material respects with all relevant tax laws and regulations applicable to it and its business and no claims or investigations are being made or conducted against it with respect to taxes.
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8.15
Pari passu obligations
The payment obligations of the Guarantor under this Guarantee and the other Transaction Documents to which it is (or is to become) a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
8.16
Familiarity with the terms of the Agreement
The Guarantor has received a copy of the Charter and is familiar with and has approved its terms and conditions.
8.17
Anti-Corruption Laws
The Guarantor has conducted its business in compliance with all Anti-Corruption Laws applicable to it and has instituted and maintains policies and procedures designed to prevent violation of such Anti-Corruption Laws.
8.18
Sanctions

(a)
The Guarantor is not a Restricted Party nor is it owned and/or controlled (directly or indirectly) by a Restricted Party.

(b)
No proceeds provided to the Charterer shall be made available to or for the benefit of a Restricted Party nor shall they otherwise be applied (directly or indirectly) in a manner or for a purpose prohibited by Sanctions.
9.
INFORMATION UNDERTAKINGS
9.1
Duration of undertakings
The undertakings in this Clause 9 (Information Undertakings) shall remain in force from the date of this Guarantee to the end of the Agreement Term.
9.2
Provision of financial information
The Guarantor will provide to the Owner:

(a)
within 180 days of the end of each financial year, certified copies of the audited consolidated financial statements of the Group and the profit and loss accounts and balance sheets of the Guarantor for that financial year, prepared in accordance with GAAP;

(b)
together with the audited consolidated financial statements referred to in Clause 9.2(a) above, a Compliance Certificate addressed to the Owner substantially in the form set out in Schedule 1 ([Form Of Compliance Certificate]) evidencing the compliance (or otherwise) of the Guarantor with the financial covenants in respect of the Group as set out in Clause 10 (Financial Covenants); and

(c)
promptly, such further information in the possession or control of the Guarantor regarding the financial condition and operations of the Group as the Owner may reasonably request.
9.3
Notification of default
The Guarantor shall:

(a)
notify the Owner of any Termination Event (and the steps, if any, being taken to remedy it) promptly upon its becoming aware of the occurrence of it, stating whether in its opinion such default is a Termination Event or a Potential Termination Event; and
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(b)
promptly upon a request by the Owner, supply to the Owner a certificate signed on behalf of the Guarantor by two of its directors or senior officers certifying that no Termination Event is continuing (or if a Termination Event is continuing, specifying the Termination Event and the steps, if any, being taken to remedy it).
9.4
Notification of claims, material litigation and other proceedings
The Guarantor shall, promptly upon becoming aware of the same, inform the Owner in writing of:

(a)
any claim, action, suit, proceedings or investigation against any Obligor in connection with Sanctions by any Sanctions Authority;

(b)
any Environmental Claim against any Obligor which is current, pending or threatened and of any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any Obligor; and

(c)
any litigation, arbitration, tax claim or administrative proceeding instituted or (to its knowledge) threatened and of any other occurrence of which it becomes aware which might have a Material Adverse Effect.
9.5
Provision of other information
The Guarantor shall promptly provide the Owner with such other information concerning itself and its affairs as the Owner may from time to time require.
9.6
Know your customer checks
The Guarantor shall promptly provide the Owner with such other information concerning itself and its affairs as the Owner may requested by the Owner in order for it to comply with any anti-money laundering or know your customer legislation, regulation or procedures applicable to it from time to time.
10.
FINANCIAL COVENANTS
10.1
Duration
The undertakings contained in this Clause 10 (Financial Covenants) shall remain in force from date of this Guarantee until the end of the Agreement Term.
10.2
Financial covenants
The Guarantor will procure that:

(a)
the Guarantor shall always maintain a minimum free cash or cash equivalent US$500,000.00 per vessel at consolidated level. For clarification purposes, any cash held under any minimum liquidity requirements and Debt Service Reserve Accounts with other financiers shall be taken into account for the testing of this covenant; and

(b)
the Leverage Ratio of the Guarantor (on a consolidated basis) shall not at any time exceed 75%.
“Leverage Ratio” means, the ratio (expressed as a percentage) of:

(i)
the Total Net Debt (i.e. the aggregate senior secured Financial Indebtedness of the Group, including 50% of Joint Venture vessels’ debt, as at such date minus the aggregate amount of all cash balances standing on such date to the credit of a bank account of a member of the Group); and
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(ii)
the aggregate Fair Market Value of all Fleet Vessels including 50% of Joint Venture vessels.
10.3
Testing of financial condition
The requirements contained in Clause 10.2 (Financial covenants) as to the financial condition of the Group shall be tested on the Delivery Date by reference to the most recent unaudited consolidated financial statements of the Group and thereafter quarterly as at 31 March, 30 June, 30 September and 31 December in each year in each case by reference to the unaudited consolidated financial statements or (as the case may be) the Compliance Certificate delivered to the Owner pursuant to Clause 9.2 (Provision of financial information).
11.
INDEMNITIES AND EXPENSES
11.1
Indemnity against costs
The Guarantor shall pay to the Owner on demand, and the Guarantor shall indemnify and keep the Owner indemnified against, all costs, charges, expenses, claims, liabilities, losses, duties and fees (including, but not limited to, legal fees and expenses on a full indemnity basis) and taxes thereon suffered or incurred by the Owner:

(a)
in the negotiation, preparation, printing, execution and registration of this Guarantee and the other Transaction Documents;

(b)
in collating, monitoring and otherwise attending to the relevant conditions precedent in the Charter;

(c)
in the enforcement or preservation or the attempted enforcement or preservation of any of the rights and powers of the Owner under this Guarantee and the other Transaction Documents;

(d)
in connection with any actual or proposed amendment of or supplement to this Guarantee or any other of the Transaction Documents, or with any request to the Owner to grant any consent or waiver in respect of any provision of this Guarantee or any other Transaction Document, whether or not it is given; and

(e)
arising out of any act or omission made by the Owner in good faith in connection with any of the matters dealt with in this Guarantee or any other Transaction Document.
11.2
Documentary taxes
The Guarantor shall promptly pay all stamp duty, registration and other similar taxes payable on or by reference to this Guarantee and the other Transaction Documents to which the Guarantor is (or is to become) a party and shall indemnify the Owner on the Owner’s written demand against any and all claims, expenses, liabilities and losses resulting from any failure or delay by the Guarantor to pay any such duty or tax.
11.3
Currency indemnity
If any sum due from the Guarantor under the Transaction Documents (a Sum), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the First Currency) in which that Sum is payable into another currency (the Second Currency) for the purpose of making or filing a claim or proof against the Guarantor or obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings, the Guarantor shall as an independent obligation, within 3 Business Days of demand, indemnify the Owner against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (a) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (b) the rate or rates of exchange available to the Owner at the time of its receipt of that Sum.
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11.4
Survival of indemnities
The indemnities contained in this Guarantee and the other Transaction Documents to which the Guarantor is (or is to become) a party shall continue in full force and effect after the full and final discharge of the Outstanding Indebtedness with respect to matters arising prior to such discharge.
12.
CHANGES TO THE PARTIES
12.1
No assignment or transfer by the Guarantor
The Guarantor may not assign or transfer all or any of its rights, benefits or obligations under this Guarantee.
12.2
Assignments and transfers by the Owner
The Owner may assign or transfer all or any portion of its rights, benefits or obligations under this Guarantee to any person to whom it assigns or transfers a corresponding proportion of its rights, benefits or obligations under and in accordance with the Charter.
12.3
Change of office
The Owner may at any time and from time to time change the office through which it performs its obligations under this Guarantee and the other Transaction Documents.
12.4
Delegation
The Owner may at any time and from time to time delegate any one or more of its rights, powers and/or obligations under this Guarantee and the other Transaction Documents to any person (provided that the Owner shall remain fully responsible for the exercise or performance of any rights, powers and/or obligations delegated by it).
12.5
Guarantor to assist
The Guarantor undertakes to do or to procure all such acts and things and to sign, execute and deliver or procure the signing, execution and delivery of all such instruments and documents as the Owner may reasonably require for the purpose of perfecting any such assignment or transfer as mentioned in Clause 13.2 (Assignments and transfers by the Owner).
12.6
Disclosure of information
The Owner may disclose to any potential assignee, transferee or sub-participant, or to any other party with whom it may propose to enter into contractual relations in connection with this Agreement or any other of the Transaction Documents, such information about the Guarantor and the other Obligors and their respective businesses, assets or financial condition as the Owner shall request from the Guarantor (Guarantors consent not to be unreasonably withheld).
13.
SET-OFF
The Owner may set off any matured obligation due from the Guarantor under this Guarantee or any other Transaction Document to which the Guarantor is at any time a party (to the extent beneficially owned by the Owner) against any matured obligation owed by the Owner to the Guarantor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Owner may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
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14.
MISCELLANEOUS
14.1
Time of essence
Time is of the essence as regards every obligation of the Guarantor under this Guarantee and the other Transaction Documents to which it is (or is to become) a party.
14.2
Remedies and waivers
No failure to exercise, nor any delay in exercising, on the part of the Owner, any right or remedy under the Transaction Documents shall operate as a waiver of any such right or remedy or constitute an election to affirm any of the Transaction Documents. No election to affirm any Transaction Document on the part of the Owner shall be effective unless it is in writing. No single or partial exercise of any such right or remedy shall prevent any further or other exercise of it or the exercise of any other right or remedy. The rights and remedies provided in each Transaction Document are cumulative and not exclusive of any rights or remedies provided by law.
14.3
Waivers and amendments to be in writing
Any waiver by the Owner of any provision of this Guarantee or any other Transaction Document, and any consent or approval given by the Owner under or in respect of this Guarantee or any other Transaction Document, shall only be effective if given in writing and then only strictly for the purpose and upon the terms for which it is given. This Guarantee may not be amended or varied orally but only by an instrument signed by the Parties.
14.4
Partial invalidity
If at any time one or more of the provisions of this Guarantee or any other of the Transaction Documents is or becomes invalid, illegal or unenforceable in any respect under any law by which it may be governed or affected, the validity, legality and enforceability of the remaining provisions shall not be in any way affected or impaired as a result.
14.5
Counterparts
This Guarantee may be executed in any number of counterparts and all such counterparts taken together shall be deemed to constitute one and the same instrument.
14.6
Conclusiveness of certificates
The certificate or determination of the Owner of a rate or amount under this Guarantee or any other Transaction Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates and is binding on the Guarantor.
14.7
Further assurances
The Guarantor shall, upon demand, and at its own expense, sign, perfect, do, execute and register all such further assurances, documents, acts and things as the Owner may require for:

(a)
perfecting or protecting this Guarantee or the Security;

(b)
the exercise by the Owner of any right, power or remedy vested in it under this Guarantee or any other Security Document to which the Guarantor is at any time a party; or

(c)
enforcing this Guarantee or the Security after it has become enforceable (and the Guarantor undertakes to allow its name to be used as and when required by the Owner for this purpose).
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15.
NOTICES
15.1
Communications in writing; addresses
All communications (which expression includes any notice, demand, request, consent or other communication) to be made under or in connection with this Guarantee shall be made in writing and unless otherwise stated may be made by fax or letter or, subject to Clause 16.3 (Electronic communication), electronic mail and be addressed:

(a)
in the case of the Owner, to it at:
c/o AVIC INTERNATIONAL LEASING CO., LTD.

Address:
18/F, CATIC Tower,
212 Jiang Ning Road,
Shanghai 200041, China
The People’s Republic of China

Telefax No.:
+86 21 5289 5389

Attn:
Mr. Wang Xing

Email:
wangxing@chinaleasing.net

(b)
in the case of the Guarantor, to it at:
TOP SHIPS INC.

Address:
1 Vas. Sofias & Meg. Alexandrou
Athens 15124 Greece

Telefax No:
+ 30 210 80 56 441

Telephone No:
+ 30 210 81 28 180

Attn:
Alexandros Tsirikos

Email:
atsirikos@topships.org
or to such other address or fax number or department or officer as is notified by one Party to the other under this Guarantee by not less than 5 Business Days’ notice.
15.2
Delivery

(a)
Subject to Clause 16.2(b) below, any communication or document made or delivered by one person to another under or in connection with this Guarantee will only be effective:

(i)
if by way of fax, when received in legible form;

(ii)
if by way of letter, when it has been left at the relevant address or 5 Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or

(iii)
if by way of electronic mail, then in accordance with Clause 16.3 (Electronic communication),
and, if a particular department or officer is specified as part of its address details provided under Clause 16.1 (Communications in writing; addresses), if addressed to that department or officer.
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(b)
Any communication or document to be made or delivered to the Owner will be effective only when actually received by the Owner and then only if it is expressly marked for the attention of the department or officer specified as part of its address details provided under Clause 16.1 (Communications in writing; addresses).

(c)
Any communication or document which becomes effective, in accordance with Clause 16.2(a) or Clause 16.2(b) above, on a non-working day or after 5:00 p.m. in the place of receipt shall be deemed only to become effective at the opening of business hours on the next working day in the place of receipt.
15.3
Electronic communication
Any communication to be made between the Parties under or in connection with this Guarantee may be made by electronic mail or other electronic means to the extent that the Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication and if the Parties:

(a)
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

(b)
notify each other of any change to their address or any other such information supplied by them by not less than 5 Business Days’ notice.
Any electronic communication made between the Parties will be effective only when actually received in readable form and in the case of any electronic communication made by the Guarantor to the Owner only if it is addressed in such a manner as the Owner shall specify for this purpose.
15.4
English language
All communications and documents to be given or delivered pursuant to or otherwise in relation to this Guarantee and the other Transaction Documents to which the Guarantor is (or is to become) a party shall be in the English language or be accompanied by a certified English translation.
16.
GOVERNING LAW AND JURISDICTION
16.1
This Guarantee and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.
16.2
Any dispute arising out of or in connection with this Deed (including a dispute regarding the existence, validity or termination of this Deed or any non-contractual obligation arising out of or in connection with this Deed) (a “Dispute”) shall be referred to and finally resolved by arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause 16 (Law and Jurisdiction). The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced.
16.3
The reference shall be to three arbitrators. A Party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other Party requiring the other Party to appoint its own arbitrator within fourteen (14) calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other Party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified. If the other Party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the Party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other Party, appoint its arbitrator as sole arbitrator and shall advise the other Party accordingly. The award of a sole arbitrator shall be binding on both Parties as
14


if he had been appointed by agreement. Nothing herein shall prevent the Parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator.
16.4
In cases where neither the claim nor any counterclaim exceeds the sum of US$50,000 (or such other sum as the Parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced. Where the reference is to three arbitrators the procedure for making appointments shall be in accordance with the procedure for full arbitration stated above.
16.5
The language of the arbitration shall be English.
17.
CONTRACTUAL RECOGNITION OF BAIL-IN
17.1
Notwithstanding any other term of any Transaction Document or any other agreement, arrangement or understanding between the parties to a Transaction Document, each Party acknowledges and accepts that any liability of any party to a Transaction Document under or in connection with the Transaction 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 Transaction Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.
This Guarantee has been executed and delivered as a deed on the date stated at the beginning of this Guarantee.
15



SCHEDULE 1
FORM OF COMPLIANCE CERTIFICATE
To:
GREAT MONICA LIMITED
Trust Company Complex
Ajeltake Road
Ajeltake Island
Majuro MH96960
The Republic of the Marshall Islands
Date: [●] 20[●]
Dear Sirs
Compliance Certificate – L$]L€]L●] Bareboat Charter dated 30 September 2019
We refer to:
(a)
the bareboat charter dated 30 September 2019 (as amended and/or supplemented from time to time, the Charter) made between (1) yourselves as Owner and (2) Santa Monica Marine Inc. as Charterer, pursuant to which the Owner agreed to bareboat charter the Vessel to the Charterer; and
(b)
the deed of guarantee and indemnity dated [●] 2019 (the Guarantee) made between (1) ourselves as Guarantor and (2) yourselves as Owner under which we have guaranteed the performance by the Charterer of its obligations under the Bareboat Charter.
Expressions defined in the Bareboat Charter or the Guarantee shall have the same meanings when used in this certificate.
This certificate is a Compliance Certificate which is rendered to you pursuant to Clause 9.2 (Provision of financial information) of the Guarantee.
We hereby certify that:
1.
Attached to this certificate are the latest audited consolidated financial statements of the Group and the profit and loss accounts and balance sheets for the financial year ending on [●] 201[●], prepared in accordance with GAAP.
2.
Set out below are the respective amounts, in [Dollars][Euro], of [●], [●], [●], [●] and [●]of the Group as at [●] 201[●]:
[●] [$][€][●]
[●] [$][€][●]
[●] [$][€][●]
[●] [$][€][●]
[●] [$][€][●]

3.
Accordingly, as at the date of this certificate, the financial covenants set out in Clause 10.2 (Financial covenants) of the Guarantee [are][are not] complied with, in that as at [●] 201[●]:

(i)
the aggregate amount of cash is $[●] per vessel at consolidated level;
(ii) the Leveraged Ratio (on a consolidated basis) does not exceed 75%.
[or, as the case may be, specify in what respect any of the financial covenants are not complied with]
16


4. As at [●] 201[●] no [Termination Event][Default] has occurred and is continuing.
[or, specify/identify any [Termination Event][Default]]
Yours faithfully

For and on behalf of
 
TOP SHIPS INC.
 

17



EXECUTION PAGES
THE GUARANTOR
EXECUTED as a DEED
)
Signature in the name of the company
by TOP SHIPS INC.
)
TOP SHIPS INC.
a company incorporated in the Republic of
)
 
the Marshall Islands
)
 
acting by
)
 
 
)
 
who, in accordance with the laws of the
)
 
Republic of the Marshall Islands, is acting
)
 
under the authority of
)
 
the company as [authorised
   
signatory][attorney-in-fact]
   
in the presence of:
 
[Authorised signatory][Attorney-in-fact]
     

Signature of witness:
Name of witness:
Occupation of witness:
Address of witness:
THE OWNER
EXECUTED as a DEED
)
Signature in the name of the company
by GREAT MONICA LIMITED
)
GREAT MONICA LIMITED
a company incorporated in the Republic of
)
 
the Marshall Islands
)
 
acting by
)
 
 
)
 
who, in accordance with the laws of the
)
 
Republic of the Marshall Islands, is acting
)
 
under the authority of
)
 
the company as [authorised
   
signatory][attorney-in-fact]
   
in the presence of:
 
[Authorised signatory][Attorney-in-fact]
     
Signature of witness:
Name of witness:
Occupation of witness:
Address of witness:


18
Exhibit 4.55































CONTENTS
 
   
Page
     
32.
Definitions
1
33.
Interpretations
13
34.
Background
15
35.
Newbuilding construction
15
36.
Delivery
16
37.
Disputes under the shipbuilding contract
17
38.
Terms of delivery
19
39.
Cancellation
20
40.
Conditions precedent
21
41.
Bunkers and luboils
23
42.
Further maintenance and operation
24
43.
Structural changes and alterations
24
44.
Hire
25
45.
Insurance
28
46.
Redelivery
31
47.
Redelivery conditions
32
48.
Owners’ mortgage
33
49.
Diver’s inspection at redelivery
34
50.
Transport documents
34
51.
Charterers’ representations and warranties
34
52.
Charterers’ undertakings
38
53.
Earnings Account
43
54.
Termination Events
43
55.
[Not Used]
48
56.
Name of Vessel
48
57.
Charter Period
49
58.
Transaction fees
49
59.
Early Termination, Purchase Option, Purchase Obligation and transfer of title, partial prepayment
49
60.
Pre-delivery Sales Clause
51
61.
Total Loss
51
62.
Additional payment obligations
52
63.
Stamp duties and taxes
52
64.
Operational notifiable events
52
65.
Further indemnities
53
66.
Set-off
54
67.
Further assurances and undertakings
55



68.
Cumulative rights
55
69.
Day count convention
55
70.
No waiver
55
71.
Entire agreement
55
72.
Invalidity
55
73.
English language
55
74.
No partnership
56
75.
Notices
56
76.
Conflicts
56
77.
Survival of Charterers’ obligations
57
78.
Counterparts
57
79.
Confidentiality
57
80.
Third Parties Act
57
81.
Law and jurisdiction
57
82.
Conditions subsequent
58
83.
FATCA
59
     
SCHEDULE 1 FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE
61
SCHEDULE 2 FORM OF TITLE TRANSFER PROTOCOL OF DELIVERY AND ACCEPTANCE
62
SCHEDULE 3 HIRE PAYMENT SCHEDULE
63
SCHEDULE 4 SCHEDULE OF PURCHASE OPTION PRICE (EXCLUDING HIRE DUE)
68
SIGNATURE PAGE
69



ADDITIONAL CLAUSES
TO BAREBOAT CHARTER FOR
THE MR TANKER
WITH BUILDER’S HULL NO. 2749
32.          Definitions
In this Charter:
Account Bank” means such bank or financial institution as selected or designated by the Owners from time to time.
Account Charge” means the account security deed in respect of the Earnings Account and all amounts from time to time standing to the credit to the Earnings Account from the Charterers in favour of the Owners.
Accrued Charterhire” has the meaning given to it in Clause 44.1.
Actual Delivery Date” means the date of delivery of the Vessel by the Owners to the Charterers under this Charter.
Affiliate” means, in relation to any entity, a Subsidiary of that entity, a Holding Company of that entity or any other Subsidiary of that Holding Company.
Agreement Term” means the period commencing on the date of this Charter and terminating on the expiration of the Charter Period or such earlier or later date on which all money of any nature owed by the Obligors to the Owners under the Transaction Documents or otherwise in connection with the Vessel have been paid in full to the Owners and no obligations of the Obligors of any nature to the Owners or otherwise in connection with the Transaction Documents or with the Vessel remain unperformed or undischarged.
AML Laws” means as to any person and in relation to money laundering or terrorism, the constitutional or organisational documents of such person, and any treaty, law (including the common law), statute, ordinance, code, rule, regulation, guidelines, licence, permit requirement, order or determination of an arbitrator or a court or other governmental authority and the interpretation or administration thereof, in each case applicable to or binding upon such person or any of its property or to which such person or any of its property is subject.
Applicable Rate” in respect of an Applicable Rate Period, the LIBOR notified by the Owners on the relevant Applicable Rate Determination Date to be (which is expressed as a percentage rate per annum) the rate which applies to all Unpaid Sums (including any Hire) for that Applicable Rate Period.
Applicable Rate Determination Date” means, in respect of an Applicable Rate Period, the day falling five (5) Business Days before the first day of that Applicable Rate Period.
Applicable Rate Period” means each Hire Period, with the first Applicable Rate Period commencing on the first Hire Payment Date.
Approved Broker” means each of Arrow Sale & Purchase (UK) Limited, Braemar ACM Shipbroking, Clarkson Platou, Maersk Broker A/S, Fearnley, SSY, Howe Robinson and any other reputable and independent ship brokers acceptable to the Owners (such acceptance not to be unreasonably withheld or delayed) and appointed by the Owners.



Approved Manager” in relation to the Vessel, means (i) Central Mare in respect of technical management and (ii) Central Shipping Inc. in respect of commercial management or any other management company reasonably acceptable to the Owners (which acceptance shall not be unreasonably delayed) and appointed by the Charterers.
Assumed Owners’ Cost” means US Dollars thirty million one hundred thousand (US$30,100,000).
Balloon Amount” has the meaning given to it in Schedule 3 (Hire Payment Schedule).
Break Costs” means all costs, reasonable losses, premiums or penalties incurred by the Owners as a result of the receipt by the Owners of any payment under or in relation to the Transaction Documents on a day other than the due date for payment of the sum in question.
Builders” means Hyundai Mipo Dockyard Co., Ltd., a company incorporated and existing under the laws of the Republic of Korea.
Building Contract” means the agreement dated 2 December 2018 between the Builder and the Charterers in connection with the construction of the Vessel together with all schedules, addendums and appendices thereto.
Business Day” means a day (other than a Saturday or Sunday) on which banks and financial markets are open for business in Shanghai, Hong Kong and New York and on a day when LIBOR is calculated, London.
Cancellation Date” means 30 June 2020 (for the avoidance of doubt, as the same may be extended from time to time).
Change of Control” means, in relation to the Charterers, the Charterers ceasing to be in the ownership and Control of (either directly or indirectly) the Pistiolis Family either directly or via the Charter Guarantor or, in relation to the Charterers or the Charter Guarantor, any circumstances in which Control of the Charterers or the Charter Guarantor passes from the Pistiolis Family who are in Control of the Charterers and the Charter Guarantor to a person or persons who is not or are not in Control of the Charterer and the Charter Guarantor as at the date of this Charter.
Charter Group” means the Charterers, and the Charter Guarantor, including all of their respective Holding Company (if any) and Subsidiaries from time to time, and a “member of the Charter Group” means any one of them.
Charter Guarantee” means the guarantee made or to be made by the Charter Guarantor in favour of the Owners in respect of the Charterers’ obligations under this Charter.
Charter Guarantor” means TOP SHIPS INC.
Charter Period” means, subject to Clauses 44.3(l) (Hire), 54 (Termination Events), 60 (Sale of the Vessel by the Owners) and 61 (Total Loss), the period of one hundred and twenty (120) months from the Actual Delivery Date.
Charterers’ Assignment” means the deed of assignment executed or to be executed (as the case may be) by the Charterers in favour of the Owners in relation to certain of the Charterers’ rights and interest in and to (amongst other things) the (a) Earnings, (b) Insurances, (c) Requisition Compensation and (d) the Sub-charter.
Classification Society” means the vessel classification society referred to in Box 10 (Classification Society) of this Charter, or DNV GL, Lloyd’s Register of Shipping (LR), Bureau Veritas (BV), ABS, Korean Register of Shipping (KR), China Classification Society (CCS) or such other reputable classification society which the Owners may approve from time to time.
2



Collateral Charter” means the bareboat charterparty entered or to be entered into between the Collateral Charterer and the Collateral Owner in respect of the chartering of the MR Tanker with Hull No.2749.
Collateral Charterer” means Santa Catalina Inc., a company incorporated under the laws of the Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro MH 96960, the Republic of the Marshall Islands.
Collateral Obligors” means each Obligor as defined in the Collateral Transaction Documents.
Collateral Owner” means Great Catalina Limited, a company incorporated under the laws of Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro MH 96960, the Republic of the Marshall Islands,.
Collateral Transaction Documents” means the Transaction Documents as defined in the Collateral Charter.
Contract Price” has the meaning given to it in the Novation Agreement.
Control” means, in respect of the Charterers and the Charter Guarantor, the power of a person to secure that the affairs of the Charterers and the Charter Guarantor are conducted in accordance with the wishes of that person:

(a)
by means of the holding of shares, or the possession of voting powers in or in relation to the Charterers and the Charter Guarantor; or

(b)
as a result of any powers conferred by the articles of association or any other document regulating the Charterers and the Charter Guarantor.
Cost Balance” means at any relevant time during the Agreement Term, the amount set out under the column titled “Cost Balance” in Schedule 3 corresponding to the Hire Payment Date falling on or immediately preceding such date, which may be revised, updated and replaced from time to time in accordance with Clause 44.3(b) of this Charter.
Default Termination” means a termination of the Charter Period pursuant to the provisions of Clause 54 (Termination Events).
Delivery Conditions” means the conditions set out in Clause 40(b) (Delivery Conditions).
Delivery Date” has the meaning given to it in Clause 36.4.
Disruption Event” means either or both of:

(a)
a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in order for the transactions contemplated by the Transaction Documents to be carried out which disruption is not caused by, and is beyond the control of, any of the Parties; or

(b)
the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:

(i)
from performing its payment obligations under the Transaction Documents; or

(ii)
from communicating with other Parties in accordance with the terms of the Transaction Documents,
3



and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
Earnings” means all hires, freights, pool income and other sums payable to or for the account of the Charterers in respect of the Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of the Vessel.
Earnings Account” means the US Dollar account in the name of the Charterers opened or to be opened with the Account Bank, and includes any sub-account thereof and such account which is designated by the Owners as the earnings account for the purposes of this Charter.
Effective Time” has the meaning given to it in the Novation Agreement.
Environmental Approvals” means any present or future permit, licence, approval, ruling, variance, exemption or other authorisation required under the applicable Environmental Law.
Environmental Claim” means any claim, proceeding or investigation by any person in respect of any Environmental Law.
Environmental Incident” means:

(a)
any release, emission, spill or discharge from the Vessel or into or upon the air, sea, land or soils (including the seabed) or surface water of Environmentally Sensitive Material within or from the Vessel; or

(b)
any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water from a vessel other than the Vessel and which involves a collision between the Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Vessel is actually or potentially liable to be arrested, attached, detained or injuncted and/or the Vessel and/or any Obligor and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

(c)
any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water otherwise than from the Vessel and in connection with which the Vessel is actually or potentially liable to be arrested and/or where any Obligor and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action, other than in accordance with an Environmental Approval.
Environmentally Sensitive Material” means (i) oil and oil products and (ii) any other waste, pollutant, contaminant or other substance (including any liquid, solid, gas, ion, living organism or noise) that may be harmful to human health or other life or the environment or a nuisance to any person or that may make the enjoyment, ownership or other territorial control of any affected land, property or waters more costly for such person to a material degree.
Environmental Law” means any applicable law and regulation in any jurisdiction in which any Obligor conducts business which relates to the pollution or protection of the environment or harm to or the protection of human health or the health of animals or plants.
Environmental Permits” means any authorisation and the filing of any notification, report or assessment required under any Environmental Law for the operation of the business of any Obligor.
4



“Finance Document” means any facility agreement, security document, fee letter and any other document designated as such by the Finance Parties and the Owners and which have been or may be (as the case may be) entered into between the Finance Parties and the Owners for the purpose of, among other things, financing or (as the case may be) refinancing all or any part of the Cost Balance.
“Finance Party” means any bank or financial institution which is or will be party to a Finance Document (other than the Owners and other entities which may have agreed or be intended as debtors and/or obligors thereunder) and “Finance Parties” means two or more of them.
Financial Indebtedness” means any obligation for the payment or repayment of money, whether present or future, actual or contingent, in respect of:

(a)
moneys borrowed;

(b)
any acceptance credit;

(c)
any bond, note, debenture, loan stock or similar instrument;

(d)
any finance, capital lease or operating leases for financing purposes;

(e)
receivables sold or discounted (other than on a non-recourse basis);

(f)
deferred payments for assets or services;

(g)
any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);

(h)
any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing according to the relevant account principles;

(i)
any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

(j)
the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in (a) to (i).
Fixed Hire “ means in respect of each Hire Payment Date, the figure set out in the column ‘Fixed Hire’ in the Hire Payment Schedule against such Hire Payment Date, which may be revised, updated and replaced from time to time in accordance with Clause 44.3(b) of this Charter and in relation to the 120th Payment Date, an amount equal to the Balloon Amount.
GAAP” means generally accepted accounting principles in the United States of America.
Handling Fee” has the meaning given to it in Clause 58.2 (Handling Fee).
Hire Payment Date” means the 10th day of each calendar month (or if such date is not a Business Day, the immediately following Business Day) during each and any Hire Period, save that:

(a)
the first Hire Payment Date shall fall on the Actual Delivery Date; and

(b)
the second Hire Payment Date shall fall on the date which is the 10th day of the next calendar month (or if such date is not a Business Day, the immediately following Business Day) after the calendar month during which the Actual Delivery Date falls.
Hire Payment Schedule” means Schedule 3.
5



Hire Period” means (i) in respect of any Hire Payment Date (other than the last Hire Payment Date), the period commencing on such Hire Payment Date and ending on the next succeeding Hire Payment Date; and (ii) in respect of the last Hire Payment Date, the period commencing on such Hire Payment Date and ending on the last day of the Charter Period.
Holding Company” means, in relation to any entity, any other entity in respect of which it is a Subsidiary.
IAPPC” means a valid international air pollution prevention certificate for the Vessel issued under Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as modified in 1978 and 1997).
Indemnitee” has the meaning given to such term in Clause 65 (Further indemnities).
Initial Conditions” means the conditions set out in Clause 40(a) (Initial Conditions).
Initial Sub-Charter” means the time charter party dated 14 January 2019 between the Charterers and the Initial Sub-Charterer.
Initial Sub-Charterer” means Trafigura Logistics Maritime Pte Ltd.
Innocent Owners’ Interest Insurances” means all policies and contracts of innocent owners’ interest insurance from time to time taken out by the Owners in relation to the Vessel.
Insurances” means all policies and contracts of insurance which are from time to time taken out or entered into by the Charterers in respect of the Vessel or her Earnings or otherwise in connection with the Vessel or her Earnings, with the exception of Loss of Hire and Contingent Liability.
Interpolated Screen Rate” means, in relation to the LIBOR for the Cost Balance or any part of it, the rate which results from interpolating on a linear basis between:

(a)
the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than that relevant period; and

(b)
the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds that relevant period,
each at or about 11:00a.m. London time on the Quotation Day.
ISM Code” means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation Assembly as Resolutions A.741 (18) (as amended by MSC 104 (73)) and A.913(22) (superseding Resolution A.788 (19)), as the same may be amended, supplemented or superseded from time to time (and the terms “safety management system”, “Safety Management Certificate” and “Document of Compliance” have the same meanings as are given to them in the ISM Code).
ISM Company” means, at any given time, the company responsible for the Vessel’s compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.
ISPS Code” means the International Ship and Port Facility Security Code adopted by the International Maritime Organisation (as the same may be amended, supplemented or superseded from time to time).
ISPS Company” means, at any given time, the company responsible for the Vessel’s compliance with the ISPS Code.
ISSC” means a valid international ship security certificate for the Vessel issued under the ISPS Code.
6



LIBOR” means the applicable Screen Rate as of the Specified Time for USD and for a period of one month for any Unpaid Sum (including any Fixed Hire) and if that rate is less than zero, LIBOR will be deemed to be zero.
Major Casualty Amount” means seven hundred and fifty thousand US Dollars (US$750,000) or the equivalent in any other currency or currencies.
Management Agreement” means, in relation to the Vessel, the technical and/or commercial ship management agreement and/or layup management agreement executed or to be executed (as the case may be) between the relevant Approved Manager and the Charterers.
Manager’s Undertaking” means the deed of undertaking executed or to be executed by the relevant Approved Manager in favour of the Owners.
Market Value” means, in relation to the Vessel, the value as determined in accordance with Clause 52.30 (Valuation of Market Value).
MARPOL” means the International Convention for the Prevention of Pollution from Ships adopted by the International Maritime Organisation (as the same may be amended, supplemented or superseded from time to time).
Material Adverse Effect” means a material adverse change in, or a material adverse effect on:

(a)
the business or financial condition of the Charter Group taken as a whole;

(b)
the ability of the Charterers to perform and comply with their payment obligations under any Transaction Document or Project Document to which they are a party;

(c)
the validity, legality or enforceability of this Charter, any other Transaction Document or any Project Document; or
which adversely affects the ability of the relevant Obligors to perform their obligations under the Transaction Documents or the Project Documents to which they are a party.
Mortgagees’ Interest Insurances” means all policies and contracts of mortgagees’ interest insurance, mortgagees’ additional perils (oil pollution) insurance and any other insurance from time to time taken out by any Finance Party in relation to the Vessel.
Necessary Authorisations” means all Authorisations of any person including any government or other regulatory authority required by applicable law to enable it to:

(a)
lawfully enter into and perform its obligations under the Transaction Documents and the Project Documents to which it is party;

(b)
ensure the legality, validity, enforceability or admissibility in evidence in England and, if different, its jurisdiction of incorporation, of such Transaction Documents and Project Documents to which it is party; and

(c)
carry on its business from time to time.
Novated Building Contract” means the Building Contract as novated and amended by the Novation Agreement.
Novation Agreement” means the document so entitled made between the Owners, the Charterers and the Builder dated on or about the date hereof.
Obligor” means each of the Charterers, the Charter Guarantor, and any person within the Charterer Group that may be party to a Transaction Document from time to time (other than the Owners and the Account Bank).
7



Original Buyer” has the meaning given to it in the Novation Agreement.
Outstanding Indebtedness” means liabilities which:

(a)
the Charterers has, at the date of this Charter or at any later time or times, to the Owners under or in connection with the Transaction Documents or any judgment relating to the Transaction Documents; and

(b)
the Collateral Charterer has, at the date of this Charter or at any later time or times, to the Collateral Owner under or in connection with the Transaction Documents (as defined under the Collateral Charter) or any judgment relating to the Transaction Documents (as defined under the Collateral Charter),
and for this purpose, there shall be disregarded any total or partial discharge of these liabilities, or variation of their terms, which is effected by, or in connection with, any bankruptcy, liquidation, arrangement or other procedure under the insolvency laws of any country.
Owners Cost” has the meaning given to it in the Novation Agreement.
Owners’ Cost Payment Date” means the date on which the Owners’ Cost is paid by the Owners (as buyer) to the Charterers (as seller) in accordance with the terms of the Novation Agreement.
Paid Instalments” means, as at a relevant date, the aggregate pre-delivery instalments of the Cost Balance and any other monies paid by the Owners to the Charterers under the Novation Agreement at that date.
Party” means a party to this Charter.
PDA” means the protocol of delivery and acceptance in relation to the Vessel to be executed between the Owners and the Charterers, substantially in the form contained in Schedule 1 (Form of Protocol of Delivery and Acceptance) hereto.
Permitted Security Interest” means:

(a)
any Security Interest created or to be created in accordance with the Security Documents;

(b)
liens for unpaid master’s and crew’s wages in accordance with first class ship ownership and management practice;

(c)
liens for salvage;

(d)
liens for master’s disbursements incurred in the ordinary course of trading;

(e)
any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel and not as a result of any default or omission by the Charterers, provided such liens do not secure amounts more than 21 days overdue (unless the overdue amount is being contested in good faith by appropriate steps);

(f)
any Security Interest arising by operation of law in respect of Taxes which are not overdue for payment or which are being contested in good faith by appropriate steps and in respect of which appropriate reserves have been made;

(g)
any liens securing obligations incurred in the ordinary course of trading and/or operating the Vessel and not more than 21 days overdue; and

(h)
any Security Interest which has the prior written approval of the Owners.
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Pistiolis Family” means Evangelos Pistiolis and his immediate family members.
Potential Termination Event” means an event or circumstance which, with the giving of any notice, the lapse of time, a determination of the Owners or any combination of the foregoing is a Termination Event.
Pre-Approved Flag” means the Marshall Islands or other flag approved by the Owners.
Pre-delivery Termination Sum” means the aggregate sum of all of the Owners’ documented losses as a result of the early termination of this Charter in accordance with Clause 54 (Termination Events) as a result of the occurrence of a Termination Event which is continuing prior to the Delivery Date, which both Parties acknowledge as a genuine and reasonable pre-estimate of the Owners’ losses in the event of such termination and does not impose consequences on the Charterers which are out of proportion to their legitimate interests in the event of such termination and such amount is to be calculated as being the aggregate of the following:

(a)
the Paid Instalments together with any other sums the Owners have paid to or owe to the Builder due to the early termination of this Charter, or the repudiation or termination of the Shipbuilding Contract, or for other reasons caused by the Charterers, together with interest accrued thereon pursuant to Clause 44 (i) up to the date of receipt by the Owners of the Pre-delivery Termination Sum;

(b)
any and all evidenced and documented direct costs, losses, liabilities and expenses incurred or suffered by the Owners as a result of the early termination of this Charter prior to the Delivery Date;

(c)
any properly documented Break Costs incurred (or payable) by the Owners under the Financing Documents, with the exclusion of any SWAP related costs; and

(d)
any sums other than Fixed Hire, due and payable, but unpaid, under this Charter (including for the avoidance of doubt Pre-Delivery Interest) together with interest accrued thereon pursuant to Clause 44 (i) up to the date of receipt by the Owners of the Pre- delivery Termination Sum.
and for the avoidance of doubt there shall be no double counting of any amount that may be counted under any sub-clause (a) to (d) by also counting it as being included in any other sub-clause;
Project Documents” means the Sub-Charter and the Management Agreements;
“Purchase Obligation Date” means the date on which the Owners shall transfer the legal and beneficial interest in the Vessel to the Charterers, and the Charterers shall purchase the Vessel, being the last day of the Charter Period.
“Purchase Obligation Price” means an amount equal to the aggregate as of the Purchase Obligation Date of (i) $100, (ii) the Cost Balance as at the last day of the Agreement Term, (iii) any Break Costs, applicable only if charter is extended or terminated pursuant to Clauses (Hire), (Termination Events), (Sale of the Vessel by the Owners) and (Total Loss) and (iv) all other amounts payable under this Charter and the other Transaction Documents together with any applicable interest thereon.
Purchase Option Price” means the amount due and payable by the Charterers to the Owners pursuant to Clause 59 (Purchase option and transfer of title), being the aggregate of:

(a)
the estimated amount corresponding to the Hire Payment Date in the “Purchase Option Price” column as referenced in Schedule 4 (Schedule of Purchase Option Price) to this Charter, but such amount to be adjusted, revised, updated and replaced from time to time in accordance with the terms of this Charter and confirmed by the Owners (and agreed to by the Charterers) by reference to, among others, the figure to be provided
9



by the Owners upon the fixing of the delivery or closing date in accordance with such early purchase of the Vessel (the “Amount”); and

(b)
all Unpaid Sums due and payable together with interest accrued thereon pursuant to paragraph (j) of Clause 44 (Hire) from the due date for payment thereof up to the date of actual payment,
together with any applicable and documented Break Costs under the financing entered into by Owners, with the exclusion of any SWAP related costs.
Quotation Day” means in relation to any period for which a Variable Hire or an interest rate is to be determined, the day falling five (5) Business Days before the first day of that period.
Reference Banks” shall mean the principal London offices of Citibank N.A., HSBC Bank Plc., JP Morgan Chase Bank, N.A., or such other banks as the Owners may nominate in consultation with the Charterers.
Reference Bank Rate” means the arithmetic mean of the rates (rounded upwards to four (4) decimal places) as supplied to the Owners at their request by the Reference Banks:

(a)
(other than where paragraph (b) below applies) as the rate at which the relevant Reference Bank could borrow funds in the London interbank market in US Dollars for the relevant period, were it to do so by asking for and then accepting interbank offers for deposits in reasonable market size in that currency and for that period; or

(b)
if different, as the rate (if any and applied to the relevant Reference Bank and the relevant period) which contributors to the Screen Rate are asked to submit to the relevant administrator.
Refund Guarantee” has the meaning given to it in the Novation Agreement.
Refund Guarantor” has the meaning given to it in the Novation Agreement.
Refund Guarantee Assignment” has the meaning given to it in the Novation Agreement.
Requisition Compensation” means all compensation or other money which may from time to time be payable to the Charterers as a result of the Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).
Restricted Party” means a person or entity that is (i) listed on, or owned or controlled by a person listed on, or acting on behalf of a person listed on, any Sanctions List; (ii) a national of, located in, incorporated under the laws of, or owned or (directly or indirectly) controlled by, or acting on behalf of, a person located in or organised under the laws of a country or territory that is the target of country-wide or territory-wide Sanctions; or (iii) otherwise a target of Sanctions (“target of Sanctions” signifying a person with whom a US person or other national of Sanctions Authority would be prohibited or restricted by law from engaging in trade, business or other activities).
Sales Clause Termination Sum” means the remaining Handling Fee, plus commitment fee and all third party legal fees as set out in Clause 58.1 (Commitment Fee).
Sanctions” means the economic sanction laws, regulations, embargoes or restrictive measures administered, enacted or enforced by: (i) the United States government; (ii) the United Nations; (iii) the European Union or its Member States, including, without limitation, the United Kingdom; (iv) the People’s Republic of China; or (v) the respective governmental institutions and agencies of any of the foregoing, including, without limitation, the Office of Foreign Assets Control of the US Department of Treasury (“OFAC”), the United States Department of State and Her Majesty’s Treasury (“HMT”); (together, the “Sanctions Authorities”).
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Sanctions List” means the “Specially Designated Nationals and Blocked Persons” list maintained by the OFAC, the Consolidated List of Financial Sanctions Targets and the Investment Ban List maintained by HMT, or any similar list maintained by, or public announcement of Sanctions designation made by, any of the Sanctions Authorities.
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 US Dollars for 1-month period displayed (before any correction, recalculation or republication by the administrator) on page LIBOR01 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 Owner may specify another page or service displaying the relevant rate.
Security Interest” means a mortgage, charge, assignment, pledge, lien, or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
Security Documents” means, in relation to the Vessel, the following:

(a)
the Charter Guarantee;

(b)
the Charterers’ Assignment;

(c)
the Managers’ Undertaking;

(d)
the Account Charge;

(e)
the Shares Pledge;

(f)
the Refund Guarantee Assignment; and

(g)
any other document that may at any time be executed by any person creating, evidencing or perfecting any Security Interest to secure all or part of the Obligors’ obligations under or in connection with the Transaction Documents,
and “Security Document” means any one of them.
Settlement Date” means, following a Total Loss of the Vessel, the earliest of:

(a)
the date which falls 180 days after the date of occurrence of the Total Loss or, if such date is not a Business Day, the immediately preceding Business Day; and

(b)
the date on which the Owners receive the Total Loss Proceeds in respect of the Total Loss.
SMC” means a valid safety management certificate issued for the Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.
Specified Time” means:

(a)
in connection with determining the Screen Rate, 11:00 a.m. (London time) on the Quotation Day; or

(b)
in connection with determining the Reference Bank Rate, noon (London time) on the Quotation Day.
Sub-charter” means the Initial Sub-Charter or any other sub-charter where approval is needed in accordance with Clause 51.
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Sub-charterers” means the Initial Sub-Charterer or any other Sub-Charterer under a Sub-charter.
Subsidiary” shall have its meaning as defined in the Companies Ordinance (Cap. 622 of the Laws of Hong Kong).
Tax” or “tax” means any present and future tax (including, without limitation, value added tax, consumption tax or any other tax in respect of added value or any income), levy, impost, duty or other charge or withholding of any nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and “Taxes”, “taxes”, “Taxation” and “taxation” shall be construed accordingly.
Termination” means the termination at any time of the chartering of the Vessel under this Charter.
Termination Event” means each of the events specified in paragraph 54.1 of Clause 54 (Termination Events).
Termination Notice” has the meaning given to such term in paragraph (l) of Clause 44 (Hire) and paragraph 54.3 of Clause 54 (Termination Events).
Termination Payment Date” means:

(a)
in respect of a termination of this Charter in accordance with paragraph (l) of Clause 44 (Hire), the date specified in the Termination Notice served on the Charterers pursuant to that Clause having regard to the various remedy periods;

(b)
in respect of a Default Termination, the date specified in the Termination Notice served on the Charterers pursuant to paragraph 54.3 of Clause 54 (Termination Events) in respect of such Default Termination;

(c)
in respect of a Total Loss Termination, the Settlement Date in respect of the Total Loss which gives rise to such Total Loss Termination.
Termination Sum” means the aggregate of:-

(a)
all Fixed Hire due and payable but unpaid under this Charter up to and including the Termination Payment Date (if the Termination Payment Date is not a Hire Payment Date, the Fixed Hire payable shall be reduced pro-rata for the days between preceding Hire Payment Date and the Termination Payment Date;

(b)
the amount of Cost Balance as at the relevant Termination Payment Date;

(c)
all liabilities, costs and expenses (including, without limitation, legal fees) so incurred directly in relation to repossessing the vessel;

(d)
any costs and expenses, relating to Owner’s finance, incurred or suffered by the Owners as a direct result of the Termination Notice.

(e)
any and all Break Costs (excluding swap related expenses); and

(f)
any sums (other than hire) unpaid under this Charter and if such sums due and payable but unpaid then together with interest accrued thereon up to and including the Termination Payment Date.
Third Parties Act” means the Contracts (Rights of Third Parties) Act 1999.
Title Transfer PDA” means the protocol of delivery and acceptance in relation to the Vessel to be executed between the Owners and the Charterers, substantially in the form contained in Schedule 2 (Form of Title Transfer Protocol of Delivery and Acceptance) hereto.
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Total Loss” means during the Charter Period:

(a)
actual or constructive or compromised or agreed or arranged total loss of the Vessel;

(b)
the requisition for title or compulsory acquisition of the Vessel by any government or other competent authority (other than by way of requisition for hire);

(c)
the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture of the Vessel (not falling within paragraph (b) of this definition), unless the Vessel is released and returned to the possession of the Owners or the Charterers within ninety (90) days after the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture in question,
and for the purpose of this Charter, (i) an actual Total Loss of the Vessel shall be deemed to have occurred at the date and time when the Vessel was lost but if the date of the loss is unknown the actual Total Loss shall be deemed to have occurred on the date on which the Vessel was last reported, (ii) a constructive Total Loss shall be deemed to have occurred at the date and time at which a notice of abandonment of the Vessel is given to the insurers of the Vessel and (iii) a compromised, agreed or arranged Total Loss shall be deemed to have occurred on the date of the relevant compromise, agreement or arrangement.
Total Loss Proceeds” means the proceeds of the Insurances or any other compensation of any description in respect of a Total Loss in respect of a Total Loss.
Total Loss Termination” means a termination of the Charter Period pursuant to the provisions of paragraph 61.1 of Clause 61 (Total Loss).
Transaction Documents” means, together, this Charter, the Sub-charter, the Novation Agreement, the Security Documents, the Collateral Transaction Documents and such other documents as maybe designated as such by the Owners from time to time.
Unpaid Sum” means any sum due and payable but unpaid by any Obligor under the Transaction Documents.
US Dollars”, “Dollars”, “USD”, “US$” and “$” each means available and freely transferable and convertible funds in lawful currency of the United States of America.
US Tax Obligor” means:

(a)
an Obligor which is resident for tax purposes in the United States of America; or

(b)
an Obligor some or all of whose payments under the Transaction Documents to which it is a party are from sources within the United States for US federal income tax purposes.
Valuation Report” means, in relation to the Vessel, a valuation report of the Vessel addressed to the Owners from an Approved Broker.
Vessel” means the 50,000 DWT class product / chemical Tanker currently bearing Builders’ hull number 2749 as more particularly described in Boxes 5 (Vessel’s name, call sign and flag) to 10 (Classification Society) of this Charter.
33.
INTERPRETATIONS

(a)
In this Charter, unless the context otherwise requires, any reference to:

(i)
this Charter include the Schedules hereto and references to Clauses and Schedules are, unless otherwise specified, references to Clauses of and Schedules to this Charter and, in the case of a Schedule, to such Schedule as incorporated in this Charter as substituted from time to time;
13




(ii)
any statutory or other legislative provision shall be construed as including any statutory or legislative modification or re-enactment thereof, or any substitution therefor;

(iii)
the term “Vessel” includes any part of the Vessel;

(iv)
the “Owners”, the “Charterers”, any “Obligor”, “Sub-charterer” or any other person include any of their respective successors, permitted assignees and permitted transferees;

(v)
any agreement, instrument or document include such agreement, instrument or document as the same may from time to time be amended, modified, supplemented, novated or substituted;

(vi)
the “equivalent” in one currency (the “first currency”) as at any date of an amount in another currency (the “second currency”) shall be construed as a reference to the amount of the first currency which could be purchased with such amount of the second currency at the spot rate of exchange quoted by the People’s Bank of China at or about 11:00 a.m. two (2) Business Days (being a day other than a Saturday or Sunday on which banks and foreign exchange markets are generally open for business in Beijing) prior to such date for the purpose of the first currency with the second currency for delivery and value on such date;

(vii)
hereof”, “herein” and “hereunder” and other words of similar import means this Charter as a whole (including the Schedules) and not any particular part hereof;

(viii)
law” includes common or customary law and any constitution, decree, judgment, legislation, order, ordinance, regulation, rule, statute, treaty or other legislative measure in any jurisdiction or any present or future directive, regulation, request or requirement, or official or judicial interpretation of any of the foregoing, in each case having the force of law and, if not having the force of law, in respect of which compliance is generally customary;

(ix)
the word “person” or “persons” or to words importing persons include, without limitation, any state, divisions of a state, government, individuals, partnerships, corporations, ventures, government agencies, committees, departments, authorities and other bodies, corporate or unincorporated, whether having distinct legal personality or not;

(x)
the “winding-up”, “dissolution”, “administration”, “liquidation”, “insolvency”, “reorganisation”, “readjustment of debt”, “suspension of payments”, “moratorium” or “bankruptcy” (and their derivatives and cognate expressions) of any person shall each be construed so as to include the others and any equivalent or analogous proceedings or event under the laws of any jurisdiction in which such person is incorporated or any jurisdiction in which such person carries on business;

(xi)
protection and indemnity risks” means the usual risks covered by a protection and indemnity association which is a member of the International Group of P&I Club, including pollution risks, extended passenger cover and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), clause 8 of the Institute Time Clauses (Hull)(1/10/83) or clause 8 of the Institute Time Clauses (Hulls)(1/11/1995) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;
14




(xii)
a Potential Termination Event or Termination Event which is “continuing” is a reference to a Potential Termination Event or Termination Event which is not remedied or waived; and

(xiii)
words denoting the plural number include the singular and vice versa.

(b)
Headings are for the purpose of reference only, have no legal or other significance, and shall be ignored in the interpretation of this Charter.

(c)
A time of day (unless otherwise specified) is a reference to Beijing time.
34.
BACKGROUND

(a)
By a novation agreement (the “Novation Agreement”) of even date herewith made between the Original Buyer, the Owners and the Charterers, the Owners have agreed to purchase the Vessel subject to the terms and conditions therein.

(b)
Accordingly the parties hereby agree that the Owners’ obligation to charter the Vessel to the Charterers under this Charter is subject to the effective transfer of ownership of the Vessel to the Owners pursuant to the Novation Agreement.
35.
NEWBUILDING CONSTRUCTION
35.1

(a)
The Vessel shall be constructed in accordance with the Shipbuilding Contract and in accordance with the Specifications (as defined in the Shipbuilding Contract) annexed thereto. Once the Novated Rights and Obligations (as defined in the Novation Agreement) have been novated to the Owners, the Owners and Charterers shall be deemed to have accepted and agreed to the Shipbuilding Contract and the Specifications in all respects on the understanding that the Vessel is to be built solely for the use of the Charterers.

(b)
In addition to the Buyer’s Supplies, the Charterers or the Charter Guarantor shall, at its sole cost, expense and risk, supply bunkers, fuel, lubricating oil, hydraulic oil and greases for the purpose of trial runs under and in accordance with the Shipbuilding Contract.

(c)
Subject to the terms of the Novation Agreement, the Charterers or its appointed supervisor approved by the Owners (at the Charter Guarantor’s/Charterers’ cost and expense) shall continue to exercise the Other Rights and Obligations (as ‘Buyer’ and as defined in the Novation Agreement) under the Shipbuilding Contract relating to, inter alia:

(i)
Approval of Plans and Drawings;

(ii)
Changes and modifications on the Vessel;

(iii)
Supervision of the Vessel; and

(iv)
Attending all tests and sea trials.
The Charterers or its appointed supervisor shall, at its own cost and expense, duly exercise the Other Rights and Obligations including the above rights (i) to (iv) in accordance with the Shipbuilding Contract in all respects.
35.2
The Vessel shall be constructed in accordance with the Shipbuilding Contract, under the supervision of the Charterers (or its appointed supervisor). Subject to the provisions of clause 3.6(a)(ii) of the Novation Agreement, the Charterers have the right to make changes and modifications to the Vessel in accordance with the Shipbuilding Contract and the Charterers
15



and the Charter Guarantor will procure that the Charterers will not make such changes or modifications to the Vessel without the Owners’ prior written consent where required under clause 3.7 of the Novation Agreement. All documented costs and expenses relating to any such change and modification shall be borne by the Charterers or Charter Guarantor.
35.3
If, on the Delivery Date, there are any amounts due from the Charterers to the Builder under the terms of the Shipbuilding Contact and/or the Novation Agreement (including but not limited to any amounts payable by the Charterers under clause 3.7 of the Novation Agreement and any amounts due for any bunkers, lubes or other costs and expenses incurred as a result of any extras, additions or alteration of the Vessel), then the Charterers shall pay such sums (as evidenced by a commercial invoice from the Builder) to the Builder on or before the Delivery Date (the “Extra SBC Costs”). If any liquidated damages for reasons other than delay are payable by the Builder under the Shipbuilding Contract, these liquidated damages shall be deducted from the Delivery Instalment payable by the Owners (any such deduction shall consequently reduce the Contract Price and the Cost Balance). If any liquidated damages for delay are payable by the Builder under the Shipbuilding Contract, then the Charterers may apply these towards payment of the Extra SBC Costs and any other reasonable, documented and directly incurred expenses as a result of a delay in delivery (including any extra supervision costs incurred in accordance with the applicable supervision contract). Any excess liquidated damages for delay after such prior application by the Charterers shall be used to reduce the Delivery Instalment payable by the Owners as part of the Contract Price (any such deduction shall consequently reduce the Contract Price, the Fixed Hire and Cost Balance accordingly).
36.
DELIVERY
36.1
The Vessel is scheduled to be delivered according to the terms of the Shipbuilding Contract. In case the delivery date under the Shipbuilding Contract is extended or postponed or delayed pursuant to the Shipbuilding Contract then subject to the terms of this Charter, the delivery date under the Charter shall be automatically and accordingly extended or postponed subject to it not being after the Cancellation Date.
36.2
Notwithstanding the foregoing, the obligation of the Owners to charter the Vessel to the Charterers hereunder is conditional upon:

(a)
the delivery of the Vessel to the Owners by the Builder and acceptance of the Vessel by the Owners pursuant to the Shipbuilding Contract; and

(b)
the satisfaction of the conditions precedent set out in Clause 40 below.
36.3
Subject to the Vessel being delivered to, and taken over by, the Owners pursuant to the Shipbuilding Contract and the satisfaction or waiver by the Owners of the conditions precedent set out in Clause 40, then the Charterers shall be deemed to have accepted and taken delivery of the Vessel (without reservation) under this Charter simultaneously with delivery by the Builder to the Owners pursuant to the Shipbuilding Contract whether or not the Charterers takes actual physical possession and/or use of the Vessel on the Delivery Date.
36.4
Subject to Clauses 36.2 and 36.3, the actual date of delivery for the purpose of this Charter shall be the date when the Vessel is delivered by the Builder to the Owners as indicated by the protocol of delivery and acceptance signed and timed by the Owners and the Builder pursuant to the Shipbuilding Contract (the “Delivery Date”) and shall be deemed to be the commencement date for the purposes of this Charter whether or not the Charterers takes actual physical possession and/or use of the Vessel on the Delivery Date.
36.5
Without prejudice to the provisions of Clause 36.4 above, the Owners and the Charterers shall on the Delivery Date sign a protocol of delivery and acceptance in the form attached hereto as Schedule 1.
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37.
DISPUTES UNDER THE SHIPBUILDING CONTRACT
37.1
Dispute under Shipbuilding Contract
Generally

(a)
If there is a dispute under the Shipbuilding Contract, then, unless the Owners have served a Renovation Notice (and without prejudice to (i) any rights Owners may have to serve such a Renovation Notice at any time including pursuant to paragraph (c) below and (ii) the Owners’ rights under Clause 54, the Owners shall enter into immediate consultation with the Charterers and/or the Builder in order to seek to resolve the dispute in an amicable way and the aggregate period of such consultation shall be no more than ten (10) Banking Days (unless otherwise agreed by the Parties). The Owners shall not serve a termination notice under the Shipbuilding Contract without prior consultation with the Charterers.

(b)
In the event that the dispute cannot be resolved during above consultation period and arbitration proceedings have been initiated by any party under the Shipbuilding Contract in respect of such dispute, then the arbitration proceedings shall, subject to paragraph (c) below, be handled in accordance with paragraphs (d) to (h) below.

(c)
Without prejudice to the terms of the Novation Agreement and notwithstanding the fact that arbitration proceedings in accordance with paragraphs (d) to (h) below may have commenced, the Owners shall also have the option to serve a Renovation Notice under the Novation Agreement in the event any (or any combination of) the following circumstances arise prior to the Delivery Date:

(i)
the Refund Guarantee is terminated or otherwise ceases to be in full force and effect for any reason; or

(ii)
the Vessel has not been delivered by the Builder prior to the Cancellation Date.
In the event that a Renovation Notice is served under the Novation Agreement in connection with any of the above events, the Pre-Delivery Termination Sum (if not then already payable) shall be deemed to be payable by the Charterers to the Owners in full within ten (10) days of such Renovation Notice being served.
Termination at Charterers’ request & Builder disputing / Builder termination or disputed tender for delivery

(d)
If:

(i)
the Charterers and/or Charter Guarantor propose to the Owners to terminate the Shipbuilding Contract or reject the Vessel while the Builder disputes the right of the Charter Guarantor, Charterers and/or the Owners to terminate the Shipbuilding Contract or reject the Vessel; or

(ii)
the Builder terminates or purports to terminate the Shipbuilding Contract while the Owners and/or the Charterers and/or the Charter Guarantor disputes such cancellation; or

(iii)
the Builder tenders for delivery of the Vessel while the Owners and/or the Charterers and/or Charter Guarantor disputes such tender for delivery the Charter Guarantor shall, at the Charter Guarantor’s cost and risk (and on behalf of the Owners if a Renovation Notice has not been served and otherwise also on behalf of the Charterers),
the Charterers shall further undertake to (1) lead the defence, claim, counterclaim and/or negotiations (when appropriate and if permitted by the arbitration tribunal); (2) appoint and/or engage and pay for the solicitors and/or counsels and/or experts and/or
17



arbitrator(s) (whether or not such solicitors and/or counsels and/or experts act for the Owners and/or Charterers and/or Charter Guarantor); and (3) deal with the arbitration and/or enforcement and/or settlement under the Shipbuilding Contract (however, any settlement or acknowledgment of the Builder’s demand or claim or waiver of the Owners’ or Charterers’ or Charter Guarantor’s demand or claim shall be subject to the Owners’ prior written consent, which shall not be unreasonably withheld or delayed). All Parties shall provide full assistance and cooperation to each other (including, without limitation, the Owners shall (i) take reasonable steps to enforce the award or settlement agreement against the Builder at the Charter Guarantor’s cost if the Charter Guarantor or Charterers cannot do so by itself and (ii) makes demands under the Refund Guarantee if a Renovation Notice has not been served). In addition, the Owners shall (at Charterers and Charter Guarantor’s direction, cost and risk) bring proceedings under the Refund Guarantee if the Refund Guarantor does not honour a demand under the Refund Guarantee.
Charterers’ wrongful termination, Builder’s justified termination

(e)
Should the cancellation of the Shipbuilding Contract or rejection of the Vessel by the Owners based on Charterers’ proposal or instruction be proven wrongful or the Builder’s cancellation or tender for delivery be proven justified, in whole or in part, by final award and/or settlement agreement (any settlement agreement shall be approved by the Charterers and the Owners (each acting reasonably) and any such approved settlement agreement and/or final award shall be binding upon the Charterers), the Charterers and Charter Guarantor shall indemnify and keep the Owners indemnified against all the liability and compensation that the Owners are ordered to assume/pay to the Builder together with all documented losses, costs, expenses, interests, orders or other sanctions suffered or incurred by the Owners arising directly in any manner out of such wrongful cancellation or rejection of the Vessel by the Owners or justified cancellation or tender for delivery by the Builder.
Charterers’ justified termination, Builder’s wrongful termination

(f)
Should the cancellation of Shipbuilding Contract or rejection of the Vessel by the Charterers and/or Charter Guarantor and/or Owners based on Charterers’ proposal or instruction be proven justified or Builder’s cancellation or tender for delivery be proven wrongful, in whole or in part, by final award and/or settlement agreement (any settlement agreement shall be approved by the Charterers and the Owners (each acting reasonably) and any such approved settlement agreement and/or final award shall be binding upon the Charterers), after receipt of the amount from the Builder and/or Refund Guarantor as ordered by the final award and/or settlement agreement, such amounts shall be applied in accordance with Clause 37.2.
Settlement

(g)
Should any settlement agreement (any settlement agreement shall be approved by the Charterers and the Owners (each acting reasonably)) be reached with the Builder during the arbitration or enforcement proceeding, in respect of any and all amounts and liabilities payable by the Builder under the settlement agreement, the Owners shall and the Charterers and Charter Guarantor shall apply such amounts in accordance with Clause 37.2.

(h)
Any refunds received by the Charter Guarantor or Charterers from the Builder and/or the Refund Guarantor under the Shipbuilding Contract and the Refund Guarantee shall be applied (and the Charter Guarantor shall procure they are applied) in accordance with Clause 37.2 unless a Step-in Notice under clause 3.4(b) of the Novation Agreement has been served by the Owners.
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37.2
Payment Regime
Any amounts (other than amounts received by the Owners from the Charterers as indemnity costs pursuant to clause 37.1(d)) received pursuant to Clause 37.1 (d) and Clause 37.1 (f), (g) and (h) shall be applied promptly in the following order:

(a)
firstly towards payment to the Owners in full of the Pre-delivery Termination Sum, which shall (if already not then payable) be deemed at the time of such receipt to be immediately payable by the Charterers to the Owners;

(b)
secondly in the event that the Owners receive an amount in excess of the Pre-delivery Termination Sum, towards any amounts then outstanding under any Collateral Charter; and

(c)
thirdly any further excess shall be paid over to the Charterers (for the Charterers’ account or the account of the Charter Guarantor at the Charterers’ option).
If the Owners receive an amount which is less than the Pre-delivery Termination Sum, the Charterers or the Charter Guarantor shall immediately pay any shortfall to the Owners, so that the Owners receive the Pre-delivery Termination Sum in full.
37.3
Charterers’ rejection under clause 3.6 (a)(v) of the Novation Agreement
The Charterers shall consult with the Owners in advance in the event that they and/or Charter Guarantor wish to exercise the right under clause 3.6(a)(v) of the Novation Agreement to reject the Vessel and shall provide sufficient evidence to the Owners in support of such decision. Any related dispute shall be determined in accordance with this Clause 37 or as between the Parties hereto, in accordance with Clause 54.
37.4
Owners’ pre-delivery default

(a)
After the Effective Time under the Novation Agreement has occurred, if the Owners fail to pay any instalment to the Builder pursuant to the Shipbuilding Contract and the same failure has not been remedied by the Owners by the date which falls three (3) Banking Days prior to the date upon which the Builder may terminate the Shipbuilding Contract for non-payment, then the Charterers shall be entitled to terminate this Charter upon written notice to the Owners and serve a Renovation Notice in accordance with the terms of the Novation Agreement.

(b)
Upon this Charter being terminated by the Charterers in accordance with Clause 37.4(a) above, the Charterers shall, notwithstanding any such termination of this Charter, be obliged to pay to the Owners, within ten (10) days of any such termination, the Pre-delivery Termination Sum, if any on the date of such termination.
38.
TERMS OF DELIVERY
38.1
The Vessel shall be delivered to the Charterers in her condition as indicated in all the protocols and delivery documents as delivered by the Builder pursuant to Article VII of the Shipbuilding Contract, and the Charterers hereby acknowledge and agree that the Owners make no condition, term, representation, warranty, covenant, agreement or declaration, express or implied (and whether statutory or otherwise) as to the seaworthiness, merchantability, condition, design, operation, performance, class, capacity or fitness for use or as to the eligibility of the Vessel for any particular trade or operation or any other condition, term, representation or warranty whatsoever, express or implied, with respect to the Vessel. Acceptance of delivery by the Charterers or (as the case may be) deemed delivery of the Vessel to the Charterers under this Charter shall be irrevocable, final and conclusive proof and evidence that, for the purposes of the obligations and liabilities of the Owners hereunder or in connection herewith, the Vessel is at that time seaworthy, in accordance with the provisions of this Charter, in good working order and repair.
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38.2
The Charterers hereby waive all their rights in respect of any condition, term, representation or warranty express or implied (and whether statutory or otherwise) on the part of the Owners and all their claims against the Owners howsoever and whenever the same may arise in respect of the Vessel or arising out of the operation or performance of the Vessel and the chartering thereof under this Charter (including in respect of the seaworthiness, condition, design, operation, fitness for use or otherwise with respect to the Vessel). In particular, and without prejudice to the generality of the foregoing, the Owners shall be under no liability whatever and howsoever arising in relation to any injury, death, loss, damage or delay of, or to, or in connection with the Vessel or any person or property whatsoever, whether on board the Vessel or elsewhere, irrespective of whether such injury, death, loss, damage or delay shall arise from the unseaworthiness of or any defect in the Vessel. For the purposes of this Clause “delay” shall include delay in relation to the Vessel. (whether in respect of delivery of the Vessel to the Charterers under this Charter or otherwise) or any other delay whatsoever. The Charterers acknowledge that no representation has been made or will be made by or on behalf of the Owners in relation to the Vessel or any part thereof.
If any of the above mentioned damage, injury, death loss or delay is the consequence of a fault, an act, an omission or a misconduct of the Builder, the Owners shall assign all necessary Owners’ rights (provided that the Owners have such rights and such rights are assignable) to the Charterers (or at the Charterers’ option, to the Charter Guarantor) in order to entitle the Charterers or the Charter Guarantor to exercise any appropriate recourse and/or action against the Builder.
To the extent permissible under applicable law, the Charterers also waives any rights which it may have in tort in respect of any of the matters referred to above in paragraph 1 of this Clause 38.2 excluding tort due to wilful misconduct or gross negligence and irrevocably agrees that the Owners shall have no greater liability in tort in respect of any such matter than it would have in contract after taking account of all the foregoing exclusions. No third party making any representation or warranty relating to the Vessel or any part of the Vessel is the agent or partner of the Owners nor has any such third party authority to bind the Owners thereby.
38.3
The Charterers agree that the Owners shall be under no liability to supply any replacement vessel or any piece or part thereof during any period when the Vessel is unusable or becomes a Total Loss and shall not be liable to the Charterers or any other person as a result of the Vessel being unusable or a Total Loss.
38.4
None of the Owners or their respective shareholders, affiliates, subsidiaries, consultants, agents and their respective shareholders, directors, officers, employees, or representatives shall be liable to the Charterers (including any of its assigns, novatees, successors, shareholders, affiliates, subsidiaries, consultants, agents, managers, clients and their respective shareholders, directors, officers, employees, or representatives) for (i) indirect, special, exemplary, punitive or consequential losses and damages, arising from, or relating to or in connection with this Charter (ii) and to the extent not covered by (i) above, the following, whether direct or indirect loss of profit, loss of production, loss of revenue, loss of time, loss of contracts or otherwise, in each case irrespective of cause (by contract, by law, in tort or otherwise) and notwithstanding the negligence, misconduct or breach (whether contractual, statutory or otherwise) save for (in each case) resulting from the gross negligence of wilful misconduct of such indemnified parties.
39.
CANCELLATION
If, prior to any payment (i) being due and/or payable under the Shipbuilding Contract or (ii) having been made by the Owners under the Shipbuilding Contract, a Termination Event occurs and is continuing, then this Charter shall immediately terminate and be cancelled (with the exception of Clause 65) upon the Owners serving a Termination Notice in accordance with Clause 44 (Hire) and paragraph (c) of Clause 54 (Termination Events), provided that the Owners shall be entitled to retain all fees paid by the Charterers pursuant to Clause 58 (Transaction Fees) (and without prejudice to Clause 58 (Transaction Fees) but if such fees have not been paid but are due and payable, the Charterers shall forthwith pay such fees to the Owners in accordance with Clause 58 (Transaction Fees)) and such payment shall be
20



irrevocable and unconditional and shall not be construed as a penalty but shall represent an agreed estimate of the loss and damage suffered by the Owners in entering into this Charter upon the rems and conditions contained shall therefore be paid as compensation to the Owners.
40.
CONDITIONS PRECEDENT

(a)
Initial Conditions
Notwithstanding anything to the contrary in this Charter, the obligations of the Owners to make any payments to the Builder pursuant to the Building Contract as novated under the Novation agreement, to purchase and take delivery of the Vessel pursuant to the Novated Building Contract and to charter the Vessel to the Charterers under this Charter are subject to and conditional upon the Owners’ receipt of following documents and evidence (in each case in form and substance acceptable to the Owners) on or before the first payment date for making a part payment of the Purchase Price under the Novation Agreement (or such other date as the Owners and the Charterers may agree):

(i)
an original of each of the following:

(A)
the duly executed Charter;

(B)
the duly executed Novation Agreement;

(C)
the following duly executed Security Documents:

(I)
the Charter Guarantee;

(II)
the Charterers’ Assignment;

(III)
the Managers’ Undertaking; and

(D)
all documents required by any of the Security Documents set out in paragraph (C), including but not limited to the notices and acknowledgement required under such Security Documents, except for the letters of undertaking from the insurers, underwriters, protection and indemnity clubs and association which will be provided to the Owners and the acknowledgment by the acknowledgement by the Sub-charterers to the assignment of the Sub-charter, both of which will be required under the Charterers’ Assignment and provided to the Owners in accordance with Clause 82 (Conditions subsequent);

(ii)
certified true copies of the memorandum and articles of association (or equivalent documents) (and all amendments thereto) of each Obligor and any other documents required to be filed or registered or issued under the laws of their jurisdiction of incorporation to establish their incorporation;

(iii)
certified true copies of written resolutions or (as the case may be), resolutions passed at separate meetings, in each case, of the board of directors and (if required by any legal advisors to the Owners) shareholders of each Obligor (or its sole member or general partners), evidencing its approval of the Transaction Documents and the Project Documents to which it is a party and authorising appropriate officers or attorneys to execute the same and to sign all notices required to be given hereunder or thereunder on its behalf or other evidence of such approvals and authorisations as shall be acceptable to the Owners;

(iv)
if applicable, the original power of attorney of each Obligor under which any documents (including the Transaction Documents and Project Documents to which it is a party) are to be executed or transactions undertaken by that party;
21




(v)
a certified list specifying the directors and officers of the Obligor (together with their respective specimen signatures);

(vi)
if applicable, copies of all governmental and other consents, licences, approvals and authorisations as may be necessary to authorise the performance by each Obligor of its obligations under the Transaction Documents and Project Documents to which it is a party, and the execution, validity and enforceability of such Transaction Documents and Project Documents;

(vii)
certified copies of the duly executed Management Agreements, in each case together with all addenda, amendments or supplements;

(viii)
evidence that the fees, costs and expenses then due from the Charterers pursuant to the Novation Agreement, this Charter (including Clauses 62 (Fees and expenses) and 65 (Further indemnities)) have been paid or will be paid at such time as is agreed with the Owners;

(ix)
a legal opinion issued by legal advisers to the Owners in the following jurisdictions, each in form and substance satisfactory to and agreed by the Owners (acting reasonably) (or confirmation satisfactory to the Owners that such an opinion will be given):

(A)
England and Wales; and

(B)
such other jurisdictions as the Owners may reasonably consider necessary.

(b)
Delivery Conditions
Notwithstanding anything to the contrary in this Charter, the obligations of the Owners to purchase and take delivery of the Vessel pursuant to the Novation Agreement and to charter the Vessel to the Charterers under this Charter are subject to and conditional upon the Owners’ receipt of following documents and evidence (in each case in form and substance acceptable to the Owners) on or before the Actual Delivery Date (or such other date as the Owners and the Charterers may agree):

(i)
an original of the Account Charge and all documents required by the Account Charge, including but not limited to the notices and acknowledgement required under the Account Charge;

(ii)
evidence that:

(A)
all the conditions precedents under clause 2 (Conditions Precedent) of the Novation Agreement have been satisfied or, in the Owners’ opinion, will be satisfied on the Actual Delivery Date;

(B)
subject to Clause 82 (Conditions Subsequent), the Vessel is (or will on the Actually Delivery Date) be insured in the manner required by the Transaction Documents;

(iii)
certified copies of:

(A)
the Approved Managers’ current Document of Compliance (as such term is defined pursuant to the ISM Code);

(B)
the Vessel’s current IAPPC;
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(C)
a copy of the Vessel’s classification confirmation certificate evidencing that it is free of all overdue recommendations and requirements from the Classification Society; and (iv)a copy of each of the Collateral Transaction Documents;

(iv)
valuations made in accordance with Clause 52 (dd), dated no more than thirty (30) days prior to the Effective Date;

(v)
evidence that the fees, costs and expenses then due from the Charterers pursuant to the Novation Agreement, this Charter (including Clauses 62 (Fees and expenses) and 65 (Further indemnities)) have been paid or will be paid at such time as is agreed with the Owners;

(vi)
a legal opinion issued by legal advisers to the Owners in the following jurisdictions, each in form and substance satisfactory to and agreed by the Owners (acting reasonably) (or confirmation satisfactory to the Owners that such an opinion will be given):

(A)
a legal opinion of HFW, legal advisors to the Owners on matters relating to English law;

(B)
legal opinions by lawyers appointed by the Owners on matters relating to the laws of the Republic of the Marshall Islands;

(C)
a legal opinion of the jurisdiction in which the account bank is situated; and

(D)
such other jurisdictions as the Owners may reasonably consider necessary; and (viii) such other consent, licence, approval, authorisation or other document, opinion or assurance which are necessary in connection with their entry into and performance of the transactions contemplated by any of the Transaction Documents or for the validity and enforceability thereof (including, without limitation in relation to or for the purposes of any financing by the Owners).

(c)
If the Owners in their sole discretion agree to deliver the Vessel under this Charter to the Charterers before all of the documents and evidence required by this Clause 39 have been delivered to or to the order of the Owners, the Charterers undertake to deliver all outstanding documents and evidence to or to the order of the Owners no later than seven (7) Business Days after the Actual Delivery Date or such other date as specified by the Owners, acting in their sole discretion. The delivery of the Vessel by the Owners to the Charterers under this Charter shall not, unless otherwise notified by the Owners (acting in their sole discretion) to the Charterers in writing, be taken as a waiver of the Owners’ right to require production of all the documents and evidenced required by this Clause 40.
41.
BUNKERS AND LUBOILS
41.1
At delivery the Charterers shall take over all bunkers, lubricating oil, hydraulic oil, greases, water and unbroached stores and provisions in the Vessel without cost.
41.2
To the extent that Clause 46 (Redelivery) applies, at redelivery the Owners shall take over all bunkers, unused lubricating oil, hydraulic oil, greases, water and unbroached provisions and other consumable stores in the Vessel.
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42.
FURTHER MAINTENANCE AND OPERATION
42.1
The good commercial maintenance practice under Clause 10 (Maintenance and Operation) (Part II) of this Charter shall be deemed to include:

(a)
the maintenance and operation of the Vessel by the Charterers in accordance with (as the following are amended from time to time):

(i)
the relevant regulations, requirements and recommendations of the Classification Society;

(ii)
the relevant regulations, requirements and recommendations of the country and flag of the Vessel’s registry;

(iii)
any applicable IMO regulations (including but not limited to the ISM Code, the ISPS Code and MARPOL);

(iv)
all other applicable laws or regulations; and

(v)
Charterers’ current standard operations and maintenance manuals;

(b)
the maintenance and operation of the Vessel by the Charterers taking into account:

(i)
engine manufacturers’ recommended maintenance and service schedules;

(ii)
builder’s operations and maintenance manuals; and

(iii)
recommended maintenance and service schedules of all installed equipment and pipework.
42.2
In addition to the above, the Charterers covenant with the Owners to arrange online access to class records for the Owners as available to the Charterers.
42.3
Any equipment that is found not to be required on board as a result of law or regulation is either to be removed at the Charterers expense or to be maintained in operable condition.
42.4
The title to any equipment:

(a)
placed on board as a result of operational requirements of the Charterers shall automatically be deemed to belong to the Owners (unless hired from or belonging to a third party) immediately upon such placement, and such equipment may only be removed: (A) with the Owners’ prior written consent, (B) at the Charterers’ own expense, and (C) without damage to the Vessel; and

(b)
replaced, renewed or substituted shall remain with the Owners until the part or equipment which replaced it or the new or substitute part or equipment becomes property of the Owners.
42.5
Without prejudice to any other provisions under this Charter, the Charterers shall maintain, use and operate the Vessel with commercially reasonable care as if the Charterers were the owner of the same.
43.
STRUCTURAL CHANGES AND ALTERATIONS
43.1
Unless required by the Classification Society, compulsory legislation or pursuant to the terms of any Sub-charter, the Charterers shall make no material structural changes in the Vessel or material changes in the machinery, engines, appurtenances or spare parts thereof without in each instance first securing the Owners’ consent thereto, such consent not to be unreasonably withheld or delayed, provided that:
24




(a)
any such changes do not have a material adverse effect on the Vessel’s certification or the Vessel’s fitness for purpose;

(b)
any such changes will not materially diminish the value of the Vessel and/or have a material adverse effect on the safety, performance, value or marketability of the Vessel;

(c)
the Charterers shall bear all time, costs and expenses in relation to any such changes;

(d)
the Charterers shall furnish the Owners with:

(i)
copies of all plans in relation to such changes;

(ii)
if applicable, confirmation from the Classification Society that such changes will not adversely affect the class of the Vessel, provided always that such Classification Society agrees to issue such confirmation;

(iii)
one Valuation Report (at the Charterers’ cost) on the Market Value of the Vessel after the implementation of such changes.
43.2
Upon the occurrence of any Termination Event which is continuing, if the Owners decide to retake possession of the Vessel, the Charterers shall at their expense restore the Vessel to its former condition unless the changes made are carried out:

(a)
to improve the performance, operation or marketability of the Vessel; or

(b)
as a result of a regulatory compliance.
43.3
Any improvement, structural changes or new equipment becoming necessary for the continued operation of the Vessel by reason of new class requirements or by compulsory legislation shall be for the Charterers’ account and the Charterers shall not have any right to recover from the Owners any part of the cost for such improvements, changes or new equipment either during the Charter Period or, to the extent that Clause 46 (Redelivery) applies, at redelivery of the Vessel. The Charterers shall give written notice to the Owners of any such improvement, structural changes or new equipment.
44.
HIRE
44.1
In consideration of the Owners’ agreement to charter the Vessel to the Charterers pursuant to the terms hereof, the Charterers agree to pay to the Owners an amount of interest on the Paid Instalments (excluding, for the avoidance of any doubt, the delivery instalment), accruing at the rate of three (3) month LIBOR plus 4.0 per cent. per annum (the “Accrued Charterhire”), with such amount being accrued and payable quarterly in arrears.
44.2
The Accrued Charterhire shall be, for the avoidance of any doubt, non-refundable under all circumstances.
44.3
In consideration of the Owners’ agreement to charter the Vessel to the Charterers pursuant to the terms hereof, the Charterers agree to pay to the Owners the following sums on the relevant dates as follows:

(a)
on each and every Hire Payment Date, pay to the Owners the relevant amount then payable on the corresponding Hire Payment Date (the “Fixed Hire”) as determined by reference to the amount set out opposite such Hire Payment Date under the heading “Fixed Hire” in the hire payment schedule as attached as Schedule 3 (Hire Payment Schedule) hereto (the “Hire Payment Schedule”);

(b)
for the purpose of determining any Monthly Hire payment:

(i)
the Charterers hereby expressly acknowledge that the Hire Payment Schedule in its current form and content as attached hereto (i) is based on the Assumed
25



Owners’ Cost and (ii) on the assumption that no partial pre-payment has been made pursuant to Clause 59(g); and

(ii)
accordingly, should the Parties agree to a change in the Assumed Owners’ Cost or the Charterers make a partial pre-payment, the Owners shall deliver to the Charters an amended Hire Payment Schedule at such time (including, without limitation, the cost Balance) reflecting the resulting pro-rata adjustments for the Charterers’ review and approval, which shall thereafter:

(A)
constitute the current Hire Payment Schedule; and

(B)
save for manifest error, be conclusive evidence of the rate of Fixed Hire payable under this Charter; and

(iii)
for the avoidance of doubt and notwithstanding any provisions in this Clause 44 (Hire), the Charterers’ obligation to pay Monthly Hire as calculated in accordance with the formula set out in Clause 44(b)(ii)(B) above shall remain at all times, whether or not the Owners provide any amended Hire Payment Schedule.

(c)
All payments of Fixed Hire shall be paid in advance on each Hire Payment Date (prior to 16:00, Shanghai time) (in respect of which time is of the essence) with the first (1st) instalment falling due on the Actual Delivery Date.

(d)
Any payment provided herein due on any day which is not a Business Day shall be payable on the following Business Day.

(e)
All payments under this Charter shall be made to the account notified by the Owners to the Charterers prior to the first Hire Payment Date (or such other account as the Owners may thereafter notify the Charterers from time to time) for credit to such account notified by the Owners.

(f)
Following delivery of the Vessel to, and acceptance by, the Charterers under this Charter, the Charterers’ obligation to pay Fixed Hire in accordance with this Clause 44 shall be absolute irrespective of any contingency whatsoever including but not limited to:

(i)
any set-off (save as permitted under Clause 44.1), counterclaim, recoupment, defence or other right which the Charterers may have against the Owners, the Finance Parties or any other third party (unless otherwise agreed between the Owners and the Charterers);

(ii)
any unavailability of the Vessel, for any reason, including but not limited to seaworthiness, condition, design, operation, merchantability or fitness for use or purpose of the Vessel or any apparent or latent defects in the Vessel or its machinery and equipment or the ineligibility of the Vessel for any particular use or trade or for registration of documentation under the laws of any relevant jurisdiction or lack of registration or the absence or withdrawal of any consent required under the applicable law of any relevant jurisdiction for the ownership, chartering, use or operation of the Vessel or any damage to the Vessel;

(iii)
any lack or invalidity of title or any other defect in title;

(iv)
any failure or delay on the part of either party to this Charter, whether with or without fault on its part, in performing or complying with any of the terms, conditions or other provisions of this Charter;

(v)
any insolvency, bankruptcy, reorganisation, arrangement, readjustment of debt, dissolution, administration, liquidation or similar proceedings by or
26



against the Owners or the Charterers or any change in the constitution of the Owners or the Charterers;

(vi)
any invalidity or unenforceability or lack of due authorisation of or any defect in this Charter;

(vii)
any other cause which would but for this provision have the effect of terminating or in any way affecting the obligations of the Charterers hereunder,
it being the intention of the parties that the provisions of this Clause 44, and the obligation of the Charterers to pay Fixed Hire and make any payments under this Charter, shall (save as expressly provided in this Clause 44) survive any frustration and that, save as expressly provided in this Charter, no moneys paid under this Charter by the Charterers to the Owners shall in any event or circumstance be repayable to the Charterers.

(g)
All payments of Fixed Hire and all other Unpaid Sums to the Owners pursuant to this Charter and the other relevant Transaction Documents shall be made in immediately available funds in US Dollars, free and clear of, and without deduction or withholding for or on account of, any Taxes (unless otherwise agreed between the Owners and the Charterers).

(h)
In the event that the Charterers are required by any law or regulation to make any deduction or withholding on account of any taxes which arise as a consequence of any payment due under this Charter, then:

(i)
the Charterers shall notify the Owners promptly after they become aware of such requirement;

(ii)
the Charterers shall remit the amount of such taxes to the appropriate taxation authority within three (3) Business Days or any other applicable shorter time limits and in any event prior to the date on which penalties attach thereto; and

(iii)
such payment shall be increased by such amount as may be necessary to ensure that the Owners receive a net amount which, after deducting or withholding such taxes, is equal to the full amount which the Owners would have received had such payment not been subject to such taxes.

(i)
The Charterers shall forward to the Owners evidence reasonably satisfactory to the Owners that any such taxes have been remitted to the appropriate taxation authority within thirty (30) days of the expiry of any time limit within which such taxes must be so remitted or, if earlier, the date on which such taxes are so remitted.

(j)
Subject to sub-paragraph 54.1)(a) of Clause 54 (Termination Events), if the Charterers fail to pay any amount payable by it under a Transaction Document on its due date, interest shall accrue on a daily basis over the Unpaid Sum from the due date up to the date of actual payment (both before and after judgment) at a rate of 8% per annum.

(k)
In the event that this Charter is terminated for whatever reason, the Charterers’ obligation to pay Fixed Hire, and such other Unpaid Sum which (in each case) has accrued due before, and which remains unpaid, at the date of such termination shall continue notwithstanding such termination.

(l)
In the event that it becomes unlawful or it is prohibited for either the Owners or the Charterers to charter the Vessel pursuant to this Charter, then the Owners and Charterers, if such new or changed law or regulation or such interpretation or application permit, shall notify the other party of the relevant event and negotiate in good faith for a period of thirty (30) days from the date of the receipt of the relevant notice by the other party to agree an alternative. If such agreement is not reached within such thirty (30)-day period, the Charterers agree that, in such circumstances, the
27



Owners shall have the right to terminate this Charter by delivering to the Charterers a Termination Notice, whereupon the Charterers shall be obliged to pay to the Owners the Termination Sum in accordance with paragraph (d) of Clause 54 (Termination Events) and/or such other terms and conditions as may be specified in such Termination Notice.

(m)
Subject to paragraph (o) below, the Charterers shall, within three (3) Business Days of a demand by the Owners, pay to the Owners the amount of any Increased Costs incurred by the Owners as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Charter.

(i)
“Increased Costs” means:

(A)
a reduction in the rate of return from the Fixed Hire or on the Owners’ overall capital;

(B)
an additional or increased cost; or

(C)
a reduction of any amount due and payable under any Transaction Document,
which is incurred or suffered by the Owners to the extent that it is attributable to the Owners having entered into any Transaction Document or funding or performing its obligations under any Transaction Document.

(n)
The Owners shall notify the Charterers of any claim arising from paragraph (m) above (and of the event giving rise to such claim). The Owners shall, as soon as practicable after having made a demand in respect of such claim, provide a certificate confirming the amount of its Increased Costs as well as evidence supporting its calculation.

(o)
Paragraph (m) above does not apply to the extent any Increased Costs is:

(i)
compensated for by a payment made under paragraph (h)(iii) above; or

(ii)
attributable to the wilful breach by the Owners of any law or regulation.
45.
INSURANCE
45.1
During the Agreement Term, the Charterers shall at their expense keep the Vessel insured against fire and usual marine risks (including hull and machinery and excess risks), oil pollution liability risks, war and protection and indemnity risks (and any risks against which it is compulsory to insure for the operation for the Vessel) in US Dollars and in such market and on such terms as the Owners and the Finance Parties (if any) shall in writing approve45 in line with good shipping practise.
45.2
Such insurances shall be arranged by the Charterers to protect the interests of the Owners, the Charterers and (if any) the mortgagee of the Vessel (but if there exists any mortgagee, the Charterers shall request such mortgagee to agree to enter into a quiet enjoyment agreement with the Charterers in such form as the parties may agree but nothing herein shall prohibit the Owners from granting such mortgage in favour of a Finance Party under a Finance Document) or such other relevant Finance Party, and the Charterers shall be at liberty to protect under such insurances the interests of any Approved Manager.
45.3
Insurance policies shall cover the Owners, the Charterers and (if any) the Finance Parties according to their respective interests. Subject to the approval of the Owners (acting on the instructions or with the approval of the Finance Parties (in each case if applicable) and the insurers, the Charterers shall effect all insured repairs and shall undertake settlement and reimbursement from the insurers of all costs in connection with such repairs as well as insured
28



charges, expenses and liabilities to the extent of coverage under the insurances herein provided for.
45.4
The Charterers shall also remain responsible for and to effect repairs and settlement of costs and expenses incurred thereby in respect of all other repairs not covered by the insurances and/or not exceeding any possible franchise(s) or deductibles provided for in the insurances.
45.5
The Charterers shall arrange that, at any time during the Agreement Term, the hull and machinery and war risks insurance shall be in an amount not less than the greater of:

(a)
an amount which equals one hundred and twenty per cent (120%) of the Cost Balance; and

(b)
the current Market Value of the Vessel.
45.6
The terms of the hull and machinery insurance and the identity of the insurers shall be acceptable to the Owners and (if any) the Finance Parties. The Vessel shall be entered in a P&I Club which is a member of the International Group Association on customary terms and shall be covered against liability for pollution claims in an amount not less than one billion US Dollars (US$1,000,000,000). The P&I cover shall be placed with a P&I Club acceptable to the Owners and (if any) the Finance Parties. All insurances shall include customary protection in favour of the Owners and (if any) the Finance Parties as notice of cancellation and exclusion from liability for premiums or calls. The insurance policies or cover notes for the hull and machinery insurance shall name the Owners as co-assured, endorsing its rights and interests. The Owners shall be entered as a member for the P&I cover and war risks insurance.
45.7
The Charterers:

(a)
undertake to place the Insurances in such markets, in such currency, on such terms and conditions, and with such brokers, underwriters and associations as the Owners and, if applicable, the Finance Parties shall have previously approved in writing such approval not be unreasonably withheld; and

(b)
shall not alter the terms of any of the Insurances nor allow any person (except the Approved Manager) to be co-assured under any of the Insurances without the prior written consent of the Owners and, if applicable, the Finance Parties, and will supply the Owners and, if applicable, the Finance Parties from time to time on request with such information as the Owners and, if applicable, any Finance Party may in their discretion require with regard to the Insurances and the brokers, underwriters or associations through or with which the Insurances are placed.
45.8
The Charterers undertake duly and punctually to pay all premiums, calls and contributions, and all other sums at any time payable in connection with the Insurances, and, at their own expense, to arrange and provide any guarantees from time to time required by any protection and indemnity or war risks association. The Charterers shall provide the Owners and/or such Finance Party with (i) copies of all invoices issued by the brokers, underwriters or associations in respect of such premiums calls, contributions and other sums, and (ii) evidence satisfactory to the Owners and/or such Finance Party that such premiums, calls, contributions and other sums have been duly and punctually paid; that any such guarantees have been duly given; and that all declarations and notices required by the terms of any of the Insurances to be made or given by or on behalf of the Charterers to brokers, underwriters or associations have been duly and punctually made or given.
45.9
The Charterers will comply in all respects with all terms and conditions of the Insurances and will make all such declarations to brokers, underwriters and associations as may be required to enable the Vessel to operate in accordance with the terms and conditions of the Insurances. The Charterers will not do, nor permit to be done, any act, nor make, nor permit to be made, any omission, as a result of which any of the Insurances may become liable to be suspended, cancelled or avoided, or may become unenforceable, or as a result of which any sums payable under or in connection with any of the Insurances may be reduced or become liable to be repaid
29



or rescinded in whole or in part. In particular, but without limitation, the Charterers will not permit the Vessel to be employed other than in conformity with the Insurances without first taking out additional insurance cover in respect of that employment in all respects to the satisfaction of the Owners and, if applicable, the Finance Parties, and the Charterers will promptly notify the Owners and, if applicable, the Finance Parties of any new requirement imposed by any broker, underwriter or association in relation to any of the Insurances.
45.10
The Charterers will endeavour and before the expiry of any of the Insurances renew them and shall as soon as reasonably thereafter (but in any event within fifteen (15) days after the relevant renewals) give the Owners and, if applicable, the Finance Parties such details of those renewals as the Owners and, if applicable, the Finance Parties may require.
45.11
The Charterers shall deliver to the Owners and, if applicable, the Finance Parties certified copies (and, if required by the Owners and/or (if applicable) any Finance Parties, the originals) of all policies, certificates of entry (endorsed with the appropriate loss payable clauses as may be required by the Owners and the Finance Parties from time to time) and other documents relating to the Insurances (including, without limitation, receipts for premiums, calls or contributions) and shall procure that letters of undertaking in such form as the Owners and, if applicable, the Finance Parties may approve shall be issued to the Owners and, if applicable, the Finance Parties by the brokers through which the Insurances are placed (or, in the case of protection and indemnity or war risks associations, by their managers). If the Vessel is at any time during the Agreement Term insured under any form of fleet cover, the Charterers shall procure that those letters of undertaking contain confirmation that the brokers, underwriters or association (as the case may be) will not set off claims relating to the Vessel against premiums, calls or contributions in respect of any other vessel or other insurance, and that the insurance cover of the Vessel will not be cancelled by reason of non-payment of premiums, calls or contributions relating to any other vessel or other insurance. Failing receipt of those confirmations, the Charterers will instruct the brokers, underwriters or association concerned to issue a separate policy or certificate for the Vessel in the sole name of the Charterers or of the Charterers’ brokers as agents for the Charterers.
45.12
Upon the Owners’ reasonable request, the Charterers shall provide the Owners and, if applicable, the Finance Parties with full information available to the Charterers regarding any casualty or other accident or damage to the Vessel, including, without limitation, any communication with all parties involved in case of a claim under any of the Insurances.
45.13
The Charterers agree that, at any time after the occurrence of a Termination Event which is continuing, the Owners and, if applicable, the Finance Parties shall be entitled to collect, sue for, recover and give a good discharge for all claims in respect of any of the Insurances; to pay collecting brokers the customary commission on all sums collected in respect of those claims; to compromise all such claims or refer them to arbitration or any other form of judicial or non-judicial determination; and otherwise to deal with such claims in such manner as the Owners and, if applicable, the Finance Parties shall in their discretion think fit.
45.14
Whether or not a Termination Event shall have occurred, the proceeds of any claim under any of the Insurances in respect of a Total Loss shall be paid and applied in accordance with Clause 61 (Total Loss).
45.15
In the event of any claim in respect of any of the Insurances (other than in respect of a Total Loss), if the Charterers shall fail to reach agreement with any of the brokers, underwriters or associations for the immediate restoration of the Vessel, or for payment to third parties, within such time as the Owners and, if applicable, the Finance Parties may stipulate, the Owners and, if applicable, the Finance Parties shall be entitled to require payment to itself. In the event of any dispute arising between the Charterers and any broker, underwriter or association with respect to any obligation to make any payment to the Charterers or to the Owners and/or (if applicable) the Finance Parties under or in connection with any of the Insurances, or with respect to the amount of any such payment, the Owners and/or (if applicable) the Finance Parties shall be entitled to settle that dispute directly with the broker, underwriter or association concerned. Any such settlement shall be binding on the Charterers.
30



45.16

(a)
implement any recommendations contained in the reports issued following the surveys referred to in sub-paragraph Error! Reference source not found. above within the relevant time limits, and provide evidence satisfactory to the Owners and, if applicable, the Finance Parties that the protection and indemnity insurers are satisfied that this has been done; and

(b)
in addition to the foregoing (if such trade is in the United States of America and Exclusive Economic Zone):

(i)
obtain and retain a certificate of financial responsibility under the Act in form and substance satisfactory to the United States Coast Guard and provide the Owners with evidence of the same;

(ii)
procure that the protection and indemnity insurances do not contain a US Trading Exclusion Clause or any other analogous provision and provide the Owners with evidence that this is so; and

(iii)
comply strictly with any operational or structural regulations issued from time to time by any relevant authorities under the Act so that at all times the Vessel falls within the provisions which limit strict liability under the Act for oil pollution.
45.17
The Owners shall be at liberty to, in relation to the Vessel, take out Lessor’s or Innocent Owners’ Interest Insurance and Lessor’s Additional Peril (Pollution) insurance on such terms and conditions as the Owners may from time to time decide. The Charterers shall from time to time upon the Owners’ demand reimburse the Owners for all costs, premiums and expenses paid or incurred by the Owners in connection with such Lessor’s or Innocent Owners’ Interest Insurance and Lessor’s Additional Peril (Pollution) insurance, but only to the extent corresponding to each of the Lessor’s or Owners’ Interest Insurance or Lessor’s Additional Peril (Pollution) insurance for an amount not exceeding one hundred and twenty per cent (120%) of the then current Cost Balance.
45.18
Any Finance Party shall be at liberty to take out a Mortgagees’ Interest Insurance in relation to the Vessel on such terms and conditions as that Finance Party may from time to time decide. The Charterers shall from time to time upon the Owners’ demand reimburse the Owners for all costs, premiums and expenses paid or incurred by the Owners or that Finance Party in connection with such Mortgagees’ Interest Insurance, but only to the extent corresponding to a Mortgagee’s Interest Insurance for an amount not exceeding one hundred and twenty per cent. (120%) of the amount then outstanding under any loan made available by the Finance Parties pursuant to any Finance Documents.
45.19
The Owners shall be at liberty to, in relation to the Vessel, take out freight, demurrage and defence cover on such terms and conditions as the Owners may from time to time decide. The Charterers shall from time to time upon the Owners’ demand reimburse the Owners for all costs, premiums and expenses paid or incurred by the Owners in connection with such cover, but only to the extent corresponding to such cover for an amount not exceeding one hundred and twenty per cent (120%) of the then current Cost Balance.
46.
REDELIVERY
Upon the occurrence of any Termination Event which is continuing, the Owners decide to retake possession of the Vessel pursuant to paragraph (g) of Clause 54 (Termination Events), then the Charterers shall, at their own cost and expense, redeliver or cause to be redelivered the Vessel to the Owners at a safe, ice free port reasonably nominated solely by the Owner where the Vessel would be afloat at all times in a ready safe berth or anchorage, in accordance with Clauses 46 (Redelivery), 47 (Redelivery conditions) and 49 (Diver’s inspection at redelivery).
31



47.
REDELIVERY CONDITIONS

(a)
In addition to what has been agreed in Clauses 15 (Redelivery) (Part II) and 46 (Redelivery), the condition of the Vessel shall at redelivery be as follows:

(i)
the Vessel shall be free of any class and statutory recommendations affecting its trading certificates;

(ii)
the Vessel must be redelivered with all equipment and spares or replacement items listed in the delivery inventory carried out pursuant to Clause 9 (Inventories, Oil and Stores) (Part II) and any spare parts on board or on order for any equipment installed on the Vessel following delivery (provided that any such items which are on lease or hire purchase shall be replaced with items of an equivalent standard and condition fair wear and tear excepted); all records, logs, plans, operating manuals and drawings, spare parts onboard shall be included at the time of redelivery in connection with a transfer of the Vessel or such other items as are then in the possession of the Charterers shall be delivered to the Owners;

(iii)
the Vessel must be redelivered with all national and international trading certificates and hull/machinery survey positions for both class and statutory surveys free of any overdue recommendation and qualifications valid and un-extended for a period of at least three (3) months beyond the redelivery date;

(iv)
all of the Vessel’s ballast tank coatings to be maintained in “Fair” (as such term (or its equivalent) may be defined and/or interpreted in the relevant survey report) condition as appropriate for the Vessel’s age at the time of redelivery, fair wear and tear excepted;

(v)
the Vessel shall have passed any flag or class surveys or inspections due within three (3) months after the date of redelivery and have its continuous survey system up to date;

(vi)
the Vessel must be re-delivered with accommodation and common spaces for crew and officers substantially in the same condition as at the Actual Delivery Date, free of damage over and above fair wear and tear, clean and free of infestation and odours; with cargo spaces generally fit to carry the cargoes originally designed and intended for the Vessel; with main propulsion equipment, auxiliary equipment, cargo handling equipment, navigational equipment, etc., in such operating condition as provided for in this Charter;

(vii)
the Vessel shall be free and clear of all liens other than those created by or on the instruction of the Owners;

(viii)
the condition of the cargo holds to be in accordance with the maintenance regime undertaken by the Charterers during the Charter Period since delivery with allowance for legitimate cargoes carried since the last major maintenance programme;

(ix)
at the costs and expenses of the Charterers, a final joint report from the surveyors appointed by the Owners and the Charterers respectively shall be carried out as to the condition of the Vessel and a list of agreed deficiencies if any shall be drawn up;

(x)
the anti-fouling coating system applied at the last scheduled dry-docking shall be in accordance with prevailing regulations at the time of application;

(xi)
the funnel markings and name (unless being maintained by the Owner following redelivery) shall be painted out by the Charterers; and
32




(xii)
recently taken lube oil samples for all major machinery shall be made available within one (1) week of redelivery and results forwarded to Owners’ technical management for review.

(b)
At redelivery, the Charterers shall ensure that the Vessel shall meet the following performance levels (which where relevant shall be determined by reference to the Vessel’s log books):

(i)
all equipment controlling the habitability of the accommodation and service areas to be in proper working order, fair wear and tear excepted; and

(ii)
available deadweight to be within one per cent (1%) of that achieved at delivery (as the same may be adjusted as a result of any upgrading of the Vessel carried out in accordance with this Charter (such adjustment to be agreed between the Owners and Charterers at the time such upgrading work is to be undertaken);

(c)
The Owners and Charterers shall each appoint (at the Charterers’ cost and expense) surveyors for the purpose of determining and agreeing in writing the condition of the Vessel at redelivery.

(d)
If the Vessel is not in the condition or does not meet the performance criteria required by this Clause 47, a list of deficiencies together with the costs of repairing/remedying such deficiencies shall be agreed by the respective surveyors.

(e)
The Charterers shall be obliged to repair any class items restricting the operation or trading of the Vessel prior to redelivery.

(f)
The Charterers shall be obliged to repair/remedy all such other deficiencies as are necessary to put the Vessel into the return condition required by this Clause 47.

(g)
Until such time as any compensatory amount in respect of any repairs/remedial work outstanding as at redelivery has been paid in accordance with the terms of this Charter and the Vessel has been redelivered, the Charterers shall continue to pay the Fixed Hire in accordance with the terms of this Charter.
48.
OWNERS’ MORTGAGE
48.1
If required by the Sub-Charterer, the Owner shall procure, or provide, as the case may be a quiet enjoyment letter in wording to be reasonably agreed between the parties, the Charterers:

(a)
acknowledge that the Owners are entitled and do intend to enter or have entered into certain funding arrangements with the Finance Parties in order to finance part of the Owners’ Cost, which funding arrangements may be secured, inter alia, by ship mortgages over the Vessel and (along with other related matters) the relevant Finance Documents;

(b)
irrevocably consent to any assignment in favour of the Finance Parties pursuant to the relevant Finance Documents of the Charterers’ rights, interests and benefits in and to the Insurances, Earnings, Requisition Compensation and any guarantee in favour of the Charterers for the performance of the obligations of any Sub-charterer under any Sub-charter; and

(c)
without limiting the generality of paragraph 52.14 of Clause 52 (Charterers’ undertakings), undertake to execute, provide or procure the execution or provision (as the case may be) of such further reasonably information or document as are necessary to effect the assignment referred to in paragraph (b) above.

(d)
Without prejudice to the foregoing, the Owners’ may assign, transfer or novate their rights under this Charter without the prior written consent of the Charterers.
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49.
DIVER’S INSPECTION AT REDELIVERY
49.1
Unless the Vessel is returned in dry-dock, a diver’s inspection is required to be performed at the time of redelivery.
49.2
The Charterers shall, at the written request of the Owners, arrange at the Charterers’ time and expense for an underwater inspection by a diver approved by the Classification Society immediately prior to the redelivery.
49.3
A video film of the inspection shall be made. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society.
49.4
If damage to the underwater parts is found, the Charterers shall arrange, at their time and costs, for the Vessel to be dry-docked and repairs carried out to the satisfaction of the Classification Society.
49.5
If the conditions at the port of redelivery are unsuitable for such diver’s inspection, the Charterers shall take the Vessel (in Owners’ time but at Charterers’ expense) to a suitable alternative place nearest to the redelivery port unless an alternative solution is agreed.
All costs relating to any diver’s inspection shall be borne by the Charterers.
50.
TRANSPORT DOCUMENTS
The Charterers shall use their standard documents, waybills and conditions of carriage in the carriage of goods. Such documents, waybills and standard conditions shall comply with compulsory applicable legislation.
51.
CHARTERERS’ REPRESENTATIONS AND WARRANTIES
51.1
The Charterers represent and warrant to the Owners on the date of this Charter and (by reference to the facts and circumstances then pertaining) on, each payment date for making payment of the Paid Instalments, the Actual Delivery Date and each Hire Payment Date as follows (except that (1) the representation and warranty contained in paragraph (g) and (x) below shall only be made on the date of this Charter, each payment date for making payment of the Paid Instalments and on the Actual Delivery Date, and (2) the representations and warranties in paragraph (b) below shall only be made on the date of this Charter):

(a)
Status and due authorisation: each Obligor is a corporation, limited partnership or limited liability company duly incorporated or formed under the laws of its jurisdiction of incorporation or formation (as the case may be) with power to enter into the Transaction Documents and the Project Documents (to which it is a party) and to exercise its rights and perform its obligations under the Transaction Documents and the Project Documents (to which it is a party) and all corporate and other action required to authorise its execution of the Transaction Documents and the Project documents (to which it is a party) and its performance of its obligations thereunder has been duly taken;

(b)
No deductions or withholding: under the laws of the Obligors’ respective jurisdictions of incorporation or formation in force at the date hereof, none of the Obligors will be required to make any deduction or withholding from any payment it may make under any of the Transaction Documents;

(c)
Claims pari passu: under the laws of the Obligors’ respective jurisdictions of incorporation or formation in force at the date hereof, the payment obligations of each Obligor under each Transaction Document to which it is a party, rank at least pari passu with the claims of all other unsecured and unsubordinated creditors of such obligor save for any obligations which are preferred solely by any bankruptcy, insolvency or other similar laws of general application;
34




(d)
No Immunity: in any proceedings taken in any of the Obligors’ respective jurisdictions of incorporation or formation in relation to any of the Transaction Documents, none of the Obligors will be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process;

(e)
Governing law and judgments: in any proceedings taken in any of the Obligors’ jurisdiction of incorporation or formation in relation to any of the Transaction Documents in which there is an express choice of the law of a particular country as the governing law thereof, that choice of law and any judgment or (if applicable) arbitral award obtained in that country will be recognised and enforced;

(f)
Validity and admissibility in evidence: as at the date hereof, all acts, conditions and things required to be done, fulfilled and performed in order (A) to enable each of the Obligors lawfully to enter into, exercise its rights under and perform and comply with the obligations expressed to be assumed by it in the Transaction Documents and the Project Documents to which it is a party, (B) to ensure that the obligations expressed to be assumed by each of the Obligors in the Transaction Documents and the Project Documents are legal, valid and binding, and (C) to make the Transaction Documents and the Project Documents to which it is a party admissible in evidence in the jurisdictions of incorporation or formation of each of the Obligors, have been done, fulfilled and performed;

(g)
No filing or stamp taxes: under the laws of the Obligors’ respective jurisdictions of incorporation or formation in force at the date hereof, it is not necessary that any of the Transaction Documents to which it is a party be filed, recorded or enrolled with any court or other authority in its jurisdiction of incorporation or formation (other than the Registrar of Companies for England and Wales or the relevant maritime registry, to the extent applicable) or that any stamp, registration or similar tax be paid on or in relation to any of the Transaction Document except that the Charterers’ Assignment, the Manager’s Undertakings and the Account Charge shall be filed against the Charterers with the Marshall Islands within one month of the date of execution of such document;

(h)
Binding obligations: the obligations expressed to be assumed by each of the Obligors in the Transaction Documents and the Project Documents to which it is a party are legal and valid obligations, binding on each of them in accordance with the terms of such Transaction Documents and the Project Documents and no limit on any of their powers will be exceeded as a result of the borrowings, granting of security or giving of guarantees contemplated by such Transaction Documents and the Project Documents or the performance by any of them of any of their obligations thereunder;

(i)
No misleading information: to the best of its knowledge, any factual information provided by any Obligor to the Owners in connection with the Transaction Documents was true and accurate in all material respects as at the date it was provided and is not misleading in any material respect;

(j)
No winding-up: none of the Obligors has taken any corporate, limited liability company or limited partnership action nor have any other steps been taken or legal proceedings been started or (to the best of the Charterers’ knowledge and belief) threatened against any Obligor for its winding-up, dissolution, administration or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues which might have a Material Adverse Effect ;

(k)
Solvency:

(i)
None of the Obligors is unable, or admits or has admitted its inability, to pay its debts or has suspended making payments in respect of any of its debts;
35




(ii)
None of the Obligors by reason of actual or anticipated financial difficulties, has commenced, or intends to commence, negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.

(iii)
The value of the assets of each Obligor is not less than the liabilities of such Obligor (as the case may be) (taking into account contingent and prospective liabilities).

(iv)
No moratorium has been, declared in respect of any indebtedness of any Obligor.

(l)
No material defaults:

(i)
Without prejudice to paragraph (ii) below, none of the Obligors are in breach of or in default under any agreement to which it is a party or which is binding on it or any of its assets to an extent or in a manner which might have a Material Adverse Effect.

(ii)
No Potential Termination Event or Termination Event is continuing or might reasonably be expected to result from each Obligor’s entry into and performance of each Transaction Document to which such Obligor is a party;

(m)
No material proceedings: no material action or administrative proceeding of or before any court, arbitral body or agency which is not covered by adequate insurance or which might have a Material Adverse Effect has been started;

(n)
Accounts: all financial statements relating to the Charterers required to be delivered under paragraph 52.1 of Clause 52 (Charterers’ undertakings), were each prepared in accordance with GAAP, (in conjunction with the notes thereto) fairly represent the financial condition of the Charterers at the date as of which they were prepared and the results of their operations during the financial period then ended;

(o)
No obligation to create Security Interest: the execution of the Transaction Documents by the Obligors and their exercise of their rights and performance of their obligations thereunder will not result in the existence of nor oblige any Obligor to create any Security Interest over all or any of their present or future revenues or assets, other than pursuant to the Security Documents to which they are a party;

(p)
No breach: the execution of the Transaction Documents and the Project Documents by each of the Obligors and their exercise of their rights and performance of their obligations under any of the Transaction Documents and the Project Documents to which they are a party do not constitute and will not result in any breach of any agreement or treaty to which any of them is a party;

(q)
Security: each of the Obligors is the legal and beneficial owner of all assets and other property which it purports to charge, mortgage, pledge, assign or otherwise secure pursuant to each Security Document and those Security Documents to which it is a party create and give rise to valid and effective security having the ranking expressed in those Security Documents;

(r)
Necessary authorisations: the Necessary Authorisations required by each Obligor are in full force and effect, and each Obligor is in compliance with the material provisions of each such Necessary Authorisation relating to it and, to the best of its knowledge, none of the Necessary Authorisations relating to it are the subject of any pending or threatened proceedings or revocation;

(s)
No money laundering: the performance of the obligations of the Obligors under the Transaction Documents and the Project Documents, will be for the account of members of the respective Obligor(s) and will not involve any breach by any of them of any law or regulatory measure relating to “money laundering” as defined in Article 1 of the
36



Directive (2005/EC/60) of the European Parliament and of the Council of the European Communities;

(t)
Disclosure of material facts: the Charterers are not aware of any material facts or circumstances which have not been disclosed to the Owners and which might, if disclosed, have reasonably been expected to materially adversely affect the decision of a person considering whether or not to enter into the Transaction Documents.

(u)
Environmental laws:

(i)
Each of the Charter Guarantors is in compliance with paragraph 52.8 of Clause 52 (Charterers’ undertakings) and (to the best of its knowledge and belief) no circumstances have occurred which would prevent such compliance in a manner or to an extent which has or is reasonably likely to have a Material Adverse Effect. No Environmental Claim has been commenced or (to the best of the Charterers’ knowledge and belief) is threatened against any of the Charter Guarantor where that claim has or is reasonably likely, if determined against the Charter Guarantor, to have a Material Adverse Effect.

(v)
Taxation

(i)
No Obligor is materially overdue in the filing of any Tax returns and no Obligor overdue in the payment of any amount in respect of Tax of one million US Dollars (US$1,000,000) (or its equivalent in any other currency) or more, save in the case of Taxes which are being contested in good faith.

(ii)
As far as the Charterers are aware, each of the Obligors (save for the Approved Manager) is resident for Tax purposes only in the jurisdiction of its incorporation.

(w)
No Restricted Party: no Obligor is a Restricted Party nor has any Obligor or any of their respective directors, officers or employees or any person acting on their behalf received notice or are aware of any claim, action, suit, proceeding or investigation against any of them with respect to Sanctions by a Sanctions Authority.

(x)
No Material Adverse Effect: no event or circumstance which has occurred which has a Material Adverse Effect.

(y)
Status of Project Documents: The copies of the Project Documents delivered to the Lender are true and complete copies. The Project Documents constitute legal, valid, binding and enforceable obligations of the parties to them in accordance with their respective terms except insofar as enforcement may be limited by any applicable laws relating to bankruptcy, insolvency, administration and similar laws affecting creditors’ rights generally and by principles of equity. No amendments or additions to the Project Documents have been agreed nor has any party to any Project Document waived any of its respective rights under that Project Document (except as those notified to the Owners in writing and, if consent of the Owners are required pursuant to this Charter, as consented to by the Owners).
51.2
The representation and warranties of the Charterers in this Clause 51 are subject to:

(a)
the principle that equitable remedies are remedies which may be granted or refused at the discretion of the court;

(b)
the limitation of enforcement by laws relating to bankruptcy, insolvency, liquidation, reorganisation, court schemes, moratoria, administration and other laws generally affecting or limiting the rights of creditors;

(c)
the time barring of claims under any applicable limitation acts;
37




(d)
the possibility that a court may strike out provisions for a contract as being invalid for reasons of oppression, undue influence or similar; and

(e)
any other reservations or qualifications of law expressed in any legal opinions obtained by the Owners in connection with the Transaction Documents.
52.
CHARTERERS’ UNDERTAKINGS
The undertaking and covenants in this Clause 52 remain in force for the duration of the Agreement Term.
52.1
Financial statements the Charterers shall and shall procure the Charter Guarantor to each supply to the Owners (i) as soon as the same become available, but in any event within one hundred and eighty (180) days after the end of each of its financial years, its audited consolidated financial statements for that financial year.
52.2
Requirements as to financial statements each set of financial statements delivered to the Owners under paragraph 52.1 of Clause 52 in relation to the Charterers and the Charter Guarantor (each a “Notifying Party”):

(a)
shall be certified by an authorised signatory of the relevant Notifying Party as fairly representing its financial condition as at the date as at which those financial statements were drawn up; and

(b)
shall be prepared in accordance with GAAP.
52.3
Information The Charterers shall supply to the Owners:

(a)
promptly upon becoming aware of them, details of any material litigation, arbitration or administrative proceedings which are current, threatened or pending against the Charterers, and which, if adversely determined, are reasonably likely to have a Material Adverse Effect; and

(b)
promptly, such further information regarding the financial condition, business and operations of the Charterers as the Owners may reasonably request.
52.4
Maintenance of legal validity The Charterers shall comply with the terms of and do all that is necessary to maintain in full force and effect all Necessary Authorisations required in or by the laws and regulations of its jurisdiction of formation or incorporation and all other applicable jurisdictions, to enable it lawfully to enter into and perform its obligations under the Transaction Documents and to ensure the legality, validity, enforceability or admissibility in evidence of the Transaction Documents in its jurisdiction of incorporation or formation and all other applicable jurisdictions.
52.5
Notification of Potential Termination Event The Charterers shall promptly, upon becoming aware of the same, inform the Owners in writing of the occurrence of any Termination Event or Potential Termination Event (and the steps, if any, being taken to remedy this) and, upon receipt of a written request to that effect from the Owners, confirm to the Owners that, save as previously notified to the Owners or as notified in such confirmation, no Termination Event or Potential Termination Event is continuing or if a Termination Event or Potential Termination Event is continuing specifying the steps, if any, being taken to remedy it.
52.6
Claims pari passu The Charterers shall ensure that at all times the claims of the Owners against it under the Transaction Documents rank at least pani passu with the claims of all its other unsecured and subordinated creditors save those whose claims are preferred by any bankruptcy, insolvency, liquidation, winding-up or other similar laws of general application.
52.7
Necessary Authorisations Without prejudice to any specific provision of the Transaction Documents relating to a Necessary Authorisation, the Charterers shall (i) obtain, comply with and do all that is necessary to maintain in full force and effect all Necessary Authorisations if a
38



failure to do the same may cause a Material Adverse Effect; and (ii) promptly upon request, supply certified copies to the Owners of all Necessary Authorisations.
52.8
Compliance with applicable laws The Charterers shall comply with all applicable laws, including Environmental Laws, to which it may be subject (except as regards Restricted Parties to which paragraph 52.9 below applies, and anti-corruption and anti-bribery laws to which paragraph 52.10 below applies) if a failure to do the same may have a Material Adverse Effect.
52.9
No dealings with Restricted Parties The Charterers shall not, and shall not permit or authorise any other person to, directly or indirectly, utilise or employ the Vessel or to use, lend, make payments of, contribute or otherwise make available, all or any part of the proceeds of any transaction(s) contemplated by the Transaction Documents to fund any trade, business or other activities:

(a)
involving or for the benefit of any Restricted Party; and

(b)
in any other manner that would reasonably be expected to result in any Obligor or the Owners or any Finance Party (if applicable) being in breach of any Sanctions or become a Restricted Party.
52.10
Anti-corruption and anti-bribery laws The Charterers shall conduct its business in compliance with applicable anti-corruption and anti-bribery laws.
52.11
Environmental compliance
The Charterers shall:

(a)
comply with any Environmental Law;

(b)
obtain, maintain and ensure compliance with all requisite Environmental Approvals; and

(c)
implement procedures to monitor compliance with and to prevent liability under any Environmental Law,
where failure to do so has or is reasonably likely to have a Material Adverse Effect.
52.12
Environmental Claims The Charterers shall, promptly upon becoming aware of the same, inform the Owners in writing of:

(i)
any Environmental Claim against the Charterers which is current or pending; and

(ii)
any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against the Charterers,
where the claim, if determined against the Charterers, has or is reasonably likely to have a Material Adverse Effect.
52.13
Taxation

(a)
The Charterers shall pay and discharge any Tax imposed upon it or its assets within the time period allowed without incurring penalties unless and only to the extent that:

(i)
such payment is being contested in good faith;

(ii)
adequate reserves are being maintained for such Tax and the costs required to contest them have been disclosed in its latest financial statements; and

(iii)
such payment can be lawfully withheld and failure to pay such Tax does not have or is not reasonably likely to have a Material Adverse Effect.
39




(b)
No Obligor may change its residence for Tax purposes.
52.14
Further assurance The Charterers shall, at their own expense, promptly take all such action as the Owners may reasonably require for the purpose of perfecting or protecting any of the Owner’s rights with respect to the security created or evidenced (or intended to be created or evidenced) by the Security Documents.
52.15
Other information The Charterers will promptly supply to the Owners such financial information and explanations as the Owners may from time to time reasonably require in connection with the Charterers.
52.16
Inspection of records The Charterers will permit the inspection of their financial records and accounts relating to the Transaction Documents on reasonable notice from time to time during business hours by the Owners or its nominee.
52.17
Merger and demerger The Charterers shall not enter into any amalgamation, merger, demerger or corporate restructuring without the prior written consent of the Owners (such consent not to be unreasonably withheld or delayed).
52.18
Transfer of assets The Charterers shall not, sell or transfer any of its material assets other than:

(a)
on arm’s length terms to third parties where the net proceeds of sale are used as a prepayment hereunder; or

(b)
on arm’s length terms to its Affiliates, which are and remain members of the Charter Group.
52.19
Change of business The Charterers shall not, without the prior written consent of the Owners, make any substantial change to the general nature of their shipping business from that carried on at the date of this Charter.
52.20
Know your customer” checks If:

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

(b)
any change in the status of the Charterers after the date of this Charter; or

(c)
a proposed assignment or transfer by Owners of any of its rights and obligations under this Charter,
obliges the Owners to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Charterers shall promptly upon the request of the Owners supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Owners in order for the Owners 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 Transaction Documents.
52.21
Management of the Vessel The Charterers shall ensure that:

(a)
the Vessel is at all times technically and commercially managed by an Approved Manager;

(b)
unless (A) the Charterers have promptly informed the Owners in writing of any proposed change of an Approved Manager, and (B) the Owners have granted its prior written consent (which shall not be unreasonably withheld or delayed) to such proposed change, the Approved Manager shall not be changed to another entity; and
40




(c)
the Approved Managers will provide a written confirmation confirming that, among other things, following the occurrence of Termination Event which is continuing, all claims of the Approved Managers against the Charterers shall be subordinated to the claims of the Owners or the Finance Parties (if applicable) under the Transaction Documents.
52.22
Classification The Charterers shall ensure that the Vessel maintains the highest classification required for the purpose of the relevant trade of the Vessel which shall be with the Vessel’s Classification Society, in each case, free from any material overdue recommendations and adverse notations affecting that the Vessel’s class.
52.23
Certificate of financial responsibility The Charterers shall, if required, obtain and maintain a certificate of financial responsibility in relation to the Vessel which is to call at the United States of America.
52.24
Registration The Charterers shall not change or permit a change to the flag of the Vessel during the duration of this Charter other than to a Pre-Approved Flag, such approval not to be unreasonably withheld or delayed. Any change to the flag of the Vessel shall be at the cost of the Charterers (which shall include any costs of the Finance Parties (if applicable).
52.25
ISM, ISPS and Maritime Labour Convention Compliance The Charterers shall ensure that each ISM Company and ISPS Company complies in all material respects with the ISM Code and the ISPS Code, respectively, or any replacements thereof and in particular (without prejudice to the generality of the foregoing) shall ensure that such company holds (i) a valid and current Document of Compliance issued pursuant to the ISM Code, (ii) a valid and current SMC issued in respect of the Vessel pursuant to the ISM Code, and (iii) an ISSC in respect of the Vessel, and the Charterers shall promptly, upon request, supply the Owners with copies of the same. The Charterers shall at all time comply with the Maritime Labour Convention.
52.26
Chartering-in The Charterers shall not, during the duration of this Charter, without the prior written consent of the Owners, take any vessel on charter or other contract of employment (or agree to do so) except for vessels chartered in by the Charterers on a temporary basis to be provided to any Sub-charterer in order to fulfil its obligations under the relevant Sub-charter (in circumstances where the Vessel is not available for whatever reason).
52.27
Change of control The Charterers shall ensure that during the duration of the Charter Period, no Change of Control shall occur without the prior written consent of the Owners (which shall not be unreasonably withheld or delayed).
52.28
Inspection of Vessel and inspection reports In the absence of a Termination Event, subject to there being no undue interference with the operation of the Vessel:

(a)
the Owners may at the Charterers’ cost arrange for persons appointed by the Owners to board the Vessel once in each calendar year during the Charter Period to inspect the Vessel’s state and condition, and the Charterers will provide commercially reasonable assistance to facilitate such inspection; and

(b)
the Charterers shall, within five (5) Business Days’ of the Owners’ written demand, reimburse the Owners for all costs, fees and expenses reasonably incurred by the Owners in connection with the Owners’ procuring or arranging the procurement of the relevant inspection report as to the condition of the Vessel,
provided always however that if a Termination Event has occurred and is continuing, the Owners may at any time and at the Charterers’ cost conduct such inspection and the Charterers shall be deemed to have granted such permission and shall provide such necessary assistance to the Owners in respect of such inspection.
52.29
Sub-charterers The Charterers will, where applicable, use best endeavours and forthwith execute and deliver any and all such other agreements, instruments and documents (including any novation agreement) as may be required by law or deemed necessary or desirable by the Owners to ensure that any Sub-Charter which is in effect on the Actual Delivery Date remains
41



in effect, so that all obligations previously owed by the relevant Sub-charterers to the Charterers under such Sub-Charter shall continue to be owed to the Charterers throughout the term of the Sub-charter.
52.30
Valuation of Market Value

(a)
The Charterers shall procure valuation of the Market Value of the Vessel to be made (and procure the delivery to the Owners of the Valuation Reports issued by the Approved Brokers): (i) within thirty (30) days prior to the Actual Delivery Date, (ii) once every twelve (12) months during the Charter Period (each such Valuation Report to be at the Charterers’ cost); and (ii) at such other times as the Owners may require in their absolute discretion (each such additional Valuation Reports to be at Owners’ cost unless a Termination Event has occurred and is continuing following which such additional Valuation Reports shall be at the cost of the Charterers).

(b)
The Market Value of the Vessel shall be the arithmetic average of desk-top valuations obtained from two (2) Approved Brokers with one selected by the Charterers and the other selected by the Owners prior to the Actual Delivery Date and from one Approved Broker acceptable to the Owners during the Agreement Term (in each such case the Approved Brokers shall be acceptable to the Owners and the expenses of both appointments shall be borne by the Charterers). Each such valuation shall take into account the benefit of this Charter and any Sub-charter (dated no earlier than 30 days from the relevant date) on the basis of a willing buyer and a willing seller at arm’s length.

(c)
If valuation is obtained in accordance with this Clause and the Market Value of the Vessel is less than (i) the Cost Balance for the first 2 years and (ii) 120% of the Purchase Option Price pro rata adjusted for the period after 2 years, of (x) the Cost Balance for the first 2 years after the Actual Delivery Date or (y) the Purchase Option Price for the remainder of the Agreement Term (the “Required LTV Ratio”), the Charterers shall, within 5 days of the issuance of the Valuation Reports (or, if the two Valuation Reports are not issued on the same day, the date of the later Valuation Report), prepay to the Owners in an amount equal to the shortfall as may be necessary to ensure that the Ratio does not exceed the Required LTV Ratio.

(d)
After the prepayment referred to above is completed, the following Fixed Hire, Purchase Option Prices, Cost Balance and Balloon Amount shall be adjusted downwards in the same proportion as the above proportion of the prepayment.
52.31
Sub-Charter Apart from the Initial Sub-Charter, the Charterers shall procure that there shall be no Sub-charter (including but not limited to on a bareboat basis) of the Vessel without the consent of the Owners, such consent not to be unreasonably withheld save that (and subject to the foregoing) any sub-chartering contract of less than twenty four (24) months (including optional extension periods) not made on a bareboat charter basis shall not require the consent of the Owners and further provided that, (i) the Charterers shall use all reasonable endeavours to procure (if required) the consent of the Sub-Charterer to the assignment of any Sub-Charter to the Owners, upon obtaining which (if the same is required) the Charterers shall so assign that contract to the Owners by way of security for the Charterers’ obligations under this Charter; and (ii) all sub-chartering documentation is promptly provided to the Owners, for its information.
52.32
Transactions with Affiliates The Charterers shall procure that all transactions conducted or to be conducted between them and any of the Obligors or any of that Obligor’s Affiliates will be on an arm’s length commercial basis.
52.33
Notification The Charterers shall notify the Owners promptly after they become aware of the expiry or early termination of the Sub-Charter.
52.34
Project Documents

(a)
The Charterers shall:
42




(i)
without affecting its obligations under the applicable provisions of the Transaction Documents, perform and observe its obligations under the Project Documents and use its best endeavours to procure that each of the other parties to the Project Documents performs and observes its obligations under them; and

(ii)
obtain and maintain in force, and promptly furnish certified copies to the Owners of, all licences, authorisations, approvals and consents, and do all other acts and things, which may from time to time be necessary or desirable for the continued due performance of its obligations under the Transaction Documents and the Project Documents or which may be required for the validity, enforceability or admissibility in evidence of the Transaction Documents and the Project Documents;

(b)
The Charterers shall not, without the prior consent of the Owners:

(i)
except as contemplated by this Charter, sell or agree to sell the Vessel (including a sale of the Vessel during her construction by way of an assignment, novation or other transfer of the Building Contract) or convey, assign, transfer, sell or otherwise dispose of or deal with any of its other real or personal property, assets or rights, whether present or future, in connection with the Vessel;

(ii)
waive or fail to enforce any provision of, or agree to any amendment or supplement to, the Building Contract, save to the extent expressly permitted by the terms of any Transaction Document.
53.
EARNINGS ACCOUNT
In addition to Clause 52 (Charterers’ undertakings), the Charterers hereby undertake to the Owners that, throughout the Agreement Term, they will deposit all of the Earnings received by the Charterers into the Earnings Account, free and clear of any costs, fees, expenses, disbursements, withholdings or deductions.
54.
TERMINATION EVENTS
54.1
Each of the following events shall constitute a Termination Event:

(a)
Failure to pay any Obligor fails to pay any amount due from it under any Transaction Document to which they are parties at the time, in the currency and otherwise in the manner specified therein provided that, if an Obligor can demonstrate to the reasonable satisfaction of the Owners that all necessary instructions were given to effect such payment and the non-receipt thereof is attributable solely to an administrative or technical error or an error in the banking system or a Disruption Event, then such payment shall instead be deemed to be due, solely for the purposes of this paragraph, within five (5) Business Days of the date on which it actually fell due under this Charter (if a payment of Hire) and seven (7) Business Days (if a sum payable on demand) ; or

(b)
Misrepresentation any representation or statement made by any Obligor in any Transaction Document to which it is a party or in any notice or other document, certificate or statement delivered by it pursuant thereto or in connection therewith is or proves to have been incorrect or misleading in any material respect, where the circumstances causing the same give rise to a Material Adverse Effect; or

(c)
Specific covenants any Obligor fails duly to perform or comply with any of the obligations expressed to be assumed by or procured by them under paragraphs 52.27, 52.30 and 52.32) of Clause 52 (Charterers’ undertakings) ; or

(d)
Other obligations any of the Obligors fails duly to perform or comply with any of the obligations expressed to be assumed by them in any Transaction Document (other
43



than those referred to in paragraph (c)) and such failure is not remedied within 60 days after the earlier of (A) the Owners having given notice thereof to the relevant Obligor and (B) the Obligor becoming aware of such failure to perform or comply; or

(e)
Cross Default any Financial Indebtedness of any Obligor is not paid when due (or within any applicable grace period) and payable prior to its specified maturity where the aggregate of all such unpaid or accelerated indebtedness of such Obligor is equal to or greater than US Dollars Ten Million (US$10,000,000) or its equivalent in any other currency or currencies and such default is not remedied within 45 days after such default; or

(f)
Insolvency and rescheduling any of the Obligors is unable to pay their debts as they fall due, commences negotiations with any one or more of their creditors with a view to the general readjustment or rescheduling of their indebtedness or makes a general assignment for the benefit of their creditors or a composition with their creditors; or

(g)
Winding-up any of the Obligors files for initiation of formal restructuring proceedings, is wound up or declared bankrupt or take any corporate action or other steps are taken or legal proceedings are started for their winding-up, dissolution, administration or re-organisation or for the appointment of a liquidator, receiver, administrator, administrative receiver, conservator, custodian, trustee or similar officer of them or of any or all of their revenues or assets or any moratorium is declared or sought in respect of any of their indebtedness; or

(h)
Execution or distress

(i)
any Obligor fails to comply with or pays any sum due from them (within 30 days of such amount falling due) under any final judgment or any final order made or given by any court or other official body of a competent jurisdiction in an aggregate in respect of the Obligor equal to or greater than US Dollars Ten Million (US$10,000,000) or its equivalent in any other currency, being a judgment or order against which there is no right of appeal or if a right of appeal exists, where the time limit for making such appeal has expired; or

(ii)
any execution or distress is levied against, or an encumbrancer takes possession of, the whole or any part of, the property, undertaking or assets of any Obligor in an aggregate amount equal to or greater than US Dollars Five Million (US$5,000,000) or its equivalent in any other currency or currencies, other than any execution or distress which is being contested in good faith and which is either discharged within 30 days or in respect of which adequate security has been provided within 30 days to the relevant court or other authority to enable the relevant execution or distress to be lifted or released; or

(i)
Similar event any event occurs which, under the laws of any jurisdiction, has a similar or analogous effect to any of those events mentioned in paragraphs (f), (g) or (h) above; or

(j)
Repudiation any of the Obligors repudiates any Transaction Document to which it is a party or do or cause to be done any act or thing evidencing an intention to repudiate any such Transaction Document; or

(k)
Validity and admissibility at any time any act, condition or thing required to be done, fulfilled or performed in order:

(i)
to enable any of the Obligors lawfully to enter into, exercise their rights under and perform the material obligations expressed to be assumed by them in the Transaction Documents;
44




(ii)
to ensure that the material obligations expressed to be assumed by any of the Obligors in the Transaction Documents are legal, valid and binding;

(iii)
to make the Transaction Documents admissible in evidence in any applicable jurisdiction,
is not done, fulfilled or performed within thirty (30) days after notification from the Owners to the relevant Obligor requiring the same to be done, fulfilled or performed; or

(l)
Illegality at any time:

(i)
it is or becomes unlawful for any of the Obligors to perform or comply with any or all of their obligations under the Transaction Documents to which they are parties;

(ii)
any of the obligations of any of the Obligors under the Transaction Documents to which they are parties are not or cease to be legal, valid and binding; or

(iii)
any Security Interest created or purported to be created by the Security Documents ceases to be legal, valid, binding, enforceable or effective or is alleged by a party to such Security Document (other than the Owners) to be ineffective,
and, in each case, such illegality is not remedied or mitigated to the satisfaction of the Owners within sixty (60) days after it has given notice thereof to the Charterers; or

(m)
Material adverse change at any time there shall occur any event or change which has a Material Adverse Effect in respect of any of the Obligors and such event or change, if capable of remedy, is not so remedied within thirty (30) days of the delivery of a notice confirming such event or change by the Owners to the Charterers; or

(n)
Conditions precedent if any of the conditions set out in Clause 40 (Conditions precedent) is not satisfied by the relevant time or such other time period specified by the Owners in their discretion; or

(o)
Revocation or modification of consents etc. if any Necessary Authorisation which is now or which at any time during the Agreement Term becomes necessary to enable an Obligor to comply with any of its obligations in or pursuant to any of the Transaction Documents or the Project Documents is revoked, withdrawn or withheld, or modified in a manner which the Owners reasonably consider is, or may be, prejudicial to the interests of Owners in a material manner, or if such Necessary Authorisation ceases to remain in full force and effect and not remedied with 20 days; or

(p)
Cessation of business any of the Obligors ceases, or threatens to cease, to carry on all or a substantial part of its business; or

(q)
Curtailment of business if the business of any of the Obligors is wholly or materially curtailed by any intervention by or under authority of any government, or if all or a substantial part of the undertaking, property or assets of the Obligor is seized, nationalised, expropriated or compulsorily acquired by or under authority of any government or any of the Obligors disposes or threatens to dispose of a substantial part of their business or assets; or

(r)
Reduction of capital if any of the Obligors reduces their committed or subscribed capital other than in the course of regular finance or business activity; or

(s)
Environmental matters
45




(i)
any Environmental Claim is pending or made against any Obligors or in connection with the Vessel, where such Environmental Claim has a Material Adverse Effect;

(ii)
any actual Environmental Incident occurs in connection with the Vessel, where such Environmental Incident has a Material Adverse Effect; or

(t)
Loss of property all or a substantial part of the business or assets of any of the Obligors is destroyed, abandoned, seized, appropriated or forfeited for any reason, and such occurrence in the reasonable opinion of the Owners has a Material Adverse Effect; or

(u)
Sanctions any Obligor or any of their directors, officers or employees becomes a Restricted Party and no remedy is available within 60 days or any Sanctions are enacted against the Vessel; or

(v)
Arrest the Vessel is arrested or seized for any reason whatsoever (other than caused solely and directly by any action or omission from the Owners) unless the Vessel is released and returned to the possession of the Charterers within forty five (45) days of such arrest or seizure; or

(w)
Delivery the Vessel has not for any reason been delivered to, and accepted by, the Owners under the Novated Building Contract on or before the Cancellation Date;

(x)
Collateral Charter a “Termination Event” (or any other similar event or circumstance and each as however described) occurs under the Collateral Charter.
54.2
The Owners and the Charterers agree that it is a fundamental term and condition of this Charter that no Termination Event shall occur during the Agreement Term. Without prejudice to the forgoing, a Termination Event which is continuing shall constitute an agreed terminating event, the occurrence of which will entitle the Owners to exercise all or any of the remedies set out below in this Clause 54.
54.3
At any time after occurrence of a Termination Event, the Owners shall be entitled to terminate the Charter forthwith by giving a written notice to the Charterers demanding the Charterers (a) to redeliver the Vessel to Owners and (b) pay the Termination Sum to the Owners in accordance with Clause 54(f) below, within sixty (60) days following the date of the notice (“Termination Notice”). Once the Termination Notice is sent to the Charterers, the Owners shall be entitled to (but not bound and without prejudice to the Charterers’ obligations hereunder) retake possession of the Vessel immediately on the date of the Termination Notice or any other date as specified by the Owners and the Charterers shall, within sixty (60) days following the date of Termination Notice, pay the Termination Sum to the Owners in accordance with Clause 54(f) below. If the Termination Date is not a Payment Date, the Fixed Hire payable, calculated on a pro rata basis between the immediately previous Payment Date and on the immediately following Payment Date shall become immediately due and payable on the Termination Date. In case the Charterers fail to pay the Termination Sum in full within sixty (60) following the date of the Termination Notice the Owners shall be entitled to exercise the remedies as provided in Clause 54(i).
54.4
The Owners may demand that the Charterers pay to the Owners on the Termination Payment Date or such later date as the Owners shall specify (and without prejudice to any other rights, claims or remedies which the Owners may have under this Charter and applicable laws) the Termination Sum. If the Termination Sum paid by the Charterers under this Charter does not cover the Owners’ loss, the Owners shall be entitled to claim further compensation for their losses and for all reasonable expenses incurred together with any interest accrued thereon. The Owners shall not be under any liability whatsoever to the Charterers for loss or damage if any occasioned by the Charterers for the termination of this Charter unless such termination is wrongful.
46



54.5
The Charterers shall pay or reimburse to the Owners on demand all losses suffered by the Owners in connection with such Termination Event and/or termination including, without prejudice to the generality of the foregoing, all liabilities, reasonable costs and expenses so incurred in recovering possession of, and in moving, storing, insuring and maintaining, the Vessel and in carrying out any works or modifications required to cause the Vessel to conform with the provisions of Clause 47 in respect of redelivery under this Charter together with interest thereon from the date on which the relevant loss was suffered by the Owners until the date of payment or reimbursement thereof (both before and after any relevant judgment or winding up of the Charterers) pursuant to this Clause 51.
54.6
Upon receipt of the Termination Notice from the Owners, the Charterers have the obligation to pay the Termination Sum (together with interest at the default rate in accordance with Clause 44.3(j)) for purchasing the Vessel from the Owners within 60 days. Upon receipt of full amount of the Termination Sum, by the Charterers, the Owners will transfer to the Charterers or its nominee all of the Owners’ rights, title and interests in the Vessel on “as is-where is” basis and shall discharge the mortgage as may be created over the Vessel. The Charterers shall not be entitled for any reason whatsoever to claim against the Owners for any losses, or any loss of profit resulting directly or indirectly from any defect or alleged defect in the Vessel. All registration, legal or other expenses whatsoever incurred in respect of the transfer of the title in the Vessel from the Owners to the Charterers or its nominee shall be for the account of the Charterers.
54.7
Any amount due to the Owners under this Clause shall bear interest (before and after any relevant judgment or any winding-up of the Charterers) from the Termination Date to the date of the Owners’ actual receipt thereof.
54.8
Notwithstanding the termination of this Charter pursuant to this Clause, the Charterers shall irrevocably and unconditionally continue to comply with its obligations under this Charter until the Owners have received the Termination Sum and other sum payable by the Charterers to the Owners pursuant to this Charter.
54.9
If the Charterers fail to pay in full the Termination Sum and other sums payable under this Charter upon the Owners’ demand for payment pursuant to this Clause 54 within sixty (60) days following the date of the Termination Notice, the Parties shall first obtain three valuation reports from three independent Approved Valuers (each party appoint one Approved Valuers and the third one to be appointed by the parties jointly)

(a)
if the average of the three assessment of the Fair Market Value of the Vessel at that time is no less than the Termination Sum, Owners shall then proceed to sell the Vessel without delay in the open market appointing as sales brokers, among other parties, at least one of the 3 independent Approved Valuers, free of any charter, lease or other engagement concerning the Vessel for such price and on such terms and conditions as it may, in its absolute discretion, think fit, but in any event within the price ranges provided by the Approved Valuers; or Charterers shall have the right to bring forward a buyer during the time that Owners are circulating the Vessel for sale and in case terms are better, including without limitation, than the sale price, Owner’s shall sell to the party brought forward by Charterers.

(b)
if the average of the three assessments of the Fair Market Value of the Vessel at that time is less than the Termination Sum, then the Owners may, at any time they think fit in its absolute discretion, sell the Vessel in the open market . In any event, the Owners shall, as soon as practicable following the Termination Payment Date, obtain three valuation reports from three independent Approved Valuers of the Fair Market Value of the Vessel and the average of the three report values shall be deducted from the Termination Sum.

(c)
where the Owners elect to sell the Vessel in accordance with Clause 54(i) above, an amount equal to the aggregate of the expenses, disbursements, taxes, costs and losses whatsoever as may have been incurred by the Owners in respect of the sale of
47



the Vessel shall be deducted from the gross proceeds of the sale of the Vessel; the balance of the sale proceeds is referred to hereinafter as the “Net Sale Proceeds”;

(d)
an amount equal to the Termination Sum plus all other amounts due and payable from the Charterers to the Owners hereunder, shall be deducted from the Net Sale Proceeds or the Fair Market Value, as the case maybe. If the Net Sale Proceeds or the Fair Market Value, as the case maybe, are insufficient to satisfy all amounts due and payable from the Charterers to the Owners hereunder, the Charterers shall pay the outstanding balance to the Owners. If there is any amount remaining from the Net Sale Proceeds or the Fair Market Value after the deduction of all the amounts due and payable by the Charterers to the Owners hereunder, the Owners shall pay the difference to the Charterers provided that if the Fair Market Value of the Vessel has been deducted from the Termination Sum in accordance with Clause 54(i)(d) the Owners shall be entitled to any surplus following a subsequent sale of the Vessel.
54.10
Where the Owners intends to sell the Vessel in accordance with Clause 54.9 above, Owners shall notify the Charterers in writing of the potential sale and the potential sale price of the Vessel (the “Proposed Owners’ Sale Price”) whereupon the Charterers (or their nominee) may, within 15 days of such notification, purchase the Vessel and pay an amount which is higher than the Proposed Owners’ Sale Price where the Owners intend to sell the Collateral Vessel at the same time as the Vessel, the Owners shall notifying the Charterers thereof in writing of the potential sale whereupon the Charterers (or their nominee) may, within 15 days of such notification, purchase both the Vessel and the Collateral Vessel and pay an amount which is at least equal to the aggregate of the Termination Sum and the Termination Sum (as defined in the Collateral Charter). If the Charterers notify the Owners that they do not intend to purchase the Vessel or the Charterers do not respond to the Owners within 5 days’ period or the MOA has not been agreed by the Owners and the Charterers’ or their nominee or the deposit has not been remitted the nominated account under the MOA within such 10 days’ period (or such longer period as the Owners may agree), the Owners may sell the Vessel on such terms as the Owners may deem fit.
54.11
Liquidated damages received under the Building Contract

(a)
any liquidated damages received by the Charterers or the Owners for:

(i)
any delays in delivery of the Vessel under the Building Contract shall be for Charterers account; and

(ii)
any physical defects or deficiencies of the Vessel under the Building Contract shall accrue to the account of the Charterers.
54.12
Where the Owners decide to terminate this Charter and retake possession of the Vessel pursuant to this Clause 54, the Owners agree to appoint a reputable ship manager to oversee the operation of the Vessel while it is in the Owners’ possession in accordance with prudent and sound commercial ship practices.
55.
[NOT USED]
56.
NAME OF VESSEL
Provided that the prior written consent has been given by the Owners:
56.1
the name of the Vessel may be chosen by the Charterers; and
56.2
the Vessel may be painted in the colours, display the funnel insignia and fly the house flag as required by the Charterers.
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57.
CHARTER PERIOD
The Charter period under this Charter shall be one hundred and twenty (120) months commencing from the Actual Delivery Date, unless otherwise extended or terminated pursuant to Clauses 44.3(l) (Hire), 54 (Termination Events), 60 (Sale of the Vessel by the Owners) and 61 (Total Loss).
58.
TRANSACTION FEES
58.1
Commitment fee
The Charterers shall pay to the Owners a commitment fee computed and accruing on a daily basis at the rate of 1.00 per cent per annum on amounts owed but not yet due by the Owners in respect of the Cost Balance and any other amounts payable by the Owners under the Novation AGreement.
58.2
Handling fee
A non-refundable handling fee (the “Handling fee”) in the amount of US$602,000 shall be paid by the Charterers to the Owners as follows:

(a)
US$100,000, receipt of which the Owners hereby acknowledge;

(b)
US$201,000 to be paid within five (5) Business Days of the date of this Charter; and

(c)
US$301,000 to be paid on the earlier of the date of Early Termination due to the enactment of the Pre-delivery Sales Clause and the Actual Delivery Date.
59.
EARLY TERMINATION, PURCHASE OPTION, PURCHASE OBLIGATION AND TRANSFER OF TITLE, PARTIAL PREPAYMENT
59.1
Subject to no Termination Events or Total Loss under Clause 61 (Total loss), the Charterers may, at any time from the Actual Delivery Date, by at least 90 days prior written notice to the Owners, declare to the Owners their exercise of the option to purchase the Vessel or to cause their nominee to purchase the Vessel by payment of (i) at any time prior to the second anniversary of the Actual Delivery Date, an amount equal to the Termination Sum as at that date together with a pre-payment fee equal to five (5) per cent of the Assumed Owners’ Cost plus the Sales Clause Termination Sum or (ii) at any time after the second anniversary of the Actual Delivery Date, the corresponding amount equal to the Purchase Option Price as set out under Schedule 4 or if the purchase option is exercised on a date which is not an anniversary date of the Actual Delivery Date, then the Purchase Option Price shall be the sum of the applicable Purchase Option Price from the last occurring anniversary date added to the product of n/365 (where n is the number of days elapsed since the last anniversary date to the proposed Purchase Option Date) and the positive difference between the Purchase Option Price on the next occurring anniversary date after the Purchase Option Date and the Purchase Option Price on the last anniversary date.. To avoid any confusion, the Charter Period will end immediately upon the Purchase Option Price having been paid.
59.2
If the Charterers have not exercised their rights under paragraph 59.1, the Charterers shall be obliged to purchase the Vessel or to cause their nominee to purchase the Vessel at the end of the Charter Period by payment of the Purchase Obligation Price and the Charterers shall pay the Purchase Obligation Price on the Purchase Obligation Date unless this Charter is terminated before the natural expiration of this Charter or the Owners and the Charterers agree otherwise.
59.3
In exchange for the full payment of the Purchase Option Price (in the case of a purchase under paragraph 59.1 above) or the sum stated in paragraph 59.2 above (in the case of a purchase under paragraph 59.2 above) and all sums due and payable to the Owners under the Transaction Documents and subject to compliance with the other conditions set out in this Clause, the Owners shall:
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(a)
transfer title to and ownership of the Vessel to the Charterers (or their nominee) by delivering to the Charterers (in each case at the Charterers’ costs):

(i)
a duly executed and notarised, legalised and/or apostilled (as applicable) bill of sale; and

(ii)
the Title Transfer PDA; and

(b)
(subject to the prior written consent of any Finance Party or its agent or permitted assigns and transferees (in each case as applicable)) use all reasonable endeavours to procure the deletion of any mortgage or prior Security Interest in relation to the Vessel at the Charterers’ cost,
provided always that prior to such transfer or deletion (as the case may be), the Owners shall have received the letter of indemnity as referred to in paragraph 59.6 below from the Charterers, and the Charterers shall have performed all their obligations in connection herewith and with the Vessel, including without limitation the full payment of all Unpaid Sums, taxes, charges, duties, costs and disbursements (including legal fees) in relation to the Vessel.
59.4
The transfer in accordance with paragraph 59.3 above shall be made in all respects at the Charterers’ expense on an “as is, where is” basis and the Owners shall give the Charterers (or their nominee) no representations, warranties, agreements or guarantees whatsoever concerning or in connection with the Vessel, the Insurances, the Vessel’s condition, state or class or anything related to the Vessel, expressed or implied, statutory or otherwise.
59.5
The Owners shall have no responsibility for the registrability of a bill of sale referred to in paragraph 59.3 above executed by the Owners, as far as such bill of sale is prescribed in a generally acceptable form.
59.6
The Charterers shall, immediately prior to the receipt of the bill of sale, furnish the Owners with a letter of indemnity (in a form satisfactory to the Owners) whereby the Charterers and the Charter Guarantor shall state that, among other things, the Owners has and will have no interest, concern or connection with the Vessel after the date of such letter and that the Charterers and/or the Charter Guarantor shall indemnify the Owners and keep the Owners indemnified forever against any claims made by any person arising in connection with the Vessel.
59.7

(a)
upon at least ninety (90) days’ written notice, the Charterers should have the option for one time only to make a one-off prepayment of up to $3m (in multiples of $1m); and

(b)
any partial prepayment should follow the following mechanism.

(i)
If the partial prepayment is to be exercised on a date falling before the 2nd anniversary of the Delivery Date, then the proportion of the partial prepayment is equal to the amount of the prepayment divided by USD29,000,000.

(ii)
If the partial prepayment is to be exercised on a date falling after the 2nd anniversary of the Delivery Date, then the proportion of the partial prepayment is equal to the amount of the prepayment divided by the Purchase Option Price on that date.

(iii)
After the partial prepayment is completed, the following Fixed Hire, Cost Balance, Purchase Option Prices and Balloon Amount should be adjusted downwards in the same proportion as the above proportion of the partial prepayment.
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60.
PRE-DELIVERY SALES CLAUSE
During the Charter Period, the Owners shall not sell the Vessel unless (i) the Vessel is sold to an Affiliate of the Owners subject to Charterers consent not to be unreasonably withheld, or (ii) such sale is permitted by and made in accordance with Clause 54 (Termination Events) or (iii) with the Charterers’ prior written consent, provided that, in respect of a sale effected under (i) and (iii), such sale shall not increase the obligations of the Obligors under the Transaction Documents and any documentation required in connection with such sale shall be effected at the cost of the Owners. Notwithstanding the foregoing of this clause (except for the sale permitted by and made in accordance with Clause 54 (Termination Events)), this Charter will continue to exist, valid and effective on the same and identical terms (save for logical and consequential amendments).
60.1
For the period starting from the signing of this charter and ending on the actual Delivery Date, the Charterers have the right to sell the Vessel and terminate the Charter provided that a written notice is provided by the Charterers to the Owners at least 90 days prior to the Delivery Date and an amount equal to the Termination Sum as at that date together with a pre-payment fee equal to three (3) percent of the Assumed Owners’ Cost plus the Sales Clause Termination Sum.
60.2
At any time, throughout the period of this charter, the Corporate Guarantor may acquire the beneficial ownership the Charterer.
61.
TOTAL LOSS
61.1
If circumstances exist giving rise to a Total Loss, the Charterers shall promptly notify the Owners of the facts of such Total Loss. If the Charterers wish to proceed on the basis of a Total Loss and advise the Owners thereof, the Owners shall agree to the Vessel being treated as a Total Loss for all purposes of this Charter. The Owners shall thereupon abandon the Vessel to the Charterers and/or execute such documents as may be required to enable the Charterers to abandon the Vessel to insurers and claim a Total Loss. Without prejudice to the obligations of the Charterers to pay to the Owners all monies then due or thereafter to become due under this Charter, if the Vessel shall become a Total Loss during the Charter Period, the Charter Period shall end on the Settlement Date.
61.2
If the Vessel becomes a Total Loss during the Charter Period, the Charterers shall, on the Settlement Date, pay to the Owners the amount calculated in accordance with paragraph 61.3 below.
61.3
On the Settlement Date, the Charterers shall pay to the Owners an amount equal to the Pre-delivery Termination Sum or the Termination Sum as at the Termination Payment Date (provided that such amount payable shall be set off against the Total Loss Proceeds if they are already received by the Owners as referred to under paragraph 61.4 below). The foregoing obligations of the Charterers under this paragraph 61.3 shall apply regardless of whether or not any moneys are payable under any Insurances in respect of the Vessel, regardless of the amount payable thereunder, regardless of the cause of the Total Loss and regardless of whether or not any of the said compensation shall become payable.
61.4
All Total Loss Proceeds shall be paid to such account or accounts as the Owners may direct and shall be applied towards satisfaction of the Termination Sum and any other sums due and payable under the Transaction Documents. To the extent that there is any surplus after such application, such surplus shall be promptly returned to the Charterers.
61.5
The Charterers shall, at the Owners’ request, provide satisfactory evidence, in the reasonable opinion of the Owners, as to the date on which the constructive total loss of the Vessel occurred pursuant to the definition of Total Loss.
61.6
The Charterers shall continue to pay the Advance Hire and the Hire on the days and in the amounts required under this Charter notwithstanding that the Vessel shall become a Total Loss provided always that no further instalments of Hire or the payments of the Advance Hire shall
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become due and payable after the Charterers have made the payment required by paragraph 61.3 above.
62.
ADDITIONAL PAYMENT OBLIGATIONS
62.1
Subject always to paragraph 62.2, the Charterers shall bear all costs, fees (including legal fees) and disbursements reasonably incurred by the Owners and the Charterers in connection with:

(a)
the negotiation, preparation and execution of this Charter and the other Transaction Documents;

(b)
the delivery of the Vessel under the Novation Agreement and this Charter;

(c)
preparation or procurement of any survey, inspections, tax or insurance advice;

(d)
all legal fees and other expenses reasonably arising out of or in connection with the exercising of the purchase option by the Charterers pursuant to Clause 59 (Purchase Option and Title Transfer) of this Charter; and

(e)
such other activities relevant to the transaction contemplated herein.
62.2
Notwithstanding anything to the contrary, the Charterers shall not bear any costs, fees (including legal fees) and disbursements incurred by the Owners in connection with:

(a)
any financing activities undertaken by the Owners, whether or not such financing activities are undertaken for the purposes of entering into this Charter, the Novation Agreement or any of the Transaction Documents; and

(b)
the incorporation, setting-up or continued operation of any special purpose vehicles or legal entities for the purposes of or in relation to this Charter, the Novation Agreement or any of the Transaction Documents.
63.
STAMP DUTIES AND TAXES
The Charterers shall pay promptly all documented stamp, documentary or other like duties and taxes to which the Charter, the Novation Agreement and the other Transaction Documents may be subject or give rise and shall indemnify the Owners on demand against any and all liabilities with respect to or resulting from any delay on the part of the Charterers to pay such duties or taxes, provided that Owners will procure that their tax residence is at all times in the most tax efficient jurisdiction for this transaction. If the parties determine that there is a more tax efficient jurisdiction, the Owners agree to reasonably consider to move the Owners tax residency to such jurisdiction at Charterers’ cost.
64.
OPERATIONAL NOTIFIABLE EVENTS
The Owners are to be advised as soon the Charterers are aware of the occurrence of any of the following events:

(a)
when a material condition of class is applied by the Classification Society;

(b)
whenever the Vessel is arrested, confiscated, seized, requisitioned, impounded, forfeited or detained by any government or other competent authorities or any other persons;

(c)
whenever a class or flag authority refuses to issue or withdraw trading certification;

(d)
in the event of a fire requiring the use of fixed fire systems or collision / grounding;

(e)
whenever the Vessel is planned for dry-docking in accordance with Clause 10(g) (Part II) and whether routine or emergency;
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(f)
the Vessel is taken under tow unless in the normal course of shipping operations;

(g)
any death or serious injury on board; or

(h)
any damage to the Vessel the repair costs of which (whether before or after adjudication) are likely to exceed US Dollars Three Million (US$3,000,000).
65.
FURTHER INDEMNITIES
65.1
Whether or not any of the transactions contemplated hereby are consummated, the Charterers shall, in addition to the provisions under Clause 17 (Indemnity) (Part II) of this Charter, indemnify, protect, defend and hold harmless the Owners and their respective officers, directors and employees (collectively, the “Indemnitees”) throughout the Agreement Term from, against and in respect of, any and all liabilities, obligations, losses, damages, penalties, fines, fees, claims, actions, proceedings, judgement, order or other sanction, lien, salvage, general average, suits, costs, expenses and disbursements, including reasonable legal fees and expenses, of whatsoever kind and nature (collectively, the “Expenses”), imposed on, suffered or incurred by or asserted against any Indemnitee, in any way relating to, resulting from or arising out of or in connection with, in each case, directly or indirectly, any one or more of the following:

(a)
this Charter, any of the other Transaction Documents and the Project Documents, and any amendment, supplement or modification thereof or thereto requested by the Charterers;

(b)
the Vessel or any part thereof, including with respect to:

(i)
the ownership of, manufacture, design, possession, use or non-use, operation, maintenance, testing, repair, overhaul, condition, alteration, modification, addition, improvement, storage, seaworthiness, replacement, repair of the Vessel or any part (including, in each case, latent or other defects, whether or not discoverable and any claim for patent, trademark, or copyright infringement and all liabilities, obligations, losses, damages and claims in any way relating to or arising out of spillage of cargo or fuel, out of injury to persons, properties or the environment or strict liability in tort);

(ii)
any claim or penalty arising out of violations of applicable law by the Charterers or any other Sub-charterers;

(iii)
death or property damage of shippers or others;

(iv)
any liens in respect of the Vessel or any part thereof; or

(v)
any registration and/or tonnage fees (whether periodic or not) in respect of the Vessel payable to any registry of ships;

(c)
any breach of or failure to perform or observe, or any other non-compliance with, any covenant or agreement or other obligation to be performed by the Charterers under any Transaction Document to which it is a party or the falsity of any representation or warranty of the Charterers in any Transaction Document to which it is a party or the occurrence of any Termination Event;

(d)
in preventing or attempting to prevent the arrest, confiscation, seizure, taking and execution, requisition, impounding, forfeiture or detention of the Vessel, or in securing or attempting to secure the release of the Vessel in connection with the exercise of the rights of a holder of a lien created by the Charterers;

(e)
incurred or suffered by the Owners in:
53




(i)
procuring the delivery of the Vessel to the Charterers under Clause 35 (Delivery);

(ii)
registering the Vessel at the registry of the Pre-Approved Flag;

(iii)
recovering possession of the Vessel following termination of this Charter under Clause 54 (Termination Events);

(iv)
arranging for a sale of the Vessel in accordance with Clause 60 (Sale of Vessel by the Owners); or

(v)
arranging for a transfer of the title of the Vessel in accordance with paragraph 59.3 of Clause 59 (Purchase Option and transfer of title)

(f)
arising from the Master or officers of the Vessel or the Charterers’ agents signing bills of lading or other documents;

(g)
in connection with:

(i)
the arrest, seizure, taking into custody or other detention by any court or other tribunal or by any governmental entity; or

(ii)
subjection to distress by reason of any process, claim, exercise of any rights conferred by a lien or by any other action whatsoever, of the Vessel which are expended, suffered or incurred as a result of or in connection with any claim or against, or liability of, the Charterers or any other member of the Charterers’ group, together with any costs and expenses or other outgoings which may be paid or incurred by the Owners in releasing the Vessel from any such arrest, seizure, custody, detention or distress.
Provided however that the Owners shall not be entitled to any indemnification or recompense pursuant to this Clause 65 for any liabilities, obligations, losses, damages, penalties, claims, actions, suits, fees, costs, expenses and disbursements incurred by the Owners as a consequence of any (A) wilful breach of this Charter by the Owners, or (B) arrest of the Vessel arising due to any action or omission on the part of the Owners.
65.2
The Charterers shall pay to the Owners promptly on the Owners’ written demand the amount of all costs and expenses (including legal fees) incurred by the Owners in connection with the enforcement of, or the preservation of any rights under, any Transaction Document including (without limitation) (i) any losses, costs and expenses which the Owners may from time to time sustain, incur or become liable for by reason of the Owners being deemed by any court or authority to be an operator, or in any way concerned in the operation, of the Vessel and (ii) collecting and recovering the proceeds of any claim under any of the Insurances.
65.3
Without prejudice to any right to damages or other claim which either party may, at any time, have against the other hereunder, it is hereby agreed and declared that the indemnities of the Owners by the Charterers contained in this Charter shall continue in full force and effect for a period of twenty four (24) months after the Agreement Term.
66.
SET-OFF
66.1
The Owners may set off any matured and/or contingent obligation due from the Charterers under the Transaction Documents (to the extent beneficially owned by the Owners) against any obligation (whether matured or not) owed by the Owners to the Charterers, regardless of the place of payment or currency of either obligation. If the obligations are in different currencies, the Owners may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
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66.2
The Charterers may not set off any matured and/or contingent obligation due from the Owners under the Transaction Documents (to the extent beneficially owned by the Charterers) against any obligation (whether matured or not) owed by the Charterers to the Owners, regardless of the place of payment or currency of either obligation.
67.
FURTHER ASSURANCES AND UNDERTAKINGS
67.1
Each party shall make all applications and execute all other documents and do all other acts and things as may be necessary to implement and to carry out their obligations under, and the intent of, this Charter.
67.2
The parties shall act in good faith to each other in respect of any dealings or matters under, or in connection with, this Charter.
68.
CUMULATIVE RIGHTS
The rights, powers and remedies provided in this Charter are cumulative and not exclusive of any rights, powers or remedies at law or in equity unless specifically otherwise stated.
69.
DAY COUNT CONVENTION
Any interest, commission or fee accruing under a Transaction Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days.
70.
NO WAIVER
No delay, failure or forbearance by a party to exercise (in whole or in part) any right, power or remedy under, or in connection with, this Charter will operate as a waiver. No waiver of any breach of any provision of this Charter will be effective unless that waiver is in writing and signed by the party against whom that waiver is claimed. No waiver of any breach will be, or be deemed to be, a waiver of any other or subsequent breach.
71.
ENTIRE AGREEMENT
71.1
This Charter contains all the understandings and agreements of whatsoever kind and nature existing between the parties in respect of this Charter, the rights, interests, undertakings agreements and obligations of the parties to this Charter and shall supersede all previous and contemporaneous negotiations and agreements.
71.2
This Charter may not be amended, altered or modified except by a written instrument executed by each of the parties to this Charter.
72.
INVALIDITY
If any term or provision of this Charter or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable the remainder of this Charter or application of such term or provision to persons or circumstances (other than those as to which it is already invalid or unenforceable) shall (to the extent that such invalidity or unenforceability does not materially affect the operation of this Charter) not be affected thereby and each term and provision of this Charter shall be valid and be enforceable to the fullest extent permitted by law.
73.
ENGLISH LANGUAGE
All notices, communications and financial statements and reports under or in connection with this Charter and the other Transaction Documents shall be in English language or, if in any other language, shall be accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail.
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74.
NO PARTNERSHIP
Nothing in this Charter creates, constitutes or evidences any partnership, joint venture, agency, trust or employer/employee relationship between the parties, and neither party may make, or allow to be made any representation that any such relationship exists between the parties. Neither party shall have the authority to act for, or incur any obligation on behalf of, the other party, except as expressly provided in this Charter.
75.
NOTICES
75.1
Any notices to be given to the Owners under this Charter shall be sent in writing by registered letter, facsimile or email and addressed to:
c/o AVIC INTERNATIONAL LEASING CO., LTD.

Address:
18/F, CATIC Tower,

212 Jiang Ning Road,
Shanghai 200041, China
The People’s Republic of China

Fax No.:
+86 21 5289 5389

Email:
chenzhengrong@chinaleasing.net

Attention:
Ms. Emily Chen
or to such other address, facsimile number or email address as the Owners may notify to the Charterers in accordance with this Clause 75.
75.2
Any notices to be given to the Charterers under this Charter shall be sent in writing by registered letter, facsimile or email and addressed to the Charterers:
c/o TOP SHIPS INC.

Address:
1 Vas. Sofias & Meg. Alexandrou, Athens 15124 Greece

Telephone No.:
+30 21 081 28 180

Email:
atsirikos@topships.org

Attention:
Alexandros Tsirikos
or to such other address, facsimile number or email address as the Charterers may notify to the Owners in accordance with this Clause 75.
75.3
Any such notice shall be deemed to have reached the party to whom it was addressed, when dispatched and acknowledged received (in case of a facsimile or an email) or when delivered (in case of a registered letter). A notice or other such communication received on a non-working day or after business hours in the place of receipt shall be deemed to be served on the next following working day in such place

76.
CONFLICTS
Unless stated otherwise, in the event of there being any conflict between the provisions of Clauses 32 (Definitions) (Part II) to 75 (Notices) (Part II) and the provisions of Clauses 32 (Definitions) to 82 (Conditions subsequent), the provisions of Clauses 32 (Definitions) to 82 (Conditions subsequent) shall prevail.
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77.
SURVIVAL OF CHARTERERS’ OBLIGATIONS
The termination of this Charter for any cause whatsoever shall not affect the right of the Owners to recover from the Charterers any money due to the Owners on or before the termination in consequence thereof and all other rights of the Owners (including but not limited to any rights, benefits or indemnities which are expressly provided to continue after the termination of this Charter) are reserved hereunder.
78.
COUNTERPARTS
This Charter may be executed in any number of counterparts and any single counterpart or set of counterparts signed, in either case, by all the parties hereto shall be deemed to constitute a full and original agreement for all purposes.
79.
CONFIDENTIALITY
79.1
The Parties shall maintain the information provided in connection with the Transaction Documents strictly confidential and agree to disclose to no person other than:

(a)
its board of directors, employees (only on a need to know basis), and shareholders, professional advisors and rating agencies;

(b)
as may be required to be disclosed under applicable law or stock market or other regulations or for the purpose of legal proceedings;

(c)
in the case of the Owners, to any Finance Party or other actual or potential financier providing funding for the acquisition or refinancing of the Vessel;

(d)
in the case of the Charterers, to any Sub-charterer in respect of obtaining any consent required under the terms of any Sub-charter; and

(e)
the managers, the classification society and flag authorities as may be necessary in connection with the transactions contemplated hereunder.
79.2
Any other disclosure by each Party shall be subject to the prior written consent of the other Party.
80.
THIRD PARTIES ACT
80.1
Any person which is an Indemnitee or a Finance Party from time to time and is not a party to this Charter shall be entitled to enforce such terms of this Charter as provided for in this Charter in relation to the obligations of the Charterers to such Indemnitee or (as the case may be) Finance Party, subject to the provisions of Clause 81 (Law and jurisdiction) and the Third Parties Act. The Third Parties Act applies to this Charter as set out in this Clause 80.
80.2
Save as provided above, a person who is not a party to this Charter has no right under the Third Parties Act to enforce or to enjoy the benefit of any term of this Charter.
81.
LAW AND JURISDICTION
81.1
This Charter and any non-contractual obligations arising from or in connection with it shall in all respects be governed by and interpreted in accordance with English law.
81.2
Any dispute, controversy or claim arising out of or relating to this Charter, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it shall be referred to and finally resolved by London arbitration.
81.3
The law of this Clause 81 shall be English law.
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81.4
Any dispute arising out of or in connection with this Charter shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause.
81.5
The arbitration shall be conducted in accordance with the London Maritime Arbitrations Association (LMAA). Terms current at the time when the arbitration proceedings are commenced.
81.6
The reference shall be to three arbitrators. A party wishing to refer a dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within fourteen (14) calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified.
81.7
If one party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both Parties as if the sole arbitrator had been appointed by agreement.
81.8
In cases where neither the claim nor any counterclaim exceeds the sum of US$50,000 (or such other sum as the parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedures current at the time when the arbitration proceedings are commenced and the number of arbitrators shall be one.
82.
CONDITIONS SUBSEQUENT
82.1
Notwithstanding anything to the contrary in this Charter, the obligations of the Owners to charter, or continue to charter, the Vessel to the Charterers under this Charter shall be subject to the condition that the Owners shall have received the following documents and evidence in form and substance satisfactory to the Owners no later than three (3) Business Days after the Actual Delivery Date:

(a)
a copy of the endorsed policy issued by the insurer in respect of the Vessel;

(b)
a copy of the duly signed letter of undertaking issued by all the relevant underwriters or insurance brokers in respect of the Vessel;

(c)
the Owners shall have received, no later than fourteen (14) calendar days after the Actual Delivery Date, an original of the duly executed acknowledgement by the Sub-charterers in accordance with the Charterers Assignment;

(d)
the Vessel’s transcript of register evidencing that the Vessel is free from any registered Security Interest;

(e)
the Vessel’s current Safety Management Certificate (as such term is defined pursuant to the ISM Code);

(f)
the Approved Manager’s current Document of Compliance (as such term is defined pursuant to the ISM Code);

(g)
the Vessel’s current ISSC;

(h)
the Vessel’s current IAPPC; and

(i)
the Vessel’s classification certificate evidencing that it is free of all recommendations and requirements from the Classification Society.
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83.
FATCA
83.1
Defined terms
For the purposes of this Clause 83 (FATCA), the following terms shall have the following meanings:
Code” means the United States Internal Revenue Code of 1986, as amended.
FATCA” means sections 1471 through 1474 of the Code and any Treasury regulations thereunder.
FATCA Deduction” means a deduction or withholding from a payment under the Transaction Documents or the Project Documents required by or under FATCA.
FATCA Exempt Party” means a Relevant Party that is entitled under FATCA to receive payments free from any FATCA Deduction.
FATCA FFI” means a foreign financial institution as defined in section 1471(d)(4) of the Code which, if a Relevant Party is not a FATCA Exempt Party, could be required to make a FATCA Deduction.
FATCA Non-Exempt Party” means any Relevant Party who is not a FATCA Exempt Party. “Relevant Party” means any of the parties to the Transaction Documents.
IRS” means the United States Internal Revenue Service or any successor taxing authority or agency of the United States government.
83.2
FATCA Information

(a)
Subject to paragraph (iii) below, each Relevant Party shall, on the date of this Charter, and thereafter within ten (10) Business Days of a reasonable request by another Relevant Party:

(i)
confirm to that other party whether it is a FATCA Exempt Party or is not a FATCA Exempt Party; and

(ii)
supply to the requesting party (with a copy to all other Relevant Parties) such other form or forms (including IRS Form W-8 or Form W-9 or any successor or substitute form, as applicable) and any other documentation and other information relating to its status under FATCA (including its applicable “pass thru percentage” or other information required under FATCA or other official guidance including intergovernmental agreements) as the requesting party reasonably requests for the purpose of the requesting party’s compliance with FATCA.

(b)
If a Relevant Party confirms to any other Relevant Party that it is a FATCA Exempt Party or provides an IRS Form W-8 or W-9 showing 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 so notify all other Relevant Parties reasonably promptly.

(c)
Nothing in this Clause 74 (FATCA) shall oblige any Relevant Party to do anything which would or, in its reasonable opinion, might constitute a breach of any law or regulation, any policy of that party, any fiduciary duty or any duty of confidentiality, or to disclose any confidential information (including, without limitation, its tax returns and calculations); provided, however, that nothing in this paragraph shall excuse any Relevant Party from providing a true, complete and correct IRS Form W-8 or W-9 (or any successor or substitute form where applicable). Any information provided on such
59



IRS Form W-8 or W-9 (or any successor or substitute forms) shall not be treated as confidential information of such party for purposes of this paragraph.

(d)
If a Relevant Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with the provisions of this Charter or the provided information is insufficient under FATCA, 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 Transaction Documents as if it is a FATCA Non-Exempt Party; and

(ii)
if that party failed to confirm its applicable passthru percentage then such party shall be treated for the purposes of this Charter and the Transaction 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 sufficient confirmation, forms, documentation or other information to establish the relevant facts.
83.3
FATCA Deduction and gross-up by Relevant Party

(a)
If the representation made by the Charterers under Clause 48 (Charterers’ representations and warranties) proves to be untrue or misleading such that the Charterers are required to make a FATCA Deduction, the Charterers shall make the FATCA Deduction and any payment required in connection with that FATCA Deduction within the time allowed and in the minimum amount required by FATCA.

(b)
If the Charterers are required to make a FATCA Deduction then the Charterers shall increase the payment due from them to the Owners to an amount which (after making any FATCA Deduction) leaves an amount equal to the payment which would have been due if no FATCA Deduction had been required.

(c)
The Charterers shall promptly upon becoming aware that they must make a FATCA Deduction (or that there is any change in the rate or basis of a FATCA Deduction) notify the Owners accordingly. Within thirty (30) days of the Charterers making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the Charterers shall deliver to the Owners evidence reasonably satisfactory to the Owners that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the relevant governmental or taxation authority.

(d)
If the Owners are required to make a deduction or withholding from a payment under the Finance Documents in respect of FATCA, which deduction or withholding would not have been required if a Relevant Person were not a US Tax Obligor or FATCA FFI, and are required under the Finance Documents (if any) to pay additional amounts in respect of such deduction or withholding, the amount of the payment due from the Charterers shall be increased to an amount which, after any such deduction or withholding and payment of additional amounts, leaves the Owners with an amount equal to the amount which it would have had remaining if it had not been required to pay additional amounts under such Finance Documents.
83.4
FATCA Deduction by Owners
The Owners may make any FATCA Deduction they are required by FATCA to make, and any payment required in connection with that FATCA Deduction, and the Owners shall not be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient for that FATCA Deduction.
60



SCHEDULE 1
FORM OF PROTOCOL OF DELIVERY AND ACCEPTANCE
PROTOCOL OF DELIVERY AND ACCEPTANCE
It is hereby certified that pursuant to a bareboat charter dated                             and made between [ ] of [ ] (the “Owners”) as owner and [ ] of [ ] (the “Bareboat Charterers”) as bareboat charterer (as maybe amended and supplemented from time to time, the “Bareboat Charter”) in respect of one (1) vessel named [ ] and registered under the laws and flag of the Marshall Islands with IMO number [ ] (the “Vessel”), the Vessel is delivered for charter by the Owner to the Bareboat Charterer, and accepted by the Bareboat Charterer from the Owner at                        hours (Beijing time) on the date hereof in accordance with the terms and conditions of the Bareboat Charter.
IN WITNESS WHEREOF, the Owners and the Bareboat Charterers have caused this PROTOCOL OF DELIVERY AND ACCEPTANCE to be executed by their duly authorised representative on this       day of                          20[●] in [●].

THE OWNERS
 
THE BAREBOAT CHARTERERS
     
By:
 
By:
     
Name:
 
Name:
Title:
 
Title:
Date:
 
Date:
61



SCHEDULE 2
FORM OF TITLE TRANSFER PROTOCOL OF DELIVERY AND ACCEPTANCE
PROTOCOL OF DELIVERY AND ACCEPTANCE
Vessel [ ]
[ ] of [ ] (the “Owners”) deliver to [ ] of [ ] (the “Bareboat Charterers”) the Vessel described below and the Bareboat Charterers accept delivery of, title and risk to the Vessel pursuant to the terms and conditions of the bareboat charterer dated                          2019 (as may be amended and supplemented from time to time) and made between (1) the Owners and (2) the Bareboat Charterers.
Name of Vessel:
 
[ ]
Flag:
 
Marshall Islands
Place of Registration:
 
Marshall Islands
IMO Number:
 
[ ]
Gross Registered Tonnage:
 
[..]
Net Registered Tonnage:
 
[..]
Dated:
 
         20[●]
At:
 
hours (Hong Kong time)
     
Place of delivery:
   
THE OWNER
 
THE BAREBOAT CHARTERER
[ ]
 
[ ]
by:
 
by:
     
Name:
 
Name:
Title:
 
Title:
Date:
 
Date:
62



SCHEDULE 3
HIRE PAYMENT SCHEDULE
FIXED HIRE PAYMENT SCHEDULE
Builders Hull number 2749
payment dates
Cost
Balance at beginning of applicable term
Fixed Hire
Balloon Amount
10/01/2020
US$ 30,100,000.00
US$ 292,485.00
 
10/02/2020
US$ 29,984,434.99
US$ 273,615.00
 
10/03/2020
US$ 29,875,690.36
US$ 292,485.00
 
10/04/2020
US$ 29,758,806.92
US$ 283,050.00
 
10/05/2020
US$ 29,645,029.06
US$ 292,485.00
 
10/06/2020
US$ 29,526,789.85
US$ 283,050.00
 
10/07/2020
US$ 29,411,692.25
US$ 292,485.00
 
10/08/2020
US$ 29,292,081.55
US$ 292,485.00
 
10/09/2020
US$ 29,171,767.81
US$ 283,050.00
 
10/10/2020
US$ 29,054,650.80
US$ 292,485.00
 
10/11/2020
US$ 28,932,941.50
US$ 283,050.00
 
10/12/2020
US$ 28,814,466.01
US$ 292,485.00
 
10/01/2021
US$ 28,691,344.97
US$ 292,485.00
 
10/02/2021
US$ 28,567,500.25
US$ 264,180.00
 
10/03/2021
US$ 28,454,983.03
US$ 292,485.00
 
10/04/2021
US$ 28,329,749.04
US$ 283,050.00
 
10/05/2021
US$ 28,207,842.51
US$ 292,485.00
 
10/06/2021
US$ 28,081,155.89
US$ 283,050.00
 
10/07/2021
US$ 27,957,835.33
US$ 292,485.00
 
10/08/2021
US$ 27,829,679.24
US$ 292,485.00
 

63



10/09/2021
US$ 27,700,769.87
US$ 283,050.00
 
10/10/2021
US$ 27,575,285.62
US$ 292,485.00
 
10/11/2021
US$ 27,444,881.00
US$ 283,050.00
 
10/12/2021
US$ 27,317,941.22
US$ 292,485.00
 
10/01/2022
US$ 27,186,023.99
US$ 292,485.00
 
10/02/2022
US$ 27,053,331.39
US$ 264,180.00
 
10/03/2022
US$ 26,932,775.55
US$ 292,485.00
 
10/04/2022
US$ 26,798,594.42
US$ 283,050.00
 
10/05/2022
US$ 26,667,978.48
US$ 292,485.00
 
10/06/2022
US$ 26,532,240.94
US$ 283,050.00
 
10/07/2022
US$ 26,400,109.94
US$ 292,485.00
 
10/08/2022
US$ 26,262,797.94
US$ 292,485.00
 
10/09/2022
US$ 26,124,678.85
US$ 283,050.00
 
10/10/2022
US$ 25,990,229.58
US$ 292,485.00
 
10/11/2022
US$ 25,850,508.41
US$ 283,050.00
 
10/12/2022
US$ 25,714,499.62
US$ 292,485.00
 
10/01/2023
US$ 25,573,157.78
US$ 292,485.00
 
10/02/2023
US$ 25,430,985.17
US$ 264,180.00
 
10/03/2023
US$ 25,301,816.42
US$ 292,485.00
 
10/04/2023
US$ 25,158,048.93
US$ 283,050.00
 
10/05/2023
US$ 25,018,101.34
US$ 292,485.00
 
10/06/2023
US$ 24,872,666.25
US$ 283,050.00
 
10/07/2023
US$ 24,731,095.36
US$ 292,485.00
 
10/08/2023
US$ 24,583,973.33
US$ 292,485.00
 
10/09/2023
US$ 24,435,986.55
US$ 283,050.00
 
10/10/2023
US$ 24,291,931.76
US$ 292,485.00
 
10/11/2023
US$ 24,142,228.44
US$ 283,050.00
 

64




10/12/2023
US$ 23,996,502.72
US$ 292,485.00
 
10/01/2024
US$ 23,845,062.94
US$ 292,485.00
 
10/02/2024
US$ 23,692,733.04
US$ 273,615.00
 
10/03/2024
US$ 23,549,393.28
US$ 292,485.00
 
10/04/2024
US$ 23,395,325.50
US$ 283,050.00
 
10/05/2024
US$ 23,245,351.30
US$ 292,485.00
 
10/06/2024
US$ 23,089,496.45
US$ 283,050.00
 
10/07/2024
US$ 22,937,782.64
US$ 292,485.00
 
10/08/2024
US$ 22,780,119.98
US$ 292,485.00
 
10/09/2024
US$ 22,621,530.62
US$ 283,050.00
 
10/10/2024
US$ 22,467,154.97
US$ 292,485.00
 
10/11/2024
US$ 22,306,726.08
US$ 283,050.00
 
10/12/2024
US$ 22,150,559.77
US$ 292,485.00
 
10/01/2025
US$ 21,988,270.02
US$ 281,790.00
 
10/02/2025
US$ 21,835,721.37
US$ 254,520.00
 
10/03/2025
US$ 21,697,125.62
US$ 281,790.00
 
10/04/2025
US$ 21,542,865.69
US$ 272,700.00
 
10/05/2025
US$ 21,392,704.45
US$ 281,790.00
 
10/06/2025
US$ 21,236,655.22
US$ 272,700.00
 
10/07/2025
US$ 21,084,752.20
US$ 281,790.00
 
10/08/2025
US$ 20,926,892.91
US$ 281,790.00
 
10/09/2025
US$ 20,768,105.76
US$ 272,700.00
 
10/10/2025
US$ 20,613,537.57
US$ 281,790.00
 
10/11/2025
US$ 20,452,908.60
US$ 272,700.00
 
10/12/2025
US$ 20,296,547.53
US$ 281,790.00
 
10/01/2026
US$ 20,134,055.37
US$ 281,790.00
 
10/02/2026
US$ 19,970,608.12
US$ 254,520.00
 

65




10/03/2026
US$ 19,822,110.63
US$ 281,790.00
 
10/04/2026
US$ 19,656,829.85
US$ 272,700.00
 
10/05/2026
US$ 19,495,940.58
US$ 281,790.00
 
10/06/2026
US$ 19,328,742.66
US$ 272,700.00
 
10/07/2026
US$ 19,165,987.18
US$ 281,790.00
 
10/08/2026
US$ 18,996,849.88
US$ 281,790.00
 
10/09/2026
US$ 18,826,718.44
US$ 272,700.00
 
10/10/2026
US$ 18,661,107.37
US$ 281,790.00
 
10/11/2026
US$ 18,489,002.52
US$ 272,700.00
 
10/12/2026
US$ 18,321,470.49
US$ 281,790.00
 
10/01/2027
US$ 18,147,369.34
US$ 281,790.00
 
10/02/2027
US$ 17,972,244.87
US$ 254,520.00
 
10/03/2027
US$ 17,813,138.21
US$ 281,790.00
 
10/04/2027
US$ 17,636,049.21
US$ 272,700.00
 
10/05/2027
US$ 17,463,665.46
US$ 281,790.00
 
10/06/2027
US$ 17,284,522.36
US$ 272,700.00
 
10/07/2027
US$ 17,110,139.07
US$ 281,790.00
 
10/08/2027
US$ 16,928,918.03
US$ 281,790.00
 
10/09/2027
US$ 16,746,631.82
US$ 272,700.00
 
10/10/2027
US$ 16,569,188.95
US$ 281,790.00
 
10/11/2027
US$ 16,384,788.34
US$ 272,700.00
 
10/12/2027
US$ 16,205,287.25
US$ 281,790.00
 
10/01/2028
US$ 16,018,747.72
US$ 281,790.00
 
10/02/2028
US$ 15,831,111.77
US$ 263,610.00
 
10/03/2028
US$ 15,654,549.64
US$ 281,790.00
 
10/04/2028
US$ 15,464,773.02
US$ 272,700.00
 
10/05/2028
US$ 15,280,038.75
US$ 281,790.00
 

66




10/06/2028
US$ 15,088,060.86
US$ 272,700.00
 
10/07/2028
US$ 14,901,183.80
US$ 281,790.00
 
10/08/2028
US$ 14,706,979.10
US$ 281,790.00
 
10/09/2028
US$ 14,511,632.91
US$ 272,700.00
 
10/10/2028
US$ 14,321,477.05
US$ 281,790.00
 
10/11/2028
US$ 14,123,864.98
US$ 272,700.00
 
10/12/2028
US$ 13,931,503.44
US$ 281,790.00
 
10/01/2029
US$ 13,731,599.21
US$ 281,790.00
 
10/02/2029
US$ 13,530,519.99
US$ 254,520.00
 
10/03/2029
US$ 13,347,832.53
US$ 281,790.00
 
10/04/2029
US$ 13,144,497.63
US$ 272,700.00
 
10/05/2029
US$ 12,946,565.32
US$ 281,790.00
 
10/06/2029
US$ 12,740,871.87
US$ 272,700.00
 
10/07/2029
US$ 12,540,643.69
US$ 281,790.00
 
10/08/2029
US$ 12,332,564.34
US$ 281,790.00
 
10/09/2029
US$ 12,123,261.95
US$ 272,700.00
 
10/10/2029
US$ 11,919,520.72
US$ 281,790.00
 
10/11/2029
US$ 11,707,790.57
US$ 272,700.00
 
10/12/2029
US$ 11,501,686.08
US$ 281,790.00
 
10/01/2030
 
US$ 11,287,500

In this Schedule 3, the “Balloon Amount” means an amount which does not exceed the lower of (i) US$11,287,500 and (ii) thirty (30) per cent of the Cost Price, and shall be payable in a lump sum on the final Hire Payment Date.
67



SCHEDULE 4
SCHEDULE OF PURCHASE OPTION PRICE (EXCLUDING HIRE DUE)
Purchase Option Date
Purchase Option Price
2nd anniversary
USD27,274,800
3rd anniversary
USD25,704,000
4th anniversary
USD24,021,000
5th anniversary
USD22,185,000
6th anniversary
USD20,360,000
7th anniversary
USD18,380,400
8th anniversary
USD16,116,900
9th anniversary
USD13,974,000

*Subject to the Owners’ confirmation by reference to the figure to be provided by the Owners upon the fixing of the delivery or closing date in accordance with such early purchase of the Vessel.
68



SIGNATURE PAGE


ADDITIONAL CLAUSES
TO BAREBOAT CHARTER FOR
HULL NO. 2749

THE OWNERS
 
THE CHARTERERS
     
GREAT CATALINA LIMITED
 
SANTA CATALINA INC.
     
By:
 
By:
     
Name:
 
Name:
Title:
 
Title:
Date:
 
Date:
69



Dated          2019



TOP SHIPS INC.
as Guarantor




and




GREAT CATALINA LIMITED
as Owner




GUARANTEE AND INDEMNITY
relating to the obligations of
SANTA CATALINA INC.







HFW
www.hfw.com


TABLE OF CONTENTS
Clause
 
Page
1.
DEFINITIONS AND INTERPRETATION
1
2.
GUARANTEE AND INDEMNITY
2
3.
CONTINUING SECURITY
3
4.
RESTRICTIONS ON GUARANTOR
4
5.
PAYMENTS
5
6.
NO SET-OFF, COUNTERCLAIM OR TAX DEDUCTION
5
7.
DISCHARGE CONDITIONAL
5
8.
REPRESENTATIONS AND WARRANTIES
5
9.
INFORMATION UNDERTAKINGS
8
10.
FINANCIAL COVENANTS
9
11.
INDEMNITIES AND EXPENSES
10
12.
CHANGES TO THE PARTIES
11
13.
SET-OFF
11
14.
MISCELLANEOUS
12
15.
NOTICES
13
16.
GOVERNING LAW AND JURISDICTION
14
17.
CONTRACTUAL RECOGNITION OF BAIL-IN
15
SCHEDULE 1 [FORM OF COMPLIANCE CERTIFICATE]
16
EXECUTION PAGES
18


THIS DEED OF GUARANTEE AND INDEMNITY is made on                            2019
BETWEEN
(1)
TOP SHIPS INC., a corporation incorporated in the Republic of the Marshall Islands whose registered office is at 1 Vas. Sofias & Meg. Alexandrou, Athens 15124 Greece (the Guarantor); and
(2)
GREAT CATALINA LIMITED, a corporation incorporated under the laws of the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro MH96960, the Republic of the Marshall Islands (the Owner which expression includes its successors and assigns).
BACKGROUND
(A)
By a bareboat charter dated 30 September 2019 (as amended and/or supplemented from time to time, the Charter) and entered into between (i) the Owner as owners and (ii) the Santa Catalina Inc. as charterer(the Charterer), the Owner agreed to bareboat charter the Vessel to the Charterer pursuant to the terms and conditions contained therein.
(B)
It is one of the conditions precedent to the chartering of the Vessel by the Owner to the Charterer under the Charter that the Assignor enters into this Deed.
(C)
This is the Charter Guarantee relating to the Vessel
IT IS AGREED as follows:
1.
DEFINITIONS AND INTERPRETATION
1.1
Definitions
Words and expressions defined in the Charter shall, unless otherwise expressly provided in this Guarantee or the context otherwise requires, have the same meanings when used in this Guarantee, including the recitals.
1.2
General interpretation
In this Guarantee:

(a)
unless the context otherwise requires, words in the singular include the plural and vice versa;

(b)
references to any document include that document as varied, novated, supplemented, extended or replaced from time to time;

(c)
references to any enactment include re-enactments, amendments and extensions of that enactment;

(d)
references to any person include that person’s successors and permitted assigns and references to a Party mean a party to this Guarantee;

(e)
clause headings are for convenience of reference only and are not to be taken into account in construction;

(f)
unless otherwise specified, references to Clauses and the recitals are respectively to Clauses of and the recitals to this Guarantee;

(g)
any rights in respect of an asset includes:

(i)
all amounts and proceeds paid or payable;




(ii)
all rights to make any demand or claim; and

(iii)
all powers, remedies, causes of action, security, guarantees and indemnities,
in each case in respect of or derived from that asset;

(h)
the term the Security means the Security Interests created by the Transaction Documents to which the Guarantor is at any time a party;

(i)
any words following the terms including, include, in particular or any similar expression shall be construed as illustrative and shall not limit the sense of the words, description, definition, phrase or term preceding those terms; and

(j)
a Potential Termination Event is continuing if it has not been remedied or waived and a Termination Event is continuing it has not been waived.
1.3
Agreement to prevail
This Guarantee shall be read together with the Charter and, in the event of any conflict between the provisions of this Guarantee and the provisions of the Charter, the provisions of the Charter shall prevail.
1.4
Third party rights

(a)
A person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the Third Parties Act) to enforce or enjoy the benefit of any term of this Guarantee.

(b)
Notwithstanding Clause 1.4(a) but subject always to Clause 1.4(c) and the provisions of the Third Parties Act, a person who is not a Party may rely on any clause under this Guarantee which expressly confers rights on them.

(c)
Notwithstanding any term of this Guarantee or any other Transaction Document, the consent of any person who is not a Party is not required to rescind or vary this Guarantee at any time.
2.
GUARANTEE AND INDEMNITY
2.1
Guarantee and indemnity
The Guarantor irrevocably and unconditionally:

(a)
guarantees the due and punctual performance by the Charterer of all its obligations under or pursuant to the Charter and the other Transaction Documents to which the Charterer is a party and the due and punctual payment by the Charterer to the Owner of each and every part of the Outstanding Indebtedness in accordance with the terms of the Transaction Documents;

(b)
undertakes that, if and whenever the Charterer fails to pay on the due date any sum whatsoever due and payable under or pursuant to any Transaction Document, the Guarantor shall pay such sum on demand by the Owner; and

(c)
agrees, as a separate and independent stipulation, that if any amounts intended to be guaranteed by Clause 2.1(a) are not recoverable on the footing of a guarantee, whether by reason of illegality, incapacity, lack or exceeding of powers, ineffectiveness of execution or any other fact or circumstance, whether or not known to the Owner or the Guarantor, then such amounts shall nevertheless be recoverable from the Guarantor as sole or principal debtor by way of indemnity and shall be payable by the Guarantor to the Owner on demand.
2



2.2
Default interest
If the Guarantor fails to pay any amount payable by it under this Guarantee on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate of 8% if the overdue amount had, during the period of non-payment, constituted part of the Fixed Hire, each of a duration selected by the Owner (acting reasonably). Any interest accruing under this Clause 2.3 shall be immediately payable by the Guarantor on demand by the Owner. If unpaid, any such interest will be compounded with the overdue amount at the end of each period applicable to that overdue amount but will remain immediately due and payable.
2.3
Nature of guarantee
The guarantee contained in this Clause 2 is a guarantee of payment and performance and not of collection.
2.4
Guarantor as principal debtor
The Guarantor agrees that it is, and will throughout the Agreement Term remain, liable under this Guarantee as a principal debtor and not as a surety only.
2.5
Immediate recourse
The Guarantor waives any rights which it may have to require the Owner first to enforce any of the other Transaction Documents or claim payment from the Charterer or any other person before enforcing any rights of the Owner against the Guarantor under this Guarantee.
3.
CONTINUING SECURITY
3.1
Continuing security; guarantee not affected by other security
This Guarantee and the Security Interest:

(a)
is and shall at all times throughout the Agreement Term remain a continuing security for the payment of the full amount of the Outstanding Indebtedness from time to time;

(b)
shall not be satisfied by any intermediate payment or satisfaction of any part of the Outstanding Indebtedness; and

(c)
shall be in addition to and shall not merge with or be prejudiced or affected by any other security for the Outstanding Indebtedness which has been, or may at any time be, given to the Owner by the Charterer or any other person.
3.2
Waiver of defences
Neither the rights of the Owner nor the obligations of the Guarantor under this Guarantee or any other Transaction Document to which it is at any time a party shall be discharged, impaired or otherwise affected by reason of any of the following, whether or not known to the Guarantor, the Owner or any other person:

(a)
any time or indulgence granted to, or composition with, the Charterer or any other person; or

(b)
any termination, renewal, extension or variation of any credit, accommodation or facility granted by the Owner to the Charterer or any other person or any amendment of, or the making of any supplement to, any Transaction Document or any other document or security; or
3




(c)
the taking, variation, compromise, renewal, enforcement, realisation or release of, or refusal or neglect to take, perfect, release or enforce, any rights, remedies or securities against, or granted by, any Obligor or other person; or

(d)
any incapacity, disability, or defect in powers of any Obligor or other person, or any irregular exercise of it by, or lack of authority of, any person purporting to act on behalf of any Obligor or other person; or

(e)
any illegality, invalidity, avoidance or unenforceability on any grounds whatsoever of, or of any obligations of any Obligor or other person under, any Transaction Document or any other document or security; or

(f)
the death, liquidation, administration, insolvency, amalgamation, reorganisation or dissolution, or any change in the constitution, name or style, of any Obligor, the Owner or any other person; or

(g)
any other act, omission, matter or thing which, but for this provision, might operate to exonerate the Guarantor from liability, whether in whole or in part, under this Guarantee.
4.
RESTRICTIONS ON GUARANTOR
4.1
Deferral of Guarantor’s rights
Until the expiry of the Agreement Term, the Guarantor shall not be entitled, nor shall the Guarantor claim, by virtue of any payment made by the Guarantor under this Guarantee:

(a)
to exercise any right of subrogation or indemnity or any other right or remedy in relation to any rights, security or moneys held by or recovered or receivable by the Owner under the Transaction Documents; or

(b)
to exercise any right of set-off or counterclaim against the Charterer or any other Obligor; or

(c)
to exercise any right of contribution from the Charterer or any other Obligor in respect of the Outstanding Indebtedness; or

(d)
to receive, claim or have the benefit of any payment, distribution or security from the Charterer or any other Obligor; or

(e)
unless so directed by the Owner (in which case the Guarantor shall prove in accordance with the Owner’s directions), to rank as a creditor or have any right of proof in the bankruptcy, liquidation or insolvency of the Charterer or any other Obligor in competition with the Owner.
4.2
No security to be taken by the Guarantor
The Guarantor represents and warrants that it has not taken, and undertakes that it will not take, without the prior written consent of the Owner, any security from the Charterer or any other Obligor in respect of the Guarantor’s liability under this Guarantee.
4.3
Application of payments or benefits received by the Guarantor
If the Guarantor is required by the Owner to prove in the bankruptcy, liquidation or insolvency of the Charterer or any other Obligor, or receives any payment, distribution or security from the Charterer or any other Obligor, or exercises any right of set off or counterclaim in respect of any payment made by it under this Guarantee, or otherwise acts in breach of any provision of this Clause 4 (Restrictions On Guarantor), then in each such case the Guarantor shall hold on trust for the Owner and immediately pay or transfer (as may be appropriate) to the Owner any such payment, amount set off, distribution or benefit of such security received by it.
4



5.
PAYMENTS
5.1
Place, time and manner of payment
Unless otherwise specified by the Owner, all moneys to be paid by the Guarantor under this Guarantee shall be paid to the Owner in Dollars on the due date and in same day funds to such account as the Owner may from time to time notify the Guarantor.
5.2
Non-Business Days
Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
5.3
Accrual of interest and periodic payments
All payments of interest and other payments of an annual or periodic nature to be made by the Guarantor shall accrue from day to day and be calculated on the basis of the actual number of days elapsed and a 360 day year.
5.4
Application of receipts
Without prejudice to Clause 5.5 (Suspense account), all moneys received or recovered by the Owner pursuant to this Guarantee shall be applied, in the first place, to pay or make good all costs, expenses and liabilities whatsoever incurred by the Owner in or about or incidental to the recovery of such moneys, and the balance shall be applied in accordance with the terms of the Charter.
5.5
Waiver of rights of appropriation
The Guarantor irrevocably waives any rights of appropriation to which it may be entitled in respect of any payment made under this Guarantee.
6.
NO SET-OFF, COUNTERCLAIM OR TAX DEDUCTION
The provisions of Clause 66 (Set-Off) of the Charter shall extend and apply to this Guarantee as if the same were expressly set out in this Guarantee but as if all references in the Charter to a Party included the Guarantor.
7.
DISCHARGE CONDITIONAL
Any release, discharge or settlement between the Guarantor and the Owner in relation to this Guarantee shall be conditional on no right, security, disposition or payment to the Owner by the Guarantor, the Charterer or any other person in respect of the Outstanding Indebtedness being avoided, set aside or ordered to be refunded pursuant to any enactment or law relating to breach of duty by any person, bankruptcy, liquidation, administration, protection from creditors generally or insolvency or for any other reason. If any such right, security, disposition or payment is avoided, set aside or ordered to be refunded, the Owner shall be entitled subsequently to enforce this Guarantee against the Guarantor as if such release, discharge or settlement had not occurred and any such security, disposition or payment had not been made.
8.
REPRESENTATIONS AND WARRANTIES
8.1
Date of representations and warranties
The Guarantor represents and warrants that the following matters are true at the date of this Guarantee.
5



8.2
Existence, powers and compliance
The Guarantor:

(a)
is a corporation duly incorporated with limited liability, validly existing and in good standing under the laws of the Republic of the Marshall Islands (its jurisdiction of incorporation);

(b)
has full power to own its property and assets and to carry on its business as it is now being conducted; and

(c)
has complied with all statutory and other requirements relative to its business.
8.3
Capacity and authorisation
The entry into and performance by the Guarantor of this Guarantee and the other Transaction Documents to which it is (or is to become) a party are within the corporate powers of the Guarantor and have been duly authorised by all necessary corporate actions and approvals and no limitation on its powers will be exceeded as a result of the liabilities incurred under this Guarantee. In entering into this Guarantee and the other relevant Transaction Documents the Guarantor is acting on its own account and not as agent or nominee of any person.
8.4
No contravention of laws or contractual restrictions
The entry into and performance by the Guarantor of, and the transactions contemplated by, this Guarantee and the other Transaction Documents to which it is (or is to become) a party and the granting of Security Interest by the Guarantor do not and will not:

(a)
contravene in any respect the constitutional documents of the Guarantor or any law, regulation or contractual restriction binding on the Guarantor or any of its assets; or

(b)
result in the creation or imposition of any Security Interest (other than a Permitted Security Interest) on any of its assets in favour of any party.
8.5
Licences and approvals in force
All licences, authorisations, approvals and consents necessary for the entry into, performance, validity, enforceability or admissibility in evidence of this Guarantee and the other Transaction Documents to which the Guarantor is (or is to become) a party have been obtained and are in full force and effect and there has been no breach of any condition or restriction imposed in this respect.
8.6
Validity and enforceability
When duly executed and delivered, and where applicable registered, this Guarantee and each other Transaction Document to which the Guarantor is (or is to become) a party will:

(a)
constitute the legal, valid and binding obligations of the Guarantor enforceable against it in accordance with its terms; and

(b)
(to the extent that by its terms it purports to do so) create a legal, valid and binding first priority Security Interest in accordance with its terms over all the assets to which by its terms it relates,
except insofar as enforcement may be limited by any applicable laws relating to bankruptcy, insolvency, administration and similar laws affecting creditors’ rights generally and by principles of equity.
6



8.7
No third party Security Interests; title
At the time of execution of each Security Document to which the Guarantor is (or is to become) a party, no third party will have any Security Interest (other than a Permitted Security Interest) in any asset over which a Security Interest is to be created pursuant to that Security Document and the Guarantor will be the sole and absolute legal and beneficial owner of that asset.
8.8
Insolvency
No corporate action, legal proceeding or other procedure or step described in Clause 54(a)(vi) (Insolvency and rescheduling) of the Charter or creditors’ process described in Clause 54(a)(vii) (Winding-up) of the Charter has been taken or, to the knowledge of the Guarantor, threatened in relation to any Obligor.
8.9
No litigation current or pending
No litigation, arbitration, tax claim or administrative proceeding is current or pending or (to the knowledge of the Guarantor) threatened, which, if adversely determined, might reasonably be expected to have a Material Adverse Effect.
8.10
Governing law and enforcement
Subject to the Legal Reservations, the choice of English law as the governing law of this Guarantee and each other Transaction Document expressed to be governed by English law to which the Guarantor is (or is to become) a party will be recognised and enforced in the jurisdiction of incorporation of the Guarantor, and any judgment obtained in England in relation to this Guarantee or any such other Transaction Document will be recognised and enforced in that jurisdiction.
8.11
Truth of financial and other information
All factual information furnished in writing to the Owner by or on behalf of the Guarantor in connection with the negotiation and preparation of this Guarantee and the other Transaction Documents was (when given) true and correct in all material respects and there are no other facts or considerations the omission of which would render any such information materially misleading.
8.12
No liability to deduction or withholding
Except in respect of any FATCA Deduction which may be required by Clause 6 (No Set-Off, Counterclaim Or Tax Deduction), all payments to be made by the Guarantor under this Guarantee or any other Transaction Document may be made free and clear of and without deduction or withholding for or on account of any taxes.
8.13
No filing or stamp taxes
Under the law of the Guarantor’s jurisdiction of incorporation it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of this Guarantee or any other Transaction Document to which the Guarantor is (or is to become) a party that this Guarantee or such other Transaction Document (or particulars of it) be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to it executed by the Guarantor at the company’s registration office in its jurisdiction of incorporation (and payment of associated fees), which registration will be made (and such fees paid) promptly after the date of each relevant Security Document.
8.14
Tax compliance
The Guarantor has complied in all material respects with all relevant tax laws and regulations applicable to it and its business and no claims or investigations are being made or conducted against it with respect to taxes.
7



8.15
Pari passu obligations
The payment obligations of the Guarantor under this Guarantee and the other Transaction Documents to which it is (or is to become) a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
8.16
Familiarity with the terms of the Agreement
The Guarantor has received a copy of the Charter and is familiar with and has approved its terms and conditions.
8.17
Anti-Corruption Laws
The Guarantor has conducted its business in compliance with all Anti-Corruption Laws applicable to it and has instituted and maintains policies and procedures designed to prevent violation of such Anti-Corruption Laws.
8.18
Sanctions

(a)
The Guarantor is not a Restricted Party nor is it owned and/or controlled (directly or indirectly) by a Restricted Party.

(b)
No proceeds provided to the Charterer shall be made available to or for the benefit of a Restricted Party nor shall they otherwise be applied (directly or indirectly) in a manner or for a purpose prohibited by Sanctions.
9.
INFORMATION UNDERTAKINGS
9.1
Duration of undertakings
The undertakings in this Clause 9 (Information Undertakings) shall remain in force from the date of this Guarantee to the end of the Agreement Term.
9.2
Provision of financial information
The Guarantor will provide to the Owner:

(a)
within 180 days of the end of each financial year, certified copies of the audited consolidated financial statements of the Group and the profit and loss accounts and balance sheets of the Guarantor for that financial year, prepared in accordance with GAAP;

(b)
together with the audited consolidated financial statements referred to in Clause 9.2(a) above, a Compliance Certificate addressed to the Owner substantially in the form set out in Schedule 1 ([Form Of Compliance Certificate]) evidencing the compliance (or otherwise) of the Guarantor with the financial covenants in respect of the Group as set out in Clause 10 (Financial Covenants); and

(c)
promptly, such further information in the possession or control of the Guarantor regarding the financial condition and operations of the Group as the Owner may reasonably request.
9.3
Notification of default
The Guarantor shall:

(a)
notify the Owner of any Termination Event (and the steps, if any, being taken to remedy it) promptly upon its becoming aware of the occurrence of it, stating whether in its opinion such default is a Termination Event or a Potential Termination Event; and
8




(b)
promptly upon a request by the Owner, supply to the Owner a certificate signed on behalf of the Guarantor by two of its directors or senior officers certifying that no Termination Event is continuing (or if a Termination Event is continuing, specifying the Termination Event and the steps, if any, being taken to remedy it).
9.4
Notification of claims, material litigation and other proceedings
The Guarantor shall, promptly upon becoming aware of the same, inform the Owner in writing of:

(a)
any claim, action, suit, proceedings or investigation against any Obligor in connection with Sanctions by any Sanctions Authority;

(b)
any Environmental Claim against any Obligor which is current, pending or threatened and of any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any Obligor; and

(c)
any litigation, arbitration, tax claim or administrative proceeding instituted or (to its knowledge) threatened and of any other occurrence of which it becomes aware which might have a Material Adverse Effect.
9.5
Provision of other information
The Guarantor shall promptly provide the Owner with such other information concerning itself and its affairs as the Owner may from time to time require.
9.6
Know your customer checks
The Guarantor shall promptly provide the Owner with such other information concerning itself and its affairs as the Owner may requested by the Owner in order for it to comply with any anti-money laundering or know your customer legislation, regulation or procedures applicable to it from time to time.
10.
FINANCIAL COVENANTS
10.1
Duration
The undertakings contained in this Clause 10 (Financial Covenants) shall remain in force from date of this Guarantee until the end of the Agreement Term.
10.2
Financial covenants
The Guarantor will procure that:

(a)
the Guarantor shall always maintain a minimum free cash or cash equivalent US$500,000.00 per vessel at consolidated level. For clarification purposes, any cash held under any minimum liquidity requirements and Debt Service Reserve Accounts with other financiers shall be taken into account for the testing of this covenant; and

(b)
the Leverage Ratio of the Guarantor (on a consolidated basis) shall not at any time exceed 75%.
“Leverage Ratio” means, the ratio (expressed as a percentage) of:

(i)
the Total Net Debt (i.e. the aggregate senior secured Financial Indebtedness of the Group, including 50% of Joint Venture vessels’ debt, as at such date minus the aggregate amount of all cash balances standing on such date to the credit of a bank account of a member of the Group); and
9




(ii)
the aggregate Fair Market Value of all Fleet Vessels including 50% of Joint Venture vessels.
10.3
Testing of financial condition
The requirements contained in Clause 10.2 (Financial covenants) as to the financial condition of the Group shall be tested on the Delivery Date by reference to the most recent unaudited consolidated financial statements of the Group and thereafter quarterly as at 31 March, 30 June, 30 September and 31 December in each year in each case by reference to the unaudited consolidated financial statements or (as the case may be) the Compliance Certificate delivered to the Owner pursuant to Clause 9.2 (Provision of financial information).
11.
INDEMNITIES AND EXPENSES
11.1
Indemnity against costs
The Guarantor shall pay to the Owner on demand, and the Guarantor shall indemnify and keep the Owner indemnified against, all costs, charges, expenses, claims, liabilities, losses, duties and fees (including, but not limited to, legal fees and expenses on a full indemnity basis) and taxes thereon suffered or incurred by the Owner:

(a)
in the negotiation, preparation, printing, execution and registration of this Guarantee and the other Transaction Documents;

(b)
in collating, monitoring and otherwise attending to the relevant conditions precedent in the Charter;

(c)
in the enforcement or preservation or the attempted enforcement or preservation of any of the rights and powers of the Owner under this Guarantee and the other Transaction Documents;

(d)
in connection with any actual or proposed amendment of or supplement to this Guarantee or any other of the Transaction Documents, or with any request to the Owner to grant any consent or waiver in respect of any provision of this Guarantee or any other Transaction Document, whether or not it is given; and

(e)
arising out of any act or omission made by the Owner in good faith in connection with any of the matters dealt with in this Guarantee or any other Transaction Document.
11.2
Documentary taxes
The Guarantor shall promptly pay all stamp duty, registration and other similar taxes payable on or by reference to this Guarantee and the other Transaction Documents to which the Guarantor is (or is to become) a party and shall indemnify the Owner on the Owner’s written demand against any and all claims, expenses, liabilities and losses resulting from any failure or delay by the Guarantor to pay any such duty or tax.
11.3
Currency indemnity
If any sum due from the Guarantor under the Transaction Documents (a Sum), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the First Currency) in which that Sum is payable into another currency (the Second Currency) for the purpose of making or filing a claim or proof against the Guarantor or obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings, the Guarantor shall as an independent obligation, within 3 Business Days of demand, indemnify the Owner against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (a) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (b) the rate or rates of exchange available to the Owner at the time of its receipt of that Sum.
10



11.4
Survival of indemnities
The indemnities contained in this Guarantee and the other Transaction Documents to which the Guarantor is (or is to become) a party shall continue in full force and effect after the full and final discharge of the Outstanding Indebtedness with respect to matters arising prior to such discharge.
12.
CHANGES TO THE PARTIES
12.1
No assignment or transfer by the Guarantor
The Guarantor may not assign or transfer all or any of its rights, benefits or obligations under this Guarantee.
12.2
Assignments and transfers by the Owner
The Owner may assign or transfer all or any portion of its rights, benefits or obligations under this Guarantee to any person to whom it assigns or transfers a corresponding proportion of its rights, benefits or obligations under and in accordance with the Charter.
12.3
Change of office
The Owner may at any time and from time to time change the office through which it performs its obligations under this Guarantee and the other Transaction Documents.
12.4
Delegation
The Owner may at any time and from time to time delegate any one or more of its rights, powers and/or obligations under this Guarantee and the other Transaction Documents to any person (provided that the Owner shall remain fully responsible for the exercise or performance of any rights, powers and/or obligations delegated by it).
12.5
Guarantor to assist
The Guarantor undertakes to do or to procure all such acts and things and to sign, execute and deliver or procure the signing, execution and delivery of all such instruments and documents as the Owner may reasonably require for the purpose of perfecting any such assignment or transfer as mentioned in Clause 13.2 (Assignments and transfers by the Owner).
12.6
Disclosure of information
The Owner may disclose to any potential assignee, transferee or sub-participant, or to any other party with whom it may propose to enter into contractual relations in connection with this Agreement or any other of the Transaction Documents, such information about the Guarantor and the other Obligors and their respective businesses, assets or financial condition as the Owner shall request from the Guarantor (Guarantors consent not to be unreasonably withheld).
13.
SET-OFF
The Owner may set off any matured obligation due from the Guarantor under this Guarantee or any other Transaction Document to which the Guarantor is at any time a party (to the extent beneficially owned by the Owner) against any matured obligation owed by the Owner to the Guarantor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Owner may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
11



14.
MISCELLANEOUS
14.1
Time of essence
Time is of the essence as regards every obligation of the Guarantor under this Guarantee and the other Transaction Documents to which it is (or is to become) a party.
14.2
Remedies and waivers
No failure to exercise, nor any delay in exercising, on the part of the Owner, any right or remedy under the Transaction Documents shall operate as a waiver of any such right or remedy or constitute an election to affirm any of the Transaction Documents. No election to affirm any Transaction Document on the part of the Owner shall be effective unless it is in writing. No single or partial exercise of any such right or remedy shall prevent any further or other exercise of it or the exercise of any other right or remedy. The rights and remedies provided in each Transaction Document are cumulative and not exclusive of any rights or remedies provided by law.
14.3
Waivers and amendments to be in writing
Any waiver by the Owner of any provision of this Guarantee or any other Transaction Document, and any consent or approval given by the Owner under or in respect of this Guarantee or any other Transaction Document, shall only be effective if given in writing and then only strictly for the purpose and upon the terms for which it is given. This Guarantee may not be amended or varied orally but only by an instrument signed by the Parties.
14.4
Partial invalidity
If at any time one or more of the provisions of this Guarantee or any other of the Transaction Documents is or becomes invalid, illegal or unenforceable in any respect under any law by which it may be governed or affected, the validity, legality and enforceability of the remaining provisions shall not be in any way affected or impaired as a result.
14.5
Counterparts
This Guarantee may be executed in any number of counterparts and all such counterparts taken together shall be deemed to constitute one and the same instrument.
14.6
Conclusiveness of certificates
The certificate or determination of the Owner of a rate or amount under this Guarantee or any other Transaction Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates and is binding on the Guarantor.
14.7
Further assurances
The Guarantor shall, upon demand, and at its own expense, sign, perfect, do, execute and register all such further assurances, documents, acts and things as the Owner may require for:

(a)
perfecting or protecting this Guarantee or the Security;

(b)
the exercise by the Owner of any right, power or remedy vested in it under this Guarantee or any other Security Document to which the Guarantor is at any time a party; or

(c)
enforcing this Guarantee or the Security after it has become enforceable (and the Guarantor undertakes to allow its name to be used as and when required by the Owner for this purpose).
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15.
NOTICES
15.1
Communications in writing; addresses
All communications (which expression includes any notice, demand, request, consent or other communication) to be made under or in connection with this Guarantee shall be made in writing and unless otherwise stated may be made by fax or letter or, subject to Clause 16.3 (Electronic communication), electronic mail and be addressed:

(a)
in the case of the Owner, to it at:
c/o AVIC INTERNATIONAL LEASING CO., LTD.

Address:
18/F, CATIC Tower,
212 Jiang Ning Road,
Shanghai 200041, China
The People’s Republic of China

Telefax No.:
+86 21 5289 5389

Attn:
Mr. Wang Xing

Email:
wangxing@chinaleasing.net

(b)
in the case of the Guarantor, to it at:
TOP SHIPS INC.

Address:
1 Vas. Sofias & Meg. Alexandrou
Athens 15124 Greece

Telefax No:
+ 30 210 80 56 441

Telephone No:
+ 30 210 81 28 180

Attn:
Alexandros Tsirikos

Email:
atsirikos@topships.org
or to such other address or fax number or department or officer as is notified by one Party to the other under this Guarantee by not less than 5 Business Days’ notice.
15.2
Delivery

(a)
Subject to Clause 16.2(b) below, any communication or document made or delivered by one person to another under or in connection with this Guarantee will only be effective:

(i)
if by way of fax, when received in legible form;

(ii)
if by way of letter, when it has been left at the relevant address or 5 Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or

(iii)
if by way of electronic mail, then in accordance with Clause 16.3 (Electronic communication),
and, if a particular department or officer is specified as part of its address details provided under Clause 16.1 (Communications in writing; addresses), if addressed to that department or officer.
13




(b)
Any communication or document to be made or delivered to the Owner will be effective only when actually received by the Owner and then only if it is expressly marked for the attention of the department or officer specified as part of its address details provided under Clause 16.1 (Communications in writing; addresses).

(c)
Any communication or document which becomes effective, in accordance with Clause 16.2(a) or Clause 16.2(b) above, on a non-working day or after 5:00 p.m. in the place of receipt shall be deemed only to become effective at the opening of business hours on the next working day in the place of receipt.
15.3
Electronic communication
Any communication to be made between the Parties under or in connection with this Guarantee may be made by electronic mail or other electronic means to the extent that the Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication and if the Parties:

(a)
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

(b)
notify each other of any change to their address or any other such information supplied by them by not less than 5 Business Days’ notice.
Any electronic communication made between the Parties will be effective only when actually received in readable form and in the case of any electronic communication made by the Guarantor to the Owner only if it is addressed in such a manner as the Owner shall specify for this purpose.
15.4
English language
All communications and documents to be given or delivered pursuant to or otherwise in relation to this Guarantee and the other Transaction Documents to which the Guarantor is (or is to become) a party shall be in the English language or be accompanied by a certified English translation.
16.
GOVERNING LAW AND JURISDICTION
16.1
This Guarantee and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.
16.2
Any dispute arising out of or in connection with this Deed (including a dispute regarding the existence, validity or termination of this Deed or any non-contractual obligation arising out of or in connection with this Deed) (a “Dispute”) shall be referred to and finally resolved by arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause 16 (Law and Jurisdiction). The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced.
16.3
The reference shall be to three arbitrators. A Party wishing to refer a Dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other Party requiring the other Party to appoint its own arbitrator within fourteen (14) calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other Party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified. If the other Party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the Party referring a Dispute to arbitration may, without the requirement of any further prior notice to the other Party, appoint its arbitrator as sole arbitrator and shall advise the other Party accordingly. The award of a sole arbitrator shall be binding on both Parties as
14



if he had been appointed by agreement. Nothing herein shall prevent the Parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator.
16.4
In cases where neither the claim nor any counterclaim exceeds the sum of US$50,000 (or such other sum as the Parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced. Where the reference is to three arbitrators the procedure for making appointments shall be in accordance with the procedure for full arbitration stated above.
16.5
The language of the arbitration shall be English.
17.
CONTRACTUAL RECOGNITION OF BAIL-IN
17.1
Notwithstanding any other term of any Transaction Document or any other agreement, arrangement or understanding between the parties to a Transaction Document, each Party acknowledges and accepts that any liability of any party to a Transaction Document under or in connection with the Transaction 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 Transaction Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.
This Guarantee has been executed and delivered as a deed on the date stated at the beginning of this Guarantee.

15


SCHEDULE 1
[FORM OF COMPLIANCE CERTIFICATE]
To:
GREAT CATALINA LIMITED
Trust Company Complex
Ajeltake Road
Ajeltake Island
Majuro MH96960
The Republic of the Marshall Islands
Date: [●] 20[●]
Dear Sirs
Compliance Certificate – L$]L€]L●] Bareboat Charter dated 30 September 2019
We refer to:
(a)
the bareboat charter dated 30 September 2019 (as amended and/or supplemented from time to time, the Charter) made between (1) yourselves as Owner and (2) Santa Catalina Inc. as Charterer, pursuant to which the Owner agreed to bareboat charter the Vessel to the Charterer; and
(b)
the deed of guarantee and indemnity dated [●] 2019 (the Guarantee) made between (1) ourselves as Guarantor and (2) yourselves as Owner under which we have guaranteed the performance by the Charterer of its obligations under the Bareboat Charter.
Expressions defined in the Bareboat Charter or the Guarantee shall have the same meanings when used in this certificate.
This certificate is a Compliance Certificate which is rendered to you pursuant to Clause 9.2 (Provision of financial information) of the Guarantee.
We hereby certify that:
1.
Attached to this certificate are the latest audited consolidated financial statements of the Group and the profit and loss accounts and balance sheets for the financial year ending on [●] 201[●], prepared in accordance with GAAP.
2.
Set out below are the respective amounts, in [Dollars][Euro], of [●], [●], [●], [●] and [●]of the Group as at [●] 201[●]:
 
[●]
[$][€][●]
 
[●]
[$][€][●]
 
[●]
[$][€][●]
 
[●]
[$][€][●]
 
[●]
[$][€][●]

3.
Accordingly, as at the date of this certificate, the financial covenants set out in Clause 10.2 (Financial covenants) of the Guarantee [are][are not] complied with, in that as at [●] 201[●]:

(i)
the aggregate amount of cash is $[●] per vessel at consolidated level;

(ii)
the Leveraged Ratio (on a consolidated basis) does not exceed 75%.
[or, as the case may be, specify in what respect any of the financial covenants are not complied with]
16



4.
As at [●] 201[●] no [Termination Event][Default] has occurred and is continuing.
[or, specify/identify any [Termination Event][Default]]
Yours faithfully

………………………………………..
For and on behalf of
TOP SHIPS INC.
17



EXECUTION PAGES
THE GUARANTOR
EXECUTED as a DEED
by TOP SHIPS INC.
a company incorporated in the Republic of
the Marshall Islands
acting by

who, in accordance with the laws of the
Republic of the Marshall Islands, is acting
under the authority of
the company as [authorised
signatory][attorney-in-fact]
in the presence of:
)
)
)
)
)
)
)
)
)
 
Signature in the name of the company
TOP SHIPS INC.






……………………………………………..
[Authorised signatory][Attorney-in-fact]

Signature of witness:


Name of witness:


Occupation of witness:


Address of witness:
THE OWNER
EXECUTED as a DEED
by GREAT CATALINA LIMITED
a company incorporated in the Republic of
the Marshall Islands
acting by

who, in accordance with the laws of the
Republic of the Marshall Islands, is acting
under the authority of
the company as [authorised
signatory][attorney-in-fact]
in the presence of:
)
)
)
)
)
)
)
)
)
 
Signature in the name of the company
GREAT CATALINA LIMITED






……………………………………………..
[Authorised signatory][Attorney-in-fact]

Signature of witness:


Name of witness:


Occupation of witness:


Address of witness:


18

Exhibit 4.56

















Exhibit 4.57




















Exhibit 4.58






















Exhibit 4.59






















Exhibit 4.60
































Exhibit 4.61

































Exhibit 8.1

List of Subsidiaries

Subsidiary
Jurisdiction of Incorporation
Top Tanker Management Inc.
Marshall Islands
Mytikas Shipping Company Limited
Marshall Islands
Lyndon International Co
Marshall Islands
Monte Carlo One Shipping Company Limited
Marshall Islands
Monte Carlo Seven Shipping Company Limited
Marshall Islands
Monte Carlo 37 Shipping Company Limited
Marshall Islands
Monte Carlo 39 Shipping Company Limited
Marshall Islands
Monte Carlo LAX Shipping Company Limited
Marshall Islands
Monte Carlo 71 Shipping Company Limited
Marshall Islands
Gramos Shipping Company Inc.
Marshall Islands
Style Maritime Ltd.
Marshall Islands
Jasmin Finance Limited
Marshall Islands
Astarte International Inc.
Marshall Islands
PCH77 Shipping Company Limited
Marshall Islands
Eco Seven Inc.
Marshall Islands
PCH Dreaming Inc.
Marshall Islands
South California Inc.
Marshall Islands
Malibu Warrior Inc.
Marshall Islands
Santa Catalina Inc.
Marshall Islands
Santa Monica Marine Inc.
Marshall Islands
Exhibit 12.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

I, Evangelos J. Pistiolis, certify that:

1. I have reviewed this annual report on Form 20-F of Top Ships Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.

5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date: April 10, 2020


 
/s/ Evangelos J. Pistiolis
Evangelos J. Pistiolis
Chief Executive Officer
(Principal Executive Officer)
Exhibit 12.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

I, Alexandros Tsirikos, certify that:

1. I have reviewed this annual report on Form 20-F of Top Ships Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.

5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date: April 10, 2020

 
/s/ Alexandros Tsirikos
Alexandros Tsirikos
Chief Financial Officer
(Principal Financial Officer)
Exhibit 13.1
 
PRINCIPAL EXECUTIVE OFFICER CERTIFICATION
 
PURSUANT TO 18 U.S.C. SECTION 1350
 
 
 
In connection with this Annual Report of Top Ships Inc. (the "Company") on Form 20-F for the year ended December 31, 2019 as filed with the Securities and Exchange Commission (the "SEC") on or about the date hereof (the "Report"), I, Evangelos J. Pistiolis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
     (1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.
 
Date: April 10, 2020

 
/s/ Evangelos J. Pistiolis
Evangelos J. Pistiolis
Chief Executive Officer
(Principal Executive Officer)

Exhibit 13.2
 
PRINCIPAL FINANCIAL OFFICER CERTIFICATION
 
PURSUANT TO 18 U.S.C. SECTION 1350
 
 
 
In connection with this Annual Report of Top Ships Inc. (the "Company") on Form 20-F for the year ended December 31, 2019 as filed with the Securities and Exchange Commission (the "SEC") on or about the date hereof (the "Report"), I, Alexandros Tsirikos, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
     (1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.
 
Date: April 10, 2020

 
/s/ Alexandros Tsirikos
Alexandros Tsirikos
Chief Financial Officer
(Principal Financial Officer)
Exhibit 15.1



CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-234281 on Form F-3 of our report dated April 10, 2020, relating to the consolidated financial statements of Top Ships Inc. appearing in this Annual Report on Form 20-F for the year ended December 31, 2019.


/s/  Deloitte Certified Public Accountants S.A.
Athens, Greece
April 10, 2020