EuroDry Ltd. (Form: 20-F, Received: 04/17/2020 06:02:39)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_________________

FORM 20-F

_________________

(Mark One)

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

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

☐	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 001-38502

EURODRY LTD.

(Exact name of Registrant as specified in its charter)

(Translation of Registrant's name into English)

Marshall Islands

(Jurisdiction of incorporation or organization)

4 Messogiou & Evropis Street, 151 24 Maroussi Greece

(Address of principal executive offices)

Tasos Aslidis, Tel: (908) 301-9091, info@eurodry.gr, EuroDry Ltd. c/o Tasos Aslidis,

11 Canterbury Lane, Watchung, NJ 07069

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares, $0.01 par value	EDRY	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
		2,304,630 common shares, $0.01 par value


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.
☐ Yes ☒ No

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or an emerging growth company. See definition of "accelerated filer", "large

accelerated filer", and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer	Accelerated filer	Non-accelerated filer
☐	☐	☐

		Emerging growth company
		☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☒
† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: ☒ U.S. GAAP ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board. ☐ Other If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow
☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No

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

Indicate by check mark whether the registrant has filed all documents and reports to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes ☐ No

TABLE OF CONTENTS

Page

Forward-Looking Statements

Part I

Item 1.	Identity of Directors, Senior Management and Advisers	2
Item 2.	Offer Statistics and Expected Timetable	2
Item 3.	Key Information	2
Item 4.	Information on the Company	36
Item 4A.	Unresolved Staff Comments	53
Item 5.	Operating and Financial Review and Prospects	53
Item 6.	Directors, Senior Management and Employees	65
Item 7.	Major Shareholders and Related Party Transactions	69
Item 8.	Financial Information	73
Item 9.	The Offer and Listing	74
Item 10.	Additional Information	74
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	86
Item 12.	Description of Securities Other than Equity Securities	87

Part II

Item 13.	Defaults, Dividend Arrearages and Delinquencies	87
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	87
Item 15.	Controls and Procedures	87
Item 16A.	Audit Committee Financial Expert	89
Item 16B.	Code of Ethics	89
Item 16C.	Principal Accountant Fees and Services	89
Item 16D.	Exemptions from the Listing Standards for Audit Committees	89
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	89
Item 16F.	Change in Registrant's Certifying Accountant	89
Item 16G.	Corporate Governance	89
Item 16H.	Mine Safety Disclosure	90

Part III

Item 17.	Financial Statements	90
Item 18.	Financial Statements	90
Item 19.	Exhibits	90

FORWARD-LOOKING STATEMENTS

EuroDry Ltd. and its wholly owned subsidiaries, or the Company, desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. This annual report contains forward-looking statements. These forward-looking statements include information about possible or assumed future results of our operations or our performance. Words such as "expects," "intends," "plans," "believes," "anticipates," "estimates," and variations of such words and similar expressions are intended to identify the forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding:

•

our future operating or financial results;

•

future, pending or recent acquisitions, joint ventures, business strategy, areas of possible expansion, and expected capital spending or operating expenses;

•

drybulk industry trends, including charter rates and factors affecting vessel supply and demand;

•

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

•

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

•

our expectations about the availability of vessels to purchase or the useful lives of our vessels;

•

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

•

our ability to leverage to our advantage our manager’s relationships and reputations in the drybulk shipping industry;

•

changes in seaborne and other transportation patterns;

•

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

•

potential liability from future litigation;

•

global and regional political conditions;

•

acts of terrorism and other hostilities, including piracy;

•

business disruptions due to natural disasters or other disasters outside our control, such as the recent novel coronavirus COVID-19 (“Coronavirus”) outbreak; and

•

other factors discussed in the section titled “Risk Factors.”

WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS CONTAINED IN THIS ANNUAL REPORT, EXCEPT AS REQUIRED BY LAW, OR THE DOCUMENTS TO WHICH WE REFER YOU IN THIS ANNUAL REPORT, TO REFLECT ANY CHANGE IN OUR EXPECTATIONS WITH RESPECT TO SUCH STATEMENTS OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY STATEMENT IS BASED.

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

Please note: Throughout this report, all references to "we," "our," "us" and the "Company" refer to EuroDry Ltd. and 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. Unless otherwise indicated, all references to "dollars" and "$" in this report are to, and amounts are presented in, U.S. dollars.

A.	Selected Financial Data

SELECTED CONSOLIDATED FINANCIAL DATA

On May 30, 2018, Euroseas Ltd. ("Euroseas" or "Former Parent Company") contributed to the Company seven subsidiaries (the "Subsidiaries") in connection with the spin-off of its drybulk fleet held for use as of December 31, 2017 comprising six vessels, one Ultramax and two Kamsarmax vessels built between 2016 and 2018, and three Japanese-built Panamax vessels built between 2000 and 2004 and one dormant company, which was the hull-owning company of Hull No. DY161, the shipbuilding contract of which was cancelled in 2016 (the "Spin-off"). Historical comparative periods include the results of the carve-out operations of the seven Subsidiaries that were contributed to the Company.

The following table presents selected consolidated financial and other data of EuroDry Ltd. for each of the years in the four-year period ended December 31, 2019. The table should be read together with "Item 5. Operating and Financial Review and Prospects." Excluding fleet data, the selected consolidated financial data of EuroDry Ltd. is a summary of, is derived from, and is qualified by reference to, our audited consolidated financial statements and notes thereto, which have been prepared in accordance with U.S. generally accepted accounting principles, or "U.S. GAAP."

Our audited consolidated statements of operations, shareholders' equity and cash flows for the years ended December 31, 2017, 2018 and 2019 and the consolidated balance sheets at December 31, 2018 and 2019, together with the notes thereto, are included in "Item 18. Financial Statements" and should be read in their entirety.

As further described in Note 2 to our consolidated financial statements on January 1, 2018 we adopted the new accounting guidance for revenue from contracts with customers (ASC 606) and on January 1, 2019 we adopted the new accounting guidance for leases (ASC 842), in each case using the modified retrospective approach. As such, the information prior to adoption of such new guidance has not been restated and continues to be reported under the accounting standards in effect for such periods.

See next page for table of EuroDry Ltd. – Summary of Selected Historical Financials.

	EuroDry Ltd. – Summary of Selected Historical Financials (in U.S. Dollars except for the Fleet Data and number of shares)
	2016			2017			2018			2019
Statement of Operations Data
Time charter revenue		8,331,821			16,985,607			25,934,204			28,789,458
Voyage charter revenue		-			3,294,608			-			-
Commissions		(452,868	)		(1,122,196	)		(1,411,333	)		(1,547,996	)
Net revenue		7,878,953			19,158,019			24,522,871			27,241,462
Voyage expenses		(82,627	)		(2,396,318	)		(410,676	)		(1,117,022	)
Vessel operating expenses		(4,308,418	)		(6,892,388	)		(9,183,152	)		(10,776,338	)
Dry-docking expenses		-			(127,509	)		(1,465,079	)		(1,664,915	)
Vessel depreciation		(3,828,634	)		(4,786,272	)		(5,422,155	)		(6,458,251	)
Related party management fees		(780,135	)		(1,409,716	)		(1,701,340	)		(1,964,536	)
Loss on termination and impairment of shipbuilding contracts		(7,050,179	)		-			-			-
General and administrative expenses		(798,828	)		(917,160	)		(2,346,502	)		(2,252,666	)
Operating (loss) / income		(8,969,868	)		2,628,656			3,993,967			3,007,734
Interest and other financing costs		(1,161,169	)		(1,817,574	)		(2,913,141	)		(3,513,105	)
Gain on derivatives, net		-			49,167			13,786			496,820
Other (expenses) / income		(10,316	)		(10,548	)		25,123			25,048
Net (loss) / income		(10,141,353	)		849,701			1,119,735			16,497
Dividends to Series B preferred shares		-			-			(565,229	)		(1,748,981	)
Preferred deemed dividend		-			-			-			(185,665	)
Net (loss) / income attributable to common shareholders		(10,141,353	)		849,701			554,506			(1,918,149	)
(Loss) / earnings per share attributable to common shareholders, basic and diluted		(6.21	)		0.38			0.25			(0.85	)
Preferred stock dividends declared		-			-			565,229			1,748,981
Preferred dividends declared per preferred share		-			-			28.83			113.67
Weighted average number of shares outstanding during period, basic and diluted		1,633,141			2,213,505			2,232,821			2,251,439

	EuroDry Ltd. – Summary of Selected Historical Financials (continued) As of December 31,
Balance Sheet Data	2016			2017			2018			2019
Current assets		2,819,911			7,620,376			14,465,269			9,577,657
Vessels, net		64,439,364			81,979,636			110,637,462			105,461,265
Deferred assets and other long term assets		19,430,520			7,852,664			2,605,030			2,650,000
Total assets		86,689,795			97,452,676			127,707,761			117,688,922
Current liabilities including current portion of long term debt		2,124,590			9,641,000			8,983,748			11,169,038
Long term debt, including current portion		29,513,283			38,331,302			63,358,755			56,495,134
Total liabilities		55,592,898			64,590,553			65,411,848			61,162,052
Preferred shares		-			-			18,757,358			14,721,665
Former Parent Company investment		41,603,370			42,518,895			-			-
Number of common shares outstanding		-			-			2,279,920			2,304,630
Share capital		-			-			22,799			23,046
Total shareholders' equity		31,096,897			32,862,123			43,538,555			41,805,205
Cash Flow Data		Year Ended December 31,
		2016			2017			2018			2019
Net cash provided by operating activities		4,255,829			2,910,287			3,970,170			15,113,924
Net cash used in investing activities		(24,243,012	)		(9,635,504	)		(29,045,685	)		(1,111,297	)
Net cash provided by / (used in) financing activities		20,472,737			9,283,359			27,928,885			(12,628,112	)


Fleet Data ⁽¹⁾	2016			2017			2018			2019

Number of vessels		2.85			4.94			5.74			7.0
Calendar days		1,043			1,802			2,096			2,555
Available days		1,043			1,802			2,052			2,489
Voyage days		1,043			1,781			2,045			2,473
Utilization Rate (percent)		100.0	%		98.8	%		99.7	%		99.4	%
	(In U.S. Dollars per day per vessel)
Average TCE rate ⁽²⁾		7,909			10,042			12,481			11,190
Vessel Operating Expenses		4,131			3,825			4,381			4,218
Management Fees		748			782			812			769
G&A Expenses		766			509			1,120			882
Total Operating Expenses excluding drydocking expenses		5,645			5,116			6,313			5,869
Drydocking		-			71			699			652

(1) For the definition of calendar days, available days, voyage days and utilization rate, see "Item 5.A – Operating Results".

(2) Time charter equivalent rate, or TCE rate, is a measure of the average daily revenue performance of our vessels and is determined by dividing time charter revenue and voyage charter revenue less voyage expenses or time charter equivalent revenues, or TCE revenues, by the number of voyage days during the relevant time period. TCE revenues, a non-U.S. GAAP measure, provides additional meaningful information in conjunction with time charter revenues and voyage charter revenues, the most directly comparable U.S. GAAP measure, because it assists the Company's management in making decisions regarding the deployment and use of its vessels and because the Company believes that it provides useful information to investors regarding the Company's financial performance. TCE revenues and TCE rate are also standard shipping industry performance measures used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., spot charters, time charters, pool agreements and bareboat charters) under which the vessels may be employed between the periods (see also "Item 5.A – Operating Results"). Our definition of TCE revenues and TCE rate may not be comparable to that used by other companies in the shipping industry.

The following table reflects the reconciliation of TCE revenues to time charter revenue and voyage charter revenue as reflected in the consolidated statement of operations (see discussion above) and our calculation of TCE rates for the periods presented.

	Year Ended December 31,
	2016			2017			2018			2019
	(In U.S. dollars, except for voyage days and TCE rates which are expressed in U.S. dollars per day)
Time charter revenue		8,331,821			16,985,607			25,934,204			28,789,458
Voyage charter revenue		-			3,294,608			-			-
Voyage expenses		(82,627	)		(2,396,318	)		(410,676	)		(1,117,022	)
Time Charter Equivalent or TCE Revenues		8,249,194			17,883,897			25,523,528			27,672,436
Voyage days		1,043			1,781			2,045			2,473
Average TCE rate		7,909			10,042			12,481			11,190

B.	Capitalization and Indebtedness

Not Applicable.

C.	Reasons for the Offer and Use of Proceeds

Not Applicable.

D.	Risk Factors

Any investment in our common stock involves a high degree of risk. You should consider carefully the following factors, as well as the other information set forth in this annual report, before making an investment in our common stock. Some of the following risks relate principally to the industry in which we operate and our business in general. Other risks relate to the securities market for, and ownership of, our common stock. Any of the described risks could significantly and negatively affect our business, financial condition, operating results and common stock price. The following risk factors describe the material risks that are presently known to us.

Industry Risk Factors

The cyclical nature of the shipping industry may lead to volatile changes in freight rates, which may reduce our revenues and negatively affect our results of operations.

We are an independent shipping company that operates in the drybulk shipping industry. Our profitability is dependent upon the charter rates we are able to charge for our ships. The supply of, and demand for, shipping capacity strongly influences charter rates. The demand for shipping capacity is determined primarily by the demand for the types of commodities carried and the distance that those commodities must be moved by sea. The demand for commodities is affected by, among other things, world and regional economic and political conditions (including developments in international trade, economic slowdowns caused by public health events such as the recent Coronavirus outbreak, fluctuations in industrial and agricultural production and armed conflicts), environmental

concerns, weather patterns, and changes in seaborne and other transportation costs. The size of the existing fleet in a particular market, the number of new vessel deliveries, the scrapping of older vessels and the number of vessels out of active service (i.e., laid-up, drydocked, awaiting repairs or otherwise not available for hire) determine the supply of shipping capacity, which is measured by the amount of suitable tonnage available to carry cargo. The cyclical nature of the shipping industry may lead to volatile changes in charter rates, which may reduce our revenues and net income.

In addition to the prevailing and anticipated charter rates, factors that affect the rate of newbuilding, scrapping and laying-up include newbuilding prices, secondhand vessel values in relation to scrap prices, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance and insurance coverage, the efficiency and age profile of the existing fleet in the market and government and industry regulation of maritime transportation practices, particularly environmental protection laws and regulations. These factors influencing the supply of and demand for shipping capacity are outside of our control, and we may not be able to correctly assess the nature, timing and degree of changes in industry conditions. Some of these factors may have a negative impact on our revenues and net income.

Our future profitability will be dependent on the level of charter rates in the international drybulk shipping industry.

Over the period 2016 to 2019, the BDI (Baltic Drybulk Index, an index that reflects the average daily equivalent rate of renting a vessel and operating crew) has fluctuated between a very low level of 297 points in February 2016 to a peak of 2,501 in September 2019. In 2017, the BDI experienced a low of 702 points in February before reaching a high of 1,702 points in early December and closing the year at 1,366 points. In 2018, it fluctuated between 1,082 points in February and 1,772 in July before closing at 1,271 points. The year 2019 began in a gloomy fashion with the BDI receding to 595 points by mid-February (-58% since the previous peak). By September, it had recovered to 2,501 points, but subsided again by mid-November to 1,284 points and closed the year at 1,090 points. From January through Mach 2020, the index continued to slump, declining to under 500 points by mid-February, and jumping to about 550 points by the end of March 2020.The continued volatility in dry bulk charter rates is mostly due to various factors affecting demand for and supply of vessels, including the lack of trade financing for purchases of commodities carried by sea, which may result in a significant decline in cargo shipments, trade disruptions caused by natural disasters, and increased newbuilding deliveries. In addition, the Coronavirus pandemic has resulted in disruptions to industrial production and supply chains initially in China and subsequently in other countries too, which have caused uncertainty in the short-term outlook for the sector. There is no certainty that the dry bulk charter market will experience any recovery over the next months and the market could decline from its current level, especially given the large number of scheduled newbuilding deliveries.

Rates in the drybulk market are influenced by the balance of demand for and supply of vessels and may remain depressed or decline again in the future. Because the factors affecting the supply of and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in industry conditions are unpredictable, and as a result so are the rates at which we can charter our vessels. In addition, we may not be able to successfully charter our vessels in the future or renew existing charters at rates sufficient to allow us to meet our obligations or to pay dividends to our shareholders.

Some of the factors that influence demand for vessel capacity include:

•

supply of, and demand for, drybulk commodities;

•

changes in the exploration or production of energy resources and commodities, and the resulting changes in the international pattern of trade;

•

global and regional economic and political conditions, including pandemics, armed conflicts and terrorist activities;

•

pandemics, such as the outbreak of Coronavirus in China in 2020;

•

embargoes and strikes;

•

the location of regional and global exploration, production and manufacturing facilities;

•

availability of credit to finance international trade;

•

the location of consuming regions for energy resources and commodities;

•

the distance drybulk commodities are to be moved by sea;

•

environmental and other regulatory developments;

•

currency exchange rates;

•

changes in global production and manufacturing distribution patterns of finished goods that utilize drybulk commodities;

•

changes in seaborne and other transportation patterns; and

•

weather and other natural phenomena.

Some of the factors that influence the supply of vessel capacity include:

•

the number of newbuilding orders and deliveries including slippage in deliveries;

•

the scrapping rate of older vessels;

•

the price of steel and other materials;

•

port and canal congestion;

•

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

•

vessel casualties;

•

the number of vessels that are out of service; and

•

changes in global commodity production.

We anticipate that the future demand for our drybulk vessels and the charter rates of the drybulk market will be dependent upon economic recovery and growth in the United States, Europe, Japan, China, India and the overall world economy, as well as seasonal and regional changes in demand and changes to the capacity of the world fleet. The capacity of the world fleet may increase and economic growth may not continue. Adverse economic, political, social or other developments could also have a material adverse effect on our business and results of operations.

An over-supply of drybulk carrier capacity may lead to further reductions in charter rates and profitability and may require us to raise additional capital in order to remain compliant with our loan covenants and affect our ability to pay dividends or redeem preferred stock in the future.

The market supply of drybulk carriers has been increasing, and the number of both drybulk vessels on order reached historic highs in 2014. It remains high, by historical standards, despite a number of order cancellations, delivery delays and an increased scrapping rate for drybulk vessels during 2015 and 2016. In 2017 drybulk scrapping rates halved year on year, returning to their five-year average. In 2018 scrapping of the world drybulk fleet declined significantly, 70% year on year to 4.4 million dwt. In 2019 scrapping rates increased by about 76% to 7.8 million dwt. If the number of new ships delivered exceeds the number of vessels being scrapped and lost, vessel capacity will increase. As of March 31, 2020, as reported by industry sources, the capacity of the worldwide drybulk fleet was approximately 884.6 million dwt with another 79.0 million dwt, or about 8.9% of the present fleet capacity, on order. If the supply of vessel capacity increases but the demand for vessel capacity does not increase correspondingly, charter rates and vessel values could materially decline.

If such a rate decline occurs upon the expiration or termination of our current charters, we may only be able to re-charter those vessels at reduced rates or we may not be able to charter these vessels at all. A number of the drybulk carrier charters we renewed or concluded during 2016 and 2017 were at unprofitable rates and were entered into because they resulted in lower losses than would have resulted had we put the vessels in lay-up; charter rates improved and reached profitable levels during most of 2018 but remained volatile and fluctuated significantly during the year, which continued into 2019. With a market recovery in the third quarter of 2019, we were able to secure long-term time charters for some of our vessels running into the fourth quarter, however, in early 2020 charter rates have once again declined to less favourable levels. Any inability to enter into more profitable charters may require us to raise additional capital in order to remain compliant with our loan covenants and may also affect our ability to pay dividends or redeem preferred stock in the future.

The market value of our vessels can fluctuate significantly, which may adversely affect our financial condition, cause us to breach financial covenants, result in the incurrence of a loss upon disposal of a vessel or increase the cost of acquiring additional vessels.

The value of our vessels may fluctuate, adversely affecting our earnings and liquidity and causing us to breach our secured credit agreements.

The fair market values of our vessels are related to prevailing charter rates. While the fair market value of vessels and the freight charter market have a very close relationship as the charter market moves from trough to

peak, the time lag between the effect of charter rates on market values of ships can vary. A decrease in the market values of our vessels could limit the amount of funds that we can borrow or trigger certain financial covenants under our current or future credit facilities, and we may incur a loss if we sell vessels following a decline in their market value. Furthermore, a decrease in the market value of our vessels could require us to raise additional capital at costs unfavorable to our shareholders in order to remain compliant with our loan covenants, or could result in foreclosure of our vessels and adversely affect our earnings and financial condition.

The market value of our vessels may increase or decrease depending on the following factors:

•

general economic and market conditions affecting the shipping industry in general;

•

supply of drybulk vessels, including newbuildings;

•

demand for drybulk vessels;

•

types and sizes of vessels;

•

scrap values;

•

other modes of transportation;

•

cost of newbuildings;

•

technological advances;

•

new regulatory requirements from governments or self-regulated organizations;

•

competition from other shipping companies; and

•

prevailing level of charter rates.

As vessels grow older, they generally decline in value. Due to the cyclical nature of the drybulk shipping industry, if for any reason we sell vessels at a time when prices have fallen, we could incur a loss and our business, results of operations, cash flow, financial condition and ability to pay dividends could be adversely affected.

In addition, we periodically re-evaluate the carrying amount and period over which vessels are depreciated to determine if events have occurred that would require modification to such assets' carrying values or their useful lives. A determination that a vessel's estimated remaining useful life or fair value has declined below its carrying amount could result in an impairment charge against our earnings and a reduction in our shareholders' equity.

Our secured loan agreements, which are secured by mortgages on our vessels, contain various financial covenants. Any change in the assessed market value of any of our vessels might also cause a violation of the covenants of each secured credit agreement, which, in turn, might restrict our cash and affect our liquidity. Among those covenants are requirements that relate to our net worth, operating performance and liquidity. For example, there is a maximum fleet leverage covenant that is based, in part, upon the market value of the vessels securing the loans, as well as requirements to maintain a minimum ratio of the market value of our vessels mortgaged thereunder to our aggregate outstanding balance under each respective loan agreement. If the assessed market value of our vessels declines below certain thresholds, we may violate these covenants and may incur penalties for breach of our credit agreements. For example, these penalties could require us to prepay the shortfall between the assessed market value of our vessels and the value of such vessels required to be maintained pursuant to the secured credit agreement, or to provide additional security acceptable to the lenders in an amount at least equal to the amount of any shortfall. If we are unable to pledge additional collateral, our lenders could accelerate our debt and foreclose on our fleet. Furthermore, we may enter into future loans, which may include various other covenants, in addition to the vessel-related ones, that may ultimately depend on the assessed values of our vessels. Such covenants could include, but are not limited to, minimum fair net worth covenants.

A decrease in the level of imports of raw materials and other commodities will reduce demand for our ships and, in turn, harm our business, results of operations and financial condition.

The employment of our vessels and our revenues depend on the international shipment of raw commodities primarily to China, Japan, South Korea and Europe from North and South America, India and Australia. Any reduction in or hindrance to the demand for such materials could negatively affect demand for our vessels and, in turn, harm our business, results of operations and financial condition. For instance, the government of China has implemented economic policies aimed at reducing the consumption of coal which may, in turn, result in a decrease in shipping demand.

Our international operations expose us to the risk that increased trade protectionism will harm our business. If global economic challenges exist, governments may turn to trade barriers to protect their domestic industries

against foreign imports, thereby depressing shipping demand. In particular, the leaders of the United States have indicated the United States may seek to implement more protective trade measures, and even remove the country from multilateral trading fora. Increasing trade protectionism in the markets that our customers serve has caused and may continue to cause an increase in: (a) the cost of goods exported from Asia Pacific, (b) the length of time required to deliver goods from the region and (c) the risks associated with exporting goods from the region. Such increases may also affect the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs.

Any increased trade barriers or restrictions on trade, especially trade with China, would 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 and financial condition and our ability to pay dividends to our shareholders.

Adverse economic conditions, especially in the Asia Pacific region, the European Union or the United States, could harm our business, results of operations and financial condition.

China has been one of the world's fastest growing economies in terms of gross domestic product, or GDP, which has increased the demand for shipping. However, China's high rate of real GDP growth has already reached a plateau and posted a 0.5 percentage points decline, year on year, in 2019. The United States has imposed tariffs on certain goods and may seek to implement more protectionist trade measures to protect and enhance its domestic economy. Additionally, the European Union, or the EU, and certain of its member states are facing significant economic and political challenges, including a risk of increased protectionist policies. Our business, results of operations and financial condition will likely be harmed by any significant economic downturn and economic instability in the Asia Pacific region, including China, or in the EU or the United States.

Outbreaks of epidemic and pandemic of diseases and governmental responses thereto could adversely affect our business.

Our operations are subject to risks related to outbreaks of infectious diseases. For example, the recent outbreak of Coronavirus, a virus causing potentially deadly respiratory tract infections originating in China, may negatively affect economic conditions and the demand for our shipping regionally as well as globally and otherwise impact our operations and the operations of our customers and suppliers. Governments in affected countries are imposing travel bans, quarantines and other emergency public health measures. Those measures, though temporary in nature, may continue and increase depending on developments in the virus' 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 Coronavirus. Although our operations have not been affected by the Coronavirus outbreak to date, the ultimate severity of the Coronavirus outbreak is uncertain at this time and therefore we cannot predict the impact it may have on our future operations, which could be material and adverse.

Eurozone's potential inability to deal with the sovereign debt issues of some of its members could have a material adverse effect on the profitability of our business, financial condition and results of operations.

Despite the efforts of the European Council since 2011 to implement a structured financial support mechanism for Eurozone countries experiencing financial difficulties, questions remain about the capability of a number of member countries to refinance their sovereign debt and meet their debt obligations. In March 2011, the European Council agreed on the need for Eurozone countries to establish a permanent stability mechanism, the European Stability Mechanism (or the "ESM"), which will be activated by mutual agreement to provide external financial assistance to Eurozone countries. Despite these measures, concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations and the overall stability of the euro. An extended period of adverse development in the outlook for European countries could reduce the overall demand for our services. These potential developments, or market perceptions concerning these and related issues, could have a material adverse effect on our financial position, results of operations and cash flow.

The drybulk industry is highly competitive, and we may be unable to compete successfully for charters with established companies or new entrants that may have greater resources and access to capital, which may have a material adverse effect on our business, prospects, financial condition, liquidity and results of operations.

The drybulk industry is highly competitive, capital intensive and highly fragmented. Competition arises primarily from other vessel owners, some of whom may have greater resources and access to capital than we have. Competition among vessel owners for the seaborne transportation of drybulk cargo can be intense and depends on

the charter rate, location, size, age, condition and the acceptability of the vessel and its operators to the charterers. Due in part to the highly fragmented market, many of our competitors with greater resources and access to capital than we have could operate larger fleets than we may operate and thus be able to offer lower charter rates or higher quality vessels than we are able to offer. If this were to occur, we may be unable to retain or attract new charterers on attractive terms or at all, which may have a material adverse effect on our business, prospects, financial condition, liquidity and results of operations.

Changes in the economic and political environment in China and policies adopted by the Chinese government to regulate China's economy may have a material adverse effect on our business, financial condition and results of operations.

The Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, (or "OECD"), in such respects as structure, government involvement, level of development, growth rate, capital reinvestment, allocation of resources, rate of inflation and balance of payments position. Prior to 1978, the Chinese economy was a planned economy. Since 1978, increasing emphasis has been placed on the utilization of market forces in the development of the Chinese economy. Annual and five-year State Plans are adopted by the Chinese government in connection with the development of the economy. 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 commodities 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. The Chinese government may not continue to pursue a policy of economic reform. The level of imports to and exports from China could be adversely affected by the nature of the economic reforms pursued 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, all of which could adversely affect our business, operating results, financial condition and cash flows.

We conduct business in China, where the legal system is not fully developed and has inherent uncertainties that could limit the legal protections available to us.

Some of our vessels may be chartered to Chinese customers and from time to time on our charterers' instructions, our vessels may call on Chinese ports. Such charters and voyages may be subject to regulations in China that may require us to incur new or additional compliance or other administrative costs and may require that we pay to the Chinese government new taxes or other fees. Applicable laws and regulations in China may not be well publicized and may not be known to us or to our charterers in advance of us or our charterers becoming subject to them, and the implementation of such laws and regulations may be inconsistent. Changes in Chinese laws and regulations, including with regards to tax matters, or changes in their implementation by local authorities could affect our vessels if chartered to Chinese customers as well as our vessels calling to Chinese ports and could have a material adverse impact on our business, financial condition and results of operations.

We may become dependent on spot charters in the volatile shipping markets, which may result in decreased revenues and/or profitability.

Although all but one of our vessels are currently under time charters or pool agreements, as one vessel is undergoing her drydock, in the future, we may have some or all of these vessels on spot charters. The spot market is highly competitive and rates within this market are subject to volatile fluctuations, while time charters provide income at pre-determined rates over more extended periods of time. If we decide to spot charter our vessels, we may not be able to keep all our vessels fully employed in these short-term markets. In addition, we may not be able to predict whether future spot rates will be sufficient to enable our vessels to be operated profitably. A significant decrease in charter rates has affected and could continue affecting the value of our fleet and could adversely affect our profitability and cash flows with the result that our ability to pay debt service to our lenders and reinstate currently suspended dividends to our shareholders could be adversely affected.

The current state of global financial markets and current economic conditions may adversely impact our ability to obtain additional financing on acceptable terms or at all, which may hinder or prevent us from expanding our business.

Global financial markets and economic conditions have been, and continue to be, volatile. Beginning in February 2020, partially due to fears associated with the spread of the Coronavirus, global financial markets, and starting in late February, financial markets in the United States experienced even greater relative volatility and a steep and abrupt downturn, which volatility and downturn may continue as the Coronavirus continues to spread. On March 11, 2020, the World Health Organization (WHO) declared the Coronavirus 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. This continuing volatility may negatively affect the general willingness of banks and other financial institutions to extend credit, particularly in the shipping industry, due to the historically volatile, and currently below historical average, asset values of vessels. As the shipping industry is highly dependent on the availability of credit to finance and expand operations, it has been and may continue to be negatively affected by this decline in lending. In addition, the current state of global financial markets and current economic conditions might adversely impact our ability to issue additional equity at prices which will not be dilutive to our existing shareholders or preclude us from issuing equity at all.

Also, as a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the cost of obtaining money from the credit markets has increased as 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. Due to these factors, we cannot be certain that additional financing will be available, if needed, and to the extent required, on acceptable terms or at all. If additional financing 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.

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 operate or are registered, which can significantly affect the ownership and operation of our vessels. These requirements include, but are not limited to, the International Convention for the Prevention of Pollution from Ships of 1973, as modified by the Protocol of 1978 relating thereto, collectively referred to as MARPOL 73/78 and herein as MARPOL, including the designation of emission control areas, ECAs, thereunder, the International Convention on Load Lines of 1966, or the LL Convention, the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended by different Protocol in 1976, 1984 and 1992, and amended in 2000, and generally referred to as the 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, or the CWA, the U.S. Clean Air Act, or the CAA, 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.

Furthermore, events like the 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. Thus, 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 including greenhouse gases, 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.

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. Because such conventions, laws and regulations are often revised, we cannot predict the ultimate cost of complying with such conventions, laws and regulations or the impact thereof on the resale price or useful life of our vessels. Additional conventions, laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing business and which may materially adversely affect our operations. We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates with respect to our operations. 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. 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. There can be no assurance that any such insurance we have arranged to cover certain environmental risks 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. We currently maintain, for each of our vessels, pollution liability coverage insurance of $1.0 billion per incident. If the damages from a catastrophic spill exceeded our insurance coverage, it would severely and adversely affect our business, results of operations, cash flows, financial condition and ability to pay dividends.

Environmental requirements can also require a reduction in cargo capacity, ship modifications or operational changes or restrictions, lead to decreased availability of insurance coverage for environmental matters or result in the denial of access to certain jurisdictional waters or ports, or detention in certain ports. Under local, national and foreign laws, as well as international treaties and conventions, we could incur material liabilities, including clean up obligations and natural resource damages in the event that there is a release of bunkers or hazardous substances from our vessels or otherwise in connection with our operations. We could also become subject to personal injury or property damage claims relating to the release of hazardous substances associated with our existing or historic operations. Violations of, or liabilities under, environmental requirements can result in substantial penalties, fines and other sanctions, including in certain instances, seizure or detention of our vessels.

We are subject to international safety regulations 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 ISM Code set forth in Chapter IX of Solas. The ISM Code requires shipowners, 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 rely upon the safety management system that we and our technical managers have developed for compliance with the ISM Code. 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. Currently, each of our vessels, Eurobulk Ltd. ("Eurobulk") and Eurobulk (Far East) Ltd. Inc. ("Eurobulk FE"), our affiliated ship management companies (each a "Manager" and together, the "Managers"), are ISM Code-certified, but we may not be able to maintain such certification indefinitely.

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 documents of compliance for our offices and safety management certificates for all of our vessels for which the certificates are required by the United Nations' International Maritime Organization (the "IMO"). The document of compliance (the "DOC") and the safety management certificate (the "SMC") are renewed as required.

In addition, vessel classification societies also impose significant safety and other requirements on our vessels. In complying with current and future environmental requirements, vessel-owners and operators may also incur significant additional costs in meeting new maintenance and inspection requirements, in developing contingency arrangements for potential spills and in obtaining insurance coverage. Government regulation of vessels, particularly in the areas of safety and environmental requirements, can be expected to become stricter in the future and require us to incur significant capital expenditures on our vessels to keep them in compliance.

The operation of our vessels is also affected by other government regulation in the form of international conventions, national, state and local laws and regulations in force in the jurisdictions in which the vessels operate, as well as in the country or countries of their registration. Because such conventions, laws, and regulations are often revised, we may not be able to predict the ultimate cost of complying with such conventions, laws and regulations or the impact thereof on the resale prices or useful lives of our vessels. Additional conventions, laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing business and which may materially adversely affect our operations. We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, certificates and financial assurances with respect to our operations. See Item 4: "Information on the Company – Business Overview – Environmental and Other Regulations in the Shipping Industry" for more information.

Regulations relating to ballast water discharge may adversely affect our revenues and profitability.

The IMO has imposed updated guidelines for ballast water management systems specifying the maximum amount of viable organisms allowed to be discharged from a vessel's ballast water. Depending on the date of the IOPP renewal survey, existing vessels constructed before September 8, 2017 must comply with the updated D-2 standard on or after September 8, 2019. For most vessels, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms. Ships constructed on or after September 8, 2017 are to comply with the D-2 standards on or after September 8, 2017. We currently have 2 vessels that do not comply with the updated guideline and costs of compliance may be substantial and adversely affect our revenues and profitability.

Furthermore, United States regulations are currently changing. Although the 2013 Vessel General Permit ("VGP") program and U.S. National Invasive Species Act ("NISA") are currently in effect to regulate ballast discharge, exchange and installation, the Vessel Incidental Discharge Act ("VIDA"), which was signed into law on December 4, 2018, requires that the U.S. Environmental Protection Agency ("EPA") develop national standards of performance for approximately 30 discharges, similar to those found in the VGP within two years. By approximately 2022, the U.S. Coast Guard must develop corresponding implementation, compliance, and enforcement regulations regarding ballast water. The new regulations could require the installation of new equipment, which may cause us to incur substantial costs.

Regulations relating to low sulfur emissions that came into effect on January 1, 2020 may adversely affect our revenues and profitability.

Under maritime regulations that came into effect on January 1, 2020, ships will have to reduce sulfur emissions, for which the principal solutions are the use of scrubbers or buying fuel with low sulfur content which is more expensive than standard marine fuel. We do not currently intend to install scrubbers on our fleet. Our fuel costs and fuel inventories have increased as a result of these sulfur emission regulations, but the effect is limited by the fact that our vessels are under time charter agreements and these costs are paid by the charterer. However, fuel costs are taken into account by the charterer in determining the amount of time charter hire and, therefore, fuel costs also indirectly affect time charter rates. Low sulfur fuel is more expensive than standard marine fuel containing 3.5% sulfur content and may become more expensive or difficult to obtain as a result of increased demand, which may have a material adverse effect on our business, results of operations, cash flows and financial condition.

If our vessels fail to maintain their class certification and/or fail any annual survey, intermediate survey, drydocking or special survey, those vessels would be unable to carry cargo, thereby reducing our revenues and profitability and violating certain covenants in our loan agreements.

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. That status 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.

Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as "in class" by a classification society that is a member of the International Association of Classification Societies ("IACS"). All of our vessels that we have purchased, and may agree to purchase in the future, must be certified as being "in class" prior to their delivery under our standard purchase contracts and memorandum of agreement. If the vessel is not certified on the date of closing, we have no obligation to take delivery of the vessel. We have all of our vessels, and intend to have all vessels that we acquire in the future, classed by IACS members. See Item 4: "Information on the Company – Business Overview – Environmental and Other Regulations in the Shipping Industry" for more information.

Rising fuel prices may adversely affect our results of operations and the marketability of our vessels.

Fuel (bunkers) is a significant, if not the largest, operating expense for many of our shipping operations when our vessels are under voyage charter. When a vessel is operating under a time charter, these costs are paid by the charterer. However, fuel costs are taken into account by the charterer in determining the amount of time charter hire and, therefore, fuel costs also indirectly affect time charter rates. Fuel prices are highly based and are highly correlated to the price of oil. While the price of fuel is currently at relatively low levels due to the price of oil, the price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by the Organization of the Petroleum Exporting Countries ("OPEC") and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Fuel prices had been at historically high levels through mid-2014, but by the first quarter of 2016 fuel prices had fallen by more than 50%. Oil prices began rising in February 2016 until June 2016, due to, among other reasons, the war in Syria, oscillated until November 2016, due to movements in the U.S. dollar exchange rate and various geopolitical events, surging again since end-November 2016, due to the announcement by OPEC of future production cuts. In the two-year period 2017-2018, oil prices fluctuated between about $45/bbl (for West Texas Intermediate, "WTI") and about $75/bbl before reaching $76.41/bbl in October 2018 and then falling to $42.53/bbl by December 24, 2018. Thereafter, oil prices rebounded responding, at least partly, to a 90-day trade-war truce agreed between the USA and China. By April 1, 2019 the WTI rose by 49.1% to $63.43/bbl. Oil markets faced a steep one-day loss on August 7, 2019 with the WTI closing at $51.09/bbl, after the U.S. threatened to impose more tariffs on China, then soared to $62.90/bbl in September when key oil facilities in Saudi Arabia were disabled in a missile attack. Prices dropped to around $55.0/bbl in October, and then began rising until the end of the year to approximately $61.0/bbl. In the first week of January 2020, following turmoil in the Persian Gulf, the price of oil increased to $62.70/bbl, only to drop once again to $57.86/bbl by mid-January as disruptions eventually eased. However, by February 1, 2020 the price dropped to $52.10/bbl, as concerns over the Coronavirus pandemic started emerging, and further dropped starting on March 9, 2020 to $23.43 by March 25, 2020, after OPEC and Russia failed to agree on maintaining production cuts, and Saudi Arabia increased its own production. Oil prices, however, are significantly below their 10-year average of ca. $70/bbl (for WTI). Any increases in the price of fuel especially if exceeding its 10-year average may adversely affect our operations, especially if such increases are combined with lower drybulk rates.

Upon redelivery of vessels at the end of a period time or trip time charter, we may be obligated to repurchase bunkers on board at prevailing market prices, which could be materially higher than fuel prices at the inception of the charter period. We may also be obligated to value our bunkers inventories on board at the end of a period time or trip time charter, at a lower value than the acquisition value, if prevailing market prices are significantly lower at the time of the vessel redelivery from the charterer.

Rising crew costs may adversely affect our profits.

Crew costs are a significant expense for us under our charters. There is a limited supply of well-qualified crew. We generally bear crewing costs under our charters. An increase in the world vessel operating fleet will likely result in higher demand for crews which, in turn, might drive crew costs further up. Any increase in crew costs may adversely affect our profitability, especially if such increase is combined with lower drybulk rates.

Maritime claimants could arrest or attach our vessels, which would interrupt our business or have a negative effect on our cash flows.

Crew members, suppliers of goods and services to a vessel, shippers of cargo, lenders and other parties may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting or attaching a vessel through foreclosure proceedings. The arresting or attachment of one or more of our vessels could interrupt our cash flow and require us to pay large sums to have the arrest or attachment lifted which would have a material adverse effect on our financial condition and results of operations.

In addition, in some jurisdictions, such as South Africa, under the "sister ship" theory of liability, a claimant may arrest both the vessel that is subject to the claimant's maritime lien, and any "associated" vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert "sister ship" liability against one of our vessels for claims relating to another of our vessels.

The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.

We expect that our vessels will call in ports in South America and other areas where smugglers 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, which could have an adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.

Governments could requisition our vessels during a period of war or emergency, resulting in loss of earnings.

A government could requisition for title or seize one or more of our vessels. Requisition for title occurs when a government takes control of a vessel and becomes the owner. Also, a government could requisition one or more of our vessels for hire. 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. Even if we would be entitled to compensation in the event of a requisition of one or more of our vessels, the amount and timing of the payment would be uncertain. Government requisition of one or more of our vessels could have a material adverse effect on our financial condition and results of operations.

World events outside our control may negatively affect our ability to operate, thereby reducing our revenues and results of operations or our ability to obtain additional financing, thereby restricting the implementation of our business strategy.

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, terrorist or other attacks, war or international hostilities. Terrorist attacks such as the attacks in the United States on September 11, 2001 and similar attacks that followed, the continuing response to these attacks, as well as the threat of future terrorist attacks, continue to cause uncertainty in the world financial markets and may affect our business, results of operations and financial condition. The continuing conflicts in Iraq, Iran, Afghanistan, Libya, Egypt, Ukraine, Syria, amongst other countries, 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. These uncertainties could also have a material adverse effect on our ability to obtain additional financing on terms acceptable to us or at all. Terrorist attacks on vessels may in the future also negatively affect our operations and financial condition and directly impact our vessels or our customers. Future terrorist attacks could result in increased volatility and turmoil of the financial markets in the United States of America and globally and could result in an economic recession in the United States of America or the world. Any of these occurrences could have a material adverse impact on our financial condition, costs and operating cash flows.

Disruptions in world financial markets and the resulting governmental action could have a material adverse impact on our ability to obtain financing, our results of operations, financial condition and cash flows, and could cause the market price of our common stock to further decline.

Europe, the United States and other parts of the world have exhibited weak economic conditions, are exhibiting volatile economic trends or have been in a recession. For example, during the 2008-2009 crisis, the credit markets in the United States experienced sudden and significant contraction, deleveraging and reduced liquidity, and the United States federal government and state governments have since implemented a broad variety of

governmental action and/or new regulation of the financial markets. Securities and futures markets and the credit markets are subject to comprehensive statutes, regulations and other requirements. The Securities and Exchange Commission ("SEC"), other regulators, self-regulatory organizations and exchanges are authorized to take extraordinary actions in the event of market emergencies, and may effect changes in law or interpretations of existing laws. A number of financial institutions and especially banks that traditionally provided debt to shipping companies like ours have experienced serious financial difficulties and, in some cases, have entered bankruptcy proceedings or are in regulatory enforcement actions. As a result, access to credit markets around the world has been reduced. The extension of Quantitative Easing ("QE"), high levels of Non-Performing Loans ("NPLs") in Europe and stricter lending requirements may reduce bank lending capacity and/or make the terms of any lending more onerous.

We face risks related to changes in economic environments, changes in interest rates, and instability in the banking and securities markets around the world, among other factors. Major market disruptions and the changes in market conditions and regulatory changes worldwide may adversely affect our business or impair our ability to borrow amounts under our credit facilities or any future financial arrangements. We cannot predict how long the current market conditions will last. However, these recent and developing economic and governmental factors, including proposals to reform the financial system, together with the concurrent decline in charter rates and vessel values, may have a material adverse effect on our results of operations, financial condition or cash flows, and might cause the price of our common stock on the Nasdaq Capital Market to decline.

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.

We may require substantial additional financing to fund acquisitions of additional vessels and to implement our business plans. Sufficient financing may not be available on terms that are acceptable to us or at all. If we cannot raise the financing we need in a timely manner and on acceptable terms, we may not be able to acquire the vessels necessary to implement our business plans and consequently we may not be able to pay dividends.

Effects and events related to the Greek sovereign debt crisis may adversely affect our operating results.

Greece has experienced a macroeconomic downturn in recent years, which has been slowly recovering as a result of the sovereign debt crisis and the related austerity measures implemented by the Greek government. Eurobulk's 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 Eurobulk pay to the Greek government new taxes or other fees. We and Eurobulk also face the risk that strikes, work stoppages, civil unrest and violence within Greece may disrupt our and Eurobulk's shore-side operations located in Greece. The Greek government's taxation authorities have increased their scrutiny of individuals and companies to secure tax law compliance. If economic and financial market conditions remain uncertain, persist or deteriorate further, the Greek government may impose further changes to tax and other laws to which we and Eurobulk may be subject or change the ways they are enforced, which may adversely affect our business, operating results, and financial condition.

We rely on information technology, and if we are unable to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, our operations could be disrupted and our business could be negatively affected.

We rely on information technology networks and systems to process, transmit and store electronic and financial information; to capture knowledge of our business; to coordinate our business across our operation bases; and to communicate internally and with customers, suppliers, partners and other third-parties. These information technology systems, some of which are managed by third parties, may be susceptible to damage, disruptions or shutdowns, hardware or software failures, power outages, computer viruses, cyberattacks, telecommunication failures, user errors or catastrophic events. Our information technology systems are becoming increasingly integrated, so damage, disruption or shutdown to the system could result in a more widespread impact. Our business operations could be targeted by individuals or groups seeking to sabotage or disrupt our information technology systems and networks, or to steal data. A successful cyber-attack could materially disrupt our operations, including the safety of our operations, or lead to unauthorized release of information or alteration of information in our systems. Any such attack or other breach of our information technology systems could have a material adverse effect on our business and results of operations. If our information technology systems suffer severe damage, disruption or shutdown, and our business continuity plans do not effectively resolve the issues in a timely manner, our operations could be disrupted and our business could be negatively affected. In addition, cyber-attacks could

lead to potential unauthorized access and disclosure of confidential information and data loss and corruption. There is no assurance that we will not experience these service interruptions or cyber-attacks in the future. Further, as the methods of cyber-attacks continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerabilities to cyber-attacks.

The vote by the United Kingdom to leave the European Union could adversely affect us.

The United Kingdom ("U.K.") referendum on its membership in the EU resulted in the U.K. withdrawing from the EU on January 31, 2020. We have activities in the EU, and as a result, we face risks associated with the potential uncertainty and disruptions that may follow Brexit, including volatility in exchange rates and interest rates and potential material changes to the regulatory regime applicable to our business or global trading parties. While the framework for the U.K. and Europe's future relationship has been laid out in a Withdrawal Agreement, negotiations are ongoing and final terms of the withdrawal remain uncertain. 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 generally and in the U.K., specifically. While we have limited exposure to the U.K. or the Pound sterling ("GBP"), any of these effects of Brexit, and others we cannot anticipate or that may evolve over time, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our operating results are subject to seasonal fluctuations, which could affect our operating results and the amount of available cash with which we service our debt or could pay dividends.

We operate our vessels in markets that have historically exhibited seasonal variations in demand and, as a result, in charter rates. To the extent we operate vessels in the spot market, this seasonality may result in quarter-to-quarter volatility in our operating results which could affect our ability to reinstate payment of dividends to our common shareholders. For example, the drybulk carrier market is typically stronger in the fall and winter months in anticipation of increased consumption of coal and other raw materials in the northern hemisphere during the winter months. The celebration of Chinese New Year in the first quarter of each year also results in lower volumes of seaborne trade into China during this period. In addition, unpredictable weather patterns in these months tend to disrupt vessel scheduling and supplies of certain commodities. This seasonality has not materially affected our operating results and the amount of available cash with which we service our debt or could pay dividends, because our fleet is currently employed on period time charters, but this seasonality may materially affect our operating results if our vessels are employed in the spot market in the future.

We may have difficulty securing profitable employment for our vessels if their charters expire in a depressed market.

All seven of our vessels are currently employed on time charter contracts. Six of our vessels are under time charters scheduled to expire during 2020, and one vessel has been under a pool agreement since August 2018. When the current charters of our vessels are due for renewal, we may be unable to re-charter these vessels at better rates if the current market rates do not improve or we might not be able to charter them at all. Although we do not receive any revenues from our vessels while not employed, we are required to pay expenses necessary to maintain the vessel in proper operating condition, insure it and service any indebtedness secured by such vessel. If we cannot re-charter our vessels on time charters or trade them in the spot market profitably, our results of operations and operating cash flow will be adversely affected.

Reliance on suppliers may limit our ability to obtain supplies and services when needed.

We rely on a significant number of third party suppliers of consumables, spare parts and equipment to operate, maintain, repair and upgrade our fleet of ships. Delays in delivery or unavailability or poor quality of supplies could result in off-hire days due to consequent delays in the repair and maintenance of our fleet or lead to our time charters being terminated. This would negatively impact our revenues and cash flows. Cost increases could also negatively impact our future operations.

The derivative contracts we have entered into to hedge our exposure to fluctuations in interest rates can result in higher than market rates and reductions in our stockholders' equity as well as charges against our income, while there is no assurance of the credit worthiness of our counterparties.

We have entered into interest rate swaps generally for purposes of managing our exposure to fluctuations in interest rates applicable to indebtedness under our credit facilities which were advanced at floating rates based on

London Interbank Offered Rate ("LIBOR"). Interest rates and currency hedging may result in us paying higher than market rates. As of December 31, 2019, the aggregate notional amount of interest rate swaps relating to our fleet as of such date was $10.0 million. There is no assurance that our derivative contracts or any that we enter into in the future will provide adequate protection against adverse changes in interest rates or that our bank counterparties will be able to perform their obligations. In addition, as a result of the implementation of new regulation of the swaps markets in the United States, the European Union and elsewhere over the next few years, the cost of interest rate swaps may increase or suitable hedges may not be available. While we monitor the credit risks associated with our bank counterparties, there can be no assurance that these counterparties would be able to meet their commitments under our derivative contracts or any future derivative contract. Our bank counterparties include financial institutions that are based in European Union countries that have faced and might face again financial stress. The potential for our bank counterparties to default on their obligations under our derivative contracts may be highest when we are most exposed to the fluctuations in interest and currency rates such contracts are designed to hedge, and several or all of our bank counterparties may simultaneously be unable to perform their obligations due to the same events or occurrences in global financial markets. To the extent our existing interest rate swaps do not, and future derivative contracts may not, qualify for treatment as hedges for accounting purposes, we would recognize fluctuations in the fair value of such contracts in our income statement. In addition, to the extent any future derivative contracts qualify for treatment as hedges for accounting purposes, changes in the fair value of our derivative contracts would be recognized in "Accumulated Other Comprehensive Loss" affecting our accumulated deficit, and may affect compliance with the net worth covenant requirements in our credit facilities. Changes in the fair value of our derivative contracts that do not qualify for treatment as hedges for accounting and financial reporting purposes affect, among other things, our net income and our earnings per share. For additional information see "Item 5. Operating and Financial Review and Prospects" and "Item 11. Quantitative and Qualitative Disclosures about Market Risk".

We may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on us.

We may be involved in various litigation matters from time to time. These matters may include, among other things, contract disputes, personal injury claims, environmental claims or proceedings, asbestos and other toxic tort claims, employment matters, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of our business. Although we intend to defend these matters vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter, and the ultimate outcome of any litigation or the potential costs to resolve them may have a material adverse effect on us. Insurance may not be applicable or sufficient in all cases and/or insurers may not remain solvent which may have a material adverse effect on our financial condition and operating cash flows.

Company Risk Factors

We depend entirely on Eurobulk and Eurobulk FE to manage and charter our fleet, which may adversely affect our operations if Eurobulk or Eurobulk FE fails to perform its obligations.

We have no employees and we currently contract the commercial and technical management of our fleet, including crewing, maintenance and repair, to Eurobulk and Eurobulk FE, our affiliated ship management companies. We may lose a Manager's services or a Manager may fail to perform its obligations to us which could have a material adverse effect on our financial condition and results of our operations. Although we may have rights against either Manager if it defaults on its obligations to us, you will have no recourse against either Manager. Further, we will need to seek approval from our lenders to change either Manager as our ship manager.

Because the Managers are privately held companies, there is little or no publicly available information about them and there may be very little advance warning of operational or financial problems experienced by the Managers that may adversely affect us.

The ability of a Manager to continue providing services for our benefit will depend in part on its own financial strength. Circumstances beyond our control could impair a Manager's financial strength, and because each Manager is privately held it is unlikely that information about its financial strength would become public unless such Manager began to default on its obligations. As a result, there may be little advance warning of problems affecting the Managers, even though these problems could have a material adverse effect on us.

We may have difficulty properly managing our growth through acquisitions of new or secondhand vessels and we may not realize expected benefits from these acquisitions, which may negatively impact our cash flows, liquidity and our ability to pay dividends to our stockholders.

We intend to grow our business by ordering newbuild vessels and through selective acquisitions of high-quality secondhand vessels to the extent that they are available. Our future growth will primarily depend on:

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the operations of the shipyards that build any newbuild vessels we may order;

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the availability of employment for our vessels;

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locating and identifying suitable high-quality secondhand vessels;

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obtaining newbuild contracts at acceptable prices;

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obtaining required financing on acceptable terms;

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consummating vessel acquisitions;

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enlarging our customer base;

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hiring additional shore-based employees and seafarers;

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continuing to meet technical and safety performance standards; and

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managing joint ventures or significant acquisitions and integrating the new ships into our fleet.

Ship values are correlated with charter rates. During periods in which charter rates are high, ship values are generally high as well, and it may be difficult to consummate ship acquisitions or enter into shipbuilding contracts at favorable prices. During periods in which charter rates are low and employment is scarce, ship values are low and any vessel acquired without an attached time charter will automatically incur additional expenses to operate, insure, maintain and finance the ship, thereby significantly increasing the acquisition cost. In addition, any vessel acquisition may not be profitable at or after the time of acquisition and may not generate cash flows sufficient to justify the investment. We may not be successful in executing any future growth plans and we cannot give any assurance that we will not incur significant expenses and losses in connection with such growth efforts. Other risks associated with vessel acquisitions that may harm our business, financial condition and operating results include the risks that we may:

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fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements;

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be unable to hire, train or retain qualified shore-based and seafaring personnel to manage and operate our growing business and fleet;

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decrease our liquidity by using a significant portion of available cash or borrowing capacity to finance acquisitions;

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significantly increase our interest expense or financial leverage if we incur additional debt to finance acquisitions;

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incur or assume unanticipated liabilities, losses or costs associated with any vessels or businesses acquired; or

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incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges.

If we fail to properly manage our growth through acquisitions of newbuild or secondhand vessels we may not realize expected benefits from these acquisitions, which may negatively impact our cash flows, liquidity and our ability to pay dividends to our stockholders. Unlike newbuild vessels, secondhand vessels typically do not carry warranties as to their condition. While we generally inspect existing vessels prior to purchase, such an inspection would normally not provide us with as much knowledge of a vessel's condition as we would possess if it had been built for us and operated by us during its life. Repairs and maintenance costs for secondhand vessels are difficult to predict and may be substantially higher than for vessels we have operated since they were built. These costs could decrease our cash flows, liquidity and our ability to pay dividends to our stockholders.

Our business depends upon certain members of our senior management who may not necessarily continue to work for us.

Our future success depends to a significant extent upon our Chairman and Chief Executive Officer, Aristides J. Pittas, certain members of our senior management and our Managers. Mr. Pittas has substantial experience in the drybulk shipping industry and has worked with us and our Managers for many years. He, our Managers and certain of our senior management team are crucial to the execution of our business strategies and to the growth and development of our business. If these individuals were no longer to be affiliated with us or our Managers, or if we were to otherwise cease to receive services from them, we may be unable to recruit other

employees with equivalent talent and experience, which could have a material adverse effect on our financial condition and results of operations.

Certain of our shareholders hold shares of EuroDry in amounts to give them a significant percentage of the total outstanding voting power represented by our outstanding shares.

As of March 31, 2020, Dry Friends Investment Company Inc., or Dry Friends, our largest shareholder and an affiliate of the Company, partly owned by our Chairman and CEO, Vice Chairman and people affiliated or working with Eurobulk amongst others, owns approximately 39.3% of the outstanding shares of our common stock and unvested incentive award shares, representing 35.5% of total voting power (after accounting for the certain voting rights of our Series B Preferred Shares before conversion and 32.4% of total voting power on an as converted basis). As a result of this share ownership and for as long as Dry Friends owns a significant percentage of our outstanding common stock, Dry Friends will be able to influence the outcome of any shareholder vote, including the election of directors, the adoption or amendment of provisions in our amended and restated articles of incorporation or bylaws, as amended, and possible mergers, corporate control contests and other significant corporate transactions. In addition, as of March 31, 2020, funds advised by Tennenbaum Capital Partners LLC ("TCP") and Preferred Dry Friends Investment Company Inc., an affiliate of the Company partly owned by our Chairman and CEO, Vice Chairman and people affiliated or working with Eurobulk amongst others, owned shares of our Series B Preferred Shares, to which we will refer as the Series B Preferred Shares, that are convertible into 13.3% and 4.1%, respectively, of our common shares and unvested incentive award shares on an as-converted basis. In addition, we cannot enter into certain transactions without consent from holders of our Series B Preferred Shares. This concentration of ownership and the consent rights of holders of Series B Preferred Shares may have the effect of delaying, deferring or preventing a change in control, merger, consolidation, takeover or other business combination involving us, and could also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could in turn have an adverse effect on the market price of our common stock.

Our corporate governance practices are in compliance with, and are not prohibited by, the laws of the Republic of the Marshall Islands, and as such we are entitled to exemption from certain Nasdaq corporate governance standards. As a result, you may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.

Our Company's 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 requirements regarding the disclosure of a going concern audit opinion, submission of a listing agreement, notification of material non-compliance with Nasdaq corporate governance practices, and the establishment and composition of an audit committee and a formal written audit committee charter. For a list of the practices followed by us in lieu of Nasdaq's corporate governance rules, we refer you to the section of this annual report entitled "Board Practices—Corporate Governance" under Item 6.

Our growth depends on our ability to expand relationships with existing charterers, establish relationships with new customers and obtain new time charters, for which we will face substantial competition from new entrants and established companies with significant resources.

One of our principal objectives is to acquire additional vessels in conjunction with entering into additional long-term, fixed-rate charters for these vessels. The process of obtaining new long-term, fixed-rate charters is highly competitive and generally involves an intensive screening process and competitive bids, and often extends for several months. Generally, we compete for charters based upon charter rate, customer relationships, operating expertise, professional reputation and vessel specifications, including size, age and condition.

In addition, as vessels age, it can be more difficult to employ them on profitable time charters, particularly during periods of decreased demand in the charter market. Accordingly, we may find it difficult to continue to find profitable employment for our vessels as they age.

We face substantial competition from a number of experienced companies, including state-sponsored entities and financial organizations. Some of these competitors have significantly greater financial resources than we do, and can therefore operate larger fleets and may be able to offer better charter rates. In the future, we may also face competition from reputable, experienced and well-capitalized marine transportation companies, including state-sponsored entities, that do not currently own vessels, but may choose to do so. Any increased competition may cause greater price competition for time charters, as well as for the acquisition of high-quality secondhand vessels and newbuild vessels. Further, since the charter rate is generally considered to be one of the principal factors in a

charterer's decision to charter a vessel, the rates and available tonnage offered by our competitors can place downward pressure on rates throughout the charter market. As a result of these factors, we may be unable to charter our vessels, expand our relationships with existing customers or to obtain new customers on a profitable basis, if at all, which could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for dividends to our stockholders.

We and our principal officers have affiliations with the Managers that could create conflicts of interest detrimental to us.

Our principal officers are also principals, officers and employees of the Managers, which are our ship management companies. These responsibilities and relationships could create conflicts of interest between us and the Managers. Conflicts may also arise in connection with the chartering, purchase, sale and operations of the vessels in our fleet versus other vessels that are or may be managed in the future by the Managers. Circumstances in any of these instances may make one decision advantageous to us but detrimental to the Managers and vice versa. Eurobulk currently manages vessels for EuroDry, and three bulkers that are not owned by EuroDry, potentially causing conflicts such as those described above. Further, it is possible that in the future Eurobulk may manage additional vessels which will not belong to EuroDry and in which the Pittas family may have non-controlling, little or even no power or participation, and Eurobulk may not be able to resolve all conflicts of interest in a manner beneficial to us and our shareholders.

Companies affiliated with Eurobulk or our officers and directors may acquire vessels that compete with our fleet.

Companies affiliated with Eurobulk or our officers and directors own drybulk carriers and may acquire additional drybulk carriers in the future. These vessels could be in competition with our fleet and other companies affiliated with Eurobulk might be faced with conflicts of interest with respect to their own interests and their obligations to us. Eurobulk, Dry Friends and Aristides J. Pittas, our Chairman and Chief Executive Officer, have granted us a right of first refusal to acquire any drybulk vessel that any of them may consider for acquisition in the future. In addition, Aristides J. Pittas will use his best efforts to cause any entity with respect to which he directly or indirectly controls to grant us this right of first refusal. Were we, however, to decline any such opportunity offered to us or if we did not have the resources or desire to accept any such opportunity, Eurobulk, Dry Friends and Aristides J. Pittas, and any of their respective affiliates, could acquire such vessels.

Our officers do not devote all of their time to our business.

Our officers are involved in other business activities that may result in their spending less time than is appropriate or necessary in order to manage our business successfully. Our Chief Executive Officer, Chief Financial Officer, Chief Administrative Officer, Internal Auditor and Secretary are not employed directly by us, but rather their services are provided pursuant to our Master Management Agreement with Eurobulk. Our CEO is also President of Eurobulk and involved in the management of other affiliates and member of the board of other companies. Therefore, our officers may spend a material portion of their time providing services to other companies. They may also spend a material portion of their time providing services to Eurobulk and its affiliates on matters unrelated to us.

We are an "emerging growth company", and we cannot be certain that the reduced disclosure and other requirements applicable to emerging growth companies will not make our common shares less attractive to investors.

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act ("JOBS Act"), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.

In addition, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") for so long as we are an emerging growth company.

For as long as we take advantage of the reduced reporting obligations, the information that we provide our shareholders may be different from information provided by other public companies.

We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations or to make dividend payments.

We are a holding company and our subsidiaries, which are all wholly-owned by us, conduct all of our operations and own all of our operating assets. We have no significant assets other than the equity interests in our wholly-owned subsidiaries. As a result, our ability to make dividend payments to you depends on our subsidiaries and their ability to distribute funds to us. If we are unable to obtain funds from our subsidiaries, we may be unable or our Board of Directors may exercise its discretion not to pay dividends.

We may not be able to pay dividends.

We have not declared any dividends on our common stock and we may not earn sufficient revenues or we may incur expenses or liabilities that would reduce or eliminate the cash available for distribution as dividends. Our loan agreements may also limit the amount of dividends we can pay under some circumstances based on certain covenants included in the loan agreements.

The declaration and payment of any dividends will be subject at all times to the discretion of our Board of Directors. Our Series B Preferred Shares provide that we must pay a cash dividend to holders of the Series B Preferred Shares in an amount equal to 40% of any dividend we pay on our common shares on an as-converted-basis in addition to the dividend of the Series B Preferred Shares that is payable at the time. This provision may be an important factor when our Board of Directors determines whether to declare dividends on our common shares. The timing and amount of dividends will depend on our earnings, financial condition, cash requirements and availability, restrictions in our loan agreements, growth strategy, charter rates in the drybulk shipping industry, the provisions of Marshall Islands law affecting the payment of dividends and other factors. Marshall Islands law generally prohibits the payment of dividends other than from surplus (retained earnings and the excess of consideration received for the sale of shares above the par value of the shares), but, if there is no surplus, dividends may be declared out of the net profits (basically, the excess of our revenue over our expenses) for the fiscal year in which the dividend is declared or the preceding fiscal year. Marshall Islands law also prohibits the payment of dividends while a company is insolvent or if it would be rendered insolvent upon the payment of a dividend. As a result, we may not be able to pay dividends.

We may not have sufficient cash from our operations to enable us to pay dividends on or to redeem our Preferred Shares following the payment of expenses and the establishment of any reserves.

The Series B Preferred Shares paid dividends in-kind until January 29, 2019 (rather than in cash). After that date, dividends to holders of the Series B Preferred Shares are paid in cash. In the future, we may have insufficient cash available to redeem our Preferred Shares. The amount we can pay for dividends or use to redeem Preferred Shares depends upon the amount of cash we generate from our operations, which may fluctuate.

If we are unable to fund our future capital expenditures, we may not be able to continue to operate some of our vessels, which would have a material adverse effect on our business and our ability to pay dividends.

In order to fund our future capital expenditures, we may be required to incur borrowings or raise capital through the sale of debt or equity securities. Our ability to access the capital markets through future offerings may be limited by our financial condition at the time of any such offering as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. Our failure to obtain the funds for necessary future capital expenditures would limit our ability to continue to operate some of our vessels and could have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends. Even if we are successful in obtaining such funds through financings, the terms of such financings could further limit our ability to pay dividends.

Our existing loan agreements contain restrictive covenants that may limit our liquidity and corporate activities.

Our existing loan agreements impose operating and financial restrictions on us. These restrictions may limit our ability to:

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incur additional indebtedness;

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create liens on our assets;

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sell capital stock of our subsidiaries;

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make investments;

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engage in mergers or acquisitions;

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pay dividends;

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make capital expenditures;

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change the management of our vessels or terminate or materially amend the management agreement relating to each vessel; and

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sell our vessels.

Therefore, we may need to seek permission from our lenders in order to engage in some corporate actions. The lenders' interests may be different from our interests, and we may not be able to obtain the lenders' permission when needed. This may prevent us from taking actions that are in our best interest.

Servicing future debt would limit funds available for other purposes.

To finance our fleet, we have incurred secured debt under loan agreements for our vessels. We also currently expect to incur additional secured debt to finance the acquisition of additional vessels we may decide to acquire in the future. We must dedicate a portion of our cash flow from operations to pay the principal and interest on our debt. These payments limit funds otherwise available for working capital expenditures and other purposes. As of December 31, 2019, we had total bank debt of approximately $56.9 million. Our debt repayment schedule as of December 31, 2019 required us to repay $20.3 million of debt during the next two years. As of March 31, 2020, we repaid $2.0 million of our total debt decreasing our outstanding debt to $54.9 million. If we are unable to service our debt, it could have a material adverse effect on our financial condition, results of operations and cash flows.

A further rise in interest rates could cause an increase in our costs and have a material adverse effect on our financial condition and results of operations. To finance vessel purchases, we have borrowed, and may continue to borrow, under loan agreements that provide for periodic interest rate adjustments based on indices that fluctuate with changes in market interest rates. If interest rates increase significantly, it would increase our costs of financing our acquisition of vessels, which could have a material adverse effect on our financial condition and results of operations. Any increase in debt service would also reduce the funds available to us to purchase other vessels.

Our ability to obtain additional debt financing may be dependent on the performance of our then existing charters and the creditworthiness of our charterers.

The actual or perceived credit quality of our charterers, and any defaults by them, may be one of the factors that materially affect our ability to obtain the additional debt financing that we will require to purchase additional vessels or may significantly increase our costs of obtaining such financing. We may be unable to obtain additional financing, or may be able to obtain additional financing only at a higher-than-anticipated cost, which may materially affect our results of operations, cash flows and our ability to implement our business strategy.

As we expand our business, we may need to upgrade our operations and financial systems, and add more staff and crew. If we cannot upgrade these systems or recruit suitable employees, our performance may be adversely affected.

Our Managers' current operating and financial systems may not be adequate if we expand the size of our fleet, and our attempts to improve those systems may be ineffective. In addition, if we expand our fleet, we will have to rely on our Managers to recruit suitable additional seafarers and shore-side administrative and management personnel. Our Managers may not be able to continue to hire suitable employees as we expand our fleet. If our Managers' affiliated crewing agent encounters business or financial difficulties, we can make satisfactory arrangements with unaffiliated crewing agents or else we may not be able to adequately staff our vessels. If we are unable to operate our financial and operations systems effectively or to recruit suitable employees, our performance may be materially adversely affected.

If we acquire additional ships, whether on the secondhand market or newbuildings, and those vessels are not delivered on time or are delivered with significant defects, our earnings and financial condition could be adversely affected.

We expect to acquire additional vessels in the future either from the secondhand markets or by placing newbuilding orders. A delay in the delivery of any of these vessels to us or the failure of the contract counterparty to deliver a vessel at all could cause us to breach our obligations under a related time charter and could adversely affect

our earnings, our financial condition and the amount of dividends, if any, that we pay in the future. The delivery of any drybulk vessels we might decide to acquire, whether newbuildings or secondhand vessels, could be delayed or certain events may arise which could result in us not taking delivery of a vessel, such as a total loss of a vessel, a constructive loss of a vessel, substantial damage to a vessel prior to delivery or construction not in accordance with agreed upon specification or with substantial defects.

We may have difficulty properly managing our planned growth through acquisitions of our newbuilds and additional vessels.

We intend to grow our business through ordering newbuilding vessels or selective acquisitions of secondhand vessels. Our future growth will primarily depend on our ability to locate and acquire suitable additional vessels, enlarge our customer base, operate and supervise any newbuilds we may order and obtain required debt or equity financing on acceptable terms.

A delay in the delivery to us of any such vessel, or the failure of the shipyard to deliver a vessel at all, could cause us to breach our obligations under a related charter and could adversely affect our earnings. In addition, the delivery of any of these vessels with substantial defects could have similar consequences.

A shipyard could fail to deliver a newbuild on time or at all because of:

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work stoppages or other hostilities, political or economic disturbances that disrupt the operations of the shipyard;

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quality or engineering problems;

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bankruptcy or other financial crisis of the shipyard;

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a backlog of orders at the shipyard;

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disputes between us and the shipyard regarding contractual obligations;

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weather interference or catastrophic events, such as major earthquakes or fires;

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our requests for changes to the original vessel specifications or disputes with the shipyard; or

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shortages of or delays in the receipt of necessary construction materials, such as steel, or equipment, such as main engines, electricity generators and propellers.

During periods in which charter rates are high, vessel values generally are high as well, and it may be difficult to consummate vessel acquisitions or enter into newbuilding contracts at favorable prices. During periods when charter rates are low, we may be unable to fund the acquisition of newbuilding vessels, whether through lending or cash on hand. For these reasons, we may be unable to execute our growth plans or avoid significant expenses and losses in connection with our future growth efforts.

Credit market volatility may affect our ability to refinance our existing debt or incur additional debt.

The credit markets have recently experienced extreme volatility and disruption, which has limited credit capacity for certain issuers, and lenders have requested shorter terms and lower leverage ratios. The market for new debt financing is extremely limited and in some cases not available at all. If current levels of market disruption and volatility continue or worsen, we may not be able to refinance our existing debt or incur additional debt, which may require us to seek other funding sources to meet our liquidity needs or to fund planned expansion.

Labor interruptions could disrupt our business.

Our vessels are manned by masters, officers and crews that are employed by third parties. 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 normally and could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.

We will not be able to take advantage of potentially favorable opportunities in the current spot market with respect to vessels employed on time charters.

As of March 31, 2020, all but one of our vessels are employed under time charters with remaining terms ranging from less than one month to 9 months based on the minimum duration of the charter contracts, with the

exception of the pool agreement we have entered into since August 2018. One of our vessels is undergoing her drydocking. The percentage of our fleet that is under time charter contracts represents approximately 32% of our vessel capacity for the remainder of 2020. Although time charters provide relatively steady streams of revenue, vessels committed to time charters may not be available for spot charters during periods of increasing charter hire rates, when spot charters might be more profitable. If we cannot re-charter these vessels on time charters or trade them in the spot market profitably, our results of operations and operating cash flow may suffer. We may not be able to secure charter rates in the future that will enable us to operate our vessels profitably. Although we do not receive any revenues from certain of our vessels while such vessels are unemployed, we are required to pay expenses necessary to maintain the vessel in proper operating condition, insure it and service any indebtedness secured by such vessel. Despite the fact that as of March 31, 2020 all but one of our vessels are employed, we may be forced to lay up vessels if rates drop to levels below daily running expenses or if we are unable to find employment for the vessels for prolonged periods of time.

We or our Managers may be unable to attract and retain key management personnel and other employees in the shipping industry, which may negatively affect 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. Our success will depend upon our and our Managers' ability to hire additional employees and to retain key members of our management team. The loss of any of these individuals could adversely affect our business prospects and financial condition and operating cash flows. Difficulty in hiring and retaining personnel could adversely affect our results of operations. We do not currently intend to maintain "key man" life insurance on any of our officers.

Risks involved with operating ocean-going vessels could affect our business and reputation, which may reduce our revenues.

The operation of an ocean-going vessel carries inherent risks. These risks include, among others, the possibility of:

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marine disaster;

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piracy;

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environmental accidents;

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grounding, fire, explosions and collisions;

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cargo and property losses or damage;

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business interruptions caused by mechanical failure, human error, war, terrorism, political action in various countries, labor strikes, adverse weather conditions, natural disasters or other disasters outside our control, such as the recent Coronavirus outbreak; and

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work stoppages or other labor problems with crew members serving on our vessels including crew strikes and/or boycotts.

Such occurrences could result in death or injury to persons, loss of property or environmental damage, delays in the delivery of cargo, loss of revenues from or termination of charter contracts, governmental fines, penalties or restrictions on conducting business, higher insurance rates, and damage to our reputation and customer relationships generally. Any of these circumstances or events could increase our costs or lower our revenues, which could result in reduction in the market price of our shares of common stock. The involvement of our vessels in an environmental disaster may harm our reputation as a safe and reliable vessel owner and operator.

The operation of drybulk carriers has certain unique operational risks which could affect our business, financial condition, results of operations and ability to pay dividends.

The operation of drybulk carriers has certain unique risks. With a drybulk carrier, the cargo itself and its interaction with the ship can be a risk factor. By their nature, drybulk cargoes are often heavy, dense, easily shifted, and react badly to water exposure. In addition, drybulk carriers are often subjected to battering treatment during unloading operations with grabs, jackhammers (to pry encrusted cargoes out of the hold), and small bulldozers. This treatment may cause damage to the vessel. Vessels damaged due to treatment during unloading procedures may be more susceptible to breach to the sea. Hull breaches in drybulk carriers may lead to the flooding of the vessels holds. If a drybulk carrier suffers flooding in its forward holds, the bulk cargo may become so dense and waterlogged that its pressure may buckle the vessels bulkheads leading to the loss of a vessel. If we are unable to adequately maintain

our vessels we may be unable to prevent these events. Any of these circumstances or events could negatively impact our business, financial condition, results of operations and ability to pay dividends. In addition, the loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator.

Our vessels may suffer damage and may face unexpected drydocking costs, which could affect our cash flows and financial condition.

If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and may be substantial. We may have to pay drydocking costs that our insurance does not cover. The loss of earnings while these vessels are being repaired and reconditioned, as well as the actual cost of these repairs, would decrease our earnings. In addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently located. We may be unable to find space at a suitable drydocking facility or our vessels may be forced to travel to a drydocking facility that is not conveniently located near our vessels' positions. The loss of earnings and any costs incurred while these vessels are forced to wait for space or to steam to more distant drydocking facilities would decrease our earnings.

Purchasing and operating previously owned vessels may result in increased operating costs and vessels off-hire, which could adversely affect our earnings. The aging of our fleet may result in increased operating costs in the future, which could adversely affect our results of operations.

Although we inspect the secondhand vessels prior to purchase, this inspection does not provide us with the same knowledge about their condition and cost of any required (or anticipated) repairs that it would have had if these vessels had been built for and operated exclusively by us. Generally, we do not receive the benefit of warranties on secondhand vessels.

In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. As of March 31, 2020, the vessels in our fleet had an average age of approximately 11.6 years. As our vessels age, they may become less fuel efficient and more costly to maintain and will not be as advanced as more recently constructed vessels due to improvements in design and engine technology. Rates for cargo insurance, paid by charterers, also increase with the age of a vessel, making older vessels less desirable to charterers. 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 our 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.

In addition, charterers actively discriminate against hiring older vessels. For example, Rightship, the ship vetting service founded by Rio Tinto and BHP-Billiton that has become the major vetting service in the drybulk shipping industry, ranks the suitability of vessels based on a scale of one to five stars. Most major carriers will not charter a vessel that Rightship has vetted with fewer than three stars. Rightship automatically downgrades any vessel over 18 years of age to two stars, which significantly decreases its chances of entering into a charter. Therefore, as our vessels approach and exceed 18 years of age, we may not be able to operate these vessels again profitably or even generate positive cash flows during the remainder of their useful lives even if the market rates improve, which could adversely affect our earnings. As of March 31, 2020, two of our vessels are over 18 years of age.

If we sell vessels, we are not certain that the price for which we sell them will equal their carrying amount at that time.

Unless we set aside reserves for vessel replacement, at the end of a vessel's useful life, our revenue will decline, which would adversely affect our cash flows and income.

As of March 31, 2020, the vessels in our fleet had an average age of approximately 11.6 years. Unless we maintain cash reserves for vessel replacement, we may be unable to replace the vessels in our fleet upon the expiration of their useful lives. We estimate the useful life of our vessels to be 25 years from the completion of their construction. Our cash flows and income are dependent on the revenues we earn by chartering our vessels to customers. If we are unable to replace the vessels in our fleet upon the expiration of their useful lives, our business, financial condition and results of operations may be materially adversely affected. Any reserves set aside for vessel replacement would not be available for other cash needs or dividends.

Technological innovation could reduce our charter income and the value of our vessels.

The charter 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. As a result, our available cash could be adversely affected.

We are subject to certain risks with respect to our counterparties on contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our business.

We enter into, among other things, charter-party agreements. Such agreements subject us to counterparty risks. The ability and willingness 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 and offshore industries, the overall financial condition of the counterparty, charter rates received for specific types of vessels, and various expenses. In addition, in depressed market conditions, our charterers may no longer need a vessel that is currently under charter or may be able to obtain a comparable vessel at lower rates. As a result, charterers may seek to renegotiate the terms of their existing charter parties or avoid their obligations under those contracts, especially when the contracted charter rates are significantly above market levels. Should a counterparty fail to honor its obligations under agreements with us, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on time charters would be at lower rates given currently decreased charter rate levels. If our charterers fail to meet their obligations to us or attempt to renegotiate our charter agreements, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on time charters may be at lower rates given currently decreased charter rate levels. As a result, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends in the future and compliance with covenants in our credit facilities.

A decrease in spot charter rates may provide an incentive for some charterers to default on their charters.

When we enter into a time charter, charter rates under that charter are fixed for the term of the charter. If the spot charter rates or short-term time charter rates in the drybulk shipping industry remain significantly lower than the time charter equivalent rates that some of our charterers are obligated to pay us under our 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, which would affect our ability to operate our vessels profitably and may affect our ability to comply with covenants contained in our current or future credit facilities and financing agreements.

We may not have adequate insurance to compensate us adequately for damage to, or loss of, our vessels.

We procure insurance for our fleet against risks commonly insured against by vessel owners and operators which includes hull and machinery insurance, protection and indemnity insurance (which, in turn, 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 which covers business interruptions that result in the loss of use of a vessel except in cases we consider such protection appropriate. We may not be adequately insured against all risks and we may not be able to obtain adequate insurance coverage for our fleet in the future. The insurers may not pay particular claims. Even if our insurance coverage is adequate to cover our losses, we may not be able to timely obtain a replacement vessel in the event of a loss. Our insurance policies contain deductibles for which we will be responsible and limitations and exclusions which may increase our costs. Since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could be material. Moreover, the insurers may default on any claims they are required to pay. If our insurance is not enough to cover claims that may arise, it may have a material adverse effect on our financial condition, results of operations and cash flows.

Because we obtain some of our insurance through protection and indemnity associations ("P&I Associations"), we may also be subject to calls in amounts based not only on our own claim records, but also the claim records of other members of the P&I Associations.

We are indemnified for legal liabilities incurred while operating our vessels through membership in P&I Associations or clubs. P&I Associations are mutual insurance associations whose members must contribute to cover losses sustained by other association members. The objective of a P&I Association is to provide mutual insurance based on the aggregate tonnage of a member's vessels entered into the association. Claims are paid through the aggregate premiums of all members of the association, although members remain subject to calls for additional funds if the aggregate premiums are insufficient to cover claims submitted to the association. We cannot assure you that the P&I Association to which we belong will remain viable or that we will not become subject to additional funding calls which could adversely affect us. Claims submitted to the association may include those incurred by members of the association as well as claims submitted to the association from other P&I Associations with which our P&I Association has entered into inter-association agreements.

We may be subject to calls in amounts based not only on our claim records but also the claim records of other members of the P&I Associations through which we receive insurance coverage for tort liability, including pollution-related liability. 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, cash flows, financial condition and ability to pay dividends.

Our vessels are exposed to operational risks, including terrorism, cyber-terrorism and piracy that may not be adequately covered by our insurance.

The operation of any vessel includes risks such as weather conditions, mechanical failure, collision, fire, contact with floating objects, cargo or property loss or damage and business interruption due to political circumstances in countries, piracy, terrorist and cyber-terrorist attacks, armed hostilities and labor strikes. Such occurrences could result in death or injury to persons, loss, damage or destruction of property or environmental damage, delays in the delivery of cargo, loss of revenues from or termination of charter contracts, governmental fines, penalties or restrictions on conducting business, higher insurance rates and damage to our reputation and customer relationships generally.

Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Indian Ocean and in the Gulf of Aden off the coast of Somalia. Although the frequency of sea piracy worldwide has generally decreased since 2013, sea piracy incidents continue to occur, particularly in the Gulf of Aden off the coast of Somalia and increasingly in the Sulu Sea and the Gulf of Guinea, with drybulk vessels and tankers particularly vulnerable to such attacks. Acts of piracy could result in harm or danger to the crews that man our vessels.

If these piracy attacks occur in regions in which our vessels are deployed that insurers characterized as "war risk" zones or Joint War Committee "war and strikes" listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including the employment of onboard security guards, could increase in such circumstances. Furthermore, while we believe the charterer remains liable for charter payments when a vessel is seized by pirates, the charterer may dispute this and withhold charterhire until the vessel is released. A charterer may also claim that a vessel seized by pirates was not "on-hire" for a certain number of days and is therefore entitled to cancel the charter party, a claim that we would dispute. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, any detention 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, financial condition and earnings.

We may not be adequately insured against all risks, and our insurers may not pay particular claims. With respect to war risks insurance, which we usually obtain for certain of our vessels making port calls in designated war zone areas, such insurance may not be obtained prior to one of our vessels entering into an actual war zone, which could result in that vessel not being insured. Even if our insurance coverage is adequate to cover our losses, we may not be able to timely obtain a replacement vessel in the event of a loss. Under the terms of our credit facilities, we will be subject to restrictions on the use of any proceeds we may receive from claims under our insurance policies. Furthermore, in the future, we may not be able to maintain or obtain adequate insurance coverage at reasonable rates for our fleet. We may also be subject to calls, or premiums, in amounts based not only on our own claim records but also the claim records of all other members of the P&I Associations through which we receive indemnity insurance

coverage for tort liability. Our insurance policies also contain deductibles, limitations and exclusions which, although we believe are standard in the shipping industry, may nevertheless increase our costs in the event of a claim or decrease any recovery in the event of a loss. If the damages from a catastrophic oil spill or other marine disaster exceeded our insurance coverage, the payment of those damages could have a material adverse effect on our business and could possibly result in our insolvency.

Recent action by the IMO's Maritime Safety Committee and U.S. agencies indicate that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. This might cause companies to cultivate additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. However, the impact of such regulations is hard to predict at this time. We do not carry cyber-attack insurance, which could have a material adverse effect on our business, financial condition and results of operations.

In general, we do not carry loss of hire insurance. Occasionally, we may decide to carry loss of hire insurance when our vessels are trading in areas where a history of piracy has been reported. Loss of hire insurance covers the loss of revenue during extended vessel off-hire periods, such as those that occur during an unscheduled drydocking or unscheduled repairs due to damage to the vessel. Accordingly, any loss of a vessel or any extended period of vessel off-hire, due to an accident or otherwise, could have a material adverse effect on our business, financial condition and results of operations.

If our vessels call on ports located in countries or territories that are subject to restrictions, sanctions or embargoes imposed by the U.S. government, the European Union, the United Nations, or other governments, it could lead to monetary fines or penalties and/or adversely affect our reputation and the market for our shares of common stock and its trading price.

Although we do not expect that our vessels will call on ports located in countries or territories subject to country-wide or territory-wide sanctions and/or embargoes imposed by the U.S. government or other authorities or countries identified by the U.S. government or other authorities as state sponsors of terrorism ("Sanctioned Jurisdictions"), and we endeavor to take precautions reasonably designed to mitigate such activities, including relevant trade exclusion clauses in our charter contracts forbidding the use of our vessels in trade that would violate economic sanctions, it is possible that, from time to time, vessels in our fleet on charterers' instructions, and without our consent, may call on ports located in such countries or territories in the future. If such activities result in a sanctions violation, we could be subject to monetary fines, penalties, or other sanctions, and our reputation and the market for our common stock could be adversely affected.

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 U.S. administration, the EU, 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, we could face monetary fines or penalties, or we may suffer reputational harm.

All of the Company's revenues are from chartering-out its vessels on voyage or time charter contracts or from entering into pooling arrangements under which an international company and trading house involved in the use and/or transportation of drybulk commodities directs the Company's vessel to carry cargoes on its behalf. In time charters and pooling arrangements, the Company has no contractual relationship with the owner of the cargo and does not know the identity of the cargo owner. The vessel is directed to a load port to load the cargo, and to a discharge port to offload the cargo, based solely on the instructions of the charterer. Under its time charters and pooling arrangements, the terms of which are consistent with industry standards, the Company may not have the ability to prohibit its charterers from sending its vessels to Iran, North Korea, Sudan, Syria or Cuba to carry cargoes that do not violate applicable laws. As of March 31, 2020 none of our vessels have called on ports at the aforementioned countries in the past or are arranged to call such ports in the future. The vessels' shipowning companies do not presently have, and have not in the past had, any agreements, arrangements or contracts with the governments of Iran, North Korea, Sudan, Syria or Cuba or entities that these countries control.

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 with all applicable sanctions and embargo laws and regulations 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 or territories 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 stock may adversely affect the price at which our common stock trades. 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 or territories subject to U.S. sanctions and embargo laws that are not controlled by the governments of those countries or territories, or engaging in operations associated with those countries or territories pursuant to contracts with third parties that are unrelated to those countries or territories or entities controlled by their governments. Investor perception of the value of our common stock may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries or territories.

We expect to operate substantially outside the United States, which will expose us to political and governmental instability, which could harm our operations.

We expect that our operations will be primarily conducted outside the United States and may be adversely affected by changing or adverse political and governmental conditions in the countries where our vessels are flagged or registered and in the regions where we otherwise engage in business. Any disruption caused by these factors may interfere with the operation of our vessels, which could harm our business, financial condition and results of operations. Past political efforts to disrupt shipping in these regions, particularly in the Arabian Gulf, have included attacks on ships and mining of waterways. In addition, terrorist attacks outside this region, such as the attacks that occurred against targets in the United States on September 11, 2001, and on a number of occasions in other countries following that, as well as continuing or new unrest and hostilities in Iraq, Iran, Afghanistan, Libya, Egypt, Ukraine, Syria and elsewhere in the world, may lead to additional armed conflicts or to further acts of terrorism and civil disturbance. Any such attacks or disturbances may disrupt our business, increase vessel operating costs, including insurance costs, and adversely affect our financial condition and results of operations. Our operations may also be adversely affected by expropriation of vessels, taxes, regulation, tariffs, trade embargoes, economic sanctions or a disruption of or limit to trading activities or other adverse events or circumstances in or affecting the countries and regions where we operate or where we may operate in the future.

The international nature of our operations may make the outcome of any bankruptcy proceedings difficult to predict.

We are incorporated under the laws of the Republic of the Marshall Islands and we conduct operations in countries around the world. Consequently, in the event of any bankruptcy, insolvency, liquidation, dissolution, reorganization or similar proceeding involving us or any of our subsidiaries, bankruptcy laws other than those of the United States could apply. If we become a debtor under U.S. bankruptcy law, bankruptcy courts in the United States may seek to assert jurisdiction over all of our assets, wherever located, including property situated in other countries. There can be no assurance, however, that we would become a debtor in the United States, or that a U.S. bankruptcy court would be entitled to, or accept, jurisdiction over such a bankruptcy case, or that courts in other countries that have jurisdiction over us and our operations would recognize a U.S. bankruptcy court's jurisdiction if any other bankruptcy court would determine it had jurisdiction.

Obligations associated with being a public company require significant company resources and management attention.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and the other rules and regulations of the SEC, including Sarbanes-Oxley. Section 404 of Sarbanes-Oxley requires that we evaluate and determine the effectiveness of our internal control over financial reporting.

We work with our legal, accounting and financial advisors to identify any areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. We evaluate areas such as corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We will make changes in any of these and other areas,

including our internal control over financial reporting, which we believe are necessary. However, these and other measures we may take may not be sufficient to allow us to satisfy our obligations as a public company on a timely and reliable basis. In addition, compliance with reporting and other requirements applicable to public companies do create additional costs for us and require the time and attention of management. Our limited management resources may exacerbate the difficulties in complying with these reporting and other requirements while focusing on executing our business strategy. We may not be able to predict or estimate the amount of the additional costs we may incur, the timing of such costs or the degree of impact that our management's attention to these matters will have on our business.

Exposure to currency exchange rate fluctuations will result in fluctuations in our cash flows and operating results.

We generate all our revenues in U.S. dollars, but we incur approximately 20% of our vessel operating expenses and drydocking expenses, all of our vessel management fees, and approximately 6% in 2019 of our general and administrative expenses in currencies other than the U.S. dollar. This could lead to fluctuations in our operating expenses, which would affect our financial results. Expenses incurred in foreign currencies increase when the value of the U.S. dollar falls, which would reduce our profitability and cash flows. In 2019, we had no exposure to the GBP.

Investment in derivative instruments such as freight forward agreements could result in losses.

From time to time, we may take positions in derivative instruments including freight forward agreements ("FFAs"). FFAs and other derivative instruments may be used to hedge a vessel owner's exposure to the charter market by providing for the sale of a contracted charter rate along a specified route and period of time. Upon settlement, if the contracted charter rate is less than the average of the rates, as reported by an identified index, for the specified route and period, the seller of the FFA is required to pay the buyer an amount equal to the difference between the contracted rate and the settlement rate, multiplied by the number of days in the specified period. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. If we take positions in FFAs or other derivative instruments and do not correctly anticipate charter rate movements over the specified route and time period, we could suffer losses in the settling or termination of the FFA. This could adversely affect our results of operations and cash flows. As of December 31, 2019, the Company has entered into interest rate swap and FFA agreements. See "Note 13 – Derivative Financial Instruments" under the "Consolidated Financial Statements" (page F-37).

We are exposed to volatility in LIBOR, and we may enter into derivative contracts, which can result in higher than market interest rates and charges against our income. If volatility in LIBOR occurs, it could affect our profitability, earnings and cash flow.

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. The amount outstanding under our senior secured credit facility has been, and amounts under additional credit facilities that we may enter in the future will generally be, advanced at a floating rate based on LIBOR, which has been volatile in prior years, which can affect the amount of interest payable on our debt, and which, in turn, could have an adverse effect on our earnings and cash flow. In addition, in recent years, LIBOR has been at relatively low levels, and may rise in the future as the current low interest rate environment comes to an end. Our financial condition could be materially adversely affected at any time that we have not entered into interest rate hedging arrangements to hedge our exposure to the interest rates applicable to our credit facilities and any other financing arrangements we may enter into in the future. Even if we enter into interest rate swaps or other derivative instruments for purposes of managing our interest rate exposure, our hedging strategies may not be effective and we may incur substantial losses.

LIBOR has historically been volatile, with the spread between LIBOR and the prime lending rate widening significantly at times. These conditions are the result of the disruptions in the international credit markets. Because the interest rates borne by our outstanding indebtedness fluctuate with changes in LIBOR, if this volatility were to occur, it would affect the amount of interest payable on our debt, which in turn, could have an adverse effect on our profitability, earnings and cash flow.

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, our loan agreements contain 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. Since some of our loans have such clauses, our borrowing 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. Entering into swaps and derivatives transactions is inherently risky and presents various possibilities for incurring significant expenses. Such risk may have an adverse effect on our financial condition and results of operations.

We depend upon a few significant customers, due to our currently small fleet, for a large part of our revenues and the loss of one or more of these customers could adversely affect our financial performance.

We have historically derived a significant part of our revenues from a small number of charterers. During 2019, approximately 81% of our revenues derived from our top five charterers. During 2018, 2017 and 2016, approximately 69%, 74% and 91%, respectively, of our revenues derived from our top five charterers. If one or more of our charterers chooses not to charter our vessels or is unable to perform under one or more charters with us and we are not able to find a replacement charter, we could suffer a loss of revenues that could adversely affect our financial condition and results of operations.

United States tax authorities could treat us as a "passive foreign investment company," which could have adverse United States federal income tax consequences to United States holders.

A foreign corporation will be treated as a "passive foreign investment company," or PFIC, for United States 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, and 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. For purposes of these tests, income derived from the performance of services does not constitute "passive income." United States shareholders of a PFIC are subject to a disadvantageous United States 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 addition, United States shareholders of a PFIC are required to file annual information returns with the United States Internal Revenue Service, or IRS.

Based on our current method of operation, we do not believe that we have been, are or will be a PFIC with respect to any taxable year. In this regard, we 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 should not constitute "passive income," and the assets that we own and operate in connection with the production of that income should not constitute passive assets.

There is substantial legal authority supporting this 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, it should be noted that there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. Accordingly, in the absence of legal authority directly relating to PFIC rules, no assurance can be given that the IRS or a court of law will accept this 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 the nature and extent of our operations changed.

If the IRS were to find that we are or have been a PFIC for any taxable year, our United States shareholders will face adverse United States federal income tax consequences. Under the PFIC rules, unless those shareholders make an election available under the United States Internal Revenue Code of 1986, as amended, (which election could itself have adverse consequences for such shareholders, as discussed in Item 10 of this Annual Report under "Taxation — United States Federal Income Taxation of U.S. Holders"), such shareholders would be subject to United States 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 our shares, as if the excess distribution or gain had been recognized ratably over the United States shareholder's holding period of our shares. See "Taxation — United States Federal Income Taxation of U.S. Holders" in this Annual Report under Item 10 for a more comprehensive discussion of the United States federal income tax consequences to United States shareholders if we are treated as a PFIC.

Based on the current and expected composition of our and our subsidiaries' assets and income, it is not anticipated that we will be treated as a PFIC. Our actual PFIC status for any taxable year, however, will not be determinable until after the end of such taxable year. Accordingly, there can be no assurances regarding our status as a PFIC for the current taxable year or any future taxable year. See the discussion in the section entitled "Item 10.E. Taxation — Passive Foreign Investment Company Status and Significant Tax Consequences". We urge U.S. Holders to consult with their own tax advisors regarding the possible application of the PFIC rules.

We may have to pay tax on United States source income, which would reduce our earnings.

Under the United States Internal Revenue Code of 1986, or the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as us and our subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States may be subject to a 4% United States federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code, or Section 883, and the applicable Treasury Regulations promulgated thereunder.

We intend to take the position that we qualified for this statutory tax exemption for United States federal income tax return reporting purposes for our 2019 taxable year and we intend to so qualify for future taxable years. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption for any future taxable year and thereby become subject to United States federal income tax on our U.S.-source shipping income. For example, in certain circumstances we may no longer qualify for exemption under Section 883 for a particular taxable year if shareholders, other than "qualified shareholders", with a five percent or greater interest in our common shares owned, in the aggregate, 50% or more of our outstanding common shares for more than half the days during the taxable year. Due to the factual nature of the issues involved, there can be no assurances on our tax-exempt status. In addition, we may fail to qualify if our common stock comes to represent 50% or less of the value or outstanding voting power of our stock.

If we are not entitled to exemption under Section 883 for any taxable year, we would be subject for those years to an effective 2% United States federal income tax on the shipping income we derive during the year which is attributable to the transport of cargoes to or from the United States. The imposition of this taxation would have a negative effect on our business and would result in decreased earnings available for distribution to our shareholders.

Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties, and an adverse effect on our business.

We operate in a number of countries throughout the world, including countries known to have a reputation for corruption. We are committed to doing business in accordance with applicable anti-corruption laws and have adopted a code of business conduct and ethics which is consistent and in full compliance with the U.S. Foreign Corrupt Practices Act of 1977. We are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take action determined to be in violation of such anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and might adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.

If management is unable to provide reports as to the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.

Under Section 404 of Sarbanes-Oxley, we are required to include in each of our annual reports on Form 20-F a report containing our management's assessment of the effectiveness of our internal control over financial reporting. If, in such annual reports on Form 20-F, our management cannot provide a report as to the effectiveness of our internal control over financial reporting as required by Section 404, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.

It may be difficult to enforce service of process and enforcement of judgments against us and our officers and directors.

We are a Marshall Islands corporation, and our subsidiaries are incorporated in jurisdictions outside of the United States. Our executive offices are located outside of the United States in Maroussi, Greece. A majority of our directors and officers reside outside of the United States, and a substantial portion of our assets and the assets of our officers and directors are located outside of the United States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside of the United States, judgments you may obtain in the U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws.

There is also substantial doubt that the courts of the Marshall Islands, Greece or jurisdictions in which our subsidiaries are organized would enter judgments in original actions brought in those courts predicated on U.S. federal or state securities laws. In addition, the protection afforded minority shareholders in the Marshall Islands is different than those offered in the United States.

Risk Factors Relating To Our Common Stock

The trading volume for our common stock has been low, which may cause our common stock to trade at lower prices and make it difficult for you to sell your common stock.

Although our shares of common stock have traded on the Nasdaq Capital Market since May 31, 2018, the trading volume has been low. Our shares may not actively trade in the public market and any such limited liquidity may cause our common stock to trade at lower prices and make it difficult to sell your common stock.

The market price of our common stock has been and may in the future be subject to significant fluctuations.

The market price of our common stock has been and may in the future be subject to significant fluctuations as a result of many factors, some of which are beyond our control. Among the factors that have in the past and could in the future affect our stock price are:

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

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changes in market valuations or sales or earnings estimates or publication of research reports by analysts;

•

changes in earnings estimates or shortfalls in our operating results from levels forecasted by securities analysts;

•

speculation in the press or investment community about our business or the shipping industry;

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changes in market valuations of similar companies and stock market price and volume fluctuations generally;

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payment of dividends;

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strategic actions by us or our competitors such as mergers, acquisitions, joint ventures, strategic alliances or restructurings;

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changes in government and other regulatory developments;

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additions or departures of key personnel;

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general market conditions and the state of the securities markets; and

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domestic and international economic, market and currency factors unrelated to our performance.

The international drybulk shipping industry has been highly unpredictable. In addition, the stock markets in general, and the markets for drybulk shipping and shipping stocks in general, have experienced extreme volatility

that has sometimes been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. Our shares may trade at prices lower than you originally paid for such shares.

If our common stock does not meet the Nasdaq Capital Market's minimum share price requirement, and if we cannot cure such deficiency within the prescribed timeframe, our common stock could be delisted.

Under the rules of the Nasdaq Capital Market, listed companies are required to maintain a share price of at least $1.00 per share. If the share price declines below $1.00 for a period of 30 consecutive business days, then the listed company has a cure period of at least 180 days to regain compliance with the $1.00 per share minimum. The company may regain compliance if the bid price of its common shares closes at $1.00 per share or more for a minimum of ten consecutive business days at any time during the 180-day cure period. If the price of our common stock closes below $1.00 for 30 consecutive days, and if we cannot cure that deficiency within the 180-day timeframe, then our common stock could be delisted.

If the market price of our common stock falls below $5.00 per share, under stock exchange rules, our shareholders will not be able to use such shares as collateral for borrowing in margin accounts. This inability to continue to use our common stock as collateral may lead to sales of such shares creating downward pressure on and increased volatility in the market price of our common stock.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.

The trading market for our common shares will depend, in part, upon the research and reports that securities or industry analysts publish about us or our business. We do not have any control over analysts as to whether they will cover us, and if they do, whether such coverage will continue. If analysts do not commence coverage of the Company, or if one or more of these analysts cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. In addition, if one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price may likely decline.

Our Amended and Restated Articles of Incorporation, Bylaws and Shareholders' Rights Plan contain anti-takeover provisions that may discourage, delay or prevent (1) our merger or acquisition and/or (2) the removal of incumbent directors and officers and (3) the ability of public shareholders to benefit from a change in control.

Our current amended and restated articles of incorporation and bylaws contain certain anti-takeover provisions. These provisions include blank check preferred stock, the prohibition of cumulative voting in the election of directors, a classified Board of Directors, advance written notice for shareholder nominations for directors, removal of directors only for cause, advance written notice of shareholder proposals for the removal of directors and limitations on action by shareholders. In addition, we adopted a shareholders' rights plan pursuant to which our Board of Directors may cause the substantial dilution of any person that attempts to acquire us without the approval of our Board of Directors. These anti-takeover provisions, including provisions of our shareholders' rights plan, either individually or in the aggregate, may discourage, delay or prevent (1) our merger or acquisition by means of a tender offer, a proxy contest or otherwise, that a shareholder may consider in its best interest, (2) the removal of incumbent directors and officers, and (3) the ability of public shareholders to benefit from a change in control. These anti-takeover provisions could substantially impede the ability of shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common stock and shareholders' ability to realize any potential change of control premium.

Future sales of our common stock could cause the market price of our common stock to decline.

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales could occur, may depress the market price for our common stock. These sales could also impair our ability to raise additional capital through the sale of our equity securities in the future.

We may issue additional shares of our stock in the future and our stockholders may elect to sell large numbers of shares held by them from time to time. Our amended and restated articles of incorporation authorize us to issue up to 200,000,000 shares of common stock and 20,000,000 shares of preferred stock.

Sales of a substantial number of any of the shares of common stock mentioned above may cause the market price of our common stock to decline.

Issuance of preferred stock may adversely affect the voting power of our shareholders and have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of our common stock.

Our Board of Directors approved the issuance of 19,042 shares of our Series B Preferred Shares at the Spin-off date and may decide in the future to issue preferred shares in one or more series and to determine the rights, preferences, privileges and restrictions with respect to, among other things, dividends, conversion, voting, redemption, liquidation and the number of shares constituting any series subject to prior shareholders' approval. If our Board determines to issue preferred shares, such issuance may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable. The issuance of preferred shares with voting and conversion rights may also adversely affect the voting power of the holders of common shares. This could substantially impede the ability of public shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common stock and shareholders' ability to realize any potential change of control premium.

Our Series B Preferred Shares are senior obligations of ours and rank prior to our common stock with respect to dividends, distributions and payments upon liquidation, which could have an adverse effect on the value of our common stock.

The rights of the holders of our Series B Preferred Shares rank senior to the obligations to holders of our common shares. Upon our liquidation, the holders of Series B Preferred Shares will be entitled to receive a liquidation preference of $1,000 per share, plus all accrued but unpaid dividends, prior and in preference to any distribution to the holders of any other class of our equity securities, including our common shares. The existence of the Series B Preferred Shares could have an adverse effect on the value of our common shares.

Because the Republic of the Marshall Islands, where we are incorporated, does not have a well-developed body of corporate law, shareholders may have fewer rights and protections than under typical state law in the United States, such as Delaware, and shareholders may have difficulty in protecting their interests with regard to actions taken by our Board of Directors.

Our corporate affairs are governed by our amended and restated articles of incorporation and bylaws, as amended, and by the Marshall Islands Business Corporations Act, or the 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 U.S. jurisdictions. Stockholder rights may differ as well. For example, under Marshall Islands law, a copy of the notice of any meeting of the shareholders must be given not less than 15 days before the meeting, whereas in Delaware such notice must be given not less than 10 days before the meeting. Therefore, if immediate shareholder action is required, a meeting may not be able to be convened as quickly as it can be convened under Delaware law. Also, under Marshall Islands law, any action required to be taken by a meeting of shareholders may only be taken without a meeting if consent is in writing and is signed by all of the shareholders entitled to vote, whereas under Delaware law action may be taken by consent if approved by the number of shareholders that would be required to approve such action at a meeting. Therefore, under Marshall Islands law, it may be more difficult for a company to take certain actions without a meeting even if a majority of the shareholders approve of such action. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of Delaware and other states with substantially similar legislative provisions, 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 U.S. jurisdiction.

Item 4.

Information on the Company

A.	History and Development of the Company

EuroDry Ltd. is a Marshall Islands company incorporated under the BCA on January 8, 2018. We are a provider of worldwide ocean-going transportation services. We own and operate drybulk carriers that transport major bulks such as iron ore, coal and grains, and minor bulks such as bauxite, phosphate and fertilizers. As of March 31, 2020, our fleet consisted of seven drybulk carriers (comprising four Panamax drybulk carriers, two

Kamsarmax and one Ultramax drybulk carrier), all of which are in operation. The total cargo carrying capacity of our seven drybulk carriers is 528,931 dwt.

On May 30, 2018, EuroDry was spun-off from our Former Parent Company and issued 2,254,830 shares of its common stock to holders of common stock of Euroseas as of the applicable record date (one share of EuroDry for every five shares of Euroseas held). Our common shares trade under the symbol EDRY on the Nasdaq Capital Market. Our executive offices are located at 4 Messogiou & Evropis Street, 151 24, Maroussi, Greece. Our telephone number is +30-211-1804005.

The SEC maintains an Internet site at www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our website address is www.eurodry.gr. The information contained on our website is not part of this annual report.

B.	Business Overview

Our fleet consists of drybulk carriers that transport iron ore, coal, grain and other dry cargoes along worldwide shipping routes. Please see information in the section "Our Fleet", below. During 2017, 2018 and 2019 we had a fleet utilization of 98.8%, 99.7% and 99.4%, respectively, our vessels achieved daily time charter equivalent rates of $10,042, $12,481 and $11,190, respectively, and we generated voyage charter and time charter revenues of $20.28 million, $25.93 million and $28.80 million, respectively.

Our business strategy is focused on providing consistent shareholder returns by carefully selecting the timing and the structure of our investments in drybulk vessels and by reliably, safely and competitively operating the vessels we own, through our affiliates, Eurobulk and Eurobulk FE. Representing a continuous shipowning and management history that dates back to the 19th century, we believe that one of our advantages in the industry is our ability to select and safely operate drybulk vessels of any age.

Our Fleet

As of March 31, 2020, the profile and deployment of our fleet is the following:

Name	Type	Dwt	Year Built	Employment (*)	TCE Rate ($/day)
Drybulk Vessels
EKATERINI	Kamsarmax	82,000	2018	TC until Apr-20	$13,000
XENIA	Kamsarmax	82,000	2016	TC until Nov-20	Hire 101% of the Average Baltic Kamsarmax P5TC index (***) with a floor at $11,000
EIRINI P	Panamax	76,466	2004	TC until Jul-20	Hire 100% of Average BPI 4TC^(**)
PANTELIS	Panamax	74,020	2000	TC until Apr-20	$5,000
TASOS	Panamax	75,100	2000	In drydock	-
ALEXANDROS P	Ultramax	63,500	2017	Guardian Navigation GMax LLC Pool	Pool revenue from August 2018
STARLIGHT	Panamax	75,845	2004	TC until Sep-20	Hire 100% of Average BPI 4TC^(**)
Total Vessels	7	528,931

(*)	TC denotes time charter. All dates listed are the earliest redelivery dates under each TC.

(**)	Denotes the Baltic Panamax Index; The Average BPI 4TC is an index based on four time charter routes.

(***)

The average Baltic P5TC Index is an index based on five Panamax time charter routes.

We plan to expand our fleet by investing in vessels in the drybulk market under favorable market conditions. We also intend to take advantage of the cyclical nature of the market by buying and selling ships when we believe favorable opportunities exist. We employ our vessels in the spot and time charter market and through pool arrangements. As of March 31, 2020, all but one of our vessels are employed under time charter contracts or pool agreements. One of our vessels is currently undergoing her drydock.

As of March 31, 2020, approximately 32% of our ship capacity days for the remainder of 2020 are under contract.

In "Critical Accounting Policies – Impairment of vessels" below, we discuss our policy for impairing the carrying values of our vessels. During the past few years, the market values of vessels have experienced extraordinarily high volatility, and 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. We may 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.

The table set forth below indicates (i) the carrying value of each of our vessels as of December 31, 2018 and 2019, respectively, (ii) which of our vessels we believe has a basic market value below its carrying value, and (iii) the aggregate difference between carrying and market value represented by such vessels. This aggregate difference represents the approximate analysis of the amount by which we believe we would have to reduce our net income/ (loss) if we sold all of such vessels in the current environment, using industry-standard valuation methodologies, in cash, in arm's-length transactions. For purposes of this calculation, we have assumed that the vessels would be sold at a price that reflects our estimate of their current basic market values. However, we are not holding our vessels for sale, except as otherwise noted in this report.

Our estimates of basic 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 any notations. Our estimates are based on information available from various industry sources, including:

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

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news and industry reports of similar vessel sales;

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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;

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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;

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

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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 market value are inherently uncertain. In addition, vessel values are highly volatile; as such, our estimates may not be indicative of the current or future basic market value of our vessels or prices that we could achieve if we were to sell them.

Name	Capacity	Purchase Date	Carrying Value as of December 31, 2018	Carrying Value as of December 31, 2019
Drybulk Vessels	(dwt)		(million USD)	(million USD)
PANTELIS	74,020	Jul-2009	$12.26⁽¹⁾	$10.86⁽²⁾
EIRINI P	76,466	May-2014	$15.59⁽¹⁾	$14.69⁽²⁾
XENIA	82,000	Feb-2016	$28.59⁽¹⁾	$27.46⁽²⁾
TASOS	75,100	Jan-2017	$4.07	$3.84
ALEXANDROS P.	63,500	Jan-2017	$16.65	$16.06
EKATERINI	82,000	May-2018	$23.34	$22.51
STARLIGHT	75,845	Nov-2018	$10.14⁽¹⁾	$10.08⁽²⁾
Total Drybulk Vessels	528,931		$110.64	$105.5

(1) Indicates drybulk vessels for which we believe, as of December 31, 2018, the basic charter-free market value is lower than the vessel's carrying value as of December 31, 2018. We believe that the aggregate carrying value of these vessels, assessed separately, of $66.58 million as of December 31, 2018 exceeds their aggregate basic charter-free market value of approximately $52.90 million by approximately $13.68 million. As further discussed in "Critical Accounting Policies – Impairment of vessels" below, we believe that the carrying values of our vessels as of December 31, 2018 were recoverable.

(2) Indicates drybulk vessels for which we believe, as of December 31, 2019, the basic charter-free market value is lower than the vessel's carrying value as of December 31, 2019. We believe that the aggregate carrying value of these vessels, assessed separately, of $63.09 million as of December 31, 2019 exceeds their aggregate basic charter-free market value of approximately $49.20 million by approximately $13.89 million. As further discussed in "Critical Accounting Policies – Impairment of vessels" below, we believe that the carrying values of our vessels as of December 31, 2019 were recoverable.

We note that all of our drybulk vessels, are currently employed under time charter contracts of durations from less than one to 9 months until the earliest redelivery charter period, with the exception of the pool agreement we have entered into since August 2018. If we sell those vessels with the charters attached, the sale price may be affected by the relationship of the charter rate to the prevailing market rate for a comparable charter with the same terms.

We refer you to the risk factor entitled "The market value of our vessels can fluctuate significantly, which may adversely affect our financial condition, cause us to breach financial covenants, result in the incurrence of a loss upon disposal of a vessel or increase the cost of acquiring additional vessels" and the discussion in Item 3.D under "Industry Risk Factors".

Management of Our Fleet

The operations of our vessels are managed by Eurobulk Ltd., or Eurobulk, and Eurobulk (Far East) Ltd. Inc., or Eurobulk FE, both affiliated companies. Eurobulk manages our fleet under a Master Management Agreement with us and separate management agreements with each shipowning company. Eurobulk was founded in 1994 by members of the Pittas family and is a reputable ship management company with strong industry relationships and experience in managing vessels. Under our Master Management Agreement, Eurobulk is responsible for providing us with: (i) executive services associated with us being a public company; (ii) other services to our subsidiaries and commercial management services, which include obtaining employment for our vessels and managing our relationships with charterers; and (iii) technical management services, which include managing day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society compliance, supervising the maintenance and general efficiency of vessels, arranging our hire of qualified officers and crew, arranging and supervising drydocking and repairs, arranging insurance for vessels, purchasing stores, supplies, spares and new equipment for vessels, appointing supervisors and technical consultants and providing technical support and shoreside personnel who carry out the management functions described above and certain accounting services.

Our Master Management Agreement with Eurobulk compensates Eurobulk with an annual fee and a daily management fee per vessel managed. Our Master Management Agreement is similar to the master management agreement between Euroseas and Eurobulk relating to our vessels that were previously owned by Euroseas. The Master Management Agreement is terminable by Eurobulk only for cause or under other limited circumstances, such as sale of the Company or Eurobulk or the bankruptcy of either party. The Master Management Agreement runs through January 1, 2023 and will automatically be extended after the initial period for an additional five-year period

unless terminated on or before the 90th day preceding the initial termination date. Pursuant to the Master Management Agreement, vessels we might acquire in the future can enter into a separate management agreement with Eurobulk with the term and daily rate as specified in the Master Management Agreement. The management agreements between Eurobulk FE and the shipowning companies follow substantially the same terms of the similar agreements with Eurobulk.

The management fee will be adjusted annually for Eurozone inflation every January 1^st. Under the Master Management Agreement, we pay Eurobulk an annual fee of $1,250,000 and a fee of 685 Euros per vessel per day in operation and 342.50 Euros per vessel per day in lay-up. In the case of newbuilding vessel contracts, the same management fee of 685 Euros will become effective when construction of the vessels actually begins.

Eurobulk FE was founded in 2015 and is based in the Philippines. Eurobulk FE manages our vessels M/V "Xenia," M/V "Tasos," M/V "Alexandros P" and M/V "Ekaterini," pursuant to a management agreement with each vessel's shipowning company and Master Management Agreement with Eurobulk FE, with terms substantially similar to the corresponding agreements of Eurobulk with the other shipowning companies.

During 2019, in exchange for providing us with the services described above, we paid Eurobulk an annual fee of $1,250,000. We also paid Eurobulk and Eurobulk FE a management fee of 685 Euros per vessel per day for any operating vessel and 50% (i.e. 342.5 Euros) of that amount for any vessel laid-up. There was no adjustment for inflation from January 1, 2020, to date and, hence, we continue to pay an annual fee of $1,250,000 and a fee of 685 Euros per vessel per day in operation and 342.5 Euros per vessel per day in lay-up. In the case of newbuilding vessel contracts, the same management fee of 685 Euros becomes effective when construction of the vessels actually begins.

Our Competitive Strengths

We believe that we possess the following competitive strengths:

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Experienced Management Team. Our management team has significant experience in all aspects of commercial, technical, operational and financial areas of our business. Aristides J. Pittas, our Chairman and Chief Executive Officer, holds a dual graduate degree in Naval Architecture and Marine Engineering and Ocean Systems Management from the Massachusetts Institute of Technology. He has worked in various technical, shipyard and ship management capacities and since 1991 has focused on the ownership and operation of vessels carrying dry cargoes. Dr. Anastasios Aslidis, our Chief Financial Officer, holds a Ph.D. in Ocean Systems Management also from Massachusetts Institute of Technology and has over 20 years of experience, primarily as a partner at a Boston based international consulting firm focusing on investment and risk management in the maritime industry.

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Cost Efficient Vessel Operations. We believe that because of the efficiencies afforded to us through Eurobulk, the strength of our management team and the quality of our fleet, we are, and will continue to be, a reliable, low cost vessel operator, without compromising our high standards of performance, reliability and safety. Our total vessel operating expenses, including management fees and general and administrative expenses but excluding drydocking expenses were $5,869 per day for the year ended December 31, 2019. Our technical and operating expertise allows us to efficiently manage and transport a wide range of cargoes with a flexible trade route profile, which helps reduce ballast time between voyages and minimize off-hire days. Our professional, well-trained masters, officers and on board crews further help us to control costs and ensure consistent vessel operating performance. We actively manage our fleet and strive to maximize utilization and minimize maintenance expenditures for operational and commercial utilization. For the year ended December 31, 2019, our operational fleet utilization was 99.4%, from 99.7% in 2018, while our commercial utilization rate was at 100% for both years. Our total fleet utilization rate in 2019 was 99.4%.

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Strong Relationships with Customers and Financial Institutions. We believe ourselves, Eurobulk, Eurobulk FE and the Pittas family have developed strong industry relationships and have gained acceptance with charterers, lenders and insurers because of long-standing reputation for safe and reliable service and financial responsibility through various shipping cycles. Through Eurobulk and Eurobulk FE, we offer reliable service and cargo carrying flexibility that enables us to attract customers and obtain repeat business. We also believe that the established customer base and reputation of ourselves, Eurobulk, Eurobulk FE and the Pittas family help us to secure favorable employment for our vessels with well-known charterers.

Our Business Strategy

Our business strategy is focused on providing consistent shareholder returns by carefully timing and structuring acquisitions of drybulk carriers and by reliably, safely and competitively operating our vessels through

our Managers. We continuously evaluate purchase and sale opportunities, as well as long term employment opportunities for our vessels. Key elements of the above strategy are:

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Renew and Expand our Fleet. We expect to grow our fleet in a disciplined manner through timely and selective acquisitions of quality vessels. We perform in-depth technical review and financial analysis of each potential acquisition and only purchase vessels as market opportunities present themselves. We focus on purchasing well-maintained secondhand vessels, newbuildings or newbuilding resales based on the evaluation of each investment option at the time it is made. During 2018 the construction of an 82,000 DWT bulk carrier was completed, which was delivered on May 7, 2018. In December 2018, we acquired another second hand Panamax drybulk carrier.

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Maintain Balanced Employment. We intend to employ our fleet on either longer term time charters, i.e. charters with duration of more than a year, or shorter term time/spot charters. We seek longer term time charter employment to obtain adequate cash flow to cover as much as possible of our fleet’s recurring costs, consisting of vessel operating expenses, management fees, general and administrative expenses, interest expense and drydocking costs for the upcoming 12-month period. We also may use FFAs – as a substitute for time charter employment – to partly provide coverage for our drybulk vessels in order to increase the predictability of our revenues. We look to deploy the remainder of our fleet on spot charters, shipping pools or contracts of affreightment (“COA”) depending on our view of the direction of the markets and other tactical or strategic considerations. When we expect charter rates to improve we try to increase the percentage of our fleet employed in shorter term contracts (allowing us to take advantage of higher rates in the future), while when we expect the market to weaken we try to increase the percentage of our fleet employed in longer term contracts (allowing us to take advantage of higher current rates). We believe this balanced employment strategy will provide us with more predictable operating cash flows and sufficient downside protection, while allowing us to participate in the potential upside of the spot market during periods of rising charter rates. As of March 31, 2020, on the basis of our existing time charters, approximately 32% of our vessel capacity for the remainder of 2020 are under time charter contracts, which will ensure employment of a portion of our fleet, partly protect us from market fluctuations and increase our ability to make principal and interest payments on our debt and pay dividends to our shareholders.

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Optimize Use of Financial Leverage. We intend to use bank debt to partly fund our vessel acquisitions and increase financial returns for our shareholders. We actively assess the level of debt we incur in light of our ability to repay that debt based on the level of cash flow generated from our balanced chartering strategy and efficient operating cost structure. Our debt repayment schedule as of December 31, 2019 calls for a reduction of approximately 12% of our debt by the end of 2020 and an additional reduction of about 27% by the end of 2021 for a total of 39% reduction over the next two years, excluding any new debt that we assumed or may assume. As our debt is being repaid we expect that our ability to raise or borrow additional funds more cheaply in order to grow our fleet and generate better returns for our shareholders will increase.

Our Customers

Our major charterer customers during the last three years include Klaveness, Quadra, Guardian pool, Ausca, Amaggi, Norden, Panocean, Cargill and Noble amongst others. We are a relationship driven company, and our top five customers in 2019 include three of our top five customers from 2018 (Klaveness, Guardian pool and Panocean) and one from 2017 (Klaveness). Our top five customers accounted for approximately 81% of our revenues in 2019 and 69% in 2018. In 2019, Klaveness, Quadra and Guardian pool accounted for 35%, 16% and 15% of our revenues, respectively. In 2018, Klaveness and Amaggi accounted for 32% and 11% of our revenues, respectively. In 2017, Klaveness, Norden, Amaggi and China National Chartering accounted for 26%, 18%, 17% and 13% of our revenues, respectively. Our dependence on our key charterer customers is moderate as in the event of a charterer default, our vessels can generally be re-chartered at the market rate, in the spot or charter market, although such a rate could be lower than the charter rate agreed with the charterer. In addition, as of the date of this report, none of our charterers have reported any inability to pay their obligations to us as a result of the Coronavirus outbreak.

The Dry Cargo Industry

Dry cargo shipping refers to the transport of certain commodities by sea between various ports in bulk or containerized form.

Drybulk commodities are typically divided into two categories — major and minor bulks. Major bulks include coal, iron ore and grains, while minor bulks include aluminum, phosphate rock, fertilizer, raw materials, agricultural and mineral cargo, cement, forest products and some steel products, including scrap.

There are five main classes of drybulk carriers — Handysize, Handymax, Panamax, Kamsarmax and Capesize. These classes represent the sizes of the vessel carrying the cargo in terms of deadweight (dwt) capacity, which is defined as the total weight including cargo that the vessel can carry when loaded to a defined load line of the vessel. Handysize vessels are the smallest of the five categories and include those vessels weighing up to 40,000 dwt. Handymax carriers are those vessels that weigh between 40,000 and 60,000 dwt, while Panamax vessels are those ranging from 60,000 dwt to 80,000 dwt. Vessels over 80,000 dwt are called Kamsarmax vessels, while vessels over 100,000 dwt are called Capesize vessels (mini-Capes 100-140,000 dwt).

Drybulk carriers are ordinarily chartered either through a voyage charter or a time charter, under a longer term COA or in pools. Under a voyage charter, the owner agrees to provide a vessel for the transport of cargo between specific ports in return for the payment of an agreed freight rate per ton of cargo or an agreed dollar lump sum amount. Voyage costs, such as canal and port charges and bunker expenses, are the responsibility of the owner. Under a time charter, the ship owner places the vessel at the disposal of a charterer for a given period of time in return for a specified rate (either hire per day or a specified rate per dwt capacity per month) with the voyage costs being the responsibility of the charterer. In both voyage charters and time charters, operating costs (such as repairs and maintenance, crew wages and insurance premiums), as well as drydockings and special surveys, are the responsibility of the ship owner. The duration of time charters varies, depending on the evaluation of market trends by the ship owner and by charterers. Occasionally, drybulk vessels are chartered on a bareboat basis. Under a bareboat charter, operations of the vessels and all operating costs are the responsibility of the charterer, while the owner only pays the financing costs of the vessel.

A COA is another type of charter relationship where a charterer and a ship owner enter into a written agreement pursuant to which a specific cargo will be carried over a specified period of time. COAs benefit charterers by providing them with fixed transport costs for a commodity over an identified period of time. COAs benefit ship owners by offering ascertainable revenue over that same period of time and eliminating the uncertainty that would otherwise be caused by the volatility of the charter market. A shipping pool is a collection of similar vessel types under various ownerships, placed under the care of a single commercial manager. The manager markets the vessels as a single fleet and collects the earnings which are distributed to individual owners under a pre-arranged weighing system by which each participating vessel receives its share. Pools have the size and scope to combine voyage charters, time charters and COA with freight forward agreements for hedging purposes, to perform more efficient vessel scheduling thereby increasing fleet utilization.

The international drybulk shipping industry is cyclical and volatile, having reached historical highs in 2008 and historical lows in 2016. Charter rates improved in 2017, however, they remained below profitable levels for most of the year. In 2018 the charter rates improved significantly before turning back to the 2017 levels at the beginning of 2019. Gradually during the year, the BDI turned to a six-year high, and peaked at the beginning of September 2019. However, by the end of the year, the BDI returned to 2017 levels and has continued to decline even further in early 2020. The development of charter rates is dependent on the supply of and demand for drybulk vessels. Demand for vessels depends on the international trade of drybulk commodities which, in turn, is affected by the economic growth, infrastructure investment and industrial production of major importing regions like Europe and Far East amongst others as well as the production of drybulk commodities by exporters like Brazil, Australia, South Africa, Argentina and Russia amongst others. During 2017, global seaborne drybulk trade growth (in tons) reached 4.1% according to industry analysts, the highest annual growth since 2014, however, trade growth in 2018 decreased to 2.5% and increased to an estimated 2.9% in 2019. According to the International Monetary Fund's world economic growth forecast as of January 2020, trade growth was projected to increase to 3.3% for 2020 and 3.4% for 2021, indicating a boost in macroeconomic environment for drybulk seaborne trade growth, however, the outbreak of the Coronavirus pandemic will likely have significant negative effects on world economic growth and drybulk seaborne trade, at least, in the first half of 2020 and, possibly, beyond that.

At the same time, the supply of drybulk vessels cannot be changed drastically in the short term as it takes about nine months to build a ship and, usually, there is a lag of, at least, fifteen to eighteen months between placing an order to build a vessel and its delivery. In the near term, supply is limited by the existing number of vessels and can only be adjusted by increasing or decreasing the operating speed of a vessel but various economic and operational factors could limit the range of such adjustments. As of March 31, 2020, the backlog of vessels under construction ("orderbook") is about 9% of the fleet and it is scheduled to be delivered mostly over the next two years. This level of orderbook reflects lower newbuilding orders placed during 2016 and 2017 due to the depressed charter rates in those years and will limit supply growth during 2020 and 2021. More than half of the orderbook is concentrated on Capesize vessels (11.8% of the Capesize fleet), while vessels below 100,000 dwt, the segment in which our vessels compete, face an orderbook of about 9% of the fleet and, consequently, less supply growth. The

above levels of orderbook along with trends of vessel withdrawals in 2020 indicate that growth of fleet is likely to remain comparable to drybulk trade growth, thus, providing a foundation for charter rates to retain the present levels.

Typically, periods of high charter rates result in an increased rate of new vessel ordering, often more than what the demand levels warrant; these vessels begin to be delivered eighteen months or more later when demand growth for vessels often slows down creating oversupply and quick correction of charter rates. The cyclicality of charter rates is also reflected in vessel values.

Our Competitors

We operate in markets that are highly competitive and based primarily on supply and demand. We compete for charters on the basis of price, vessel location, size, age and vessel condition, as well as on reputation. Eurobulk arranges our charters (whether spot charters, time charters or shipping pools) through Eurochart S.A. ("Eurochart"), an affiliated brokering company which negotiates the terms of the charters based on market conditions. We compete primarily with other shipowners of carriers in the drybulk sector. Ownership of drybulk carriers is highly fragmented and is divided among state controlled and independent shipowners. Some of our publicly listed competitors include Diana Shipping Inc. (NYSE: DSX), Eagle Bulk Shipping Inc. (NASDAQ: EGLE), Genco Shipping and Trading Limited (NYSE: GNK), Navios Maritime Partners Inc. (NYSE: NMM), Star Bulk Carriers Corp. (NASDAQ: SBLK), Safe Bulkers, Inc. (NYSE: SB) and Globus Maritime Limited (NASDAQ: GLBS).

Seasonality

Coal, iron ore and grains trades, the major commodities of the drybulk shipping industry, are somewhat seasonal in nature. Energy markets primarily affect the demand for coal, higher demand is witnessed mainly during summer periods when air conditioning and refrigeration require more electricity and towards the end of the calendar year in anticipation of the forthcoming winter period. Demand for iron ore tends to decline in the summer months because many of the major steel users, such as automobile makers, significantly reduce their level of production. Grains are completely seasonal as they are driven by the harvest within a climate zone. Because three of the five largest grain producers (the United States, Canada and the European Union) are located in the northern hemisphere and the other two (Argentina and Australia) in the southern one, harvests occur throughout the year and are shipped accordingly.

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.

While we do not carry oil as cargo, we do carry fuel oil (bunkers) in our drybulk carriers. We currently maintain, for each of our vessels, pollution liability insurance coverage of $1.0 billion per incident. If the damages from a catastrophic spill exceeded our insurance coverage, that would have a material adverse effect on our financial condition and operating cash flows.

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, took effect on January 1, 2020.

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 70^th 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. Once the cap becomes effective, ships will be 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 took effect 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 late 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 having commenced 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.

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.

Although all our vessels are currently ISM Code-certified, such certification may not be maintained by all our vessels at all times. Non-compliance with the ISM Code may subject such party to increased liability, invalidate existing insurance or decrease available insurance coverage for the affected vessels and result in a denial of access to, or detention in, certain ports. For example, the U.S. Coast Guard and E.U. authorities have indicated that vessels not in compliance with the ISM Code will be prohibited from trading in U.S. and E.U. ports.

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").

Amendments to the SOLAS Convention Chapter VII apply to vessels transporting dangerous goods and require those vessels be in compliance with the International Maritime Dangerous Goods Code ("IMDG Code"). Effective January 1, 2018, the IMDG Code includes (1) updates to the provisions for radioactive material, reflecting the latest provisions from the International Atomic Energy Agency, (2) new marking, packing and classification requirements for dangerous goods, and (3) new mandatory training requirements. Amendments which took effect on January 1, 2020 also reflect the latest material from the UN Recommendations on the Transport of Dangerous Goods, including (1) new provisions regarding IMO type 9 tank, (2) new abbreviations for segregation groups, and (3) special provisions for carriage of lithium batteries and of vehicles powered by flammable liquid or gas.

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.

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 8, 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. Costs of compliance with these regulations may be substantial.

Once mid-ocean ballast exchange or 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 also adopted 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.

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;

(iii)

loss of subsistence use of natural resources that are injured, destroyed or lost;

(iv)

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 non-tank vessels, edible oil tank vessels, and any oil spill response vessels, to the greater of $1,200 per gross ton or $997,100 (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.

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 has proposed leasing new sections of U.S. waters to oil and gas companies for offshore drilling. The effects of these proposals and 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. The Company intends to comply with all applicable state regulations in the ports where the Company's 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. The CAA requires states to adopt State Implementation Plans, or SIPs, some of which regulate emissions resulting from vessel loading and unloading operations which may affect our vessels.

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 the 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.

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.

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 EU ports.

International Labour Organization

The International Labour 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 that are 500 gross tonnage or over and are either engaged in international voyages or 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.

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 regulations 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 Facility 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 BMP5 industry standard.

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. Our vessels are currently classed with Lloyd's Register of Shipping, Bureau Veritas and Nippon Kaiji Kyokai. ISM and ISPS certification have been awarded by Bureau Veritas and the Panama Maritime Authority to our vessels and Eurobulk, our ship management company.

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.

The following table lists the upcoming intermediate or special survey for the vessels in our current fleet. Special surveys typically require drydocking of the vessels while intermediate surveys may not, depending on the age of the vessel and its condition. The intermediate surveys listed in the table below will not require drydocking of the vessels.

Vessel	Next	Type

STARLIGHT	March 2022	Intermediate Survey (Drydocking)
EIRINI P	June 2022	Intermediate Survey (Drydocking)
PANTELIS	May 2020	Intermediate Survey (Drydocking)
TASOS	April 2020	Intermediate Survey (Drydocking)
XENIA	February 2021	Special Survey
ALEXANDROS P	January 2022	Special Survey
EKATERINI	May 2021	Intermediate Survey

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.

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.

C.	Organizational structure

EuroDry is the sole owner of all outstanding shares of the subsidiaries listed in Note 1 of our consolidated financial statements under "Item 18. Financial Statements" and in Exhibit 8.1 to this annual report.

D.	Property, plants and equipment

We do not own any real estate property. As part of the management services provided by Eurobulk during the period in which we have conducted business to date, we have shared, at no additional cost, offices with Eurobulk. We do not have current plans to lease or purchase office space, although we may do so in the future.

Our interests in our vessels are owned through our wholly-owned vessel owning subsidiaries and these are our only material properties. Please refer to Note 1, "Basis of Presentation and General Information", of the attached Financial Statements for a listing of our vessel owning subsidiaries. Our vessels are subject to priority mortgages, which secure our obligations under our various credit facilities. For further details regarding our credit facilities, refer to "Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Credit Facilities."

Item 4A.

Unresolved Staff Comments

None.

Item 5.

Operating and Financial Review and Prospects

The following discussion should be read in conjunction with "Item 3. Key Information – D. Risk Factors", "Item 4. Business Overview", and our financial statements and footnotes thereto contained in this annual report. This discussion contains forward-looking statements, which are based on our assumptions about the future of our business. Our actual results may differ materially from those contained in the forward-looking statements. Please read "Forward-Looking Statements" for additional information regarding forward-looking statements used in this annual report. Reference in the following discussion to "we," "our" and "us" refer to EuroDry and our subsidiaries, except where the context otherwise indicates or requires.

We actively manage the deployment of our fleet between spot market voyage charters, which generally last from several days to several weeks, and time charters, which can last up to several years. Some of our vessels may participate in shipping pools, or, in some cases in contracts of affreightment. We may also use FFA contracts to provide partial coverage for our drybulk vessels – as a substitute for time charters – in order to increase the predictability of our revenues.

Vessels operating on time charters provide more predictable cash flows but can yield lower profit margins than vessels operating in the spot market during periods characterized by favorable market conditions. Vessels operating in the spot market generate revenues that are less predictable but may enable us to achieve increased profit margins during periods of high vessel rates although we are exposed to the risk of declining vessel rates, which may have a materially adverse impact on our financial performance. Vessels operating in pools benefit from better scheduling, and thus increased utilization, and better access to contracts of affreightment due to the larger commercial operation of the pool. We are constantly evaluating opportunities to increase the number of our vessels deployed on time charters or to participate in shipping pools (if available for our vessels), however we only expect to enter into additional time charters or shipping pools if we can obtain contract terms that satisfy our criteria. We carefully evaluate the length and the rate of the time charter contract at the time of fixing or renewing a contract considering market conditions, trends and expectations.

We constantly evaluate vessel purchase opportunities to expand our fleet accretive to our earnings and cash flow. Additionally, we will consider selling certain of our vessels when favorable sales opportunities present themselves. If, at the time of sale, the carrying value is less than the sales price, we will realize a gain on sale, which will increase our earnings, but if, at the time of sale, the carrying value of a vessel is more than the sales price, we will realize a loss on sale, which will negatively impact our earnings. Please see "Critical Accounting Policies", below, for a further discussion of the consequences of selling our vessels for amounts below their carrying values.

Significant Developments in 2019

Series B Preferred Shares

On June 18, 2019, the Board of Directors agreed to redeem $4.3 million of the Series B Preferred Shares. In parallel with the redemption, the holders of the remaining Series B Preferred Shares agreed to reduce the dividend rate to 9.25% per annum effective June 19, 2019, which will apply until January 29, 2021 at which time the dividend rate will be increased to 14% per annum, and is payable only in cash. The Series B Preferred Shares paid dividends in-kind until January 29, 2019 at a rate of 5% per annum. From January 29, 2019 to January 29, 2021, the dividend rate on the Series B Preferred Shares was set to increase to 12% per annum and to 14% per annum thereafter and was payable only in cash. From January 29, 2019 to June 19, 2019, the Series B Preferred Shares carried an annual dividend rate of 12% per annum, which was paid in cash.

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 in a period during which each vessel in our fleet was owned by us including off-hire days associated with major repairs, drydockings or special or intermediate surveys or days of vessels in lay-up. Calendar days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during that period.

Available days. We define available days as the total number of Calendar days net of off-hire days associated with scheduled repairs, drydockings or special or intermediate surveys or days of vessels in lay-up. The shipping industry uses available days to measure the number of days in a period during which vessels were available to generate revenues.

Voyage days. We define voyage days as the total number of Available days net of off-hire days associated with unscheduled repairs or days waiting to find employment but including days our vessels were sailing for repositioning. The shipping industry uses voyage days to measure the number of days in a period during which vessels actually generate revenues or are sailing for repositioning purposes.

Fleet utilization. We calculate fleet utilization by dividing the number of our voyage days during a period by the number of our 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 amount of days that its vessels are off-hire either waiting to find employment, or commercial off-hire, or for reasons such as unscheduled repairs or other off-hire time related to the operation of the vessels, or operational off-hire. We distinguish our fleet utilization into commercial and operational. We calculate our commercial fleet utilization by dividing our available days net of commercial off-hire days during a period by our available days during that

period. We calculate our operational fleet utilization by dividing our available days net of operational off-hire days during a period by our available days during that period.

Spot Charter Rates. We calculate spot charter rates on contracts made in the spot market for the use of a vessel for a specific voyage ("voyage charter") to transport a specified agreed upon cargo at a specified freight rate per ton or occasionally a lump sum amount. Under a voyage charter agreement, the charter party generally commits to a minimum amount of cargo and the charterer is liable for any short loading of cargo or "dead" freight. Spot charter rates are volatile and fluctuate on a seasonal and year to year basis. The fluctuations are caused by imbalances in the availability of cargoes for shipment and the number of vessels available at any given time to transport these cargoes.

Time Charter Equivalent ("TCE"). A standard maritime industry performance measure used to evaluate performance is the daily TCE. Daily TCE revenues are time charter revenues and voyage charter revenues minus voyage expenses divided by the number of voyage days during the relevant time period. 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 whereas under spot market voyage charters, we pay such voyage expenses. We believe that the daily TCE neutralizes the variability created by unique costs associated with particular voyages or the employment of drybulk carriers on time charter or on the spot market (drybulk vessels are, generally, chartered on a time charter basis) and presents a more accurate representation of the revenues generated by our vessels. Our definition of TCE may not be comparable to that used by other companies in the shipping industry.

Basis of Presentation and General Information

We use the following measures to describe our financial performance:

Time charter revenue and Voyage charter revenue. Our charter revenues are driven primarily by the number of vessels in our fleet, the number of voyage days during which our vessels generate revenues and the amount of daily charter revenue 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 drydock undergoing repairs, maintenance and upgrade work, the age, condition and specifications of our vessels, levels of supply and demand in the transportation market, the number of vessels on time charters, spot charters and in pools and other factors affecting charter rates in the drybulk market.

Commissions. We pay commissions on all chartering arrangements of 1.25% to Eurochart, a company affiliated with our CEO, plus additional commission of usually up to 1.25% to other brokers involved in the transaction, plus address commission of usually up to 3.75% deducted from charter hire. These additional commissions, as well as changes to charter rates will cause our commission expenses to fluctuate from period to period. Eurochart also receives a fee equal to 1% calculated as stated in the relevant memorandum of agreement for any vessel sold by it on our behalf.

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, as well as commissions. Under time charters, the charterer pays voyage expenses whereas under spot market voyage charters, we pay such expenses. The amounts of such voyage expenses are driven by the mix of charters undertaken during the period. Voyage expenses are also incurred, when our vessels are sailing for repositioning purposes or for drydocking, which we pay.

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 other miscellaneous expenses. Our vessel operating expenses, which generally represent fixed costs, have historically changed in line with the size of our fleet. Other factors beyond our control, some of which may affect the shipping industry in general (including, for instance, developments relating to market prices for insurance or inflationary increases) may also cause these expenses to increase.

Related party management fees. These are the fees that we pay to our affiliated ship managers under our management agreements for the technical and commercial management that Eurobulk and Eurobulk FE perform on our behalf.

Vessel depreciation. We depreciate our vessels on a straight-line basis with reference to the cost of the vessel, age and scrap value as estimated at the date of acquisition. Depreciation is calculated over the remaining useful life of the vessel. Remaining useful lives of property are periodically reviewed and revised to recognize changes in conditions, new regulations or other reasons. Revisions of estimated lives are recognized over current and future periods.

Drydocking and special survey expense. Our vessels are required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are trading. Drydocking and special survey expenses are accounted on the direct expense method as this method eliminates the significant amount of time and subjectivity to determine which costs and activities related to drydocking and special survey should be deferred.

Interest expense and loan costs. We traditionally finance vessel acquisitions partly with debt on which we incur interest expense. The interest rate we pay is generally linked to the 3-month LIBOR rate, although from time to time we may utilize fixed rate loans or could use interest rate swaps to eliminate our interest rate exposure. Interest due is expensed in the period incurred. Loan costs are deferred and amortized over the period of the loan; the un-amortized portion is written-off if the loan is prepaid early.

General and administrative expenses. We incur expenses consisting mainly of executive compensation, professional fees, directors' liability insurance and reimbursement of our directors' and officers' travel-related expenses. We acquire executive services of our chief executive officer, chief financial officer, chief administrative officer, internal auditor and corporate secretary, through Eurobulk as part of our Master Management Agreement.

In evaluating our financial condition, we focus on the above measures to assess our historical operating performance and we use future estimates of the same measures to assess our future financial performance. In addition, we use the amount of cash at our disposal and our total indebtedness to assess our short-term liquidity needs and our ability to finance additional acquisitions with available resources (see also discussion under "Capital Expenditures" below). In assessing the future performance of our present fleet, the greatest uncertainty relates to the spot market performance which affects those of our vessels that are not employed under fixed time charter contracts as well as the level of the new charter rates for the charters that are to expire. Decisions about the acquisition of additional vessels or possible sales of existing vessels are based on financial and operational evaluation of such action and depend on the overall state of the drybulk vessel market, the availability of purchase candidates, available employment, anticipated drydocking cost and our general assessment of economic prospects for the sectors in which we operate.

Results from Operations

Year ended December 31, 2019 compared to year ended December 31, 2018

Time charter revenue. Time charter revenue for 2019 amounted to $28.79 million, increasing by 11% compared to $25.93 million for the year ended December 31, 2018, as a result of the increased average number of vessels in our fleet, partly offset by the decrease in the average TCE our vessels earned in 2019, compared to 2018. In 2019, we operated an average of 7.0 vessels, a 22% increase over the average of 5.74 vessels we operated during the same period in 2018. In the year 2019 our fleet had 2,473 voyage days earning revenue as compared to 2,045 voyage days earning revenue in 2018. While employed, our vessels generated a TCE rate of $11,190 per day per vessel in 2019 compared to a TCE rate of $12,481 per day per vessel in 2018, a decrease of 10.3%. The average TCE rate our vessels achieve is a combination of the time charter rate earned by our vessels under time charter contracts and pool agreements, which is not influenced by market developments during the duration of the charter (unless the two charter parties renegotiate the terms of the charter or the charterer is unable to make the contracted payments or we enter into new charter party agreements), and the TCE rate earned by our vessels employed in the spot market which is influenced by market developments.

Commissions. We paid a total of $1.55 million in charter commissions for the year ended December 31, 2019, representing 5.4% of charter revenues. This represents an increase over the year ended December 31, 2018, where commissions paid were $1.41 million, also representing 5.4% of charter revenues.

Voyage expenses. Voyage expenses for the year were $1.1 million and relate to expenses for repositioning voyages between time charter contracts, and owners' expenses at certain ports. For the year ended December 31, 2018, voyage expenses amounted to $0.41 million. Our vessels are, generally, chartered under time charter contracts. Voyage expenses, usually, represent a small fraction (3.88% and 1.58% in 2019 and 2018, respectively) of voyage revenues. Voyage expenses are dependent on the number of voyage charters, the cost of fuel, port costs and canal tolls and the number of days our vessels sailed without a charter.

Vessel operating expenses. Vessel operating expenses were $10.78 million in 2019 compared to $9.18 million in 2018, reflecting the higher average number of vessels operated during 2019. Daily vessel operating expenses per vessel amounted to $4,218 per day in 2019 versus $4,381 per day in 2018, a decrease of 3.7%, mainly due to the higher initial expenses for the secondhand vessel acquired in 2018 alongside some repairs and spare replacements performed concurrently with the drydocking of two vessels that underwent special survey in 2018.

Related party management fees. These are part of the fees we pay to Eurobulk and Eurobulk FE under our Master Management Agreement. During 2019, Eurobulk and Eurobulk FE charged us 685 Euros per day per vessel totalling $1.96 million for the year, or $769 per day per vessel. During 2018, Eurobulk and Eurobulk FE charged us 685 Euros per day per vessel totalling $1.7 million for the year, or $812 per day per vessel.

General and administrative expenses. These expenses include the fixed portion of our management fees, incentive awards, legal and auditing fees, directors' and officers' liability insurance and other miscellaneous corporate expenses. In 2019, we had a total of $2.25 million of general and administrative expenses as compared to $2.35 million in 2018, a decrease of 4%. This decrease is due to the higher expenses incurred during 2018 for the Spin-off.

Drydocking expenses. These are expenses we pay for our vessels to complete a drydocking as part of an intermediate or special survey. In 2019, two vessels underwent drydock and one vessel underwent an in-water (intermediate) survey for a total cost of $1.67 million, as compared to two vessels that underwent drydock and one vessel that underwent in-water (intermediate) survey in 2018 for a total cost of $1.47 million.

Vessel depreciation. Vessel depreciation for 2019 was $6.46 million. Comparatively, vessel depreciation for 2018 amounted to $5.42 million. The increase is due to the higher number of vessels operated within the year 2019 compared to the previous year.

Interest and other financing costs. Interest expense and other financing costs for the year were $3.51 million, compared to $2.91 million during the same period in 2018. This increase of 20.6% is due to higher average outstanding debt in 2019 compared to 2018.

Derivatives gain / (loss). In 2019, we had a realized gain of $0.02 million and an unrealized loss of $0.3 million from the mark to market valuation on our interest rate swap contracts that we entered into in August 2017 and July 2018 compared to a marginal realized gain and an unrealized loss of $0.05 million in 2018 from the mark to market valuation on the same interest rate swap contracts. We had entered into the interest rate swaps to mitigate our exposure to possible increases in interest rates. In October 2018 we also entered into a FFA, and had a $0.05 million unrealized gain. We had entered into FFA contracts to mitigate our exposure to possible declines in the drybulk market rates. Within the first quarter of 2019, we entered into four additional FFAs. These positions all matured or were closed by October 2019 with a net realized gain of $0.7 million. In 2019 we also entered into two bunker swap contracts that resulted in a net realized gain of $0.1 million.

Dividend Series B Preferred Shares. The Series B Preferred Shares paid dividends in-kind until January 29, 2019 at a rate of 5% per annum. On June 18, 2019, we agreed to redeem approximately $4.3 million of the Series B Preferred Shares with a simultaneous reduction of the dividend rate for the remaining outstanding shares to 9.25% per annum until January 29, 2021, payable in cash. Thereafter, the Series B Preferred Shares will carry a rate of 14% per annum, also payable in cash. Since January 29, 2019, the Series B Preferred Shares have carried a dividend of 12% per annum. After the agreed upon redemption of $4.3 million, there were $15.39 million face value of Series B Preferred Shares outstanding. In 2019, the Company declared $1.75 million in dividends on its Series B Preferred Shares, of which $0.08 million were paid in-kind, $1.31 million were paid in cash and another $0.36 million were accrued as of December 31, 2019 and were paid in the first quarter of 2020, and recorded preferred deemed dividends of $0.19 million arising out of the redemption of approximately $4.3 million of Series B Preferred Shares. In 2018, there were $0.57 million dividends paid in-kind.

Net (loss)/income attributable to common shareholders. As a result of the above, net loss attributable to common shareholders for the year ended December 31, 2019 was $1.92 million, as compared to a net income of $0.55 million for the year ended December 31, 2018.

Year ended December 31, 2018 compared to year ended December 31, 2017

For a discussion of the year ended December 31, 2018 compared to the year ended December 31, 2017, please refer to Part A, Item 5, "Operating and Financial Review and Prospects" in our Annual Report on Form 20-F for the year ended December 31, 2018.

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 accounting principles generally accepted in the United States of America, or 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.

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 high degree of judgment and the methods of their application.

Depreciation

We record the value of our vessels at their cost (which includes acquisition costs directly attributable to the vessel and expenditures made to prepare the vessel for its initial voyage) less accumulated depreciation and impairment (if any). Depreciation is based on cost less the estimated residual scrap value. An increase in the useful life of the vessel or in the residual value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of the vessel or in the residual value would have the effect of increasing the annual depreciation charge and possibly an impairment charge. We depreciate our vessels on a straight-line basis over their estimated useful lives, estimated to be 25 years from date of initial delivery from the shipyard and the residual value of our vessels is estimated to be $250 per lightweight ton.

Impairment of vessels

We review our vessels held for use for impairment whenever events or changes in circumstances (such as vessel market values, vessel sales and purchases, business plans and overall market conditions) indicate that the carrying amount of the assets may not be recoverable. If we identify indication for impairment for a vessel, we determine undiscounted projected net operating cash flows for each vessel and compare it to the vessel carrying value. When the estimate of undiscounted cash flows, excluding interest charges, expected to be generated by the use of the asset is less than its carrying amount, we evaluate the asset for an impairment loss. In the event that impairment occurred, we would determine the fair value of the related asset and we record a charge to operations calculated by comparing the asset's carrying value to the estimated fair market value. We estimate fair market value primarily through the use of third party valuations performed on an individual vessel basis.

The carrying values of the Company's 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.

The Company determines the rates to be used in its impairment analysis based on the prevailing market charter rates for the first two years and on inflation-unadjusted historical average rates, from year three onwards. The Company calculates the historical average rates over a 18-year period for 2019, excluding peak periods, and a 17-year period for 2018, which both start in 2002 and take into account complete market cycles, and which provide a more representative reference for the long term rates. These rates are used for the period a vessel is not under a charter contract; if there is a contract, the charter rate of the contract is used for the period of the contract.

Our impairment exercise is highly sensitive on variances in the time charter rates and vessel operating costs; it also requires assumptions for:

•

the effective fleet utilization rate;

•

estimated scrap values;

•

future drydocking costs; and

•

probabilities of sale for each vessel.

Our estimates for the time charter rates for the first two years are based on the prevailing market charter rates (based on the length of charters that can be secured at the time of the analysis, generally, one to two years). Vessel utilization estimates are based on the status of each vessel at the time of the assessment and the Company's past experience in finding employment for its vessels at comparable market conditions. Cost estimates, like drydocking and operating costs, are based on the Company's data for its own vessels; past estimates for such costs have generally been very close to the actual levels observed. Specifically, we use our budgeted operating expenses escalated by 1.5% per annum and our budgeted drydocking costs, assuming a five-year special survey cycle. Overall, the assumptions are based on historical trends as well as future expectations. Although management believes that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are highly subjective. Our impairment test, for the years ended December 31, 2019 and December 31, 2018, identified four of our vessels with indication for impairment as presented in the following table. For these vessels, we performed our impairment analysis which indicated no impairment. Furthermore, we performed

sensitivity analysis for the charter rates and operating cost assumptions (which are the inputs most sensitive to variations) allowing for variances of up to 10%, and a further reduction in charter rates for the following two years, to reflect any possible effect from the slowdown of economic activity due to the Coronavirus pandemic, without an impairment indication.

There can be no assurance as to how long-term charter rates and vessel values will increase as compared to their current levels and approach historical average levels for similarly aged vessels or whether they will improve by any significant degree. Charter rates, which improved significantly during 2017 and the first half of 2018, but gradually weakened in the second half of 2018 and through most of 2019 (apart from a brief upsurge in the third quarter), have weakened once again in early 2020, and may return to their previously depressed levels which could adversely affect our revenue, profitability and future assessments of vessel impairment. The impairment analysis may determine that the carrying value of a vessel is recoverable if the vessel is held and operated to the end of its useful life, however, if the vessel is sold when the market is depressed, the Company might suffer a loss on the sale. Whether the Company realizes a gain or loss on the sale of a vessel is primarily a function of the relative market values of vessels at the time the vessel was acquired less the accumulated depreciation and impairment, if any, versus the relative market values on the date a vessel is sold.

For a discussion of the potential loss in the case of sale of all of our vessels with market value below their carrying value, we refer to the "Item 4.B. Business Overview – Our Fleet".

For the four vessels that as of December 31, 2019 had an impairment indication, a comparison of the average estimated daily TCE rate used in our impairment analysis with the average "break even rate" for the uncontracted period for each of the vessels is presented below:

Vessel	Charter Rate as of 12/31/2019	Remaining Months Chartered	Remaining Life (years)	Rate Year 1 (2020)	Rate Year 2 (2021)	Rate Year 3+ (2022+)	Breakeven Rate (USD/day)
Eirini P*	0	0	9	10,697	10,697	15,651	11,899
Xenia*	11,000	10	21	11,716	11,716	17,142	9,870
Pantelis	0	0	5	10,289	10,289	15,055	11,139
Starlight*	0	0	9	10,697	10,697	15,651	10,317

(*) These vessels are chartered at a market index linked rate.

Recent Accounting Pronouncements

Please refer to Note 2 of the financial statements included in Item 18 of this annual report for a description of recent accounting pronouncements that may apply to us.

Implications of Being an Emerging Growth Company

We had less than $1.07 billion in revenue during our last fiscal year, which means that we qualify as an "emerging growth company" as defined in the JOBS Act. An emerging growth company may take advantage or specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

•

exemption from the auditor attestation requirement in the assessment of the emerging growth company's internal controls over financial reporting under Section 404(b) of Sarbanes-Oxley;

•

exemption from new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies; and

•

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

We may take advantage of these provisions until the end of the fiscal year following the fifth anniversary of our initial public offering or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if, among other things, we have more than $1.07 billion in "total annual gross

revenues" during the most recently completed fiscal year. We may choose to take advantage of some, but not all, of these reduced burdens. For as long as we take advantage of the reduced reporting obligations, the information that we provide shareholders may be different from information provided by other public companies. We are choosing to "opt out" of the extended transition period relating to the exemption from new or revised financial accounting standards and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth public companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

B.	Liquidity and Capital Resources

Historically, our sources of funds have been equity provided by our shareholders, operating cash flows and long-term borrowings. Our principal use of funds has been capital expenditures to establish and expand our fleet, maintain the quality of our vessels during operations and the periodically required drydockings, comply with international shipping standards and environmental laws and regulations, fund working capital requirements and, if necessary, operating shortfalls, make principal repayments on outstanding loan facilities, and pay preferred dividends.

Our short-term liquidity requirements include paying operating expenses, funding working capital requirements, interest and principal payments on outstanding debt, paying our preferred dividends and maintaining cash reserves to strengthen our position against adverse fluctuations in operating cash flows. Our primary source of short-term liquidity is cash generated from operating activities, available cash balances and portions from debt and equity financings.

Our long-term liquidity requirements are funding vessel acquisitions and debt repayment. Sources of funding for our long-term liquidity requirements include cash flows from operations, bank borrowings, issuance of debt and equity securities, and vessel sales.

Our total cash and cash equivalents and restricted cash at December 31, 2019 were $9.1 million, an increase of $1.3 million from $7.8 million at December 31, 2018. We hold cash and cash equivalents primarily in U.S. Dollars, with a minor balance held in Euros. We conduct our funding and treasury activities based on corporate policies designed to minimize borrowing costs and maximize investment returns while maintaining the safety of the funds and appropriate levels of liquidity for our purposes.

We are exposed to market risk from foreign currency fluctuations and changes in interest rates and market rates for vessels. We use interest rate swaps to manage interest costs and the risks associated with changing interest rates of some of our loans. Please refer to "Item 11 – Quantitative and Qualitative Disclosures about Market Risk."

We expect to rely on cash available, funds generated from operating cash flows, funds from our shareholders, equity offerings and long-term borrowings to meet our liquidity needs going forward and to finance our capital expenditures and working capital needs in 2020 and beyond.

Cash Flows

As of December 31, 2019, we had a working capital deficit of $1.6 million, and for the year ended December 31, 2019 generated nominal net income, incurred a net loss attributable to common shareholders of $1.9 million and generated net cash from operating activities of $15.1 million. Our cash balance amounted to $5.40 million and cash in restricted retention accounts amounted to $3.73 million as of December 31, 2019. The holders of EuroDry Series B Preferred Shares will receive a cash dividend at an annual dividend rate of 9.25% until January 2021, which will increase to 14% thereafter. Although we cannot predict the magnitude the effects of the Coronavirus will have on our cash flows, we expect our revenues to potentially decrease compared to 2019, due to decreased time charter rates observed in the market as a result of the Coronavirus pandemic. We intend to fund our capital expenditures and working capital requirements via cash on hand and cash flows from operations. In the event that these are not sufficient, we may use funds from debt refinancing and equity offerings, sell vessels (where equity will be released) and draw down funds under a commitment from a company controlled by the Pittas family and affiliated with our Chief Executive Officer, if required, among other options. We believe we will have adequate funding through the sources described above and, accordingly, we believe we have the ability to continue as a going concern and finance our obligations as they come due over the next twelve months following the date of the issuance of our financial statements. Consequently, our 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.

Year ended December 31, 2019 compared to year ended December 31, 2018

Net cash from operating activities.

Our net surplus from cash flows provided by operating activities for 2019 was $15.1 million as compared to $3.97 million in 2018.

The major drivers of the change of cash flows from operating activities for the year ended December 31, 2019 compared to the year ended December 31, 2018, are the following: the increased inflows from revenue due to the increase in the average number of vessels in our fleet, partly offset by the decrease in market rates during the year ended December 31, 2019, which resulted in a lower TCE rate of $11,190 compared to $12,481 for the year ended December 31, 2018, and the elimination of a large receivable balance from related parties. This effect resulted in a comparative operating income (excluding non-cash items) of $9.65 million for the year ended year December 31, 2019 and $9.55 million for the corresponding period in 2018, respectively. For the year ended December 31, 2019, we had a net working capital inflow of $0.43 million and a significant decrease of the Due from related companies balance of $7.51 million compared to a net working capital outflow of $3.27 million for the year ended December 31, 2018.

Net cash from investing activities.

Net cash flows used in investing activities were $1.11 million for the year ended December 31, 2019 compared to $29.05 million used in investing activities for the year ended December 31, 2018. The net decrease in cash flows used in investing activities of $27.94 million from 2018 is attributable to the fact that there were no vessels delivered or acquired during 2019, as compared to 2018, when we took delivery of the newbuilding vessel Ekaterini in May 2018 and of the secondhand vessel Starlight in November 2018. The amount paid in 2019 relates to the installation of ballast water treatment systems on board the vessels Starlight and Eirini P.

Net cash from financing activities.

Net cash flows used in financing activities were $12.63 million for the year ended December 31, 2019, compared to net cash flows provided by financing activities of $27.93 million for the year ended December 31, 2018. This decrease in cash flows provided by financing activities of $40.56 million, compared to the year ended December 31, 2018, is mainly attributable to a decrease of $43.49 million in proceeds from long term debt (net of loan arrangement fees paid) during the year ended December 31, 2019, compared to the same period of 2018, and a net outflow of funds due to the redemption of $4.3 million of the Series B Preferred Shares and $1.31 million in dividends paid on the Series B Preferred shares during the year ended December 31, 2019 and a net inflow of funds invested by the Former Parent Company (Euroseas) of $3.30 million during the year ended December 31, 2018, which is partially offset by a decrease of $11.84 million in payments of long term debt during the year ended December 31, 2019, compared to the same period of 2018.

Year ended December 31, 2018 compared to year ended December 31, 2017

Debt Financing

We operate in a capital-intensive industry which requires significant amounts of investment, and we fund a major portion of this investment through long term debt. We maintain debt levels we consider prudent based on our market expectations, cash flow, interest coverage and percentage of debt to capital.

As of December 31, 2019, we had five outstanding floating interest-bearing loans with a combined outstanding balance of $56.9 million with margins over LIBOR ranging from 2.70% to 3.25%. These loans have maturity dates between 2021 and 2025.

Our long-term debt as of December 31, 2019 comprises bank loans granted to our vessel-owning subsidiaries.

Borrower	December 31, 2019			Interest rate (margin + LIBOR)

Kamsarmax One Shipping Ltd.		10,531,000		2.95% + LIBOR
Ultra One Shipping Ltd.		14,060,000		3.25% + LIBOR
Kamsarmax Two Shipping Ltd.		16,000,000		2.80% + LIBOR
Light Shipping Ltd. / Areti Shipping Ltd. / Pantelis Shipping Corp.		12,200,000		3.25% + LIBOR
Eirini Shipping Ltd.		4,100,000		2.70% + LIBOR
		56,891,000
Less: Current portion		(6,924,000	)
Long-term portion		49,967,000

A description of our loans, as of December 31, 2019, is provided in Note 7 of our attached financial statements. As of December 31, 2019, we are scheduled to repay approximately $6.9 million of the above bank loans in 2020.

Our loan agreements contain covenants.

Our loans have various covenants such as minimum requirements regarding the security cover ratio (the ratio of fair value of vessel to outstanding loan less cash in retention accounts) and restrictions as to changes in management and ownership of the vessel ship-owning companies, distribution of profits or assets (in effect not permitting dividend payment or other distributions in cases that an event of default has occurred), additional indebtedness and mortgage of vessels without the lender's prior consent, sale of vessels, maximum fleet-wide leverage, sale of capital stock of our subsidiaries, ability to make investments and other capital expenditures, entering in mergers or acquisitions, minimum cash balance requirements and minimum cash retention accounts (restricted cash). When necessary, we do provide supplemental collateral in the form of restricted cash or cross-collateralize vessels to ensure compliance with security cover ratio ("loan-to-value" ratio). Increases in restricted cash required to satisfy loan covenants would reduce funds available for investment or working capital and could have a negative impact on our operations. If we cannot cure any violated covenants, we might be required to repay all or part of our loans, which, in turn, might require us to sell one or more of our vessels under distressed conditions. As of December 31, 2019, we were not in default of any credit facility covenant.

Capital Expenditures

We make capital expenditures from time to time in connection with our vessel acquisitions or capital enhancements to our vessels.

In March 2017, Euroseas declared the option to build a Kamsarmax vessel which was delivered in May 2018 for $23.9 million and named Ekaterini. In November 2018, we took delivery of the Panamax drybulk carrier of 75,845 dwt built in 2004 in Japan (renamed M/V "Starlight") for approximately $10.21 million.

We currently have two vessels scheduled for drydocking over the next 12 months (refer to section above "B. Liquidity and Capital Resources – Cash Flows" for a discussion of how we plan to cover our working capital requirements and capital commitments). We may face delays in performing these drydocks due to Coronavirus, particularly if travel restrictions persist. As of the date of this report, there are no reported delays for our drydocks.

Dividends

In 2019 and 2018, the Company declared no dividend on its common stock. The Series B Preferred Shares paid dividends in-kind until January 29, 2019 at a rate of 5% per annum. From January 29, 2019 to January 29, 2021, the dividend rate on the Series B Preferred Shares was set to increase to 12% per annum and to 14% per annum thereafter. On June 18, 2019, the Board of Directors agreed to redeem approximately $4.3 million of the Series B Preferred Shares with a simultaneous reduction of the dividend rate to 9.25% per annum until January 29, 2021, after which it will increase to 14% per annum. From January 29, 2019 to June 19, 2019, the Series B Preferred Shares carried a dividend rate of 12% per annum. Within 2019 the Company declared one dividend on its Series B Preferred Shares, amounting to $0.08 million, which was paid in-kind, and four quarterly dividends out of which

$1.3 million were paid in cash and another $0.36 million were accrued. We also recorded a preferred deemed dividend of $0.19 million arising out of the redemption of approximately $4.3 million of the Series B Preferred Shares. Within 2018 the Company declared three consecutive quarterly dividends on its Series B Preferred Shares, amounting to $0.57 million which were paid in-kind.

C.	Research and development, patents and licenses, etc.

Not applicable.

D.	Trend information

Our results of operations depend primarily on the charter rates that we are able to realize. Charter rates paid for drybulk carriers are primarily a function of the underlying balance between vessel supply and demand.

The demand for drybulk carrier capacity is determined by the underlying demand for commodities transported in these vessels, which in turn is influenced by trends in the global economy. One of the main drivers of the drybulk trade has been the growth in imports by China of iron ore, coal and steel products during the last ten years and exports of finished goods. Demand for drybulk carrier capacity is also affected by the operating efficiency of the global fleet, i.e., the average speed the fleet operates, and port congestion.

The supply of drybulk carriers is dependent on the delivery of new vessels and the removal of vessels from the global fleet, either through scrapping or loss. As of March 31, 2020, as reported by industry sources, the capacity of the worldwide drybulk fleet was approximately 884.6 million dwt with another 79.0 million dwt, or about 8.9% of the present fleet capacity, on order.

The level of scrapping activity is generally a function of scrapping prices in relation to current and prospective charter market conditions, as well as operating, repair and survey costs. The average age at which a vessel is scrapped over the last ten years has been between 25 and 27 years, with smaller vessels scrapped at a later age. During strong markets, the average age at which the vessels are scrapped increases; during 2004, 2005, 2006, 2007 and the first nine months of 2008, the majority of the Handysize and Handymax bulkers that were scrapped were in excess of 30 years of age. During the same period, Panamax drybulk carriers were scrapped at an average age of 29 years. However, the scrapping rate increased significantly and the average age decreased since the beginning of October of 2008 when daily charter rates declined. Increased charter rates in the drybulk market commencing in the second quarter of 2009 resulted in decreased scrapping rates of drybulk vessels throughout 2010. However, as the drybulk market declined throughout 2012, 2013, 2014 and 2015, scrapping rates of drybulk vessels increased again. In 2016 drybulk rates increased, however, scrapping activity remained strong, at close to 2015 levels. In 2017 scrapping of drybulk vessels declined to almost half of its 2016 level. 2018 saw a further decline in scrapping to 4.4 million dwt, a decline of 70% year on year, while in 2019, a total of $7.9 million dwt were scrapped. As of March 1, 2020, the year to date 2020 demolition rate is 3.1 million dwt, which represents a 183% increase over the demolition rate for the corresponding period in 2019 due to a series of drybulk export disruptions, exacerbated by higher bunker costs due to IMO2020 and the Coronavirus outbreak, coinciding with the seasonally low first quarter.

Declining shipping charter hire rates have a negative impact on our earnings when our vessels are employed in the spot market or when they are to be re-chartered after completing a time charter contract. The extent to which the Coronavirus will impact our future results of operations and financial condition will depend on future developments, which are 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. The Company's business could be materially and adversely affected by the risks, or the public perception of the risks and travel restrictions related to Coronavirus. We are unable to reasonably predict the estimated length or severity of the Coronavirus pandemic on future operating results. As of March 31, 2020, approximately 32% of our ship capacity days for the remainder of 2020 are under time charter contracts. If the market rates decrease from current levels or the supply of vessels increases, our vessels may have difficulty securing employment and, if so, may be employed at rates lower than their present charters.

E.	Off-balance Sheet Arrangements

As of December 31, 2019, we did not have any off-balance sheet arrangements.

F.	Tabular Disclosure of Contractual Obligations

Contractual Obligations and Commitments

Contractual obligations are set forth in the following table as of December 31, 2019:

In U.S. dollars (US$)	Total	Less Than	One to Three Years	Three to	More Than
In U.S. dollars (US$)	Total	One Year	One to Three Years	Five Years	Five Years
Bank debt	56,891,000	6,924,000	19,048,000	21,559,000	9,360,000
Interest Payments (1)	8,260,109	2,601,456	3,853,543	1,367,378	437,732
Vessel Management fees (2)	6,859,550	1,960,196	4,038,788	860,566	-
Other Management fees (3)	4,374,275	1,250,000	2,575,500	548,775	-
Total	76,384,934	12,735,652	29,515,831	24,335,719	9,797,732

(1) Assuming the amortization of the loans as of December 31, 2019 described above, each loan's interest rate margin over LIBOR and average LIBOR rates of about 1.61%, 1.21%, 1.21%, 1.41% and 1.81% per annum for the five years, respectively, based on the LIBOR yield curve as of December 31, 2019. Also includes our obligation to make payments required as of December 31, 2019 under our interest rate swap agreements based on the same LIBOR forward rate assumptions.

(2) Refers to our obligation for management fees we expect to incur under our Master Management agreements and management agreements with the shipowning companies in effect as of December 31, 2019 and expiring on May 30, 2023. These agreements were renewed for five years effective May 30, 2018. The management fees have been computed for 2020 based on the agreed rate of 685 Euros per day per vessel (approximately $785). For the years after 2020 we have assumed an annual increase in the rate of 2.0% for inflation. We assumed a rate of 1.12 in the US Dollar to Euro exchange rate. We further assume that we hold our vessels until they reach 25 years of age, after which they are considered to be scrapped and no long bear obligations and a fleet of seven vessels in 2020 and the subsequent years.

(3) Refers to our obligation for management fees of $1.25 million per year under our Master Management Agreement with Eurobulk for the cost of providing executive services to the Company. This fee is adjusted for inflation in Greece during the previous calendar year every January 1st. From January 1, 2021 on, we have assumed an inflation rate of 2.0% per year. The agreement expires on May 30, 2023.

G.	Safe Harbor

See "Forward-Looking Statements" at the beginning of this annual report.

Item 6.

Directors, Senior Management and Employees

A.	Directors and Senior Management

The following sets forth the name and position of each of our directors and executive officers.

Name	Age	Position
Aristides J. Pittas	60	Chairman, President and CEO; Class C Director
Dr. Anastasios Aslidis	59	CFO and Treasurer; Class C Director
Aristides P. Pittas	68	Vice Chairman; Class C Director
Stephania Karmiri	52	Secretary
Panagiotis Kyriakopoulos	59	Class A Director
George Taniskidis	59	Class B Director
Apostolos Tamvakakis	62	Class B Director
Christian Donohue	52	Series B Director

Aristides J. Pittas has been a member of the Board of Directors and Chairman and Chief Executive Officer of EuroDry since its inception on January 8, 2018. He is also member of the Board of Directors and Chairman and Chief Executive Officer of Euroseas since its inception on May 5, 2005. Since 1997, Mr. Pittas has also been the President of Eurochart, our affiliate. Eurochart is a shipbroking company specializing in chartering and selling and purchasing ships. Since January 1995, Mr. Pittas has been the President and Managing Director of Eurobulk, our affiliated ship management company. He resigned as Managing Director of Eurobulk in June 2005. Eurobulk is a ship management company that provides ocean transportation services. From September 1991 to December 1994, Mr. Pittas was the Vice President of Oceanbulk Maritime SA, a ship management company. From March 1990 to August 1991, Mr. Pittas served both as the Assistant to the General Manager and the Head of the Planning Department of Varnima International SA, a shipping company operating tanker vessels. From June 1987 until February 1990, Mr. Pittas was the head of the Central Planning department of Eleusis Shipyards S.A. From January 1987 to June 1987, Mr. Pittas served as Assistant to the General Manager of Chios Navigation Shipping Company in London, a company that provides ship management services. From December 1985 to January 1987, Mr. Pittas worked in the design department of Eleusis Shipyards S.A. where he focused on shipbuilding and ship repair. Mr. Pittas has a B.Sc. in Marine Engineering from University of Newcastle - Upon-Tyne and a MSc in both Ocean Systems Management and Naval Architecture and Marine Engineering from the Massachusetts Institute of Technology.

Dr. Anastasios Aslidis has been the Chief Financial Officer and Treasurer and a member of the Board of Directors of EuroDry since May 5, 2018. He is also member of the Board of Directors, Treasurer and Chief Financial Officer of Euroseas since September 2005. Prior to joining Euroseas, Dr. Aslidis was a partner at Marsoft, an international consulting firm focusing on investment and risk management in the maritime industry. Dr. Aslidis has more than 25 years of experience in the maritime industry. He also served as consultant to the Boards of Directors of shipping companies (public and private) advising on strategy development, asset selection and investment timing. Dr. Aslidis holds a Ph.D. in Ocean Systems Management (1989) from the Massachusetts Institute of Technology, M.S. in Operations Research (1987) and M.S. in Ocean Systems Management (1984) also from the Massachusetts Institute of Technology, and a Diploma in Naval Architecture and Marine Engineering from the National Technical University of Athens (1983).

Aristides P. Pittas has been a member of EuroDry's Board of Directors and Vice Chairman of the Board of EuroDry since its inception on January 8, 2018. He is also member of the Board of Directors of Euroseas since its inception on May 5, 2005 and its Vice Chairman since September 1, 2005. Mr. Pittas has been a shareholder in over 100 oceangoing vessels during the last 20 years. Since February 1989, Mr. Pittas has been the Vice President of Oceanbulk Maritime SA, a ship management company. From November 1987 to February 1989, Mr. Pittas was employed in the supply department of Drytank SA, a shipping company. From November 1981 to June 1985, Mr. Pittas was employed at Trust Marine Enterprises, a brokerage house as a sale and purchase broker. From September 1979 to November 1981, Mr. Pittas worked at Gourdomichalis Maritime SA in the operation and Freight Collection department. Mr. Pittas has a B.Sc in Economics from Athens School of Economics.

Stephania Karmiri has been a member of the Board of Directors of EuroDry since its inception on January 8, 2018 until May 5, 2018, and EuroDry's Secretary since May 5, 2018. She has also been Euroseas' Secretary since its inception on May 5, 2005. Since July 1995, Mrs. Karmiri has been executive secretary to Eurobulk, our affiliated ship management company. Eurobulk is a ship management company that provides ocean transportation services. At

Eurobulk, Mrs. Karmiri has been responsible for dealing with sale and purchase transactions, vessel registrations/deletions, bank loans, supervision of office administration and office/vessel telecommunication. From May 1992 to June 1995, she was secretary to the technical department of Oceanbulk Maritime SA, a ship management company. From 1988 to 1992, Mrs. Karmiri served as assistant to brokers for Allied Shipbrokers, a company that provides shipbroking services to sale and purchase transactions. Mrs. Karmiri has taken assistant accountant and secretarial courses from Didacta college.

Panagiotis Kyriakopoulos has been a member of the Board of Directors of EuroDry since May 5, 2018. He has also been a member of the Board of Directors of Euroseas since its inception on May 5, 2005. Since July 2002, he has been the Chief Executive Officer of STAR INVESTMENTS S.A., one of the leading Mass Media Companies in Greece, running television and radio stations. From July 1997 to July 2002 he was the C.E.O. of the Hellenic Post Group, the Universal Postal Service Provider, having the largest retail network in Greece for postal and financial services products. From March 1996 until July 1997, Mr. Kyriakopoulos was the General Manager of ATEMKE SA, one of the leading construction companies in Greece listed on the Athens Stock Exchange. From December 1986 to March 1996, he was the Managing Director of Globe Group of Companies, a group active in the areas of shipowning and management, textiles and food and distribution. The company was listed on the Athens Stock Exchange. From June 1983 to December 1986, Mr. Kyriakopoulos was an assistant to the Managing Director of Armada Marine S.A., a company active in international trading and shipping, owning and managing a fleet of twelve vessels. Presently he is Chairman of the Hellenic Private Television Owners Association, BoD member of the Hellenic Federation of Enterprises (SEV) and BoD member of Digea S.A. He has also been an investor in the shipping industry for more than 20 years. Mr. Kyriakopoulos has a B.Sc. degree in Marine Engineering from the University of Newcastle upon Tyne, a MSc. degree in Naval Architecture and Marine Engineering with specialization in Management from the Massachusetts Institute of Technology and a Master degree in Business Administration (MBA) from Imperial College, London.

George Taniskidis has been a member of the Board of Directors of EuroDry since May 5, 2018. He has also been a member of the Board of Directors of Euroseas since its inception on May 5, 2005. He is the Chairman of Core Capital Partners, a consulting firm specializing in debt restructuring. He was Chairman and Managing Director of Millennium Bank and a member of the Board of Directors of BankEuropa (subsidiary bank of Millennium Bank in Turkey) until May 2010. He was also a member of the Executive Committee and the Board of Directors of the Hellenic Banks Association. From 2003 until 2005, he was a member of the Board of Directors of Visa International Europe, elected by the Visa issuing banks of Cyprus, Malta, Portugal, Israel and Greece. From 1990 to 1998, Mr. Taniskidis worked at XIOSBANK (until its acquisition by Piraeus Bank in 1998) in various positions, with responsibility for the bank's credit strategy and network. Mr. Taniskidis studied Law in the National University of Athens and in the University of Pennsylvania Law School, where he received a L.L.M. After law school, he joined the law firm of Rogers & Wells in New York, where he worked until 1989 and was also a member of the New York State Bar Association. He is also a member of the Young Presidents Organization.

Apostolos Tamvakakis has been a member of the Board of Directors of EuroDry since May 5, 2018. He has also been a member of the Board of Directors of Euroseas since June 25, 2013. From January 2015 to February 2017 he was independent non-executive Vice Chairman of the Board of Directors of Piraeus Bank. Since July 2012 he participated as a Member of the Board of Directors and Committees in various companies. From December 2009 to June 2012, Mr. Tamvakakis was appointed Chief Executive Officer of the National Bank of Greece. From May 2004 to March 2009, he served as Chairman and Managing Director of Lamda Development, a real estate development company of the Latsis Group and from March 2009 to December 2009, he served on the management team of the Geneva-based Latsis Group, as Head of Strategy and Business Development. From October 1998 to April 2004, he served as Deputy CEO of National Bank of Greece. Prior to that, he worked as Deputy Governor of National Mortgage Bank of Greece, as Deputy General Manager of ABN AMRO Bank, as Manager of Corporate Finance at Hellenic Investment Bank and as Planning Executive at Mobil Oil Hellas. He also served as Vice-Chairman of Athens Stock Exchange, Chairman of the Steering Committee of Interalpha Group of Banks, Chairman of Ethnokarta, National Securities, AVIS (Greece), ETEVA and the Southeastern European Board of the Europay Mastercard Group. Mr. Tamvakakis has also served in numerous boards of directors and committees. He is the Chairman and Managing Partner of EOS Capital Partners Alternative Investment Fund Manager, the investment manager of a private equity fund "EOS Hellenic Renaissance Fund". He holds the positions of Vice Chairman of Gek Terna, Member of the BoD of Quest Holdings, Chairman of the Liquidations Committee of PQH Single Special Liquidation S.A. and member of the Marketing Commission of the Hellenic Olympic Committee. He is a graduate of the Athens University of Economics and has an M.A. in Economics from the Saskatchewan University in Canada with major in econometrics and economics.

Christian Donohue has been a member of the Board of Directors of EuroDry since May 30, 2018. He has also been a member of the Board of Directors of Euroseas since December 7, 2017. Mr. Donohue was appointed

pursuant to the provisions of the Statement of Designation of our Series B Preferred Shares. Mr. Donohue is a Managing Director at BlackRock and he held the same position at Tennenbaum Capital Partners, before Tennenbaum Capital Partners was acquired by BlackRock in 2018.

Family Relationships

Aristides P. Pittas, Vice Chairman, is the cousin of Aristides J. Pittas, our Chairman, President and CEO.

B.	Compensation

Executive Compensation

We have no direct employees. The services of our Chief Executive Officer, Chief Financial Officer, Chief Administrative Officer, Internal Auditor and Secretary are provided by Eurobulk. These services are provided to us under our Master Management Agreement with Eurobulk under which we pay a fee, before bonuses, adjusted annually for inflation in the Eurozone to account for the increased management cost associated with us being a public company and other services to our subsidiaries. During 2019, under this Master Management Agreement, as amended, we paid Eurobulk $1,250,000 for the services of our executives, Mr. Aristides J. Pittas, Dr. Anastasios Aslidis and Mr. Symeon Pariaros, our Secretary, Mrs. Stephania Karmiri, and our Internal Auditor. As of January 1, 2020, this fee remained the same at $1,250,000.

Director Compensation

Our directors who are also our officers or have executive positions or beneficially own greater than 10% of the outstanding common shares receive no compensation for serving on our Board of Directors or its committees.

Directors who are not our officers, do not have any executive position or do not beneficially own greater than 10% of the outstanding common shares receive the following compensation: an annual retainer of $7,500, plus $1,875 for attending a quarterly meeting of the Board of Directors, plus an additional retainer of $3,750 if serving as Chairman of the Audit Committee. They also participate in the Company's Equity Incentive Plan.

All directors are reimbursed reasonable out-of-pocket expenses incurred in attending meetings of our Board of Directors or any committee of our Board of Directors.

Equity Incentive Plan

In May 2018, our Board of Directors approved an equity incentive plan. The equity incentive plan is administered by the Board of Directors which can make awards totaling in aggregate up to 150,000 shares over five years after the equity incentive plan's adoption date. Officers, directors and employees (including any prospective officer or employee) of the Company and its subsidiaries and affiliates and consultants and service providers to (including persons who are employed by or provide services to any entity that is itself a consultant or service provider to) the Company and its subsidiaries and affiliates are eligible to receive awards under the equity incentive plan. Awards may be made under the equity incentive plan in the form of incentive stock options, non-qualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, unrestricted stock, restricted stock units and performance shares.

On November 21, 2018, the Board of Directors awarded 25,090 shares of restricted stock to our directors, officers and key employees of Eurobulk, 50% of which vested on November 16, 2019, and the remainder will vest on November 16, 2020.

On November 4, 2019, the Board of Directors awarded 24,710 shares of restricted stock to our directors, officers and key employees of Eurobulk, 50% of which will vest on July 1, 2020 and the remainder will vest on July 1, 2021. Vesting of the awards is conditioned on continuous employment throughout the period to the vesting date.

C. Board Practices

The current term of our Class A directors expires in 2020, the term of our Class B directors expires in 2021 and the term of our Class C directors expires in 2022.

There are no service contracts between us and any of our directors providing for benefits upon termination of their employment or service.

Our Board of Directors does not have separate compensation or nomination committees, and instead, the entire Board of Directors performs those responsibilities.

Audit Committee

We currently have an Audit Committee comprised of three independent members of our Board of Directors. The Audit Committee is responsible for reviewing the Company's accounting controls and the appointment of the Company's outside auditors. The members of the Audit Committee are Mr. Panagiotis Kyriakopoulos (Chairman and "audit committee financial expert" as such term is defined under SEC regulations), Mr. Apostolos Tamvakakis and Mr. George Taniskidis.

Code of Ethics

We have adopted a code of ethics that complies with the applicable guidelines issued by the SEC. Our code of ethics is posted on our website: http://www.eurodry.gr under "Corporate Governance."

Corporate Governance

Our Company's corporate governance practices are in compliance with, and are not prohibited by, the laws of the Republic of the Marshall Islands. We are exempt from many of Nasdaq's corporate governance practices other than the requirements regarding the disclosure of a going concern audit opinion, submission of a listing agreement, notification of material non-compliance with Nasdaq corporate governance practices, and the establishment and composition of an audit committee and a formal written audit committee charter. The practices that we follow in lieu of Nasdaq's corporate governance rules are described below.

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We are not required under Marshall Islands law to maintain a Board of Directors with a majority of independent directors, and we may not be able to maintain a Board of Directors with a majority of independent directors in the future.

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In lieu of a compensation committee comprised of independent directors, our Board of Directors will be responsible for establishing the executive officers’ compensation and benefits. Under Marshall Islands law, compensation of the executive officers is not required to be determined by an independent committee.

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In lieu of a nomination committee comprised of independent directors, our Board of Directors will be responsible for identifying and recommending potential candidates to become board members and recommending directors for appointment to board committees. Shareholders may also identify and recommend potential candidates to become board members in writing. No formal written charter has been prepared or adopted because this process is outlined in our bylaws.

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In lieu of obtaining an independent review of related party transactions for conflicts of interests, consistent with Marshall Islands law requirements, a related party transaction will be permitted if: (i) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors and the Board of Directors in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, or, if the votes of the disinterested directors are insufficient to constitute an act of the Board of Directors as defined in Section 55 of the Marshall Islands Business Corporations Act, by unanimous vote of the disinterested directors; or (ii) the material facts as to his relationship or interest are disclosed and the shareholders are entitled to vote thereon, and the contract or transaction is specifically approved in good faith by a simple majority vote of the shareholders; or (iii) the contract or transaction is fair as to the Company as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

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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, 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 advance notice to properly introduce any business at a meeting of the shareholders. Our bylaws also provide that shareholders may designate in writing a proxy to act on their behalf.

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In lieu of holding regular meetings at which only independent directors are present, our entire Board of Directors, a majority of whom are independent, will hold regular meetings as is consistent with the laws of the Republic of the Marshall Islands.

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The Board of Directors adopted a new Equity Incentive Plan in May 2018. Shareholder approval was not necessary since Marshall Islands law permits the Board of Directors to take such actions.

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As a foreign private issuer, we are not required to obtain shareholder approval if any of our directors, officers, or 5% or greater shareholders has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company, or assets to be acquired, or in the consideration to be paid in the transaction(s) and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common stock or voting power of 5% or more.

•

In lieu of obtaining shareholder approval prior to the issuance of designated securities, the Company will comply with provisions of the Marshall Islands Business Corporations Act, providing that the Board of Directors approves share issuances.

Other than as noted above, we are in full compliance with all other applicable Nasdaq corporate governance standards.

D. Employees

We have no salaried employees, although we pay Eurobulk for the services of our Chief Executive Officer, Chief Financial Officer, Chief Administrative Officer, Internal Auditor and Secretary: Mr. Aristides J. Pittas, Dr. Anastasios Aslidis, Mr. Symeon Pariaros, Mr. Konstantinos Siadimas and Ms. Stephania Karmiri, respectively. Eurobulk also ensures that all seamen have the qualifications and licenses required to comply with international regulations and shipping conventions, and that all of our vessels employ experienced and competent personnel. As of December 31, 2019, approximately 62 officers and 98 crew members served on board the vessels in our fleet.

E. Share Ownership

With respect to the ownership of our common stock by each of our directors and executive officers, and all of our directors and executive officers as a group, see "Item 7. Major Shareholders and Related Party Transactions".

All of the shares of our common stock have the same voting rights and are entitled to one vote per share.

Equity Incentive Plan

See Item 6.B of this annual report, "Compensation."

Options

No options were granted during the fiscal year ended December 31, 2019. There are currently no options outstanding to acquire any of our shares.

Warrants

We do not currently have any outstanding warrants.

Item 7.

Major Shareholders and Related Party Transactions

A.	Major Stockholders

The following table sets forth certain information regarding the beneficial ownership of our voting stock as of March 31, 2020 by each person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of our voting stock, each of our directors and executive officers, and all of our directors and executive officers and 5% owners as a group. All of our shareholders, including the shareholders listed in this table, are entitled to one vote for each share of common stock held.

	Number of Shares of Voting Common Stock Beneficially Owned		Percent of Voting of Common Stock (13)			Number of Shares of Voting Series B Preferred Stock Beneficially Owned (14)		Percent of Voting of Series B Preferred Shares (14)			Number of Shares of Voting Common Stock Beneficially Owned Upon Conversion; 50% Voting Before Conversion		Percent of Total Voting Securities
Dry Friends Investment Company Inc(2)		905,562		39.3	%		-		-					32.4	%
Tennenbaum Opportunities Fund VI, LLC (3, 4)		58,320		2.5	%		11,731		76.2	%		370,765		15.4	%
Tennenbaum Opportunities Partners V, LLC (3, 4)		121,680		5.3	%		-		-			-		4.2	%
Family United Navigation Co		322,219		14.0	%		-		-			-		11.5	%
Preferred Dry Friends Investment Company Inc(4)		-		-			3,655		23.8	%		115,518		4.1	%
Aristides J Pittas(5)		25,214		1.1	%		-		-			-		*
George Taniskidis(6)		1,621		*			-		-			-		*
Panagiotis Kyriakopoulos(7)		10,472		*			-		-			-		*
Aristides P Pittas(8)		5,653		*			-		-			-		*
Anastasios Aslidis(9)		21,422		*			-		-			-		*
Apostolos Tamvakakis(10)		2,083		*			-		-			-		*
Christian Donohue		-		*			-		-			-		*
Stephania Karmiri(11)		-		*			-		-			-		*
Symeon Pariaros(12)		11,013		*			-		-			-		*
All directors and officers and 5% owners as a group		1,481,040		64.3	%		15,386		100	%		486,283		70.5	%

* Indicates less than 1.0%.

(1)

Beneficial ownership is determined in accordance with the Rule 13d-3(a) of the Securities Exchange Act of 1934, as amended, and generally includes voting or investment power with respect to securities. Except as subject to community property laws, where applicable, the person named above has sole voting and investment power with respect to all shares of common stock shown as beneficially owned by him/her.

(2)

Represents 905,562 shares of common stock held of record by Dry Friends. A majority of the shareholders of Dry Friends are members of the Pittas family. Investment power and voting control by Dry Friends resides in its Board of Directors which consists of five directors, a majority of whom are members of the Pittas family. Actions by Dry Friends may be taken by a majority of the members on its Board of Directors.

(3)

Tennenbaum Capital Partners, LLC serves as investment advisor to, inter alia, Tennenbaum Opportunities Partners V, LP and Tennenbaum Opportunities Fund VI, LLC, which are the registered holders of the Common Shares and Series B Preferred Shares of EuroDry Ltd. beneficially owned by Tennenbaum Capital Partners, LLC. Tennenbaum Capital Partners, LLC is indirectly controlled by BlackRock, Inc., which may be deemed to have beneficial ownership of shares beneficially owned by Tennenbaum Capital Partners, LLC. The address of Tennenbaum Opportunities Partners V, LP, Tennenbaum Opportunities Fund V, LLC and Tennenbaum Capital Partners, LLC is 2951 28th Street, Suite 1000, Santa Monica, CA 90405. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. Tennenbaum Opportunities Partners V, LP and Tennenbaum Opportunities Fund VI, LLC currently hold (a) 180,000 shares of common stock and (b) Series B Preferred Shares that are convertible into 370,675 shares of common stock.

(4)	Common shares are issuable upon conversion of Series B Preferred Shares (or any convertible notes into which the Series B Preferred Shares may convert) owned by this shareholder (based on the current conversion ratio).

(5)

Does not include 85,640 shares of common stock held of record by Dry Friends, by virtue of ownership interest in Dry Friends by Mr. Pittas. Mr. Pittas disclaims beneficial ownership except to the extent of his pecuniary interest. Does not include 1,041 Series B Preferred Shares held of record by Preferred Dry Friends Investment Company Inc., by virtue of ownership interest in Preferred Dry Friends Investment Company Inc. by Mr. Pittas. Mr. Pittas disclaims beneficial ownership except to the extent of his pecuniary interest. Includes 2,800 shares vesting on July 1, 2020, 2,785 shares of common stock vesting on November 16, 2019 and 2,800 shares vesting on July 1, 2021.

(6)	Does not include 4,157 shares held of record by Dry Friends, by virtue of Mr. Taniskidis' ownership in Dry Friends. Mr. Taniskidis disclaims beneficial ownership except to the extent of his pecuniary interest. Does not include 96 Series

B Preferred Shares held of record by Preferred Dry Friends Investment Company Inc., by virtue of ownership interest in Preferred Dry Friends Investment Company Inc. by Mr. Taniskidis and members of his family. Mr. Taniskidis disclaims beneficial ownership except to the extent of his pecuniary interest. Includes 300 shares vesting on July 1, 2020, 297 shares of common stock vesting on November 16, 2020 and 300 shares vesting on July 1, 2021.

(7)	Includes 300 shares vesting on July 1, 2020, 297 shares of common stock vesting on November 16, 2020 and 300 shares vesting on July 1, 2021.

(8)

Does not include 197,293 shares of common stock held of record by Dry Friends and Family United Navigation Co., by virtue of ownership interest in Dry Friends and Family United Navigation Co. of Mr. Pittas and members of his family. Mr. Pittas disclaims beneficial ownership except to the extent of his pecuniary interest. Does not include 24 shares of Series B Preferred stock held of record by Preferred Dry Friends Investment Company Inc., by virtue of ownership interest in Preferred Dry Friends Investment Company Inc.by Mr. Pittas and members of his family. Mr. Pittas disclaims beneficial ownership except to the extent of his pecuniary interest. Includes 770 shares vesting on July 1, 2020, 760 shares of common stock vesting on November 16, 2020 and 770 shares vesting on July 1, 2021.

(9)	Includes 1,900 shares vesting on July 1, 2020, 1,890 shares of common stock vesting on November 16, 2020 and 1,900 shares vesting on July 1, 2021.

(10)	Includes 300 shares vesting on July 1, 2020, 297 shares of common stock vesting on November 16, 2020 and 300 shares vesting on July 1, 2021.

(11)	Does not include 114 shares of common stock held of records by Dry Friends, by virtue of Mrs. Karmiri's ownership in Dry Friends. Mrs. Karmiri disclaims beneficial ownership except to the extent of her pecuniary interest.

(12)	Includes 300 shares vesting on July 1, 2020, 297 shares of common stock vesting on November 16, 2020 and 300 shares vesting on July 1, 2021.

(13)	Voting stock includes 37,255 unvested shares for a total of 2,304,630 issued and outstanding shares of the Company as of April 22, 2019.

(14)	As of March 31, 2020, Series B Preferred Shares vote on an as-converted basis weighted by 50%.

B.	Related Party Transactions

The operations of our vessels are managed by Eurobulk and Eurobulk FE, both affiliated companies. Eurobulk manages certain corporate matters and certain vessels of our fleet under a Master Management Agreement with us and separate management agreements with each shipowning company. Eurobulk FE manages four of our vessels under similar management agreements with the respective ship-owning companies.

Under our Master Management Agreement, Eurobulk is responsible for providing us with executive services associated with us being a public company. Under the separate management agreements with the shipowning companies, Eurobulk or Eurobulk FE are responsible to provide (i) other administration services to our subsidiaries and commercial management services, which include obtaining employment for our vessels and managing our relationships with charterers; and (ii) technical management services, which include managing day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory and classification society compliance, supervising the maintenance and general efficiency of vessels, arranging our hire of qualified officers and crew, arranging and supervising drydocking and repairs, arranging insurance for vessels, purchasing stores, supplies, spares and new equipment for vessels, appointing supervisors and technical consultants and providing technical support and shoreside personnel who carry out the management functions described above and certain accounting services.

EuroDry signed new Master Management Agreements ("MMAs") with the Managers which took effect after the completion of the Spin-off. Our Master Management Agreement with Eurobulk compensates Eurobulk with an annual executive compensation and a daily management fee per vessel managed. The amount of such executive compensation allocated to the Company prior to the Spin-off was based on the proportion of the number of calendar days that related to EuroDry's vessels to the number of days of the entire fleet of Euroseas. For the Company post Spin-off the annual compensation for such services was set at $1,250,000. This amount was $693,524, $731,456 and $1,250,000 for 2017, 2018 and 2019, respectively. Our Master Management Agreement is substantially similar to the master management agreement between Euroseas and Eurobulk relating to our vessels that were previously owned by Euroseas. The Master Management Agreement is terminable by Eurobulk only for cause or under other limited circumstances, such as sale of the Company or Eurobulk or the bankruptcy of either party. The fee under the management agreements between Eurobulk FE and the ship-owning companies follow substantially the same terms of the similar agreements with Eurobulk.

The Eurodry Master Management Agreement ("MMA") with the Managers provides for an annual adjustment of the daily vessel management fee due to inflation to take effect on January 1 of each year. The vessel

management fee for laid-up vessels is half of the daily fee. This MMA, as periodically amended and restated, will automatically be extended after the initial five-year period for an additional five-year period unless terminated on or before the 90th day preceding the initial termination date. Pursuant to the MMA, each ship-owning company has signed – and each future ship owning company when a vessel is acquired will sign - with the Managers, a management agreement with the rate and term of these agreements set in the MMA effective at such time.

The MMA was amended and restated on January 1, 2012 to reflect a 5% discount on the daily vessel management fee for the period during which the number of the Euroseas-owned vessels (including vessels in which Euroseas is a part owner) managed by the Managers is greater than 20 ("volume discount"); it was renewed on January 1, 2014 for a new five-year term until January 1, 2019. Starting January 1, 2013, the daily vessel management fee was adjusted to 720 Euros per day per vessel in operation and 360 Euros per day per vessel in lay-up before the 5% discount. The fee remained unchanged for the subsequent years starting January 1, 2014, 2015, 2016, 2017. The MMA was further renewed on January 1, 2018 for an additional five-year term until January 1, 2023 with the 5% volume discount permanently incorporated in the daily management fee. The daily management fee remained unchanged at Euros 685 for the year 2019 and will be adjusted annually for inflation in the Eurozone. Vessel management fees paid to the Managers amounted to $1,409,716, $1,701,340 and $1,964,536 in 2017, 2018 and 2019, respectively. The fee remained unchanged for 2020.

The management of the M/V "Xenia", M/V "Alexandros P.", M/V "Tasos" and M/V "Ekaterini" is performed by Eurobulk FE, which provides technical, commercial and accounting services. The remaining fleet (M/V "Pantelis, M/V "Eirini P." and M/V "Starlight") is managed by Eurobulk.

We receive chartering and sale and purchase services from Eurochart, an affiliate, and pay a commission of 1.25% on charter revenue and 1% on vessel sale price. During 2019, Eurochart received $359,868 for chartering services calculated as 1.25% of chartering revenues. During 2018, Eurochart received chartering commissions of $324,178 and commissions of $101,100 for acquisition of M/V "Starlight" from the sellers of the vessel. During 2017, Eurochart received chartering commissions of $253,503 and commissions of $134,000 from the sellers of the vessel for the vessels acquired. Eurochart also receives 1% commission of the acquisition price from the seller of the vessel for the vessels we acquire.

Technomar S.A., a crewing agent, and Sentinel Marine Services Inc., an insurance brokering company are affiliates to whom we pay a fee of about $50 per crew member per month and a commission on premium not exceeding 5%, respectively.

Aristides J. Pittas is currently the Chairman of each of Eurochart and Eurobulk, all of which are our affiliates.

We have entered into a registration rights agreement with Friends, which registration rights transferred to Dry Friends, our largest shareholder, pursuant to which we granted Dry Friends the right, under certain circumstances and subject to certain restrictions, to require us to register under the Securities Act shares of our common stock held by Dry Friends. Under the registration rights agreement, Dry Friends has the right to request us to register the sale of shares held by it on its behalf and may require us to make available shelf registration statements permitting sales of shares into the market from time to time over an extended period. In addition, Dry Friends has the ability to exercise certain piggyback registration rights in connection with registered offerings initiated by us.

Eurobulk, Eurobulk FE, Friends Investment Company Inc. and Aristides J. Pittas, our Chairman and Chief Executive Officer, have granted us a right of first refusal to acquire any drybulk vessel or containership which any of them may consider for acquisition in the future. In addition, Mr. Pittas has granted us a right of first refusal to accept any chartering out opportunity for a drybulk vessel which may be suitable for any of our vessels, provided that we have a suitable vessel, properly situated and available, to take advantage of the chartering out opportunity. Mr. Pittas has also agreed to use his best efforts to cause any entity he directly or indirectly controls to grant us this right of first refusal.

C.	Interests of Experts and Counsel

Not Applicable.

Item 8.

Financial Information

A.	Consolidated Statements and Other Financial Information

See Item 18.

Legal Proceedings

To our knowledge, there are no material legal proceedings to which we are a party or to which any of our properties are subject, other than routine litigation incidental to our business. In our opinion, the disposition of these lawsuits should not have a material impact on our consolidated results of operations, financial position and cash flows.

Dividend Policy

Thus far we have not paid a dividend to our common shareholders. The exact timing and amount of any future dividend payments to our common stock will be determined by our Board of Directors and will be dependent upon our earnings, financial condition, cash requirement and availability, restrictions in its loan agreements, growth strategy, the provisions of Marshall Islands law affecting the payment of distributions to shareholders and other factors, such as the acquisition of additional vessels.

The payment of dividends to our common stock is not guaranteed or assured, and may again be discontinued at any time at the discretion of our Board of Directors. Because we are a holding company with no material assets other than the stock of our subsidiaries, our ability to pay dividends will depend on the earnings and cash flow of these subsidiaries and their ability to pay dividends to us. If there is a substantial decline in the drybulk charter market, our earnings would be negatively affected, thus limiting our ability to pay dividends. Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent upon the payment of such dividends. Dividends may be declared in conformity with applicable law by, and at the discretion of, our Board of Directors at any regular or special meeting. Dividends may be declared and paid in cash, stock or other property of the Company.

The Series B Preferred Shares paid dividends (in-kind until January 29, 2019 at a rate of 5%). From January 29, 2019 to January 29, 2021, the dividend rate on the Series B Preferred Shares was set to increase to 12% per annum and to 14% per annum thereafter. On June 18, 2019, the Board of Directors agreed to redeem approximately $4.3 million of the Series B Preferred Shares with a simultaneous reduction of the dividend rate to 9.25% per annum until January 29, 2021, after which it will increase to 14% per annum, payable in cash. From January 29, 2019 to June 19, 2019, the Series B Preferred Shares carried a dividend rate of 12% per annum. If a cash dividend is paid on the Company's common stock after January 29, 2019, the holders of Series B Preferred Shares shall receive an additional cash dividend in an amount equal to 40% of the common stock dividend it would have received on an as-converted basis. The Company declared $0.57 million in dividends on its preferred shares during 2018, which were paid in-kind and $1.75 million in dividends on its preferred shares during 2019, of which $0.08 million were paid in-kind, $1.31 million were paid in cash, and another 0.36 million were accrued as of December 31, 2019 and were paid in the first quarter of 2020. In addition, $0.19 million of preferred deemed dividends were recorded as a result of the redemption of $4.3 million of the Series B Preferred Shares, representing the difference between (1) the fair value of the consideration transferred to the holders of the EuroDry Series B Preferred Shares (comprising the cash payment offered) and (2) the carrying amount of the Series B Preferred Shares before the redemption (net of issuance costs).

B.	Significant Changes

No significant events occurred after December 31, 2019.

Item 9.

The Offer and Listing

A.	Offer and Listing Details

The trading market for shares of our common stock is the Nasdaq Capital Market, on which our shares have traded under the symbol "EDRY" since May 31, 2018.

B.	Plan of Distribution

Not Applicable.

Markets

The trading market for shares of our common stock is the Nasdaq Capital Market, on which our shares have traded under the symbol "EDRY" since May 31, 2018. Our shares began trading on the Nasdaq Global Market on May 24, 2018 under the symbol "EDRYV" and continued through the close of trading on May 30, 2018. Beginning on May 31, 2018, "when-issued" trading under the symbol "EDRYV" ended and EuroDry Ltd. begun "regular-way" trading on the NASDAQ under the symbol "EDRY".

D.	Selling Shareholders

Not Applicable.

Dilution

Not Applicable.

F.	Expenses of the Issue

Not Applicable.

Item 10.

Additional Information

A.	Share Capital

Not Applicable.

B.	Memorandum and Articles of Association

Amended and Restated Articles of Incorporation and Bylaws, as amended

Our current amended and restated articles of incorporation are filed with the SEC as Exhibit 1.1 (Amended and Restated Articles of Incorporation) to this Annual Report on Form 20-F, and our current bylaws, as amended, are filed with the SEC as Exhibit 1.2 (Amended and Restated Bylaws) to this Annual Report on Form 20-F.

Purpose

Our purpose, as stated in our amended and restated articles of incorporation, is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the Business Corporations Act of the Marshall Islands, or the BCA.

Authorized Capitalization

Under our amended and restated articles of incorporation, our authorized capital stock consists of 200,000,000 shares of common stock, par value $0.01 per share and 20,000,000 shares of preferred stock par value $0.01 per share. All of our shares of stock are in registered form.

Common Stock

As of March 31, 2020, we are authorized to issue up to 200,000,000 shares of common stock, par value $0.01 per share, of which there are 2,304,630 shares issued and outstanding. Each outstanding share of common stock is entitled to one vote, either in person or by proxy, on all matters that may be voted upon by their holders at meetings of the shareholders. Holders of our common stock (i) have equal ratable rights to dividends from funds legally available therefore, if declared by the Board of Directors; (ii) are entitled to share ratably in all of our assets available for distribution upon liquidation, dissolution or winding up; and (iii) do not have preemptive, subscription or conversion rights or redemption or sinking fund provisions. All issued shares of our common stock when issued will be fully paid for and non-assessable.

Preferred Stock

As of March 31, 2020, we are authorized to issue up to 20,000,000 shares of preferred stock, par value $0.01 per share, of which there are 15,387 shares issued and outstanding. The preferred stock may be issued in one or more series and our Board of Directors, without further approval from our shareholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights, liquidation preferences and other rights and restrictions relating to any series. Issuances of preferred stock, while providing flexibility in connection with possible financings, acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of our common stock. Additional Series B Convertible Preferred Shares were issued when dividends to preferred shares were paid in-kind (see below).

The Series B Preferred Shares paid dividends in-kind, quarterly in arrears until January 29, 2019 at a rate of 5% per annum, depending on the trading price of the Company's common stock. The first payment of dividend was made in-kind on June 30, 2018 at a dividend rate of 5%, followed by another two quarterly dividends in-kind at the same dividend rate. The Series B Preferred Shares dividend rate was set to increase to 12% per annum from January 29, 2019 to January 29, 2021 and to 14% per annum thereafter, and the related dividends are payable in cash On June 18, 2019, the Board of Directors agreed to redeem $4.3 million of the Series B Preferred Shares with a simultaneous reduction of the dividend rate for the remaining outstanding shares. After the agreed redemption, there were $15.4 million face value of Series B Preferred Shares outstanding. In parallel with the redemption, the holders of the remaining Series B Preferred Shares agreed to reduce the annual dividend to 9.25% until January 29, 2021, thereafter increasing it to 14% per annum, payable in cash. From January 29, 2019 to June 18, 2019, the dividend rate was 12% per annum. The terms of the Series B Preferred Shares after the agreed-upon redemption and simultaneous reduction of dividend rate, remain the same. If a cash dividend is paid on the Company's common stock after January 29, 2019, the holders of Series B Preferred Shares shall receive an additional cash dividend in an amount equal to 40% of the common stock dividend it would have received on an as-converted basis.

The Series B Preferred Shares can be converted at the option of their holders at any time, and at the option of the Company only if certain share price and liquidity milestones are met, including the Company's common stock trading that a volume-weighted average price of $25.00 (subject to adjustment), the Company having sold its common stock in a public offering at a per share price of at least $25.00 (subject to adjustment) resulting in gross proceeds of at least $20 million and an effective registration statement for the common stock into which the Series B Preferred Shares would convert being effective. Each Series B Preferred Share is convertible into common stock at an initial conversion price of $10.91 (subject to adjustment, including upon a default). The Series B Preferred Shares are redeemable in cash by the Company at any time after the fifth anniversary of the original issue date. Holders of the Series B Preferred Shares may require the Company to redeem their shares only upon the occurrence of certain corporate events.

Subject to certain ownership thresholds, holders of Series B Preferred Shares have the right to appoint one director to the Company's board of directors and TCP also has consent rights over certain corporate actions including authorizing, creating or issuing any class or series of capital stock that runs senior or in parity with the Series B Preferred Shares, engaging in certain transactions with affiliates or engaging in transactions that increase the leverage of the Company more than a certain level. In addition, the holders of Series B Preferred Shares will vote as one class with the Company's common stock on all matters on which shareholders are entitled to vote, with each Series B Preferred Share having a number of votes equal to 50% of the numbers of shares of common stock of the Company into which such Series B Preferred Share would be convertible on the applicable record date.

The rights and privileges of the Series B Preferred Shares are set forth in the Amended and Restated Statement of Designation of the Rights, Preferences and Privileges of the Series B Convertible Preferred Shares, a copy of which is included as Exhibit 2.4 hereto and is incorporated by reference herein.

Directors

Our directors, except the Series B Director (defined below), 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. Cumulative voting may not be used to elect directors.

Our Board of Directors must consist of at least three directors, such number to be determined by the Board of Directors by a majority vote of the entire Board of Directors from time to time. Shareholders may change the number of our directors only by an affirmative vote of the holders of the majority of the outstanding shares of capital stock entitled to vote generally in the election of directors.

Our Board of Directors is divided into three classes as set out below in "Classified Board of Directors." Each director, except the Series B Director, is elected to serve until the third succeeding annual meeting after his election and until his successor shall have been elected and qualified, except in the event of his death, resignation or removal.

Our Series B Director was appointed pursuant to the provisions of the Statement of Designation of our Series B Preferred Shares. The holders of Series B Preferred Shares have the right, voting separately as a class, to nominate and elect one member of the Board of Directors (the "Series B Director") who shall (i) have no family relationship with any other officer or director of the Corporation; (ii) be independent pursuant to the rules of Nasdaq if the Corporation is required to be subject to the rules of Nasdaq requiring a listed company to maintain a majority independent board; and (iii) be determined by the Board of Directors to meet its nominating standards. The Series B Director shall be elected by the affirmative vote of the holders of a majority of the outstanding Series B Preferred Shares. Any Series B Director elected as provided herein may be removed and replaced at any time by the affirmative vote of the holders of a majority of the outstanding Series B Preferred Shares. Upon any termination of the right of the holders of the Series B Preferred Shares to vote as a class for a Series B Director, the term of office of the Series B Director then in office elected by such holders voting as a class shall terminate immediately and the number of directors constituting the Board of Directors shall automatically be reduced by one. The Series B Director is entitled to one vote on any matter before the Board of Directors. The Series B Director is not entitled to remuneration by the Corporation for acting as director, but is entitled to the reimbursement of reasonable expenses, including all out-of-pocket expenses, incurred in connection therewith. The right of the Holders of Series B Preferred Shares to elect a member of the Board of Directors shall terminate once Tennenbaum Opportunities Fund VI, LLC, a fund managed by TCP, and allowed transferees no longer hold at least 65% of the number of shares of Common Stock (on an as-converted basis) that the Series B Preferred Shares acquired by Tennenbaum Opportunities Fund VI, LLC would have converted into at the time of purchase.

Shareholder Meetings

Under our bylaws, as amended, 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 may be called at any time by the Board of Directors, the Chairman of the Board or by the President. Notice of every annual and special meeting of shareholders must be given to each shareholder of record entitled to vote at least 15 but no more than 60 days before such meeting.

Dissenters' Rights of Appraisal and Payment

Under the BCA, our shareholders have the right to dissent from various corporate actions, including any merger or consolidation or sale 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. In the event of any further amendment of our amended and restated articles of incorporation, 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 the Company's shares are primarily traded on a local or national securities exchange.

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 stock both at the time the derivative action is commenced and at the time of the transaction to which the action relates.

Limitations on Liability and Indemnification of Officers and Directors

The BCA authorizes corporations to limit or eliminate the personal liability of directors and officers to corporations and their shareholders for monetary damages for breaches of directors' fiduciary duties. Our bylaws, as amended, include a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director to the fullest extent permitted by law.

Our bylaws, as amended, provide that we must indemnify our directors and officers to the fullest extent authorized by law. We are also expressly authorized to carry directors' and officers' insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers.

The limitation of liability and indemnification provisions in our bylaws, as amended, may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our shareholders. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.

There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.

Anti-takeover Effect of Certain Provisions of our Amended and Restated Articles of Incorporation and Bylaws, as Amended

Several provisions of our amended and restated articles of incorporation and bylaws, as amended, which are summarized below, may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change in 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.

Blank Check Preferred Stock

Under the terms of our 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 in control of our company or the removal of our management.

Classified Board of Directors

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 us. 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 of Directors

Our amended and restated articles of incorporation prohibit cumulative voting in the election of directors. Our bylaws, as amended, require parties other than the Board of Directors to give advance written notice of nominations for the election of directors. Our bylaws, as amended, also provide that our directors may be removed

only for cause and by either action of the Board of Directors or the holders of 51% of the issued and outstanding voting shares of the Company. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.

Limited Actions by Shareholders

Our amended and restated articles of incorporation and our bylaws, as amended, 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 amended and restated articles of incorporation and our bylaws, as amended, provide that, subject to certain exceptions, our Board of Directors, our Chairman of the Board or by the President and the business transacted at the special meeting is limited to the purposes stated in the notice. Accordingly, a shareholder may not call a special meeting and shareholder consideration of a proposal may be delayed until the next annual meeting.

Advance Notice Requirements for Shareholder Proposals and Director Nominations

Our bylaws, as amended, provide that shareholders seeking to nominate candidates for election as directors or to bring business before an annual meeting of shareholders must provide timely notice of their proposal in writing to the corporate secretary. Generally, to be timely, a shareholder's notice must be received at our principal executive offices not less than 150 days nor more than 180 days prior to the one-year anniversary of the immediately preceding annual meeting of shareholders. Our bylaws, as amended, also specify requirements as to the form and content of a shareholder's notice. These provisions may impede shareholders' ability to bring matters before an annual meeting of shareholders or make nominations for directors at an annual meeting of shareholders.

Certain Business Combinations

Our amended and restated articles of incorporation also prohibit us, subject to several exclusions, from engaging in any "business combination" with any interested shareholder for a period of three years following the date the shareholder became an interested shareholder.

Shareholders' Rights Plan

We adopted a shareholders' rights plan on May 5, 2018. Each right entitles the registered holder, upon the occurrence of certain events, to purchase from us one-thousandth of a share of Series A Participating Preferred Stock at an exercise price of $26, subject to adjustment. The rights will expire on the earliest of (i) May 30, 2028 or (ii) redemption or exchange of the rights. The plan was designed to enable us to protect shareholder interests in the event that an unsolicited attempt is made for a business combination with or takeover of the company. We believe that the shareholders' rights plan should enhance the board of directors' negotiating power on behalf of shareholders in the event of a coercive offer or proposal. We are not currently aware of any such offers or proposals and we adopted the plan as a matter of prudent corporate governance. A copy of the plan is filed as Exhibit 2.5 to this Annual Report on Form 20-F.

C.	Material Contracts

We have a number of credit facilities with commercial banks. For a discussion of our facilities, please see the section of this annual report entitled "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Debt Financing", and Note 9 of our attached financial statements.

We are a party to a registration rights agreement with Friends, which was transferred to Dry Friends. For a discussion of these agreements, please see the section of this annual report entitled "Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions." Furthermore, we are a party to a registration rights agreement with TCP and a registration obligation agreement with two funds managed by TCP. For a discussion of these agreements, please see the section of this annual report entitled "Item 3—Key Information—D. Risk Factors—Company Risk Factors—Future sales of our stock could cause the market price of our common stock to decline."

There are no other material contracts, other than contracts entered into in the ordinary course of business, to which the Company or any of its subsidiaries is a party.

D.	Exchange Controls

Under Marshall Islands law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of our shares.

Taxation

The following is a discussion of the material Marshall Islands, Liberian and United States federal income tax considerations applicable to us and U.S. Holders and Non-U.S. Holders, each as discussed below, of our common stock.

Marshall Islands Tax Considerations

We are incorporated in 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 holders of our common stock that are not residents or domiciled or carrying any commercial activity in the Marshall Islands. The holders of our common stock will not be subject to Marshall Islands tax on the sale or other disposition of such common stock.

Liberian Tax Considerations

Certain of our subsidiaries are incorporated in the Republic of Liberia. Under the Consolidated Tax Amendments Act of 2010, our Liberian subsidiaries will be deemed non-resident Liberian corporations wholly exempted from Liberian taxation effective as of 1977, and distributions we make to our shareholders will be made free of any Liberian withholding tax.

United States Federal Income Tax

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 stock. The following discussion of United States federal income tax matters is based on the Code, judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the United States Department of the Treasury, or the Treasury Regulations, all as of the date of this Annual Report, and all of which are subject to change, possibly with retroactive effect. This discussion is also based in part upon Treasury Regulations promulgated under Section 883 of the Code. The discussion below is based, in part, on the description of our business as described in "Business" above and assumes that we conduct our business as described in that section. References in the following discussion to "we" and "us" are to EuroDry and its subsidiaries on a consolidated basis.

United States Federal Income Taxation of Our Company

Taxation of Operating Income: In General

Unless exempt from United States federal income taxation under the rules discussed below, a foreign corporation is subject to United States federal income taxation in respect of any income that is derived from the use of vessels, from the hiring or leasing of vessels for use on a time, voyage or bareboat charter basis, from the participation in a pool, partnership, strategic alliance, joint operating agreement, code sharing arrangement 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 exclusive of certain U.S. territories and possessions constitutes income from sources within the United States, which we refer to as "U.S.-source shipping income."

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-United States 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 United States 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 United States Federal Income Taxation

Under Section 883 of the Code and the Treasury Regulations thereunder, we will be exempt from United States federal income taxation on our U.S.-source shipping income if:

•

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

either

•

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

•

our stock is "primarily and regularly traded on an established securities market" in our country of organization, in another country that grants an "equivalent exemption" to United States corporations, or in the United States, which we refer to as the "Publicly-Traded Test."

The Marshall Islands and Liberia, the jurisdictions where we and our shipowning subsidiaries were incorporated during 2018, each grants an "equivalent exemption" to United States corporations. Therefore, we will be exempt from United States federal income taxation with respect to our U.S.-source shipping income if we satisfy either the 50% Ownership Test or the Publicly-Traded Test.

We do not believe that we can establish that we satisfied the 50% Ownership Test for the 2018 taxable year due to the widely-held nature of our stock.

The Treasury Regulations provide, in pertinent part, that the stock of a foreign corporation will be considered to be "primarily traded" on an established securities market in a country if the number of shares of each class of stock that is traded during the taxable year on all established securities markets in that country exceeds the number of shares in each such class that is traded during that year on established securities markets in any other single country. Our common stock is "primarily traded" on the Nasdaq Capital Market, which is an established securities market for these purposes.

The Treasury Regulations also require that our stock be "regularly traded" on an established securities market. Under the Treasury Regulations, our stock will be considered to be "regularly traded" 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 by total combined value of all classes of stock, are listed on one or more established securities markets, which we refer to as the "listing threshold." We intend to take the position that our common stock, which is listed on the Nasdaq Capital Market constituted more than 50% of our outstanding shares by value and total combined voting power for the 2019 taxable year. Accordingly, we intend to take the position that we satisfied the listing threshold for the 2019 taxable year. However, it is possible that our common stock may come to constitute 50% or less of our outstanding shares by value in a future taxable year in which case we may not be able to satisfy the listing threshold or the Publicly Traded Test.

Notwithstanding the foregoing, the regulations provide, in pertinent part, that a class of shares will not be considered to be "regularly traded" on an established securities market for any taxable year in which 50% or more of the vote and value of the outstanding shares of such class are owned, actually or constructively under specified share 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 such class of stock, to which we refer as the "Five Percent Override Rule."

For purposes of being able to determine the persons who actually or constructively own 5% or more of the vote and value of our common stock, or "5% Shareholders," the regulations permit us to rely on those persons that are identified on Schedule 13G and Schedule 13D filings with the SEC, as owning 5% or more of our common stock. The regulations further provide that an investment company which is registered under the Investment Company Act of 1940, as amended, will not be treated as a 5% Shareholder for such purposes. In the event the Five Percent Override Rule is triggered, the regulations provide that the Five Percent Override Rule will nevertheless not apply if we can establish that within the group of 5% Shareholders, there are sufficient qualified shareholders for purposes of Section 883 to preclude non-qualified shareholders in such group from owning 50% or more of our common stock for more than half the number of days during the taxable year.

We believe that we were subject to the Five Percent Override Rule, but nonetheless satisfied the Publicly-Traded Test for the 2019 taxable year because the nonqualified 5% Shareholders did not own more than 50% of our common stock for more than half of the days during the taxable year. We intend to take this position on our 2019 United States federal income tax returns.

Taxation in Absence of Exemption

To the extent the benefits of Section 883 are unavailable for any taxable year, our U.S.-source shipping income, to the extent not considered to be "effectively connected" with the conduct of a United States trade or business, as described below, would be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions 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 is treated as being derived from United States sources, the maximum effective rate of United States federal income tax on our shipping income will not exceed 2% under the 4% gross basis tax regime.

To the extent the benefits of the 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 United States trade or business, as described below, any such "effectively connected" U.S.-source shipping income, net of applicable deductions, would be subject to the United States federal corporate income tax currently imposed at rates of up to 21%. In addition, we may be subject to the 30% United States federal "branch profits" taxes on earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of such United States trade or business.

Our U.S.-source shipping income would be considered "effectively connected" with the conduct of a United States trade or business only if:

•

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

•

substantially all 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.

We do not 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 do not anticipate that any of our U.S.-source shipping income will be "effectively connected" with the conduct of a U.S. trade or business.

United States Taxation of Gain on Sale of Vessels

Regardless of whether we qualify for exemption under Section 883 of the Code, we will not be subject to United States federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under United States federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by us will be considered to occur outside of the United States.

United States Federal Income Taxation of U.S. Holders

As used herein, the term "U.S. Holder" means a beneficial owner of common stock that is a United States citizen or resident, United States corporation or other United States entity taxable as a corporation, an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust.

This discussion does not purport to deal with the tax consequences of owning common stock to all categories of investors, some of which, such as dealers in securities, investors whose functional currency is not the United States dollar, persons required to recognize income for United States federal income tax purposes no later than when such income is reported on an "applicable financial statement" and investors that own, actually or under applicable constructive ownership rules, 10% or more of our common stock, may be subject to special rules. This discussion deals only with holders who hold the common stock as a capital asset. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under United States federal, state, local or foreign law of the ownership of common stock. This discussion does not address the tax consequences of owning our preferred stock.

If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding our common stock, you are encouraged to consult your tax advisor.

Distributions

Subject to the discussion of passive foreign investment companies below, any distributions made by us with respect to our common stock to a U.S. Holder will generally constitute dividends, which may be taxable as ordinary income or "qualified dividend income" as described in more detail below, to the extent of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Distributions in excess of our earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder's tax basis in his common stock on a dollar-for-dollar basis and thereafter as capital gain. Because we are not a United States corporation, U.S. Holders that are corporations generally will not be entitled to claim a dividend received deduction with respect to any distributions they receive from us. Dividends paid with respect to our common stock will generally be treated as "passive category income" or, in the case of certain types of U.S. Holders, "general category income" for purposes of computing allowable foreign tax credits for United States foreign tax credit purposes.

Dividends paid on our common stock to a U.S. Holder who is an individual, trust or estate, or a U.S. Individual Holder, will generally be treated as "qualified dividend income" that is taxable to such U.S. Individual Holders at preferential tax rates provided that (1) we are not a passive foreign investment company for the taxable year during which the dividend is paid or the immediately preceding taxable year (which we do not believe we are, have been or will be), (2) our common stock is readily tradable on an established securities market in the United States (such as the Nasdaq Capital Market, on which our common stock is listed), (3) the U.S. Individual Holder has owned the common stock for more than 60 days in the 121-day period beginning 60 days before the date on which the common stock becomes ex-dividend, and (4) the U.S. Individual Holder is not under an obligation (whether pursuant to a short sale or otherwise) to make payments with respect to positions in similar or related property. There is no assurance that any dividends paid on our common stock will be eligible for these preferential rates in the hands of a U.S. Individual Holder. Dividends paid on our stock prior to the date on which our common stock became listed on the Nasdaq Capital Market were not eligible for these preferential rates. Any dividends paid by us which are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Individual Holder.

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 ten percent of a shareholder's adjusted tax basis (or fair market value in certain circumstances) in a share of our common stock. If we pay an "extraordinary dividend" on our common stock that is treated as "qualified dividend income," then any loss derived by a U.S. Individual Holder from the sale or exchange of such common stock will be treated as long-term capital loss to the extent of such dividend.

Sale, Exchange or other Disposition of Common Stock

Assuming we do not constitute a passive foreign investment company for any taxable year, a U.S. Holder generally will recognize taxable gain or loss upon a sale, exchange or other disposition of our common stock in an amount equal to the difference between the amount realized by the 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 generally 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 United States foreign tax credit purposes. A U.S. Holder's ability to deduct capital losses is subject to certain limitations.

Passive Foreign Investment Company Status and Significant Tax Consequences

Special United States federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a passive foreign investment company, or PFIC, for United States federal income tax purposes. In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which such holder held our common stock, either:

•

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

•

at least 50% of the average value of our assets during such taxable year produce, or are held for the production of, passive income, which we refer to as “passive assets”.

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. 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.

Based on our current operations and future projections, we do not believe that we are, nor do we expect to become, a PFIC with respect to any taxable year. 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 PFIC, 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 are a PFIC. We believe there is substantial legal authority supporting our position consisting of case law and United States Internal Revenue Service, or IRS, pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. Moreover, in the absence of any legal authority specifically relating to the statutory provisions governing PFICs, 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 PFIC with respect to any taxable year, there can be no assurance that the nature of our operations will not change in the future.

As discussed more fully below, if we were to be treated as a PFIC for any taxable year which included a U.S. Holder's holding period in our common stock, then such U.S. Holder would be subject to different United States federal income taxation rules depending on whether the U.S. Holder makes an election to treat us as a "qualified electing fund," which election we refer to as a "QEF election". As an alternative to making a QEF election, a U.S. Holder should be able to make a "mark-to-market" election with respect to our common stock, as discussed below. In addition, if we were to be treated as a PFIC, a U.S. Holder of our common stock would be required to file annual information returns with the IRS.

In addition, if a U.S. Holder owns our common stock and we are a PFIC, such U.S. Holder must generally file IRS Form 8621 with the IRS.

U.S. Holders Making a Timely QEF Election

A U.S. Holder who makes a timely QEF election with respect to our common stock, or an Electing Holder, would report 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. Our net operating losses or net capital losses would not pass through to the Electing Holder and will not offset our ordinary earnings or net capital gain reportable to the Electing Holder in subsequent years (although such losses would ultimately reduce the gain, or increase the loss, if any, recognized by the Electing Holder on the sale of his common stock). Distributions received from us by an Electing Holder are excluded from the Electing Holder's gross income to the extent of the Electing Holder's prior inclusions of our ordinary earnings and net capital gain. The Electing Holder's tax basis in his common stock would be increased by any amount included in the Electing Holder's income. Distributions received by an Electing Holder, which are not includible in income because they have been previously taxed, would decrease the Electing Holder's tax basis in the common stock. An Electing Holder would generally recognize capital gain or loss on the sale or exchange of common stock.

U.S. Holders Making a Timely Mark-to-Market Election

A U.S. Holder who makes a timely mark-to-market election with respect to our common stock would include annually in the U.S. Holder's income, as ordinary income, any excess of the fair market value of the common stock at the close of the taxable year over the U.S. Holder's then adjusted tax basis in the common stock. The excess, if any, of the U.S. Holder's adjusted tax basis at the close of the taxable year over the then fair market value of the common stock would be deductible in an amount equal to the lesser of the amount of the excess or the net mark-to-market gains that the U.S. Holder included in income in previous years with respect to the common stock. A U.S. Holder's tax basis in his common stock would be adjusted to reflect any income or loss amount recognized pursuant to the mark-to-market election. A U.S. Holder would recognize ordinary income or loss on a sale, exchange or other disposition of the common stock; provided, however, that any ordinary loss on the sale, exchange or other disposition may not exceed the net mark-to-market gains that the U.S. Holder included in income in previous years with respect to the common stock.

U.S. Holders Not Making a Timely QEF Election or Mark-to-Market Election

A U.S. Holder who does not make a timely QEF Election or a timely mark-to-market election, which we refer to as a "Non-Electing Holder", would be subject to special rules with respect to (i) any "excess distribution" (generally, the portion of any distributions received by the Non-Electing Holder on the common stock in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder's holding period for the common stock), and (ii) any gain realized on the sale or other disposition of the common stock. Under these rules, (i) the excess distribution or gain would be allocated ratably over the Non-Electing Holder's holding period for the common stock; (ii) the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, would be taxed as ordinary income; and (iii) the amount allocated to each of the other prior 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. If a Non-Electing Holder dies while owning the common stock, the Non-Electing Holder's successor would be ineligible to receive a step-up in the tax basis of that common stock.

United States Federal Income Taxation of "Non-U.S. Holders"

A beneficial owner of common stock (other than a partnership) that is not a U.S. Holder is referred to herein as a "Non-U.S. Holder."

Dividends on Common Stock

Non-U.S. Holders generally will not be subject to United States federal income tax or withholding tax on dividends received from us with respect to our common stock, unless that income is effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of a United States 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.

Sale, Exchange or Other Disposition of Common Stock

Non-U.S. Holders generally will not be subject to United States federal income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of our common stock, unless:

•

such gain is effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States, if the Non-U.S. Holder is entitled to the benefits of a United States 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 United States trade or business for United States federal income tax purposes, the income from the common stock, including dividends and the gain from the sale, exchange or other disposition of the stock that is effectively connected with the conduct of that trade or business will generally be subject to regular United States federal income tax in the same manner as discussed in the previous section relating to the taxation of U.S. Holders. In addition, in the case of a corporate Non-U.S. Holder, its earnings and profits that are attributable to the effectively connected income, subject to certain adjustments, may be subject to an additional United States federal "branch profits" tax at a rate of 30%, or at a lower rate as may be specified by an applicable United States 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. Such payments will also be subject to backup withholding tax if a U.S. Individual Holder:

•

fails to provide an accurate taxpayer identification number;

•

is notified by the IRS that he failed to report all interest or dividends required to be shown on your United States federal income tax returns; or

•

in certain circumstances, fails 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 appropriate IRS Form W-8.

If a shareholder sells our common stock to or through a United States office of a broker, the payment of the proceeds is subject to both United States backup withholding and information reporting unless the shareholder certifies that it is a non-U.S. person, under penalties of perjury, or the shareholder otherwise establishes an exemption. If a shareholder sells our common stock through a non-United States office of a non-United States broker and the sales proceeds are paid outside the United States then information reporting and backup withholding generally will not apply to that payment. However, United States information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made outside the United States, if a shareholder sells our common stock through a non-United States office of a broker that is a United States person or has some other contacts with the United States.

Backup withholding is not an additional tax. Rather, a shareholder generally may obtain a refund of any amounts withheld under backup withholding rules that exceed the shareholder's United States federal income tax liability by filing a refund claim with the IRS.

Individuals who are U.S. Holders (and to the extent specified in the applicable Treasury Regulations, certain individuals who are Non-U.S. Holders and certain United States entities) who hold "specified foreign financial assets" (as defined in Section 6038D of the Code and the applicable Treasury Regulations) are required to file IRS Form 8938 (Statement of Specified Foreign Financial Assets) with information relating to each such 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. Specified foreign financial assets would include, among other assets, our common stock, unless the common stock were held through an account maintained with a United States 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, the statute of limitations on the assessment and collection of United States federal income tax with respect to a taxable year for which the filing of IRS Form 8938 is required may not close until three years after the date on which IRS Form 8938 is filed. U.S. Holders (including United States entities) and Non-U.S. Holders are encouraged to consult their own tax advisors regarding their reporting obligations under Section 6038D of the Code.

We encourage each shareholder to consult with his, her or its own tax advisor as to particular tax consequences to it of holding and disposing of our common stock, including the applicability of any state, local or foreign tax laws and any proposed changes in applicable law.

F.	Dividends and paying agents

Not Applicable.

G.	Statement by experts

Not Applicable.

H.	Documents on display

We file reports and other information with the SEC. These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549, or from the SEC's website: http://www.sec.gov. You may obtain information on the operation of the public reference room by calling 1 (800) SEC-0330 and you may obtain copies at prescribed rates.

I.	Subsidiary Information

Not Applicable.

Item 11.

Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, we face risks that are non-financial or non-quantifiable. Such risks principally include country risk, credit risk and legal risk. Our operations may be affected from time to time in varying degrees by these risks but their overall effect on us is not predictable. We have identified the following market risks as those which may have the greatest impact upon our operations:

Interest Rate Fluctuation Risk

The international drybulk shipping industry is capital intensive, requiring significant amounts of investment. Much of this investment is financed by long term debt. Our debt usually contains interest rates that fluctuate with LIBOR.

We are subject to market risks relating to changes in interest rates because we have floating rate debt outstanding, which is based on U.S. dollar LIBOR plus, in the case of each credit facility, a specified margin. Our objective is to manage the impact of interest rate changes on our earnings and cash flow in relation to our borrowings and to this effect, when we deem appropriate, we use derivative financial instruments. Effective on August 8, 2017, Euroseas Ltd. (our parent company before the Spin-off) entered into an interest rate swap with HSBC Bank Plc. ("HSBC") for a notional amount of $5.0 million, in order to manage interest costs and the risk associated with changing interest rates of the loans associated with M/V "Eirini P.", M/V "Tasos" and M/V "Pantelis" which was allocated to the Company. Under the terms of the swap, HSBC Bank Plc. makes a quarterly payment to the Company equal to the 3-month LIBOR while the Company pays an adjustable rate averaging 1.93% (more specifically, the Company paid the fixed rate of 1.40% until August 8, 2018 then 1.75% until August 8, 2019, then pays 1.85% until August 8, 2020 and then 2.32% until August 8, 2022) based on the notional amount. The swap is effective from August 8, 2017 to August 8, 2022. As of May 30, 2018, the swap agreement was novated to EuroDry.

On July 24, 2018, EuroDry Ltd. entered into an interest rate swap with HSBC for a notional amount of $5.0 million. Under this contract, HSBC makes a quarterly payment to EuroDry equal to the 3-month LIBOR while EuroDry pays a fixed rate of 2.93% based on the notional amount. The swap is effective from July 24, 2018 to July 24, 2023. As at December 31, 2019, our average debt coverage for 2020 was approximately 19% and for the two-year period of 2021 and 2022 was approximately 22%.

As at December 31, 2019, we had $56.9 million of floating rate debt outstanding with margins over LIBOR ranging from 2.70% to 3.25 %. Our interest expense is affected by changes in the general level of interest rates. As an indication of the extent of our sensitivity to interest rate changes, an increase of 100 basis points would have decreased our net income and decreased our cash flows in the twelve-month period ended December 31, 2019 by approximately $602,300 assuming the same debt profile throughout the year.

The following table sets forth the sensitivity of our loans and the interest rate swaps as of December 31, 2019 in U.S. dollars to a 100 basis points increase in LIBOR during the next five years. Specifically, the interest we will have to pay for our loans will increase but net payments we will have to make under our interest rate swap contracts will decrease.

Year Ended December 31,	Amount in $ (loans)		Amount in $ (swap)
2020		532,748		(100,000	)
2021		456,383		(100,000	)
2022		332,768		(82,055	)
2023		161,131		(27,945	)
2024 and thereafter		176,675		-

Inflation Risk

The general rate of inflation has been relatively low in recent years and as such its associated impact on costs has been minimal. We do not believe that inflation has had, or is likely to have in the foreseeable future, a significant impact on expenses. Should inflation increase, it will increase our expenses and subsequently have a negative impact on our earnings.

Foreign Exchange Rate Risk

The international drybulk shipping industry's functional currency is the U.S. Dollar. We generate all of our revenues in U.S. dollars, but incur approximately 20% of our vessel operating expenses (excluding depreciation and other operating income) in 2019 in currencies other than U.S. dollars. In addition, our vessel management fee is denominated in Euros and certain general and administrative expenses (about 6% in 2019) are mainly in Euros and some other currencies. On December 31, 2019, approximately 37% of our outstanding trade accounts payable were denominated in currencies other than the U.S. dollar, mainly in Euros. We do not use currency exchange contracts to reduce the risk of adverse foreign currency movements but we believe that our exposure from market rate fluctuations is unlikely to be material. Net foreign exchange gain for the year ended December 31, 2019 was marginal. Net foreign exchange gain for the year ended December 31, 2018 was $0.01 million, and for the year ended December 31, 2017 we had a net foreign exchange loss of $0.01 million.

A hypothetical 10% immediate and uniform adverse move in all currency exchange rates from the rates in effect as of December 31, 2019, would have increased our operating expenses by approximately $0.25 million and the fair value of our outstanding trade accounts payable by approximately $0.04 million.

Item 12.

Description of Securities Other than Equity Securities

Not Applicable.

PART II

Item 13.

Defaults, Dividend Arrearages and Delinquencies

None.

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

We adopted a shareholders' rights plan on May 5, 2018 and declared a dividend distribution of one preferred stock purchase right to purchase one one-thousandth of our Series A Participating Preferred Stock for each outstanding share of our common stock, to shareholders of record at the close of business on May 30, 2018. Each right entitles the registered holder, upon the occurrence of certain events, to purchase from us one one-thousandth of a share of Series A Participating Preferred Stock at an exercise price of $26, subject to adjustment. The rights will expire on the earliest of (i) May 30, 2028 or (ii) redemption or exchange of the rights. The plan was designed to enable us to protect shareholder interests in the event that an unsolicited attempt is made for a business combination with or takeover of the company. We believe that the shareholders' rights plan should enhance the board of directors' negotiating power on behalf of shareholders in the event of a coercive offer or proposal. We are not currently aware of any such offers or proposals and we adopted the plan as a matter of prudent corporate governance.

Item 15.

Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Pursuant to Rules 13a-15(e) or 15d-15(e) of the Exchange Act, the Company's management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as of December 31, 2019. The term disclosure controls and procedures is 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.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2019, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

(b) Management's Annual Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is identified in Exchange Act Rule 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed by, or under the supervision of, the Company's principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer's 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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with the authorization of its management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on its consolidated financial statements.

Our management, with the participation of Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2019 using the control criteria framework of the Committee of Sponsoring Organizations of the Treadway Commission, or COSO 2013, published in its report entitled 2013 Internal Control-Integrated Framework. As a result of its assessment, the Chief Executive Officer and Chief Financial Officer concluded that the Company's internal controls over financial reporting are effective as of December 31, 2019.

This annual report does not contain an attestation report of our registered public accounting firm regarding internal control over financial reporting as the Company is an emerging growth company and is exempt from this requirement.

(d) Changes in Internal Control over Financial Reporting

No change in the Company's internal control over financial reporting occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. 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 the Company 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. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Item 16A.

Audit Committee Financial Expert

Our Board of Directors has determined that all the members of our Audit Committee qualify as financial experts and they are all considered to be independent according to Nasdaq and SEC rules. Mr. Panagiotis Kyriakopoulos serves as the Chairman of our Audit Committee and as the Audit Committee's financial expert with Mr. Apostolos Tamvakakis and Mr. George Taniskidis as members.

Item 16B.

Code of Ethics

We have adopted a code of ethics that applies to officers and employees. Our code of ethics is posted in our website, www.eurodry.gr, under "Corporate Governance".

Item 16C.

Principal Accountant Fees and Services

Our principal auditors, Deloitte Certified Public Accountants, S.A. have charged us for audit, audit-related and non-audit services as follows:

	2018 (dollars in thousands)		2019 (dollars in thousands)
Audit Fees	$	193	$	155
Audit related fees	_		_
Tax fees	_		_
All other fees / expenses	_		_
Total	$	193	$	155

Audit fees relate to compensation for professional services rendered for the audit of the consolidated financial statements of the Company and for the review of the quarterly financial information as well as in connection with any other audit services required for SEC or other regulatory filings or offerings.

The Audit Committee is responsible for the appointment, replacement, compensation, evaluation and oversight of the work of the independent registered public accounting firm. As part of this responsibility, the Audit Committee pre-approves the audit and non-audit services performed by the independent registered public accounting firm in order to assure that they do not impair the auditor's independence from the Company. The Audit Committee has adopted a policy which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent registered public accounting firm may be pre-approved.

All services provided by Deloitte Certified Public Accountants, S.A., were pre-approved by the Audit Committee.

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

None.

Item 16G.

Corporate Governance

Please see Item 6.C. Board Practices - Corporate Governance.

OTHER THAN AS NOTED IN THE SECTION ABOVE, WE ARE IN FULL COMPLIANCE WITH ALL OTHER APPLICABLE NASDAQ CORPORATE GOVERNANCE STANDARDS.

Item 16H.

Mine Safety Disclosure

Not Applicable.

PART III

Item 17.

Financial Statements

See Item 18.

Item 18.

Financial Statements

The financial statements set forth on pages F-1 through F-45, together with the report of independent registered public accounting firm, are filed as part of this annual report.

Item 19.

Exhibits

1.1		Amended and Restated Articles of Incorporation of EuroDry Ltd. (1)
1.2		Amended and Restated Bylaws of EuroDry Ltd. (2)
2.1		Specimen Common Stock Certificate (2)
2.2		Specimen Series B Preferred Share Certificate (2)
		Form of Contribution Agreement between EuroDry Ltd. and Euroseas Ltd. (2)
2.3		Form of Registration Rights Agreement by and among EuroDry Ltd., Tennenbaum Opportunities Fund VI, LLC, and Friends Investment Company, Inc. (2)
2.4		Statement of Designation of the Rights, Preferences and Privileges of Series B Convertible Perpetual Preferred Shares of EuroDry Ltd. (3)
2.5		Shareholders Rights Agreement between EuroDry Ltd. and American Stock Transfer and Trust Company, LLC (3)
4.1		Form of Master Management Agreement between EuroDry Ltd. and Eurobulk Ltd. (2)
4.2		Form of Master Management Agreement between EuroDry Ltd. and Eurobulk Far East (2)
4.3		EuroDry 2018 Equity Incentive Plan (2)
4.4		Form of Standard Ship Management Agreement (2)
4.5		Form of Current Time Charter (2)
4.6		Financial Agreement between Ultra Two Shipping Ltd, as borrower, and HSBC Bank Plc, as lender, relating to a term loan facility of up to US$19,950,000 dated January 12, 2015 (2)
4.7		Loan Agreement between Kamsarmax One Shipping Ltd, as borrower, and Nord LB, as lead arranger, for a term loan facility of up to US$16,560,000 dated February 17, 2016 (2)
4.8		Form of Supplemental Agreement Letter between Kamsarmax One Shipping Ltd, as borrower, and Nord LB, as lead arranger, for a term loan facility of up to US$16,560,000 (2)
4.9		Form of Second Supplemental Agreement between Kamsarmax One Shipping Ltd, as borrower, and Nord LB, as lead arranger, for a term loan facility of up to US$16,560,000 (2)
4.10		Form of Guarantee between EuroDry Ltd., as guarantor, and Nord LB, as security trustee, relating to Loan Agreement between Kamsarmax One Shipping Ltd, as borrower, and Nord LB, as lead arranger, for a term loan facility of up to US$16,560,000 (2)
4.11		Loan Agreement between Eirini Shipping Ltd, as borrower, and HSBC Bank plc, as lender, for a term loan facility of up to US$16,500,000, dated June 25, 2014 (2)
4.12		Form of First Supplemental Agreement between Eirini Shipping Ltd, as borrower, and HSBC Bank plc, as lender, for a term loan facility of up to US$16,500,000 (2)
4.13		Form of Second Supplemental Agreement between Eirini Shipping Ltd, as borrower, and HSBC Bank plc, as lender, for a term loan facility of up to US$16,500,000 (2)
4.14		Form of Third Supplemental Agreement between Eirini Shipping Ltd, as borrower, and HSBC Bank plc, as lender, for a term loan facility of up to US$16,500,000 (2)
4.15		Form of Fourth Supplemental Agreement between Eirini Shipping Ltd, as borrower, and HSBC Bank plc, as lender, for a term loan facility of up to US$16,500,000 (2)
4.16		Form of Guarantee between EuroDry Ltd., as guarantor, and HSBC Bank plc, relating to Loan Agreement between Eirini Shipping Ltd, as borrower, and HSBC Bank plc, as lender, for a term loan facility of up to US$16,500,000 (2)

4.17		Loan Agreement between Ultra One Shipping Ltd., as borrower, and Eurobank Ergasias S.A., as arranger, account bank, agent and security trustee, relating to a term loan of up to US$15,000,000 (4)
4.18		Guarantee between EuroDry Ltd., as guarantor, and Eurobank Ergasias S.A., the Security Trustee, for up

		to $15,000,000, dated October 1, 2018
4.19		Loan Agreement between Pantelis Shipping Corp., Areti Shipping Ltd. and Light Shipping Ltd., as joint and several borrowers, and National Bank of Greece S.A., as lender, relating to a loan facility of up to US$15,000,000 (4)
4.20		Guarantee between EuroDry Ltd., as guarantor, and National Bank of Greece S.A., as lender, for up to $15,000,000, dated November 27, 2018
4.21		First Preferred Mortgage by Kamsarmax Two Shipping Ltd, as owner, in favour of HSBC Bank plc, as mortgagee, relating to Ekaterini, dated May 7, 2018
4.22		Term Loan Facility Agreement between Kamsarmax Two Shipping Ltd, as borrower, and HSBC Bank plc, as original lender, for up to $18,400,000, dated April 26, 2018
4.23		Secured Loan Agreement between Eirini Shipping Ltd, as borrower, and HSBC Bank plc, as lender, for up to $4,500,000, dated May 20, 2019
4.24		Guarantee between EuroDry Ltd., as guarantor, and HSBC Bank plc, as lender, relating to Secured Loan Agreement between Eirini Shipping Ltd, as borrower, and HSBC Bank plc, as lender, for up to $4,500,000, dated May 20, 2019

8.1		Subsidiaries of the Registrant
12.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
12.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
13.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

________________

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

(1) Filed as an Exhibit to the Company's Form 6-K (File No. 001-38502) on May 29, 2018.

(2) Filed as an Exhibit to the Company's Registration Statement (File No. 333-224732) on May 8, 2018.

(3) Filed as an Exhibit to the Company's Form 6-K (File No. 001-38502) on May 31, 2018.

(4) Filed as an Exhibit to the Company's Annual Report on Form 20-F (File No. 001-38502) on April 30, 2019.

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 Amendment to its annual report on its behalf.

		EURODRY LTD. (Registrant)

		By:	/s/ Aristides J. Pittas
			Aristides J. Pittas
			Chairman, President and CEO

Date: April 16, 2020

EuroDry Ltd. and Subsidiaries

Consolidated financial statements

Index to consolidated financial statements

Pages

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of December 31, 2018 and 2019	F-3

Consolidated Statements of Operations for the Years Ended December 31, 2017, 2018 and 2019	F-5

Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2017, 2018 and 2019	F-6

Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2018 and 2019	F-7

Notes to the Consolidated Financial Statements	F-9

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of EuroDry Ltd.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of EuroDry Ltd. and subsidiaries (the “Company” ) as of December 31, 2019 and 2018, the related consolidated statements of operations, shareholders' 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 "financial statements"). In our opinion, the 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 financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

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

/s/ Deloitte Certified Public Accountants S.A.

Athens, Greece

April 16, 2020

We have served as the Company's auditor since 2018.

F-2

EuroDry Ltd. and Subsidiaries

Consolidated Balance Sheets

(All amounts, except share data, expressed in U.S. Dollars)

	Notes		December 31, 2018		December 31, 2019
Assets
Current assets
Cash and cash equivalents				4,375,972		5,396,406
Restricted cash		7		828,955		1,083,036
Trade accounts receivable, net				2,236,210		1,843,008
Other receivables				341,952		459,785
Prepaid expenses				147,789		286,711
Due from related companies		6		5,967,444		-
Inventories		3		566,947		508,711
Total current assets				14,465,269		9,577,657

Long-term assets
Vessels, net		4		110,637,462		105,461,265
Restricted cash		7		2,550,000		2,650,000
Derivatives		13		55,030		-
Total assets				127,707,761		117,688,922

Liabilities, mezzanine equity and shareholders’ equity
Current liabilities
Long-term bank loans, current portion		7		6,930,655		6,806,294
Trade accounts payable				690,653		1,046,561
Accrued expenses		5		1,166,209		964,423
Accrued preferred dividends		14		-		358,726
Deferred revenues				196,231		445,824
Due to related companies		6		-		1,547,210
Total current liabilities				8,983,748		11,169,038

(Consolidated balance sheets continue on the next page)

F-3

EuroDry Ltd. and Subsidiaries

Consolidated Balance Sheets

(All amounts, except share data, expressed in U.S. Dollars)

(continued)

	Notes		December 31, 2018			December 31, 2019

Long-term liabilities
Long-term bank loans, net of current portion		7		56,428,100			49,688,840
Derivatives		13		-			304,174
Total long-term liabilities				56,428,100			49,993,014
Total liabilities				65,411,848			61,162,052
Commitments and contingencies		9
Mezzanine Equity
Preferred shares (par value $0.01, 20,000,000 shares authorized, 19,608 and 15,387 issued and outstanding, respectively)		14		18,757,358			14,721,665
Shareholders’ equity
Common stock (par value $0.01, 200,000,000 shares authorized, 2,279,920 and 2,304,630 issued and outstanding, respectively)				22,799			23,046
Additional paid-in capital				52,618,022			52,802,574
Accumulated deficit				(9,102,266	)		(11,020,415	)
Total shareholders’ equity				43,538,555			41,805,205
Total liabilities, mezzanine equity and shareholders’ equity				127,707,761			117,688,922

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

F-4

EuroDry Ltd. and Subsidiaries

Consolidated statements of operations

Years ended December 31, 2017, 2018 and 2019

(All amounts, except for share data, expressed in U.S. Dollars)

	Notes		2017			2018			2019
Revenues
Time charter revenue				16,985,607			25,934,204			28,789,458
Voyage charter revenue				3,294,608			-			-
Commissions (including $253,503, $324,178 and $359,868, respectively, to related party)		6		(1,122,196	)		(1,411,333	)		(1,547,996	)
Net revenue				19,158,019			24,522,871			27,241,462
Operating expenses
Voyage expenses		12		2,396,318			410,676			1,117,022
Vessel operating expenses (including $102,131, $115,026 and $148,329, respectively, to related party)		6, 12		6,892,388			9,183,152			10,776,338
Dry-docking expenses				127,509			1,465,079			1,664,915
Vessel depreciation		4		4,786,272			5,422,155			6,458,251
Related party management fees		6		1,409,716			1,701,340			1,964,536
General and administrative expenses (including $693,524, $731,456 and $1,250,000, respectively, to related party)		6, 10		917,160			2,346,502			2,252,666
Total operating expenses				16,529,363			20,528,904			24,233,728
Operating income				2,628,656			3,993,967			3,007,734
Other income / (expenses)
Interest and other financing costs		7		(1,817,574	)		(2,913,141	)		(3,513,105	)
Gain on derivatives, net		13		49,167			13,786			496,820
Interest income				-			14,083			22,216
Foreign exchange (loss) / gain				(10,548	)		11,040			2,832
Other expenses, net				(1,778,955	)		(2,874,232	)		(2,991,237	)
Net income				849,701			1,119,735			16,497
Dividends to Series B preferred shares		14		-			(565,229	)		(1,748,981	)
Preferred deemed dividend				-			-			(185,665	)
Net income / (loss) attributable to common shareholders				849,701			554,506			(1,918,149	)
Earnings / (loss) per share attributable to common shareholders - basic and diluted		11		0.38			0.25			(0.85	)
Weighted average number of shares outstanding during the year, basic and diluted		11		2,213,505			2,232,821			2,251,439

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

F-5

EuroDry Ltd. and Subsidiaries

Consolidated statements of shareholders’ equity

Years ended December 31, 2017, 2018 and 2019

(All amounts, except share data, expressed in U.S. Dollars)

	Number of Shares Outstanding		Common Stock Amount		Additional Paid-in Capital		Accumulated Deficit			Former Parent Company investment			Total
Balance January 1, 2017								(10,506,473	)		41,603,370			31,096,897
Net increase in former Parent Company investment		-		-		-		-			915,525			915,525
Net income		-		-		-		849,701			-			849,701
Balance December 31, 2017		-		-		-		(9,656,772	)		42,518,895			32,862,123
Net increase in former Parent Company investment		-		-		-		-			9,984,409			9,984,409
Capitalization at spin-off, including issuance of common stock		2,254,830		22,548		52,480,756		-			(52,503,304	)		-
Net income		-		-		-		1,119,735			-			1,119,735
Dividends to Series B preferred shares								(565,229	)					(565,229	)
Issuance of restricted shares for stock incentive award and share-based compensation		25,090		251		137,266		-			-			137,517
Balance December 31, 2018		2,279,920		22,799		52,618,022		(9,102,266	)		-			43,538,555
Net income		-		-		-		16,497			-			16,497
Dividends to Series B preferred shares								(1,748,981	)					(1,748,981	)
Preferred deemed dividend		-		-		-		(185,665	)		-			(185,665	)
Issuance of restricted shares for stock incentive award and share-based compensation		24,710		247		184,552		-			-			184,799
Balance December 31, 2019		2,304,630		23,046		52,802,574		(11,020,415	)		-			41,805,205

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

F-6

EuroDry Ltd. and Subsidiaries

Consolidated statements of cash flows

Years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

	2017			2018			2019
Cash flows from operating activities:
Net income		849,701			1,119,735			16,497
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of vessels		4,786,272			5,422,155			6,458,251
Amortization and write off of deferred charges		209,231			396,925			152,879
Share-based compensation		-			137,517			184,799
Provision for doubtful debts		-			167,019			-
Change in the fair value of derivatives		(51,453	)		(3,577	)		359,204
Changes in operating assets and liabilities:
(Increase) / decrease in:
Trade accounts receivable		44,436			(1,809,442	)		393,202
Prepaid expenses		(29,368	)		(75,269	)		(138,922	)
Other receivables		(527,943	)		302,110			(117,833	)
Inventories		(184,071	)		(114,756	)		58,236
Due from related companies		(3,045,377	)		(1,968,521	)		-
Increase / (decrease) in:
Trade accounts payable		37,630			360,599			185,151
Accrued expenses		612,037			129,182			(201,787	)
Deferred revenues		209,192			(93,507	)		249,593
Due to related companies		-			-			7,514,654
Net cash provided by operating activities		2,910,287			3,970,170			15,113,924
Cash flows from investing activities:
Cash paid for vessels under construction, capitalized expenses and vessel acquisition		(9,635,504	)		(29,045,685	)		(1,111,297	)
Net cash used in investing activities		(9,635,504	)		(29,045,685	)		(1,111,297	)

(Consolidated statements of cash flows continues on the next page)

F-7

EuroDry Ltd. and Subsidiaries

Consolidated statements of cash flows

Years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

(Continued)

	2017			2018			2019
Cash flows from financing activities:
Net increase in former Parent Company investment		915,525			3,298,356			-
Redemption of preferred shares		-			-			(4,300,000	)
Preferred dividends paid		-			-			(1,311,612	)
Loan arrangement fees paid		(42,125	)		(432,200	)		(22,500	)
Proceeds from long-term bank loans		10,862,500			48,400,000			4,500,000
Repayment of long-term bank loans		(1,813,229	)		(23,337,271	)		(11,494,000	)
Due to former Parent Company		(639,312	)		-			-
Net cash provided by / (used in) financing activities		9,283,359			27,928,885			(12,628,112	)

Net increase in cash, cash equivalents and restricted cash		2,558,142			2,853,370			1,374,515
Cash, cash equivalents and restricted cash at beginning of year		2,343,415			4,901,557			7,754,927
Cash, cash equivalents and restricted cash at end of year		4,901,557			7,754,927			9,129,442
Cash Breakdown
Cash and cash equivalents		1,257,058			4,375,972			5,396,406
Restricted cash, current		894,499			828,955			1,083,036
Restricted cash, long term		2,750,000			2,550,000			2,650,000
Total cash, cash equivalents and restricted cash shown in the statement of cash flows		4,901,557			7,754,927			9,129,442
Supplemental cash flow information Cash paid for interest, net of capitalized expenses		1,462,852			2,220,713			3,468,478
Financing and investing activities fees:
Payment-in-kind dividends		-			565,229			78,642
Capital expenditures included in liabilities		64,476			47,562			218,319
Accrued preferred dividends		-			-			358,726
Preferred shares distributed to EuroDry		-			18,192,129			-
Prior year contributions from the former Parent Company recognized in paid-in capital		-			5,490,106			-
Due from former Parent Company amount allocated to Due from related companies balance		-			903,283			-

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

F-8

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

1. Basis of Presentation and General Information

EuroDry Ltd. (the “Company” or “EuroDry”) was formed by Euroseas Ltd. (“Euroseas” or “former Parent Company”) on January 8, 2018 under the laws of the Republic of the Marshall Islands to serve as the holding company of seven subsidiaries (the "Subsidiaries") contributed by Euroseas to EuroDry in connection with the spin-off of Euroseas' drybulk vessels held for use as of December 31, 2017 (the "Spin-off"). On May 30, 2018, Euroseas contributed these Subsidiaries to EuroDry in exchange for 2,254,830 common shares in EuroDry, which Euroseas, distributed to holders of Euroseas common stock on a pro rata basis. Further, on May 30, 2018 Euroseas distributed shares of the Company’s Series B Preferred Stock (the “EuroDry Series B Preferred Shares”) to holders of Euroseas’ Series B Preferred Shares, representing 50% of Euroseas Series B Preferred Stock. For periods up to May 30, 2018, the accompanying financial statements reflect the financial position and results of the carve-out operations of the Subsidiaries that were contributed to the Company.

The operations of the vessels are managed by Eurobulk Ltd. ("Eurobulk" or “Manager”) and Eurobulk (Far East) Ltd. Inc. (“Eurobulk FE”), collectively the “Managers”, corporations controlled by members of the Pittas family. Eurobulk has an office in Greece located at 4 Messogiou & Evropis Street, Maroussi, Greece; Eurobulk FE has an office at Manilla, Philippines Suite 1003, 10th Floor Ma. Natividad Building, 470 T.M. Kalaw cor. Cortada Sts., Ermita. Both provide the Company with a wide range of shipping services such as technical support and maintenance, insurance consulting, chartering, financial and accounting services, while Eurobulk also provides executive management services, in consideration for fixed and variable fees (see Note 6).

The Pittas family is the controlling shareholder of Friends Dry Investment Company Inc. which, in turn, owns 39.3% of the Company’s shares as of December 31, 2019. Mr. Aristides J. Pittas is the Chairman and Chief Executive Officer of the Company and Euroseas.

The Company is engaged in the ocean transportation of dry bulk through ownership and operation of dry bulk ship-owning companies. Details of the Company’s wholly owned subsidiaries are set out below:

•	Pantelis Shipping Corp., incorporated in the Republic of Liberia on December 4, 2009, owner of the Liberian flag 74,020 DWT bulk carrier M/V "Pantelis" which was built in 2000 and acquired on July 23, 2009.

•	Eirini Shipping Ltd., incorporated in the Republic of Liberia on February 2, 2014, owner of the Liberian flag 76,466 DWT bulk carrier M/V “Eirini P” which was built in 2004 and acquired on May 26, 2014.

•	Ultra One Shipping Ltd., incorporated in the Republic of Liberia on November 21, 2013, owner of Liberian flag 63,500 DWT bulk carrier M/V "Alexandros P." (ex- Hull DY 160). M/V "Alexandros P", which is a new build, was delivered on January 16, 2017.

F-9

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

Years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

1. Basis of Presentation and General Information - Continued

•

Ultra Two Shipping Ltd., incorporated in the Republic of Liberia on November 21, 2013, entered on November 29, 2013, into a shipbuilding contract with Yangzhou Dayang Shipbuilding Co., Ltd. and Sumec Marine Co., Ltd., for the construction of a 63,500 DWT bulk carrier (Hull No. DY161). The shipbuilding contract was cancelled on September 2, 2016 due to excessive construction delays. Ultra Two Shipping Ltd. has no assets and operations as of December 31, 2017, 2018 and 2019 and it was dissolved effective February 1, 2020.

•	Kamsarmax One Shipping Ltd., incorporated in the Republic of the Marshall Islands on April 4, 2014, owner of the Marshall Islands flag 82,000 DWT bulk carrier M/V "Xenia". M/V "Xenia", which is a new build, was delivered on February 25, 2016.

•	Kamsarmax Two Shipping Ltd., incorporated in the Republic of the Marshall Islands on April 4, 2014, owner of the Marshall Islands flag 82,000 DWT bulk carrier M/V “Ekaterini”. M/V “Ekaterini”, which is a new build, was delivered on May 7, 2018.

•	Areti Shipping Ltd., incorporated in the Republic of the Marshall Islands on November 15, 2016, owner of the Cypriot flag 75,100 DWT bulk carrier M/V “Tasos” which was built in 2000 and acquired on January 9, 2017.

•	Light Shipping Ltd., incorporated in the Republic of the Marshall Islands on November 6, 2018, owner of the Cypriot flag 75,845 DWT bulk carrier M/V “Starlight” which was built in 2004 and acquired on November 30, 2018.

As of December 31, 2019, the Company had a working capital deficit of $1.6 million, and for the year ended December 31, 2019 generated nominal net income, incurred a net loss attributable to common shareholders of $1.9 million and generated net cash from operating activities of $15.1 million. The Company’s cash balance amounted to $5.40 million and cash in restricted retention accounts amounted to $3.73 million as of December 31, 2019. The holders of EuroDry Series B Preferred Shares will receive a cash dividend at an annual dividend rate of 9.25% until January 2021, which will increase to 14% thereafter (Note 14). The Company intends to fund its working capital requirements via cash on hand and cash flows from operations. In the event that these are not sufficient, we may use funds from debt refinancing and equity offerings, sell vessels (where equity will be released) and draw down funds under a commitment from a company controlled by the Pittas family and affiliated with our Chief Executive Officer, if required, among other options. The Company believes it will have adequate funding through the sources described above 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.

F-10

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

1. Basis of Presentation and General Information – Continued

The following charterers individually accounted for more than 10% of the Company’s revenues as follows:

	Year ended December 31,
Charterer	2017			2018			2019
A/S Klaveness Chartering		26	%		32	%		35	%
Quadra Commodities S.A.		-			-			16	%
Guardian Navigation GMax LLC pool		-			-			15	%
Amaggi Europe B.V.		17	%		11	%		-
Dampskibsselskabet Norden A/S		18	%		-			-
China National Chartering (Hong Kong) Co., Limited		13	%		-			-

F-11

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

2. Significant Accounting Policies

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The following are the significant accounting policies adopted by the Company:

Principles of consolidation

The accompanying consolidated financial statements include the accounts of EuroDry Ltd. and its subsidiaries. Inter-company balances and transactions are eliminated on consolidation.

Use of estimates

The preparation of the accompanying consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the stated amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Other comprehensive income / (loss)

The Company has no other comprehensive income / (loss) and accordingly comprehensive income / (loss) equals net income / (loss) for all periods presented. As such, no statement of comprehensive income / (loss) has been presented.

F-12

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

2. Significant Accounting Policies - Continued

Foreign currency translation

The Company’s functional currency as well as the functional currency of all its subsidiaries is the U.S. dollar. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates prevailing at the balance sheet date. Income and expenses denominated in foreign currencies are translated into U.S. dollars at exchange rates prevailing at the date of the transaction. The resulting exchange gains and/or losses on settlement or translation are included in the accompanying consolidated statements of operations.

Cash equivalents

Cash equivalents are cash in bank accounts, time deposits or other certificates purchased with an original maturity of three months or less.

Restricted cash

Restricted cash reflects deposits with certain banks that can only be used to pay the current loan installments or are required to be maintained as a certain minimum cash balance per mortgaged vessel and amounts that are pledged, blocked or held as cash collateral.

Trade accounts receivable

The amount shown as trade accounts receivable, at each balance sheet date, includes estimated recoveries from each voyage or time charter. At each balance sheet date, the Company provides for doubtful accounts on the basis of specific identified doubtful receivables.

The Company recorded a provision for doubtful accounts of $167,019 for the year ended December 31, 2018. The Company did not record any material provisions for doubtful accounts for the years ended December 31, 2017 and 2019.

Inventories

Inventories are stated at the lower of cost and net realizable value, which is the estimated selling price less reasonably predictable costs of disposal and transportation. Inventories are valued using the FIFO (First-In First-Out) method.

Vessels

Vessels are stated at cost, which comprises the vessel contract price, costs of major repairs and improvements upon acquisition, direct delivery and other acquisition expenses to prepare the vessel for her initial voyage, less accumulated depreciation and impairment, if any. Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels; otherwise these amounts are charged to expense as incurred. Vessels under construction are presented at cost, which includes shipyard installment payments and

F-13

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

Years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

2. Significant Accounting Policies - Continued

other vessel costs incurred during the construction period that are directly attributable to the construction of the vessels, including interest costs incurred during the construction period.

Expenditures for vessel repair and maintenance are charged against income in the period incurred.

Depreciation

Depreciation is calculated on a straight line basis over the estimated useful life of the vessel with reference to the cost of the vessel, and estimated scrap value. Remaining useful lives of vessels are periodically reviewed and revised to recognize changes in conditions and such revisions, if any, are recognized over current and future periods. The Company estimates that its vessels have a useful life of 25 years from the completion of their construction.

Insurance claims and insurance proceeds

Claims receivable are recorded on the accrual basis and represent the amounts to be received, net of deductibles incurred through each balance sheet date, for which recovery from insurance companies is probable and the claim is not subject to litigation. Any remaining costs to complete the claims are included in accrued liabilities. Insurance proceeds are recorded according to type of claim that gives rise to the proceeds in the consolidated statements of operations and the consolidated statements of cash flow.

Revenue and expense recognition

Revenues are generated from time charters and voyage charters. Under a time charter agreement a contract is entered into for the use of a vessel for a specific period of time and a specified daily charter hire rate, which is generally payable in advance. Under a voyage charter agreement, a contract is made in the spot market for the use of a vessel for a specific voyage to transport a specified agreed upon cargo at a specified freight rate per ton or occasionally a lump sum amount. Under a voyage charter agreement, the charter party generally commits to a minimum amount of cargo and the charterer is liable for any short loading of cargo or "dead" freight. A minor part of the Company’s revenues is also generated from pool arrangements, according to which the amount allocated to each pool participant vessel is determined in accordance with an agreed-upon formula, which is determined by points awarded to each vessel in the pool (based on the vessel’s age, design, consumption and other performance characteristics) as well as the time each vessel has spent in the pool. For the vessel that operated under pool arrangement during the years ended December 31, 2018 and 2019 the Company does not consider itself the principal, primarily because of its lack of control over the service to be transferred to the charterer under those charter party agreements and therefore related revenues and expenses are presented net.

F-14

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

Years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

2. Significant Accounting Policies - Continued

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which amends the existing accounting standard for lease accounting and adds additional disclosures about leasing arrangements. ASC 842 requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by most leases, while lessor accounting remains largely unchanged. ASC 842, as amended, subject to certain transition relief options, allows a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, or allows entities to elect not to recast the comparative periods presented when transitioning to ASC 842 and to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASC 842 also provides a practical expedient to lessors by class of underlying asset, to not separate non lease components from the associated lease component, similar to the expedient provided for lessees, when the following criteria are met: i) the timing and pattern of transfer for the lease component is the same as those for the non-lease component associated with that lease component and (ii) the lease component, if accounted for separately, would be classified as an operating lease. ASC 842 is effective for public entities with reporting periods beginning after December 15, 2018, including interim periods within those fiscal periods. The Company adopted ASC 842 for its reporting period commencing January 1, 2019 and has elected not to recast the comparative periods presented when transitioning to ASC 842.

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 in advance. As of December 31, 2019, all of the Company’s vessels are employed under time charters with remaining terms ranging from less than one month to 11 months based on the minimum duration of the time charter contracts and do not include any renewal options. A time charter generally provides typical warranties and owner protective restrictions. The performance obligations in a time charter are satisfied over the term of the contract beginning when the vessel is delivered to the charterer until it is redelivered back to the owner of the vessel. The Company’s time charter agreements are classified as operating leases pursuant to ASC 842, because (i) the vessel is an identifiable asset, (ii) the Company does not have substantive substitution rights and (iii) the charterer has the right to control the use of the vessel, during the term of the contract, and derives the economic benefits from such use. 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.

As discussed above, the transition guidance associated with ASC 842 allows for certain practical expedients to lessors. The Company elected not to separate the lease and non-lease components included in the time charter revenue because the pattern of revenue recognition for the lease and non-lease components (included in the daily hire rate) is the same and the lease component, if accounted for separately, would be classified as an operating lease. The nature of the lease component and non-lease component that are combined as a result of applying the respective practical expedient are the hire rate for a bareboat charter as well as the compensation for expenses incurred running the vessel such as crewing expense, repairs, insurance, maintenance and lubricants, respectively. The lease component is the predominant component and the Company accounts for the combined component as an operating lease in accordance with Topic 842.

F-15

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

Years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

2.	Significant Accounting Policies – Continued

Both the lease component and non-lease component are earned by the passage of time. Since lessor accounting remains largely unchanged from previous U.S. GAAP, upon adoption of ASC 842, the timing and recognition of earnings from time charter contracts to which the Company is party did not change from prior policy, with the exception of ballast bonuses which were recognized during the ballast leg while they are now deferred and recognized over time during the charter period. The performance obligations in a time charter contract are recognized on a straight-line basis over the term of the respective time charter agreements, beginning when the vessel is delivered to the charterer until it is redelivered back to the Company, and is recorded in “Time charter revenue” in the consolidated statements of operations for the years ended December 31, 2017, 2018 and 2019.

Voyage charter agreements are considered service contracts that fall under the provisions of ASC 606, because the Company as the shipowner retains the control over the operation of the vessel such as directing the routes taken or the vessel speed. The Company considered the provisions of ASC 842 and determined that its voyage charter agreements do not contain a lease because the charterer under such contracts does not have the right to control the use of the vessel since the Company, as the ship-owner, retains control over the operations of the vessel, provided also that the terms are pre-determined and any change requires the Company’s consent. The Company accounts for a voyage charter when all the following criteria are met: (i) the parties to the contract have approved the contract in the form of a written charter agreement or fixture recap and are committed to perform their respective obligations, (ii) the Company can identify each party’s rights regarding the services to be transferred, (iii) the Company can identify the payment terms for the services to be transferred, (iv) the charter agreement has commercial substance (that is, the risk, timing, or amount of the future cash flows is expected to change as a result of the contract) and (v) it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the services that will be transferred to the charterer. The Company has determined that there is one single performance obligation for each of its voyage contracts, which is to provide the charterer with an integrated transportation service within a specified time period. In addition, the Company has concluded that a contract for a voyage charter meets the criteria to recognize revenue over time because the charterer simultaneously receives and consumes the benefits of the Company’s performance as the Company performs. Therefore, since the Company’s performance obligation under each voyage contract is met evenly as the voyage progresses, revenue is recognized on a straight line basis over the voyage days from the loading of cargo to its discharge. The majority of revenue from voyage charter agreements is usually collected in advance.

Demurrage income, which is included in “Voyage charter revenue” in the consolidated statements of operations, represents revenue earned from the charterer when loading or discharging time exceeded the stipulated time in the voyage charter agreement and is recognized when earned and collection is reasonably assured. Demurrage income for the years ended December 31, 2017, 2018 and 2019 was not material.

Charter fees received in advance are recorded as a liability (deferred revenue) until charter services are rendered.

F-16

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

Years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

2. Significant Accounting Policies - Continued

Vessel operating expenses are comprised of all expenses relating to the operation of the vessels, including crewing, insurance, repairs and maintenance, stores, lubricants, spares and consumables, professional and legal fees and miscellaneous expenses. Vessel operating expenses are recognized as incurred; payments in advance of services or use are recorded as prepaid expenses. Under voyage charter agreements, voyage expenses relate to bunkers, port charges, canal tolls, and agency fees and are all paid by the Company. Costs incurred prior to loading which are directly related to the voyage are deferred by the Company if they meet certain conditions, and are amortized over the duration of the voyage from load port to discharge port. Costs incurred during the voyage are expensed as incurred. Under time charter agreements, voyage expenses which are also recognized as incurred by the Company include costs for draft surveys, hold cleaning, postage, extra war risk insurance and other minor miscellaneous expenses related to the voyage. The charterer is responsible for paying the cost of bunkers and other voyage expenses whilst the vessel is on time charter. Certain voyage expenses paid by the Company, such as extra war risk insurance and holds cleaning may be recovered from the charterer; such amounts recovered are recorded as other income.

Commissions (address and brokerage), regardless of charter type, are always paid by the Company, are deferred and amortized over the related charter period and are presented as a separate line item in revenues to arrive at net revenues in the accompanying consolidated statements of operations.

Dry-docking and special survey expenses

Dry-docking and special survey expenses are expensed as incurred.

Pension and retirement benefit obligations – crew

The ship-owning companies contract the crews on board the vessels under short-term contracts (usually up to 9 months). Accordingly, they are not liable for any pension or post-retirement benefits.

F-17

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

Years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

2.	Significant Accounting Policies - Continued

Financing costs

Loan arrangement fees are deferred and amortized to interest expense over the duration of the underlying loan using the effective interest method. Unamortized fees relating to loans repaid or refinanced are expensed in the period the repayment or refinancing occurs.

Offering costs

Deferred offering expenses are charged against paid-in capital when financing is completed or expensed to “General and administrative expenses” in the consolidated statements of operations when the offering is aborted.

Stock incentive plan awards

Share-based compensation represents vested and non-vested restricted shares granted to officers and directors as well as to non-employees and are included in “General and administrative expenses” in the consolidated statements of operations. In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting (Topic 718). ASU 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. Following the adoption of this ASU, the shares to employees and directors as well as to non-employees are measured at their fair value equal to the market value of the Company's common stock on the grant date. The shares that do not contain any future service vesting conditions are considered vested shares and the total fair value of such shares is expensed on the grant date. The shares that contain a time-based service vesting condition are considered non-vested shares on the grant date and the total fair value of such shares is recognized on a straight-line basis over the requisite service period. Prior to the adoption of this ASU, the fair value of the awards granted to non-employees was measured at the fair value at each reporting period until the non-vested shares vested and performance was complete.

Impairment of long-lived assets

The Company reviews its long-lived assets “held and used” for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If indicators of impairment are present, the Company performs an analysis of the future undiscounted net operating cash flows of the related long-lived assets. When the estimate of future undiscounted net operating cash flows, excluding interest charges, expected to be generated by the use and eventual disposition of the asset is less than its carrying amount, the Company evaluates the asset for an impairment loss. Measurement of the impairment loss is based on the fair value of the asset. In this respect, management regularly reviews the carrying amount of the vessels in connection with the estimated recoverable amount for each of the Company’s vessels.

F-18

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

Years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

2.	Significant Accounting Policies - Continued

Derivative financial instruments

Derivative instruments are recorded in the balance sheet as either an asset or liability measured at its fair value with changes in the instruments' fair value recognized as either a component in other comprehensive income if specific hedge accounting criteria are met in accordance with guidance relating to “Derivatives and Hedging” or in earnings if hedging criteria are not met.

Preferred shares

Preferred shares are recorded at the initial amount of preferred stock assumed based on the initial consideration received by the former Parent Company less offering expenses and adjusted by including the redemption value of dividends paid in-kind. The Company recognizes changes in the redemption value of the preferred shares immediately as they occur and adjusts the carrying amount of the preferred shares to equal the redemption value at the end of each reporting period to that effect.

Earnings / (loss) per common share

Basic earnings / (loss) per share is computed by dividing net income/(loss) attributable to common shareholders, after the deduction of dividends paid (in cash or in-kind) to preferred shareholders, by the weighted-average number of common shares outstanding during the period. The weighted-average number of common shares outstanding does not include any potentially dilutive securities or any non-vested restricted shares of common stock. These non-vested restricted shares, although classified as issued and outstanding as of December 31, 2018 and 2019, are considered contingently returnable until the restrictions lapse and are not included in the basic net income per share calculation until the shares are vested.

Diluted earnings / (loss) per share gives effect to all potentially dilutive securities to the extent that they are dilutive, using the treasury stock method. The Company uses the treasury stock method for non-vested restricted shares, while for the preferred shares issued the Company uses the if-converted method to assess the dilutive effect.

Segment reporting

The Company reports financial information and evaluates its operations by charter revenue and not by the type of ship employment for its customers, i.e. voyage or time charters. The Company does not use discrete financial information to evaluate the operating results for each such type of charter. Although revenue can be identified for these types of charters, management cannot and does not identify expenses, profitability or other financial information for these charters. As a result, management, including the chief operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet and thus the Company has determined that it operates under one operating segment. Furthermore, when the Company charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographical information is impracticable.

F-19

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

Years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

2.	Significant Accounting Policies - Continued

Recent accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The ASU requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In November 2018, FASB issued ASU 2018-19 “Codification Improvements to topic 326, Financial Instruments-Credit Losses”. The amendments in this update clarify that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted. The adoption of this ASU is not expected to have a material effect on the Company’s consolidated financial statements and accompanying notes.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the disclosure requirements for fair value measurement. The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. The adoption of this ASU is not expected to have a material effect on the Company’s consolidated financial statements and accompanying notes.

F-20

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

Years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

3.	Inventories

Inventories consisted of the following:

	December 31, 2018		December 31, 2019
Lubricants		533,300		487,268
Victualing		33,647		21,443
Total		566,947		508,711

F-21

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

4.	Vessels, net

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

	Costs		Accumulated Depreciation			Net Book Value
Balance, January 1, 2018		103,039,369		(21,059,733	)		81,979,636
- Delivery of M/V “Ekaterini”		23,869,382		-			23,869,382
- Delivery of M/V “Starlight”		10,210,599		-			10,210,599
- Depreciation for the year		-		(5,422,155	)		(5,422,155	)
Balance, December 31, 2018		137,119,350		(26,481,888	)		110,637,462
- Depreciation for the year		-		(6,458,251	)		(6,458,251	)
- Vessel improvements		1,282,054		-			1,282,054
Balance, December 31, 2019		138,401,404		(32,940,139	)		105,461,265

In December 2016, Kamsarmax Two Shipping Ltd. took an impairment charge on Hull No. YZJ2013-1153 (named M/V “Ekaterini”) as it considered it likely at that time that it would exercise its option to terminate the shipbuilding contract without any additional penalty. The Company recognized an impairment of $3.8 million representing the deposit paid to the shipyard as well as legal and other costs related to the shipbuilding contract. In March 2017, the Company decided not to exercise the option to terminate the contract but to proceed with the construction of M/V Ekaterini at a total cost of $23.9 million. M/V “Ekaterini” was delivered to the Company on May 7, 2018.

On November 5, 2018, Light Shipping Ltd. signed a memorandum of agreement to purchase M/V "Starlight" a 75,845 DWT 2004-built drybulk carrier, for a purchase price plus costs to make the vessel available for use of $10.2 million. M/V "Starlight" was delivered to the Company on November 30, 2018.

During the year 2019, M/V “Starlight” and M/V “Eirini P” installed Water Ballast Treatment systems onboard with a total cost of $1.3 million. These installations were considered as vessel improvements and were therefore capitalized.

The Company performed the undiscounted cash flow test as of December 31, 2018 and 2019 for those operating vessels whose carrying values were above their respective market values, and determined that the net book value of its vessels held for use was recoverable.

All the Company’s vessels have been mortgaged as security for the Company’s loans (refer Note 7).

F-22

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the`

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

5.	Accrued Expenses

The accrued expenses consist of:

	December 31, 2018		December 31, 2019

Accrued payroll expenses		74,169		112,381
Accrued interest expense		694,437		586,186
Accrued general and administrative expenses		114,432		68,336
Accrued commissions		15,039		52,175
Other accrued expenses		268,132		145,345
Total		1,166,209		964,423

F-23

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

6.	Related Party Transactions

The Managers (see Note 1) provided technical and commercial vessel management for a fixed daily fee per vessel of Euro 685 for 2017, 2018 and 2019. Vessel management fees paid to the Managers amounted to $1,409,716, $1,701,340 and $1,964,536 in 2017, 2018 and 2019, respectively, and are recorded under "Related party management fees" in the consolidated statements of operations. An additional fixed management fee is paid to Eurobulk relating to executive compensation. The amount of such executive compensation allocated to the Company prior to the Spin-off was based on the proportion of the number of calendar days that related to EuroDry's vessels to the number of days of the entire fleet of Euroseas. After the Spin-off, the annual compensation for such services was set at $1,250,000. This amount was $693,524, $731,456 and $1,250,000 for 2017, 2018 and 2019, respectively, and is recorded in “General and administrative expenses” in the consolidated statements of operations.

The Euroseas' Master Management Agreement ("MMA") with the Managers provides for an annual adjustment of the daily vessel management fee due to inflation to take effect on January 1 of each year. The vessel management fee for laid-up vessels is half of the daily fee. This MMA, as periodically amended and restated, will automatically be extended after the initial five-year period for an additional five-year period unless terminated on or before the 90th day preceding the initial termination date. Pursuant to the MMA, each ship-owning company has signed – and each future ship owning company when a vessel is acquired will sign - with the Managers, a management agreement with the rate and term of these agreements set in the MMA effective at such time.

Starting January 1, 2013, the daily vessel management fee was adjusted to Euro 720 per day per vessel in operation and 360 Euros per day per vessel in lay-up before the 5% discount. The fee remained unchanged for the subsequent years starting January 1, 2014, 2015, 2016, 2017.

The MMA was further renewed on January 1, 2018 for an additional five year term until January 1, 2023 with the 5% volume discount permanently incorporated in the daily management fee. The daily management fee remained unchanged at Euro 685 for the year 2019 and will be adjusted annually for inflation in the Eurozone. EuroDry signed new MMAs with the Managers which took effect after the completion of the Spin-off. EuroDry's MMAs are substantially on the same terms as the MMA between Euroseas and Eurobulk relating to the vessels that were previously owned by Euroseas. The fee will remain unchanged for 2020.

The vessels M/V “Xenia”, M/V “Alexandros P.”, M/V “Tasos” and M/V “Ekaterini” are managed by Eurobulk FE, which provides technical, commercial and accounting services. The remaining fleet of the Company (M/V “Pantelis, M/V “Eirini P.” and M/V “Starlight”) is managed by Eurobulk.

F-24

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

6.	Related Party Transactions - Continued

Amounts due to or from related companies represent net disbursements and collections made on behalf of the ship-owning companies by the Managers during the normal course of operations for which a right of off-set exists. As of December 31, 2018, the amount due from related companies was $5,967,444. As of December 31, 2019 the amount due to related companies was $1,547,210. Based on the MMA, an estimate of the quarter’s operating expenses, expected dry-dock expenses, vessel management fee and fee for management executive services are to be advanced by the Company’s ship-owning subsidiaries in the beginning of the quarter to the respective Manager.

The Company uses brokers for various services, as is industry practice. Eurochart S.A. (“Eurochart”), a company controlled by certain members of the Pittas family, provides vessel sale and purchase services, and chartering services to the Company whereby the Company pays commission of 1% of the vessel sales price and 1.25% of charter revenues. A commission of 1% of the purchase price is also paid to Eurochart by the seller of the vessel for acquisitions the Company makes. In November 2018, the Company paid $101,100 to Eurochart for the acquisition of M/V “Starlight”. Commissions to Eurochart for chartering services totaled $253,503, $324,178 and $359,868 in 2017, 2018 and 2019, respectively, recorded in “Commissions” in the consolidated statements of operations.

Certain members of the Pittas family, together with another unrelated ship management company, have formed a joint venture with the insurance broker Sentinel Maritime Services Inc. ("Sentinel"); and with a crewing agent Technomar Crew Management Services Corp ("Technomar"). Technomar is a company owned by certain members of the Pittas family, together with two other unrelated ship management companies. Sentinel is paid a commission on insurance premiums not exceeding 5%; Technomar is paid a fee of about $50 per crew member per month. Total fees charged by Sentinel and Technomar were $42,421 and $59,710 in 2017, $48,734 and $66,292 in 2018, and $65,924 and $82,405 in 2019, respectively. These amounts are recorded in "Vessel operating expenses" in the consolidated statements of operations.

F-25

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

7.	Long-Term Bank Loans

These consist of bank loans of the ship-owning companies and are as follows:

Borrower		December 31, 2018			December 31, 2019

Eirini Shipping Ltd. / Areti Shipping Ltd.	(a)		4,820,000			-
Kamsarmax One Shipping Ltd.	(b)		11,465,000			10,531,000
Ultra One Shipping Ltd.	(c)		15,000,000			14,060,000
Kamsarmax Two Shipping Ltd.	(d)		17,600,000			16,000,000
Light Shipping Ltd. / Areti Shipping Ltd. / Pantelis Shipping Corp.	(e)		15,000,000			12,200,000
Eirini Shipping Ltd.	(f)		-			4,100,000
			63,885,000			56,891,000
Less: Current portion			(7,071,444	)		(6,924,000	)
Long-term portion			56,813,556			49,967,000
Deferred charges, current portion			140,789			117,706
Deferred charges, long-term portion			385,456			278,160
Long-term bank loans, current portion net of deferred charges			6,930,655			6,806,294
Long-term bank loans, long-term portion net of deferred charges			56,428,100			49,688,840

The future annual loan repayments are as follows:

To December 31:
2020			6,924,000
2021			13,374,000
2022			5,674,000
2023			20,619,000
2024			940,000
Thereafter			9,360,000
Total			56,891,000

F-26

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2016, 2018 and 2019

(All amounts expressed in U.S. Dollars)

7. Long-Term Bank Loans - Continued

(a)

This loan is a $15,300,000 loan drawn by Eirini Shipping Ltd. and Eleni Shipping Ltd. jointly, ("Eirini Loan"), on June 25, 2014. The parties agreed in principle on September 30, 2016 to replace one of the underlying collaterals of the Eirini Loan (M/V "Eleni P") with a similar vessel, which in December 2016, was approved to be M/V "Tasos" (owned by Areti Shipping Ltd.). The loan was payable in 20 equal consecutive quarterly installments of $350,000 each, with an $8.3 million balloon payment to be paid together with the final installment in June 2019. The loan bears interest at LIBOR plus a margin of 3.75%. The loan was secured with the following: (i) first priority mortgage over M/V "Eirini P." and M/V "Tasos.", (ii) first assignment of earnings and insurance of M/V "Eirini P." and M/V "Tasos" (iii) a corporate guarantee of EuroDry Ltd.

On September 30, 2016, the Company signed a Supplemental Agreement with HSBC Bank Plc. The outstanding balance of the "Eirini Loan" of $12,850,000 prior to the closing of the Supplemental Agreement was reduced to $11,600,000 via prepayment using the cash collateral of $1,250,000 (which was effected after the signing of the Supplemental Agreement). In addition, seven principal installments of $350,000 each, from June 2016 to December 2017 were deferred. Repayment of the loan resumed in March 2018 and the outstanding balance of $11,600,000 was payable in two quarterly installments of $350,000 each, four of $725,000 each plus a balloon payment of $8,000,000 due in May 2019. A cash sweep mechanism was put in place until the entire deferred amount is repaid. A cash collateral amount of $600,000 (corresponding to the minimum cash balance requirement) was pledged in the cash collateral account of M/V "Eirini P" / M/V "Tasos". HSBC Bank Plc. agreed to the sale of M/V "Eleni P" and the substitution of such vessel with M/V "Tasos" as collateral for the loan. A prepayment of $0.45 million was also made within 2018, which was deducted from the balloon repayment of the said loan based on the agreement between Euroseas and HSBC Bank Plc. The loan was partly repaid in December 2018 through the refinancing by the National Bank of Greece as explained in note (e) below. The only vessel remaining in the facility was Eirini P whilst there were two quarterly principal payments of $405,000 each, due in 2019, and a balloon amount of $4,010,000 million due on May 26, 2019 to be paid together with the last installment. In May 2019, the Company entered into a loan agreement with HSBC Bank Plc. to refinance the specific loan, as explained in note (f) below.

F-27

EuroDry Ltd. and Subsidiaries

Notes to consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

7. Long-Term Bank Loans - Continued

(b)

On February 17, 2016, the Company signed a term loan facility with Nord LB and, on February 25, 2016, a loan of $13,800,000 was drawn by Kamsarmax One Shipping Ltd. to partly finance the pre-delivery installment of M/V "Xenia". The loan is to be repaid in fourteen consecutive equal semi-annual installments of $467,000 plus a balloon amount of $7,262,000 to be paid together with the last installment in February 2023. The loan bears interest at LIBOR plus a margin of 2.95%. The loan is secured with (i) first priority mortgage over M/V "Xenia", (ii) first assignment of earnings and insurance of M/V "Xenia", (iii) a corporate guarantee of EuroDry Ltd. and other covenants and guarantees similar to the remaining loans of the Company. The Security Cover ratio for this facility stands at 130%.

(c)

On October 1, 2018, the Company signed a term loan facility with Eurobank Ergasias S.A. (EFG) of up to $15 million or 60% of the market value of M/V "Alexandros P.", for the purpose of refinancing the outstanding amount of $9.9 million of the loan facility of HSH Nordbank AG (drawn on January 25, 2017 to partly finance the pre-delivery installment of M/V "Alexandros P.") and providing working capital. The facility was drawn on October 5, 2018. The loan is payable in twenty eight consecutive equal quarterly installments of $235,000 each, followed by a balloon payment of $8,420,000 to be paid together with the last installment in October 2025. The loan bears interest at LIBOR plus a margin of 3.25%. The loan is secured with (i) first priority mortgage over M/V "Alexandros P.", (ii) first assignment of earnings and insurance of M/V "Alexandros P.", (iii) a corporate guarantee of EuroDry Ltd and other covenants and guarantees similar to the remaining loans of the Company. The Security Cover ratio for this facility stands at 120%. The Company paid loan arrangement fees of $135,000 for this loan.

F-28

EuroDry Ltd. and Subsidiaries

Notes to consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

7. Long-Term Bank Loans - Continued

(d)

On April 27, 2018, the Company signed a term loan facility with HSBC Bank Plc. and a loan of $18.4 million was drawn by Kamsarmax Two Shipping Ltd. on April 30, 2018 to finance 70% of the construction cost but no more than 70% of the market value of M/V "Ekaterini", subject to the existence of a time charter at the time of drawdown for a minimum period of 24 months approved by the lender. The loan is payable in twenty consecutive quarterly installments commencing from July 2018, eight in the amount of $400,000 and twelve in the amount of $325,000, with a $11,300,000 balloon payment to be paid together with the last installment in April 2023. The interest rate margin is 2.80% over LIBOR. The loan is secured with (i) first priority mortgage over M/V "Ekaterini", (ii) first assignment of earnings and insurance of M/V "Ekaterini" and (iii) other covenants and guarantees similar to the remaining loans of the Company. The Security Cover ratio for this facility stands at 130%. The Company paid loan arrangement fees of $147,200 for this loan.

(e)

On November 27, 2018, the Company signed a term loan facility with the National Bank of Greece S.A. (NBG) and a loan of $15,000,000 was drawn by Light Shipping Ltd., Areti Shipping Ltd. and Pantelis Shipping Corp. for the purpose of refinancing the existing loans with HSBC Bank Plc. regarding M/V “Pantelis” and M/V “Tasos” and financing part of the acquisition cost of M/V “Starlight”. The loan is payable in twelve consecutive equal quarterly installments of $700,000, commencing from February 2019, plus a balloon amount of $6,600,000 to be paid together with the last installment in November 2021. The margin of the loan is 3.25% above LIBOR. The loan is secured with (i) first priority mortgages over M/V “Starlight”, M/V “Pantelis ” and M/V “Tasos” (ii) first assignment of earnings and insurance of M/V “Starlight”, M/V “Pantelis ” and M/V “Tasos”, (iii) a corporate guarantee of EuroDry Ltd and other covenants and guarantees similar to the remaining loans of the Company. The Security Cover ratio for this facility stands at 125%. The Company paid loan arrangement fees of $150,000 for this loan.

(f)

On May 22, 2019, the Company signed a term loan facility with HSBC Bank PLC for a loan up to the lesser of 49.9% of the market value of M/V “Eirini P” and $4.5 million to refinance the existing indebtedness of Eirini Shipping Ltd., as explained in note (a) above. On May 24, 2019, a loan of $4.5 million was drawn by Eirini Shipping Ltd. The loan is payable in twelve consecutive quarterly equal installments of $200,000 each, commencing from August 2019, with a $2,100,000 balloon payment to be paid together with the last installment in May 2022. The interest rate margin is 2.70% over LIBOR. The loan is secured with (i) first priority mortgage over M/V “Eirini P”, (ii) first assignment of earnings and insurance of M/V “Eirini P” and (iii) other covenants and guarantees similar to the remaining loans of the Company. The Security Cover ratio for this facility stands at 130%. The Company paid loan arrangement fees of $22,500 for this loan.

F-29

EuroDry Ltd. and Subsidiaries

Notes to consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

7. Long-Term Bank Loans - Continued

In addition to the terms specific to each loan described above, all the above loans are secured with a pledge of all the issued shares of each borrower.

The loan agreements also contain covenants such as minimum requirements regarding the Security Cover ratio (the ratio of fair value of vessel to outstanding loan less cash in retention accounts ranging from 120% to 130% as of December 31, 2019), restrictions as to changes in management and ownership of the ship-owning companies, distribution of profits or assets (i.e. not permitting dividend payment or other distributions in cases that an event of default has occurred), additional indebtedness and mortgage of vessels without the lender’s prior consent, sale of vessels, maximum fleet-wide leverage, sale of capital stock of our subsidiaries, ability to make investments and other capital expenditures, entering in mergers or acquisitions, minimum cash balance requirements and minimum cash retention accounts (restricted cash). The loan agreements also require the Company to make deposits in retention accounts with certain banks that can only be used to pay the current loan installments. Minimum cash balance requirements are in addition to cash held in retention accounts. These cash deposits amounted to $3,378,955 and $3,733,036 as of December 31, 2018 and 2019, respectively, and are included in “Restricted cash” under “Current assets” and “Long-term assets” in the consolidated balance sheets. As of December 31, 2019, all the debt covenants are satisfied.

Interest expense for the years ended December 31, 2017, 2018 and 2019 amounted to $1,608,348, $2,516,216 and $3,360,226, respectively. Capitalized interest for the years ended December 31, 2017 and 2018 amounted to $123,697 and $173,841, respectively. No interest was capitalized for the year ended December 31, 2019.

F-30

EuroDry Ltd. and Subsidiaries

Notes to consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

8. Income Taxes

Under the United States Internal Revenue Code of 1986, as amended (the "Code"), the U.S. source gross transportation income of a ship-owning or chartering corporation, such as the Company, is subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury Regulations promulgated thereunder. U.S. source gross transportation income consists of 50% of the gross shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States.

Under the Code, a corporation will be exempt from U.S. federal income tax if its stock is primarily and regularly traded on an established securities market in its country of organization, in another country that grants an "equivalent exemption" to United States corporations, or in the United States, which is referred to as the “Publicly Traded Test”. Under IRS regulations, a Company’s shares will be considered to be regularly traded on an established securities market if (i) one or more classes of its shares representing 50% or more of its outstanding shares, by voting power of all classes of shares of the corporation entitled to vote and of the total value of the shares of the corporation, are listed on the market and (ii) (A) such class of share is 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; and (B) the aggregate number of shares of such class of share traded on such market during the taxable year must be at least 10% of the average number of shares of such class of share outstanding during such year or as appropriately adjusted in the case of a short taxable year. Notwithstanding the foregoing, the treasury regulations provide, in pertinent part, that a class of the Company’s shares will not be considered to be “regularly traded” on an established securities market for any taxable year in which 50% or more of the vote and value of the outstanding shares of such class are owned, actually or constructively under specified share 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 such class of the Company’s outstanding shares (“5% Override Rule”).

For the taxable year 2017 the Company believes that it was not exempt from U.S. federal income tax of 4% on U.S. source shipping income, as it believes that it did not satisfy the Publicly Traded Test for these years before the Spin-off, while being part of Euroseas, since Euroseas’ common stock did not constitute more than 50% of Euroseas’ outstanding shares by value for the respective taxable year. As a result, tax charge of approximately $23,477 was paid on September 17, 2018 and was recorded within "Vessel operating expenses" in the consolidated statements of operations when paid.

For the taxable years 2018 and 2019 the Company believes that it was exempt from U.S. federal income tax of 4% on U.S. source shipping income, as it believes that it satisfies the Publicly Traded Test for this year, although it is subject to the 5% Override Rule, because there were non-qualified 5% shareholders that did not own more than 50% of our common stock for more than half of the days during the taxable years.

F-31

EuroDry Ltd. and Subsidiaries

Notes to consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

9.	Commitments and Contingencies

As of December 31, 2017, Areti Shipping Ltd. had a dispute with Windrose SPS Shipping and Trading ("Windrose"), a charterer, regarding Windrose's failure to pay the balance of the charter fee of $52,019 in relation to a charter party agreement dated January 20, 2017. Additionally, Areti Shipping Ltd. paid an amount of $115,000 to a bunker supplier for portion of the total claim of $179,281, after facing an arrest of M/V "Tasos" in Brazil. The Company took the case to London arbitration and obtained an award of approximately $215,000. The Company hired Swiss lawyers in order to proceed with the recovery of the funds in Switzerland where Windrose was based. In February 2018, Windrose was declared bankrupt and a liquidator was appointed by the Swiss Court. According to the Swiss Law, Areti Shipping Ltd. through their lawyers had to seek recovery of the claim from the Directors of Windrose, who may be personally liable for the company’s debts. In May 2018, in view of the uncertain recovery prospects, our Freight, Demurrage and Defence club has withdrawn its support on the case. In view of the high costs, the management has decided to abstain from any action against Windrose directors. Further, Areti Shipping Ltd. has filed its claim with the liquidator; however, the amounts recoverable, if any, will be small. In view of the above, management decided to make a provision for the full amount of $167,019, which is included in “General and administrative expenses” in the consolidated statements of operations for the year ended December 31, 2018.

There are no other material legal proceedings to which the Company is a party or to which any of its properties are subject, other than routine litigation incidental to the Company’s business. In the opinion of the management, the disposition of these lawsuits should not have a material impact on the consolidated results of operations, financial position and cash flows.

As of December 31, 2019, future gross minimum revenues under non-cancellable time charter agreements total $5.3 million, all of which is due in the year ending December 31, 2020. This amount does not include the future gross minimum revenues upon collection of hire under non-cancellable time charter agreements of M/V “Alexandros P.”, M/V “Eirini P.” and M/V “Starlight”, which are either on pool revenue agreements or index linked charter rates. In arriving at the future gross minimum revenues, the Company has deducted an estimated one off-hire day per quarter. Such off-hire estimate may not be reflective of the actual off-hire in the future. In addition, the actual revenues could be affected by early delivery of the vessel by the charterers or any exercise of the charterers’ options to extend the terms of the charters, which however cannot be estimated and hence not reflected above.

F-32

EuroDry Ltd. and Subsidiaries

Notes to consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

10. Stock Incentive Plan

On July 31, 2014, the Board of Directors of Euroseas approved the 2014 Stock Incentive Plan (the “2014 Plan”). The plan is administered by Euroseas’ Board of Directors which could make awards totaling in aggregate up to 2,500,000 shares, respectively over 10 years after the plan’s adoption date. The persons eligible to receive awards under the plan are officers, directors, and executive, managerial, administrative and professional employees of Euroseas or Eurobulk or Eurochart (collectively, “key persons”) as the Board, in its sole discretion, shall select based upon such factors as the Board shall deem relevant. Awards may be made under the plan in the form of incentive stock options, non-qualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, unrestricted stock, restricted stock units and performance shares. Following the Spin-off, each shareholder of Euroseas received one share of EuroDry, for every five shares of Euroseas held. Awardees of the Euroseas stock incentive awards with unvested shares received unvested shares of EuroDry with the same ratio, one share of EuroDry for every five shares of Euroseas out of the EuroDry Stock Incentive Plan, taking also into account that the awardees described above are common in both Euroseas and EuroDry. Shares of EuroDry issued for unvested shares of Euroseas vested on the same schedule with the original Euroseas shares.

Details of awards granted under the 2014 Plan of Euroseas, which had unvested shares as of the Spin-off date, are noted below.

On November 3, 2016 an award of 82,080 non-vested restricted shares, was made to 19 key persons of which 50% vested on November 1, 2017 and 50% vested on November 1, 2018; awards to officers and directors amounted to 48,048 shares and the remaining 34,032 shares were awarded to employees of Eurobulk. 8,208 shares of EuroDry were issued for unvested shares of Euroseas as of the Spin-off date (4,805 were awarded to officers and directors and 3,403 were awarded to employees of Eurobulk) and vested on November 1, 2018.

On November 2, 2017 an award of 100,270 non-vested restricted shares, was made to 18 key persons of which 50% vested on July 1, 2018 and 50% vested on July 1, 2019; awards to officers and directors amounted to 57,700 shares and the remaining 42,570 shares were awarded to employees of Eurobulk. 20,054 shares of EuroDry were issued for unvested shares of Euroseas as of the Spin-off date (11,540 were awarded to officers and directors and 8,514 were awarded to employees of Eurobulk), 50% of which vested on July 1, 2018 and 50% vested on July 1, 2019.

F-33

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

10.	Stock Incentive Plan - Continued

In May 2018, the Company’s Board of Directors approved an equity incentive plan (the “May 2018 Plan”). The May 2018 Plan will be administered by the Company’s Board of Directors which can make awards totaling in aggregate up to 150,000 shares over five years after the May 2018 Plan’s adoption date. Officers, directors and employees (including any prospective officer or employee) of the Company and its subsidiaries and affiliates and consultants and service providers (including persons who are employed by or provide services to any entity that is itself a consultant or service provider) to the Company and its subsidiaries and affiliates will be eligible to receive awards under the equity incentive plan. Awards may be made under the May 2018 Plan in the form of incentive stock options, non-qualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, unrestricted stock, restricted stock units and performance shares. Details of awards granted under the May 2018 Plan are noted below.

On November 21, 2018 an award of 25,090 non-vested restricted shares, was made to 18 key persons of which 50% vested on November 16, 2019 and 50% will vest on November 16 , 2020; awards to officers and directors amounted to 14,434 shares and the remaining 10,656 shares were awarded to employees of Eurobulk.

On November 4, 2019 an award of 24,710 non-vested restricted shares, was made to 17 key persons of which 50% will vest on July 1, 2020 and 50% will vest on July 1 , 2021; awards to officers and directors amounted to 13,940 shares and the remaining 10,770 shares were awarded to employees of Eurobulk.

All non-vested restricted shares are conditional upon the grantee’s continued service as an employee of the Company or Eurobulk or as a director of the Company until the applicable vesting date. The grantee does not have the right to vote on such non-vested restricted shares until they vest or exercise any right as a shareholder of these shares, however, the non-vested shares will accrue dividends as declared and paid which will be retained by the Company until the shares vest, at which time they are payable to the grantee. As non-vested restricted share grantees accrue dividends on awards that are expected to vest, such dividends are charged to retained earnings.

The Company accounts for restricted share award forfeitures as they occur. No forfeitures occurred in the years ended December 31, 2018 and 2019.

The compensation cost that has been charged against income for awards was nil, $137,517 and $184,799, for the years ended December 31, 2017, 2018 and 2019, respectively, and is included within “General and administrative expenses” in the consolidated statements of operations. The Company has used the straight-line method to recognize the cost of the awards.

F-34

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

10.	Stock Incentive Plan - Continued

A summary of the status of the Company’s non-vested shares as of December 31, 2019 and changes during the year ended December 31, 2019, are presented below:


Non-vested Shares	Shares	Weighted-Average Grant-Date Fair Value
Non-vested on January 1, 2019	35,117	9.61
Granted	24,710	8.13
Vested	(22,572)	(9.62)
Non-vested on December 31, 2019	37,255	8.81

As of December 31, 2019, there was $294,453 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the May 2018 Plan and is expected to be recognized over a weighted-average period of 0.761 years. The total fair value at grant-date of shares granted during the year ended December 31, 2019 was $200,892.

F-35

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

11.	Earnings / (Loss) per Share

Basic and diluted earnings / (loss) per common share are computed as follows:

	2017		2018			2019
Income:
Net income		849,701		1,119,735			16,497
Dividends to Series B preferred shares		-		(565,229	)		(1,748,981	)
Preferred deemed dividend		-		-			(185,665	)
Net income / (loss) attributable to common shareholders		849,701		554,506			(1,918,149	)
Weighted average common shares – outstanding, basic and diluted		2,213,505		2,232,821			2,251,439
Basic and diluted earnings / (loss) per share		0.38		0.25			(0.85	)

During 2017, 2018 and 2019, the effect of the non-vested stock awards and of Series B Preferred Shares was anti-dilutive. The number of dilutive securities was nil shares in 2017, 2018 and 2019.

12. Voyage and Vessel Operating Expenses

These consist of:

	Year ended December 31,
	2017		2018		2019
Voyage expenses
Port charges and canal dues		578,468		260,139		262,806
Bunkers		1,817,850		150,537		854,216
Total		2,396,318		410,676		1,117,022

Vessel operating expenses
Crew wages and related costs		4,616,900		5,532,463		6,778,958
Insurance		609,354		682,991		872,131
Repairs and maintenance		181,174		407,324		375,338
Lubricants		379,853		520,452		724,837
Spares and consumable stores		706,855		1,404,080		1,368,325
Professional and legal fees		186,306		257,250		264,704
Other		211,946		378,592		392,045
Total		6,892,388		9,183,152		10,776,338

F-36

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

13. Derivative Financial Instruments

Interest rate swaps

Effective on August 8, 2017, Euroseas Ltd. entered into a five year interest rate swap with HSBC Bank Plc. ("HSBC") for a notional amount of $5.0 million, in order to manage interest costs and the risk associated with changing interest rates of the loans associated with M/V "Eirini P.", M/V "Tasos" and M/V "Pantelis" and, therefore, was allocated to the Company. Under the terms of the swap, HSBC Bank Plc. makes a quarterly payment to the Company equal to the 3-month LIBOR while the Company pays an adjustable rate averaging 1.93% (more specifically, the Company pays the fixed rate of 1.40% until August 8, 2018, then 1.75% until August 8, 2019, then 1.85% until August 8, 2020 and then 2.32% until August 8, 2022) based on the notional amount. The swap agreement was novated to EuroDry on May 30, 2018.

On July 24, 2018, EuroDry entered into an interest rate swap with HSBC for a notional amount of $5.0 million. Under this contract, HSBC makes a quarterly payment to EuroDry equal to the 3-month LIBOR while EuroDry pays a fixed rate of 2.93% based on the notional amount. The swap is effective from July 24, 2018 to July 24, 2023.

The interest rate swaps did not qualify for hedge accounting as of December 31, 2018 and 2019.

F-37

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

13. Derivative Financial Instruments –Continued

Freight Forward Agreements (“FFA”)

In October 2018, the Company entered into one FFA contract on the Baltic Panamax Index (“BPI”) for the first three calendar months of 2019, totaling 90 days at an average time charter equivalent (“TCE”) rate of $12,200 per day. In January 2019, the Company entered into four FFA contracts on the BPI (one contract for the first three calendar months of 2019, totaling 120 days at an average TCE rate of $11,950 per day, a contract for the three months of the second quarter of 2019, totaling 270 days at an average TCE rate of $11,250, a contract for the three months of the third quarter of 2019, totaling 270 days at an average TCE rate of $11,100 and a contract for the three months of the fourth quarter of 2019, totaling 270 days at an average TCE rate of $11,350. The contracts were settled on a monthly basis using the average of the BPI for the days of the month the BPI is published. The Company receives a payment if the average BPI for the month is below the contract rate equal to the difference of the contract rate less the average BPI for the month multiplied by the number of contract days sold; if the average BPI for the month is greater than the contract rate the Company makes a payment equal to the difference of the average BPI for the month less the contract rate multiplied by the number of contract days sold. If the Company buys contracts previously sold (or the opposite) the Company receives or pays the difference of the two rates for the period covered by the contracts.

In April 2019, the Company hedged the forward purchase of 1,200mt of Singapore bunkers fuel (type 380cst) for this month, at $375.25 per metric ton. Also in November 2019 the Company hedged the forward purchase of 1,200mt of Singapore bunkers fuel (type 380cst) for this month, at $278.5 per metric ton. By using these bunker swaps the Company has locked in the price that would be paid for bunkers over the time period selected and the quantity purchased. These contracts were settled on a monthly basis using the Platts daily assessment price for 380 CST Singapore Fuel Oil. The Company receives a payment if the average of the Platts daily assessment price for 380 CST Singapore Fuel Oil for the month is above the contract rate equal to the difference of the Platts daily assessment price for 380 CST Singapore Fuel Oil for the month less the contract rate multiplied by the number of contract days sold. If the average for the month was below the contract rate, the Company made a payment equal to the difference of the contract rate less the Platts daily assessment price for 380 CST Singapore Fuel Oil for the month multiplied by the number of contract days sold.

The FFA and the bunker swap contracts did not qualify for hedge accounting. The Company follows guidance relating to “Fair value measurements” to calculate the fair value of the FFA contract (see Note 15).

F-38

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

13. Derivative Financial Instruments – Continued


Derivatives not designated as hedging instruments	Balance Sheet Location	December 31, 2018	December 31, 2019
FFA contract	Long-term assets– Derivatives	49,350	-

Interest rate swap contracts	Long-term assets – Derivatives	5,680	-

Total derivative assets		55,030	-


Derivatives not designated as hedging instruments	Balance Sheet Location	December 31, 2018	December 31, 2019
Interest rate swap contracts	Long-term liabilities – Derivatives	-	304,174

Total derivative liabilities		-	304,174


Derivatives not designated as hedging instruments	Location of gain (loss) recognized	Year Ended December 31, 2018	Year Ended December 31, 2019
Interest rate swap contracts– Unrealized loss	Gain on derivatives, net	(45,773)	(309,854)
Interest rate swap contracts - Realized gain	Gain on derivatives, net	10,209	17,646
FFA contracts – Unrealized gain / (loss)	Gain on derivatives, net	49,350	-
FFA contracts and Bunker Swap contracts– Realized gain	Gain on derivatives, net	-	789,028
Total net gain on derivatives		13,786	496,820

F-39

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

14. Preferred shares

	Number ofShares	Preferred SharesAmount	Dividends paid-in-kind	Total
Issued, May 30, 2018	19,042	18,192,129	565,229	18,192,129
Dividends declared	566	-	565,229	565,229
Balance, December 31, 2018	19,608	18,192,129	78,642	18,757,358
Dividends declared	79	-	(524,304)	78,642
Redemption of Preferred shares	(4,300)	(3,775,696)	-	(4,300,000)
Preferred deemed dividend	-	185,665	119,567	185,665
Balance, December 31, 2019	15,387	14,602,098		14,721,665

On January 27, 2014, Euroseas issued 25,000 shares of its Series B Convertible Perpetual Preferred Shares to a fund managed by Tennenbaum Capital Partners, LLC ("TCP") and 5,700 shares to Preferred Friends Investment Company Inc, an affiliate of Euroseas and the Company, for total net proceeds of approximately $29 million. The redemption amount of the Series B Preferred Shares is $1,000 per share.

Under the Company’s amended and restated articles of incorporation, effective after the Spin-off, the Company is authorized to issue up to 20,000,000 shares of preferred stock, par value $0.01 per share. The preferred stock may be issued in one or more series and the Company’s Board of Directors, without further approval from the Company’s shareholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights, liquidation preferences and other rights and restrictions relating to any series. On May 30, 2018, in connection with the Spin-off, 19,042 EuroDry Series B Preferred Shares, representing 50% of Euroseas Series B Preferred Stock, were issued and distributed to holders of Euroseas' Series B Preferred Shares in exchange for the cancellation of an equal number of such Euroseas Series B Preferred Shares. The rights of the holders of EuroDry Series B Preferred Shares rank senior to the obligations to holders of the Company’s common shares. Additionally, EuroDry Series B Preferred Shares are issued when dividends to EuroDry Series B Preferred Shares are paid in-kind.

F-40

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

14. Preferred shares - Continued

The EuroDry Series B Preferred Shares paid dividends in-kind until January 29, 2019 at a rate of 5% per annum. The dividend rate increased to 12% for the two years following January 29, 2019 and to 14% thereafter and is payable only in cash. Cash dividends are declared at each quarter and actual payments are made within the following quarter. If a cash dividend is paid on the Company's common stock after January 29, 2019 the holders of EuroDry Series B Preferred Shares will receive an additional cash dividend in an amount equal to 40% of the common stock dividend it would have received on an as-converted basis. The EuroDry Series B Preferred Shares are convertible to common shares at the option of their holders at any time, and at the option of the Company only if certain share price and liquidity milestones are met. Each EuroDry Series B Preferred Share will be convertible into common stock at an initial conversion price of $31.64 (subject to adjustment for certain events, including upon a default). EuroDry Series B Preferred Shares are redeemable in cash by the Company at any time after January 29, 2019. Holders of EuroDry Series B Preferred Shares may require the Company to redeem their shares only upon the occurrence of certain corporate events.

On June 19, 2019, the Company agreed to redeem $4.3 million of its Series B Preferred Shares. In parallel with the redemption, the holders of the remaining Series B Preferred Shares agreed to reduce the annual dividend rate to 9.25% until January 2021. The difference between (1) the fair value of the consideration transferred to the holders of the EuroDry Series B Preferred Shares (comprising the cash payment offered) and (2) the carrying amount of the Series B Preferred Shares before the redemption (net of issuance costs) amounted to $185,665, and was recorded as preferred deemed dividend.

For the year ended December 31, 2018, the Company declared three consecutive dividends totaling $565,229, all of which were paid in kind. For the year ended December 31, 2019, the Company declared dividends of $1,748,981, of which $78,642 were paid in-kind, $1,311,612 were paid in cash during 2019 and another $358,726 were accrued as of December 31, 2019 and were paid in the first quarter of 2020. The redemption liability as of December 31, 2019 was $15,386,000.

Subject to certain ownership thresholds, holders of EuroDry Series B Preferred Shares have the right to appoint one director to the Company's board of directors and TCP also has consent rights over certain corporate actions. In addition, the holders of EuroDry Series B Preferred Shares will vote as one class with the Company's common stock on all matters on which shareholders are entitled to vote, with each EuroDry Series B Preferred Share having a number of votes equal to 50% of the numbers of shares of common stock of the Company into which such EuroDry Series B Preferred Share would be convertible on the applicable record date.

F-41

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

15. Financial Instruments

The principal financial assets of the Company consist of cash and cash equivalents, restricted cash, trade accounts receivable and other receivables. The principal financial liabilities of the Company consist of long-term bank loans, trade accounts payable, accrued expenses, derivatives and due to related companies.

Interest rate risk

The Company enters into interest rate swap contracts as economic hedges to manage some of its exposure to variability in its floating rate long term bank loans. Under the terms of the interest rate swaps the Company and HSBC agreed to exchange, at specified intervals the difference between a paying fixed rate and receiving floating rate interest amount calculated by reference to the agreed principal amounts and maturities. Interest rate swaps allow the Company to convert long-term bank loans issued at floating rates into equivalent fixed rates. Even though the interest rate swaps were entered into for economic hedging purposes, as noted in Note 13 they do not qualify for hedge accounting, under the guidance relating to Derivatives and Hedging, as the Company does not have currently written contemporaneous documentation identifying the risk being hedged and, both on a prospective and retrospective basis, performing an effectiveness test to support that the hedging relationship is highly effective. Consequently, the Company recognizes the change in fair value of the derivative in the "Gain on derivatives, net" in the consolidated statements of operations. As of December 31, 2019, the Company had two open interest rate swap contracts for a notional amount of $10.0 million.

F-42

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

15. Financial Instruments - Continued

Concentration of credit risk

Financial instruments, which potentially subject the Company to significant concentration of credit risk consist primarily of cash and trade accounts receivable. The Company places its temporary cash investments, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluation of the relative credit standing of these financial institutions that are considered in the Company’s investment strategy. The Company limits its credit risk with trade accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and generally does not require collateral for its trade accounts receivable.

Fair value of financial instruments

The Company follows guidance relating to “Fair value measurements”, which establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. This statement 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 statement requires that assets and liabilities carried at fair value will 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.

The fair value of the Company’s investment in FFA contracts is determined based on quoted prices in active markets and therefore are considered Level 1 of the fair value hierarchy as defined in guidance relating to "Fair value measurements".

The fair value of the Company’s interest rate swap agreements is determined using a discounted cash flow approach based on market-based LIBOR swap rates. LIBOR swap rates are observable at commonly quoted intervals for the full terms of the swaps and therefore are considered Level 2 items. The fair values of the interest rate swaps determined through Level 2 of the fair value hierarchy as defined in guidance relating to "Fair value measurements" are derived principally from or corroborated by observable market data. Inputs include quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparables, interest rates, yield curves and other items that allow value to be determined.

F-43

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

15. Financial Instruments - Continued

Recurring Fair Value Measurements

	Fair Value Measurement as of December 31, 2019
	Total	(Level 1)	(Level 2)	(Level 3)
Liabilities
Interest rate swapcontracts, long term portion	$304,174	-	$304,174	-

	Fair Value Measurement as of December 31, 2018
	Total	(Level 1)	(Level 2)	(Level 3)
Assets
Interest rate swap contracts, long term portion	$5,680	-	$5,680	-
FFA contract, long term portion	$49,350	$49,350	-	-

The estimated fair values of the Company’s financial instruments such as cash and cash equivalents and restricted cash approximate their individual carrying amounts as of December 31, 2018 and 2019, due to their short-term maturity. Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short-term maturities. The fair value of the Company’s total borrowings approximates $55.4 million as of December 31, 2019 or $1.5 million less than its carrying value of $56.9 million. The fair value of the long term borrowings are estimated based on current interest rates offered to the Company for similar loans. LIBOR rates are observable at commonly quoted intervals for the full terms of the loans and hence fair values of the long-term bank loans are considered Level 2 items in accordance with the fair value hierarchy due to their variable interest rate, being the LIBOR.

F-44

EuroDry Ltd. and Subsidiaries

Notes to the consolidated financial statements

as of December 31, 2018 and 2019 and for the

years ended December 31, 2017, 2018 and 2019

(All amounts expressed in U.S. Dollars)

16. Subsequent events

Coronavirus Outbreak: On March 11, 2020, the World Health Organization declared the 2019 Novel Coronavirus (the “COVID-19”) 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 COVID-19 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.

F-45

Exhibit 4.18

DATED: 1^st OCTOBER 2018

EURODRY LTD.
(THE “GUARANTOR”)

-AND-

EUROBANK ERGASIAS S.A.
(THE “SECURITY TRUSTEE”)

GUARANTEE
RELATING TO A LOAN AGREEMENT
DATED 1^st OCTOBER 2018

Alassia Building, 13 Defteras Merarchias Street 185 35 Piraeus Greece, Tel +30 210 4138800, 210 8226801. Fax +30 210 4138809.210 8217869

In cooperation with Kyriakides Georgopoulos Law Firm www.daniolos.gr

INDEX

CLAUSE		PAGE
1.	INTERPRETATION	1
2.	GUARANTEE	2
3.	LIABILITY AS PRINCIPAL AND INDEPENDENT DEBTOR	2
4.	EXPENSES	2
5.	ADJUSTMENT OF TRANSACTIONS	3
6.	PAYMENTS	3
7.	INTEREST	3
8.	SUBORDINATION	3
9.	ENFORCEMENT	4
10.	REPRESENTATIONS AND WARRANTIES	4
11.	UNDERTAKINGS	5
12.	JUDGMENTS AND CURRENCY INDEMNITY	7
13.	SET-OFF	7
14.	NO SET-OFF OR TAX DEDUCTION	8
15.	SUPPLEMENTAL	8
16.	TRANSFER	9
17.	NOTICES	9
18.	INVALIDITY OF LOAN AGREEMENT	10
19.	GOVERNING LAW AND JURISDICTION	10

THIS GUARANTEE is made on 1 October 2018

BETWEEN

(1)	EURODRY LTD., being a company incorporated in accordance with the laws of the Republic of the Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960, Republic of Marshall Islands (the “Guarantor”); and

(2)

EUROBANK ERGASIAS S.A., a banking societe anonyme duly incorporated under the laws of Greece, having its registered office at 8, Othonos Street, Athens, Greece, acting for the purposes of this Agreement through its office at 83, Akti Miaouli, 185 38 Piraeus, Greece (the “Security Trustee”, which expression includes its successors and assigns).

BACKGROUND

(A)

By a loan agreement dated 1 October 2018 (hereinafter, as same may from time to time be amended or supplemented, the “Loan Agreement”) and made between (i) Ultra One Shipping Ltd of Liberia (the “Borrower”), as borrower, (ii) the banks and financial institutions listed in Schedule 1 thereto, which on the date hereof comprised only Eurobank Ergasias S.A., as lenders (the “Lenders” or “a Lender”) and (iii) Eurobank Ergasias S.A., as agent (the “Agent”), arranger, (the “Arranger”) account bank (the “Account Bank”) and security trustee (the “Security Trustee” and together with the Lenders, the Agent, the Arranger and the Account Bank, the “Creditor Parties”), it was agreed that the Lenders would make available to the Borrower a secured term loan facility of up to US$15,000,000 for the purposes and upon the terms and conditions set out therein

(B)	By the Agency and Trust Deed dated 1 October 2018 and entered into pursuant to the Loan Agreement, it was agreed that the Security Trustee would hold the Trust Property on trust for the Lenders.

(C)	The execution and delivery to the Security Trustee of this Guarantee is one of the conditions precedent to the availability of the facility under the said Loan Agreement.

IT IS AGREED as follows:

1	INTERPRETATION

1.1	Defined expressions. Words and expressions defined in the Loan Agreement shall have the same meanings when used in this Guarantee unless the context otherwise requires.

1.2	Construction of certain terms. In this Guarantee:

“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;

“Loan Agreement” means the loan agreement dated 1 October 2018 referred to in Recital (A) and includes any existing or future amendments or supplements, whether made with the Guarantor’s consent or otherwise.

1.3	Application of construction and interpretation provisions of Loan Agreement. Clauses 1.2 to 1.7 of the Loan Agreement apply, with any necessary modifications, to this Guarantee.

1.4	Inconsistency between Loan Agreement provisions and this Guarantee. This Guarantee shall be read together with the other Finance Documents, but in case of any conflict between the Loan Agreement and this Guarantee, the provisions of the Loan Agreement shall prevail.

GUARANTEE

2.1	Guarantee and indemnity. The Guarantor unconditionally and irrevocably:

(a)	guarantees the due payment of all amounts payable by the Borrower under or in connection with the Loan Agreement and every other Finance Document;

(b)	undertakes to pay to the Security Trustee or any other Creditor Party, on the Security Trustee’s demand, any such amount which is not paid by the Borrower when payable under or in connection with the Loan Agreement and every other Finance Document ; and

(c)

as a separate, continuing and primary obligation agrees to fully indemnify the Security Trustee on its demand in respect of all claims, expenses, liabilities and losses which are made or brought against or incurred by the Security Trustee as a result of or in connection with any obligation or liability guaranteed by the Guarantor being or becoming unenforceable, invalid, void or illegal; and the amount recoverable under this indemnity shall be equal to the amount which the Security Trustee would otherwise have been entitled to recover.

No limit on number of demands. The Security Trustee may serve more than one demand under Clause 2.1.

3	LIABILITY AS PRINCIPAL AND INDEPENDENT DEBTOR

3.1	Principal and independent debtor. 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.

3.2	Waiver of rights and defences. Without limiting the generality of Clause 3.1, none of the following shall give rise to the Guarantor being discharged, or its having any cause of action against any Creditor Party:

(a)	any amendment or supplement being made to the Finance Documents;

(b)	any arrangement or concession (including a rescheduling or acceptance of partial payments) relating to, or affecting, the Finance Documents;

(c)	any release or loss (even though negligent) of any right or Security Interest created by the Finance Documents;

(d)	any failure (even though negligent) promptly or properly to exercise or enforce any such right or Security Interest, including a failure to realise for its full market value an asset covered by such a Security Interest; or

(e)	any other Finance Document or any Security Interest now being or later becoming void, unenforceable, illegal or invalid or otherwise defective for any reason, including a neglect to register it.

EXPENSES

4.1	Costs of preservation of rights, enforcement etc. The Guarantor shall pay to the Security Trustee on its demand the amount of all expenses incurred by the Security

Trustee in connection with any matter arising out of this Guarantee or any Security Interest connected with it, including any advice, claim or proceedings relating to this Guarantee or such a Security Interest.

4.2	Fees and expenses payable under Loan Agreement. Clause 4.1 is without prejudice to the Guarantor’s liabilities in respect of the Borrower’s obligations under clause 20 of the Loan Agreement (fees and expenses) and under similar provisions of the other Finance Documents.

5	ADJUSTMENT OF TRANSACTIONS

5.1

Reinstatement of obligation to pay. The Guarantor shall pay to the Security Trustee or any other Creditor Party on its demand any amount which the Security Trustee or any other Creditor Party is required, or agrees, to pay pursuant to any claim by, or settlement with, a trustee in bankruptcy of the Borrower or of another Security Party (or similar person) on the ground that the Loan Agreement, or a payment by the Borrower or of another Security Party, was invalid or on any similar ground.

PAYMENTS

6.1	Method of payments. Any amount due under this Guarantee shall be paid:

(a)	in immediately available funds;

(b)	to such account as the Security Trustee may from time to time notify to the Guarantor;

(c)	without any form of set-off, cross-claim or condition; and free and clear of any tax deduction except a tax deduction which the Guarantor is required by law to make.

INTEREST

7.1	Accrual of interest. Any amount due under this Guarantee shall carry interest after the date on which the Security Trustee or any other Creditor Party demands payment of it until it is actually paid, unless interest on that same amount also accrues under the Loan Agreement.

7.2	Calculation of interest. Interest under this Guarantee shall be calculated and accrue in the same way as interest under clause 5 of the Loan Agreement.

7.3	Guarantee extends to interest payable under Loan Agreement. For the avoidance of doubt, it is confirmed that this Guarantee covers all interest payable under the Loan Agreement, including that payable under clause 7 of the Loan Agreement.

8	SUBORDINATION

8.1

Subordination of rights of Guarantor. All rights which the Guarantor at any time has (whether in respect of this Guarantee or any other transaction) against the Borrower, any other Security Party or their respective assets shall be fully subordinated to the rights of the Security Trustee or any other Creditor Party under the Finance Documents; and in particular, the Guarantor shall not:

(a)	claim, or in a bankruptcy of the Borrower or any other Security Party prove for, any amount payable to the Guarantor by the Borrower or any other Security Party, whether in respect of this Guarantee or any other transaction;

(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 Borrower or any other Security Party; or

(d)	claim any subrogation or other right in respect of any Finance Document or any sum received or recovered by a Creditor Party under a Finance Document.

9	ENFORCEMENT

9.1

No requirement to commence proceedings against the Borrower. Neither the Security Trustee nor any other Creditor Party will not need to commence any proceedings under, or enforce any Security Interest created by, the Loan Agreement or any other Finance Document before claiming or commencing proceedings under this Guarantee.

9.2	Conclusive evidence of certain matters. However, as against the Guarantor:

(a)	any judgment or order of a court in England or the Marshall Islands or any other Pertinent Jurisdiction in connection with the Loan Agreement; and

(b)	any written statement or admission of the Borrower (absent any manifest error) in connection with the Loan Agreement, shall be binding and conclusive as to all matters of fact and law to which it relates.

9.3

Suspense account. The Security Trustee and any Creditor Party may, for the purpose of claiming or proving in a bankruptcy of the Borrower or any other Security Party, place any sum received or recovered under or by virtue of this Guarantee or any Security Interest connected with it on a separate suspense or other nominal account without applying it in satisfaction of the Borrower’s obligations under the Loan Agreement.

10	REPRESENTATIONS AND WARRANTIES

10.1	General. The Guarantor represents and warrants to the Security Trustee as follows.

10.2	Status. The Guarantor is duly incorporated and validly existing and in good standing under the laws of the Republic of the Marshall Islands.

10.3	Corporate power. The Guarantor has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:

(a)	to execute this Guarantee; and

(b)	to make all the payments contemplated by. and to comply with this Guarantee.

10.4	Consents in force. All the consents referred to in Clause 10.3 remain in force and nothing has occurred which makes any of them liable to revocation.

10.5	Legal validity. This Guarantee constitutes the Guarantor’s legal, valid and binding obligations enforceable against the Guarantor in accordance with its terms subject to any relevant insolvency laws affecting creditors’ rights generally.

10.6	No conflicts. The execution by the Guarantor of this Guarantee and its compliance with this Guarantee will not involve or lead to a contravention of:

(a)	any law or regulation; or

(b)	the constitutional documents of the Guarantor; or

(c)	any contractual or other obligation or restriction which is binding on the Guarantor or any of its assets.

10.7	No withholding taxes. All payments which the Guarantor is liable to make under this Guarantee may be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent Jurisdiction.

10.8	No default. To the knowledge of the Guarantor, no Event of Default or Potential Event of Default has occurred and is continuing.

10.9

Information. All information which has been provided in writing by or on behalf of the Guarantor to the Security Trustee or any other Creditor Party in connection with any Finance Document satisfied the requirements of Clause 11.2; all audited financial statements which have been so provided satisfied the requirements of Clause 11.4; and there has been no material adverse change in the financial position or state of affairs of the Guarantor from that disclosed in the latest of those accounts which could (in the reasonable opinion of the Security Trustee or any other Creditor Party) affect the solvency of the Guarantor.

10.10

No litigation. No legal or administrative action involving the Guarantor has been commenced or taken or, to the Guarantor’s knowledge, is likely to be commenced or taken which, in either case, would be likely to have a Material Adverse Effect on the Guarantor’s financial position or profitability.

10.11

The Guarantor represents and warrants that:

(a)	the its total debt net of cash will not exceed 75% of the total market value of its assets; and

(b)	the Guarantor’s minimum Net Worth listed in Nasdaq will throughout the Security Period be United States Dollars fifteen million (USD15,000,000).

11	UNDERTAKINGS

11.1	General. The Guarantor undertakes with the Security Trustee to comply with the following provisions of this Clause 11 at all times during the Security Period, except as the Security Trustee may otherwise permit.

11.2	Information provided to be accurate. All financial and other information which is provided in writing by or on behalf of the Guarantor under or in connection with this Guarantee will be true and not misleading and will not omit any material fact or consideration.

11.3	Provision of financial statements. The Guarantor will send to the Security Trustee:

(a)	as soon as possible, but in no event later than 180 days after the end of each financial year of the Guarantor, the annual audited consolidated financial statements of the Guarantor and its subsidiaries; and

(b)	promptly after each written request by the Security Trustee, such further information about the financial condition, commitments and operations of its managed fleet and of each Security Party, as the Security Trustee may reasonably require.

11.4	Form of financial statements. All audited consolidated financial statements delivered under Clause 11.3 will:

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

(b)	give a true and fair view of the state of affairs of the Guarantor at the date of those accounts and of the profit for the period to which those accounts relate; and

(c)	fully disclose or provide for all significant liabilities of the Guarantor.

11.5	Shareholder and creditor notices. The Guarantor will send the Security Trustee, at the same time as they are despatched, copies of all communications which are despatched to the Guarantor’s shareholders and creditors or any class of them.

11.6	Consents. The Guarantor will maintain in force and promptly obtain or renew, and will promptly send certified copies to the Security Trustee of, all consents required:

(a)	for the Guarantor to perform its obligations under this Guarantee;

(b)	for the validity or enforceability of this Guarantee; and the Guarantor will comply with the terms of all such consents.

11.7	Maintenance of Security Interests. The Guarantor will:

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

(b)

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

11.8

Notification of litigation. The Guarantor will provide the Security Trustee with details of any legal or administrative action involving the Guarantor as soon as such action is instituted or it becomes apparent to the Guarantor that it is likely to be instituted, unless it is clear that the legal or administrative action cannot be considered material in the context of this Guarantee.

11.9	Notification of default. The Guarantor will notify the Security Trustee as soon as the Guarantor becomes aware of:

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

(b)	any matter which indicates that an Event of Default or a Potential Event of Default may have occurred;

and will thereafter keep the Security Trustee fully up-to-date with all developments.

11.10

Maintenance of status. The Guarantor will maintain its separate corporate existence and remain in good standing under the laws of the Republic of the Marshall Islands.

11.11

Negative pledge. The Guarantor shall not, and shall procure that the Borrower will not, create or permit to arise any Security Interest over any asset present or future except Security Interests created or permitted by the Finance Documents and except for Permitted Security Interests.

11.12

No disposal of assets, change of business. The Guarantor will not, and shall procure that the Borrower will not:

(a)	transfer, lease or otherwise dispose of all or a substantial part of its assets, whether by one transaction or a number of transactions, whether related or not except in the usual course of its trading operations; or

(b)	make any substantial change to the nature of its business from that existing at the date of this Guarantee.

11.13

No merger etc. The Guarantor shall procure that the Borrower will not, enter into any form of merger, sub-division, amalgamation or other reorganisation, and shall ensure that throughout the Security Period, no change shall be made to the legal or beneficial ownership of the shares in the Guarantor without the prior written consent of the Lenders, which shall not be unreasonably withheld. For the avoidance of doubt the Lenders consent and agree to any changes relating to the Guarantor’s trading shares in the normal course of business and confirm that such changes do not violate the terms of this Guarantee.

11.14

Maintenance of ownership of Borrower. The Guarantor shall remain the beneficial owner of the entire issued and allotted share capital of the Borrower, free from any Security Interest, and shall ensure that throughout the Security Period, no change shall be made to the legal ownership of the shares in the Borrower. For the avoidance of doubt the last sentence of Clause 11.13 above applies to this Clause 11.14.

11.15

Sanctions.

The Guarantor confirms and undertakes that it shall (and shall procure that the Borrower shall) comply with all Sanctions applicable to it or the Borrower, in accordance with the Loan Agreement.

12	JUDGMENTS AND CURRENCY INDEMNITY

12.1	Judgments relating to Loan Agreement. This Guarantee shall cover any amount payable by the Borrower under or in connection with any judgment relating to the Loan Agreement.

12.2	Currency indemnity. In addition, clause 21.5 (currency indemnity) of the Loan Agreement shall apply, with any necessary adaptations, in relation to this Guarantee.

SET-OFF

13.1	Application of credit balances. The Security Trustee may at any time after the occurrence of an Event of Default which is continuing without prior notice:

(a)	apply any balance (whether or not then due) which at any time stands to the credit of any account in the name of the Guarantor at any office in any country of the Security

Trustee or any other Creditor Party in or towards satisfaction of any sum then due from the Guarantor to the Security Trustee under this Guarantee; and

(b)	for that purpose:

(i)

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

(ii)

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

(iii)

enter into any other transaction or make any entry with regard to the credit balance which the Security Trustee considers appropriate.

13.2

Existing rights unaffected. The Security Trustee shall not be obliged to exercise any of its rights under Clause 13.1; and those rights shall be without prejudice and in addition to any right of set-off, combination of accounts, charge, lien or other right or remedy to which the Security Trustee or any other Creditor Party is entitled (whether under the general law or any document).

14	NO SET-OFF OR TAX DEDUCTION

14.1	No deductions. All amounts due from the Guarantor under this Guarantee shall be paid:

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

(b)	free and clear of any tax deduction except a tax deduction which the Guarantor is required by law to make.

14.2	Grossing-up for taxes. If the Guarantor is required by law to make a tax deduction from any payment:

(a)	the Guarantor shall notify the Security Trustee as soon as it becomes aware of the requirement;

(b)	the Guarantor shall pay the tax deducted to the appropriate taxation authority promptly, and in any event before any fine or penalty arises;

(c)

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

14.3	Evidence of payment of taxes. Within 1 month after making any tax deduction, the Guarantor shall deliver to the Security Trustee documentary evidence satisfactory to the Lender that the tax had been paid to the appropriate taxation authority.

14.4	Exclusion of tax on overall net income. In this Clause 14 “tax deduction” means any deduction or withholding for or on account of any present or future tax except tax on any Creditor Party’s overall net income.

15	SUPPLEMENTAL

15.1	Continuing guarantee. This Guarantee shall remain in force as a continuing security at all times during the Security Period.

15.2	Rights cumulative, non-exclusive. The Security Trustee’s rights under and in connection with this Guarantee are cumulative, may be exercised as often as appears expedient and shall not be taken to exclude or limit any right or remedy conferred by law.

15.3	No impairment of rights under Guarantee. If the Security Trustee omits to exercise, delays in exercising or invalidly exercises any of its rights under this Guarantee, that shall not impair that or any other right of the Security Trustee under this Guarantee.

15.4	Severability of provisions. If any provision of this Guarantee is or subsequently becomes void, illegal, unenforceable or otherwise invalid, that shall not affect the validity, legality or enforceability of its other provisions.

15.5	Guarantee not affected by other security. This Guarantee shall not impair, nor be impaired by, any other guarantee, any Security Interest or any right of set-off or netting or to combine accounts which any Creditor Party may now or later hold in connection with the Loan Agreement.

15.6	Guarantor bound by Loan Agreement. The Guarantor agrees with the Security Trustee to be bound by all provisions of the Loan Agreement which are applicable to the Security Parties in the same way as if those provisions had been set out (with any necessary modifications) in this Guarantee.

15.7

Applicability of provisions of Guarantee to other Security Interests. Any Security Interest which the Guarantor creates (whether at the time at which it signs this Guarantee or at any later time) to secure any liability under this Guarantee shall be a principal and independent security, and Clauses 3 and 18 shall, with any necessary modifications, apply to it, notwithstanding that the document creating the Security Interest neither describes it as a principal or independent security nor includes provisions similar to Clauses 3 and 18.

15.8

Applicability of provisions of Guarantee to other rights. Clauses 3 and 18 shall also apply to any right of set-off or netting or to combine accounts which the Guarantor creates by an agreement entered into at the time of this Guarantee or at any later time (notwithstanding that the agreement does not include provisions similar to Clauses 3 and 18), being an agreement referring to this Guarantee.

15.9	Third party rights. A person who is not a party to this Guarantee has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Guarantee.

TRANSFER

16.1	Transfer by Security Trustee. The Security Trustee may transfer its rights under and in connection with this Guarantee to the same extent as it may transfer its rights under the Loan Agreement.

NOTICES

17.1	Notices to Guarantor. Any notice or demand to the Guarantor under or in connection with this Guarantee shall be given by letter or fax at:

Eurodry Ltd.
c/o Eurobulk Ltd.
4, Messogiou & Evropis Street
151 24 Maroussi
Greece

Fax No: +30 2111 804097
Attn: Tassos Aslidis/George Kavalis

or to such other address which the Guarantor may notify to the Security Trustee.

17.2	Application of certain provisions of Loan Agreement. Clauses 28.3, 28.4 and 28.5 of the Loan Agreement apply to any notice or demand under or in connection with this Guarantee.

17.3	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 payable by the Borrower under the Loan Agreement;

(b)	at the same time as the service of a notice under clause 19.2 (events of default) of the Loan Agreement;

and a demand under this Guarantee may refer to all amounts payable under or in connection with the Loan Agreement without specifying a particular sum or aggregate sum.

17.4	Notices to Security Trustee. Any notice to the Security Trustee under or in connection with this Guarantee shall be sent to the same address and in the same manner as notices to the Security Trustee under the Loan Agreement.

18	INVALIDITY OF LOAN AGREEMENT

18.1	Invalidity of Loan Agreement. In the event of:

(a)	the Loan Agreement now being or later becoming, with immediate or retrospective effect, void, illegal, unenforceable or otherwise invalid for any other reason whatsoever, whether of a similar kind or not; or

(b)	without limiting the scope of paragraph (a), a bankruptcy of the Borrower, the introduction of any law or any other matter resulting in the Borrower being discharged from liability under the Loan Agreement, or the Loan Agreement ceasing to operate (for example, by interest ceasing to accrue),

this Guarantee shall cover any amount which would have been or become payable under or in connection with the Loan Agreement if the Loan Agreement had been and remained entirely valid, legal and enforceable, or the Borrower had not suffered bankruptcy, or any combination of such events or circumstances, as the case may be, and the Borrower had remained fully liable under it for liabilities whether invalidly incurred or validly incurred but subsequently retrospectively invalidated; and references in this Guarantee to amounts payable by the Borrower under or in connection with the Loan Agreement shall include references to any amount which would have so been or become payable as aforesaid.

18.2	Invalidity of Finance Documents. Clause 18.1 also applies to each of the Finance Documents to which the Borrower is a party.

19	GOVERNING LAW AND JURISDICTION

19.1	English law. This Guarantee (and any non contractual obligations connected with it) shall be governed by, and construed in accordance with, English law.

19.2	Exclusive English jurisdiction. Subject to Clause 19.3, the courts of England shall have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Guarantee (and any non contractual obligations connected with it).

19.3	Choice of forum for the exclusive benefit of the Security Trustee. Clause 19.2 is for the exclusive benefit of the Security Trustee, which reserves the rights:

(a)	to commence proceedings in relation to any matter which arises out of or in connection with this Guarantee in the courts of any country other than England and which have or claim jurisdiction to that matter; and

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

The Guarantor shall not commence any proceedings in any country other than England in relation to a matter which arises out of or in connection with this Guarantee.

19.4

Process agent. The Guarantor irrevocably appoints Hill Dickinson Services (London) Ltd at their office for the time being, presently at The Broadgate Tower, 20 Primrose Street, London, EC2A 2EW, England, to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with this Guarantee.

19.5

Creditor Parties’ rights unaffected. Nothing in this Clause 19 shall exclude or limit any right which any Creditor Party may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

19.6	Meaning of “proceedings”. In this Clause 19, “proceedings” means proceedings of any kind, including an application for a provisional or protective measure.

THIS GUARANTEE has been entered into on the date stated at the beginning of this Guarantee.

EXECUTION PAGE

THE GUARANTOR

Signed by	)
STEFANIA KARMIRI	)	/s/ STEFANIA KARMIRI
for and on behalf of	)
EURODRY LTD.	)
of the Marshall Islands	)

in the presence of
Witness:	/s/ KATERINA A. AVRAMIDOU
Name:	KATERINA A. AVRAMIDOU
Address:	DANIOLOS LAW FIRM 13, DEFTERAS MERARCHIAS STR. 185 35 PIRAEUS GREECE TEL.+30 210 4138 800 - FAX +30 210 4138 809
Occupation:	Attorney at law

THE SECURITY TRUSTEE

Signed by	)
STAVROS YAGOS	)	/s/ STAVROS YAGOS
and NIKOLETTA MITROPOULOU	)	/s/ NIKOLETTA MITROPOULOU
for and on behalf of	)
EUROBANK ERGASIAS S.A.	)

in the presence of
Witness:	/s/ KATERINA A. AVRAMIDOU
Name:	KATERINA A. AVRAMIDOU
Address:	DANIOLOS LAW FIRM 13, DEFTERAS MERARCHIAS STR. 185 35 PIRAEUS GREECE TEL.+30 210 4138 800 - FAX +30 210 4138 809
Occupation:	Attorney at law

Exhibit 4.20

Dated 27 November 2018

EURODRY LTD.

as Guarantor

and

NATIONAL BANK OF GREECE S.A.
as Lender

GUARANTEE

relating to

a Loan Agreement dated 27 November 2018

WATSON FARLEY
&
WILLIAMS

Index

Clause Page

1	Interpretation	1
2	guarantee	3
3	Liability as Principal and Independent Debtor	3
4	Expenses	4
5	Adjustment of Transactions	4
6	Payments	4
7	Interest	6
8	Subordination	6
9	enforcement	6
10	Representations and Warranties	7
11	Undertakings	9
12	Judgements and Currency Indemnity	12
13	Set-Off	12
14	Supplemental	13
15	assignment	14
16	Bail-in	14
17	Notices	15
18	Invalidity of Loan Agreement	15
19	Governing Law and Jurisdiction	16
Execution		20

THIS GUARANTEE is made on 27 November 2018

PARTIES

(1)	EURODRY LTD., a company incorporated and existing under the laws of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 as Guarantor (the “Guarantor”)

(2)	NATIONAL BANK OF GREECE S.A., acting through its branch at 2 Bouboulinas Street and Akti Miaouli, Piraeus 185 35, Greece (the “Lender”, which expression includes its successors and assigns)

BACKGROUND

(A)

By a term loan agreement dated 27 November 2018 (the “Loan Agreement”) and made between (i) Pantelis Shipping Corp., Areti Shipping Ltd and Light Shipping Ltd as joint and several borrowers (the “Borrowers”) and (ii) the Lender, it was agreed that the Lender would make available to the Borrowers a loan facility of (originally) up to US$15,000,000.

(B)	The execution and delivery to the Lender of this Guarantee (which is the Guarantee referred to in the Loan Agreement) is one of the conditions precedent to the availability of the facility under the Loan Agreement.

OPERATIVE PROVISIONS

1	INTERPRETATION

1.1	Defined expressions

Words and expressions defined in the Loan Agreement shall have the same meanings when used in this Guarantee unless the context otherwise requires.

1.2	Construction of certain terms

In this Guarantee:

“Accounting Period” means (a) each financial year of the Guarantor and (b) each consecutive semi-annual period during the Security Period ending on 31 December and 30 June of each financial year for which the Guarantor must provide financial statements pursuant to Clause 11.3(a) and (b) of this Guarantee;

“Applicable Accounts” means, as at the date of calculation or, as the case may be, in respect of an Accounting Period, the annual audited or semi-annual unaudited (as the case may be), consolidated financial statements the Guarantor is obliged to deliver to the Lender pursuant to Clause 11.3(a) and (b) of this Guarantee;

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

“Bail-In Legislation” means:

(a)

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

(b)

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

“Cash” shall have the meaning given to such term in the latest Applicable Accounts (free of any Security Interests other than in favour of the lenders of the Group);

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

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

“Financial Year” means, in relation to each of the Borrowers, the Guarantor and the Group, each period of 1 year commencing on 1 January in respect of which their individual or, as the case may be, consolidated accounts are or ought to be prepared;

“Fleet Vessels” means all of the vessels from time to time owned by any member of the Group or otherwise beneficially owned by the Guarantor (each a “Fleet Vessel”);

“Fleet Book Value” means, at the end of a relevant period, the aggregate book value of the Fleet Vessels less depreciation as stated in the most recent financial statements of the Group delivered pursuant to clause 11.6 of the Loan Agreement and Clause 11.3 of this Guarantee;

“Fleet Market Value” means, at the date of calculation, the aggregate of the Market Values of the Fleet Vessels;

“Group” means together, the Borrowers, the Guarantor and all consolidated subsidiaries of the Guarantor from time to time and “member of the Group” shall be construed accordingly;

“Leverage Ratio” means, at any relevant time, the ratio of:

(a)

the Total Liabilities; to

(b)

the Market Value Adjusted Total Assets;

“Loan Agreement” means the loan agreement dated 21^.- November 2018 (referred to in Recital (A) and includes any existing or future amendments or supplements, whether made with the Guarantor's consent or otherwise;

“Market Value” means, in relation to each Fleet Vessel, the market value thereof as obtained by the Guarantor for purposes of the Applicable Accounts;

“Market Value Adjusted Total Assets” means at any relevant time the Total Assets as adjusted by replacing the Fleet Book Value with the Fleet Market Value;

“Market Value Adjusted Net Worth” means at any relevant time the amount obtained by deducting from the Market Value Adjusted Total Assets the amount of the Total Liabilities;

“Resolution Authority” means any body which has authority to exercise any Write-down and Conversion Powers;

“Total Assets” means at any relevant time the total assets (including Cash and cash equivalents) of the Group as stated in the most recent Applicable Accounts of the Group;

“Total Liabilities” means at any relevant time the total liabilities of the Group as stated in the most recent Applicable Accounts of the Group; and

“Write-down and Conversion Powers” means in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule.

1.3	Application of construction and interpretation provisions of Loan Agreement

Clauses 1.2 to 1.6 of the Loan Agreement apply, with any necessary modifications, to this Guarantee.

1.4	Inconsistency between Loan Agreement provisions and this Guarantee

This Guarantee shall be read together with the Loan Agreement, but in case of any conflict between the Loan Agreement and this Guarantee, the provisions of the Loan Agreement shall prevail

GUARANTEE

2.1	Guarantee and indemnity

The Guarantor unconditionally and irrevocably:

(a)	guarantees the due payment of all amounts payable by the Borrowers under or in connection with the Loan Agreement and every other Finance Document;

(b)	undertakes to pay to the Lender, on the Lender's demand, any such amount which is not paid by the Borrowers when due and payable under or in connection with any Finance Document;

(c)

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

2.2	No limit on number of demands

The Lender may serve more than one demand under Clause 2.1.

2.3	Release of this Guarantee

The Lender agrees that it shall release the Guarantor from its obligations under this Guarantee at the end of the Security Period and once all amounts which are due and parable under the Loan Agreement and the Finance Documents have been duly paid.

3	LIABILITY AS PRINCIPAL AND INDEPENDENT DEBTOR

3.1	Principal and independent debtor

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.

3.2	Waiver of rights and defences

Without limiting the generality of Clause 3.1, the Guarantor shall neither be discharged by, nor have any claim against the Lender in respect of:

(a)	any amendment or supplement being made to the Finance Documents;

(b)	any arrangement or concession (including a rescheduling or acceptance of partial payments) relating to, or affecting, the Finance Documents;

(c)	any release or loss (even though negligent) of any right or Security Interest created by the Finance Documents;

(d)	any failure (even though negligent) promptly or properly to exercise or enforce any such right or Security Interest, including a failure to realise for its full market value an asset covered by such a Security Interest; or

(e)	any other Finance Document or any Security Interest now being or later becoming void, unenforceable, illegal or invalid or otherwise defective for any reason, including a neglect to register it.

EXPENSES

4.1	Costs of preservation of rights, enforcement etc.

The Guarantor shall pay to the Lender on its demand the amount of all expenses incurred by the Lender in connection with any matter arising out of this Guarantee or any Security Interest connected with it, including, without limitation, any advice, claim or proceedings relating to this Guarantee or such a Security Interest.

4.2	Fees and expenses payable under Loan Agreement

Clause 4.1 is without prejudice to the Guarantor's liabilities in respect of the Borrowers' obligations under clause 19 of the Loan Agreement (fees and expenses) and under similar provisions of other Finance Documents.

5	ADJUSTMENT OF TRANSACTIONS

5.1	Reinstatement of obligation to pay

The Guarantor shall pay to the Lender on its demand any amount which the Lender is required, or agrees, to pay pursuant to any claim by, or settlement with, a trustee in bankruptcy of any Borrower or of another Security Party (or similar person) on the ground that the Loan Agreement or any other Finance Document, or a payment by any Borrower or of another Security Party, was invalid or on any similar ground.

PAYMENTS

6.1	Method of payments

Any amount due under this Guarantee shall be paid:

(a)	in immediately available funds;

(b)	to such account as the Lender may from time to time notify to the Guarantor;

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

(d)	free and clear of any tax deduction except a tax deduction which the Guarantor is required by law to make.

6.2	Grossing-up for taxes

If the Guarantor is required by law to make a tax deduction, the amount due to the Lender shall be increased by the amount necessary to ensure that the Lender receives and retains a net amount which, after the tax deduction, is equal to the full amount that it would otherwise have received.

6.3	Indemnity and evidence of payment of taxes

The Guarantor shall fully indemnify the Lender in respect of all claims, expenses, liabilities and losses incurred by the Lender by reason of any failure of the Guarantor to make any tax deduction or by reason of any increased payment not being made on the due date for such payment in accordance with Clause 6.2. Within 30 days after making any tax deduction, that Guarantor shall deliver to the Lender any receipts, certificates or other documentary evidence satisfactory to the Lender that the tax had been paid to the appropriate taxation authority.

6.4	Tax Credit

If the Guarantor makes a Tax Payment and the Lender determines that:

(a)	a Tax Credit is attributable to an increased payment of which that Tax Payment forms part, to that Tax Payment or to a Tax Deduction in consequence of which that Tax Payment was received; and

(b)	the Lender has obtained, utilised and retained that Tax Credit,

the Lender shall pay an amount to the Guarantor which the Lender determines will leave it (after that payment) in the same after-tax position as it would have been in had the Tax Payment not been required to be made by the Guarantor.

In this Clause:

“Tax Credit” means a credit against, relief or remission for, or repayment of any tax.

“Tax Deduction” means a deduction or withholding for or on account of tax from a payment under a Finance Document.

“Tax Payment” means either the increase in a payment made by the Guarantor to the Lender under Clause 6.2 (Grossing-up for taxes) or a payment under Clause 6.3 (Indemnity and evidence of payment of taxes).

Unless a contrary indication appears, in this Clause 6.4 (Tax Credit) reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

INTEREST

7.1	Accrual of interest

Any amount due under this Guarantee shall carry interest after the date on which the Lender demands payment of it until it is actually paid, unless interest on that same amount also accrues under the Loan Agreement.

7.2	Calculation of interest

Interest under this Guarantee shall be calculated and accrue in the same way as interest under clause 5 of the Loan Agreement.

7.3	Guarantee extends to interest payable under Loan Agreement

For the avoidance of doubt, it is confirmed that this Guarantee covers all interest payable under the Loan Agreement, including that payable under clause 6 of the Loan Agreement.

8	SUBORDINATION

8.1	Subordination of rights of Guarantor

All rights which the Guarantor at any time has (whether in respect of this Guarantee or any other transaction) against the Borrowers, any other Security Party or their respective assets, shall be fully subordinated to the rights of the Lender under the Finance Documents; and in particular the Guarantor shall not:

(a)	demand or accept repayment of any amounts due to the Guarantor by the Borrowers under any existing or future loans to the Borrowers or any guarantee granted or to be granted in respect of the Borrowers' obligations;

(b)	claim, or in a bankruptcy of a Borrower or any other Security Party prove for, any amount payable to the Guarantor by that Borrower or any other Security Party, whether in respect of this Guarantee or any other transaction;

(c)	take or enforce any Security Interest for any such amount;

(d)	claim to set-off any such amount against any amount payable by the Guarantor to the Borrowers or any other Security Party; or

(e)	claim any subrogation or other right in respect of any Finance Document or any sum received or recovered by the Lender under a Finance Document,

Provided that, for the avoidance of doubt, nothing in this Clause 8.1 shall prohibit or restrict intercompany payments between the Guarantor and the Borrowers to settle any operational expenses (including dry docking costs/accruals and administrative costs) of the Borrowers and/or the Ships.

9	ENFORCEMENT

9.1	No requirement to commence proceedings against the Borrowers

The Lender will not commence any proceedings under, or enforce any Security Interest created by, the Loan Agreement or any other Finance Document before claiming or commencing proceedings under this Guarantee.

9.2	Conclusive evidence of certain matters

However, as against the Guarantor:

(a)	any judgment or order of a court in England, the Republic of the Marshall Islands, Liberia, and Cyprus or any other Pertinent Jurisdiction in connection with the Loan Agreement or any other Finance Document; and

(b)	any written statement or admission of the Borrowers (absent manifest error) in connection with the Loan Agreement or any other Finance Document,

shall be binding and conclusive as to all matters of fact and law to which it relates.

10	REPRESENTATIONS AND WARRANTIES

10.1

General

The Guarantor represents and warrants to the Lender as follows.

10.2

Status

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

10.3	Share capital and ownership

At the date of this Guarantee, the Guarantor is authorised to issue two hundred twenty million (220,000,000) registered shares out of which Twenty million (20,000,000) are registered preferred shares). All the registered common shares shall have a par value of three cents each (US$ 0.03) per share and all the registered preferred shares have a par value of one cent each (US$0.01) per share. As of today, the Corporation has issued to date 2.297.898 common shares (including 35.095 unvested incentive stock award shares) and 1.173 preferred shares.

10.4	Corporate power

The Guarantor has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:

(a)	to execute this Guarantee; and

(b)	to make all the payments contemplated by, and to comply with, this Guarantee.

10.5	Consents in force

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

10.6	Legal validity

This Guarantee constitutes the Guarantor's legal, valid and binding obligations enforceable against the Guarantor in accordance with its terms subject to any relevant insolvency laws affecting creditors' rights generally.

10.7	No conflicts

The execution by the Guarantor of this Guarantee and its compliance with this Guarantee will not involve or lead to a contravention of:

(a)	any law or regulation in any Pertinent Jurisdiction; or

(b)	the constitutional documents of the Guarantor; or

(c)	any contractual or other obligation or restriction which is binding on the Guarantor or any of its assets.

10.8	No withholding taxes

All payments which the Guarantor is liable to make under this Guarantee may be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent Jurisdiction.

10.9	No default

No Event of Default or Potential Event of Default has occurred and no Event of Default or Potential Event of Default will result from the entry by the Guarantor into this Guarantee.

10.10

Information

All information which has been provided in writing by or on behalf of the Guarantor to the Lender in connection with any Finance Document satisfied the requirements of Clause 11.2 of this Guarantee; all audited accounts and financial statements which have been so provided satisfied the requirements of Clause 11.4 of this Guarantee and are true, correct and not misleading and give a true and fair view of the state of the position of the Guarantor; and there has been no change in the financial position or state of affairs of the Guarantor or the Group from that disclosed in the latest of those accounts which is likely to have a Material Adverse Effect.

10.11

No litigation

No legal or administrative action involving the Guarantor has been commenced or taken or, to the Guarantor's knowledge, is likely to be commenced or taken which would, in either case, be likely to have a Material Adverse Effect on the Guarantor's financial position or profitability.

10.12

Taxes paid

The Guarantor has paid all taxes applicable to, or imposed on or in relation to the Guarantor or its business, if any.

10.13

Provisions of Loan Agreement and other Finance Documents

The Guarantor is fully familiar with and agrees with all provisions of the Loan Agreement and the other Finance Documents.

10.14

No waiver

No oral or written statement has been made to the Guarantor by or on behalf of the Lender or any other person which could be construed as a waiver of any provisions of this Guarantee or a statement of intention not to enforce this Guarantee in accordance with its terms.

10.15

Sanctions

(a)	The Guarantor:

(i)

is not a Prohibited Party;

(ii)

is not owned or controlled by or acting directly or indirectly on behalf of or for the benefit of, a Prohibited Party;

(iii)

does not own or control a Prohibited Party;

(iv)

does not have a Prohibited Party serving as a director, officer or, to the best of its knowledge, employee; or

(v)

is not domiciled or incorporated in any of the restricted countries.

(b)	The Guarantor is in compliance with all Sanctions.

11	UNDERTAKINGS

11.1

General

The Guarantor undertakes with the Lender to comply with the following provisions of this Clause 11 at all times during the Security Period, except as the Lender may otherwise permit.

11.2	Information provided to be accurate

All financial and other information which is provided in writing by or on behalf of the Guarantor under or in connection with this Guarantee will be true and not misleading and will not omit any material fact or consideration.

11.3	Provision of financial information

The Guarantor will send to the Lender:

(a)	as soon as possible, but in no event later than 120 days after the end of its Financial Year, the consolidated audited annual financial statements of the Group for that Financial Year (commencing with the audited financial statements for the Financial Year which ended on 31 December 2018);

(b)

as soon as possible, but in no event later than 90 days after the end of each 6-month period ending on 30 June and 31 December in its Financial Year the semi-annual consolidated unaudited financial statements of the Group, for that 6-month period (commencing with the financial statements for the period ending on 30 June 2018), duly certified as to their correctness by the chief financial officer of the Guarantor; and

(c)	from time to time, and on demand such financial or other information relating to the Borrowers, the Guarantor, the Group and/or a Ship as may be requested by the Lender.

11.4	Form of Financial Statements

All statements (audited and unaudited) delivered under Clause 11.3 will:

(a)	be prepared in accordance with GAAP consistently applied;

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

(c)	fully disclose or provide for all significant liabilities of the Guarantor.

11.5	Shareholder notices

The Guarantor will send to the Lender, at the same time as they are despatched, copies of all communications which are despatched to the Guarantor's r creditors or any class of them.

11.6

Consents

The Guarantor will maintain in force and promptly obtain or renew, and will promptly send certified copies to the Lender of, all consents required:

(a)	for the Guarantor to perform its obligations under this Guarantee; and

(b)	for the validity or enforceability of this Guarantee,

and the Guarantor will comply with the terms of all such consents.

11.7	Notification of litigation

The Guarantor will provide the Lender with details of any legal or administrative action involving the Guarantor or any other member of the Group as soon as such action is instituted or it becomes apparent to the Guarantor that it is likely to be instituted, unless it is clear that such legal or administrative action cannot be considered material in the context of any Finance Document.

11.8	Notification of default

The Guarantor will notify the Lender as soon as the Guarantor becomes aware of:

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

(b)	any matter which indicates that an Event of Default or a Potential Event of Default may have occurred,

and will thereafter keep the Lender fully up-to-date with all developments.

11.9	Maintenance of status

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

11.10

Negative pledge

The Guarantor shall procure that no Borrower will, create or permit to arise any Security Interest over any asset present or future except Security Interests created or permitted by the Finance Documents and except for Permitted Security Interests.

11.11

Negative undertaking

The Guarantor will not:

(a)	change the nature of its business; or

provide any form of credit or financial assistance to a person who is directly or indirectly interested in the Guarantor's share or loan capital, or enter into any transaction with or involving such a person or company on terms which are, in any respect, less favourable to the Guarantor than those which it could obtain in a bargain made at arms' length. Any shareholder loans, intercompany loans, affiliate loans and third party loans to the Guarantor shall be fully subordinated to the rights of the Lender under this Agreement and the Finance Documents, on terms satisfactory to the Lender in its sole discretion;

(b)	enter into any form of amalgamation, merger or de-merger (other than with its affiliates) or any form of reconstruction or reorganisation; and

(c)	cause its shares (or any part thereof) to cease to be quoted on NASDAQ in New York or any other internationally recognised stock exchange acceptable to the Lender.

11.12

Pari passu

The Guarantor shall procure that its liabilities under this Guarantee do and will rank at least pari passu with all its other present and future liabilities, except for liabilities which are mandatorily preferred by law.

11.13

Financial Covenants

The Guarantor shall ensure that at all times during the Security Period:

(a)	the aggregate of all Cash for the Group on a consolidated basis shall be equal to no less than $300,000 in respect of each Fleet Vessel;

(b)	maintain a Market Value Adjusted Net Worth of not less than $15,000,000; and

(c)	the Leverage Ratio shall not exceed 75 per cent.

11.14

Principal place of business

The Guarantor will maintain its place of business, and keep its corporate documents and records, at the address stated in Clause 17; and the Guarantor will not establish, or do anything as a result of which it would be deemed to have, a place of business in the United Kingdom.

11.15

Ownership

The Guarantor shall remain the legal holder and beneficial owner of the entire issued and allotted share capital of each Borrower, free from any Security Interest, except that created in favour of the Lender.

11.16

Compliance Check

(c)	The Guarantor shall supply to the Lender, together with each set of financial statements delivered pursuant to (a) and (b) of Clause 11.3 of this Guarantee, a Compliance Certificate.

(d)	Each Compliance Certificate shall be duly signed by the chief financial officer of the Guarantor evidencing (inter alia) the Guarantor's compliance with the provisions of Clause 11.13 and providing confirmation that no Event of Default has occurred.

11.17

Compliance with laws

The Guarantor shall, and shall procure that each other Security Party will, comply in all respects with all laws and regulations to which it or such Security Party may be subject to.

11.18

“Know your customer” checks

If:

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

(b)	any change in the status of the Guarantor after the date of this Agreement; or

(c)	a proposed assignment or transfer by the Lender of any of its rights and obligations under this Guarantee to a party that is not a Lender prior to such assignment or transfer,

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

12	JUDGEMENTS AND CURRENCY INDEMNITY

12.1	Judgments relating to Loan Agreement and Finance Documents

This Guarantee shall cover any amount payable by the Borrowers under or in connection with any judgment relating to the Loan Agreement or any other Finance Document.

12.2	Currency indemnity

In addition, clause 20.4 (currency indemnity) of the Loan Agreement shall apply, with any necessary adaptations, in relation to this Guarantee.

SET-OFF

13.1	Application of credit balances

The Lender may, following the occurrence of an Event of Default which is continuing, without prior notice:

(a)

apply any balance (whether or not then due) which at any time stands to the credit of any account in the name of the Guarantor at any office in any country of the Lender in or towards satisfaction of any sum then due from the Guarantor to the Lender under this Guarantee or any other Finance Document; and

(b)	for that purpose:

(i)

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

(ii)

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

(iii)

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

13.2	Existing rights unaffected

The Lender shall not be obliged to exercise any of its rights under Clause 13.1; and those rights shall be without prejudice and in addition to any right of set-off, combination of accounts, charge, lien or other right or remedy to which a Lender is entitled (whether under the general law or any document).

14	SUPPLEMENTAL

14.1	Continuing guarantee

This Guarantee shall remain in force as a continuing security at all times during the Security Period and will extend to the ultimate balance of all the Secured Liabilities regardless of any intermediate payment or discharge in whole or in part.

14.2	Rights cumulative, non-exclusive

The Lender's rights under and in connection with this Guarantee are cumulative, may be exercised as often as appears expedient and shall not be taken to exclude or limit any right or remedy conferred by law.

14.3	No impairment of rights under Guarantee

If the Lender omits to exercise, delays in exercising or invalidly exercises any of its rights under this Guarantee, that shall not impair that or any other right of the Lender under this Guarantee.

14.4	Severability of provisions

If any provision of this Guarantee is or subsequently becomes void, illegal, unenforceable or otherwise invalid, that shall not affect the validity, legality or enforceability of its other provisions.

14.5	Guarantee not affected by other security

This Guarantee shall not impair, nor be impaired by, any other guarantee, any Security Interest or any right of set-off or netting or to combine accounts which the Lender may now or later hold in connection with the Loan Agreement or any other Finance Document.

14.6	Guarantor bound by Loan Agreement

The Guarantor agrees with the Lender to be bound by all provisions of the Loan Agreement which are applicable to the Security Parties in the same way as if those provisions had been set out (with any necessary modifications) in this Guarantee.

14.7	Applicability of provisions of Guarantee to other Security Interests

Any Security Interest which the Guarantor creates (whether at the time at which it signs this Guarantee or at any later time) to secure any liability under this Guarantee shall be a principal and independent security, and Clauses 3 and 18 of this Guarantee shall, with any necessary modifications, apply to it, notwithstanding that the document creating the Security Interest neither describes it as a principal or independent security nor includes provisions similar to Clauses 3 and 18.

14.8	Applicability of provisions of Guarantee to other rights

Clauses 3 and 18 of this Guarantee shall also apply to any right of set-off or netting or to combine accounts which the Guarantor creates by an agreement entered into at the time of this Guarantee or at any later time (notwithstanding that such agreement does not include provisions similar to Clauses 3 and 18), being an agreement referring to this Guarantee.

14.9	Third party rights

A person who is not a party to this Guarantee has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Guarantee.

15	ASSIGNMENT

15.1	Assignment by Lender

The Lender may assign its rights under and in connection with this Guarantee to the same extent as it may assign its rights under the Loan Agreement.

BAIL-IN

16.1	Contractual recognition of bail-in

Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding between the parties to a Finance Document, each Party acknowledges and accepts that any liability of any party to a Finance Document under or in connection with the Finance Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:

(a)	any Bail-In Action in relation to any such liability, including (without limitation):

(i)

a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;

(ii)

a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and

(iii)

a cancellation of any such liability; and

(iv)

a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability; and

(b)	a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.

NOTICES

17.1	Notices to Guarantor

Any notice or demand to the Guarantor under or in connection with this Guarantee shall be given by letter or fax at:

4, Messogiou & Evropis Street

151 24 Maroussi

Greece

Fax No.: +30 211 1804097

or to such other address which the Guarantor may notify to the Lender.

17.2	Application of certain provisions of Loan Agreement

Clause 27 of the Loan Agreement applies to any notice or demand under or in connection with this Guarantee.

17.3	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 payable by the Borrowers under the Loan Agreement;

(b)	at the same time as the service of a notice under clause 18.2 (events of default) of the Loan Agreement

and a demand under this Guarantee may refer to all amounts payable under or in connection with the Loan Agreement without specifying a particular sum or aggregate sum.

17.4	Notices to Lender

Any notice to the Lender under or in connection with this Guarantee shall be sent to the same address and in the same manner as notices to the Lender under the Loan Agreement.

18	INVALIDITY OF LOAN AGREEMENT

18.1	Invalidity of Loan Agreement

In the event of:

(a)	the Loan Agreement now being or later becoming, with immediate or retrospective effect, void, illegal, unenforceable or otherwise invalid for any other reason whatsoever, whether of a similar kind or not; or

(b)	without limiting the scope of paragraph (a), a bankruptcy of any Borrowers, the introduction of any law or any other matter resulting in the Borrowers being discharged from liability under the Loan Agreement, or the Loan Agreement ceasing to operate (for example, by interest ceasing to accrue),

any combination of such events or circumstances, as the case may be, and the relevant Borrowers had remained fully liable under it for liabilities whether invalidly incurred or validly incurred but subsequently retrospectively invalidated; and references in this Guarantee to amounts payable by the Borrowers under or in connection with the Loan Agreement shall include references to any amount which would have so been or become payable as aforesaid.

18.2	Invalidity of Finance Documents

Clause 17.1 also applies to each of the other Finance Documents to which a Borrower is a party.

19	GOVERNING LAW AND JURISDICTION

19.1	English law

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.

19.2	Exclusive English jurisdiction

Subject to Clause 19.3, the courts of England shall have exclusive jurisdiction to settle any Dispute.

19.3	Choice of forum for the exclusive benefit of the Lender

Clause 19.2 is for the exclusive benefit of the Lender, which reserves the rights:

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

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

The Guarantor shall not commence any proceedings in any country other than England in relation to a Dispute.

19.4	Process agent

The Guarantor irrevocably appoints Hill Dickinson Service (London) Limited, presently at Irongate House, Duke's Place, London EC3A 7LP England, to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with a Dispute.

19.5	Lender's rights unaffected

Nothing in this Clause 19 shall exclude or limit any right which the Lender may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

19.6	Meaning of “proceedings” and “Dispute”

In this Clause 19, “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 existence, validity or termination of this Guarantee) or any non-contractual obligation arising out of or in connection with this Guarantee.

THIS GUARANTEE has been entered into on the date stated at the beginning of this Guarantee.

SCHEDULE

FORM OF COMPLIANCE CERTIFICATE

[●] 2018

Dear Sirs,

We refer to a loan agreement dated [●] November 2018 (the “Loan Agreement”) made between (amongst others) yourselves and ourselves in relation to a term loan facility of (originally) up to $15,000,000.

Words and expressions defined in the Loan Agreement shall have the same meaning when used in this compliance certificate.

The Borrowers and the Guarantor each confirm compliance with the minimum liquidity requirements set out in Clause 11.5 of the Loan Agreement and the financial covenants referred to in Clause 11.13 of the guarantee and indemnity granted by the Guarantor, in each case for the [6-month] period ending on the date of this certificate.

We now certify that, as at [●]:

(a)	the ratio set out in Clause 11.13 is at [●] per cent.;

(b)	the aggregate of all Cash is [●]. Such amount [does][not] equal less than $300,000 in respect of each Fleet Vessel;

(c)	the Market Value Adjusted Net Worth is $[●]; and

(d)	the Leverage Ratio is [●] per cent.

This certificate shall be governed by, and construed in accordance with, English law.


Chief Financial Officer for and on behalf of Eurodry Ltd.		Director for and on behalf of Pantelis Shipping Corp.

Director for and on behalf of [●]

IN WITNESS WHEREOF this Guarantee has been duly executed as a Deed by each of the parties hereto the day and year first above written.

EXECUTION

GUARANTOR

SIGNED and DELIVERED	)
as a Deed by	)
Stephania Karmiri	)	/s/ Stephania Karmiri
being an attorney-in-fact	)
for and on behalf of	)
EURODRY LTD.	)
in the presence of:	)

/s/ Emmanouil Pontikis EMMANOUIL PONTIKIS Attorney-At-Law Watson Farley & Williams 348 Syngrou Avenue 176 74 Kallithea Athens - Greece

LENDER

SIGNED and DELIVERED	)
as a Deed by	)
	)
being an attorney-in-fact	)
for and on behalf of	)	/s/ M. Maniatakou /s/ Amalia Kafka
NATIONAL BANK OF GREECE S.A.	)	M. Maniatakou Amalia Kafka
in the presence of:	)

/s/ Emmanouil Pontikis EMMANOUIL PONTIKIS Attorney-At-Law Watson Farley & Williams 348 Syngrou Avenue 176 74 Kallithea Athens - Greece

Exhibit 4.21

Dated 7 May 2018

KAMSARMAX TWO SHIPPING LTD
as Owner

in favour of

HSBC BANK plc
as Mortgagee

FIRST PREFERRED MARSHALL ISLANDS MORTGAGE

relating to
"EKATERINI"

Index

Clause		Page
1	Definitions and Interpretation	1
2	Covenant to Pay and Perform	2
3	Mortgage	2
4	Undertakings	3
5	Protection of Security	4
6	Enforceability and Mortgagee's Powers	5
7	Protection of Third Parties	7
8	Application of Moneys	7
9	Further Assurance	7
10	Power of Attorney	7
11	Incorporation of Facility Agreement Provisions	8
12	Total Amount	9
13	Supplemental	9
14	Changes to the Parties	9
15	Governing Law	9
16	Enforcement	10

THIS FIRST PREFERRED MORTGAGE is made on 07 May 2018

(1)	KAMSARMAX TWO SHIPPING LTD, a corporation incorporated in the Republic of The Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH 96960 (the "Owner")

IN FAVOUR OF

(2)	HSCB BANK plc, acting through its office at 8 Canada Square, London, E14 5HQ, United Kingdom (the "Mortgagee")

BACKGROUND

(A)	The Owner is the sole owner of the whole of the vessel "EKATERINI" registered under the laws and flag of the Republic of The Marshall Islands with Official Number 7847.

(B)	By the Facility Agreement the Mortgagee agreed to make available to the Owner a dollar facility in one advance in an amount not exceeding $18,400,000. The form of the Facility Agreement without attachments is annexed to this Mortgage marked "A" and shall be read together with this Mortgage.

(C)	It is a condition precedent to the availability of the Facility under the Facility Agreement that the Owner executes, delivers and records this Mortgage in favour of the Mortgagee as security for the Secured Liabilities.

(D)	This Mortgage is the Mortgage referred to in the Facility Agreement.

(E)	The Owner has authorised the execution and delivery of this Mortgage under and pursuant to Chapter 3 of Title 47 of the Marshall Islands Revised Code as amended.

OPERATIVE PROVISIONS

1	DEFINITIONS AND INTERPRETATION

1.1	Definitions

In this Mortgage:

"Facility Agreement" means the facility agreement dated 26 April 2018 referred to in Recital (B) aboveand made between (i) the Owner as borrower and (ii) the Mortgagee as lender, as the same may from time to time be amended and/or supplemented.

"Party" means a party to this Mortgage.

"Secured Liabilities" means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Owner to the Mortgagee under or in connection with the Finance Documents or any of them.

"Ship" means the vessel "EKATERINI" registered in the ownership of the Owner under the laws and flag of the Republic of The Marshall Islands under Official Number 7847 and includes its engines, machinery, boats, tackle, outfit, spare gear, fuel, consumable or other stores, belongings and appurtenances whether on board or ashore and whether owned as at the date of this Mortgage or later acquired.

1.2	Defined expressions

Defined expressions in the Facility Agreement shall have the same meanings when used in this Mortgage unless the context otherwise requires or unless otherwise defined in this Mortgage.

1.3	Application of construction and interpretation provisions of Facility Agreement

Clause 1.2 (construction) of the Facility Agreement applies to this Mortgage as if it were expressly incorporated in it with any necessary modifications.

1.4	Inconsistency between Facility Agreement provisions and this Mortgage

This Mortgage shall be read together with the Facility Agreement, but in case of any conflict between the Facility Agreement and this Mortgage, unless expressly provided to the contrary in this Mortgage, the provisions of the Facility Agreement shall prevail to the extent permitted by Marshall Islands law.

1.5	Third party rights

Unless expressly provided to the contrary in a Finance Document, a person who is not a Party has no right to enforce any term of this Mortgage.

2	COVENANT TO PAY AND PERFORM

2.1	Covenant to pay

The Owner shall duly and punctually pay and discharge the Secured Liabilities in the manner provided for in the Finance Documents to which it is a party.

2.2	Covenant to perform

The Owner covenants with the Mortgagee to observe and perform all its obligations to the Mortgagee under the Finance Documents to which it is a party, other than those referred to in Clause 2.1 (Covenant to pay).

MORTGAGE

3.1

Mortgage

In consideration of the premises and other good and valuable consideration, the Owner grants, conveys, mortgages, pledges, confirms, assigns, transfers and sets over the whole of the Ship to the Mortgagee as a continuing security for the due and punctual payment and discharge by the Owner of the Secured Liabilities under Clause 2.1 (Covenant to pay) and the observation and performance by the Owner of all its obligations under Clause 2.2 (Covenant to perform).

3.2	Extent of property mortgaged

This Mortgage shall not cover property other than the Ship as the term "Vessel" is used in Sub division 2 of Section 308 of Chapter 3 of Title 47 of the Marshall Islands Revised Code as amended.

3.3	Void provisions

Any provision of this Mortgage construed as waiving the preferred status of this Mortgage shall, to such extent, be void and of no effect.

3.4	Continuing and additional security

(a)	This Mortgage shall remain in force until the end of the Security Period as a continuing security and, in particular:

(i)

the Security created by Clause 3.1 (Mortgage) will extend to the ultimate balance of all sums payable by the Owner under the Finance Documents to which it is a party, regardless of any intermediate payment or discharge in whole or in part;

(ii)

the Security created by Clause 3.1 (Mortgage), and the rights of the Mortgagee under this Mortgage, are only capable of being extinguished, limited or otherwise adversely affected by an express and specific term in a document signed by or on behalf of the Mortgagee;

(iii)

no failure or delay by or on behalf of the Mortgagee to enforce or exercise a Security created by Clause 3.1 (Mortgage) or a right of the Mortgagee under this Mortgage, and no act, course of conduct, acquiescence or failure to act (or to prevent the Owner from taking certain action) which is inconsistent with such a Security or such a right shall preclude or estop the Mortgagee (either permanently or temporarily) from enforcing or exercising it.

(b)

This Mortgage is in addition to and is not in any way prejudiced by, and shall not prejudice any guarantee or other Security or any other right of recourse now or subsequently held by the Mortgagee or any right of set-off or netting or rights to combine accounts in connection with the Finance Documents.

4	UNDERTAKINGS

4.1

General

The undertakings in this Clause 4 (Undertakings) remain in force throughout the Security Period except as the Mortgagee may otherwise permit.

4.2	Insurance and Ship undertakings

The Owner shall comply with the provisions of clause 20 (insurance undertakings) and clause 21 (general ship undertakings) of the Facility Agreement, all of which are expressly incorporated in this Mortgage with any necessary modifications.

4.3	Perfection of Mortgage

The Owner shall:

(a)

comply with and satisfy all the requirements and formalities established by Chapter 3 of Title 47 of the Marshall Islands Revised Code as amended and any other pertinent legislation of the Republic of The Marshall Islands to perfect this Mortgage as a legal, valid and enforceable first preferred mortgage and maritime lien upon the Ship; and

(b)	promptly provide the Mortgagee from time to time with evidence in such form as the Mortgagee requires that the Owner is complying with paragraph (a) of this Clause 4.3 (Perfection of Mortgage).

4.4	Notice of Mortgage

The Owner shall:

(a)	carry on board the Ship with its papers a certified copy of this Mortgage and cause that certified copy of this Mortgage to be exhibited to any person having business with the Ship

which might give rise to a lien on the Ship other than a lien for crew's wages and salvage and to any representative of the Mortgagee on demand; and

(b)	place and maintain in a conspicuous place in the navigation room and the Master's cabin of the Ship a framed printed notice in plain type in English of such size that the paragraph of reading matter shall cover a space not less than 6 inches wide and 9 inches high reading as follows:

"NOTICE OF MORTGAGE

This Vessel is covered by a First Preferred Mortgage to HSBC Bank plc under authority of Chapter 3 of Title 47 of the Marshall Islands Revised Code as amended. Under the terms of the said Mortgage neither the Owner nor any Charterer nor the Master of this Vessel nor any other person has any right, power or authority to create, incur or permit to be imposed upon this Vessel any lien whatsoever other than for crew's wages and salvage."

4.5	Negative pledge

(a)	The Owner shall not create or permit to subsist any Security over the Ship other than a Permitted Security.

(b)	Paragraph (a) above does not apply to any Permitted Security.

(c)	This Clause 4.5 (Negative pledge) is in addition to, and shall not be limited by, any provision of the Facility Agreement.

4.6

Disposals

The Owner shall not enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of the Ship or any part of the Ship. For the avoidance of doubt this restriction does not apply to any Charter of the Ship (other than a bareboat charter which requires the Lender's consent).

4.7	Protection of Mortgagee interests

The Owner shall not enter into any transaction, or do anything, which is contrary to, or which may adversely affect, the rights of the Mortgagee under this Mortgage.

5	PROTECTION OF SECURITY

5.1	Mortgagee's right to protect or maintain security

The Mortgagee may, but shall not be obliged to, take any action which it may reasonably think fit for the purpose of protecting or maintaining the Security created or intended to be created by this Mortgage.

5.2	No obligations imposed on Mortgagee

The Owner shall remain liable to perform all obligations connected with the Ship and the Mortgagee shall not, in any circumstances, have or incur any obligation of any kind in connection with the Ship other than in accordance with this Mortgage.

5.3	Mortgagee's right to insure, repair etc.

Without limiting the generality of Clause 5.1 (Mortgagee's right to protect or maintain security), if the Owner does not comply with Clause 4 (Undertakings), the Mortgagee may:

(a)	effect, replace and renew any Insurances;

(b)	arrange for the carrying out of such surveys and/or repairs of the Ship as it deems expedient or necessary; and

(c)	discharge any liabilities charged on the Ship, or otherwise relating to or affecting it, and/or take any measures which the Mortgagee may think expedient or necessary for the purpose of preventing its arrest and securing its release.

5.4	Release of Security

Upon repayment of the Loan together with accrued interest and all other amounts due under the Finance Documents, and subject to no Event of Default having occurred which is continuing, the Mortgagee shall, at the request and cost of the Owner, discharge this Mortgage.

6	ENFORCEABILITY AND MORTGAGEE'S POWERS

6.1	Right to enforce security

If an Event of Default occurs and is continuing and irrespective of whether a notice has been served under clause 24.21 (acceleration) of the Facility Agreement or a demand made under the Facility Agreement and without the necessity for the Mortgagee to serve any notice or take any other action or for any court order in any jurisdiction to the effect that an Event of Default has occurred or that the Security constituted by this Mortgage has become enforceable:

(a)	the Security constituted by this Mortgage shall immediately become enforceable for all purposes;

(b)	the Mortgagee shall be entitled then or at any later time or times to exercise the powers set out in Clause 6.2 (Right to take possession, sell etc.) and in any other Finance Document;

(c)	the Mortgagee shall be entitled then or at any later time or times to exercise the powers possessed by it as mortgagee of the Ship conferred by the law of any country or territory the courts of which have or claim any jurisdiction in respect of the Owner or the Ship; and

(d)	the Mortgagee shall be entitled to exercise all the rights and remedies in foreclosure and otherwise given to mortgagees by applicable law including the provisions of Chapter 3 of Title 47 of the Marshall Islands Revised Code as amended.

6.2	Right to take possession, sell etc.

If the Security constituted by this Mortgage has become enforceable, the Mortgagee shall be entitled then or at any later time or times:

(a)

to take possession of the Ship whether actually or constructively and/or otherwise to take control of the Ship wherever the Ship may be and cause the Owner or any other person in possession of the Ship forthwith upon demand to surrender the Ship to the Mortgagee without legal process and without the Mortgagee being liable for any losses caused by such actions or to account to the Owner in connection with the same;

(b)

to sell the Ship with or without prior notice to the Owner, and with or without the benefit of any Charter, by public auction or private contract at any time, at any place and upon any terms (including, without limitation, on terms that all or any part or parts of the purchase price be satisfied by shares, loan stock or other securities and/or be left outstanding as a debt, whether secured or unsecured and whether carrying interest or not) which the Mortgagee may think fit, with power for the Mortgagee to purchase the Ship at any such public auction and to set off the purchase price against all or any part of the Secured Liabilities;

(c)

to manage, insure, maintain and repair the Ship and to charter, employ, lay up or in any other manner whatsoever deal with the Ship, upon any terms and for any period which the Mortgagee may think fit, in all respects as if the Mortgagee were the owner of the Ship and without the Mortgagee being responsible for any loss incurred as a result of or in connection with any such action;

(d)	to collect, recover and give good discharge for any moneys or claims arising in relation to the Ship and to permit any brokers through whom collection or recovery is effected to charge the usual brokerage for the same;

(e)	to take over or commence or defend (if necessary using the name of the Owner) any claims or proceedings relating to, or affecting, the Ship which the Mortgagee may think fit and to abandon, release or settle in any way any such claims or proceedings; and

(f)	generally, to enter into any transaction or arrangement of any kind and to do anything in relation to the Ship which the Mortgagee may think fit.

6.3	No liability of Mortgagee

(a)	The Mortgagee shall not be obliged to:

(i)

check the nature or sufficiency of any payment received by it or him under this Mortgage; or

(ii)

preserve, exercise or enforce any right forming part of, or relating to, the Ship.

(b)	In addition to, and without limiting, any exclusion or limitation of liability of the Mortgagee under any Finance Document, the Mortgagee shall have no liability:

(i)

for any loss caused by an exercise of, or failure to exercise, rights under or enforcement of, or failure to enforce any Security created by this Mortgage;

(ii)

as mortgagee in possession or otherwise, to account for any income or principal amount which might have been produced or realised from the Ship; or

(iii)

as mortgagee in possession or otherwise, for any reduction in the value of the Ship.

6.4	No requirement to commence proceedings

The Mortgagee will not need to commence any proceedings under, or enforce any Security created by the Facility Agreement or any other Finance Document before commencing proceedings under, or enforcing any Security created by, this Mortgage.

6.5	Prior Security

(a)	At any time after the Security created by this Mortgage has become enforceable, the Mortgagee may:

(i)

redeem any prior Security over all or any part of the Ship;

(ii)

procure the transfer of that Security to itself; and/or

(iii)

settle the accounts of any prior mortgagee, chargee or encumbrancer and any accounts so settled will be, in the absence of manifest error, conclusive and binding on the Owner.

(b)	The Owner shall pay to the Mortgagee immediately upon demand the costs and expenses incurred by the Mortgagee in connection with any such redemption, settlement and/or transfer including the payment of any principal or interest.

7	PROTECTION OF THIRD PARTIES

No person dealing with the Mortgagee shall be concerned to enquire:

(a)	whether the rights conferred by or pursuant to any Finance Document are exercisable or have been properly exercised;

(b)	whether any Secured Liabilities remain owing;

(c)	whether any laws, directions, restrictions, consents and/or, regulations affecting the rights of the Mortgagee have been obtained or complied with; or

(d)	as to the application of any monies received by the Mortgagee.

8	APPLICATION OF MONEYS

All sums received by the Mortgagee:

(a)	in respect of a sale of the Ship;

(b)	in respect of net profits arising out of the employment of the Ship pursuant to paragraph (c) of Clause 6.2 (Right to take possession, sell etc.); or

(c)	in respect of any other transaction or arrangement under Clause 6.1 (Right to enforce security) or Clause 6.2 (Right to take possession, sell etc.),

shall be held by the Mortgagee:

(i)

first, to pay or discharge any expenses or liabilities (including any interest) which have been paid or incurred by the Mortgagee or any Delegate in or in connection with the exercise of its powers under this Mortgage; and

(ii)

second, for application in accordance with clause 28.2 (application of receipts; partial payments) of the Facility Agreement.

9	FURTHER ASSURANCE

Clause 19.20 (further assurance) of the Facility Agreement applies to this Mortgage as if it were expressly incorporated in it with any necessary modifications.

10	POWER OF ATTORNEY

10.1	Appointment

The Owner, by way of security for the performance of its obligations under this Mortgage, irrevocably appoints (with full power of substitution) the Mortgagee as its attorney-in-fact:

(a)	to do all acts and execute or sign all documents which the Owner itself can do and execute in relation to the Ship including, without limitation, all acts and documents necessary to sell the Ship by such means and on such terms as the Mortgagee may determine;

(b)	to do all acts and things and execute or sign all documents which the Owner is obliged to do, execute or sign under this Mortgage and which it has failed so to do, execute or sign immediately upon the Mortgagee's first written demand

Provided always that this power of attorney shall only be exercisable after the occurrence of an Event of Default which is continuing.

10.2	General power of attorney

The power of attorney constituted by Clause 10.1 (Appointment) shall be a general power of attorney.

10.3	Ratification of actions of attorney

The Owner ratifies and confirms, and agrees to ratify and confirm, any act, deed or document which the Mortgagee (or any delegate or substitute) reasonably does or executes pursuant to its terms.

10.4	Conclusiveness of exercise

The exercise of the power of attorney constituted by Clause 10.1 (Appointment) shall not put any person dealing with the Mortgagee (or any delegate or substitute) on enquiry whether, by its terms, the power of attorney is exercisable and the exercise by the Mortgagee (or any delegate or substitute) of its powers shall, as between the Mortgagee (or any delegate or substitute) and any third party (absent manifest error), be conclusive evidence of the Mortgagee's right (or the right of any delegate or substitute) to exercise the same.

10.5	Delegation

The Mortgagee may delegate to any person or persons all or any of the powers and discretions conferred on the Mortgagee by Clause 10 (Power of Attorney) and may do so on terms authorising successive sub-delegations.

10.6

Liability

The Mortgagee shall not be bound to supervise, or be in any way responsible for any damages, costs or losses incurred by reason of any omission or default on the part of, any such delegate or sub-delegate.

10.7

Duration

The power of attorney constituted by Clause 10.1 (Appointment) shall be granted for the duration of the Security Period.

11	INCORPORATION OF FACILITY AGREEMENT PROVISIONS

11.1	Incorporation of specific provisions

The following provisions of the Facility Agreement apply to this Mortgage as if they were expressly incorporated in this Mortgage with any necessary modifications:

clause 12.2 (tax gross-up);

clause 28.3 (no set-off by transaction obligors);

clause 31 (bail-in);

clause 32 (notices);

clause 34 (partial invalidity);

clause 35 (remedies and waivers);

clause 37 (irrevocable payment); and

clause 41 (counterparts).

11.2	Incorporation of general provisions

Clause 11.1 (Incorporation of specific provisions) is without prejudice to the application to this Mortgage of any provision of the Facility Agreement which, by its terms, applies or relates to the Finance Documents generally or this Mortgage specifically.

12	TOTAL AMOUNT

For the purpose of recording this Mortgage as required by Chapter 3 of Title 47 of the Marshall Islands Revised Code as amended, the total amount of the direct and contingent obligations secured by this Mortgage is $18,400,000 together with interest, fees and performance of mortgage covenants. The date of maturity of this Mortgage is 30 March 2023 and there is no separate discharge amount.

13	SUPPLEMENTAL

13.1	No restriction on other rights

Nothing in this Mortgage shall be taken to exclude or restrict any power, right or remedy which the Mortgagee may at any time have under:

(a)	any other Finance Document; or

(b)	the law of any country or territory the courts of which have or claim any jurisdiction in respect of the Owner or the Ship.

13.2	Exercise of other rights

The Mortgagee may exercise any right under this Mortgage before it has exercised any right referred to in paragraphs (a) or (b) of Clause 13.1 (No restriction on other rights).

13.3	Settlement or discharge conditional

Any settlement or discharge under this Mortgage between the Mortgagee and the Owner shall be conditional upon no security or payment to the Mortgagee by the Owner or any other person being set aside, adjusted or ordered to be repaid, whether under any insolvency law or otherwise.

14	CHANGES TO THE PARTIES

14.1

Owner

The Owner may not assign any of its rights or transfer any of its rights or obligations under this Deed.

14.2

Mortgagee

The Mortgagee may assign any of its rights under this Mortgage in accordance with the provisions of the Facility Agreement.

15	GOVERNING LAW

This Mortgage is governed by Marshall Islands law.

16	ENFORCEMENT

16.1	Jurisdiction

The Mortgagee reserves the rights:

(a)	to commence proceedings in relation to any matter which arises out of or in connection with this Mortgage in the courts of any country which have or claim jurisdiction to that matter; and

(b)	to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in the Marshall Islands or without commencing proceedings in the Marshall Islands.

16.2	Action against Ship

The rights referred to in Clause 16.1 (Jurisdiction) include the right of the Mortgagee to arrest and take action against the Ship at whatever place the Ship shall be found lying and for the purpose of any action which the Mortgagee may bring before the courts of that jurisdiction or other judicial authority and for the purpose of any action which the Mortgagee may bring against the Ship, any writ, notice, judgment or other legal process or documents may (without prejudice to any other method of service under applicable law) be served upon the Master of the Ship (or upon anyone acting as the Master) and such service shall be deemed good service on the Owner for all purposes.

16.3	Mortgagee's rights unaffected

Nothing in this Clause 16.3 (Mortgagee's rights unaffected) shall exclude or limit any right which the Mortgagee may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

This Mortgage has been executed by the duly authorised Attorney-in-Fact of the Owner on the date stated at the beginning of this Mortgage.

KAMSARMAX TWO SHIPPING LTD

By: /s/Stefania Karmiri Stefania Karmiri

"A"

Dated April 2018

$18,400,000

TERM LOAN FACILITY

KAMSARMAX TWO SHIPPING LTD
as Borrower

and

HSBC BANK plc
as Original Lender

FACILITY AGREEMENT

relating to
the financing of part of the constuction cost of
hull no. YZJ 1153 (tbn "EKATERINI") currently under construction at
Jiangsu NewYangzi Shipbuilding Co., Ltd., Jiangsu Yangzijiang Shipbuilding Co., Ltd. and Jiangsu
Tianyuan Marine Import & Export Co., Ltd

Index

Clause		Page
Section 1 Interpretation		2
1	Definitions and Interpretation	2
Section 2 The Facility		23
2	The Facility	23
3	Purpose	23
4	Conditions of Utilisation	23
Section 3 Utilisation		25
5	Utilisation	25
Section 4 Repayment, Prepayment and Cancellation		27
6	Repayment	27
7	Prepayment and Cancellation	27
Section 5 Costs of Utilisation		30
8	Interest	30
9	Interest Periods	31
10	Changes to the Calculation of Interest	32
11	Fees	33
Section 6 Additional Payment Obligations		34
12	Tax Gross Up and Indemnities	34
13	Increased Costs	37
14	Other Indemnities	39
15	Mitigation by the Lender	41
16	Costs and Expenses	42
Section 7 Representations, Undertakings and Events of Default		43
17	Representations	43
18	Information Undertakings	48
19	General Undertakings	50
20	Insurance Undertakings	56
21	General Ship Undertakings	61
22	Security Cover	67
23	Accounts and application of Earnings	68
24	Events of Default	69
Section 8 The Lender, the Borrower and the Reference Banks		74
25	Changes to the Lender	74
26	Changes to the Transaction Obligors	75
27	The Reference Banks	75
Section 9 Administration		76
28	Payment Mechanics	76
29	Set-Off	77
30	Conduct of business by the Lender	77
31	Bail-In	78
32	Notices	78
33	Calculations and Certificates	80
34	Partial Invalidity	80
35	Remedies and Waivers	80
36	Settlement or Discharge Conditional	81
37	Irrevocable Payment	81
38	Amendments	81

39	Confidential Information	81
40	Confidentiality of Funding Rates and Reference Bank Quotations	84
41	Counterparts	85
Section 10 Governing Law and Enforcement		86
42	Governing Law	86
43	Enforcement	86

Schedules

Schedule 1 The Parties	87
Part A The Borrower	87
Part B The Original Lender	88
Schedule 2 Conditions Precedent	89
Part A Conditions Precedent to Initial Utilisation Request	89
Part B Conditions Precedent to Utilisation	92
Part C Conditions subsequent relevant to Qualified IPO	94
Schedule 3 Requests	96
Part A Utilisation Request	96
Part B Selection Notice	98
Schedule 4 Timetables	99

Execution

Execution Page	100

THIS AGREEMENT is made on April 2018

PARTIES

(1)	KAMSARMAX TWO SHIPPING LTD, a corporation incorporated in the Republic of The Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH 96960 as borrower (the "Borrower")

(2)	HSBC BANK plc, as lender (the "Original Lender")

BACKGROUND

The Lender has agreed to make available to the Borrower a secured loan facility of up to the lesser of (i) $18,400,000, (ii) 70 per cent. of the Initial Market Value and (iii) 70 per cent. of the Contract Cost for the purpose of financing part of the construction cost of the Ship which is to be constructed by the Builder, and to be purchased by the Borrower, pursuant to the Shipbuilding Contract.

OPERATIVE PROVISIONS

SECTION 1

INTERPRETATION

1	DEFINITIONS AND INTERPRETATION

1.1	Definitions

In this Agreement:

"Account Bank" means HSBC Bank plc acting through its office at 8 Canada Square, London, E14 5HQ, United Kingdom or any replacement bank or other financial institution as may be approved by the Lender.

"Accounts" means the Earnings Account and the Minimum Liquidity Account.

"Account Security" means a document creating Security over any Account in agreed form.

"Affiliate" means:

(a)

in respect of Clauses 14.2(d) (Other indemnities), 17.30 (Sanctions), 19.23 (Sanctions), 21.10 (Compliance with laws etc.), 21.12 (Sanctions and Ship trading), means a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified; and

(b)

in any other case, 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 Brokers" means any firm or firms of insurance brokers approved in writing by the Lender.

"Approved Classification" means, as at the date of this Agreement, DNV-GL or the equivalent classification with another Approved Classification Society.

"Approved Classification Society" means, as at the date of this Agreement, DNV-GL or any other classification society which is a member of the International Association of Classification Societies approved in writing by the Lender.

"Approved Flag" means, as at the date of this Agreement, the flag of the Marshall Islands or such other flag approved in writing by the Lender.

"Approved Manager" means, as at the date of this Agreement, Eurobulk Ltd, a corporation incorporated in the Republic of Liberia, whose registered office is at 80 Broad street, Monrovia, Liberia and its principal branch at 4 Messogiou & Evropis Street, Maroussi, 151 -24, Greece, or Eurobulk (Far East) Ltd Philippines, a corporation incorporated in the Philippines, whose registered office and its principal office is at of 10th Floor Maria Natividad Building, 470 T.M Kalaw Cor Cortada Sts, Ermita 1000, Manila, Philippines, or any other person approved in writing by the Lender as the commercial manager and/or technical manager of the Ship.

"Approved Valuer" means Howe Robinson of London, England, Barry Rogliano Sales, Fearnleys of Oslo, Norway and Hartland Shipping Services Limited and any other reputable, independent and first class firm or firms of independent sale and purchase shipbrokers approved in writing by the Lender.

"Assignment Agreement" means an agreement in the form agreed between the Existing Lender and the relevant assignee for the purpose of Clause 25 (Changes to the Lender).

"Authorisation" means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation, legalisation or registration.

"Availability Period" means the period from and including the date of this Agreement to and including 30 June 2018, or such other later date as the Lender may, in its absolute discretion, approve in writing.

"Available Facility" means the Commitment minus:

(a)

the amount of the outstanding Loan; and

(b)

in relation to any proposed Utilisation, the amount of the Loan that is due to be made on or before the proposed Utilisation Date.

"Bail-In Action" means the exercise of any Write-down and Conversion Powers.

"Bail-In Legislation" means:

(a)

(b)

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

"Break Costs" means the amount (if any) by which:

(a)

the interest which the Lender should have received for the period from the date of receipt of all or any part of the Loan or an Unpaid Sum to the last day of the current Interest Period in relation to the Loan, the relevant part of the Loan or that Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

exceeds

(b)

the amount which the Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

"Builder" means Jiangsu NewYangzi Shipbuilding Co., Ltd., Jiangsu Yangzijiang Shipbuilding Co., Ltd. and Jiangsu Tianyuan Marine Import & Export Co., Ltd, all companies organized and existing under the laws of the Republic of Peoples' Republic of China, having their principal offices at Jiangyin-Jingjiang Industry Zone, Jingjiang City, Jiangsu Province, 214532, the People's Republic of China, Erxu Harbour, Jiangyin-Jingjiang Industry Zone, Jiangyin City, Jiangsu Province, 214431, the People's Republic of China and Room 1309, No.217 and North Zhongshan Road, Nanjing, Jiangsu Province, the People's Republic of China respectively.

"Business Day" means a day (other than a Saturday or Sunday) on which banks are open for general business in London and Athens and in respect of a day on which a payment is required to be made under a Finance Document, also in New York.

"Charter" means any charter relating to the Ship, or other contract for its employment, whether or not already in existence.

"Charter Guarantee" means any guarantee, bond, letter of credit or other instrument (whether or not already issued) supporting a Charter.

"Charterparty Assignment" means the assignment creating security over the rights of the Borrower under any Charter the duration of which (without taking into account any optional extensions) exceeds or is capable of exceeding 12 months and any Charter Guarantee in respect thereof in agreed form.

"Code" means the US Internal Revenue Code of 1986.

"Commitment" means $18,400,000, to the extent not cancelled or reduced under this Agreement.

"Confidential Information" means all information relating to any Transaction Obligor, the Finance Documents or the Facility of which the Lender becomes aware in its capacity as, or for the purpose of becoming, the Lender or which is received by the Lender in relation to, or for the purpose of becoming the Lender under, the Finance Documents or the Facility from any Transaction Obligor or any of its advisers in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes:

(a)

information that:

(i)

is or becomes public information other than as a direct or indirect result of any breach by the Lender of Clause 39 (Confidential Information);

(ii)

is identified in writing at the time of delivery as non-confidential by any Transaction Obligor or any of its advisers; or

(iii)

is known by the Lender before the date the information is disclosed to it by any Transaction Obligor or any of its advisers or is lawfully obtained by the Lender after that date, from a source which is, as far as the Lender is aware, unconnected with any Transaction Obligor and which, in either case, as far as the Lender is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality; or

(iv)

is reported by any Transaction Obligor to the US SEC in compliance with the relevant reporting obligations of the Corporate Guarantor; and

(b)

any Funding Rate or Reference Bank Quotation.

"Confidentiality Undertaking" means a confidentiality undertaking in substantially the appropriate form recommended by the LMA from time to time or in any other form agreed between the Borrower and the Lender.

"Contract Cost" means the price payable for the Ship as the date of this Agreement, being in the amount of $26,300,000.

"Corporate Guarantee" means each of Corporate Guarantee A and Corporate Guarantee B, and, in the plural means both of them.

"Corporate Guarantee A" means a corporate guarantee, executed or to be executed by Euroseas, in agreed form.

"Corporate Guarantee B" means a corporate guarantee, executed or to be executed by Eurodry, in agreed form.

"Corporate Guarantor" means:

(a)

for the period commencing on the date of this Agreement and ending on the Substitute Date, Euroseas; and

(b)

from the date of the Substitute Date and at all times thereafter, Eurodry.

"Default" means an Event of Default or a Potential Event of Default.

"Delegate" means any delegate, agent, attorney or co-trustee appointed by the Lender.

"Delivery Date" means the date on which the Ship is delivered by the Builder to the Borrower under the Shipbuilding Contract, as evidenced by the relevant protocol of delivery and acceptance.

"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 connection with the Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties or, if applicable, any Transaction Obligor; 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 or, if applicable, any Transaction Obligor preventing that, or any other, Party or, if applicable, any Transaction Obligor:

(i)

from performing its payment obligations under the Finance Documents to which it is a party; or

(ii)

from communicating with other Parties or, if applicable, any Transaction Obligor in accordance with the terms of the Finance Documents,

and which (in either such case) is not caused by, and is beyond the control of, the Party or, if applicable, any Transaction Obligor whose operations are disrupted.

"Document of Compliance" has the meaning given to it in the ISM Code.

"dollars" and "$" mean the lawful currency, for the time being, of the United States of America.

"Earnings" means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Borrower or the Lender and which arise out of or in connection with or relate to the use or operation of the Ship, including (but not limited to):

(a)

the following, save to the extent that any of them is, with the prior written consent of the Lender, pooled or shared with any other person:

(i)

all freight, hire and passage moneys including, without limitation, all moneys payable under, arising out of or in connection with a Charter or a Charter Guarantee;

(ii)

the proceeds of the exercise of any lien on sub-freights;

(iii)

compensation payable to the Borrower or the Lender in the event of requisition of the Ship for hire or use;

(iv)

remuneration for salvage and towage services;

(v)

demurrage and detention moneys;

(vi)

without prejudice to the generality of sub-paragraph (i) above, damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Ship;

(vii)

all moneys which are at any time payable under any Insurances in relation to loss of hire;

(viii)

all monies which are at any time payable to the Borrower in relation to general average contribution; and

(b)

if and whenever the Ship is employed on terms whereby any moneys falling within sub-paragraphs (i) to (viii) of paragraph (a) above are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Ship.

"Earnings Account" means:

(a)

an account in the name of the Borrower with the Account Bank designated "Earnings Account";

(b)

any other account in the name of the Borrower with the Account Bank which may, with the prior written consent of the Lender, be opened in the place of the account referred to in paragraph (a) above, irrespective of the number or designation of such replacement account; or

(c)

any sub-account of any account referred to in paragraphs (a) or (b) above.

"EEA Member Country" means any member state of the European Union, Iceland, Liechtenstein and Norway.

"Environmental Approval" means any present or future permit, ruling, variance or other Authorisation required under Environmental Laws.

"Environmental Claim" means any claim by any governmental, judicial or regulatory authority or any other person which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law and, for this purpose, "claim" includes a claim for damages, compensation, contribution, injury, fines, losses and penalties or any other payment of any kind, including in relation to clean-up and removal, whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.

"Environmental Incident" means:

(a)

any release, emission, spill or discharge of Environmentally Sensitive Material whether within the Ship or from the Ship into any other vessel or into or upon the air, water, land or soils (including the seabed) or surface water; or

(b)

any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, water, land or soils (including the seabed) or surface water from a vessel other than the Ship and which involves a collision between the Ship and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Ship is actually or potentially liable to be arrested, attached, detained or injuncted and/or the Ship and/or any Transaction Obligor and/or any operator or manager of the Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

(c)

any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, water, land or soils (including the seabed) or surface water otherwise than from the Ship and in connection with which the Ship is actually or potentially liable to be arrested and/or where any Transaction Obligor and/or any operator or manager of the Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action.

"Environmental Law" means any present or future law relating to pollution or protection of human health or the environment, to conditions in the workplace, to the carriage, generation, handling, storage, use, release or spillage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material.

"Environmentally Sensitive Material" means and includes all contaminants, oil, oil products, toxic substances 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.

"EU Bail-In Legislation Schedule" means the document described as such and published by the LMA from time to time.

"Eurodry" means Eurodry Ltd., a corporation incorporated in the Republic of The Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH 96960.

"Euroseas" means Euroseas Ltd., a corporation incorporated in the Republic of The Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH 96960.

"Event of Default" means any event or circumstance specified as such in Clause 24 (Events of Default).

"Facility" means the term loan facility made available under this Agreement as described in Clause 2 (The Facility).

"Facility Office" means the office or offices through which the Lender will perform its obligations under this Agreement.

"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 paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.

"FATCA Deduction" means a deduction or withholding from a payment under a Finance Document required by FATCA.

"FATCA Exempt Party" means a Party that is entitled to receive payments free from any FATCA Deduction.

"Finance Document" means:

(a)

this Agreement;

(b)

the Utilisation Request;

(c)

any Security Document;

(d)

any other document which is executed for the purpose of establishing any priority or subordination arrangement in relation to the Secured Liabilities; or

(e)

any other document designated as such by the Lender and the Borrower.

"Financial Indebtedness" means any indebtedness for or in relation to:

(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 relation to any lease or hire purchase contract which would, in accordance with GAAP, be treated as a balance sheet liability;

(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 relation to 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 relation to any guarantee or indemnity for any of the items referred to in paragraphs (a) to (h) above.

"Funding Rate" means any individual rate notified by the Lender to the Borrower pursuant to any Finance Document.

"GAAP" means generally accepted accounting principles in the United States of America.

"General Assignment" means the general assignment creating Security over the Ship's Earnings, its Insurances and any Requisition Compensation in relation to the Ship, in agreed form.

"Governmental Authority" means the government of any jurisdiction, or any political subdivision thereof, whether provincial, state or local, and any department, ministry, agency, instrumentality, authority, body, court, central bank or other entity lawfully exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

"Holding Company" means, in relation to a person, any other person in relation to which it is a Subsidiary.

"Indemnified Person" has the meaning given to it in Clause 14.2 (Other indemnities).

"Initial Market Value" means the Market Value of the Ship calculated in accordance with the valuation relative thereto referred to in paragraph 6.1 of Part A of Schedule 2 (Conditions Precedent).

"Insurances" means:

(a)

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

(b)

all rights and other assets relating to, or derived from, any of such policies, contracts or entries, including any rights to a return of premium and any rights in relation to any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Agreement.

"Interest Payment Date" has the meaning given to it in paragraph (a) of Clause 8.2 (Payment of interest).

"Interest Period" means, in relation to the Loan or any part of the Loan, each period determined in accordance with Clause 9 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default interest).

"Interpolated Screen Rate" means, in relation to the Loan or any part of the Loan, the rate (rounded to the same number of decimal places as the two relevant Screen Rates) 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 the Interest Period of the Loan or that part of the Loan; and

(b)

the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of the Loan or that part of the Loan,

each as of the Specified Time for dollars.

"ISM Code" means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (including the guidelines on its implementation), adopted by the International Maritime Organisation, as the same may be amended or supplemented from time to time.

"ISPS Code" means the International Ship and Port Facility Security (ISPS) Code as adopted by the International Maritime Organization's (IMO) Diplomatic Conference of December 2002, as the same may be amended or supplemented from time to time.

"ISSC" means an International Ship Security Certificate issued under the ISPS Code.

"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 Acts, the possibility that an undertaking to assume liability for or indemnify a person against non-payment of UK stamp duty may be void and defences of set-off or counterclaim;

(c)

similar principles, rights and defences under the laws of any Relevant Jurisdiction; and

any other matters which are set out as qualifications or reservations as to matters of law of general application in any legal opinion delivered pursuant to Clause 4 (Conditions of Utilisation).

"Lender" means:

(a)

the Original Lender; and

(b)

any bank, financial institution, trust, fund or other entity which has become the Lender in accordance with Clause 25 (Changes to the Lender),

which in each case has not ceased to be a Party in accordance with this Agreement.

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

(a)

the applicable Screen Rate as of the Specified Time for dollars and for a period equal in length to the Interest Period of the Loan or that part of the Loan; or

(b)

as otherwise determined pursuant to Clause 10.1 (Unavailability of Screen Rate), and if, in either case, that rate is less than zero, LIBOR shall be deemed to be zero.

"LMA" means the Loan Market Association or any successor organisation.

"Loan" means the loan to be made available under the Facility or the aggregate principal amount outstanding for the time being of the borrowings under the Facility and a "part of the Loan" means any part of the Loan as the context may require.

"Major Casualty" means any casualty to the Ship in relation to which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $900,000 or the equivalent in any other currency.

"Management Agreement" means the agreement entered into between the Borrower and the Approved Manager regarding the commercial and/or technical management of the Ship.

"Manager's Undertaking" means the letter of undertaking from the Approved Manager subordinating the rights of such Approved Manager against the Ship and the Borrower to the rights of the Lender in agreed form.

"Margin" means 2.80 per cent. per annum.

"Market Value" means, in relation to the Ship or any other vessel, at any date, an amount determined by the Lender as being an amount equal to:

(a)

the market value of the Ship or vessel shown by the average of two dollar valuations (and in the case of the Initial Market Value determination shown by one valuation) each prepared:

(i)

as at a date not more than 20 days previously;

(ii)

by an Approved Valuer;

(iii)

with or without physical inspection of the Ship or vessel (as the Lender may require); and

(iv)

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 Charter or Security in respect of the Ship.

"Material Adverse Effect" means a material adverse change of circumstances or any event or series of events which, in the reasonable opinion of the Lender, is likely to have a material adverse effect on the business, assets, financial condition or credit worthiness of the Borrower or its ability to repay the Loan.

"Minimum Liquidity Account" means:

(a)

an account in the name of the Borrower with the Account Bank designated "Minimum Liquidity Account";

(b)

any other account in the name of the Borrower with the Account Bank which may, with the prior written consent of the Parties, be opened in the place of the account referred to in paragraph (a) above, irrespective of the number or designation of such replacement account; or

(c)

any sub-account of any account referred to in paragraphs (a) or (b) above.

"Month" means 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 an Interest 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 Interest Period is to end.

The above rules will only apply to the last Month of any period.

"Mortgage" means the first priority or (as applicable) preferred ship mortgage on the Ship in accordance with the laws of the applicable Approved Flag, and if required pursuant to the laws of the relevant Approved Flag a deed of covenant collateral thereto, each in agreed form.

"Nominated Family" means the family disclosed in writing to the Lender prior to the date of this Agreement and "members of the Nominated Family" shall be construed accordingly.

"OFAC" means the Office of Foreign Assets Control of the US Department of the Treasury.

"Original Jurisdiction" means the jurisdiction under whose laws the Borrower is incorporated as at the date of this Agreement.

"Participating Member State" means any member state of the European Union that has the euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.

"Party" means a party to this Agreement.

"Permitted Charter" means

(a)

a Qualifying Charter; or

(b)

any other Charter:

(i)

which is a time, voyage or consecutive voyage charter;

(ii)

the duration of which does not exceed and is not capable of exceeding, by virtue of any optional extensions, 12 months plus a redelivery allowance of not more than 30 days;

(iii)

which is entered into on bona fide arm's length terms at the time at which the Ship is fixed; and

(iv)

in relation to which not more than two months' hire is payable in advance,

and any other Charter which is approved in writing by the Lender.

"Permitted Financial Indebtedness" means any Financial Indebtedness incurred under the Finance Documents.

"Permitted Security" means:

(a)

Security created by the Finance Documents;

(b)

any netting or set-off arrangement entered into by any Transaction Obligor in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;

(c)

liens for unpaid master's and crew's wages in accordance with first class ship ownership and management practice and not being enforced through arrest;

(d)

liens for salvage;

(e)

liens for master's disbursements incurred in the ordinary course of trading in accordance with first class ship ownership and management practice and not being enforced through arrest; and

(f)

any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Ship:

(i)

not as a result of any default or omission by the Borrower;

(ii)

not being enforced through arrest; and

(iii)

subject, in the case of liens for repair or maintenance, to Clause 21.16 (Restrictions on chartering, appointment of managers etc.),

provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested in good faith by appropriate steps).

"Potential Event of Default" means any event or circumstance specified in Clause 24 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

"Prohibited Person" means any person (whether designated by name or by reason of being included in a class of persons) that is, or is owned or controlled by Persons that are:

(a)

the target of Sanctions; or

(b)

located, organised or resident in a country or territory that is, or whose government is, the target of Sanctions (currently, the Crimea region, Cuba, Iran, North Korea and Syria).

"Qualified IPO" means the initial public offering in respect of the issued share capital of Eurodry on the Nasdaq Stock Market or a stock exchange acceptable to the Lender in its absolute discretion.

"Qualifying Charter" means a time charter for the Ship with a duration (without taking account of any optional extension periods) of at least 24 months, with a charterer acceptable to the Lender in its absolute discretion acting reasonably and otherwise on such terms and conditions as may be approved in writing by the Lender in its absolute discretion acting reasonably.

"Quotation Day" means, in relation to any period for which an interest rate is to be determined, two Business Days before the first day of that period unless market practice differs in the Relevant Interbank Market in which case the Quotation Day will be determined by the Lender in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).

"Receiver" means a receiver or receiver and manager or administrative receiver of the whole or any part of the Security Assets.

"Reference Bank Quotation" means any quotation supplied to the Lender by a Reference Bank.

"Reference Bank Rate" means the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Lender at its request by the Reference Banks:

(a)

if:

(i)

the Reference Bank is a contributor to the Screen Rate; and

(ii)

it consists of a single figure,

as the rate (applied to the relevant Reference Bank and the relevant currency and period) which contributors to the Screen Rate are asked to submit to the relevant administrator; or

(b)

in any other case, as the rate at which the relevant Reference Bank could fund itself in dollars for the relevant period with reference to the unsecured wholesale funding market.

"Reference Banks" means the principal London offices of any three banks from the ICE LIBOR panel or such other entities as may be appointed by the Lender in consultation with the Borrower.

"Related Fund" in relation to a fund (the "first fund"), means a fund which is managed or advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or investment adviser is an Affiliate of the investment manager or investment adviser of the first fund.

"Relevant Interbank Market" means the London interbank market.

"Relevant Jurisdiction" means, in relation to a Transaction Obligor:

(a)

Its Original Jurisdiction;

(b)

any jurisdiction where any asset (other than the Ship) subject to, or intended to be subject to, any of the Transaction Security created, or intended to be created, by it is situated and in case of the Ship the flag of the Ship;

(c)

any jurisdiction where it conducts its business; and

(d)

the jurisdiction whose laws govern the perfection of any of the Security Documents entered into by it.

"Repayment Date" means each date on which a Repayment Instalment is required to be paid under Clause 6.1 (Repayment of Loan).

"Repayment Instalment" has the meaning given to it in Clause 6.1 (Repayment of Loan).

"Repeating Representation" means each of the representations set out in Clause 17 (Representations) except Clause 17.10 (Insolvency), Clause 17.11 (No filing or stamp taxes) and Clause 17.12 (Deduction of Tax) and any representation of any Transaction Obligor made in any other Finance Document that is expressed to be a "Repeating Representation" or is otherwise expressed to be repeated.

"Representative" means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.

"Requisition" means:

(a)

any expropriation, confiscation, requisition (excluding a requisition for hire or use which does not involve a requisition for title) or acquisition of the Ship, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected (whether de jure or de facto) by any government or official authority or by any person or persons claiming to be or to represent a government or official authority; and

(b)

any capture or seizure of the Ship (including any hijacking or theft) by any person whatsoever.

"Requisition Compensation" includes all compensation or other moneys payable to the Borrower by reason of any Requisition or any arrest or detention of the Ship in the exercise or purported exercise of any lien or claim.

"Resolution Authority" means any body which has authority to exercise any Write-down and Conversion Powers.

"Safety Management Certificate" has the meaning given to it in the ISM Code.

"Safety Management System" has the meaning given to it in the ISM Code.

"Sanctions" means the sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by any of the Sanctions Authorities as applicable to any Transaction Obligor.

"Sanctions Authorities" means:

(a)

the United States of America;

(b)

the United Nations;

(c)

the European Union;

(d)

the United Kingdom;

(e)

Hong Kong; or

(f)

the respective Governmental Authorities of any of the foregoing, including without limitation, OFAC, the US Department of State and Her Majesty's Treasury.

"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 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 Lender may specify another page or service displaying the relevant rate after consultation with the Borrower.

"Secured Liabilities" means all present and future obligations and liabilities, (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of each Transaction Obligor to the Lender under or in connection with each Finance Document to which each is a party.

"Security" means a mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having the effect of conferring security.

"Security Assets" means all of the assets of the Transaction Obligors which from time to time are, or are expressed to be, the subject of the Transaction Security.

"Security Cover Ratio" means, at any relevant time, the aggregate of (i) the Market Value of the Ship, (ii) the net realisable value of any additional Security provided at that time under Clause 22.1 (Minimum required security cover), expressed as a percentage of the Loan.

"Security Document" means:

(a)

any Corporate Guarantee;

(b)

the Shares Security;

(c)

the Mortgage;

(d)

the General Assignment;

(e)

the Account Security;

(f)

the Charterparty Assignment;

(g)

any Manager's Undertaking;

(h)

any other document (whether or not it creates Security) which is executed as security for the Secured Liabilities; or

(i)

any other document designated as such by the Lender and the Borrower.

"Security Period" means the period starting on the date of this Agreement and ending on the date on which the Lender is satisfied that there is no outstanding Commitment in force and that the Secured Liabilities have been irrevocably and unconditionally paid and discharged in full.

"Security Property" means:

(a)

the Transaction Security expressed to be granted in favour of the Lender and all proceeds of that Transaction Security; and

(b)

all obligations expressed to be undertaken by a Transaction Obligor to pay amounts in relation to the Secured Liabilities to the Lender and secured by the Transaction Security together with all representations and warranties expressed to be given by a Transaction Obligor or any other person in favour of the Lender.

"Selection Notice" means a notice substantially in the form set out in Part B of Schedule 3 (Requests) given in accordance with Clause 9 (Interest Periods).

"Shareholder" means:

(a)

for the period commencing on the date of this Agreement and ending on the Substitute Date, Euroseas; and

(b)

from date of the Substitute Date and at all times thereafter, Eurodry.

"Shares Security" means:

(a)

a document creating Security over the share capital in the Borrower, to be executed by Eurodry pursuant to the terms of Clause 4.5(a) (Conditions subsequent relevant to Qualified IPO) as of the date of the Substitute Date;

(b)

if the Substitute Date does not occur pursuant to the terms of Clause 4.5(a) (Conditions subsequent relevant to Qualified IPO), a document creating Security over the share capital in the Borrower, to be executed by Euroseas pursuant to the terms and conditions of clause 11.14 (Shares security) of Corporate Guarantee A,

in each case, in agreed form.

"Ship" means the Kamsarmax bulk carrier type of vessel, having Builder's hull number YZJ 1153, which is to be constructed by the Builder for, and to be purchased by, the Borrower under the Shipbuilding Contract and which, on delivery, is to be registered in the name of the Borrower under an Approved Flag with the name "EKATERINI".

"Shipbuilding Contract" means the shipbuilding contract dated 1 April 2014 and made between (a) the Builder and (b) the Borrower for the construction by the Builder of the Ship and its purchase by the Borrower as from time to time amended and/or supplemented.

"Specified Time" means a day or time determined in accordance with Schedule 4 (Timetables).

"Spin-Off" means the transfer of shares of all dry bulk vessel owning Subsidiaries currently owned directly or indirectly by Euroseas to Eurodry (other than as disclosed to the Lender as of the date of this Agreement).

"Subsidiary" means a subsidiary undertaking within the meaning of section 1162 of the Companies Act 2006.

"Substitute Date" means the date on which the Lender confirms in writing to the Borrower that all the conditions subsequent under Clause 4.5(a) (Conditions subsequent relevant to Qualified IPO) have been satisfied.

"Tax" means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

"Tax Credit" has the meaning given to it in Clause 12.1 (Definitions).

"Tax Deduction" has the meaning given to it in Clause 12.1 (Definitions).

"Tax Payment" has the meaning given to it in Clause 12.1 (Definitions).

"Termination Date" means the date falling fifty nine (59) Months from the Utilisation Date.

"Third Parties Act" has the meaning given to it in Clause 1.5 (Third party rights).

"Total Loss" means:

(a)

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

(b)

any Requisition of the Ship unless the Ship is returned to the full control of the Borrower within 30 days of such Requisition.

"Total Loss Date" means, in relation to the Total Loss of the Ship:

(a)

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

(b)

in the case of a constructive, compromised, agreed or arranged total loss of the Ship, the earlier of:

(i)

the date on which a notice of abandonment is given (or deemed or agreed to be given) to the insurers; and

(ii)

the date of any compromise, arrangement or agreement made by or on behalf of the Borrower with the Ship's insurers in which the insurers agree to treat the Ship as a total loss; and

(c)

in the case of any other type of Total Loss, the date (or the most likely date) on which it appears to the Lender that the event constituting the total loss occurred.

"Transaction Document" means:

(a)

a Finance Document;

(b)

any Charter (including, without limitation, the Qualifying Charter); or

(c)

any other document designated as such by the Lender and the Borrower.

"Transaction Obligor" means each of the Borrower, the Corporate Guarantor, the Shareholder and any Approved Manager and, in the plural, means all of them.

"Transaction Security" means the Security created or evidenced or expressed to be created or evidenced under the Security Documents.

"Transfer Date" means, in relation to an assignment, the later of:

(a)

the proposed transfer date specified in the Assignment Agreement; and

(b)

the date on which the parties to the Assignment Agreement have all executed, and agreed to be bound by, the Assignment Agreement.

"Unpaid Sum" means any sum due and payable but unpaid by a Transaction Obligor in accordance with the applicable provisions of the Finance Documents to which any of them is a party.

"US" means the United States of America.

"US Tax Obligor" means:

(a)

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

(b)

a person some or all of whose payments under the Finance Documents to which it is a party are from sources within the US for US federal income tax purposes.

"Utilisation" means a utilisation of the Facility.

"Utilisation Date" means the date on which the Loan is to be made.

"Utilisation Request" means a notice substantially in the form set out in Part A of Schedule 3 (Requests).

"VAT" means:

(a)

any tax imposed in compliance with the Council Directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112); and

(b)

any other tax of a similar nature, whether imposed in a member state of the European Union in substitution for, or levied in addition to, such tax referred to in paragraph (a) above, or imposed elsewhere.

"Write-down and Conversion Powers" means:

(a)

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

(b)

in relation to any other applicable Bail-In Legislation:

(i)

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

(ii)

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

1.2	Construction

(a)	Unless a contrary indication appears, a reference in this Agreement to:

(i)

the "Account Bank", the "Lender", any "Obligor", any "Party", any "Transaction Obligor" or any other person shall be construed so as to include its successors in title and permitted assigns;

(ii)

"assets" includes present and future properties, revenues and rights of every description;

(iii)

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

(iv)

"document" includes a deed and also a letter, fax, email or telex;

(v)

"expense" means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable Tax including VAT (if applicable);

(vi)

a "Finance Document", a "Security Document" or "Transaction Document" or any other agreement or instrument is a reference to that Finance Document, Security Document or Transaction Document or other agreement or instrument as amended, novated, supplemented, extended or restated;

(vii)

"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;

(viii)

"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;

(ix)

"proceedings" means, in relation to any enforcement provision of a Finance Document, proceedings of any kind, including an application for a provisional or protective measure;

(x)

a "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);

(xi)

a "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;

(xii)

a provision of law is a reference to that provision as amended or re-enacted;

(xiii)

a time of day is a reference to London time;

(xiv)

any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall, in respect of a jurisdiction other than England, be deemed to include that which most nearly approximates in that jurisdiction to the English legal term;

(xv)

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

(xvi)

"including" and "in particular" (and other similar expressions) shall be construed as not limiting any general words or expressions in connection with which they are used.

(b)	The determination of the extent to which a rate is "for a period equal in length" to an Interest Period shall disregard any inconsistency arising from the last day of that Interest Period being determined pursuant to the terms of this Agreement.

(c)	Section, Clause and Schedule headings are for ease of reference only and are not to be used for the purposes of construction or interpretation of the Finance Documents.

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

(e)	A Potential Event of Default and an Event of Default is "continuing" if it has not been remedied or waived.

1.3	Construction of insurance terms

In this Agreement:

"approved" means, for the purposes of Clause 20 (Insurance Undertakings), approved in writing by the Lender.

"excess risks" means the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Ship in consequence of its insured value being less than the value at which the Ship is assessed for the purpose of such claims.

"obligatory insurances" means all insurances effected, or which the Borrower is obliged to effect, under Clause 20 (Insurance Undertakings) or any other provision of this Agreement or of another Finance Document.

"policy" includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms.

"protection and indemnity risks" means the usual risks covered by a protection and indemnity association managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02) (1/11/03), clause 8 of the Institute Time Clauses (Hulls) (1/10/83) (1/11/95) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision.

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

1.4	Agreed forms of Finance Documents

References in Clause 1.1 (Definitions) to any Finance Document being in "agreed form" are to that Finance Document:

(a)	in a form attached to a certificate dated the same date as this Agreement (and signed by the Borrower and the Lender); or

(b)	in any other form agreed in writing between the Borrower and the Lender.

1.5	Third party rights

(a)	Unless expressly provided to the contrary in a Finance Document, 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 to enjoy the benefit of any term of this Agreement.

(b)	Subject to paragraph (c) below but otherwise notwithstanding any term of any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement at any time.

(c)	An amendment or waiver which adversely affects the rights or obligations of a Reference Bank may not be effected without the consent of that Reference Bank.

(d)

Any Affiliate, Receiver or Delegate or any other person described in paragraph (f) of Clause 14.2 (Other indemnities), Clause 27.1 (Role of Reference Banks) or Clause 27.2 (Third Party Reference Banks) may, subject to this Clause 1.5 (Third party rights) and the Third Parties Act, rely on any Clause of this Agreement which expressly confers rights on it.

SECTION 2

THE FACILITY

2	THE FACILITY

2.1	The Facility

Subject to the terms of this Agreement, the Lender makes available to the Borrower a dollar term loan facility in one advance in an amount not exceeding the Commitment.

PURPOSE

3.1

Purpose

The Borrower shall apply all amounts borrowed by it under the Facility only for the purpose of financing part of the construction cost of the Ship which is to be constructed by the Builder, and to be purchased by the Borrower, pursuant to the Shipbuilding Contract by way of a loan in a principal amount not exceeding the lesser of (i) $18,400,000, (ii) 70 per cent. of the Initial Market Value and (iii) 70 per cent. of the Contract Cost.

3.2	Monitoring

The Lender is not bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

4	CONDITIONS OF UTILISATION

4.1	Initial conditions precedent

The Borrower may not deliver a Utilisation Request unless the Lender has received all of the documents and other evidence listed in Part A of Schedule 2 (Conditions Precedent) in form and substance satisfactory to the Lender.

4.2	Further conditions precedent

The Lender will only be obliged to comply with Clause 5.4 (Loan) if:

(a)	on the date of the Utilisation Request and on the proposed Utilisation Date and before the Loan is made available:

(i)

no Default is continuing or would result from the proposed Loan;

(ii)

the Repeating Representations to be made by each Transaction Obligor are true; and

(iii)

no event or series of events has occurred which is likely to have a Material Adverse Effect;

(b)	the Lender has received on or before the Utilisation Date, or is satisfied it will receive when the Loan is made available, all of the documents and other evidence listed in Part B of Schedule 2 (Conditions Precedent) in form and substance satisfactory to the Lender.

4.3	Notification of satisfaction of conditions precedent

The Lender shall notify the Borrower promptly upon being satisfied as to the satisfaction of the conditions precedent referred to in Clause 4.1 (Initial conditions precedent) and Clause 4.2 (Further conditions precedent).

4.4	Waiver of conditions precedent

If the Lender, at its discretion, permits the Loan to be borrowed before any of the conditions precedent referred to in Clause 4.1 (Initial conditions precedent) or Clause 4.2 (Further conditions precedent) has been satisfied, the Borrower shall ensure that that condition is satisfied within seven (7) Business Days after the Utilisation Date or such later date as the Lender may agree in writing with the Borrower.

4.5	Conditions subsequent relevant to Qualified IPO

(a)

If the planned Spin-Off and the Qualified IPO materialize, the Borrower undertakes to deliver to the Lender within 5 days (or such later date as the Lender, in its absolute discretion, may agree) all of the documents and other evidence listed in Part C of Schedule 2 (Conditions Subsequent relevant to Qualified IPO) in form and substance satisfactory to the Lender.

(b)	As of the Substitute Date, all definitions of, and all references to, "Corporate Guarantor" and "Shareholder" in this Agreement shall be read and construed as referring to Eurodry.

(c)	As of the Substitute Date, the Lender shall deliver a duly executed original of a deed of release (and of each document to be delivered under or pursuant to it) releasing Corporate Guarantor A from its obligations under the Corporate Guarantee A in agreed form.

(d)

If the Qualified IPO and the Spin-Off are not completed by 30 July 2018, the Borrower undertakes to deliver to the Lender all of the documents and other evidence listed in paragraphs 1.1-1.4, 3, 4, Schedule 25.3Schedule 25.5 of Part C of Schedule 2 (Conditions Subsequent relevant to Qualified IPO) (together with any additional documents and evidence that may be required by the Lender) in respect of Euroseas in form and substance satisfactory to the Lender.

SECTION 3

UTILISATION

5	UTILISATION

5.1	Delivery of a Utilisation Request

(a)	The Borrower may utilise the Facility by delivery to the Lender of a duly completed Utilisation Request not later than the Specified Time.

(b)	The Borrower may not deliver more than one Utilisation Request.

5.2	Completion of a Utilisation Request

A Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

(a)	the proposed Utilisation Date is a Business Day within the Availability Period;

(b)	the currency and amount of the Utilisation comply with Clause 5.3 (Currency and amount); and

(c)	the propOsed Interest Period complies with Clause 9 (Interest Periods).

5.3	Currency and amount

(a)	The currency specified in the Utilisation Request must be dollars.

(b)	The amount of the proposed Loan must be an amount which is not more than the lesser of (i) $18,400,000, (ii) 70 per cent. of the Initial Market Value and (iii) 70 per cent. of the Contract Cost.

5.4

Loan

If the conditions set out in this Agreement have been met, the Lender shall make the Loan available by the Utilisation Date through its Facility Office

5.5	Cancellation of Commitment

The Commitment which is unutilised at the end of the Availability Period shall then be cancelled.

5.6	Retentions and payment to third parties

The Borrower irrevocably authorises the Lender on the Utilisation Date, to pay to, or for the account of, the Borrower, the Loan. That payment shall be made to the account of the Builder and/or to such other account, in which the Borrower specifies in the Utilisation Request (including for the avoidance of doubt the Earnings Account or the Retention Account).

5.7	Disbursement of Loan to third party

Payment by the Lender under Clause 5.6 (Retentions and payment to third parties) to a person other than the Borrower shall constitute the making of the Loan and the Borrower shall at that

time become indebted, as principal and direct obligor, to the Lender in an amount equal to the Loan.

5.8	Prepositioning of funds

If the Lender, at the request of the Borrower and on terms acceptable to the Lender and in its absolute discretion, prepositions funds with the Builder's bank, the Borrower:

(a)

agrees to pay interest on the amount of the funds so prepositioned at the rate described in Clause 8.1 (Calculation of interest) on the basis of successive interest periods of one day and so that interest shall be paid together with the first payment of interest on the Loan after the Utilisation Date or, if such Utilisation Date does not occur, within three Business Days of demand by the Lender; and

(b)	shall, without duplication, indemnify the Lender against any additional costs, loss or liability it may incur in connection with such arrangement.

SECTION 4

REPAYMENT, PREPAYMENT AND CANCELLATION

REPAYMENT

6.1	Repayment of Loan

The Borrower shall repay the Loan by:

(a)	twenty (20) consecutive quarterly instalments, the first eight (8) of which shall be in an amount of $400,000 each and the subsequent twelve (12) of which shall be in an amount of $325,000 each (each, a "Repayment Instalment" and together, the "Repayment Instalments"); and

(b)	a balloon instalment in the amount of $11,300,000 (the "Balloon Instalment") payable together with the twentieth (20t^h) Repayment Instalment.

The first Repayment Instalment shall be repaid on the date falling three (3) Months after the Utilisation Date, each subsequent Repayment Instalment shall be repaid at three (3) monthly intervals thereafter and the last Repayment Instalment, together with the Balloon Instalment, shall be repaid on the Termination Date.

6.2	Reduction of Repayment Instalments

If any part of the Facility is cancelled, the Repayment Instalments and the Balloon Instalment falling after that cancellation shall be reduced pro rota by the amount cancelled.

6.3	Termination Date

On the Termination Date, the Borrower shall additionally pay to the Lender all other sums then accrued and owing under the Finance Documents.

6.4	Reborrowing

The Borrower may not reborrow any part of the Facility which is repaid.

7	PREPAYMENT AND CANCELLATION

7.1	Illegality

If it becomes unlawful in any applicable jurisdiction for the Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain all or any part of the Loan or it becomes unlawful for any Affiliate of the Lender for the Lender to do so:

(a)	the Lender shall promptly notify the Borrower in writing upon becoming aware of that event and the Available Facility will be immediately cancelled; and

(b)

the Borrower shall prepay the Loan on the last day of the Interest Period for the Loan occurring after the Lender has notified the Borrower in writing or, if earlier, the date specified by the Lender in the notice delivered to the Borrower (being no earlier than the last day of any applicable grace period permitted by law) and the Commitment shall be cancelled.

7.2	Voluntary and automatic cancellation

(a)

The Borrower may, if it gives the Lender not less than five (5) Business Days' (or such shorter period as the Lender may agree) prior notice, cancel the whole or any part (being a minimum amount equal to a multiple of $325,000) of the Loan. Any cancellation under this Clause 7.2 (Voluntary and automatic cancellation) shall reduce the amount of the Loan the unutilised pro rata.

(b)	The unutilised Commitment (if any) shall be automatically cancelled at close of business on the Utilisation Date.

7.3	Voluntary prepayment of Loan

(a)

The Borrower may, if it gives the Lender not less than five (5) Business Days' (or such shorter period as the Lender may agree) prior notice, prepay the whole or any part of the Loan on the last day of an Interest Period (but, if in part, being an amount that reduces the amount of the Loan by minimum amount equal to a multiple of $325,000).

(b)	Any partial prepayment under this Clause 7.3 (Voluntary prepayment of Loan) shall reduce pro rata the amount of each Repayment Instalment and the Balloon Instalment falling after that prepayment by the amount prepaid.

7.4	Mandatory prepayment on sale or Total Loss

If the Ship is sold (without prejudice to paragraph (a) of Clause 19.1119.11 (Disposals)) or becomes a Total Loss, the Borrower shall prepay the Loan together with accrued interest and all other amounts due under the Finance Documents to which it is a party. Such repayment shall be made:

(a)	in the case of a sale of the Ship, on the date on which the sale is completed by delivery of the Ship to the buyer of the Ship; and

(b)	in the case of a Total Loss, on the earlier of (i) the date falling 120 days after the Total Loss Date and (ii) the date of receipt by the Lender of the proceeds of insurance relating to such Total Loss.

7.5	Mandatory prepayment on change of control in Corporate Guarantor

(a)

If, without the prior written consent of the Lender (which will not be unreasonably withheld), there is a Change of Control, the Borrower shall promptly notify the Lender upon becoming aware of that event and, if the Lender so requires, the Lender shall, by no less than 10 days' notice to the Borrower, cancel the Facility and declare the Loan, together with accrued interest and all other amounts accrued under the Finance Documents immediately due and payable, whereupon the Facility shall be cancelled and the Loan and all such outstanding interest and amounts will become immediately due and payable Provided that in the case of sub-paragraph (ii) below, the Borrower will first have the option to rectify the Security Cover Ratio within 15 Business Days.

(b)	For the purpose of paragraph (a) above, "Change of Control" means:

(i)

the members of the Nominated Family cease to own directly or indirectly more than 10 per cent. of the shares (and the voting rights attaching to those shares) in the Corporate Guarantor; or

(ii)

the members of the Nominated Family own between 11 per cent. to 19 per cent. (inclusive) of the shares (and the voting rights attaching to those shares) in the Corporate Guarantor and the Security Cover Ratio is equal to or less than 143 per cent. of the Loan.

7.6	Mandatory prepayment on non-employment of Ship under Qualifying Charter

If the Borrower does not enter into a Qualifying Charter in respect of the Ship in accordance with Clause 21.21 (Qualifying Charter), the Borrower shall, on the date falling six months after the Utilisation Date, prepay the Loan in an amount equal to the additional minimum liquidity amount required to be maintained under Clause 19.22(a)(ii) together with accrued interest. Such prepayment shall reduce pro rata the amount of each Repayment Instalment and the Balloon Instalment falling after that prepayment by the amount prepaid.

7.7	Restrictions

(a)

Any notice of cancellation or prepayment given by any Party under this Clause 7 (Prepayment and Cancellation) shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.

(b)	Any prepayment under this Agreement (either voluntary or mandatory) shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs (if made on a date which is not an Interest Payment Date), without premium or penalty.

(c)	The Borrower may not reborrow any part of the Facility which is prepaid.

(d)	The Borrower shall not repay or prepay all or any part of the Loan or cancel all or any part of the Commitment except at the times and in the manner expressly provided for in this Agreement.

(e)	No amount of the Commitment cancelled under this Agreement may be subsequently reinstated.

SECTION 5

COSTS OF UTILISATION

INTEREST

8.1	Calculation of interest

The rate of interest on the Loan or any part of the Loan for each Interest Period is the percentage rate per annum which is the aggregate of:

(a)	the Margin; and

(b)

LIBOR.

8.2	Payment of interest

(a)	The Borrower shall pay accrued interest on the Loan or any part of the Loan on the last day of each Interest Period (each an "Interest Payment Date").

(b)	If an Interest Period is longer than three (3) Months, the Borrower shall also pay interest then accrued on the Loan or the relevant part of the Loan on the dates falling at three Monthly intervals after the first day of the Interest Period.

8.3	Default interest

(a)

If a Transaction Obligor fails to pay any amount payable by it under a Finance Document on its due date or (ii) any other Event of Default has occurred, and is continuing, subject to written notice to the Borrower, interest shall accrue, in case of sub-paragraph (i) above, on the Unpaid Sum from the due date up to the date of actual payment (both before and after judgment) or, in the case of sub-paragraph (ii) above, on the Loan from the date of occurrence of such Event of Default up to the date of actual remedy or waiver of such breach or Event of Default to the satisfaction of the Lender, at a rate which, subject to paragraph (b) below, is 2 per cent. per annum higher than the rate which would have been payable if the Unpaid Sum had, during the period of non-payment or during which the breach of Event of Default continues, constituted part of the Loan in the currency of the Unpaid Sum for successive Interest Periods, each of a duration selected by the Lender. Any interest accruing under this Clause 8.3 (Default interest) shall be immediately payable by the Borrower on demand by the Lender.

(b)	If an Unpaid Sum consists of all or part of the Loan which became due on a day which was not the last day of an Interest Period relating to the Loan or that part of the Loan:

(i)

the first Interest Period for that Unpaid Sum shall have a duration equal to the unexpired portion of the current Interest Period relating to the Loan or that part of the Loan; and

(ii)

the rate of interest applying to that Unpaid Sum during that first Interest Period shall be 2 per cent. per annum higher than the rate which would have applied if that Unpaid Sum had not become due.

(c)	Default interest (if unpaid) arising on an Unpaid Sum will be compounded with the Unpaid Sum at the end of each Interest Period applicable to that Unpaid Sum but will remain immediately due and payable.

8.4	Notification of rates of interest

The Lender shall promptly notify the Borrower of the determination of a rate of interest under this Agreement.

9	INTEREST PERIODS

9.1	Selection of Interest Periods

(a)	The Borrower may select the Interest Period for the Loan in the Utilisation Request. Subject to paragraph (f) below and Clause 9.2 (Changes to Interest Periods), the Borrower may select each subsequent Interest Period in respect of the Loan in a Selection Notice.

(b)	Each Selection Notice is irrevocable and must be delivered to the Lender by the Borrower not later than the Specified Time.

(c)

If the Borrower fails to select an Interest Period in the Utilisation Request or fails to deliver a Selection Notice to the Lender in accordance with paragraphs (a) and (b) above, the relevant Interest Period will, subject to paragraph (f)below and Clause 9.2 (Changes to Interest Periods), be three (3) Months.

(d)	Subject to this Clause 9 (Interest Periods), the Borrower may select an Interest Period of three (3), six (6) or twelve (12) Months or any other period agreed between the Borrower and the Lender.

(e)	An Interest Period in respect of the Loan shall not extend beyond the Termination Date.

(f)

In respect of a Repayment Instalment, the Borrower may request in the relevant Selection Notice that an Interest Period for a part of the Loan equal to such Repayment Instalment shall end on the Repayment Date relating to it and, subject to paragraph (d) above, select a longer Interest Period for the remaining part of the Loan.

(g)	The first Interest Period for the Loan shall start on the Utilisation Date and each subsequent Interest Period shall start on the last day of its preceding Interest Period.

(h)	Except for the purposes of paragraph (f) above and Clause 9.2 (Changes to Interest Periods), the Loan shall have one Interest Period only at any time.

9.2	Changes to Interest Periods

(a)

In respect of a Repayment Instalment, prior to determining the interest rate for the Loan, the Lender may establish an Interest Period for a part of the Loan equal to such Repayment Instalment to end on the Repayment Date relating to it and the remaining part of the Loan shall have the Interest Period selected in the relevant Selection Notice, subject to paragraph (d) of Clause 9.1 (Selection of Interest Periods).

(b)	If the Lender makes any change to an Interest Period referred to in this Clause 9.2 (Changes to Interest Periods), it shall promptly notify the Borrower.

9.3	Non-Business Days

If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

10	CHANGES TO THE CALCULATION OF INTEREST

10.1	Unavailability of Screen Rate

(a)	Interpolated Screen Rate: If no Screen Rate is available for LIBOR for the Interest Period of the Loan or any part of the Loan, the applicable LIBOR shall be the Interpolated Screen Rate for a period equal in length to the Interest Period of the Loan or that part of the Loan.

(b)	Reference Bank Rate: If no Screen Rate is available for LIBOR for:

(i)

dollars; or

(ii)

the Interest Period of the Loan or any part of the Loan and it is not possible to calculate the Interpolated Screen Rate,

the applicable LIBOR shall be the Reference Bank Rate as of the Specified Time and for a period equal in length to the Interest Period of the Loan or that part of the Loan.

(c)

Cost of funds: If paragraph (b) above applies but no Reference Bank Rate is available for dollars for the relevant Interest Period there shall be no LIBOR for the Loan or that part of the Loan (as applicable) and Clause 10.4 (Cost of funds) shall apply to the Loan or that part of the Loan for that Interest Period.

10.2	Calculation of Reference Bank Rate

(a)	Subject to paragraph (b) below, if LIBOR is to be determined on the basis of a Reference Bank Rate but a Reference Bank does not supply a quotation by the Specified Time, the Reference Bank Rate shall be calculated on the basis of the quotations of the remaining Reference Banks.

(b)	If at or about noon on the Quotation Day none or only one of the Reference Banks supplies a quotation, there shall be no Reference Bank Rate for the relevant Interest Period.

10.3	Market disruption

If before close of business in London on the Quotation Day for the relevant Interest Period the Lender notifies the Borrower that the cost to it of funding the Loan or the relevant part of the Loan from whatever source it may reasonably select would be in excess of LIBOR then Clause 10.4 (Cost of funds) shall apply to the Loan or that part of the Loan (as applicable) for the relevant Interest Period.

10.4	Cost of funds

(a)	If this Clause 10.4 (Cost of funds) applies, the rate of interest on the Loan or the relevant part of the Loan for the relevant Interest Period shall be the percentage rate per annum which is the sum of:

(i)

the Margin; and

(ii)

the rate notified by the Lender to the Borrower as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period to be that which expresses as a percentage rate per annum the cost to the Lender of funding the Loan or that part of the Loan from whatever source it may reasonably select or, if such rate is less than zero, such rate shall be deemed to be zero.

(b)

If this Clause 10.4 (Cost of funds) applies and the Lender or the Borrower so requires, the Lender and the Borrower shall enter into negotiations (for a period of not more than 30 days) with a view to agreeing a substitute basis for determining the rate of interest or (as the case may be) an alternative basis for funding.

(c)	Any substitute or alternative basis agreed pursuant to paragraph (b) above shall, be binding on all Parties.

10.5	Break Costs

The Borrower shall, within three Business Days of demand by the Lender, pay to the Lender its Break Costs attributable to all or any part of the Loan or an Unpaid Sum being paid by the Borrower on a day other than the last day of an Interest Period for the Loan, the relevant part of the Loan or that Unpaid Sum.

FEES

11.1	Commitment fee

(a)	The Borrower shall pay to the Lender a fee computed at the rate of 1.00 per cent. per annum on the Available Facility quarterly in arrears during the Availability Period.

(b)	The accrued commitment fee is payable on the last day of each successive period of three Months which ends during the Availability Period, on the last day of the Availability Period and, if cancelled, on the cancelled amount of the Available Facility at the time the cancellation is effective.

11.2	Arrangement fee

The Borrower shall pay to the Lender on the Utilisation Date an arrangement fee in an amount equal to 0.80 per cent. of the Loan actually utilised on the Utilisation Date.

SECTION 6

ADDITIONAL PAYMENT OBLIGATIONS

12	TAX GROSS UP AND INDEMNITIES

12.1	Definitions

(a)	In this Agreement:

"Tax Credit" means a credit against, relief or remission for, or repayment of any Tax.

"Tax Deduction" means a deduction or withholding for or on account of Tax from a payment under a Finance Document, other than a FATCA Deduction.

"Tax Payment" means either the increase in a payment made by the Borrower to the Lender under Clause 12.2 (Tax gross-up) or a payment under Clause 12.3 (Tax indemnity).

(b)	Unless a contrary indication appears, in this Clause 12 (Tax Gross Up and Indemnities) reference to "determines" or "determined" means a determination made in the absolute discretion of the person making the determination.

12.2	Tax gross-up

(a)	The Borrower shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

(b)

The Borrower shall promptly upon becoming aware that the Borrower must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Lender accordingly. Similarly, the Lender shall notify the Borrower and the Borrower on becoming so aware in respect of a payment payable to the Lender.

(c)	If a Tax Deduction is required by law to be made by the Borrower, the amount of the payment due from the Borrower shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

(d)	If the Borrower is required to make a Tax Deduction, the Borrower shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(e)

Within thirty (30) days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Borrower making that Tax Deduction shall deliver to the Lender evidence reasonably satisfactory to the Lender that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

12.3	Tax indemnity

(a)

The Borrower shall (within five (5) Business Days of written demand by the Lender) pay to the Lender an amount equal to the loss, liability or cost which the Lender determines will be or has been (directly or indirectly) suffered for or on account of Tax by the Lender in respect of a Finance Document.

(b)	Paragraph (a) above shall not apply:

(i)

with respect to any Tax assessed on the Lender:

(A)

under the law of the jurisdiction in which the Lender is incorporated or, if different, the jurisdiction (or jurisdictions) in which the Lender is treated as resident for tax purposes; or

(B)

under the law of the jurisdiction in which the Lender's Facility Office is located in respect of amounts received or receivable in that jurisdiction,

if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by the Lender; or

(ii)

to the extent a loss, liability or cost:

(A)

is compensated for by an increased payment under Clause 12.2 (Tax gross-up); or

(B)

relates to a FATCA Deduction required to be made by a Party.

(c)	The Lender shall, if making, or intending to make, a claim under paragraph (a) above, promptly notify the Borrower of the event which will give, or has given, rise to the claim.

12.4	Tax Credit

If the Borrower makes a Tax Payment and the Lender determines that:

(a)	a Tax Credit is attributable to an increased payment of which that Tax Payment forms part, to that Tax Payment or to a Tax Deduction in consequence of which that Tax Payment was received; and

(b)	the Lender has obtained and utilised that Tax Credit,

the Lender shall pay an amount to the Obligor which the Lender determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by the Obligor.

12.5	Stamp taxes

The Borrower shall pay and, within five (5) Business Days of written demand, indemnify the Lender against any cost, loss or liability which the Lender incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

12.6

VAT

(a)

All amounts expressed to be payable under a Finance Document by any Party to the Lender which (in whole or in part) constitute the consideration for any supply for VAT purposes are deemed to be exclusive of any VAT which is chargeable on that supply, and accordingly, if VAT is or becomes chargeable on any such supply made by the Lender to any Party under a Finance Document and the Lender is required to account to the relevant tax authority for the relevant VAT (if any), that Party must pay to the Lender (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of the charged VAT

as per the above (and the Lender must promptly provide an appropriate VAT invoice to that Party).

(b)

Where a Finance Document requires any Party to reimburse or indemnify the Lender for any cost or expense, that Party shall reimburse or indemnify (as the case may be) the Lender for the full amount of such cost or expense, including such part of it as represents VAT (if charged), save to the extent that the Lender reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority.

(c)

Any reference in this Clause 12.6 (VAT) to any Party shall, at any time when that Party is treated as a member of a group or unity (or fiscal unity) for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the person who is treated at that time as making the supply, or (as appropriate) receiving the supply, under the grouping rules (provided for in Article 11 of Council Directive 2006/112/EC or as implemented by the relevant member state of the European Union) each if applicable so that a reference to a Party shall be construed as a reference to that Party or the relevant group or unity (or fiscal unity) of which that Party is a member for VAT purposes at the relevant time or the relevant representative member (or representative or head) of that group or unity at the relevant time (as the case may be).

(d)

In relation to any supply made by the Lender to any Party under a Finance Document, if reasonably requested by the Lender, that Party must promptly provide the Lender with details of that Party's VAT registration (if applicable) and such other information as is reasonably requested in connection with the Lender's VAT reporting requirements in relation to such supply.

12.7	FATCA Information

(a)	Subject to paragraph (c) below, each Party shall, within ten Business Days of a reasonable request by another Party:

(i)

confirm to that other Party whether it is:

(A)

a FATCA Exempt Party; or

(B)

not a FATCA Exempt Party; and

(ii)

supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party's compliance with FATCA; and

(iii)

supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party's compliance with any other law, regulation or exchange of information regime.

(b)	If a Party confirms to another Party pursuant to sub-paragraph (i) of paragraph (a) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.

(c)	Paragraph (a) above shall not oblige the Lender to do anything and sub-paragraph (iii) of paragraph (a) above shall not oblige any other 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 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 sub-paragraphs (i) or (ii) of paragraph (a) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information.

12.8	FATCA Deduction

(a)

Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.

(b)	Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment.

13	INCREASED COSTS

13.1	Increased costs

(a)	Subject to Clause 13.3 (Exceptions), the Borrower shall, within five (5) Business Days of a written demand by the Lender, pay for the account of the Lender the amount of any Increased Costs incurred by the Lender or any of its Affiliates 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,

in each case after the date of this Agreement; or

(iii)

the implementation, application of or compliance with Basel III or CRD IV or any law or regulation that implements or applies Basel III or CRD IV.

(b)	In this Agreement:

(i)

"Basel III" means:

(A)

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

(B)

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

(C)

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

(ii)

"CRD IV" means:

(A)

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending regulation (EU) No. 648/2012;

(B)

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC; and

(C)

any other law or regulation which implements Basel III.

(iii)

"Increased Costs" means:

(A)

a reduction in the rate of return from the Facility or on the Lender's (or its Affiliate's) overall capital;

(B)

an additional or increased cost; or

(C)

a reduction of any amount due and payable under any Finance Document,

which is incurred or suffered by the Lender or any of its Affiliates as a result of the events referred in Clause 13.1 (Increased costs) to the extent that it is attributable to the Lender having entered into the Commitment or funding or performing its obligations under any Finance Document.

13.2	Increased cost claims

If the Lender intends to make a claim pursuant to Clause 13.1 (Increased costs) it shall promptly notify the Borrower.

13.3	Exceptions

Clause 13.1 (Increased costs) does not apply to the extent any Increased Cost is:

(a)	attributable to a Tax Deduction required by law to be made by the Borrower;

(b)	attributable to a FATCA Deduction required to be made by a Party;

(c)	compensated for by Clause 12.3 (Tax indemnity) (or would have been compensated for under Clause 12.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 12.3 (Tax indemnity) applied);

(d)	compensated for by any payment made pursuant to Clause 14.3 (Mandatory Cost); or

(e)	attributable to the wilful breach by the Lender or its Affiliates of any law or regulation.

14	OTHER INDEMNITIES

14.1	Currency indemnity

(a)	If any sum due from the Borrower under the Finance 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:

(i)

making or filing a claim or proof against the Borrower; or

(ii)

obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

the Borrower shall, as an independent obligation, on demand, indemnify the Lender 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 that person at the time of its receipt of that Sum.

(b)	The Borrower waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

14.2	Other indemnities

(a)	The Borrower shall within five (5) days of a written demand, indemnify the Lender and any Receiver and Delegate against:

(i)

any cost, loss or liability incurred by it as a result of:

(A)

the occurrence of any Event of Default;

(B)

a failure by a Transaction Obligor to pay any amount due under a Finance Document to which it is a party on its due date;

(C)

funding, or making arrangements to fund the Loan, requested by the Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by the Lender alone); or

(D)

the Loan (or part of the Loan) not being prepaid in accordance with a notice of prepayment given by the Borrower; and

(ii)

any cost, loss or liability incurred by the Lender (otherwise than by reason of the Lender's gross negligence or wilful misconduct) or, in the case of any cost, loss or liability pursuant to Clause 28.6 (Disruption to Payment Systems etc.) notwithstanding the Lender's negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Lender.

(b)

The Borrower shall, on demand, indemnify the Lender, each Affiliate of the Lender and any Receiver and Delegate and each officer or employee of the Lender or its Affiliate or any Receiver or Delegate (as applicable) (each such person for the purposes of this Clause 14.2 (Other indemnities) an "Indemnified Person"), against any cost, loss or liability incurred by that Indemnified Person pursuant to or in connection with any litigation, arbitration or administrative proceedings or regulatory enquiry, in connection with or arising out of the entry into and the transactions contemplated by the Finance Documents, having the benefit of any Security constituted by the Finance Documents or which relates to the condition or operation of, or any incident occurring in relation to, the Ship unless such cost, loss or liability is caused by the gross negligence or wilful misconduct of that Indemnified Person.

(c)

No Party other than the Lender or the Receiver or Delegate (as applicable) may take any proceedings against any officer, employee or agent of the Lender or the Receiver or Delegate (as applicable) in respect of any claim it might have against the Lender or the Receiver or Delegate or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document or any Security Property.

(d)	Without limiting, but subject to any limitations set out in paragraph (b) above, the indemnity in paragraph (b) above shall cover any cost, loss or liability incurred by each Indemnified Person in any jurisdiction:

(i)

arising or asserted under or in connection with any law relating to safety at sea, the ISM Code, any Environmental Law or any Sanctions; or

(ii)

in connection with any Environmental Claim.

(e)	The Borrower shall, on demand, indemnify the Lender and every Receiver and Delegate against any cost, loss or liability incurred by any of them:

(i)

in relation to or as a result of:

(A)

any failure by the Borrower to comply with its obligations under Clause 16 (Costs and Expenses);

(B)

acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised;

(C)

the taking, holding, protection or enforcement of the Finance Documents and the Transaction Security;

(D)

the exercise of any of the rights, powers, discretions, authorities and remedies vested in the Lender and each Receiver and Delegate by the Finance Documents or by law;

(E)

any default by any Transaction Obligor in the performance of any of the obligations expressed to be assumed by it in the Finance Documents to which it is a party;

(F)

any action by any Transaction Obligor which vitiates, reduces the value of, or is otherwise prejudicial to, the Transaction Security; and

(G)

instructing lawyers, surveyors or other professional advisers or experts following the occurrence of an Event of Default which is continuing;

(ii)

which otherwise relates to any of the Security Property or the performance of the terms of this Agreement or the other Finance Documents (otherwise, in each case, than by reason of the Lender's or Receiver's or Delegate's gross negligence or wilful misconduct).

(f)

Any Affiliate or Receiver or Delegate or any officer or employee of the Lender, or of any of its Affiliates or any Receiver or Delegate (as applicable) may rely on this Clause 14.2 (Other indemnities) and the provisions of the Third Parties Act, subject to Clause 1.5 (Third party rights) and the provisions of the Third Parties Act.

14.3	Mandatory Cost

The Borrower shall, on demand by the Lender, pay to the Lender, such amount which the Lender certifies in a notice to the Borrower to be its good faith determination of the amount necessary to compensate it for complying with:

(a)

if the Lender is lending from a Facility Office in a Participating Member State, the minimum reserve requirements (or other requirements having the same or similar purpose) of the European Central Bank (or any other authority or agency which replaces all or any of its functions) in respect of loans made from that Facility Office; and

(b)

if the Lender is lending from a Facility Office in the United Kingdom, any reserve asset, special deposit or liquidity requirements (or other requirements having the same or similar purpose) of the Bank of England (or any other governmental authority or agency) and/or paying any fees to the Financial Conduct Authority and/or the Prudential Regulation Authority (or any other governmental authority or agency which replaces all or any of their functions),

which, in each case, is referable to the Loan.

15	MITIGATION BY THE LENDER

15.1	Mitigation

(a)

The Lender shall, in consultation with the Borrower, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 7.1 (Illegality), Clause 12 (Tax Gross Up and Indemnities), Clause 13 (Increased Costs) or paragraph (a) of Clause 14.3 (Mandatory Cost) including (but not limited to) transferring or assigning its rights under the Finance Documents to another Affiliate or Facility Office.

(b)	Paragraph (a) above does not in any way limit the obligations of any Transaction Obligor under the Finance Documents.

15.2	Limitation of liability

(a)	The Borrower shall, on demand, indemnify the Lender for all costs and expenses reasonably incurred by the Lender as a result of steps taken by it under Clause 15.1 (Mitigation).

(b)	The Lender is not obliged to take any steps under Clause 15.1 (Mitigation) if either:

(i)

an Event of Default has occurred and is continuing; or

(ii)

in the opinion of the Lender (acting reasonably), to do so might be prejudicial to it.

16	COSTS AND EXPENSES

16.1	Transaction expenses

The Borrower shall, promptly on written demand, pay the Lender the amount of all costs and expenses (including all pre-agreed legal fees which shall be payable in any event not later than thirty (30) days from the date of issuance of Lender's legal advisors relevant invoices) reasonably incurred by it in connection with the negotiation, preparation, printing, execution and perfection of:

(a)	this Agreement and any other documents referred to in this Agreement or in a Security Document; and

(b)	any other Finance Documents executed after the date of this Agreement.

16.2	Amendment costs

If:

(a)	a Transaction Obligor requests an amendment, waiver or consent; or

(b)	a Transaction Obligor requests, and the Lender agrees to, the release of all or any part of the Security Assets from the Transaction Security,

the Borrower shall, on demand, reimburse the Lender for the amount of all costs and expenses (including legal fees) reasonably incurred by the Lender in responding to, evaluating, negotiating or complying with that request or requirement Provided that no sum shall be payable under this Clause 16.2 (Amendment costs) if the relevant request for an amendment, notice, waiver or consent are rejected by the Lender and/or are not granted.

16.3	Enforcement and preservation costs

The Borrower shall, within three (3) Business Days of written demand, pay to the Lender the amount of all costs and expenses (including legal fees) incurred by the Lender in connection with the enforcement of, or the preservation of any rights under, any Finance Document or the Transaction Security and with any proceedings instituted by or against the Lender as a consequence of it entering into a Finance Document, taking or holding the Transaction Security, or enforcing those rights.

SECTION 7

REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

17	REPRESENTATIONS

17.1

General

The Borrower makes the representations and warranties set out in this Clause 17 (Representations) to the Lender on the date of this Agreement.

17.2

Status

(a)	It is a corporation, duly incorporated and validly existing in good standing under the law of its Original Jurisdiction.

(b)	It has the power to own its assets and carry on its business as it is being conducted. 17.3 Share capital and ownership

(a)	The Borrower is authorised to issue 500 registered and/or bearer shares with a par value of US$0.01 each, all of which shares have been issued.

(b)	The legal title to and direct beneficial interest in the shares in the Borrower is held by the Relevant Shareholder, free of any Security (other than Permitted Security) or any other claim.

(c)	With the exception of the planned Spin-Off, none of the shares in the Borrower is subject to any option to purchase, pre-emption rights or similar rights.

17.4	Binding obligations

Subject to Legal Reservations, the obligations expressed to be assumed by it in each Transaction Document to which it is a party are legal, valid, binding and enforceable obligations.

17.5	Validity, effectiveness and ranking of Security

(a)

Each Finance Document to which it is a party does now or, as the case may be, will upon execution and delivery create the Security it purports to create over any assets to which such Security, by its terms, relates, and such Security will, when created or intended to be created, be valid and effective.

(b)	No third party has or will have any Security (except for Permitted Security) over any assets that are the subject of any Transaction Security granted by it.

(c)	The Transaction Security granted by it to the Lender has or will when created or intended to be created have first ranking priority or such other priority it is expressed to have in the Finance Documents and is not subject to any prior ranking or pari passu ranking security.

(d)	No concurrence, consent or authorisation of any person is required for the creation of or otherwise in connection with any Transaction Security.

17.6	Non-conflict with other obligations

The entry into and performance by it of, and the transactions contemplated by, each Transaction Document to which it is a party do 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 or constitute a default or termination event (however described) under any such agreement or instrument.

17.7	Power and authority

(a)	It has the power to enter into, perform and deliver, and has taken all necessary action to authorise:

(i)

its entry into, performance and delivery of, each Transaction Document to which it is or will be a party and the transactions contemplated by those Transaction Documents; and

(ii)

in the case of the Borrower on the Delivery Date, the registration of the Ship under its Approved Flag.

(b)	No limit on its powers will be exceeded as a result of the borrowing, granting of security or giving of guarantees or indemnities contemplated by the Transaction Documents to which it is a party.

17.8	Validity and admissibility in evidence

All Authorisations required or desirable:

(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; and

(b)	to make the Transaction Documents to which it is a party admissible in evidence in its Relevant Jurisdictions,

have been obtained or effected and are in full force and effect.

17.9	Governing law and enforcement

(a)	The choice of governing law of each Transaction Document to which it is a party will be recognised and enforced in its Relevant Jurisdictions.

(b)	Any judgment obtained in relation to a Transaction Document to which it is a party in the jurisdiction of the governing law of that Transaction Document will be recognised and enforced in its Relevant Jurisdictions.

17.10

Insolvency

No:

(a)	corporate action, legal proceeding or other procedure or step described in paragraph (a) of Clause 24.8 (Insolvency proceedings); or

(b)	creditors' process described in Clause 24.9 (Creditors' process),

has been taken or, to its knowledge, threatened in relation to a Transaction Obligor; and none of the circumstances described in Clause 24.7 (Insolvency) applies to a Transaction Obligor.

17.11

No filing or stamp taxes

Under the laws of its Relevant Jurisdictions it is not necessary that the Finance Documents to which it is a party be registered, filed, recorded, notarised or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Finance Documents to which it is a party or the transactions contemplated by those Finance Documents.

17.12

Deduction of Tax

It is not required to make any Tax Deduction from any payment it may make under any Finance Document to which it is a party.

17.13

No default

(a)	No Event of Default and, on the date of this Agreement and on the Utilisation Date, no Default is continuing or might reasonably be expected to result from the making of any Utilisation or the entry into, the performance of, or any transaction contemplated by, any Transaction Document.

(b)	No other event or circumstance is outstanding which constitutes a default or a termination event (however described) under any other agreement or instrument which is binding on it or to which its assets are subject which might have a Material Adverse Effect.

17.14

No misleading information

(a)	Any factual information provided by any Transaction Obligor for the purposes of this Agreement was true 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.

(b)	Nothing has occurred or been omitted from any such information and no information has been given or withheld that results in any such information being untrue or misleading in any material respect.

17.15

Pari passu ranking

Its payment obligations under the Finance Documents to which it is a party rank at least pail passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

17.16

No proceedings pending or threatened

(a)	No litigation, arbitration or administrative proceedings or investigations (including proceedings or investigations relating to any alleged or actual breach of the ISM Code or of the ISPS Code) of or before any court, arbitral body or agency which, if adversely determined,

might reasonably be expected to have a Material Adverse Effect have (to the best of its knowledge and belief (having made due and careful enquiry)) been started or threatened against it or any other Transaction Obligor.

(b)

No judgment or order of a court, arbitral tribunal or other tribunal or any order or sanction of any governmental or other regulatory body which might reasonably be expected to have a Material Adverse Effect has (to the best of its knowledge and belief (having made due and careful enquiry)) been made against it or any other Transaction Obligor.

17.17

Validity and completeness of the Shipbuilding Contract

(a)	The Shipbuilding Contract constitutes legal, valid, binding and enforceable obligations of the Builder and the Borrower.

(b)	The copy of the Shipbuilding Contract delivered to the Lender before the date of this Agreement is a true and complete copy.

(c)	Other than as disclosed to the Lender in writing on or before the date of this Agreement, no further amendments or additions to the Shipbuilding Contract have been agreed nor has the Borrower or the Builder waived any of their respective rights under the Shipbuilding Contract.

17.18

No rebates etc.

There is no agreement or understanding to allow or pay any rebate, premium, inducement, commission, discount or other benefit or payment (however described) to the Borrower, the Builder or a third party in connection with the purchase by the Borrower of the Ship, other than as disclosed to the Lender in writing on or before the date of this Agreement.

17.19

Valuations

(a)	All information supplied by it or on its behalf to an Approved Valuer for the purposes of a valuation delivered to the Lender in accordance with this Agreement was true and accurate as at the date it was supplied or (if appropriate) as at the date (if any) at which it is stated to be given.

(b)	It has not omitted to supply any information to an Approved Valuer which, if disclosed, would adversely affect any valuation prepared by such Approved Valuer.

(c)	There has been no change to the factual information provided pursuant to paragraph (a) above in relation to any valuation between the date such information was provided and the date of that valuation which, in either case, renders that information untrue or misleading in any material respect.

17.20

No breach of laws

It has not breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.

17.21

Compliance with Environmental Laws

All Environmental Laws relating to the ownership, operation and management of the Ship and the business of each Transaction Obligor (as now conducted and as reasonably anticipated to

be conducted in the future) and the terms of all Environmental Approvals have been complied with.

17.22

No Environmental Claim

No Environmental Claim has been made or threatened against any Transaction Obligor or the Ship which might reasonably be expected to have a Material Adverse Effect.

17.23

No Environmental Incident

No Environmental Incident has occurred and no person has claimed that an Environmental Incident has occurred against any Transaction Obligor or the Ship which might reasonably be expected to have a Material Adverse Effect.

17.24

ISM and ISPS Code compliance

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

17.25

Taxes paid

(a)	It is not and no other Transaction Obligor is materially overdue in the filing of any Tax returns and it is not (and no other Transaction Obligor is) overdue in the payment of any amount in respect of Tax.

(b)	No claims or investigations are being, or are reasonably likely to be, made or conducted against it (or any other Transaction Obligor) with respect to Taxes.

17.26

Financial Indebtedness

The Borrower has no Financial Indebtedness outstanding other than Permitted Financial Indebtedness.

17.27

Good title to assets

It and each other Transaction Obligor has good, valid and marketable title to, or valid leases or licences of, and all appropriate Authorisations to use, the assets necessary to carry on its business as presently conducted.

17.28

Ownership

(a)	With effect on and from the Delivery Date, the Borrower will be the sole legal and direct beneficial owner of the Ship, its Earnings and its Insurances.

(b)

With effect on and from the date of its creation or intended creation, each Transaction Obligor will be the sole legal and direct beneficial owner of any asset that is the subject of any Transaction Security created or intended to be created by the Security Documents to which such Transaction Obligor is a party.

(c)	The constitutional documents of each Transaction Obligor do not and could not restrict or inhibit any transfer of the shares of the Borrower on creation or enforcement of the security conferred by the Security Documents.

17.29

Place of business

No Transaction Obligor shall have an established place of business in the USA or in the UK at any time during the Security Period. For the avoidance of doubt this does not preclude either Euroseas or Eurodry from being companies publicly listed on the US Nasdaq.

17.30

Sanctions

None of the Transaction Obligors, any of their Subsidiaries, any director or officer or any employee, agent, or Affiliate of a Transaction Obligor or any of its Subsidiaries:

(a)	is a Prohibited Person; or

(b)	is acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person.

17.31

US Tax Obligor

No Transaction Obligor is a US Tax Obligor.

17.32

Repetition

The Repeating Representations are deemed to be made by the Borrower by reference to the facts and circumstances then existing on the date of each Utilisation Request and the first day of each Interest Period.

18	INFORMATION UNDERTAKINGS

18.1

General

The undertakings in this Clause 18 (Information Undertakings) remain in force throughout the Security Period unless the Lender otherwise permits.

18.2	Information: miscellaneous

The Borrower shall supply to the Lender:

(a)	all documents dispatched by it to its Shareholder (or any class of them) or its creditors generally at the same time as they are dispatched;

(b)

promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings or investigations (including proceedings or investigations relating to any alleged or actual breach of the ISM Code or of the ISPS Code) which are current, threatened or pending against any Transaction Obligor, and which might, if adversely determined, have a Material Adverse Effect;

(c)	promptly upon becoming aware of them, the details of any judgment or order of a court, arbitral body or agency which is made against any Transaction Obligor and which might have a Material Adverse Effect;

(d)	promptly, its constitutional documents where these have been amended or varied;

(e)	promptly, such further information and/or documents regarding:

(i)

the Ship, goods transported on the Ship, its Earnings and its Insurances;

(ii)

any Qualifying Charter;

(iii)

the Security Assets;

(iv)

compliance of the Transaction Obligors with the terms of the Finance Documents to which they are a party;

(v)

the financial condition, business, affairs, commitments and operations of the Corporate Guarantor and the Approved Manager,

as the Lender may reasonably request; and

(f)	promptly, such further information and/or documents as the Lender may reasonably request so as to enable the Lender to comply with any laws applicable to it or as may be required by any regulatory authority.

18.3	Notification of Event of Default

(a)	The Borrower shall, and shall procure that each other Transaction Obligor shall, notify the Lender of any Event of Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

(b)

Promptly upon a request by the Lender, the Borrower shall supply to the Lender a certificate signed by two of its directors or senior officers on its behalf certifying that no Event of Default is continuing (or if an Event of Default is continuing, specifying the Event of Default and the steps, if any, being taken to remedy it).

18.4 "Know your customer" checks

If:

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

(b)	any change in the status of a Transaction Obligor (including, without limitation, a change of ownership of a Transaction Obligor) after the date of this Agreement; or

(c)	a proposed assignment by the Lender of any of its rights under this Agreement,

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

19	GENERAL UNDERTAKINGS

19.1

General

The undertakings in this Clause 19 (General Undertakings) remain in force throughout the Security Period except as the Lender may otherwise permit (such permission not to be unreasonably withheld in the case of Clause 19.12 (Merger)).

19.2	Authorisations

The Borrower shall, and shall procure that each other Transaction Obligor will, promptly:

(a)	obtain, comply with and do all that is necessary to maintain in full force and effect; and

(b)	supply certified copies to the Lender of,

any Authorisation required under any law or regulation of a Relevant Jurisdiction or the state of the Approved Flag at any time of the Ship to enable it to:

(i)

perform its obligations under the Transaction Documents to which it is a party;

(ii)

ensure the legality, validity, enforceability or admissibility in evidence in any Relevant Jurisdiction or in the state of the Approved Flag at any time of the Ship of any Transaction Document to which it is a party; and

(iii)

own and operate the Ship (in the case of the Borrower).

19.3	Compliance with laws

The Borrower shall, and shall procure that each other Transaction Obligor will, comply in all respects with all laws and regulations to which it may be subject, if failure so to comply has or is reasonably likely to have a Material Adverse Effect.

19.4	Environmental compliance

The Borrower shall, and shall procure that each other Transaction Obligor will:

(a)	comply with all Environmental Laws;

(b)	obtain, maintain and ensure compliance with all requisite Environmental Approvals;

(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.

19.5	Environmental Claims

The Borrower shall, and shall procure that each other Transaction Obligor will, promptly upon becoming aware of the same, inform the Lender in writing of:

(a)	any Environmental Claim against any Transaction Obligor which is current, pending or threatened; and

(b)	any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any Transaction Obligor,

where the claim, if determined against that Transaction Obligor, has or is reasonably likely to have a Material Adverse Effect.

19.6

Taxation

(a)	The Borrower shall, and shall procure that each other Transaction Obligor will, pay and discharge all Taxes 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 maintained for those Taxes and the costs required to contest them and, in the case of the Corporate Guarantor, both have been disclosed in the latest financial statements delivered to the Lender pursuant to the terms of the relevant Corporate Guarantee; and

(iii)

such payment can be lawfully withheld.

(b)	The Borrower shall not, and the Borrower shall procure that no other Transaction Obligor will, change its residence for Tax purposes.

19.7	No change to centre of main interests

For the purposes of The Council of the European Union Regulation No. 2015/848 on Insolvency Proceedings (recast)(the "Regulation"), the Borrower shall not (i) change its centre of main interest (as that term is used in Article 3(1) of the Regulation) from that disclosed to the Lender on or prior to the date of this Agreement nor (ii) create any "establishment" (as that term is used in Article 2(10) of the Regulation) in any other jurisdiction.

19.8	Pari passu ranking

The Borrower shall, and shall procure that each other Transaction Obligor will, ensure that at all times any unsecured and unsubordinated claims of the Lender against it under the Finance Documents to which each of them is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.

19.9

Title

(a)	With effect on and from the Delivery Date, the Borrower shall hold the legal title to, and own the entire direct beneficial interest in the Ship, its Earnings and its Insurances; and

(b)	With effect on and from its creation or intended creation, the Borrower shall hold the legal title to, and own the entire direct beneficial interest in any other assets the subject of any Transaction Security created or intended to be created by such Borrower.

19.10

Negative pledge

(a)	The Borrower shall not create or permit to subsist any Security over any of its assets which are the subject of the Security created or intended to be created by the Finance Documents other than Permitted Securities.

(b)	The Borrower shall not:

(i)

sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by a Transaction Obligor;

(ii)

sell, transfer or otherwise dispose of any of its receivables on recourse terms;

(iii)

enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or

(iv)

enter into any other preferential arrangement having a similar effect,

in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.

(c)	Paragraphs (a) and (b) above do not apply to any Permitted Security.

19.11

Disposals

(a)	The Borrower shall not enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset (including without limitation the Ship, its Earnings or its Insurances).

(b)	For the avoidance of doubt, paragraph (a)21.16(a) above does not apply to any Charter as all Charters are subject to Clause 21.16 (Restrictions on chartering, appointment of managers etc.).

19.12

Merger

Other than in respect of the Qualified IPO and the Spin-Off (which have already been approved by the Lender), the Borrower shall not, and the Borrower shall procure that the Shareholder will not, enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction.

19.13

Change of business

The Borrower shall not engage in any type of business other than the ownership and operation of its Ship.

19.14

Financial Indebtedness

The Borrower shall not incur or permit to be outstanding any Financial Indebtedness other than Permitted Financial Indebtedness.

19.15

Expenditure

The Borrower shall not incur any expenditure, except for expenditure reasonably incurred in the ordinary course of owning, operating, insuring, manning, supplying, chartering, trading maintaining and repairing its Ship.

19.16

Share capital

Other than for purposes of the transfer of ownership from Euroseas to Eurodry to take place as of the Substitute Date, the Borrower shall not:

(a)	purchase, cancel or redeem any of its share capital;

(b)	increase or reduce its authorised share capital;

(c)

issue any further shares except to the Shareholder and provided such new shares are made subject to the terms of the Shares Security applicable to the Borrower immediately upon the issue of such new shares in a manner satisfactory to the Lender and the terms of that Shares Security are complied with;

(d)	appoint any further director or officer of the Borrower (unless the provisions of the Shares Security applicable to the Borrower are complied with).

19.17

Dividends

The Borrower shall not declare, make or pay any dividend or other distribution (in cash or in kind) in respect of its share capital following (i) a breach under Clause 22.1 (Minimum required security cover), (ii) the occurrence of an Event of Default or (iii) where the making or payment of such dividend or distribution would result in the occurrence of an Event of Default.

19.18

Other transactions

The Borrower shall not:

(a)

give or allow to be outstanding any guarantee or indemnity to or for the benefit of any person in respect of any obligation of any other person or enter into any document under which the Borrower assumes any liability of any other person other than any guarantee or indemnity given under the Finance Documents;

(b)	enter into any material agreement other than:

(i)

the Transaction Documents;

(ii)

any other agreement expressly allowed under any other term of this Agreement and

(c)	enter into any transaction on terms which are, in any respect, less favourable to that Transaction Obligor than those which it could obtain in a bargain made at arms' length; or

(d)	acquire any shares or other securities other than US or UK Treasury bills and certificates of deposit issued by major North American or European banks.

(e)	For the avoidance of doubt, the Borrower may enter into any agreements for operating, trading, chartering, manning, insuring, maintaining, repairing and supplying the Ship.

19.19

Unlawfulness, invalidity and ranking; Security imperilled

The Borrower shall not, and the Borrower shall procure that no other Transaction Obligor will, do (or fail to do) or cause or permit another person to do (or omit to do) anything which is likely to:

(a)	make it unlawful for a Transaction Obligor to perform any of its obligations under the Transaction Documents to which it is a party;

(b)	cause any obligation of a Transaction Obligor under the Transaction Documents to which it is a party to cease to be legal, valid, binding or enforceable;

(c)	cause any Transaction Document to cease to be in full force and effect;

(d)	cause any Transaction Security to rank after, or lose its priority to, any other Security; and

(e)	imperil or jeopardise the Transaction Security.

19.20

Further assurance

(a)

The Borrower shall, and shall procure that each other Transaction Obligor will, promptly, and in any event within the time period specified by the Lender do all such acts (including procuring or arranging any registration, notarisation or authentication or the giving of any notice) or execute or procure execution of all such documents (including assignments, transfers, mortgages, charges, notices, instructions, acknowledgments, proxies and powers of attorney), as the Lender may reasonably specify (and in such form as the Lender may require in favour of the Lender or its nominee(s)):

(i)

to create, perfect, vest in favour of the Lender or protect the priority of the Security or any right of any kind created or intended to be created by the Finance Documents (which may include the execution of a mortgage, charge, assignment or other Security over all or any of the assets which are, or are intended to be, the subject of the Transaction Security) or for the exercise of any rights, powers and remedies of the Lender or any Receiver or Delegate provided by or pursuant to the Finance Documents or by law;

(ii)

to confer on the Lender Security over any property and assets of that Transaction Obligor located in any jurisdiction equivalent or similar to the Security intended to be conferred by or pursuant to the Finance Documents;

(iii)

to facilitate or expedite the realisation and/or sale of, the transfer of title to or the grant of, any interest in or right relating to the assets which are, or are intended to be, the subject of the Transaction Security or to exercise any power specified in any Finance Document in respect of which the Security has become enforceable following the occurrence of an Event of Default which is continuing; and/or

(iv)

to enable or assist the Lender to commence, defend or conduct any proceedings and/or to take any other action relating to any item of the Security Property.

(b)

The Borrower shall, and shall procure that each other Transaction Obligor will, take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Security conferred or intended to be conferred on the Lender by or pursuant to the Finance Documents.

(c)

At the same time as the Borrower delivers to the Lender any document executed by itself or another Transaction Obligor pursuant to this Clause 19.20 (Further assurance), the Borrower shall deliver, or shall procure that such other Transaction Obligor will deliver, to the Lender a certificate signed by two of the Borrower's or Transaction Obligor's directors or officers which shall:

(i)

set out the text of a resolution of the Borrower's or Transaction Obligor's directors specifically authorising the execution of the document specified by the Lender; and

(ii)

state that either the resolution was duly passed at a meeting of the directors validly convened and held, throughout which a quorum of directors entitled to vote on the resolution was present, or that the resolution has been signed by all the directors or officers and is valid under the Borrower's or Transaction Obligor's articles of association or other constitutional documents.

19.21

Banking operations

The Borrower shall conduct all its banking operations in connection with the Ship through the London branch of the Lender or any other branch nominated by the Lender in its discretion but following consultation with the Borrower.

19.22

Minimum Liquidity

(a)	The Borrower shall maintain in the Minimum Liquidity Account:

(i)

as from the Utilisation Date and at all times thereafter during the Security Period, a minimum liquidity of not less than $300,000; and

(ii)

if the Ship will not be employed under a Qualifying Charter on the Delivery Date, for the period commencing on the Utilisation Date and ending on the earlier of (A) the date on which the mandatory prepayment is made under Clause 7.6 (Mandatory prepayment on non-employment of Ship under Qualifying Charter) or (B) the date on which the Ship is employed under a Qualifying Charter, an additional minimum liquidity of an amount equal to $1,315,000 Provided that in the case of (B) above the Borrower has complied with the terms and conditions of Clause 21.21 (Qualifying Charter),

in each case free of Security other than the relevant Account Security in favour of the Lender.

(b)

If the Borrower complies with the terms and conditions of Clause 21.21 (Qualifying Charter), the additional minimum liquidity amount required to be maintained under paragraph (a)(ii) above will be released to the Borrower or, if the Borrower does not comply with the terms and conditions of Clause 21.21 (Qualifying Charter), the Borrower hereby irrevocably and unconditionally authorises the Lender to apply such additional minimum liquidity amount for the mandatory prepayment to be made in accordance with Clause 7.6 (Mandatory prepayment on non-employment of Ship under Qualifying Charter).

19.23

Sanctions

No Transaction Obligor will, directly or indirectly, use the proceeds of the Loan, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person (i) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the target of Sanctions

or (ii) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Loan, whether as underwriter, advisor investor or otherwise).

20	INSURANCE UNDERTAKINGS

20.1

General

The undertakings in this Clause 20 (Insurance Undertakings) remain in force from the Delivery Date and at all times thereafter throughout the rest of the Security Period except as the Lender may otherwise permit.

20.2	Maintenance of obligatory insurances

The Borrower shall keep the Ship insured at its expense against:

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

(b)	war risks;

(c)	protection and indemnity risks; and

(d)	any other risks against which the Lender considers, having regard to practices and other circumstances prevailing at the relevant time, it would be reasonable for the Borrower to insure and which are specified by the Lender by notice to the Borrower.

20.3	Terms of obligatory insurances

The Borrower shall effect such insurances:

(a)	in dollars;

(b)	in the case of fire and usual marine risks and war risks, in an amount on an agreed value basis at least the greater of:

(i)

an amount which equals 125 per cent. of the Loan; and

(ii)

the Market Value of the Ship;

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

(d)	in the case of protection and indemnity risks, in respect of the full tonnage of its Ship;

(e)	on approved terms; and

(f)	through Approved Brokers and with approved insurance companies and/or underwriters or, in the case of war risks and protection and indemnity risks, in approved war risks and protection and indemnity risks associations.

20.4	Further protections for the Lender

In addition to the terms set out in Clause 20.3 (Terms of obligatory insurances), the Borrower shall procure that the obligatory insurances effected by it shall:

(a)	subject always to paragraph (b), name the Borrower as the sole named insured unless the interest of every other named insured 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 it has incurred and which form part of any recoverable claim on underwriters; and

(B)

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

(ii)

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

and every other named insured has undertaken in writing to the Lender (in such form as it requires) and that it shall do all things necessary and provide all documents, evidence and information to enable the Lender to collect or recover any moneys which at any time become payable in respect of the obligatory insurances;

(b)

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

(c)	name the Lender as loss payee with such directions for payment as the Lender may specify;

(d)	provide that all payments by or on behalf of the insurers under the obligatory insurances to the Lender shall be made without set off, counterclaim or deductions or condition whatsoever;

(e)	provide that the obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Lender; and

(f)	provide that the Lender may make proof of loss if the Borrower fails to do so.

20.5	Renewal of obligatory insurances

The Borrower shall:

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

(i)

notify the Lender of the Approved Brokers (or other insurers) and any protection and indemnity or war risks association through or with which it proposes to renew that obligatory insurance and of the proposed terms of renewal; and

(ii)

obtain the Lender's approval to the matters referred to in sub-paragraph (i) above;

(b)	at least 14 days before the expiry of any obligatory insurance, renew that obligatory insurance in accordance with the Lender's approval pursuant to paragraph (a) above; and

(c)	procure that the Approved Brokers and/or the approved war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal notify the Lender in writing of the terms and conditions of the renewal.

20.6	Copies of policies; letters of undertaking

The Borrower shall ensure that the Approved Brokers provide the Lender with:

(a)	pro forma copies of all policies relating to the obligatory insurances which they are to effect or renew; and

(b)	a letter or letters or undertaking in a form required by the Lender and including undertakings by the Approved Brokers that:

(i)

they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of Clause 20.4 (Further protections for the Lender);

(ii)

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

(iii)

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

(iv)

they will, if they have not received notice of renewal instructions from the Borrower or its agents, notify the Lender not less than 14 days before the expiry of the obligatory insurances;

(v)

if they receive instructions to renew the obligatory insurances, they will promptly notify the Lender of the terms of the instructions;

(vi)

they will not set off against any sum recoverable in respect of a claim relating to the Ship under such obligatory insurances any premiums or other amounts due to them or any other person whether in respect of the Ship or otherwise, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums or other amounts and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts; and

(vii)

they will arrange for a separate policy to be issued in respect of the Ship forthwith upon being so requested by the Lender.

20.7	Copies of certificates of entry

The Borrower shall ensure that any protection and indemnity and/or war risks associations in which the Ship is entered provide the Lender with:

(a)	a certified copy of the certificate of entry for the Ship;

(b)	a letter or letters of undertaking in such form as may be required by the Lender; and

(c)	a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to the Ship.

20.8	Deposit of original policies

The Borrower shall ensure that all policies relating to obligatory insurances effected by it are deposited with the Approved Brokers through which the insurances are effected or renewed.

20.9	Payment of premiums

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

20.10

Guarantees

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

20.11

Compliance with terms of insurances

(a)	The Borrower shall not do or 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.

(b)	Without limiting paragraph (a) above, the Borrower shall:

(i)

take all necessary action and comply with all requirements which may from time to time be applicable to the obligatory insurances, and (without limiting the obligation contained in sub-paragraph (iii) of paragraph (b) of Clause 20.6 (Copies of policies; letters of undertaking)) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Lender has not given its prior approval;

(ii)

not make any changes relating to the classification or classification society or manager or operator of the Ship approved by the underwriters of the obligatory insurances;

(iii)

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

(iv)

not employ the Ship, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.

20.12

Alteration to terms of insurances

The Borrower shall not make or agree to any alteration to the terms of any obligatory insurance or waive any right relating to any obligatory insurance.

20.13

Settlement of claims

The Borrower shall:

(a)	not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty without the prior written consent of the Lender; and

(b)	do all things necessary and provide all documents, evidence and information to enable the Lender to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.

20.14

Provision of copies of communications

The Borrower shall provide the Lender, at the time of each such communication, with copies of all written communications between the Borrower and:

(a)	the Approved Brokers;

(b)	the approved protection and indemnity and/or war risks associations; and

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

(i)

the Borrower's obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and

(ii)

any credit arrangements made between the Borrower and any of the persons referred to in paragraphs (a) or (b) above relating wholly or partly to the effecting or maintenance of the obligatory insurances.

20.15

Provision of information

The Borrower shall promptly provide the Lender (or any persons which it may designate) with any information which the Lender (or any such designated person) requests for the purpose of:

(a)	obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurances effected or proposed to be effected; and/or

(b)	effecting, maintaining or renewing any such insurances as are referred to in Clause 20.16 (Mortgagee's interest and additional perils insurances) or dealing with or considering any matters relating to any such insurances,

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

20.16

Mortgagee's interest and additional perils insurances

(a)	The Lender shall be entitled from time to time to effect, maintain and renew a mortgagee's interest marine insurance in an amount equal to 110 per cent. of the Loan, on such terms, through such insurers and generally in such manner as the Lender may from time to time consider appropriate.

(b)	The Borrower shall within five (5) Business Days following written demand and against receipt of appropriate vouchers and/or invoices fully indemnify the Lender in respect of all premiums

and other expenses which are incurred in connection with or with a view to effecting, maintaining or renewing any insurance referred to in paragraph (a) above or dealing with, or considering, any matter arising out of any such insurance.

21	GENERAL SHIP UNDERTAKINGS

21.1

General

The undertakings in this Clause 21 (General Ship Undertakings) remain in force on and from the Delivery Date and at all times thereafter throughout the rest of the Security Period except as the Lender may otherwise permit.

21.2	Ship's names and registration

The Borrower shall:

(a)	keep the Ship registered in its name under the Approved Flag from time to time at its port of registration;

(b)	not do or allow to be done anything as a result of which such registration might be suspended, cancelled or imperilled;

(c)	not enter into any dual flagging arrangement in respect of the Ship; and

(d)	not change the name of the Ship without the prior consent of the Lender (not to be unreasonably withheld or delayed),

Provided that any change of flag of the Ship shall be subject to:

(i)

the Ship remaining subject to Security securing the Secured Liabilities created by a first priority or preferred ship mortgage on the Ship and, if appropriate, a first priority deed of covenant collateral to that mortgage (or equivalent first priority Security) on substantially the same terms as the Mortgage on the Ship and on such other terms and in such other form as the Lender shall approve or require; and

(ii)

the execution of such other documentation amending and supplementing the Finance Documents as the Lender shall approve or reasonably require.

21.3	Repair and classification

The Borrower shall keep the Ship in a good and safe condition and state of repair:

(a)	consistent with first class ship ownership and management practice; and

(b)	so as to maintain the Approved Classification free of recommendations and conditions affecting class.

21.4	Classification society undertaking

The Borrower shall instruct the relevant Approved Classification Society (and procure that the Approved Classification Society undertakes with the Lender):

(a)	to send to the Lender, following receipt of a written request from the Lender, certified true copies of all original class records held by the Approved Classification Society in relation to the Ship;

(b)	to allow the Lender (or its agents), at any time and from time to time, to inspect the original class and related records of the Borrower and the Ship at the offices of the Approved Classification Society and to take copies of them;

(c)	to notify the Lender immediately in writing if the Approved Classification Society:

(i)

receives notification from the Borrower or any person that the Ship's Approved Classification Society is to be changed; or

(ii)

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

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

(i)

to confirm that the Borrower is not in default of any of its contractual obligations or liabilities to the Approved Classification Society, including confirmation that it has paid in full all fees or other charges due and payable to the Approved Classification Society; or

(ii)

to confirm that the Borrower is in default of any of its contractual obligations or liabilities to the Approved Classification Society, to specify to the Lender in reasonable detail the facts and circumstances of such default, the consequences of such default, and any remedy period agreed or allowed by the Approved Classification Society.

21.5	Modifications

The Borrower shall not make any modification or repairs to, or replacement of, the Ship or equipment installed on it which would or might materially and adversely alter the structure, type or performance characteristics of the Ship or materially reduce its market value.

21.6	Removal and installation of parts

(a)	Subject to paragraph (b) below, the Borrower shall not remove any material part of the Ship, or any item of equipment installed on the Ship unless:

(i)

the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed;

(ii)

the replacement part or item is free from any Security in favour of any person other than the Lender; and

(iii)

the replacement part or item becomes, on installation on the Ship, the property of the Borrower and subject to the security constituted by the Mortgage on the Ship.

(b)	The Borrower may install leased equipment owned by a third party if the equipment can be removed without any risk of damage to the Ship owned by the Borrower.

21.7

Surveys

The Borrower shall submit the Ship regularly to all periodic or other surveys which may be required for classification purposes and, if so required by the Lender, provide the Lender, with copies of all survey reports.

21.8	Inspection

The Borrower shall permit the Lender (acting through surveyors or other persons appointed by it for that purpose) to board the Ship at all reasonable times and without interference to the trading of the Ship to inspect its condition or to satisfy themselves about proposed or executed repairs and shall afford all proper facilities for such inspections Provided that until the occurrence of an Event of Default which is continuing the Borrower shall incur the costs of not more than one (1) inspection per Ship annually.

21.9	Prevention of and release from arrest

(a)	The Borrower shall promptly discharge:

(i)

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

(ii)

all Taxes, dues and other amounts charged in respect of the Ship, its Earnings or its Insurances; and

(iii)

all other outgoings whatsoever in respect of the Ship, its Earnings or its Insurances.

(b)

The Borrower shall, immediately upon receiving notice of the arrest of the Ship or of its detention in exercise or purported exercise of any lien or claim, take all steps necessary to procure its release promptly and in any event not later than three (3) Business Days by providing bail or otherwise as the circumstances may require.

21.10

Compliance with laws etc.

The Borrower shall:

(a)	comply, or procure compliance with all laws or regulations:

(i)

relating to its business generally; and

(ii)

relating to the Ship, its ownership, employment, operation, management and registration,

including, but not limited to, the ISM Code, the ISPS Code, all Environmental Laws, all Sanctions and the laws of the Approved Flag;

(b)	obtain, comply with and do all that is necessary to maintain in full force and effect any Environmental Approvals; and

(c)	without limiting paragraph (a) above, not employ the Ship nor allow its employment, operation or management in any manner contrary to any law or regulation including but not limited to the ISM Code, the ISPS Code, all Environmental Laws and Sanctions.

21.11

ISPS Code

Without limiting paragraph (a) of Clause 21.10 (Compliance with laws etc.), the Borrower shall.

(a)	procure that the Ship and the company responsible for the Ship's compliance with the ISPS Code comply with the ISPS Code;

(b)	maintain an ISSC for the Ship; and

(c)	notify the Lender immediately in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC.

21.12

Sanctions and Ship trading

Without limiting Clause 21.10 (Compliance with laws etc.), the Borrower shall procure:

(a)	that the Ship shall not be used by or for the benefit of a Prohibited Person;

(b)	that the Ship shall not be used in trading in any manner contrary to Sanctions;

(c)	that the Ship shall not be traded in any manner which would trigger the operation of any sanctions limitation or exclusion clause (or similar) in the Insurances; and

(d)	that it will use its best endeavours to ensure that each charterparty (where applicable) in respect of the Ship shall contain, for the benefit of the Borrower, language similar to the BIMCO Sanctions Clause or the BIMCO Designated Entity Clause.

21.13

Trading in war zones

In the event of hostilities in any part of the world (whether war is declared or not), the Borrower shall not cause or permit the Ship to enter or trade to any zone which is declared a war zone by any government or by the Ship's war risks insurers unless:

(a)	the prior written consent of the war risks insurers has been given; and

(b)	the Borrower has (at its expense) effected any special, additional or modified insurance cover which the war risks insurers may require.

21.14

Provision of information

Without prejudice to Clause 18.2 (Information: miscellaneous) the Borrower shall promptly provide the Lender with any information which it requests regarding:

(a)	the Ship, its employment, position and engagements;

(b)	the Earnings and payments and amounts due to its master and crew;

(c)	any expenditure incurred, or likely to be incurred, in connection with the operation, maintenance or repair of the Ship and any payments made by it in respect of the Ship;

(d)	any towages and salvages; and

(e)	its compliance, the Approved Manager's compliance and the compliance of the Ship with the ISM Code and the ISPS Code,

and, upon the Lender's request, promptly provide copies of any current Charter relating to the Ship, of any current guarantee of any such Charter, the Ship's Safety Management Certificate and any relevant Document of Compliance.

21.15

Notification of certain events

The Borrower shall immediately notify the Lender by email or fax, confirmed forthwith by letter, of:

(a)	any casualty to the Ship which is or is likely to be or to become a Major Casualty;

(b)	any occurrence as a result of which the Ship has become or is likely to become a Total Loss;

(c)	any requisition of the Ship for hire;

(d)	any requirement or recommendation made in relation to the Ship by any insurer or classification society or by any competent authority which is not complied with in accordance with its terms;

(e)	any arrest or detention of the Ship that is not promptly lifted either with provision of security, bail or otherwise or any exercise or purported exercise of any lien on the Ship or the Earnings;

(f)	any intended dry docking of the Ship;

(g)	any Environmental Claim made against the Borrower or in connection with the Ship, or any Environmental Incident;

(h)	any claim for breach of the ISM Code or the ISPS Code being made against the Borrower, an Approved Manager or otherwise in connection with the Ship; or

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

(j)	the entering into any time, voyage or consecutive voyage charter in respect of the Ship the duration of which (without taking into account any optional extensions) exceeds or is capable of exceeding 12 months,

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

21.16

Restrictions on chartering, appointment of managers etc.

The Borrower shall not:

(a)	let the Ship on demise charter for any period without the prior written consent of the Lender;

(b)	materially amend, supplement or terminate a Management Agreement (and for the avoidance of doubt, but without limitation, any amendment in respect of the management fees, milestone payments, duration, termination events and governing law of the management agreement will be considered material);

(c)	appoint a manager of the Ship other than the Approved Manager or agree to any material alteration to the terms of an Approved Manager's appointment (and for the avoidance of

doubt, but without limitation, any amendment in respect of the management fees, milestone payments, duration, termination events and governing law of the management agreement will be considered material);

(d)	de activate or lay up the Ship; or

(e)

put the Ship into the possession of any person for the purpose of work being done upon it in an amount exceeding or likely to exceed $900,000 (or the equivalent in any other currency) unless that person has first given to the Lender and in terms satisfactory to it a written undertaking not to exercise any lien on the Ship or its Earnings for the cost of such work or for any other reason.

21.17

Notice of Mortgage

The Borrower shall keep the relevant Mortgage registered against the Ship as a valid first preferred mortgage, carry on board the Ship a certified copy of the relevant Mortgage and place and maintain in a conspicuous place in the navigation room and the master's cabin of the Ship a framed printed notice stating that the Ship is mortgaged by the Borrower to the Lender.

21.18

Sharing of Earnings

The Borrower shall not enter into any agreement or arrangement for the sharing of any Earnings other than a profit sharing agreed at arm's length under a charter party provided that it is not a part of any pool arrangement, in which case the Lender's prior written consent will be required (such consent not to be unreasonably withheld or delayed).

21.19

Notification of compliance

The Borrower shall promptly provide the Lender from time to time with evidence (in such form as the Lender requires) that it is complying with this Clause 21 (General Ship Undertakings).

21.20

Charterparty Assignment

If the Borrower enters into any Charter the duration of which (without taking into account any optional extensions) exceeds or is capable of exceeding 12 months the Borrower shall, on the date on which it enters into such Charter or (as applicable) such amendment:

(a)	provide the Lender with a certified true copy of such Charter;

(b)

execute in favour of the Lender a Charterparty Assignment in respect of that Charter (such Charterparty Assignment to be notified to the relevant charterer and any charter guarantor and the Borrower to use reasonable endeavours to obtain an executed acknowledgment of the notice from the relevant charterer and charter guarantor in such form as the Lender may approve or require); and

(c)

without limiting the generality of the above, if that Charter is a bareboat charter, procure that the bareboat charterer shall promptly execute in favour of the Lender an assignment of (inter alia) all its rights, title and interest in and to the Insurances in respect of the Ship effected either by the Borrower or by the bareboat charterer and a letter of undertaking in favour of the Lender whereby (inter alia) the interests of the bareboat charterer under the bareboat charter are fully subordinated to the interests of the Lender and the other Finance Parties under the Finance Documents, each to be in an agreed form,

and shall deliver to the Lender such other documents as it may reasonably require (including, without limitation, documents equivalent to those referred to at paragraphs 1.2 to 1.5 of Part A of Schedule 2 (Conditions Precedent) in respect of such Charterparty Assignment or tripartite agreement).

21.21

Qualifying Charter

If the Ship will not be employed under a Qualifying Charter on the Delivery Date, the Borrower shall enter into a Qualifying Charter within six months from the Utilisation Date and shall provide the Lender with all documents specified in paragraphs (a), (b) and (c) of Clause 21.20 (Charterparty Assignment), together with evidence that it has been unconditionally delivered by the Borrower to, and accepted by, the relevant charterer under the Qualifying Charter promptly thereafter. For the avoidance of doubt, if the Ship is not employed under a Qualifying Charter in accordance with this Clause, the Borrower shall partially prepay the Loan in accordance with Clause 7.6 (Mandatory prepayment on non-employment of Ship under Qualifying Charter).

22	SECURITY COVER

22.1	Minimum required security cover

Subject always to Clause 7.5 (Mandatory prepayment on change of control in Corporate Guarantor), Clause 22.2 (Provision of additional security; prepayment) applies if the Lender notifies the Borrower that:

(a)	the Market Value of the Ship then subject to a Mortgage; plus

(b)	the net realisable value of additional Security previously provided under this Clause 22 (Security Cover),

is below 130 per cent. of the Loan.

22.2	Provision of additional security; prepayment

(a)

If the Lender serves a notice on the Borrower under Clause 22.1 (Minimum required security cover), the Borrower shall, on or before the date falling one Month after the date on which the Lender's notice is served (the "Prepayment Date"), prepay such part of the Loan as shall eliminate the shortfall.

(b)	The Borrower may, instead of making a prepayment as described in paragraph (a) above, provide, or ensure that a third party has provided, additional security which, in the opinion of the Lender:

(i)

has a net realisable value at least equal to the shortfall; and

(ii)

is documented in such terms as the Lender may approve or require,

before the Prepayment Date; and conditional upon such security being provided in such manner, it shall satisfy such prepayment obligation.

22.3	Value of additional vessel security

The net realisable value of any additional security which is provided under Clause 22.2 (Provision of additional security; prepayment) and which consists of Security over a vessel shall be the Market Value of the vessel concerned and if in the form of freely available US Dollars in cash it will be valued on a dollar for dollar basis.

22.4	Valuations binding

Any valuation under this Clause 22 (Security Cover) and for purposes of Clause 7.5 (Mandatory prepayment on change of control in Corporate Guarantor) shall (absent manifest error) be binding and conclusive as regards the Borrower.

22.5	Provision of information

(a)

The Borrower shall promptly provide the Lender and any shipbroker acting under this Clause 22 (Security Cover) and for purposes of Clause 7.5 (Mandatory prepayment on change of control in Corporate Guarantor) with any information which the Lender or the shipbroker may request for the purposes of the valuation.

(b)	If the Borrower fails to provide the information referred to in paragraph (a) above by the date specified in the request, the valuation may be made on any basis and assumptions which the shipbroker or the Lender considers prudent.

22.6	Prepayment mechanism

Any prepayment pursuant to Clause 22.2 (Provision of additional security; prepayment) shall be made in accordance with the relevant provisions of Clause 7 (Prepayment and Cancellation) and shall be treated as a voluntary prepayment pursuant to Clause 7.3 (Voluntary prepayment of Loan).

22.7	Provision of valuations

In addition to the valuation of the Ship for purposes of Utilisation on the Utilisation Date, the Borrower shall also, at its own cost, provide the Lender with valuations of the Ship and any other vessel over which additional Security has been created in accordance with Clause 22.2 (Provision of additional security; prepayment), from an Approved Valuer appointed on behalf of and reporting to the Lender, to enable the Lender to determine the Market Value of the Ship for the purposes of determining the relevant percentage referred to in Clause 22.1 (Minimum required security cover) and for purposes of determining the relevant percentage referred to in Clause 7.5 (Mandatory prepayment on change of control in Corporate Guarantor) at any time that the Facility Agent may require.

23	ACCOUNTS AND APPLICATION OF EARNINGS

23.1

Accounts

The Borrower may not, without the prior consent of the Lender, maintain any bank account other than its Earnings Account and the Minimum Liquidity Account.

23.2	Payment of Earnings

The Borrower shall ensure that subject only to the provisions of the General Assignment to which it is a party, all the Earnings in respect of the Ship are paid in to its Earnings Account.

23.3	Location of Accounts

The Borrower shall promptly:

(a)	comply with any requirement of the Lender as to the location or relocation of its Earnings Account and the Minimum Liquidity Account (or either of them); and

(b)	execute any documents which the Lender reasonably specifies to create or maintain in favour of the Lender Security over (and/or rights of set-off, consolidation or other rights in relation to) the Earnings Account and the Minimum Liquidity Account.

23.4	Release of surplus

Any amount remaining to the credit of the Earnings Account following the making of any payments required under this Agreement shall unless an Event of Default shall have occurred and be continuing, be released to or to the order of the Borrower and may (for the avoidance of doubt) be withdrawn from the Earnings Account provided no Event of Default has occurred and is continuing.

24	EVENTS OF DEFAULT

24.1

General

Each of the events or circumstances set out in this Clause 24 (Events of Default) is an Event of Default except for Clause 24.21 (Acceleration) and Clause 24.22 (Enforcement of security).

24.2	Non-payment

A Transaction Obligor does not pay on the due date any amount payable pursuant to a Finance Document to which it is a party at the place at and in the currency in which it is expressed to be payable unless:

(a)	its failure to pay is caused by:

(i)

administrative or technical error; or

(ii)

a Disruption Event; and

(b)	payment is made within three (3) Business Days of its due date.

24.3	Specific obligations

A breach occurs of Clause 4.4 (Waiver of conditions precedent), 4.5 (Conditions subsequent relevant to Qualified IPO), Clause 19.9 (Title), Clause 19.10 (Negative pledge), Clause 19.19 (Unlawfulness, invalidity and ranking; Security imperilled), Clause 19.22 (Minimum Liquidity), Clause 20.2 (Maintenance of obligatory insurances), Clause 20.3 (Terms of obligatory insurances), Clause 20.5 (Renewal of obligatory insurances) or Clause 22 (Security Cover) or clause 10 (Financial Covenants) of the Corporate Guarantee. For the avoidance of doubt it will not be an Event of Default if the planned Spin-Off and/or Qualified IPO do not materialize for

any reason whatsoever so long as Euroseas delivers to the Lender a duly executed Shares Security and any docu^-ments required in accordance with Part C of Schedule 2 (Conditions Subsequent relevant to Qualified IPO).

24.4	Other obligations

(a)	A Transaction Obligor does not comply with any provision of the Finance Documents to which it is a party (other than those referred to in Clause 24.2 (Non-payment) and Clause 24.3 (Specific obligations)).

(b)	No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within ten (10) Business Days of the Lender giving written notice to the Borrower or (if earlier) any Transaction Obligor becoming aware of the failure to comply.

24.5	Misrepresentation

Any representation or statement made or deemed to be made by a Transaction Obligor in the Finance Documents to which it is a party or any other document delivered by or on behalf of any Transaction Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made.

24.6	Cross default

(a)	Any Financial Indebtedness of the Borrower or the Corporate Guarantor is not paid when due nor within any originally applicable grace period.

(b)	Any Financial Indebtedness of the Borrower or the Corporate Guarantor is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).

(c)	Any commitment for any Financial Indebtedness of the Borrower or the Corporate Guarantor is cancelled or suspended by a creditor of the Borrower or the Corporate Guarantor as a result of an event of default (however described).

(d)	Any creditor of the Borrower or the Corporate Guarantor becomes entitled to declare any Financial Indebtedness of the Borrower or the Corporate Guarantor due and payable prior to its specified maturity as a result of an event of default (however described).

In respect of the Borrower and the Corporate Guarantor, no Event of Default under this Clause 24.6 (Cross default) shall occur if the aggregate amount of the Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (a) to (c) above is less than $1,000,000 (or its equivalent in any other currency or currencies).

24.7	Insolvency

(a)	Either the Borrower or the Corporate Guarantor:

(i)

is unable or admits inability to pay its debts as they fall due;

(ii)

is deemed to, or is declared to, be unable to pay its debts under any applicable law;

(iii)

suspends or threatens to suspend making payments on any of its debts; or

(iv)

by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors (excluding the Lender in its capacity as such) with a view to rescheduling any of its indebtedness.

(b)	The value of the assets of the Borrower or the Corporate Guarantor is less than its liabilities (taking into account contingent and prospective liabilities).

(c)	A moratorium is declared in respect of any indebtedness of the Borrower or the Corporate Guarantor. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.

24.8	Insolvency proceedings

(a)	Any corporate action, legal proceedings or other procedure or step is taken in relation to:

(i)

the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of the Borrower or the Corporate Guarantor;

(ii)

a composition, compromise, assignment or arrangement with any creditor of the Borrower or the Corporate Guarantor;

(iii)

the appointment of a liquidator, receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of the Borrower or the Corporate Guarantor or any of its assets; or

(iv)

enforcement of any Security over any assets of the Borrower or the Corporate Guarantor,

or any analogous procedure or step is taken in any jurisdiction.

(b)	Paragraph (a) above shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 14 days of commencement.

24.9	Creditors' process

Any expropriation, attachment, sequestration, distress or execution (or any analogous process in any jurisdiction) affects any asset or assets of the Borrower or the Corporate Guarantor.

24.10

Ownership of the Borrower

The Borrower is not or ceases to be a 100% directly owned Subsidiary of the Shareholder.

24.11

Change of Chairman or CEO of Corporate Guarantor

Mr Aristeidis J.Pittas ceases to be at any time the chairman and the chief executive officer of the board of directors of the Corporate Guarantor.

24.12

Delisting of Corporate Guarantor or no Substitute Date

(a)	Prior to the date of the Qualified IPO, Euroseas is delisted for any reason whatsoever from the Nasdaq stock exchange or, after the Qualified IPO, Eurodry is for any reason delisted from the Nasdaq stock exchange.

(b)	The Qualified IPO and Spin-Off have been completed but the Substitute Date does not occur within 5 days thereafter or any later date as the Lender may agree in writing in its absolute discretion.

24.13

Unlawfulness, invalidity and ranking

(a)	It is or becomes unlawful for a Transaction Obligor to perform any of its obligations under the Finance Documents to which it is a party.

(b)	Any obligation of a Transaction Obligor under the Finance Documents to which it is a party is not or ceases to be legal, valid, binding or enforceable.

(c)	Any Finance Document ceases to be in full force and effect or to be continuing or is or purports to be determined or any Transaction Security is alleged by a party to it (other than the Lender) to be ineffective.

(d)	Any Transaction Security proves to have ranked after, or loses its priority to, any other Security.

24.14

Security imperilled

Any Security created or intended to be created by a Finance Document is in any way imperilled or in jeopardy.

24.15

Cessation of business

The Borrower or the Corporate Guarantor suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a material part of its business.

24.16

Arrest

Any arrest of the Ship or its detention in the exercise or the purported exercise of any lien or claim unless it is redelivered to the full control of the Borrower within 14 days of such arrest or detention.

24.17

Expropriation

The authority or ability of the Borrower or the Corporate Guarantor to conduct its business is limited or wholly or substantially curtailed by any seizure, expropriation, nationalisation, intervention, restriction or other action by or on behalf of any governmental, regulatory or other authority or other person in relation to any Transaction Obligor or any of its assets other than:

(a)	an arrest or detention of the Ship referred to in Clause 24.16 (Arrest); or

(b)	any Requisition.

24.18

Repudiation and rescission of agreements

A Transaction Obligor (or any other relevant party) rescinds or purports to rescind or repudiates or purports to repudiate a Transaction Document to which it is a party or any of the Transaction Security or evidences an intention to rescind or repudiate a Transaction Document to which it is a party or any Transaction Security or a Transaction Document to which it is a

party or any of the Transaction Security otherwise ceases to remain in full force and effect for any reason.

24.19

Litigation

Any litigation, arbitration or administrative proceedings or investigations of, or before, any court, arbitral body or agency are started or threatened, or any judgment or order of a court, arbitral body or agency is made, in relation to any of the Transaction Documents or the transactions contemplated in any of the Transaction Documents or against the Borrower or the Corporate Guarantor or its assets which has or is reasonably likely to have a Material Adverse Effect.

24.20

Material adverse change

Any event or circumstance occurs which has or is reasonably likely to have a Material Adverse Effect.

24.21

Acceleration

On and at any time after the occurrence of an Event of Default which is continuing the Lender may by written notice to the Borrower:

(a)	cancel the Commitment, whereupon it shall immediately be cancelled;

(b)	declare that all or part of the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon it shall become immediately due and payable; and/or

(c)	declare that all or part of the Loan be payable on demand, whereupon it shall immediately become payable on demand by the Lender,

and the Lender may serve notices under paragraphs (a), (b) and (c) above simultaneously or on different dates and the Lender may take any action referred to in Clause 24.22 (Enforcement of security) if no such notice is served or simultaneously with or at any time after the service of any of such notice.

24.22

Enforcement of security

On and at any time after the occurrence of an Event of Default which is continuing the Lender may take any action which, as a result of such Event of Default or any notice served under Clause 24.21 (Acceleration), the Lender is entitled to take under any Finance Document or any applicable law or regulation.

SECTION 8

THE LENDER, THE BORROWER AND THE REFERENCE BANKS

25	CHANGES TO THE LENDER

25.1	Assignment and transfer by the Lender

Subject to this Clause 25 (Changes to the Lender), the Lender (the "Existing Lender") may assign any of its rights or transfer by novation any of its rights and obligations under the Finance Documents to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the "New Lender").

25.2	Conditions of assignment or transfer

(a)	The Lender shall not be required to consult with the Borrower or obtain the Borrower's written consent in connection with an assignment or transfer by the Lender pursuant to Clause 25.1 (Assignment and transfer by the Lender).

(b)

If:

(i)

the Existing Lender assigns any of its rights or obligations under the Finance Documents or changes its Facility Office; and

(ii)

as a result of circumstances existing at the date the assignment or change occurs, a Transaction Obligor would be obliged to make a payment to the New Lender or the Existing Lender acting through its new Facility Office under Clause 12 (Tax Gross Up and Indemnities) or under that clause as incorporated by reference or in full in any other Finance Document or Clause 13 (Increased Costs),

then the New Lender or the Existing Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender would have been if the assignment or change had not occurred.

(c)

The Borrower on behalf of itself and each Transaction Obligor agrees that all rights and interests (present, future or contingent) which the Existing Lender has under or by virtue of the Finance Documents are assigned to the New Lender absolutely, free of any defects in the Existing Lender's title and of any rights or equities which the Borrower or any other Transaction Obligor had against the Existing Lender.

25.3	Security over Lender's rights

In addition to the other rights provided to the Lender under this Clause 25 (Changes to the Lender), the Lender may without consulting with or obtaining consent from any Transaction Obligor, at any time charge, assign or otherwise create Security in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of the Lender including, without limitation:

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

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

except that no such charge, assignment or Security shall:

(i)

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

(ii)

require any payments to be made by a Transaction Obligor other than or in excess of, or grant to any person any more extensive rights than, those required to be made or granted to the Lender under the Finance Documents.

26	CHANGES TO THE TRANSACTION OBLIGORS

26.1	Assignment or transfer by Transaction Obligors

No Transaction Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents to which it is a party.

27	THE REFERENCE BANKS

27.1	Role of Reference Banks

(a)	No Reference Bank is under any obligation to provide a quotation or any other information to the Lender.

(b)	No Reference Bank will be liable for any action taken by it under or in connection with any Finance Document, or for any Reference Bank Quotation, unless directly caused by its gross negligence or wilful misconduct.

(c)

No Party (other than the relevant Reference Bank) may take any proceedings against any officer, employee or agent of any Reference Bank in respect of any claim it might have against that Reference Bank or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document, or to any Reference Bank Quotation, and any officer, employee or agent of each Reference Bank may rely on this Clause 27.1 (Role of Reference Banks) subject to Clause 1.5 (Third party rights) and the provisions of the Third Parties Act.

27.2	Third Party Reference Banks

A Reference Bank which is not a Party may rely on Clause 27.1 (Role of Reference Banks) and Clause 40 (Confidentiality of Funding Rates and Reference Bank Quotations) subject to Clause 1.5 (Third party rights) and the provisions of the Third Parties Act.

SECTION 9

ADMINISTRATION

28	PAYMENT MECHANICS

28.1	Payments to the Lender

(a)

On each date on which a Transaction Obligor is required to make a payment under a Finance Document to which it is a party, that Transaction Obligor shall make an amount equal to such payment available to the Lender for value on the due date at the time as required in the Finance Documents, or if not specified therein, in such funds specified by the Lender as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

(b)	Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to euro, in a principal financial centre in such Participating Member State or London, as specified by the Lender) and with such bank as the Lender, in each case, specifies.

28.2	Application of receipts; partial payments

(a)	If the Lender receives a payment that is insufficient to discharge all the amounts then due and payable by a Transaction Obligor under the Finance Documents to which it is a party, the Lender may apply that payment towards:

(i)

first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Lender under the Finance Documents;

(ii)

secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;

(iii)

thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and

(iv)

fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

(b)	Following the occurrence of an Event of Default which is continuing the Lender may vary the order set in paragraph (a) above.

(c)	Paragraphs (a) and (b) above will override any appropriation made by a Transaction Obligor.

28.3	No set-off by Transaction Obligors

All payments to be made by a Transaction Obligor under the Finance Documents to which any of them is a party shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

28.4	Business Days

(a)	Any payment under the Finance Documents 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).

(b)	During any extension of the due date for payment of any principal or an Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.

28.5	Currency of account

(a)	Subject to paragraphs (b) and (c) below, dollars is the currency of account and payment for any sum due from a Transaction Obligor under any Finance Document.

(b)	Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

(c)	Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.

28.6	Disruption to Payment Systems etc.

If either the Lender determines (in its discretion) that a Disruption Event has occurred or the Lender is notified by the Borrower that a Disruption Event has occurred which negatively affects the ability of the Borrower to repay the Loan and at the same has a Material Adverse Effect:

(a)	the Lender may, and shall if requested to do so by the Borrower, consult with the Borrower with a view to agreeing with the Borrower such changes to the operation or administration of the Facility as the Lender may deem necessary in the circumstances;

(b)	the Lender shall not be obliged to consult with the Borrower in relation to any changes mentioned in paragraph (a) above if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes;

(c)

any such changes agreed upon by the Lender and the Borrower shall (whether or not it is finally determined that a Disruption Event has occurred which at the same time has a Material Adverse Effect) be binding upon the Parties and any Transaction Obligors as an amendment to (or, as the case may be, waiver of) the terms of the Finance Documents;

(d)

the Lender shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever (including, without limitation for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Lender) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 28.6 (Disruption to Payment Systems etc.).

SET-OFF

The Lender may set off any matured obligation due from a Transaction Obligor under the Finance Documents to which any them is a party (to the extent beneficially owned by the Lender) against any matured obligation owed by the Lender to that Transaction Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

30	CONDUCT OF BUSINESS BY THE LENDER

No provision of this Agreement will:

(a)	interfere with the right of the Lender to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

(b)	oblige the Lender to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

(c)	oblige the Lender to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

BAIL-IN

(a)	any Bail-In Action in relation to any such liability, including (without limitation):

(i)

a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;

(ii)

a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and

(iii)

a cancellation of any such liability; and

(b)	a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.

NOTICES

32.1	Communications in writing

Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by email, fax or letter.

32.2

Addresses

The address, email address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents are:

(a)	in the case of the Borrower, that specified in Schedule 1 (The Parties); and

(b)	in the case of the Lender, that specified in Schedule 1 (The Parties) or, if it becomes a Party after the date of this Agreement, that notified in writing to the Lender on or before the date on which it becomes a Party;

or any substitute address, email address, fax number or department or officer as the Borrower may notify to the Lender (or the Lender may notify to the other Parties, if a change is made by the Lender) by not less than five (5) Business Days' notice.

32.3

Delivery

(a)	Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:

(i)

if by way of fax or email, when received in legible form;

(ii)

if by way of letter, when it has been left at the relevant address or five (5) Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,

and, if a particular department or officer is specified as part of its address details provided under Clause 32.2 (Addresses), if addressed to that department or officer.

(b)

Any communication or document to be made or delivered to the Lender will be effective only when actually received by it and then only if it is expressly marked for the attention of the department or officer of the Lender specified in Schedule 1 (The Parties) (or any substitute department or officer as the Lender shall specify for this purpose).

(c)	Any communication or document made or delivered to the Borrower in accordance with this Clause will be deemed to have been made or delivered to each of the Transaction Obligors.

(d)	Any communication or document which becomes effective, in accordance with paragraphs (a) to (c) above, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.

32.4	Electronic communication

(a)	Any communication to be made between any two Parties under or in connection with the Finance Documents may be made by electronic mail or other electronic means (including, without limitation, by way of posting to a secure website) if those two Parties:

(i)

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

(ii)

notify each other of any change to their address or any other such information supplied by them by not less than five Business Days' notice.

(b)	Any such electronic communication as specified in paragraph (a) above to be made between the Borrower and the Lender may only be made in that way to the extent that those two Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication.

(c)

Any such electronic communication as specified in paragraph (a) above made between any two Parties will be effective only when actually received (or made available) in readable form and in the case of any electronic communication made by a Party to the Lender only if it is addressed in such a manner as the Lender shall specify for this purpose.

(d)

Any electronic communication which becomes effective, in accordance with paragraph (c) above, after 5.00 p.m. in the place in which the Party to whom the relevant communication is sent or made available has its address for the purpose of this Agreement shall be deemed only to become effective on the following day.

(e)	Any reference in a Finance Document to a communication being sent or received shall be construed to include that communication being made available in accordance with this Clause 32.4 (Electronic communication).

32.5	English language

(a)	Any notice given under or in connection with any Finance Document must be in English.

(b)	All other documents provided under or in connection with any Finance Document must be:

(i)

in English; or

(ii)

if not in English, and if so required by the Lender, accompanied by a certified English translation prepared by a translator approved by the Lender and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.

33	CALCULATIONS AND CERTIFICATES

33.1

Accounts

In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by the Lender are (in the absence of manifest error) prima facie evidence of the matters to which they relate.

33.2	Certificates and determinations

Any certification or determination by the Lender of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

33.3	Day count convention

Any interest, commission or fee accruing under a Finance 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 or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.

34	PARTIAL INVALIDITY

If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions under the law of that jurisdiction nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

35	REMEDIES AND WAIVERS

No failure to exercise, nor any delay in exercising, on the part of the Lender or any Receiver or Delegate, any right or remedy under a Finance Document shall operate as a waiver of any such right or remedy or constitute an election to affirm any Finance Document. No election to affirm any Finance Document on the part of the Lender or any Receiver or Delegate shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any

further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in each Finance Document are cumulative and not exclusive of any rights or remedies provided by law.

36	SETTLEMENT OR DISCHARGE CONDITIONAL

Any settlement or discharge under any Finance Document between the Lender and any Transaction Obligor shall be conditional upon no security or payment to the Lender by any Transaction Obligor or any other person being set aside, adjusted or ordered to be repaid, whether under any insolvency law or otherwise.

37	IRREVOCABLE PAYMENT

If the Lender considers that an amount paid or discharged by, or on behalf of, a Transaction Obligor or by any other person in purported payment or discharge of an obligation of that Transaction Obligor to the Lender under the Finance Documents is capable of being avoided or otherwise set aside on the liquidation or administration of that Transaction Obligor or otherwise, then that amount shall not be considered to have been unconditionally and irrevocably paid or discharged for the purposes of the Finance Documents.

38	AMENDMENTS

Without prejudice to the generality of Clauses 1.2 (Construction), the Borrower expressly confirms that it intends that any guarantee contained in this Agreement or any other Finance Document and any Security created by any Finance Document 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 for the purposes of or in connection with any of the following: business acquisitions of any nature; increasing working capital; enabling investor distributions to be made; carrying out restructurings; refinancing existing facilities; refinancing any other indebtedness; making facilities available to new borrowers; any other variation or extension of the purposes for which any such facility or amount might be made available from time to time; and any fees, costs and/or expenses associated with any of the foregoing.

39	CONFIDENTIAL INFORMATION

39.1	Confidentiality

The Lender agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 39.2 (Disclosure of Confidential Information) and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.

39.2	Disclosure of Confidential Information

The Lender may disclose:

(a)

to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as the Lender shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this paragraph (a) is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional

obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;

(b)	to any person:

(i)

to (or through) whom it assigns (or may potentially assign) all or any of its rights and/or obligations under one or more Finance Documents and, in each case, to any of that person's Affiliates, Related Funds, Representatives and professional advisers;

(ii)

with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or one or more Transaction Obligors and to any of that person's Affiliates, Related Funds, Representatives and professional advisers;

(iii)

appointed by the Lender or by a person to whom sub-paragraph (i) or (ii) of paragraph (b) above applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf;

(iv)

who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in sub-paragraph (i) or (ii) of paragraph (b) above;

(v)

to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation;

(vi)

to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitrations, administrative or other investigations, proceedings or disputes;

(vii)

to whom or for whose benefit the Lender charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 25.3 (Security over Lender's rights);

(viii)

who is a Party or any related entity of a Transaction Obligor;

(ix)

as a result of the registration of any Finance Document as contemplated by any Finance Document or any legal opinion obtained in connection with any Finance Document;

in each case, such Confidential Information as the Lender shall consider appropriate if:

(A)

in relation to sub-paragraphs (i), (ii) and (iii) of paragraph (b) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;

(B)

in relation to sub-paragraph (iv) of paragraph (b) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that

some or all of such Confidential Information may be price-sensitive information;

(C)

in relation to sub-paragraphs (v), (vi) and (vii) of paragraph (b) above, the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of the Lender, it is not practicable so to do in the circumstances;

(c)

to any person appointed by the Lender or by a person to whom sub-paragraph (i) or (ii) of paragraph (b) above applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this paragraph (c) if the service provider to whom the Confidential Information is to be given has entered in to a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Borrower and the Lender;

(d)

to any rating agency (including its professional advisers) such Confidential Information as may be required to be disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents and/or the Transaction Obligors if the rating agency to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information.

39.3	Entire agreement

This Clause 39 (Confidential Information) constitutes the entire agreement between the Parties in relation to the obligations of the Lender under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.

39.4	Inside information

The Lender acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and the Lender undertakes not to use any Confidential Information for any unlawful purpose.

39.5	Notification of disclosure

The Lender agrees (to the extent permitted by law and regulation) to inform the Borrower:

(a)

of the circumstances of any disclosure of Confidential Information made pursuant to sub-paragraph (v) of paragraph (b) of Clause 39.2 (Disclosure of Confidential Information) except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and

(b)	upon becoming aware that Confidential Information has been disclosed in breach of this Clause 39 (Confidential Information).

39.6	Continuing obligations

The obligations in this Clause 39 (Confidential Information) are continuing and, in particular, shall survive and remain binding on the Lender for a period of 12 months from the earlier of:

(a)	the date on which all amounts payable by the Borrower under or in connection with this Agreement have been paid in full and the Commitment has been cancelled or otherwise ceased to be available; and

(b)	the date on which the Lender otherwise ceases to be the Lender.

For the avoidance of doubt nothing in this Clause prohibits any Transaction Obligor from making appropriate disclosures to the US SEC in compliance with the relevant reporting obligations of the Corporate Guarantor.

40	CONFIDENTIALITY OF FUNDING RATES AND REFERENCE BANK QUOTATIONS

40.1	Confidentiality and disclosure

(a)	The Borrower agrees to keep each Funding Rate (and the Lender agrees to keep each Reference Bank Quotation) confidential and not to disclose it to anyone, save to the extent permitted by paragraphs (b), (d) and (e) below.

(b)	The Lender may not disclose any Reference Bank Quotation to the Borrower.

(c)

The Lender may disclose any Reference Bank Quotation to any person appointed by it to provide administration services in respect of one or more of the Finance Documents to the extent necessary to enable such service provider to provide those services if the service provider to whom that information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Lender and the relevant Reference Bank.

(d)	The Lender may disclose any Reference Bank Quotation, and the Borrower may disclose any Funding Rate, to:

(i)

any of its Affiliates and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives, if any person to whom that Funding Rate or Reference Bank Quotation is to be given pursuant to this paragraph (i) is informed in writing of its confidential nature and that it may be price sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of that Funding Rate or Reference Bank Quotation or is otherwise bound by requirements of confidentiality in relation to it;

(ii)

any person to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation if the person to whom that Funding Rate or Reference Bank Quotation is to be given is informed in writing of its confidential nature and that it may be price sensitive information except that there shall be no requirement to so inform if, in the opinion of the Lender or the Borrower, as the case may be, it is not practicable to do so in the circumstances;

(iii)

any person to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes if the person to whom that Funding Rate or Reference Bank Quotation is to be given is informed in writing of its confidential nature and that it may be price sensitive information except that there shall be no requirement to so inform if, in the opinion of the Lender or the Borrower, as the case may be, it is not practicable to do so in the circumstances; and

(iv)

any person with the consent of the Lender or Reference Bank, as the case may be.

(e)

The Lender's obligations in this Clause 40 (Confidentiality of Funding Rates and Reference Bank Quotations) relating to Reference Bank Quotations are without prejudice to its obligations to make notifications under Clause 8.4 (Notification of rates of interest) Provided that the Lender shall not include the details of any individual Reference Bank Quotation as part of any such notification.

40.2	Related obligations

(a)

The Borrower acknowledges that each Funding Rate (and the Lender acknowledges that each Reference Bank Quotation) is or may be price sensitive information and that its use may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and the Borrower undertakes not to use any Funding Rate and the Lender undertakes not to use any Reference Bank Quotation for any unlawful purpose.

(b)	The Lender and the Borrower agree (to the extent permitted by law and regulation) to inform the Lender or the relevant Reference Bank, as the case may be:

(i)

of the circumstances of any disclosure made pursuant to sub-paragraph (ii) of paragraph (d) of Clause 40.1 (Confidentiality and disclosure) except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and

(ii)

upon becoming aware that any information has been disclosed in breach of this Clause 40 (Confidentiality of Funding Rates and Reference Bank Quotations).

40.3	No Event of Default

No Event of Default will occur under Clause 24.4 (Other obligations) by reason only of the Borrower's failure to comply with this Clause 40 (Confidentiality of Funding Rates and Reference Bank Quotations).

41	COUNTERPARTS

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

SECTION 10

GOVERNING LAW AND ENFORCEMENT

42	GOVERNING LAW

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.

43	ENFORCEMENT

43.1	Jurisdiction

(a)

Unless specifically provided in another Finance Document in relation to that Finance Document, the courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with any Finance Document (including a dispute regarding the existence, validity or termination of any Finance Document or any non-contractual obligation arising out of or in connection with any Finance Document) (a "Dispute").

(b)	The Borrower accepts that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly the Borrower will not argue to the contrary.

(c)

This Clause 43.1 (Jurisdiction) is for the benefit of the Lender only. As a result, the Lender shall be not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions.

43.2	Service of process

(a)	Without prejudice to any other mode of service allowed under any relevant law, the Borrower:

(i)

irrevocably appoints Hill Dickinson Services (London) Limited, of The Broadgate Tower, 20 Primrose Street, London, EC2A 2EW, England as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and

(ii)

agrees that failure by a process agent to notify the Borrower of the process will not invalidate the proceedings concerned.

(b)

If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process, the Borrower (on behalf of all the Transaction Obligors) must immediately (and in any event within five days of such event taking place) appoint another agent on terms acceptable to the Lender. Failing this, the Lender may appoint another agent for this purpose.

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

SCHEDULE 1

THE PARTIES

PART A

THE BORROWER

Name of Borrower	Place of Incorporation	Registration number (or equivalent, if any)	Address for Communication

Kamsarmax Two Shipping Ltd	Marshall Islands	68235	c/o Eurobulk Ltd. 4 Messogiou & Evropis Street Maroussi Athens 151 24 Greece Fax: Fax: 211 1804097 Email: njp@euroltd.gr sih@eurobulk.gr

PART B

THE ORIGINAL LENDER

Name of Original Lender	Address for Communication

HSCB Bank plc	8 Canada Square London, E14 5HQ United Kingdom Fax no.:+44 (0) 207 991 4619 Attn: Mr Alastair Muir Email address: alastairmuir@hsbc.com 109-111 Messoghion Avenue 115 26 Athens Greece fax:+30 210 429 0506 Email: katerina.eleftheriou@hsbc.com Attn: Ms Katerina Eleftheriou

SCHEDULE 2

CONDITIONS PRECEDENT

PART A

CONDITIONS PRECEDENT TO INITIAL UTILISATION REQUEST

Obligors

1.1	A copy of the constitutional documents of the Borrower and Corporate Guarantor A.

1.2	A copy of a resolution of the board of directors of the Borrower and Corporate Guarantor A:

(a)	approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;

(b)	authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and

(c)	authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, a Utilisation Request and each Selection Notice) to be signed and/or despatched by it under, or in connection with, the Finance Documents to which it is a party.

1.3	An original of the power of attorney of the Borrower and Corporate Guarantor A authorising a specified person or persons to execute the Finance Documents to which it is a party.

1.4	A specimen of the signature of each person authorised by the resolution referred to in paragraph 1.2 above.

1.5	A copy of a resolution signed by Corporate Guarantor A as the holder of the issued shares in the Borrower, approving the terms of, and the transactions contemplated by, the Finance Documents to which the Borrower is a party.

1.6	A certificate of the Borrower and Corporate Guarantor A (signed by a director) confirming that borrowing or guaranteeing, as appropriate, the Commitment would not cause any borrowing, guaranteeing or similar limit binding on the Borrower or Corporate Guarantor A to be exceeded.

1.7

A certificate of an authorised signatory of the Borrower and Corporate Guarantor A certifying that each copy document relating to it specified in this Part A of Schedule 2 (Conditions Precedent) is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.

2	Shipbuilding Contract and other documents

2.1	Copies of the Shipbuilding Contract and of all documents signed or issued by the Borrower or the Builder (or both of them) under or in connection with it.

2.2	Such documentary evidence as the Lender and its legal advisers may require in relation to the due authorisation and execution by the Borrower and the Builder of the Shipbuilding Contract and of all documents to be executed by the Borrower and the Builder.

3	Finance Documents

3.1	A duly executed original of any Finance Document (for the avoidance of doubt, including Corporate Guarantee A) not otherwise referred to in this Schedule 2 (Conditions Precedent).

3.2	A duly executed original of any other document required to be delivered by each Finance Document if not otherwise referred to this Schedule 2 (Conditions Precedent).

Security

4.1	A duly executed original of the Account Security in relation to each Account (and of each document to be delivered under it).

5	Legal opinions

5.1	A legal opinion of Watson Farley & Williams, legal advisers to the Lender in England.

5.2	If the Borrower or Corporate Guarantor A is incorporated in a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Lender in the relevant jurisdiction.

Valuation

6.1	A valuation evidencing the Market Value of the Ship, addressed to the Lender, stated to be for the purposes of this Agreement and dated not earlier than 20 days before the Utilisation Date from an Approved Valuer.

7	Other documents and evidence

7.1	Evidence that any process agent referred to in Clause 43.2 (Service of process), if not the Borrower, has accepted its appointment.

7.2

A copy of any other Authorisation or other document, opinion or assurance which the Lender considers to be necessary or desirable (if it has notified the Borrower accordingly) in connection with the entry into and performance of the transactions contemplated by any Transaction Document or for the validity and enforceability of any Transaction Document.

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

7.4	Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clause 11 (Fees) and Clause 16 (Costs and Expenses) have been paid or will be paid by the Utilisation Date.

7.5

Such evidence as the Lender may require, prior to the execution of this Agreement, for it to be able to satisfy its "know your customer" (including, without limitation, an ultimate beneficial ownership (UBO) declaration in respect of the Borrower confirming that Corporate Guarantor A is owned and controlled directly or indirectly by members of the Nominated Family as required by this Agreement or any other form of declaration in respect of the share structure of Corporate Guarantor A acceptable to the Lenders) or similar identification procedures in relation to the transactions contemplated in the Finance Documents, including (without limitation) all documents required under any regulation or laws in force in the United Kingdom and the Regulation 281/2009 of the Central Bank of Greece, such documents to be to the absolute satisfaction of the Lender.

7.6	Evidence that the Borrower, Corporate Guarantor A and all corporate shareholders (if any) have issued registered shares.

PART B

CONDITIONS PRECEDENT TO UTILISATION

Borrower

A certificate of an authorised signatory of the Borrower certifying that each copy document which it is required to provide under this Part B of Schedule 2 (Conditions Precedent) is correct, complete and in full force and effect as at the Utilisation Date.

2	Ship and other security

2.1

A duly executed original of the Mortgage, the General Assignment and (if applicable) any Charterparty Assignment in respect of the Ship and of each document to be delivered under or pursuant to each of them together with documentary evidence that the Mortgage in respect of the Ship has been duly registered as a valid first priority or (as applicable) first preferred ship mortgage in accordance with the laws of the jurisdiction of its Approved Flag.

2.2

If applicable, a copy of the Qualifying Charter and of all documents signed or issued by the Borrower or the relevant charterer (or either of them) under or in connection with it and such documentary evidence as the Lender and its legal advisers may require in relation to the due authorisation and execution of the Qualifying Charter.

2.3	Evidence that the minimum liquidity set out in Clause 19.22 (Minimum Liquidity) has been credited to the Minimum Liquidity Account.

2.4	Documentary evidence that the Ship:

(a)	has been unconditionally delivered by the Builder to, and accepted by, the Borrower under the Shipbuilding Contract and that the full purchase price payable and all other sums due to the Builder under the Shipbuilding Contract, have been paid to the Builder;

(b)	is definitively and permanently registered in the name of the Borrower under the Approved Flag applicable to the Ship;

(c)	is in the absolute and unencumbered ownership of the Borrower save as contemplated by the Finance Documents;

(d)	maintains the Approved Classification with the Approved Classification Society free of all recommendations and conditions of the Approved Classification Society affecting class; and

(e)	is insured in accordance with the provisions of this Agreement and all requirements in this Agreement in respect of insurances have been complied with.

2.5	Documents establishing that the Ship will, as from the Utilisation Date, be managed commercially and/or technically by its Approved Manager on terms acceptable to the Lender, together with:

(a)	a Manager's Undertaking for the Approved Manager of the Ship; and

(b)	copies of the relevant Approved Manager's Document of Compliance and of the Ship's Safety Management Certificate (together with any other details of the applicable Safety Management

System which the Lender requires) and of any other documents required under the ISM Code and the ISPS Code in relation to the Ship including without limitation an ISSC.

2.6	An opinion from an independent insurance consultant acceptable to the Lender on such matters relating to the Insurances as the Lender may require.

3	Legal opinions

Legal opinions of the legal advisers to the Lender in the jurisdiction of the Approved Flag of the Ship, England and Marshall Islands.

4	Other documents and evidence

4.1	Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clause 11 (Fees) and Clause 16 (Costs and Expenses) have been paid or will be paid by the Utilisation Date.

PART C

CONDITIONS SUBSEQUENT RELEVANT TO QUALIFIED IPO

Obligors

1.1	A copy of the constitutional documents of the Shareholder and the Corporate Guarantor.

1.2	A copy of a resolution of the board of directors of the Shareholder and the Corporate Guarantor:

(a)	approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;

(b)	authorising a specified person or persons to execute the Finance Documents to which it is a party 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, the Finance Documents to which it is a party.

1.3	An original of the power of attorney of the Shareholder and the Corporate Guarantor authorising a specified person or persons to execute the Finance Documents to which it is a party.

1.4	A specimen of the signature of each person authorised by the resolution referred to in paragraph 1.2 above.

1.5	A certificate of the Corporate Guarantor (signed by a director) confirming that guaranteeing the Commitment would not cause any guaranteeing or similar limit binding on the Corporate Guarantor to be exceeded.

2	Corporate Guarantee B

A duly executed original of the Corporate Guarantee B.

3	Shares Security

A duly executed original of the Shares Security and of each document to be delivered under it.

4	Legal opinions

4.1	A legal opinion of Watson Farley & Williams, legal advisers to the Lender in England.

4.2	If the Shareholder or the Corporate Guarantor is incorporated in a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Lender in the relevant jurisdiction.

5	Other documents and evidence

5.1	Evidence satisfactory to the Lender that the Qualified IPO (including the Spin-Off) has been completed.

5.2	Evidence satisfactory to the Lender of transfer of ownership of the Borrower from Euroseas to Eurodry.

5.3	Evidence that any process agent referred to in Clause 43.2 (Service of process), if not the Borrower, has accepted its appointment.

5.4

5.5	Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clause 11 (Fees) and Clause 16 (Costs and Expenses) have been paid or will be paid by the Utilisation Date.

5.6

Such evidence as the Lender may require, prior to the execution of this Agreement, for it to be able to satisfy its "know your customer" (including, without limitation, an ultimate beneficial ownership (UBO) declaration in respect of the Borrower confirming that the Corporate Guarantor is owned and controlled directly or indirectly by members of the Nominated Family as required by this Agreement or any other form of declaration in respect of the share structure of the Shareholder acceptable to the Lenders) or similar identification procedures in relation to the transactions contemplated in the Finance Documents, including (without limitation) all documents required under any regulation or laws in force in the United Kingdom and the Regulation 281/2009 of the Central Bank of Greece, such documents to be to the absolute satisfaction of the Lender.

5.7	Evidence that the Borrower, the Corporate Guarantor and all corporate shareholders (if any) have issued registered shares.

SCHEDULE 3

REQUESTS

PART A

UTILISATION REQUEST

From:

Kamsarmax Two shipping Ltd

To:	HSBC Bank plc

Dated: [•] April 2018

Dear Sirs

Kamsarmax Two Shipping Ltd — $18,400,000 Facility Agreement dated [•] April 2018 (the "Agreement")

1	We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.

2	We wish to borrow the Loan on the following terms:

Proposed Utilisation Date:

[•] (or, if that is not a Business Day, the next Business Day)

Amount:

[•] or, if less, the Available Facility

Interest Period:

[•]

3	[You are authorised and requested to deduct from the Loan prior to funds being remitted the following amounts set out against the following items:

Arrangement Fee

Any accrued Commitment Fee

Net proceeds of Loan ]

4	We confirm that each condition specified in Clause 4.1 (Initial conditions precedent) and Clause 4.2 (Further conditions precedent) of the Agreement is satisfied on the date of this Utilisation Request.

5	The [net] proceeds of the Loan should be credited to [account].

6	This Utilisation Request is irrevocable.

Yours faithfully


[•]
authorized signatory for
Kamsarmax Two Shipping Ltd

PART B

SELECTION NOTICE

From:

Kamsarmax Two Shipping Ltd

To:	HSBC Bank plc

Dated: [•]

Dear Sirs

Kamsarmax Two Shipping Ltd — $18,400,000 Facility Agreement dated [•] April 2018 (the "Agreement")

1	We refer to the Agreement. This is a Selection Notice. Terms defined in the Agreement have the same meaning in this Selection Notice unless given a different meaning in this Selection Notice.

We request [that the next Interest Period for the Loan be [•] OR [an Interest Period for a part of the Loan in an amount equal to [•] (which is the amount of the Repayment Instalment next due) ending on [•] (which is the Repayment Date relating to that Repayment Instalment) and that the Interest Period for the remaining part of the Loan shall be [•]).

3	This Selection Notice is irrevocable.

Yours faithfully


[•]
authorized signatory for
Kamsarmax Two Shipping Ltd

SCHEDULE 4

TIMETABLES

Delivery of a duly completed Utilisation Request (Clause 5.1 (Delivery of a Utilisation Request)) or a Selection Notice (Clause 9.1 (Selection of Interest Periods))		Three Business Days before the intended Utilisation Date (Clause 5.1 (Delivery of a Utilisation Request)) or the expiry of the preceding Interest Period (Clause 9.1 (Selection of Interest Periods))

LIBOR is fixed		Quotation Day as of 11:00 am London time

Reference Bank Rate calculated by reference to available quotations in accordance with Clause 10.2 (Calculation of Reference Bank Rate)		Noon on the Quotation Day

EXECUTION PAGE

BORROWER

SIGNED by duly authorised for and on behalf of KAMSARMAX TWO SHIPPING LTD in the presence of: Witness' signature: Witness' name: Witness' address:	) ) ) ) ) ) ) )

ORIGINAL LENDER

SIGNED by duly authorised for and on behalf of HSBC BANK plc in the presence of: Witness' signature: Witness' name: Witness' address:	) ) ) ) ) ) ) )

100

Exhibit 4.22

Dated 26 April 2018

$18,400,000

TERM LOAN FACILITY

KAMSARMAX TWO SHIPPING LTD
as Borrower

and

HSBC BANK plc
as Original Lender

FACILITY AGREEMENT

relating to
the financing of part of the constuction cost of
hull no. 12.1 1153 (tbn “EKATERINI”) currently under construction at
Jiangsu NewYangzi Shipbuilding Co., Ltd., Jiangsu Yangzijiang Shipbuilding Co., Ltd. and Jiangsu
Tianyuan Marine Import & Export Co., Ltd

WATSON FARLEY

WILLIAMS

Index

Clause		Page

Section 1 Interpretation		2
1	Definitions and Interpretation	2
Section 2 The Facility		23
2	The Facility	23
3	Purpose	23
4	Conditions of Utilisation	23
Section 3 Utilisation		25
5	Utilisation	25
Section 4 Repayment, Prepayment and Cancellation		27
6	Repayment	27
7	Prepayment and Cancellation	27
Section 5 Costs of Utilisation		30
8	Interest	30
9	Interest Periods	31
10	Changes to the Calculation of Interest	32
11	Fees	33
Section 6 Additional Payment Obligations		34
12	Tax Gross Up and Indemnities	34
13	Increased Costs	37
14	Other Indemnities	39
15	Mitigation by the Lender	41
16	Costs and Expenses	42
Section 7 Representations, Undertakings and Events of Default		43
17	Representations	43
18	Information Undertakings	48
19	General Undertakings	50
20	Insurance Undertakings	56
21	General Ship Undertakings	61
22	Security Cover	67
23	Accounts and application of Earnings	68
24	Events of Default	69
Section 8 The Lender, the Borrower and the Reference Banks		74
25	Changes to the Lender	74
26	Changes to the Transaction Obligors	75
27	The Reference Banks	75
Section 9 Administration		76
28	Payment Mechanics	76
29	Set-Off	77
30	Conduct of business by the Lender	77
31	Bail-In	78
32	Notices	78
33	Calculations and Certificates	80
34	Partial Invalidity	80
35	Remedies and Waivers	80
36	Settlement or Discharge Conditional	81
37	Irrevocable Payment	81
38	Amendments	81

39	Confidential Information	81
40	Confidentiality of Funding Rates and Reference Bank Quotations	84
41	Counterparts	85
Section 10 Governing Law and Enforcement		86
42	Governing Law	86
43	Enforcement	86

Schedules

Schedule 1 The Parties		87
	Part A The Borrower	87
	Part B The Original Lender	88
Schedule 2 Conditions Precedent		89
	Part A Conditions Precedent to Initial Utilisation Request	89
	Part B Conditions Precedent to Utilisation	92
	Part C Conditions subsequent relevant to Qualified IPO	94
Schedule 3 Requests		96
	Part A Utilisation Request	96
	Part B Selection Notice	98
Schedule 4 Timetables		99

Execution

Execution Page		100

THIS AGREEMENT is made on 26 April 2018

PARTIES

(1)	KAMSARMAX TWO SHIPPING LTD, a corporation incorporated in the Republic of The Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH 96960 as borrower (the “Borrower”)

(2)	HSBC BANK plc, as lender (the “Original Lender”)

BACKGROUND

OPERATIVE PROVISIONS

SECTION 1

INTERPRETATION

1	DEFINITIONS AND INTERPRETATION

1.1	Definitions

In this Agreement:

“Account Bank” means HSBC Bank plc acting through its office at 8 Canada Square, London, E14 SHQ, United Kingdom or any replacement bank or other financial institution as may be approved by the Lender.

“Accounts” means the Earnings Account and the Minimum Liquidity Account.

“Account Security” means a document creating Security over any Account in agreed form.

“Affiliate” means:

(a)

(b)

in any other case, 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 Brokers” means any firm or firms of insurance brokers approved in writing by the Lender.

“Approved Classification” means, as at the date of this Agreement, DNV-GL or the equivalent classification with another Approved Classification Society.

“Approved Classification Society” means, as at the date of this Agreement, DNV-GL or any other classification society which is a member of the International Association of Classification Societies approved in writing by the Lender.

“Approved Flag” means, as at the date of this Agreement, the flag of the Marshall Islands or such other flag approved in writing by the Lender.

“Approved Manager” means, as at the date of this Agreement, Eurobulk Ltd, a corporation incorporated in the Republic of Liberia, whose registered office is at 80 Broad street, Monrovia, Liberia and its principal branch at 4 Messogiou & Evropis Street, Maroussi, 151 -24, Greece, or Eurobulk (Far East) Ltd Philippines, a corporation incorporated in the Philippines, whose registered office and its principal office is at of 10th Floor Maria Natividad Building, 470 T.M Kalaw Cor Cortada Sts, Ermita 1000, Manila, Philippines, or any other person approved in writing by the Lender as the commercial manager and/or technical manager of the Ship.

“Approved Valuer” means Howe Robinson of London, England, Barry Rogliano Sales, Fearnleys of Oslo, Norway and Hartland Shipping Services Limited and any other reputable, independent and first class firm or firms of independent sale and purchase shipbrokers approved in writing by the Lender.

“Assignment Agreement” means an agreement in the form agreed between the Existing Lender and the relevant assignee for the purpose of Clause 25 (Changes to the Lender).

“Authorisation” means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation, legalisation or registration.

“Availability Period” means the period from and including the date of this Agreement to and including 30 June 2018, or such other later date as the Lender may, in its absolute discretion, approve in writing.

“Available Facility” means the Commitment minus:

(a)

the amount of the outstanding Loan; and

(b)

in relation to any proposed Utilisation, the amount of the Loan that is due to be made on or before the proposed Utilisation Date.

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

“Bail-In Legislation” means:

(a)

(b)

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

“Break Costs” means the amount (if any) by which:

(a)

exceeds

(b)

“Builder” means Jiangsu NewYangzi Shipbuilding Co., Ltd., Jiangsu Yangzijiang Shipbuilding Co., Ltd. and Jiangsu Tianyuan Marine Import & Export Co., Ltd, all companies organized and existing under the laws of the Republic of Peoples’ Republic of China, having their principal offices at Jiangyin-Jingjiang Industry Zone, Jingjiang City, Jiangsu Province, 214532, the People’s Republic of China, Erxu Harbour, Jiangyin-Jingjiang Industry Zone, Jiangyin City, Jiangsu Province, 214431, the People’s Republic of China and Room 1309, No.217 and North Zhongshan Road, Nanjing, Jiangsu Province, the People’s Republic of China respectively.

“Business Day” means a day (other than a Saturday or Sunday) on which banks are open for general business in London and Athens and in respect of a day on which a payment is required to be made under a Finance Document, also in New York.

“Charter” means any charter relating to the Ship, or other contract for its employment, whether or not already in existence.

“Charter Guarantee” means any guarantee, bond, letter of credit or other instrument (whether or not already issued) supporting a Charter.

“Charterparty Assignment” means the assignment creating security over the rights of the Borrower under any Charter the duration of which (without taking into account any optional extensions) exceeds or is capable of exceeding 12 months and any Charter Guarantee in respect thereof in agreed form.

“Code” means the US Internal Revenue Code of 1986.

“Commitment” means $18,400,000, to the extent not cancelled or reduced under this Agreement.

“Confidential Information” means all information relating to any Transaction Obligor, the Finance Documents or the Facility of which the Lender becomes aware in its capacity as, or for the purpose of becoming, the Lender or which is received by the Lender in relation to, or for the purpose of becoming the Lender under, the Finance Documents or the Facility from any Transaction Obligor or any of its advisers in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes:

(a)

information that:

(i)

is or becomes public information other than as a direct or indirect result of any breach by the Lender of Clause 39 (Confidential Information);

(ii)

is identified in writing at the time of delivery as non-confidential by any Transaction Obligor or any of its advisers; or

(iii)

(iv)

is reported by any Transaction Obligor to the US SEC in compliance with the relevant reporting obligations of the Corporate Guarantor; and

(b)

any Funding Rate or Reference Bank Quotation

“Confidentiality Undertaking” means a confidentiality undertaking in substantially the appropriate form recommended by the LMA from time to time or in any other form agreed between the Borrower and the Lender.

“Contract Cost” means the price payable for the Ship as the date of this Agreement, being in the amount of $26,300,000.

“Corporate Guarantee” means each of Corporate Guarantee A and Corporate Guarantee B, and, in the plural means both of them.

“Corporate Guarantee A” means a corporate guarantee, executed or to be executed by Euroseas, in agreed form.

“Corporate Guarantee B” means a corporate guarantee, executed or to be executed by Eurodry, in agreed form.

“Corporate Guarantor” means:

(a)

for the period commencing on the date of this Agreement and ending on the Substitute Date, Euroseas; and

(b)

from the date of the Substitute Date and at all times thereafter, Eurodry.

“Default” means an Event of Default or a Potential Event of Default.

“Delegate” means any delegate, agent, attorney or co-trustee appointed by the Lender.

“Delivery Date” means the date on which the Ship is delivered by the Builder to the Borrower under the Shipbuilding Contract, as evidenced by the relevant protocol of delivery and acceptance.

“Disruption Event” means either or both of:

(a)

(b)

(i)

from performing its payment obligations under the Finance Documents to which it is a party; or

(ii)

from communicating with other Parties or, if applicable, any Transaction Obligor in accordance with the terms of the Finance Documents,

and which (in either such case) is not caused by, and is beyond the control of, the Party or, if applicable, any Transaction Obligor whose operations are disrupted.

“Document of Compliance” has the meaning given to it in the ISM Code.

“dollars” and “$” mean the lawful currency, for the time being, of the United States of America.

“Earnings” means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Borrower or the Lender and which arise out of or in connection with or relate to the use or operation of the Ship, including (but not limited to):

(a)

the following, save to the extent that any of them is, with the prior written consent of the Lender, pooled or shared with any other person:

(i)

all freight, hire and passage moneys including, without limitation, all moneys payable under, arising out of or in connection with a Charter or a Charter Guarantee;

(ii)

the proceeds of the exercise of any lien on sub-freights;

(iii)

compensation payable to the Borrower or the Lender in the event of requisition of the Ship for hire or use;

(iv)

remuneration for salvage and towage services;

(v)

demurrage and detention moneys;

(vi)

without prejudice to the generality of sub-paragraph (i) above, damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Ship;

(vii)

all moneys which are at any time payable under any Insurances in relation to loss of hire;

(viii)

all monies which are at any time payable to the Borrower in relation to general average contribution; and

(b)

“Earnings Account” means:

(a)

an account in the name of the Borrower with the Account Bank designated “Earnings Account”;

(b)

(c)

any sub-account of any account referred to in paragraphs (a) or (b) above.

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

“Environmental Approval” means any present or future permit, ruling, variance or other Authorisation required under Environmental Laws.

“Environmental Claim” means any claim by any governmental, judicial or regulatory authority or any other person which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law and, for this purpose, “claim” includes a claim for damages, compensation, contribution, injury, fines, losses and penalties or any other payment of any kind, including in relation to clean-up and removal, whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.

“Environmental Incident” means:

(a)

(b)

(c)

“Environmental Law” means any present or future law relating to pollution or protection of human health or the environment, to conditions in the workplace, to the carriage, generation, handling, storage, use, release or spillage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material.

“Environmentally Sensitive Material” means and includes all contaminants, oil, oil products, toxic substances 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.

“EU Bail-In Legislation Schedule” means the document described as such and published by the LMA from time to time.

“Eurodry” means Eurodry Ltd., a corporation incorporated in the Republic of The Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH 96960.

“Euroseas” means Euroseas Ltd., a corporation incorporated in the Republic of The Marshall Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH 96960.

“Event of Default” means any event or circumstance specified as such in Clause 24 (Events of Default).

“Facility” means the term loan facility made available under this Agreement as described in Clause 2 (The Facility).

“Facility Office” means the office or offices through which the Lender will perform its obligations under this Agreement.

“FATCA” means:

(a)

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

(b)

(c)

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

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

“Finance Document” means:

(a)

this Agreement;

(b)

the Utilisation Request;

(c)

any Security Document;

(d)

any other document which is executed for the purpose of establishing any priority or subordination arrangement in relation to the Secured Liabilities; or

(e)

any other document designated as such by the Lender and the Borrower.

“Financial Indebtedness” means any indebtedness for or in relation to:

(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 relation to any lease or hire purchase contract which would, in accordance with GAAP, be treated as a balance sheet liability;

(e)

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

(f)

(g)

(h)

any counter-indemnity obligation in relation to 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 relation to any guarantee or indemnity for any of the items referred to in paragraphs (a) to (h) above.

“Funding Rate” means any individual rate notified by the Lender to the Borrower pursuant to any Finance Document.

“GAAP” means generally accepted accounting principles in the United States of America.

“General Assignment” means the general assignment creating Security over the Ship’s Earnings, its Insurances and any Requisition Compensation in relation to the Ship, in agreed form.

“Governmental Authority” means the government of any jurisdiction, or any political subdivision thereof, whether provincial, state or local, and any department, ministry, agency, instrumentality, authority, body, court, central bank or other entity lawfully exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Holding Company” means, in relation to a person, any other person in relation to which it is a Subsidiary.

“Indemnified Person” has the meaning given to it in Clause 14.2 (Other indemnities).

“Initial Market Value” means the Market Value of the Ship calculated in accordance with the valuation relative thereto referred to in paragraph 6.1 of Part A of Schedule 2 (Conditions Precedent).

“Insurances” means:

(a)

(b)

“Interest Payment Date” has the meaning given to it in paragraph (a) of Clause 8.2 (Payment of interest).

“Interest Period” means, in relation to the Loan or any part of the Loan, each period determined in accordance with Clause 9 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default interest).

“Interpolated Screen Rate” means, in relation to the Loan or any part of the Loan, the rate (rounded to the same number of decimal places as the two relevant Screen Rates) 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 the Interest Period of the Loan or that part of the Loan; and

(b)

the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of the Loan or that part of the Loan,

each as of the Specified Time for dollars.

“ISM Code” means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (including the guidelines on its implementation), adopted by the International Maritime Organisation, as the same may be amended or supplemented from time to time.

“ISPS Code” means the International Ship and Port Facility Security (ISPS) Code as adopted by the International Maritime Organization’s (IMO) Diplomatic Conference of December 2002, as the same may be amended or supplemented from time to time.

“ISSC” means an International Ship Security Certificate issued under the ISPS Code.

“Legal Reservations” means:

(a)

(b)

(c)

similar principles, rights and defences under the laws of any Relevant Jurisdiction; and

any other matters which are set out as qualifications or reservations as to matters of law of general application in any legal opinion delivered pursuant to Clause 4 (Conditions of Utilisation).

“Lender” means:

(a)

the Original Lender; and

(b)

any bank, financial institution, trust, fund or other entity which has become the Lender in accordance with Clause 25 (Changes to the Lender),

which in each case has not ceased to be a Party in accordance with this Agreement.

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

(a)

the applicable Screen Rate as of the Specified Time for dollars and for a period equal in length to the Interest Period of the Loan or that part of the Loan; or

(b)

as otherwise determined pursuant to Clause 10.1 (Unavailability of Screen Rate),

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

“LMA” means the Loan Market Association or any successor organisation.

“Loan” means the loan to be made available under the Facility or the aggregate principal amount outstanding for the time being of the borrowings under the Facility and a “part of the Loan” means any part of the Loan as the context may require.

“Major Casualty” means any casualty to the Ship in relation to which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $900,000 or the equivalent in any other currency.

“Management Agreement” means the agreement entered into between the Borrower and the Approved Manager regarding the commercial and/or technical management of the Ship.

“Manager’s Undertaking” means the letter of undertaking from the Approved Manager subordinating the rights of such Approved Manager against the Ship and the Borrower to the rights of the Lender in agreed form.

“Margin” means 2.80 per cent. per annum.

“Market Value” means, in relation to the Ship or any other vessel, at any date, an amount determined by the Lender as being an amount equal to:

(a)

the market value of the Ship or vessel shown by the average of two dollar valuations (and in the case of the Initial Market Value determination shown by one valuation) each prepared:

(i)

as at a date not more than 20 days previously;

(ii)

by an Approved Valuer;

(iii)

with or without physical inspection of the Ship or vessel (as the Lender may require); and

(iv)

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 Charter or Security in respect of the Ship.

“Material Adverse Effect” means a material adverse change of circumstances or any event or series of events which, in the reasonable opinion of the Lender, is likely to have a material adverse effect on the business, assets, financial condition or credit worthiness of the Borrower or its ability to repay the Loan.

“Minimum Liquidity Account” means:

(a)

an account in the name of the Borrower with the Account Bank designated “Minimum Liquidity Account”;

(b)

(c)

any sub-account of any account referred to in paragraphs (a) or (b) above.

“Month” means 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)

(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 an Interest 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 Interest Period is to end.

The above rules will only apply to the last Month of any period.

“Mortgage” means the first priority or (as applicable) preferred ship mortgage on the Ship in accordance with the laws of the applicable Approved Flag, and if required pursuant to the laws of the relevant Approved Flag a deed of covenant collateral thereto, each in agreed form.

“Nominated Family” means the family disclosed in writing to the Lender prior to the date of this Agreement and “members of the Nominated Family” shall be construed accordingly.

“OFAC” means the Office of Foreign Assets Control of the US Department of the Treasury.

“Original Jurisdiction” means the jurisdiction under whose laws the Borrower is incorporated as at the date of this Agreement.

“Participating Member State” means any member state of the European Union that has the euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.

“Party” means a party to this Agreement.

“Permitted Charter” means

(a)

a Qualifying Charter; or

(b)

any other Charter:

(i)

which is a time, voyage or consecutive voyage charter;

(ii)

the duration of which does not exceed and is not capable of exceeding, by virtue of any optional extensions, 12 months plus a redelivery allowance of not more than 30 days;

(iii)

which is entered into on bona fide arm’s length terms at the time at which the Ship is fixed; and

(iv)

in relation to which not more than two months’ hire is payable in advance, and any other Charter which is approved in writing by the Lender.

“Permitted Financial Indebtedness” means any Financial Indebtedness incurred under the Finance Documents.

“Permitted Security” means:

(a)

Security created by the Finance Documents;

(b)

any netting or set-off arrangement entered into by any Transaction Obligor in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;

(c)

liens for unpaid master’s and crew’s wages in accordance with first class ship ownership and management practice and not being enforced through arrest;

(d)

liens for salvage;

(e)

liens for master’s disbursements incurred in the ordinary course of trading in accordance with first class ship ownership and management practice and not being enforced through arrest; and

(f)

any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Ship:

(i)

not as a result of any default or omission by the Borrower;

(ii)

not being enforced through arrest; and

(iii)

subject, in the case of liens for repair or maintenance, to Clause 21.16 (Restrictions on chartering, appointment of managers etc.),

provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested in good faith by appropriate steps).

“Potential Event of Default” means any event or circumstance specified in Clause 24 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

“Prohibited Person” means any person (whether designated by name or by reason of being included in a class of persons) that is, or is owned or controlled by Persons that are:

(a)

the target of Sanctions; or

(b)

located, organised or resident in a country or territory that is, or whose government is, the target of Sanctions (currently, the Crimea region, Cuba, Iran, North Korea and Syria).

“Qualified IPO” means the initial public offering in respect of the issued share capital of Eurodry on the Nasdaq Stock Market or a stock exchange acceptable to the Lender in its absolute discretion.

“Qualifying Charter” means a time charter for the Ship with a duration (without taking account of any optional extension periods) of at least 24 months, with a charterer acceptable to the Lender in its absolute discretion acting reasonably and otherwise on such terms and conditions as may be approved in writing by the Lender in its absolute discretion acting reasonably.

“Quotation Day” means, in relation to any period for which an interest rate is to be determined, two Business Days before the first day of that period unless market practice differs in the Relevant Interbank Market in which case the Quotation Day will be determined by the Lender in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).

“Receiver” means a receiver or receiver and manager or administrative receiver of the whole or any part of the Security Assets.

“Reference Bank Quotation” means any quotation supplied to the Lender by a Reference Bank.

“Reference Bank Rate” means the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Lender at its request by the Reference Banks:

(a)

if:

(i)

the Reference Bank is a contributor to the Screen Rate; and

(ii)

it consists of a single figure,

as the rate (applied to the relevant Reference Bank and the relevant currency and period) which contributors to the Screen Rate are asked to submit to the relevant administrator; or

(b)

in any other case, as the rate at which the relevant Reference Bank could fund itself in dollars for the relevant period with reference to the unsecured wholesale funding market.

“Reference Banks” means the principal London offices of any three banks from the ICE LIBOR panel or such other entities as may be appointed by the Lender in consultation with the Borrower.

“Related Fund” in relation to a fund (the “first fund”), means a fund which is managed or advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or investment adviser is an Affiliate of the investment manager or investment adviser of the first fund.

“Relevant Interbank Market” means the London interbank market.

“Relevant Jurisdiction” means, in relation to a Transaction Obligor:

(a)

Its Original Jurisdiction;

(b)

(c)

any jurisdiction where it conducts its business; and

(d)

the jurisdiction whose laws govern the perfection of any of the Security Documents entered into by it.

“Repayment Date” means each date on which a Repayment Instalment is required to be paid under Clause 6.1 (Repayment of Loan).

“Repayment Instalment” has the meaning given to it in Clause 6.1 (Repayment of Loan).

“Repeating Representation” means each of the representations set out in Clause 17 (Representations) except Clause 17.10 (Insolvency), Clause 17.11 (No filing or stamp taxes) and Clause 17.12 (Deduction of Tax) and any representation of any Transaction Obligor made in any other Finance Document that is expressed to be a “Repeating Representation” or is otherwise expressed to be repeated.

“Representative” means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.

“Requisition” means:

(a)

(b)

any capture or seizure of the Ship (including any hijacking or theft) by any person whatsoever.

“Requisition Compensation” includes all compensation or other moneys payable to the Borrower by reason of any Requisition or any arrest or detention of the Ship in the exercise or purported exercise of any lien or claim.

“Resolution Authority” means any body which has authority to exercise any Write-down and Conversion Powers.

“Safety Management Certificate” has the meaning given to it in the ISM Code.

“Safety Management System” has the meaning given to it in the ISM Code.

“Sanctions” means the sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by any of the Sanctions Authorities as applicable to any Transaction Obligor.

“Sanctions Authorities” means:

(a)

the United States of America;

(b)

the United Nations;

(c)

the European Union;

(d)

the United Kingdom;

(e)

Hong Kong; or

(f)

the respective Governmental Authorities of any of the foregoing, including without limitation, OFAC, the US Department of State and HeriMajesty’s Treasury.

“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 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 Lender may specify another page or service displaying the relevant rate after consultation with the Borrower.

“Secured Liabilities” means all present and future obligations and liabilities, (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of each Transaction Obligor to the Lender under or in connection with each Finance Document to which each is a party.

“Security” means a mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having the effect of conferring security.

“Security Assets” means all of the assets of the Transaction Obligors which from time to time are, or are expressed to be, the subject of the Transaction Security.

“Security Cover Ratio” means, at any relevant time, the aggregate of (i) the Market Value of the Ship, (ii) the net realisable value of any additional Security provided at that time under Clause 22.1 (Minimum required security cover), expressed as a percentage of the Loan.

“Security Document” means:

(a)

any Corporate Guarantee;

(b)

the Shares Security;

(c)

the Mortgage;

(d)

the General Assignment;

(e)

the Account Security;

(f)

the Charterparty Assignment;

(g)

any Manager’s Undertaking;

(h)

any other document (whether or not it creates Security) which is executed as security for the Secured Liabilities; or

(i)

any other document designated as such by the Lender and the Borrower.

“Security Period” means the period starting on the date of this Agreement and ending on the date on which the Lender is satisfied that there is no outstanding Commitment in force and that the Secured Liabilities have been irrevocably and unconditionally paid and discharged in full.

“Security Property” means:

(a)

the Transaction Security expressed to be granted in favour of the Lender and all proceeds of that Transaction Security; and

(b)

“Selection Notice” means a notice substantially in the form set out in Part B of Schedule 3 (Requests) given in accordance with Clause 9 (Interest Periods).

“Shareholder” means:

(a)

for the period commencing on the date of this Agreement and ending on the Substitute Date, Euroseas; and

(b)

from date of the Substitute Date and at all times thereafter, Eurodry.

“Shares Security” means:

(a)

(b)

in each case, in agreed form.

“Ship” means the Kamsarmax bulk carrier type of vessel, having Builder’s hull number YZJ 1153, which is to be constructed by the Builder for, and to be purchased by, the Borrower under the Shipbuilding Contract and which, on delivery, is to be registered in the name of the Borrower under an Approved Flag with the name “EKATERINI”.

“Shipbuilding Contract” means the shipbuilding contract dated 1 April 2014 and made between (a) the Builder and (b) the Borrower for the construction by the Builder of the Ship and its purchase by the Borrower as from time to time amended and/or supplemented.

“Specified Time” means a day or time determined in accordance with Schedule 4 (Timetables).

“Spin-Off” means the transfer of shares of all dry bulk vessel owning Subsidiaries currently owned directly or indirectly by Euroseas to Eurodry (other than as disclosed to the Lender as of the date of this Agreement).

“Subsidiary” means a subsidiary undertaking within the meaning of section 1162 of the Companies Act 2006.

“Substitute Date” means the date on which the Lender confirms in writing to the Borrower that all the conditions subsequent under Clause 4.5(a) (Conditions subsequent relevant to Qualified IPO) have been satisfied.

“Tax” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

“Tax Credit” has the meaning given to it in Clause 12.1 (Definitions).

“Tax Deduction” has the meaning given to it in Clause 12.1 (Definitions).

“Tax Payment” has the meaning given to it in Clause 12.1 (Definitions).

“Termination Date” means the date falling fifty nine (59) Months from the Utilisation Date.

“Third Parties Act” has the meaning given to it in Clause 1.5 (Third party rights).

“Total Loss” means:

(a)

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

(b)

any Requisition of the Ship unless the Ship is returned to the full control of the Borrower within 30 days of such Requisition.

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

(a)

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

(b)

in the case of a constructive, compromised, agreed or arranged total loss of the Ship, the earlier of:

(i)

the date on which a notice of abandonment is given (or deemed or agreed to be given) to the insurers; and

(ii)

the date of any compromise, arrangement or agreement made by or on behalf of the Borrower with the Ship’s insurers in which the insurers agree to treat the Ship as a total loss; and

(c)

in the case of any other type of Total Loss, the date (or the most likely date) on which it appears to the Lender that the event constituting the total loss occurred.

“Transaction Document” means:

(a)

a Finance Document;

(b)

any Charter (including, without limitation, the Qualifying Charter); or

(c)

any other document designated as such by the Lender and the Borrower.

“Transaction Obligor” means each of the Borrower, the Corporate Guarantor, the Shareholder and any Approved Manager and, in the plural, means all of them.

“Transaction Security” means the Security created or evidenced or expressed to be created or evidenced under the Security Documents.

“Transfer Date” means, in relation to an assignment, the later of:

(a)

the proposed transfer date specified in the Assignment Agreement; and

(b)

the date on which the parties to the Assignment Agreement have all executed, and agreed to be bound by, the Assignment Agreement.

“Unpaid Sum” means any sum due and payable but unpaid by a Transaction Obligor in accordance with the applicable provisions of the Finance Documents to which any of them is a party.

“US” means the United States of America.

“US Tax Obligor” means:

(a)

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

(b)

a person some or all of whose payments under the Finance Documents to which it is a party are from sources within the US for US federal income tax purposes.

“Utilisation” means a utilisation of the Facility.

“Utilisation Date” means the date on which the Loan is to be made.

“Utilisation Request” means a notice substantially in the form set out in Part A of Schedule 3 (Requests).

“VAT” means:

(a)

any tax imposed in compliance with the Council Directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112); and

(b)

“Write-down and Conversion Powers” means:

(a)

(b)

in relation to any other applicable Bail-In Legislation:

(i)

(ii)

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

1.2	Construction

(a)

Unless a contrary indication appears, a reference in this Agreement to:

(i)

the “Account Bank”, the “Lender”, any “Obligor”, any “Party”, any “Transaction Obligor” or any other person shall be construed so as to include its successors in title and permitted assigns;

(ii)

“assets” includes present and future properties, revenues and rights of every description;

(iii)

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

(iv)

“document” includes a deed and also a letter, fax, email or telex;

(v)

“expense” means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable Tax including VAT (if applicable);

(vi)

a “Finance Document”, a “Security Document” or “Transaction Document” or any other agreement or instrument is a reference to that Finance Document, Security Document or Transaction Document or other agreement or instrument as amended, novated, supplemented, extended or restated;

(vii)

“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;

(viii)

“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;

(ix)

“proceedings” means, in relation to any enforcement provision of a Finance Document, proceedings of any kind, including an application for a provisional or protective measure;

(x)

a “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);

(xi)

a “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;

(xii)

a provision of law is a reference to that provision as amended or re-enacted;

(xiii)

a time of day is a reference to London time;

(xiv)

(xv)

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

(xvi)

“including” and “in particular” (and other similar expressions) shall be construed as not limiting any general words or expressions in connection with which they are used.

(b)

The determination of the extent to which a rate is “for a period equal in length” to an Interest Period shall disregard any inconsistency arising from the last day of that Interest Period being determined pursuant to the terms of this Agreement.

(c)

Section, Clause and Schedule headings are for ease of reference only and are not to be used for the purposes of construction or interpretation of the Finance Documents.

(d)

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

(e)

A Potential Event of Default and an Event of Default is “continuing” if it has not been remedied or waived.

1.3	Construction of insurance terms

In this Agreement:

“approved” means, for the purposes of Clause 20 (Insurance Undertakings), approved in writing by the Lender.

“excess risks” means the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Ship in consequence of its insured value being less than the value at which the Ship is assessed for the purpose of such claims.

“obligatory insurances” means all insurances effected, or which the Borrower is obliged to effect, under Clause 20 (Insurance Undertakings) or any other provision of this Agreement or of another Finance Document.

“policy” includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms.

“protection and indemnity risks” means the usual risks covered by a protection and indemnity association managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02) (1/11/03), clause 8 of the Institute Time Clauses (Hulls) (1/10/83) (1/11/95) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision.

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

1.4	Agreed forms of Finance Documents

References in Clause 1.1 (Definitions) to any Finance Document being in “agreed form” are to that Finance Document:

(a)	in a form attached to a certificate dated the same date as this Agreement (and signed by the Borrower and the Lender); or

(b)	in any other form agreed in writing between the Borrower and the Lender.

1.5	Third party rights

(a)	Unless expressly provided to the contrary in a Finance Document, 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 to enjoy the benefit of any term of this Agreement.

(b)	Subject to paragraph (c) below but otherwise notwithstanding any term of any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement at any time.

(c)	An amendment or waiver which adversely affects the rights or obligations of a Reference Bank may not be effected without the consent of that Reference Bank.

(d)

SECTION 2

THE FACILITY

2	THE FACILITY

2.1	The Facility

Subject to the terms of this Agreement, the Lender makes available to the Borrower a dollar term loan facility in one advance in an amount not exceeding the Commitment.

PURPOSE

3.1

Purpose

3.2	Monitoring

The Lender is not bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

4	CONDITIONS OF UTILISATION

4.1	Initial conditions precedent

4.2	Further conditions precedent

The Lender will only be obliged to comply with Clause 5.4 (Loan) if:

(a)	on the date of the Utilisation Request and on the proposed Utilisation Date and before the Loan is made available:

(i)

no Default is continuing or would result from the proposed Loan;

(ii)

the Repeating Representations to be made by each Transaction Obligor are true; and

(iii)

no event or series of events has occurred which is likely to have a Material Adverse Effect;

(b)	the Lender has received on or before the Utilisation Date, or is satisfied it will receive when the Loan is made available, all of the documents and other evidence listed in Part B of Schedule 2 (Conditions Precedent) in form and substance satisfactory to the Lender.

4.3	Notification of satisfaction of conditions precedent

4.4	Waiver of conditions precedent

4.5	Conditions subsequent relevant to Qualified IPO

(a)

(b)	As of the Substitute Date, all definitions of, and all references to, “Corporate Guarantor” and “Shareholder” in this Agreement shall be read and construed as referring to Eurodry.

(c)	As of the Substitute Date, the Lender shall deliver a duly executed original of a deed of release (and of each document to be delivered under or pursuant to it) releasing Corporate Guarantor A from its obligations under the Corporate Guarantee A in agreed form.

(d)

SECTION 3

UTILISATION

5	UTILISATION

5.1	Delivery of a Utilisation Request

(a)	The Borrower may utilise the Facility by delivery to the Lender of a duly completed Utilisation Request not later than the Specified Time.

(b)	The Borrower may not deliver more than one Utilisation Request.

5.2	Completion of a Utilisation Request

A Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

(a)	the proposed Utilisation Date is a Business Day within the Availability Period;

(b)	the currency and amount of the Utilisation comply with Clause 5.3 (Currency and amount); and

(c)	the proposed Interest Period complies with Clause 9 (Interest Periods).

5.3	Currency and amount

(a)	The currency specified in the Utilisation Request must be dollars.

(b)	The amount of the proposed Loan must be an amount which is not more than the lesser of (i) $18,400,000, (ii) 70 per cent. of the Initial Market Value and (iii) 70 per cent. of the Contract Cost.

5.4

Loan

If the conditions set out in this Agreement have been met, the Lender shall make the Loan available by the Utilisation Date through its Facility Office

5.5	Cancellation of Commitment

The Commitment which is unutilised at the end of the Availability Period shall then be cancelled.

5.6	Retentions and payment to third parties

5.7	Disbursement of Loan to third party

Payment by the Lender under Clause 5.6 (Retentions and payment to third parties) to a person other than the Borrower shall constitute the making of the Loan and the Borrower shall at that

time become indebted, as principal and direct obligor, to the Lender in an amount equal to the Loan.

5.8	Prepositioning of funds

If the Lender, at the request of the Borrower and on terms acceptable to the Lender and in its absolute discretion, prepositions funds with the Builder’s bank, the Borrower:

(a)

(b)	shall, without duplication, indemnify the Lender against any additional costs, loss or liability it may incur in connection with such arrangement.

SECTION 4

REPAYMENT, PREPAYMENT AND CANCELLATION

REPAYMENT

6.1	Repayment of Loan

The Borrower shall repay the Loan by:

(a)	twenty (20) consecutive quarterly instalments, the first eight (8) of which shall be in an amount of $400,000 each and the subsequent twelve (12) of which shall be in an amount of $325,000 each (each, a “Repayment Instalment” and together, the “Repayment Instalments”); and

(b)	a balloon instalment in the amount of $11,300,000 (the “Balloon Instalment”) payable together with the twentieth (20th) Repayment Instalment.

6.2	Reduction of Repayment Instalments

If any part of the Facility is cancelled, the Repayment Instalments and the Balloon Instalment falling after that cancellation shall be reduced pro rata by the amount cancelled.

6.3	Termination Date

On the Termination Date, the Borrower shall additionally pay to the Lender all other sums then accrued and owing under the Finance Documents.

6.4	Reborrowing

The Borrower may not reborrow any part of the Facility which is repaid.

7	PREPAYMENT AND CANCELLATION

7.1	Illegality

(a)	the Lender shall promptly notify the Borrower in writing upon becoming aware of that event and the Available Facility will be immediately cancelled; and

(b)

7.2	Voluntary and automatic cancellation

(a)

The Borrower may, if it gives the Lender not less than five (5) Business Days’ (or such shorter period as the Lender may agree) prior notice, cancel the whole or any part (being a minimum amount equal to a multiple of $325,000) of the Loan. Any cancellation under this Clause 7.2 (Voluntary and automatic cancellation) shall reduce the amount of the Loan the unutilised pro rata.

(b)	The unutilised Commitment (if any) shall be automatically cancelled at close of business on the Utilisation Date.

7.3	Voluntary prepayment of Loan

(a)

The Borrower may, if it gives the Lender not less than five (5) Business Days’ (or such shorter period as the Lender may agree) prior notice, prepay the whole or any part of the Loan on the last day of an Interest Period (but, if in part, being an amount that reduces the amount of the Loan by minimum amount equal to a multiple of $325,000).

(b)	Any partial prepayment under this Clause 7.3 (Voluntary prepayment of Loan) shall reduce pro rata the amount of each Repayment Instalment and the Balloon Instalment falling after that prepayment by the amount prepaid.

7.4	Mandatory prepayment on sale or Total Loss

(a)	in the case of a sale of the Ship, on the date on which the sale is completed by delivery of the Ship to the buyer of the Ship; and

(b)	in the case of a Total Loss, on the earlier of (i) the date falling 120 days after the Total Loss Date and (ii) the date of receipt by the Lender of the proceeds of insurance relating to such Total Loss.

7.5	Mandatory prepayment on change of control in Corporate Guarantor

(a)

If, without the prior written consent of the Lender (which will not be unreasonably withheld), there is a Change of Control, the Borrower shall promptly notify the Lender upon becoming aware of that event and, if the Lender so requires, the Lender shall, by no less than 10 days’ notice to the Borrower, cancel the Facility and declare the Loan, together with accrued interest and all other amounts accrued under the Finance Documents immediately due and payable, whereupon the Facility shall be cancelled and the Loan and all such outstanding interest and amounts will become immediately due and payable Provided that in the case of sub-paragraph (ii) below, the Borrower will first have the option to rectify the Security Cover Ratio within 15 Business Days.

(b)	For the purpose of paragraph (a) above, “Change of Control” means:

(i)

the members of the Nominated Family cease to own directly or indirectly more than 10 per cent. of the shares (and the voting rights attaching to those shares) in the Corporate Guarantor; or

(ii)

7.6	Mandatory prepayment on non-employment of Ship under Qualifying Charter

7.7	Restrictions

(a)

(b)	Any prepayment under this Agreement (either voluntary or mandatory) shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs (if made on a date which is not an Interest Payment Date), without premium or penalty.

(c)	The Borrower may not reborrow any part of the Facility which is prepaid.

(d)	The Borrower shall not repay or prepay all or any part of the Loan or cancel all or any part of the Commitment except at the times and in the manner expressly provided for in this Agreement.

(e)	No amount of the Commitment cancelled under this Agreement may be subsequently reinstated.

SECTION 5

COSTS OF UTILISATION

INTEREST

8.1	Calculation of interest

The rate of interest on the Loan or any part of the Loan for each Interest Period is the percentage rate per annum which is the aggregate of:

(a)	the Margin; and

(b)

LIBOR.

8.2	Payment of interest

(a)	The Borrower shall pay accrued interest on the Loan or any part of the Loan on the last day of each Interest Period (each an “Interest Payment Date).

(b)	If an Interest Period is longer than three (3) Months, the Borrower shall also pay interest then accrued on the Loan or the relevant part of the Loan on the dates falling at three Monthly intervals after the first day of the Interest Period.

8.3	Default interest

(a)

(b)	If an Unpaid Sum consists of all or part of the Loan which became due on a day which was not the last day of an Interest Period relating to the Loan or that part of the Loan:

(i)

the first Interest Period for that Unpaid Sum shall have a duration equal to the unexpired portion of the current Interest Period relating to the Loan or that part of the Loan; and

(ii)

the rate of interest applying to that Unpaid Sum during that first Interest Period shall be 2 per cent. per annum higher than the rate which would have applied if that Unpaid Sum had not become due.

(c)	Default interest (if unpaid) arising on an Unpaid Sum will be compounded with the Unpaid Sum at the end of each Interest Period applicable to that Unpaid Sum but will remain immediately due and payable.

8.4	Notification of rates of interest

The Lender shall promptly notify the Borrower of the determination of a rate of interest under this Agreement.

9	INTEREST PERIODS

9.1	Selection of Interest Periods

(a)	The Borrower may select the Interest Period for the Loan in the Utilisation Request. Subject to paragraph (f) below and Clause 9.2 (Changes to Interest Periods), the Borrower may select each subsequent Interest Period in respect of the Loan in a Selection Notice.

(b)	Each Selection Notice is irrevocable and must be delivered to the Lender by the Borrower not later than the Specified Time.

(c)

(d)	Subject to this Clause 9 (Interest Periods), the Borrower may select an Interest Period of three (3), six (6) or twelve (12) Months or any other period agreed between the Borrower and the Lender.

(e)	An Interest Period in respect of the Loan shall not extend beyond the Termination Date.

(f)

(g)	The first Interest Period for the Loan shall start on the Utilisation Date and each subsequent Interest Period shall start on the last day of its preceding Interest Period.

(h)	Except for the purposes of paragraph (f) above and Clause 9.2 (Changes to Interest Periods), the Loan shall have one Interest Period only at any time.

9.2	Changes to Interest Periods

(a)

(b)	If the Lender makes any change to an Interest Period referred to in this Clause 9.2 (Changes to Interest Periods), it shall promptly notify the Borrower.

9.3	Non-Business Days

10	CHANGES TO THE CALCULATION OF INTEREST

10.1	Unavailability of Screen Rate

(a)	Interpolated Screen Rate: If no Screen Rate is available for LIBOR for the Interest Period of the Loan or any part of the Loan, the applicable LIBOR shall be the Interpolated Screen Rate for a period equal in length to the Interest Period of the Loan or that part of the Loan.

(b)	Reference Bank Rate: If no Screen Rate is available for LIBOR for:

(i)

dollars; or

(ii)

the Interest Period of the Loan or any part of the Loan and it is not possible to calculate the Interpolated Screen Rate,

the applicable LIBOR shall be the Reference Bank Rate as of the Specified Time and for a period equal in length to the Interest Period of the Loan or that part of the Loan.

(c)

10.2	Calculation of Reference Bank Rate

(a)	Subject to paragraph (b) below, if LIBOR is to be determined on the basis of a Reference Bank Rate but a Reference Bank does not supply a quotation by the Specified Time, the Reference Bank Rate shall be calculated on the basis of the quotations of the remaining Reference Banks.

(b)	If at or about noon on the Quotation Day none or only one of the Reference Banks supplies a quotation, there shall be no Reference Bank Rate for the relevant Interest Period.

10.3	Market disruption

10.4	Cost of funds

(a)	If this Clause 10.4 (Cost of funds) applies, the rate of interest on the Loan or the relevant part of the Loan for the relevant Interest Period shall be the percentage rate per annum which is the sum of:

(i)

the Margin; and

(ii)

(b)

(c)	Any substitute or alternative basis agreed pursuant to paragraph (b) above shall, be binding on all Parties.

10.5	Break Costs

FEES

11.1	Commitment fee

(a)	The Borrower shall pay to the Lender a fee computed at the rate of 1.00 per cent. per annum on the Available Facility quarterly in arrears during the Availability Period.

(b)	The accrued commitment fee is payable on the last day of each successive period of three Months which ends during the Availability Period, on the last day of the Availability Period and, if cancelled, on the cancelled amount of the Available Facility at the time the cancellation is effective.

11.2	Arrangement fee

The Borrower shall pay to the Lender on the Utilisation Date an arrangement fee in an amount equal to 0.80 per cent. of the Loan actually utilised on the Utilisation Date.

SECTION 6

ADDITIONAL PAYMENT OBLIGATIONS

12	TAX GROSS UP AND INDEMNITIES

12.1	Definitions

(a)	In this Agreement:

“Tax Credit” means a credit against, relief or remission for, or repayment of any Tax.

“Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document, other than a FATCA Deduction.

“Tax Payment” means either the increase in a payment made by the Borrower to the Lender under Clause 12.2 (Tax gross-up) or a payment under Clause 12.3 (Tax indemnity).

(b)	Unless a contrary indication appears, in this Clause 12 (Tax Gross Up and Indemnities) reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

12.2	Tax gross-up

(a)	The Borrower shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

(b)

(c)	If a Tax Deduction is required by law to be made by the Borrower, the amount of the payment due from the Borrower shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

(d)	If the Borrower is required to make a Tax Deduction, the Borrower shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(e)

12.3	Tax indemnity

(a)

(b)	Paragraph (a) above shall not apply:

(i)

with respect to any Tax assessed on the Lender:

(A)

under the law of the jurisdiction in which the Lender is incorporated or, if different, the jurisdiction (or jurisdictions) in which the Lender is treated as resident for tax purposes; or

(B)

under the law of the jurisdiction in which the Lender’s Facility Office is located in respect of amounts received or receivable in that jurisdiction,

if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by the Lender; or

(ii)

to the extent a loss, liability or cost

(A)

is compensated for by an increased payment under Clause 12.2 (Tax gross-up);0

(B)

relates to a FATCA Deduction required to be made by a Party.

(c)	The Lender shall, if making, or intending to make, a claim under paragraph (a) above, promptly notify the Borrower of the event which will give, or has given, rise to the claim.

12.4	Tax Credit

If the Borrower makes a Tax Payment and the Lender determines that:

(a)	a Tax Credit is attributable to an increased payment of which that Tax Payment forms part, to that Tax Payment or to a Tax Deduction in consequence of which that Tax Payment was received; and

(b)	the Lender has obtained and utilised that Tax Credit, the Lender shall pay an amount to the Obligor which the Lender determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by the Obligor.

12.5	Stamp taxes

12.6

VAT

(a)

as per the above (and the Lender must promptly provide an appropriate VAT invoice to that Party).

(b)

(c)

(d)

In relation to any supply made by the Lender to any Party under a Finance Document, if reasonably requested by the Lender, that Party must promptly provide the Lender with details of that Party’s VAT registration (if applicable) and such other information as is reasonably requested in connection with the Lender’s VAT reporting requirements in relation to such supply.

12.7	FATCA Information

(a)	Subject to paragraph (c) below, each Party shall, within ten Business Days of a reasonable request by another Party:

(i)

confirm to that other Party whether it is:

(A)

a FATCA Exempt Party; or

(B)

not a FATCA Exempt Party; and

(ii)

(iii)

supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party’s compliance with any other law, regulation or exchange of information regime.

(b)	If a Party confirms to another Party pursuant to sub-paragraph (i) of paragraph (a) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.

(c)	Paragraph (a) above shall not oblige the Lender to do anything and sub-paragraph (iii) of paragraph (a) above shall not oblige any other 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)

12.8	FATCA Deduction

(a)

(b)	Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment.

13	INCREASED COSTS

13.1	Increased costs

(a)	Subject to Clause 13.3 (Exceptions), the Borrower shall, within five (5) Business Days of a written demand by the Lender, pay for the account of the Lender the amount of any Increased Costs incurred by the Lender or any of its Affiliates 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,

in each case after the date of this Agreement; or

(iii)

the implementation, application of or compliance with Basel III or CRD IV or any law or regulation that implements or applies Basel III or CRD IV.

(b)	In this Agreement:

(i)

“Basel III” means:

(A)

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

(B)

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

(C)

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

(ii)

“CRD IV” means:

(A)

(B)

(C)

any other law or regulation which implements Basel III.

(iii)

“Increased Costs” means:

(A)

a reduction in the rate of return from the Facility or on the Lender’s (or its Affiliate’s) overall capital;

(B)

an additional or increased cost; or

(C)

a reduction of any amount due and payable under any Finance Document, which is incurred or suffered by the Lender or any of its Affiliates as a result of the events referred in Clause 13.1 (Increased costs) to the extent that it is attributable to the Lender having entered into the Commitment or funding or performing its obligations under any Finance Document.

13.2	Increased cost claims

If the Lender intends to make a claim pursuant to Clause 13.1 (Increased costs) it shall promptly notify the Borrower.

13.3	Exceptions

Clause 13.1 (Increased costs) does not apply to the extent any Increased Cost is:

(a)	attributable to a Tax Deduction required by law to be made by the Borrower;

(b)	attributable to a FATCA Deduction required to be made by a Party;

(c)	compensated for by Clause 12.3 (Tax indemnity) (or would have been compensated for under Clause 12.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 12.3 (Tax indemnity) applied);

(d)	compensated for by any payment made pursuant to Clause 14.3 (Mandatory Cost); or

(e)	attributable to the wilful breach by the Lender or its Affiliates of any law or regulation.

14	OTHER INDEMNITIES

14.1	Currency indemnity

(a)	If any sum due from the Borrower under the Finance 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:

(i)

making or filing a claim or proof against the Borrower; or

(ii)

obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

(b)	The Borrower waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

14.2	Other indemnities

(a)	The Borrower shall within five (5) days of a written demand, indemnify the Lender and any Receiver and Delegate against:

(i)

any cost, loss or liability incurred by it as a result of:

(A)

the occurrence of any Event of Default;

(B)

a failure by a Transaction Obligor to pay any amount due under a Finance Document to which it is a party on its due date;

(C)

(D)

the Loan (or part of the Loan) not being prepaid in accordance with a notice of prepayment given by the Borrower; and

(ii)

any cost, loss or liability incurred by the Lender (otherwise than by reason of the Lender’s gross negligence or wilful misconduct) or, in the case of any cost, loss or liability pursuant to Clause 28.6 (Disruption to Payment Systems etc.) notwithstanding the Lender’s negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Lender.

(b)

The Borrower shall, on demand, indemnify the Lender, each Affiliate of the Lender and any Receiver and Delegate and each officer or employee of the Lender or its Affiliate or any Receiver or Delegate (as applicable) (each such person for the purposes of this Clause 14.2 (Other indemnities) an “Indemnified Person”), against any cost, loss or liability incurred by that Indemnified Person pursuant to or in connection with any litigation, arbitration or administrative proceedings or regulatory enquiry, in connection with or arising out of the entry into and the transactions contemplated by the Finance Documents, having the benefit of any Security constituted by the Finance Documents or which relates to the condition or operation of, or any incident occurring in relation to, the Ship unless such cost, loss or liability is caused by the gross negligence or wilful misconduct of that Indemnified Person.

(c)

(d)	Without limiting, but subject to any limitations set out in paragraph (b) above, the indemnity in paragraph (b) above shall cover any cost, loss or liability incurred by each Indemnified Person in any jurisdiction:

(i)

arising or asserted under or in connection with any law relating to safety at sea, the ISM Code, any Environmental Law or any Sanctions; or

(ii)

in connection with any Environmental Claim.

(e)	The Borrower shall, on demand, indemnify the Lender and every Receiver and Delegate against any cost, loss or liability incurred by any of them:

(i)

in relation to or as a result of:

(A)

any failure by the Borrower to comply with its obligations under Clause 16 (Costs and Expenses);

(B)

acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised;

(C)

the taking, holding, protection or enforcement of the Finance Documents and the Transaction Security;

(D)

the exercise of any of the rights, powers, discretions, authorities and remedies vested in the Lender and each Receiver and Delegate by the Finance Documents or by law;

(E)

any default by any Transaction Obligor in the performance of any of the obligations expressed to be assumed by it in the Finance Documents to which it is a party;

(F)

any action by any Transaction Obligor which vitiates, reduces the value of, or is otherwise prejudicial to, the Transaction Security; and

(G)

instructing lawyers, surveyors or other professional advisers or experts following the occurrence of an Event of Default which is continuing;

(ii)

which otherwise relates to any of the Security Property or the performance of the terms of this Agreement or the other Finance Documents (otherwise, in each case, than by reason of the Lender’s or Receiver’s or Delegate’s gross negligence or wilful misconduct).

(f)

14.3	Mandatory Cost

(a)

(b)

which, in each case, is referable to the Loan.

15	MITIGATION BY THE LENDER

15.1	Mitigation

(a)

(b)	Paragraph (a) above does not in any way limit the obligations of any Transaction Obligor under the Finance Documents.

15.2	Limitation of liability

(a)	The Borrower shall, on demand, indemnify the Lender for all costs and expenses reasonably incurred by the Lender as a result of steps taken by it under Clause 15.1 (Mitigation).

(b)	The Lender is not obliged to take any steps under Clause 15.1 (Mitigation) if either:

(i)

an Event of Default has occurred and is continuing; or

(ii)

in the opinion of the Lender (acting reasonably), to do so might be prejudicial to it.

16	COSTS AND EXPENSES

16.1	Transaction expenses

The Borrower shall, promptly on written demand, pay the Lender the amount of all costs and expenses (including all pre-agreed legal fees which shall be payable in any event not later than thirty (30) days from the date of issuance of Lender’s legal advisors relevant invoices) reasonably incurred by it in connection with the negotiation, preparation, printing, execution and perfection of:

(a)	this Agreement and any other documents referred to in this Agreement or in a Security Document; and

(b)	any other Finance Documents executed after the date of this Agreement.

16.2	Amendment costs

If:

(a)	a Transaction Obligor requests an amendment, waiver or consent; or

(b)	a Transaction Obligor requests, and the Lender agrees to, the release of all or any part of the Security Assets from the Transaction Security,

16.3	Enforcement and preservation costs

SECTION 7

REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

17	REPRESENTATIONS

17.1

General

The Borrower makes the representations and warranties set out in this Clause 17 (Representations) to the Lender on the date of this Agreement.

17.2

Status

(a)	It is a corporation, duly incorporated and validly existing in good standing under the law of its Original Jurisdiction.

(b)	It has the power to own its assets and carry on its business as it is being conducted.

17.3	Share capital and ownership

(a)	The Borrower is authorised to issue 500 registered and/or bearer shares with a par value of US$0.01 each, all of which shares have been issued.

(b)	The legal title to and direct beneficial interest in the shares in the Borrower is held by the Relevant Shareholder, free of any Security (other than Permitted Security) or any other claim.

(c)	With the exception of the planned Spin-Off, none of the shares in the Borrower is subject to any option to purchase, pre-emption rights or similar rights.

17.4	Binding obligations

Subject to Legal Reservations, the obligations expressed to be assumed by it in each Transaction Document to which it is a party are legal, valid, binding and enforceable obligations.

17.5	Validity, effectiveness and ranking of Security

(a)

(b)	No third party has or will have any Security (except for Permitted Security) over any assets that are the subject of any Transaction Security granted by it.

(c)	The Transaction Security granted by it to the Lender has or will when created or intended to be created have first ranking priority or such other priority it is expressed to have in the Finance Documents and is not subject to any prior ranking or pari passu ranking security.

(d)	No concurrence, consent or authorisation of any person is required for the creation of or otherwise in connection with any Transaction Security.

17.6	Non-conflict with other obligations

The entry into and performance by it of, and the transactions contemplated by, each Transaction Document to which it is a party do 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 or constitute a default or termination event (however described) under any such agreement or instrument.

17.7	Power and authority

(a)	It has the power to enter into, perform and deliver, and has taken all necessary action to authorise:

(i)

its entry into, performance and delivery of, each Transaction Document to which it is or will be a party and the transactions contemplated by those Transaction Documents; and

(ii)

in the case of the Borrower on the Delivery Date, the registration of the Ship under its Approved Flag.

(b)	No limit on its powers will be exceeded as a result of the borrowing, granting of security or giving of guarantees or indemnities contemplated by the Transaction Documents to which it is a party.

17.8	Validity and admissibility in evidence

All Authorisations required or desirable:

(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; and

(b)	to make the Transaction Documents to which it is a party admissible in evidence in its Relevant Jurisdictions,

have been obtained or effected and are in full force and effect.

17.9	Governing law and enforcement

(a)	The choice of governing law of each Transaction Document to which it is a party will be recognised and enforced in its Relevant Jurisdictions.

(b)	Any judgment obtained in relation to a Transaction Document to which it is a party in the jurisdiction of the governing law of that Transaction Document will be recognised and enforced in its Relevant Jurisdictions.

17.10

Insolvency

No:

(a)	corporate action, legal proceeding or other procedure or step described in paragraph (a) of Clause 24.8 (Insolvency proceedings); or

(b)	creditors’ process described in Clause 24.9 (Creditors’ process),

has been taken or, to its knowledge, threatened in relation to a Transaction Obligor; and none of the circumstances described in Clause 24.7 (Insolvency) applies to a Transaction Obligor.

17.11

No filing or stamp taxes

17.12

Deduction of Tax

It is not required to make any Tax Deduction from any payment it may make under any Finance Document to which it is a party.

17.13

No default

(a)	No Event of Default and, on the date of this Agreement and on the Utilisation Date, no Default is continuing or might reasonably be expected to result from the making of any Utilisation or the entry into, the performance of, or any transaction contemplated by, any Transaction Document.

(b)	No other event or circumstance is outstanding which constitutes a default or a termination event (however described) under any other agreement or instrument which is binding on it or to which its assets are subject which might have a Material Adverse Effect.

17.14

No misleading information

(a)	Any factual information provided by any Transaction Obligor for the purposes of this Agreement was true 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.

(b)	Nothing has occurred or been omitted from any such information and no information has been given or withheld that results in any such information being untrue or misleading in any material respect.

17.15

Pari passu ranking

Its payment obligations under the Finance Documents to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

17.16

No proceedings pending or threatened

(a)	No litigation, arbitration or administrative proceedings or investigations (including proceedings or investigations relating to any alleged or actual breach of the ISM Code or of the ISPS Code) of or before any court, arbitral body or agency which, if adversely determined,

(b)

17.17

Validity and completeness of the Shipbuilding Contract

(a)	The Shipbuilding Contract constitutes legal, valid, binding and enforceable obligations of the Builder and the Borrower.

(b)	The copy of the Shipbuilding Contract delivered to the Lender before the date of this Agreement is a true and complete copy.

(c)	Other than as disclosed to the Lender in writing on or before the date of this Agreement, no further amendments or additions to the Shipbuilding Contract have been agreed nor has the Borrower or the Builder waived any of their respective rights under the Shipbuilding Contract.

17.18

No rebates etc.

17.19

Valuations

(a)	All information supplied by it or on its behalf to an Approved Valuer for the purposes of a valuation delivered to the Lender in accordance with this Agreement was true and accurate as at the date it was supplied or (if appropriate) as at the date (if any) at which it is stated to be given.

(b)	It has not omitted to supply any information to an Approved Valuer which, if disclosed, would adversely affect any valuation prepared by such Approved Valuer.

(c)	There has been no change to the factual information provided pursuant to paragraph (a) above in relation to any valuation between the date such information was provided and the date of that valuation which, in either case, renders that information untrue or misleading in any material respect.

17.20

No breach of laws

It has not breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.

17.21

Compliance with Environmental Laws

All Environmental Laws relating to the ownership, operation and management of the Ship and the business of each Transaction Obligor (as now conducted and as reasonably anticipated to

be conducted in the future) and the terms of all Environmental Approvals have been complied with.

17.22

No Environmental Claim

No Environmental Claim has been made or threatened against any Transaction Obligor or the Ship which might reasonably be expected to have a Material Adverse Effect.

17.23

No Environmental Incident

17.24

ISM and ISPS Code compliance

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

17.25

Taxes paid

(a)	It is not and no other Transaction Obligor is materially overdue in the filing of any Tax returns and it is not (and no other Transaction Obligor is) overdue in the payment of any amount in respect of Tax.

(b)	No claims or investigations are being, or are reasonably likely to be, made or conducted against it (or any other Transaction Obligor) with respect to Taxes.

17.26

Financial Indebtedness

The Borrower has no Financial Indebtedness outstanding other than Permitted Financial Indebtedness.

17.27

Good title to assets

17.28

Ownership

(a)	With effect on and from the Delivery Date, the Borrower will be the sole legal and direct beneficial owner of the Ship, its Earnings and its Insurances.

(b)

(c)	The constitutional documents of each Transaction Obligor do not and could not restrict or inhibit any transfer of the shares of the Borrower on creation or enforcement of the security conferred by the Security Documents.

17.29

Place of business

17.30

Sanctions

None of the Transaction Obligors, any of their Subsidiaries, any director or officer or any employee, agent, or Affiliate of a Transaction Obligor or any of its Subsidiaries:

(a)	is a Prohibited Person; or

(b)	is acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person.

17.31

US Tax Obligor

No Transaction Obligor is a US Tax Obligor.

17.32

Repetition

18	INFORMATION UNDERTAKINGS

18.1

General

The undertakings in this Clause 18 (Information Undertakings) remain in force throughout the Security Period unless the Lender otherwise permits.

18.2	Information: miscellaneous

The Borrower shall supply to the Lender:

(a)	all documents dispatched by it to its Shareholder (or any class of them) or its creditors generally at the same time as they are dispatched;

(b)

(c)	promptly upon becoming aware of them, the details of any judgment or order of a court, arbitral body or agency which is made against any Transaction Obligor and which might have a Material Adverse Effect;

(d)	promptly, its constitutional documents where these have been amended or varied;

(e)	promptly, such further information and/or documents regarding:

(i)

the Ship, goods transported on the Ship, its Earnings and its Insurances;

(ii)

any Qualifying Charter;

(iii)

the Security Assets;

(iv)

compliance of the Transaction Obligors with the terms of the Finance Documents to which they are a party;

(v)

the financial condition, business, affairs, commitments and operations of the Corporate Guarantor and the Approved Manager,

as the Lender may reasonably request; and

(f)	promptly, such further information and/or documents as the Lender may reasonably request so as to enable the Lender to comply with any laws applicable to it or as may be required by any regulatory authority.

18.3	Notification of Event of Default

(a)	The Borrower shall, and shall procure that each other Transaction Obligor shall, notify the Lender of any Event of Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

(b)

18.4	“Know your customer” checks

If:

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

(b)	any change in the status of a Transaction Obligor (including, without limitation, a change of ownership of a Transaction Obligor) after the date of this Agreement; or

(c)	a proposed assignment by the Lender of any of its rights under this Agreement,

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

19	GENERAL UNDERTAKINGS

19.1

General

19.2	Authorisations

The Borrower shall, and shall procure that each other Transaction Obligor will, promptly:

(a)	obtain, comply with and do all that is necessary to maintain in full force and effect; and

(b)	supply certified copies to the Lender of,

any Authorisation required under any law or regulation of a Relevant Jurisdiction or the state of the Approved Flag at any time of the Ship to enable it to:

(i)

perform its obligations under the Transaction Documents to which it is a party;

(ii)

(iii)

own and operate the Ship (in the case of the Borrower).

19.3	Compliance with laws

19.4	Environmental compliance

The Borrower shall, and shall procure that each other Transaction Obligor will:

(a)	comply with all Environmental Laws;

(b)	obtain, maintain and ensure compliance with all requisite Environmental Approvals;

(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.

19.5	Environmental Claims

The Borrower shall, and shall procure that each other Transaction Obligor will, promptly upon becoming aware of the same, inform the Lender in writing of:

(a)	any Environmental Claim against any Transaction Obligor which is current, pending or threatened; and

(b)	any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any Transaction Obligor,

where the claim, if determined against that Transaction Obligor, has or is reasonably likely to have a Material Adverse Effect.

19.6

Taxation

(a)	The Borrower shall, and shall procure that each other Transaction Obligor will, pay and discharge all Taxes 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)

(iii)

such payment can be lawfully withheld.

(b)	The Borrower shall not, and the Borrower shall procure that no other Transaction Obligor will, change its residence for Tax purposes.

19.7	No change to centre of main interests

For the purposes of The Council of the European Union Regulation No. 2015/848 on Insolvency Proceedings (recast)(the “Regulation”), the Borrower shall not (i) change its centre of main interest (as that term is used in Article 3(1) of the Regulation) from that disclosed to the Lender on or prior to the date of this Agreement nor (ii) create any “establishment” (as that term is used in Article 2(10) of the Regulation) in any other jurisdiction.

19.8	Pari passu ranking

The Borrower shall, and shall procure that each other Transaction Obligor will, ensure that at all times any unsecured and unsubordinated claims of the Lender against it under the Finance Documents to which each of them is a party rank at least pad passu with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.

19.9

Title

(a)	With effect on and from the Delivery Date, the Borrower shall hold the legal title to, and own the entire direct beneficial interest in the Ship, its Earnings and its Insurances; and

(b)	With effect on and from its creation or intended creation, the Borrower shall hold the legal title to, and own the entire direct beneficial interest in any other assets the subject of any Transaction Security created or intended to be created by such Borrower.

19.10

Negative pledge

(a)	The Borrower shall not create or permit to subsist any Security over any of its assets which are the subject of the Security created or intended to be created by the Finance Documents other than Permitted Securities.

(b)	The Borrower shall not:

(i)

sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by a Transaction Obligor;

(ii)

sell, transfer or otherwise dispose of any of its receivables on recourse terms;

(iii)

enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or

(iv)

enter into any other preferential arrangement having a similar effect,

in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.

(c)	Paragraphs (a) and (b) above do not apply to any Permitted Security.

19.11

Disposals

(a)	The Borrower shall not enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset (including without limitation the Ship, its Earnings or its Insurances).

(b)	For the avoidance of doubt, paragraph (a)21.16(a) above does not apply to any Charter as all Charters are subject to Clause 21.16 (Restrictions on chartering, appointment of managers etc.).

19.12

Merger

Other than in respect of the Qualified !PO and the Spin-Off (which have already been approved by the Lender), the Borrower shall not, and the Borrower shall procure that the Shareholder will not, enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction.

19.13

Change of business

The Borrower shall not engage in any type of business other than the ownership and operation of its Ship.

19.14

Financial Indebtedness

The Borrower shall not incur or permit to be outstanding any Financial Indebtedness other than Permitted Financial Indebtedness.

19.15

Expenditure

19.16

Share capital

Other than for purposes of the transfer of ownership from Euroseas to Eurodry to take place as of the Substitute Date, the Borrower shall not:

(a)	purchase, cancel or redeem any of its share capital;

(b)	increase or reduce its authorised share capital;

(c)

(d)	appoint any further director or officer of the Borrower (unless the provisions of the Shares Security applicable to the Borrower are complied with).

19.17

Dividends

19.18

Other transactions

The Borrower shall not:

(a)

(b)	enter into any material agreement other than:

(i)

the Transaction Documents;

(ii)

any other agreement expressly allowed under any other term of this Agreement and

(c)	enter into any transaction on terms which are, in any respect, less favourable to that Transaction Obligor than those which it could obtain in a bargain made at arms’ length; or

(d)	acquire any shares or other securities other than US or UK Treasury bills and certificates of deposit issued by major North American or European banks.

(e)	For the avoidance of doubt, the Borrower may enter into any agreements for operating, trading, chartering, manning, insuring, maintaining, repairing and supplying the Ship.

19.19

Unlawfulness, invalidity and ranking; Security imperilled

The Borrower shall not, and the Borrower shall procure that no other Transaction Obligor will, do (or fail to do) or cause or permit another person to do (or omit to do) anything which is likely to:

(a)	make it unlawful for a Transaction Obligor to perform any of its obligations under the Transaction Documents to which it is a party;

(b)	cause any obligation of a Transaction Obligor under the Transaction Documents to which it is a party to cease to be legal, valid, binding or enforceable;

(c)	cause any Transaction Document to cease to be in full force and effect;

(d)	cause any Transaction Security to rank after, or lose its priority to, any other Security; and

(e)	imperil or jeopardise the Transaction Security.

19.20

Further assurance

(a)

(i)

(ii)

(iii)

(iv)

to enable or assist the Lender to commence, defend or conduct any proceedings and/or to take any other action relating to any item of the Security Property.

(b)

(c)

At the same time as the Borrower delivers to the Lender any document executed by itself or another Transaction Obligor pursuant to this Clause 19.20 (Further assurance), the Borrower shall deliver, or shall procure that such other Transaction Obligor will deliver, to the Lender a certificate signed by two of the Borrower’s or Transaction Obligor’s directors or officers which shall:

(i)

set out the text of a resolution of the Borrower’s or Transaction Obligor’s directors specifically authorising the execution of the document specified by the Lender; and

(ii)

state that either the resolution was duly passed at a meeting of the directors validly convened and held, throughout which a quorum of directors entitled to vote on the resolution was present, or that the resolution has been signed by all the directors or officers and is valid under the Borrower’s or Transaction Obligor’s articles of association or other constitutional documents.

19.21

Banking operations

19.22

Minimum Liquidity

(a)	The Borrower shall maintain in the Minimum Liquidity Account^.

(i)

as from the Utilisation Date and at all times thereafter during the Security Period, a minimum liquidity of not less than $300,000; and

(ii)

in each case free of Security other than the relevant Account Security in favour of the Lender.

(b)

19.23

Sanctions

or (ii) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Loan, whether as underwriter, advisor investor or otherwise).

20	INSURANCE UNDERTAKINGS

20.1

General

20.2	Maintenance of obligatory insurances

The Borrower shall keep the Ship insured at its expense against:

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

(b)	war risks;

(c)	protection and indemnity risks; and

(d)	any other risks against which the Lender considers, having regard to practices and other circumstances prevailing at the relevant time, it would be reasonable for the Borrower to insure and which are specified by the Lender by notice to the Borrower.

20.3	Terms of obligatory insurances

The Borrower shall effect such insurances:

(a)	in dollars;

(b)	in the case of fire and usual marine risks and war risks, in an amount on an agreed value basis at least the greater of:

(i)

an amount which equals 125 per cent. of the Loan; and

(ii)

the Market Value of the Ship;

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

(d)	in the case of protection and indemnity risks, in respect of the full tonnage of its Ship;

(e)	on approved terms; and

(f)	through Approved Brokers and with approved insurance companies and/or underwriters or, in the case of war risks and protection and indemnity risks, in approved war risks and protection and indemnity risks associations.

20.4	Further protections for the Lender

In addition to the terms set out in Clause 20.3 (Terms of obligatory insurances), the Borrower shall procure that the obligatory insurances effected by it shall:

(a)	subject always to paragraph (b), name the Borrower as the sole named insured unless the interest of every other named insured 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 it has incurred and which form part of any recoverable claim on underwriters; and

(B)

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

(ii)

(b)

(c)	name the Lender as loss payee with such directions for payment as the Lender may specify;

(d)	provide that all payments by or on behalf of the insurers under the obligatory insurances to the Lender shall be made without set off, counterclaim or deductions or condition whatsoever;

(e)	provide that the obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Lender; and

(f)	provide that the Lender may make proof of loss if the Borrower fails to do so.

20.5	Renewal of obligatory insurances

The Borrower shall:

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

(i)

(ii)

obtain the Lender’s approval to the matters referred to in sub-paragraph (i) above;

(b)	at least 14 days before the expiry of any obligatory insurance, renew that obligatory insurance in accordance with the Lender’s approval pursuant to paragraph (a) above; and

(c)	procure that the Approved Brokers and/or the approved war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal notify the Lender in writing of the terms and conditions of the renewal.

20.6	Copies of policies; letters of undertaking

The Borrower shall ensure that the Approved Brokers provide the Lender with:

(a)	pro forma copies of all policies relating to the obligatory insurances which they are to effect or renew; and

(b)	a letter or letters or undertaking in a form required by the Lender and including undertakings by the Approved Brokers that:

(i)

they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of Clause 20.4 (Further protections for the Lender);

(ii)

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

(iii)

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

(iv)

they will, if they have not received notice of renewal instructions from the Borrower or its agents, notify the Lender not less than 14 days before the expiry of the obligatory insurances;

(v)

if they receive instructions to renew the obligatory insurances, they will promptly notify the Lender of the terms of the instructions;

(vi)

(vii)

they will arrange for a separate policy to be issued in respect of the Ship forthwith upon being so requested by the Lender.

20.7	Copies of certificates of entry

The Borrower shall ensure that any protection and indemnity and/or war risks associations in which the Ship is entered provide the Lender with:

(a)

a certified copy of the certificate of entry for the Ship;

(b)

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

(c)

a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to the Ship.

20.8	Deposit of original policies

The Borrower shall ensure that all policies relating to obligatory insurances effected by it are deposited with the Approved Brokers through which the insurances are effected or renewed.

20.9	Payment of premiums

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

20.10

Guarantees

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

20.11

Compliance with terms of insurances

(a)	The Borrower shall not do or 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.

(b)	Without limiting paragraph (a) above, the Borrower shall:

(i)

(ii)

not make any changes relating to the classification or classification society or manager or operator of the Ship approved by the underwriters of the obligatory insurances;

(iii)

(iv)

20.12

Alteration to terms of insurances

The Borrower shall not make or agree to any alteration to the terms of any obligatory insurance or waive any right relating to any obligatory insurance.

20.13

Settlement of claims

The Borrower shall:

(a)	not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty without the prior written consent of the Lender; and

(b)	do all things necessary and provide all documents, evidence and information to enable the Lender to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.

20.14

Provision of copies of communications

The Borrower shall provide the Lender, at the time of each such communication, with copies of all written communications between the Borrower and:

(a)	the Approved Brokers;

(b)	the approved protection and indemnity and/or war risks associations; and

(c)	the approved insurance companies and/or underwriters,

which relate directly or indirectly to:

(i)

the Borrower’s obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and

(ii)

20.15

Provision of information

The Borrower shall promptly provide the Lender (or any persons which it may designate) with any information which the Lender (or any such designated person) requests for the purpose of:

(a)	obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurances effected or proposed to be effected; and/or

(b)	effecting, maintaining or renewing any such insurances as are referred to in Clause 20.16 (Mortgagee’s interest and additional perils insurances) or dealing with or considering any matters relating to any such insurances,

20.16 Mortgagee’s interest and additional perils insurances

(a)	The Lender shall be entitled from time to time to effect, maintain and renew a mortgagee’s interest marine insurance in an amount equal to 110 per cent. of the Loan, on such terms, through such insurers and generally in such manner as the Lender may from time to time consider appropriate.

(b)	The Borrower shall within five (5) Business Days following written demand and against receipt of appropriate vouchers and/or invoices fully indemnify the Lender in respect of all premiums

21	GENERAL SHIP UNDERTAKINGS

21.1

General

21.2	Ship’s names and registration

The Borrower shall:

(a)	keep the Ship registered in its name under the Approved Flag from time to time at its port of registration;

(b)	not do or allow to be done anything as a result of which such registration might be suspended, cancelled or imperilled;

(c)	not enter into any dual flagging arrangement in respect of the Ship; and

(d)	not change the name of the Ship without the prior consent of the Lender (not to be unreasonably withheld or delayed),

Provided that any change of flag of the Ship shall be subject to:

(i)

(ii)

the execution of such other documentation amending and supplementing the Finance Documents as the Lender shall approve or reasonably require.

21.3	Repair and classification

The Borrower shall keep the Ship in a good and safe condition and state of repair:

(a)	consistent with first class ship ownership and management practice; and

(b)	so as to maintain the Approved Classification free of recommendations and conditions affecting class.

21.4	Classification society undertaking

The Borrower shall instruct the relevant Approved Classification Society (and procure that the Approved Classification Society undertakes with the Lender):

(a)	to send to the Lender, following receipt of a written request from the Lender, certified true copies of all original class records held by the Approved Classification Society in relation to the Ship;

(b)	to allow the Lender (or its agents), at any time and from time to time, to inspect the original class and related records of the Borrower and the Ship at the offices of the Approved Classification Society and to take copies of them;

(c)	to notify the Lender immediately in writing if the Approved Classification Society:

(i)

receives notification from the Borrower or any person that the Ship’s Approved Classification Society is to be changed; or

(ii)

becomes aware of any facts or matters which may result in or have resulted in a change, suspension, discontinuance, withdrawal or expiry of the Ship’s class under the rules or terms and conditions of the Borrower or the Ship’s membership of the Approved Classification Society;

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

(i)

(ii)

21.5	Modifications

21.6	Removal and installation of parts

(a)	Subject to paragraph (b) below, the Borrower shall not remove any material part of the Ship, or any item of equipment installed on the Ship unless:

(i)

the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed;

(ii)

the replacement part or item is free from any Security in favour of any person other than the Lender; and

(iii)

the replacement part or item becomes, on installation on the Ship, the property of the Borrower and subject to the security constituted by the Mortgage on the Ship.

(b)	The Borrower may install leased equipment owned by a third party if the equipment can be removed without any risk of damage to the Ship owned by the Borrower.

21.7

Surveys

21.8	Inspection

21.9	Prevention of and release from arrest

(a)	The Borrower shall promptly discharge:

(i)

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

(ii)

all Taxes, dues and other amounts charged in respect of the Ship, its Earnings or its Insurances; and

(iii)

all other outgoings whatsoever in respect of the Ship, its Earnings or its Insurances.

(b)

21.10

Compliance with laws etc.

The Borrower shall:

(a)	comply, or procure compliance with all laws or regulations:

(i)

relating to its business generally; and

(ii)

relating to the Ship, its ownership, employment, operation, management and registration,

including, but not limited to, the ISM Code, the ISPS Code, all Environmental Laws, all Sanctions and the laws of the Approved Flag;

(b)	obtain, comply with and do all that is necessary to maintain in full force and effect any Environmental Approvals; and

(c)	without limiting paragraph (a) above, not employ the Ship nor allow its employment, operation or management in any manner contrary to any law or regulation including but not limited to the ISM Code, the ISPS Code, all Environmental Laws and Sanctions.

21.11

ISPS Code

Without limiting paragraph (a) of Clause 21.10 (Compliance with laws etc.), the Borrower shall:

(a)	procure that the Ship and the company responsible for the Ship’s compliance with the ISPS Code comply with the ISPS Code;

(b)	maintain an ISSC for the Ship; and

(c)	notify the Lender immediately in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC.

21.12

Sanctions and Ship trading

Without limiting Clause 21.10 (Compliance with laws etc.), the Borrower shall procure:

(a)	that the Ship shall not be used by or for the benefit of a Prohibited Person;

(b)	that the Ship shall not be used in trading in any manner contrary to Sanctions;

(c)	that the Ship shall not be traded in any manner which would trigger the operation of any sanctions limitation or exclusion clause (or similar) in the Insurances; and

(d)	that it will use its best endeavours to ensure that each charterparty (where applicable) in respect of the Ship shall contain, for the benefit of the Borrower, language similar to the BIMCO Sanctions Clause or the BIMCO Designated Entity Clause.

21.13

Trading in war zones

(a)	the prior written consent of the war risks insurers has been given; and

(b)	the Borrower has (at its expense) effected any special, additional or modified insurance cover which the war risks insurers may require.

21.14

Provision of information

Without prejudice to Clause 18.2 (Information: miscellaneous) the Borrower shall promptly provide the Lender with any information which it requests regarding:

(a)	the Ship, its employment, position and engagements;

(b)	the Earnings and payments and amounts due to its master and crew;

(c)	any expenditure incurred, or likely to be incurred, in connection with the operation, maintenance or repair of the Ship and any payments made by it in respect of the Ship;

(d)	any towages and salvages; and

(e)	its compliance, the Approved Manager’s compliance and the compliance of the Ship with the ISM Code and the ISPS Code,

and, upon the Lender’s request, promptly provide copies of any current Charter relating to the Ship, of any current guarantee of any such Charter, the Ship’s Safety Management Certificate and any relevant Document of Compliance.

21.15

Notification of certain events

The Borrower shall immediately notify the Lender by email or fax, confirmed forthwith by letter, of:

(a)	any casualty to the Ship which is or is likely to be or to become a Major Casualty;

(b)	any occurrence as a result of which the Ship has become or is likely to become a Total Loss;

(c)	any requisition of the Ship for hire;

(d)	any requirement or recommendation made in relation to the Ship by any insurer or classification society or by any competent authority which is not complied with in accordance with its terms;

(e)	any arrest or detention of the Ship that is not promptly lifted either with provision of security, bail or otherwise or any exercise or purported exercise of any lien on the Ship or the Earnings;

(f)	any intended dry docking of the Ship;

(g)	any Environmental Claim made against the Borrower or in connection with the Ship, or any Environmental Incident;

(h)	any claim for breach of the ISM Code or the ISPS Code being made against the Borrower, an Approved Manager or otherwise in connection with the Ship; or

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

(j)	the entering into any time, voyage or consecutive voyage charter in respect of the Ship the duration of which (without taking into account any optional extensions) exceeds or is capable of exceeding 12 months,

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

21.16

Restrictions on chartering, appointment of managers etc.

The Borrower shall not:

(a)	let the Ship on demise charter for any period without the prior written consent of the Lender;

(b)	materially amend, supplement or terminate a Management Agreement (and for the avoidance of doubt, but without limitation, any amendment in respect of the management fees, milestone payments, duration, termination events and governing law of the management agreement will be considered material);

(c)	appoint a manager of the Ship other than the Approved Manager or agree to any material alteration to the terms of an Approved Manager’s appointment (and for the avoidance of

(d)	de activate or lay up the Ship; or

(e)

21.17

Notice of Mortgage

The Borrower shall keep the relevant Mortgage registered against the Ship as a valid first preferred mortgage, carry on board the Ship a certified copy of the relevant Mortgage and place and maintain in a conspicuous place in the navigation room and the master’s cabin of the Ship a framed printed notice stating that the Ship is mortgaged by the Borrower to the Lender.

21.18

Sharing of Earnings

The Borrower shall not enter into any agreement or arrangement for the sharing of any Earnings other than a profit sharing agreed at arm’s length under a charter party provided that it is not a part of any pool arrangement, in which case the Lender’s prior written consent will be required (such consent not to be unreasonably withheld or delayed).

21.19

Notification of compliance

The Borrower shall promptly provide the Lender from time to time with evidence (in such form as the Lender requires) that it is complying with this Clause 21 (General Ship Undertakings).

21.20

Charterparty Assignment

(a)	provide the Lender with a certified true copy of such Charter;

(b)

(c)

21.21

Qualifying Charter

if the Ship will not be employed under a Qualifying Charter on the Delivery Date, the Borrower shall enter into a Qualifying Charter within six months from the Utilisation Date and shall provide the Lender with all documents specified in paragraphs (a), (b) and (c) of Clause 21.20 (Charterparty Assignment), together with evidence that it has been unconditionally delivered by the Borrower to, and accepted by, the relevant charterer under the Qualifying Charter promptly thereafter. For the avoidance of doubt, if the Ship is not employed under a Qualifying Charter in accordance with this Clause, the Borrower shall partially prepay the Loan in accordance with Clause 7.6 (Mandatory prepayment on non-employment of Ship under Qualifying Charter).

22	SECURITY COVER

22.1	Minimum required security cover

(a)	the Market Value of the Ship then subject to a Mortgage; plus

(b)	the net realisable value of additional Security previously provided under this Clause 22 (Security Cover),

is below 130 per cent. of the Loan.

22.2	Provision of additional security; prepayment

(a)

if the Lender serves a notice on the Borrower under Clause 22.1 (Minimum required security cover), the Borrower shall, on or before the date falling one Month after the date on which the Lender’s notice is served (the “Prepayment Date”), prepay such part of the Loan as shall eliminate the shortfall.

(b)	The Borrower may, instead of making a prepayment as described in paragraph (a) above, provide, or ensure that a third party has provided, additional security which, in the opinion of the Lender:

(i)

has a net realisable value at least equal to the shortfall; and

(ii)

is documented in such terms as the Lender may approve or require,

before the Prepayment Date; and conditional upon such security being provided in such manner, it shall satisfy such prepayment obligation.

22.3	Value of additional vessel security

22.4	Valuations binding

22.5	Provision of information

(a)

(b)	If the Borrower fails to provide the information referred to in paragraph (a) above by the date specified in the request, the valuation may be made on any basis and assumptions which the shipbroker or the Lender considers prudent.

22.6	Prepayment mechanism

22.7	Provision of valuations

23	ACCOUNTS AND APPLICATION OF EARNINGS

23.1

Accounts

The Borrower may not, without the prior consent of the Lender, maintain any bank account other than its Earnings Account and the Minimum Liquidity Account.

23.2	Payment of Earnings

The Borrower shall ensure that subject only to the provisions of the General Assignment to which it is a party, all the Earnings in respect of the Ship are paid in to its Earnings Account.

23.3	Location of Accounts

The Borrower shall promptly:

(a)	comply with any requirement of the Lender as to the location or relocation of its Earnings Account and the Minimum Liquidity Account (or either of them); and

(b)	execute any documents which the Lender reasonably specifies to create or maintain in favour of the Lender Security over (and/or rights of set-off, consolidation or other rights in relation to) the Earnings Account and the Minimum Liquidity Account

23.4	Release of surplus

24	EVENTS OF DEFAULT

24.1

General

Each of the events or circumstances set out in this Clause 24 (Events of Default) is an Event of Default except for Clause 24.21 (Acceleration) and Clause 24.22 (Enforcement of security).

24.2	Non-payment

(a)	its failure to pay is caused by:

(i)

administrative or technical error; or

(ii)

a Disruption Event; and

(b)	payment is made within three (3) Business Days of its due date.

24.3	Specific obligations

any reason whatsoever so long as Euroseas delivers to the Lender a duly executed Shares Security and any documents required in accordance with Part C of Schedule 2 (Conditions Subsequent relevant to Qualified IPO).

24.4	Other obligations

(a)	A Transaction Obligor does not comply with any provision of the Finance Documents to which it is a party (other than those referred to in Clause 24.2 (Non-payment) and Clause 24.3 (Specific obligations)).

(b)	No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within ten (10) Business Days of the Lender giving written notice to the Borrower or (if earlier) any Transaction Obligor becoming aware of the failure to comply.

24.5	Misrepresentation

24.6	Cross default

(a)	Any Financial Indebtedness of the Borrower or the Corporate Guarantor is not paid when due nor within any originally applicable grace period.

(b)	Any Financial Indebtedness of the Borrower or the Corporate Guarantor is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).

(c)	Any commitment for any Financial Indebtedness of the Borrower or the Corporate Guarantor is cancelled or suspended by a creditor of the Borrower or the Corporate Guarantor as a result of an event of default (however described).

(d)	Any creditor of the Borrower or the Corporate Guarantor becomes entitled to declare any Financial Indebtedness of the Borrower or the Corporate Guarantor due and payable prior to its specified maturity as a result of an event of default (however described).

24.7	Insolvency

(a)	Either the Borrower or the Corporate Guarantor:

(i)

is unable or admits inability to pay its debts as they fall due;

(ii)

is deemed to, or is declared to, be unable to pay its debts under any applicable law;

(iii)

suspends or threatens to suspend making payments on any of its debts; or

(iv)

(b)	The value of the assets of the Borrower or the Corporate Guarantor is less than its liabilities (taking into account contingent and prospective liabilities).

(c)	A moratorium is declared in respect of any indebtedness of the Borrower or the Corporate Guarantor. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.

24.8	Insolvency proceedings

(a)	Any corporate action, legal proceedings or other procedure or step is taken in relation to:

(i)

(ii)

a composition, compromise, assignment or arrangement with any creditor of the Borrower or the Corporate Guarantor;

(iii)

(iv)

enforcement of any Security over any assets of the Borrower or the Corporate Guarantor,

or any analogous procedure or step is taken in any jurisdiction.

(b)	Paragraph (a) above shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 14 days of commencement.

24.9	Creditors’ process

Any expropriation, attachment, sequestration, distress or execution (or any analogous process in any jurisdiction) affects any asset or assets of the Borrower or the Corporate Guarantor.

24.10

Ownership of the Borrower

The Borrower is not or ceases to be a 100% directly owned Subsidiary of the Shareholder.

24.11

Change of Chairman or CEO of Corporate Guarantor

Mr Aristeidis J.Pittas ceases to be at any time the chairman and the chief executive officer of the board of directors of the Corporate Guarantor.

24.12

Delisting of Corporate Guarantor or no Substitute Date

(a)	Prior to the date of the Qualified IPO, Euroseas is delisted for any reason whatsoever from the Nasdaq stock exchange or, after the Qualified IPO, Eurodry is for any reason delisted from the Nasdaq stock exchange.

(b)	The Qualified IPO and Spin-Off have been completed but the Substitute Date does not occur within 5 days thereafter or any later date as the Lender may agree in writing in its absolute discretion.

24.13

Unlawfulness, invalidity and ranking

(a)	It is or becomes unlawful for a Transaction Obligor to perform any of its obligations under the Finance Documents to which it is a party.

(b)	Any obligation of a Transaction Obligor under the Finance Documents to which it is a party is not or ceases to be legal, valid, binding or enforceable.

(c)	Any Finance Document ceases to be in full force and effect or to be continuing or is or purports to be determined or any Transaction Security is alleged by a party to it (other than the Lender) to be ineffective.

(d)	Any Transaction Security proves to have ranked after, or loses its priority to, any other Security.

24.14

Security imperilled

Any Security created or intended to be created by a Finance Document is in any way imperilled or in jeopardy.

24.15

Cessation of business

The Borrower or the Corporate Guarantor suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a material part of its business.

24.16

Arrest

24.17

Expropriation

(a)	an arrest or detention of the Ship referred to in Clause 24.16 (Arrest); or

(b)	any Requisition.

24.18

Repudiation and rescission of agreements

party or any of the Transaction Security otherwise ceases to remain in full force and effect for any reason.

24.19

Litigation

24.20

Material adverse change

Any event or circumstance occurs which has or is reasonably likely to have a Material Adverse Effect.

24.21

Acceleration

On and at any time after the occurrence of an Event of Default which is continuing the Lender may by written notice to the Borrower:

(a)	cancel the Commitment, whereupon it shall immediately be cancelled;

(b)	declare that all or part of the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon it shall become immediately due and payable; and/or

(c)

declare that all or part of the Loan be payable on demand, whereupon it shall immediately become payable on demand by the Lender, and the Lender may serve notices under paragraphs (a), (b) and (c) above simultaneously or on different dates and the Lender may take any action referred to in Clause 24.22 (Enforcement of security) if no such notice is served or simultaneously with or at any time after the service of any of such notice.

24.22

Enforcement of security

SECTION 8

THE LENDER, THE BORROWER AND THE REFERENCE BANKS

25	CHANGES TO THE LENDER

25.1	Assignment and transfer by the Lender

Subject to this Clause 25 (Changes to the Lender), the Lender (the “Existing Lender”) may assign any of its rights or transfer by novation any of its rights and obligations under the Finance Documents to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the “New Lender”).

25.2	Conditions of assignment or transfer

(a)	The Lender shall not be required to consult with the Borrower or obtain the Borrower’s written consent in connection with an assignment or transfer by the Lender pursuant to Clause 25.1 (Assignment and transfer by the Lender).

(b)

If:

(i)

the Existing Lender assigns any of its rights or obligations under the Finance Documents or changes its Facility Office; and

(ii)

(c)

The Borrower on behalf of itself and each Transaction Obligor agrees that all rights and interests (present, future or contingent) which the Existing Lender has under or by virtue of the Finance Documents are assigned to the New Lender absolutely, free of any defects in the Existing Lender’s title and of any rights or equities which the Borrower or any other Transaction Obligor had against the Existing Lender.

25.3	Security over Lender’s rights

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

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

except that no such charge, assignment or Security shall:

(i)

(ii)

26	CHANGES TO THE TRANSACTION OBLIGORS

26.1	Assignment or transfer by Transaction Obligors

No Transaction Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents to which it is a party.

27	THE REFERENCE BANKS

27.1	Role of Reference Banks

(a)	No Reference Bank is under any obligation to provide a quotation or any other information to the Lender.

(b)	No Reference Bank will be liable for any action taken by it under or in connection with any Finance Document, or for any Reference Bank Quotation, unless directly caused by its gross negligence or wilful misconduct.

(c)

27.2	Third Party Reference Banks

SECTION 9

ADMINISTRATION

28	PAYMENT MECHANICS

28.1	Payments to the Lender

(a)

(b)	Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to euro, in a principal financial centre in such Participating Member State or London, as specified by the Lender) and with such bank as the Lender, in each case, specifies.

28.2	Application of receipts; partial payments

(a)	If the Lender receives a payment that is insufficient to discharge all the amounts then due and payable by a Transaction Obligor under the Finance Documents to which it is a party, the Lender may apply that payment towards:

(i)

first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Lender under the Finance Documents;

(ii)

secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;

(iii)

thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and

(iv)

fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

(b)	Following the occurrence of an Event of Default which is continuing the Lender may vary the order set in paragraph (a) above.

(c)	Paragraphs (a) and (b) above will override any appropriation made by a Transaction Obligor.

28.3	No set-off by Transaction Obligors

28.4	Business Days

(a)	Any payment under the Finance Documents 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).

(b)	During any extension of the due date for payment of any principal or an Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.

28.5	Currency of account

(a)	Subject to paragraphs (b) and (c) below, dollars is the currency of account and payment for any sum due from a Transaction Obligor under any Finance Document.

(b)	Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

(c)	Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.

28.6	Disruption to Payment Systems etc.

(a)	the Lender may, and shall if requested to do so by the Borrower, consult with the Borrower with a view to agreeing with the Borrower such changes to the operation or administration of the Facility as the Lender may deem necessary in the circumstances;

(b)	the Lender shall not be obliged to consult with the Borrower in relation to any changes mentioned in paragraph (a) above if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes;

(c)

(d)

SET-OFF

30	CONDUCT OF BUSINESS BY THE LENDER

No provision of this Agreement will:

(a)	interfere with the right of the Lender to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

(b)	oblige the Lender to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

(c)	oblige the Lender to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

BAIL-IN

(a)	any Bail-In Action in relation to any such liability, including (without limitation):

(i)

a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;

(ii)

a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and

(iii)

a cancellation of any such liability; and

(b)	a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.

NOTICES

32.1	Communications in writing

Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by email, fax or letter.

32.2

Addresses

(a)	in the case of the Borrower, that specified in Schedule 1 (The Parties); and

(b)	in the case of the Lender, that specified in Schedule 1 (The Parties) or, if it becomes a Party after the date of this Agreement, that notified in writing to the Lender on or before the date on which it becomes a Party;

32.3

Delivery

(a)	Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:

(i)

if by way of fax or email, when received in legible form;

(ii)

if by way of letter, when it has been left at the relevant address or five (5) Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,

and, if a particular department or officer is specified as part of its address details provided under Clause 32.2 (Addresses), if addressed to that department or officer.

(b)

(c)	Any communication or document made or delivered to the Borrower in accordance with this Clause will be deemed to have been made or delivered to each of the Transaction Obligors.

(d)	Any communication or document which becomes effective, in accordance with paragraphs (a) to (c) above, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.

32.4	Electronic communication

(a)	Any communication to be made between any two Parties under or in connection with the Finance Documents may be made by electronic mail or other electronic means (including, without limitation, by way of posting to a secure website) if those two Parties:

(i)

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

(ii)

notify each other of any change to their address or any other such information supplied by them by not less than five Business Days’ notice.

(b)	Any such electronic communication as specified in paragraph (a) above to be made between the Borrower and the Lender may only be made in that way to the extent that those two Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication.

(c)

(d)

(e)	Any reference in a Finance Document to a communication being sent or received shall be construed to include that communication being made available in accordance with this Clause 32.4 (Electronic communication).

32.5	English language

(a)	Any notice given under or in connection with any Finance Document must be in English.

(b)	All other documents provided under or in connection with any Finance Document must be:

(i)

in English; or

(ii)

33	CALCULATIONS AND CERTIFICATES

33.1

Accounts

33.2	Certificates and determinations

Any certification or determination by the Lender of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

33.3	Day count convention

34	PARTIAL INVALIDITY

35	REMEDIES AND WAIVERS

36	SETTLEMENT OR DISCHARGE CONDITIONAL

37	IRREVOCABLE PAYMENT

38	AMENDMENTS

39	CONFIDENTIAL INFORMATION

39.1	Confidentiality

39.2	Disclosure of Confidential Information

The Lender may disclose:

(a)

obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;

(b)	to any person:

(i)

to (or through) whom it assigns (or may potentially assign) all or any of its rights and/or obligations under one or more Finance Documents and, in each case, to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;

(ii)

with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or one or more Transaction Obligors and to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;

(iii)

(iv)

who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in sub-paragraph (i) or (ii) of paragraph (b) above;

(v)

(vi)

to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitrations, administrative or other investigations, proceedings or disputes;

(vii)

to whom or for whose benefit the Lender charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 25.3 (Security over Lender’s rights);

(viii)

who is a Party or any related entity of a Transaction Obligor;

(ix)

as a result of the registration of any Finance Document as contemplated by any Finance Document or any legal opinion obtained in connection with any Finance Document;

in each case, such Confidential Information as the Lender shall consider appropriate if:

(A)

in relation to sub-paragraphs (i), (ii) and (Hi) of paragraph (b) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;

(B)

some or all of such Confidential Information may be price-sensitive information;

(C)

(c)

to any person appointed by the Lender or by a person to whom sub-paragraph (i) or (H) of paragraph (b) above applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this paragraph (c) if the service provider to whom the Confidential Information is to be given has entered in to a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Borrower and the Lender;

(d)

39.3	Entire agreement

39.4	Inside information

39.5	Notification of disclosure

The Lender agrees (to the extent permitted by law and regulation) to inform the Borrower:

(a)

(b)	upon becoming aware that Confidential Information has been disclosed in breach of this Clause 39 (Confidential Information).

39.6	Continuing obligations

The obligations in this Clause 39 (Confidential Information) are continuing and, in particular, shall survive and remain binding on the Lender for a period of 12 months from the earlier of:

(a)	the date on which all amounts payable by the Borrower under or in connection with this Agreement have been paid in full and the Commitment has been cancelled or otherwise ceased to be available; and

(b)	the date on which the Lender otherwise ceases to be the Lender.

40	CONFIDENTIALITY OF FUNDING RATES AND REFERENCE BANK QUOTATIONS

40.1	Confidentiality and disclosure

(a)	The Borrower agrees to keep each Funding Rate (and the Lender agrees to keep each Reference Bank Quotation) confidential and not to disclose it to anyone, save to the extent permitted by paragraphs (b), (d) and (e) below.

(b)	The Lender may not disclose any Reference Bank Quotation to the Borrower.

(c)

(d)	The Lender may disclose any Reference Bank Quotation, and the Borrower may disclose any Funding Rate, to:

(i)

(ii)

(iii)

(iv)

any person with the consent of the Lender or Reference Bank, as the case may be.

(e)

The Lender’s obligations in this Clause 40 (Confidentiality of Funding Rates and Reference Bank Quotations) relating to Reference Bank Quotations are without prejudice to its obligations to make notifications under Clause 8.4 (Notification of rates of interest) Provided that the Lender shall not include the details of any individual Reference Bank Quotation as part of any such notification.

40.2	Related obligations

(a)

(b)	The Lender and the Borrower agree (to the extent permitted by law and regulation) to inform the Lender or the relevant Reference Bank, as the case may be:

(i)

(ii)

upon becoming aware that any information has been disclosed in breach of this Clause 40 (Confidentiality of Funding Rates and Reference Bank Quotations).

40.3	No Event of Default

No Event of Default will occur under Clause 24.4 (Other obligations) by reason only of the Borrower’s failure to comply with this Clause 40 (Confidentiality of Funding Rates and Reference Bank Quotations).

41	COUNTERPARTS

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

SECTION 10

GOVERNING LAW AND ENFORCEMENT

42	GOVERNING LAW

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.

43	ENFORCEMENT

43.1	Jurisdiction

(a)

(b)	The Borrower accepts that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly the Borrower will not argue to the contrary.

(c)

This Clause 43.1 (Jurisdiction) is for the benefit of the Lender only. Asa result, the Lender shall be not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions.

43.2 Service of process

(a)	Without prejudice to any other mode of service allowed under any relevant law, the Borrower:

(i)

(ii)

agrees that failure by a process agent to notify the Borrower of the process will not invalidate the proceedings concerned.

(b)

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

SCHEDULE 1

THE PARTIES

PART A

THE BORROWER

Name of Borrower	Place of Incorporation	Registration number (or equivalent, if any)	Address for Communication

Kamsarmax Two Shipping Ltd	Marshall Islands	68235	c/o Eurobulk Ltd. 4 Messogiou & Evropis Street Maroussi Athens 151 24 Greece Fax: Fax: 211 1804097 Email: njp@euroltd.gr sih@eurobulk.gr

PART B

THE ORIGINAL LENDER

Name of Original Lender	Address for Communication

HSCB Bank plc	8 Canada Square London, E14 5HQ United Kingdom Fax no.: +44 (0) 207 991 4619 Attn: Mr Alastair Muir Email address: alastairmuir@hsbc.com

	109-111 Messoghion Avenue 115 26 Athens Greece fax: +30 210 429 0506 Email: katerina.eleftheriou@hsbc.com Attn: Ms Katerina Eleftheriou

SCHEDULE 2

CONDITIONS PRECEDENT

PART A

CONDITIONS PRECEDENT TO INITIAL UTILISATION REQUEST

Obligors

1.1	A copy of the constitutional documents of the Borrower and Corporate Guarantor A.

1.2	A copy of a resolution of the board of directors of the Borrower and Corporate Guarantor A:

(a)	approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;

(b)	authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and

(c)	authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, a Utilisation Request and each Selection Notice) to be signed and/or despatched by it under, or in connection with, the Finance Documents to which it is a party.

1.3	An original of the power of attorney of the Borrower and Corporate Guarantor A authorising a specified person or persons to execute the Finance Documents to which it is a party.

1.4	A specimen of the signature of each person authorised by the resolution referred to in paragraph 1.2 above.

1.5	A copy of a resolution signed by Corporate Guarantor A as the holder of the issued shares in the Borrower, approving the terms of, and the transactions contemplated by, the Finance Documents to which the Borrower is a party.

1.6	A certificate of the Borrower and Corporate Guarantor A (signed by a director) confirming that borrowing or guaranteeing, as appropriate, the Commitment would not cause any borrowing, guaranteeing or similar limit binding on the Borrower or Corporate Guarantor A to be exceeded.

1.7

2	Shipbuilding Contract and other documents

2.1	Copies of the Shipbuilding Contract and of all documents signed or issued by the Borrower or the Builder (or both of them) under or in connection with it.

2.2	Such documentary evidence as the Lender and its legal advisers may require in relation to the due authorisation and execution by the Borrower and the Builder of the Shipbuilding Contract and of all documents to be executed by the Borrower and the Builder.

3	Finance Documents

3.1	A duly executed original of any Finance Document (for the avoidance of doubt, including Corporate Guarantee A) not otherwise referred to in this Schedule 2 (Conditions Precedent).

3.2	A duly executed original of any other document required to be delivered by each Finance Document if not otherwise referred to this Schedule 2 (Conditions Precedent).

Security

4.1	A duly executed original of the Account Security in relation to each Account (and of each document to be delivered under it).

5	Legal opinions

5.1	A legal opinion of Watson Farley & Williams, legal advisers to the Lender in England.

5.2	If the Borrower or Corporate Guarantor A is incorporated in a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Lender in the relevant jurisdiction.

Valuation

6.1	A valuation evidencing the Market Value of the Ship, addressed to the Lender, stated to be for the purposes of this Agreement and dated not earlier than 20 days before the Utilisation Date from an Approved Valuer.

7	Other documents and evidence

7.1	Evidence that any process agent referred to in Clause 43.2 (Service of process), if not the Borrower, has accepted its appointment.

7.2

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

7.4	Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clause 11 (Fees) and Clause 16 (Costs and Expenses) have been paid or will be paid by the Utilisation Date.

7.5

Such evidence as the Lender may require, prior to the execution of this Agreement, for it to be able to satisfy its “know your customer” (including, without limitation, an ultimate beneficial ownership (UBO) declaration in respect of the Borrower confirming that Corporate Guarantor A is owned and controlled directly or indirectly by members of the Nominated Family as required by this Agreement or any other form of declaration in respect of the share structure of Corporate Guarantor A acceptable to the Lenders) or similar identification procedures in relation to the transactions contemplated in the Finance Documents, including (without limitation) all documents required under any regulation or laws in force in the United Kingdom and the Regulation 281/2009 of the Central Bank of Greece, such documents to be to the absolute satisfaction of the Lender.

7.6	Evidence that the Borrower, Corporate Guarantor A and all corporate shareholders (if any) have issued registered shares.

PART B

CONDITIONS PRECEDENT TO UTILISATION

Borrower

2	Ship and other security

2.1

2.2

2.3	Evidence that the minimum liquidity set out in Clause 19.22 (Minimum Liquidity) has been credited to the Minimum Liquidity Account.

2.4	Documentary evidence that the Ship:

(a)	has been unconditionally delivered by the Builder to, and accepted by, the Borrower under the Shipbuilding Contract and that the full purchase price payable and all other sums due to the Builder under the Shipbuilding Contract, have been paid to the Builder;

(b)	is definitively and permanently registered in the name of the Borrower under the Approved Flag applicable to the Ship;

(c)	is in the absolute and unencumbered ownership of the Borrower save as contemplated by the Finance Documents;

(d)	maintains the Approved Classification with the Approved Classification Society free of all recommendations and conditions of the Approved Classification Society affecting class; and

(e)	is insured in accordance with the provisions of this Agreement and all requirements in this Agreement in respect of insurances have been complied with.

2.5	Documents establishing that the Ship will, as from the Utilisation Date, be managed commercially and/or technically by its Approved Manager on terms acceptable to the Lender, together with:

(a)	a Manager’s Undertaking for the Approved Manager of the Ship; and

(b)	copies of the relevant Approved Manager’s Document of Compliance and of the Ship’s Safety Management Certificate (together with any other details of the applicable Safety Management

System which the Lender requires) and of any other documents required under the ISM Code and the ISPS Code in relation to the Ship including without limitation an ISSC.

2.6	An opinion from an independent insurance consultant acceptable to the Lender on such matters relating to the Insurances as the Lender may require.

3	Legal opinions

Legal opinions of the legal advisers to the Lender in the jurisdiction of the Approved Flag of the Ship, England and Marshall Islands.

4	Other documents and evidence

4.1	Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clause 11 (Fees) and Clause 16 (Costs and Expenses) have been paid or will be paid by the Utilisation Date.

PART C

CONDITIONS SUBSEQUENT RELEVANT TO QUALIFIED IPO

Obligors

1.1	A copy of the constitutional documents of the Shareholder and the Corporate Guarantor.

1.2	A copy of a resolution of the board of directors of the Shareholder and the Corporate Guarantor:

(a)	approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;

(b)	authorising a specified person or persons to execute the Finance Documents to which it is a party 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, the Finance Documents to which it is a party.

1.3	An original of the power of attorney of the Shareholder and the Corporate Guarantor authorising a specified person or persons to execute the Finance Documents to which it is a party.

1.4	A specimen of the signature of each person authorised by the resolution referred to in paragraph 1.2 above.

1.5	A certificate of the Corporate Guarantor (signed by a director) confirming that guaranteeing the Commitment would not cause any guaranteeing or similar limit binding on the Corporate Guarantor to be exceeded.

2	Corporate Guarantee B

A duly executed original of the Corporate Guarantee B.

3	Shares Security

A duly executed original of the Shares Security and of each document to be delivered under it.

4	Legal opinions

4.1	A legal opinion of Watson Farley & Williams, legal advisers to the Lender in England.

4.2	If the Shareholder or the Corporate Guarantor is incorporated in a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Lender in the relevant jurisdiction.

5	Other documents and evidence

5.1	Evidence satisfactory to the Lender that the Qualified IPO (including the Spin-Off) has been completed.

5.2	Evidence satisfactory to the Lender of transfer of ownership of the Borrower from Euroseas to Eurodry.

5.3	Evidence that any process agent referred to in Clause 43.2 (Service of process), if not the Borrower, has accepted its appointment.

5.4

5.5	Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clause 11 (Fees) and Clause 16 (Costs and Expenses) have been paid or will be paid by the Utilisation Date.

5.6

Such evidence as the Lender may require, prior to the execution of this Agreement, for it to be able to satisfy its “know your customer” (including, without limitation, an ultimate beneficial ownership (UBO) declaration in respect of the Borrower confirming that the Corporate Guarantor is owned and controlled directly or indirectly by members of the Nominated Family as required by this Agreement or any other form of declaration in respect of the share structure of the Shareholder acceptable to the Lenders) or similar identification procedures in relation to the transactions contemplated in the Finance Documents, including (without limitation) all documents required under any regulation or laws in force in the United Kingdom and the Regulation 281/2009 of the Central Bank of Greece, such documents to be to the absolute satisfaction of the Lender.

5.7	Evidence that the Borrower, the Corporate Guarantor and all corporate shareholders (if any) have issued registered shares.

SCHEDULE 3

REQUESTS

PART A

UTILISATION REQUEST

From:

Kamsarmax Two shipping Ltd

To:	HSBC Bank plc

Dated: [●] April 2018

Dear Sirs

Kamsarmax Two Shipping Ltd — $18,400,000 Facility Agreement dated [0] April 2018 (the “Agreement”)

1	We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.

2	We wish to borrow the Loan on the following terms:

Proposed Utilisation Date: [●] (or, if that is not a Business Day, the next Business Day)

Amount: [●] or, if less, the Available Facility

Interest Period: [●]

3	[You are authorised and requested to deduct from the Loan prior to funds being remitted the following amounts set out against the following items:

Arrangement Fee

Any accrued Commitment Fee

Net proceeds of Loan ]

4	We confirm that each condition specified in Clause 4.1 (Initial conditions precedent) and Clause 4.2 (Further conditions precedent) of the Agreement is satisfied on the date of this Utilisation Request.

5	The [net] proceeds of the Loan should be credited to [account].

6	This Utilisation Request is irrevocable.

Yours faithfully


[●]
authorised signatory for
Kamsarmax Two Shipping Ltd

PART B

SELECTION NOTICE

From:

Kamsarmax Two Shipping Ltd

To:	HSBC Bank plc

Dated: [●]

Dear Sirs

Kamsarmax Two Shipping Ltd — $18,400,000 Facility Agreement dated [●] April 2018 (the “Agreement”)

1	We refer to the Agreement. This is a Selection Notice. Terms defined in the Agreement have the same meaning in this Selection Notice unless given a different meaning in this Selection Notice.

We request [that the next Interest Period for the Loan be [●]]0R[an Interest Period for a part of the Loan in an amount equal to [●] (which is the amount of the Repayment Instalment next due) ending on [●] (which is the Repayment Date relating to that Repayment Instalment) and that the Interest Period for the remaining part of the Loan shall be [●]].

3	This Selection Notice is irrevocable.

Yours faithfully


[●]
authorised signatory for
Kamsarmax Two Shipping Ltd

SCHEDULE 4

TIMETABLES

Delivery of a duly completed Utilisation Request (Clause 5.1 (Delivery of a Utilisation Request)) or a Selection Notice (Clause 9.1 (Selection of Interest Periods))		Three Business Days before the intended Utilisation Date (Clause 5.1 (Delivery of a Utilisation Request)) or the expiry of the preceding Interest Period (Clause 9.1 (Selection of Interest Periods))


LIBOR is fixed		Quotation Day as of 11:00 am London time


Reference Bank Rate calculated by reference to available quotations in accordance with Clause 10.2 (Calculation of Reference Bank Rate)		Noon on the Quotation Day

EXECUTION PAGE

BORROWER

SIGNED by Stephania Karmiri	)	/s/ Stephania Karmiri
duly authorised	)
for and on behalf of	)
KAMSARMAX TWO SHIPPING LTD	)
in the presence of:	)
Witness’ signature:	)
Witness’ name:	)
Witness’ address:	)

Ourania Todoulou

Watson, Farley & Williams

348 Syngrou Avenue

176-74, Kallithea, Athens,

Greece

ORIGINAL LENDER

SIGNED by	)	/s/ Katerina Eleftheriou
duly authorised	)
for and on behalf of	)
HSBC BANK plc	)
in the presence of:	)
Witness’ signature:	)
Witness’ name:	)
Witness’ address:	)	Katerina Eleftheriou

Ourania Todoulou

Watson, Farley & Williams

348 Syngrou Avenue

176-74, Kallithea, Athens,

Greece

100

Exhibit 4.23

US$4,500,000

Secured Loan Agreement

Dated 20 May 2019

(1)	Eirini Shipping Ltd (as Borrower)

(2)	HSBC Bank plc (as Lender)

Contents

1	Definitions and Interpretation	2
2	The Loan	18
3	Purpose	19
4	Conditions of Utilisation	19
5	Advance	21
6	Repayment	22
7	Illegality, Prepayment and Cancellation	22
8	Interest	25
9	Interest Periods	25
10	Changes to the Calculation of Interest	26
11	Fees	27
12	Tax Gross Up and Indemnities	28
13	Increased Costs	34
14	Other Indemnities	35
15	Mitigation by the Lender	37
16	Costs and Expenses	37
17	Security Documents and Application of Moneys	39
18	Representations	43
19	Information Undertakings	49
20	Financial Covenants	51
21	General Undertakings	52
22	Events of Default	58
23	Changes to the Lender	64
24	Changes to the Obligors	65
25	Conduct of Business by the Lender	66
26	Payment Mechanics	67
27	Set-Off	69

28	Notices	69
29	Calculations and Certificates	70
30	Partial Invalidity	70
31	Remedies and Waivers	71
32	Confidentiality	71
33	Counterparts	74
34	Governing Law	75
35	Enforcement	75
Schedule 1	Part I Conditions Precedent	76
Schedule 2	Utilisation Request	81
Schedule 3	Form of Compliance Certificate.	82

Loan Agreement

Dated 20 May 2019

Between:

(1)	Eirini Shipping Ltd, a company incorporated under the law of the Republic of Liberia, with its registered office at 80 Broad Street, Monrovia, Republic of Liberia and company number C-117046 (the “Borrower”); and

(2)	HSBC BANK plc, of 8 Canada Square, London, E14 5HQ, England (the “Lender”).

Preliminary

(A)	The Borrower is the registered owner of the Vessel and has registered the Vessel under the laws and the flag of the Republic of Liberia.

(B)	The Lender has agreed to advance to the Borrower up to the lesser of (a) $4,500,000 and (b) 49.9% of the Market Value of the Vessel in one amount in order to assist the Borrower to re-finance part of its Existing Indebtedness with the Lender.

It is agreed as follows:

Page 1

Section 1

Interpretation

1	Definitions and Interpretation

1.1	Definitions In this Agreement:

“Account Holder” means HSBC BANK plc of 8 Canada Square, London, E14 5HQ, England or any other branch of the Lender or any other bank or financial institution which at any time, with the Lender’s prior written consent, holds the Earnings Account.

“Accounts” means the Earnings Account and the Cash Collateral Account.

“Account Security Deeds” means the account security deeds referred to in Clause 17.1.4 (Security Documents).

“Administration” has the meaning given to it in paragraph 1.1.3 of the ISM Code.

“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.

“Annex VI” 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 modified in 1978 and 1997).

“Approved Shipbroker” means each of Hartland Shipping Services Limited, H. Clarkson & Company Limited, Maersk Brokers K/S, Arrow Sale and Purchase (U.K.) Ltd., Fearnley AS, Simpson Spence & Young (SSY)„ Barry Rogliano Salles of France, Galbraith’s Limited Shipbrokers, Braemar Shipping Services PLC, Banchero-Costa & C. S.p.A, Associated Shipbroking S.A.M., Howe Robinson & Co Ltd., Maritime Strategies International (MSI), E.A. Gibson Shipbrokers Ltd., Oslo Shipbrokers A.S, Inge Steensland Shipbrokers AS and any other reputable, independent and first class firm of ship brokers appointed by the Borrower with the Lender’s prior approval.

“Assignments” means all the forms of assignment referred to in Clause 17.1.2 (Security Documents),

“Authorisation” means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

“Availability Period” means the period from and including the date of this Agreement to and including 30 June 2019 or any other later date acceptable to the Lender in its absolute discretion.

“Basel III” means (a) the agreements on capital requirements, a leverage ratio and liquidity standards contained in “Basel III: A global regulatory framework for more resilient banks and banking systems”, “Basel III: International framework for liquidity risk measurement, standards and monitoring” and “Guidance for national authorities operating the countercyclical capital buffer” published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated, (b) the rules for global systemically important banks contained in “Global systemically important banks: assessment methodology and the additional loss absorbency requirement - Rules text” published by the Basel

Page 2

Committee on Banking Supervision in November 2011, (c) any further guidance or standards published by the Basel Committee on Banking Supervision relating to “Basel III” and (d) CRD IV or CRR.

“Break Costs” means the amount (if any) by which:

(a)

the interest which the Lender should have received for the period from the date of receipt of all or any part of the Loan or an Unpaid Sum to the last day of the current Interest Period in respect of the Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

exceeds:

(b)

“Business Day” means a day (other than a Saturday or Sunday) on which banks are open for general business in London, New York and Athens.

“Cash Collateral Account” means the bank account opened or to be opened in the name of the Borrower with the Account Holder and designated “HSBC Bank Plc, Re: Eirini Shipping Ltd - Cash Collateral Account”.

“Cash Collateral Amount” means an amount equal to $300,000.

“Charged Property” means all of the assets of the Obligors which from time to time are, or are expressed to be, the subject of the Security Documents.

“Charter” means in respect of the Vessel, any charter, or other contract for its employment of twelve (12) months or more duration (including any extension options), whether or not already in existence, entered or to be entered into from time to time between the Borrower and a Charterer.

“Charterer” means, in respect of the Vessel, any person who enters into any Charter with the Borrower.

“Charter Rights” means the benefit of any Charter and any and all Earnings due and/or to become due to the Borrower under or pursuant to any Charter.

“Code” means the US Internal Revenue Code of 1986.

“Commitment Fee” means the commitment fee to be paid by the Borrower to the Lender under Clause 11.1 (Commitment Fee).

“Compliance Certificate” means a certificate substantially in the form set out in Schedule 3 (Form of Compliance Certificate).

“Confidential Information” means all information relating to any Obligor, any other member of the Group, the Finance Documents or the Loan of which the Lender becomes aware in its capacity as, or for the purpose of becoming, the Lender which

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is received by the Lender in relation to, or for the purpose of becoming the Lender under, the Finance Documents or the Loan from any Obligor, any other member of the Group or any of its advisers in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:

(i)

is or becomes public information other than as a direct or indirect result of any breach by the Lender of Clause 32 (Confidentiality); or

(ii)

is identified in writing at the time of delivery as non-confidential by any Obligor, any other member of the Group or any of its advisers; or

(iii)

is known by the Lender before the date the information is disclosed to it by any Obligor, any other member of the Group or any of its advisers or is lawfully obtained by the Lender after that date, from a source which is, as far as the Lender is aware, unconnected with any Obligor or any other member of the Group and which, in either case, as far as the Lender is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.

“Confidentiality Undertaking” means a confidentiality undertaking substantially in a recommended form of the Loan Market Association at the relevant time.

“CRD IV” means Directive 2013/36/EU of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directive 2006/48/EC and 2006/49/EC.

“CRR” means Regulation (EU) no. 575/2013 of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending regulation (EU) No. 648/2012.

“CTA” means the Corporation Tax Act 2009.

“Default” means an Event of Default or any event or circumstance which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

“Delegate” means any delegate, agent or attorney or co-trustee appointed by the Lender as holder of any of the Security Documents.

“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 connection with the Loan (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or

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(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 Finance Documents; or

(ii)

from communicating with other Parties in accordance with the terms of the Finance Documents,

and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.

“DOC” means, in relation to the ISM Company, a valid Document of Compliance issued for the ISM Company by the Administration under paragraph 13.2 of the ISM Code.

“Earnings” means all hires, freights, pool income and other sums payable to or for the account of the Borrower 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 bank account opened or to be opened in the name of the Borrower with the Account Holder and designated “HSBC Bank Plc, Re: Eirini Shipping Ltd - Earnings Account”.

“Encumbrance” means a mortgage, charge, assignment, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

“Environmental Approval” means any present or future permit, ruling, variance or other Authorisation required under Environmental Laws.

“Environmental Claim” means any claim, proceeding, formal notice or investigation by any governmental, judicial or regulatory authority or any other person which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law and, for this purpose, “claim” includes a claim for damages, compensation, contribution, injury, fines, losses and penalties or any other payment of any kind, including in relation to clean-up and removal, whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.

“Environmental Incident” means:

(a)

any release, emission, spill or discharge into 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

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(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.

“Environmental Law” means any present or future law or regulation relating to pollution or protection of human health or the environment, to conditions In the workplace, to the carriage, generation, handling, storage, use, release or spillage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material.

“Event of Default” means any event or circumstance specified as such in Clause 22 (Events of Default).

“Existing Indebtedness” means the “Indebtedness” (as defined in the loan agreement dated 25 June 2014 (as amended and supplemented from time to time) entered into by and between (i) the Borrower and another, as joint and several borrowers and (ii) the Lender, as lender) on the day of its prepayment.

“Facility Office” means the Lender’s office at 8 Canada Square, London E14 5HQ, England or such other office as the Lender may designate in writing.

“Facility Period” means the period beginning on the date of this Agreement and ending on the date on which the Lender is satisfied that there is no outstanding amount under the Loan in force and that the Indebtedness has been irrevocably and unconditionally paid and discharged in full.

“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,

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which (in either case) facilitates the implementation of any law or regulation referred to in (a); or

(c)

any agreement pursuant to the implementation of any treaty, law or regulation referred to in (a) or (b) with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.

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

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

“FCPA” means the US Foreign Corrupt Practices Act of 1977.

“Finance Documents” means this Agreement, the Security Documents and any other document designated as such by the Lender and the Borrower and “Finance Document” means any one of them.

“Financial Indebtedness” means any indebtedness for or in respect of:

(a)

moneys borrowed and debit balances at banks or other financial institutions;

(b)

any acceptance under any acceptance credit or bill discounting facility (or dematerialised equivalent);

(c)

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 finance or capital lease;

(e)

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

(f)

any Treasury Transaction (and, when calculating the value of that Treasury 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 Treasury Transaction, that amount) shall be taken into account);

(g)

any counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution in respect of (i) an underlying liability of an entity which is not an Obligor which liability would fall within one of the other sections of this definition or (ii) any liabilities of any Obligor relating to any post-retirement benefit scheme;

(h)

any amount raised by the issue of shares which are redeemable (other than at the option of the issuer) before the Termination Date or are otherwise classified as borrowings under GAAP;

(i)

any amount of any liability under an advance or deferred purchase agreement if (i) one of the primary reasons behind entering into the agreement is to raise finance or to finance the acquisition or construction of

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the asset or service in question or (ii) the agreement is in respect of the supply of assets or services and payment is due more than thirty (30) days after the date of supply;

(j)

any amount raised under any other transaction (including any forward sale or purchase, sale and sale back or sale and leaseback agreement) having the commercial effect of a borrowing or otherwise classified as borrowings under GAAP; and

(k)

the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in (a) to (j).

“GAAP” means generally accepted accounting principles in the United States of America.

“Group” means the Borrower, the Guarantor and each company which is a Subsidiary of the Guarantor from time to time.

“Guarantee” means the guarantee and indemnity of the Guarantor referred to in Clause 17.1.3 (Security Documents).

“Guarantor” means Eurodry Ltd., a company incorporated under the laws of the Republic of the Marshall Islands, with its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands and/or (where the context permits) any other person who shall at any time during the Facility Period issue to the Lender a guarantee and/or indemnity for the payment of all or part of the Indebtedness.

“Holding Company” means, in relation to a person, any other person in respect of which it is a Subsidiary.

“IAPPC” means a valid international air pollution prevention certificate for the Vessel issued under Annex VI.

“Increased Costs” have the meaning given to them in Clause 13.1 (Increased Costs).

“Indebtedness” means the aggregate from time to time of: the amount of the Loan outstanding; all accrued and unpaid interest on the Loan; and all other sums of any nature (together with all accrued and unpaid interest on any of those sums) payable to the Lender under all or any of the Finance Documents.

“Initial Market Value” means the Market Value of the Vessel calculated in accordance with the valuation relative thereto referred to in Part I 2 (e) of Schedule 1 (Conditions Precedent).

“Insurances” means all policies and contracts of insurance (including all entries in protection and indemnity or war risks associations) which are from time to time taken out or entered into in respect of or in connection with the Vessel or her increased value and (where the context permits) all benefits under such contracts and policies, Including all claims of any nature and returns of premium.

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“Interest Payment Date” means each date for the payment of interest in accordance with Clause 8.2 (Payment of interest).

“Interest Period” means each period determined in accordance with Clause 9 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default interest).

“ISM Code” means the International Management Code for the Safe Operation of Ships and for Pollution Prevention.

“ISM Company” means, at any given time, the company responsible for 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.

“ISSC” means a valid international ship security certificate for the Vessel issued under the ISPS Code.

“ITA” means the Income Tax Act 2007.

“Joint Venture” means any joint venture entity, whether a company, unincorporated firm, undertaking, association, joint venture or partnership or any other entity.

“Legal Opinion” means any legal opinion delivered to HSBC Bank plc under Clause 4.1 (Initial conditions precedent) or Clause 4.3 (Conditions subsequent).

“Legal Reservations” means:

(a)

(b)

(c)

similar principles, rights and defences under the laws of any Relevant Jurisdiction; and

any other matters which are set out as qualifications or reservations as to matters of law of general application in the Legal Opinions.

“LIBOR” means:

(a)

the applicable Screen Rate; or

(b)

(if (i) no Screen Rate is available for the currency of the Loan or (ii) no Screen Rate is available for the relevant Interest Period) the Reference Bank Rate,

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as of 11.00 a.m. on the Quotation Day for dollars and for a period equal in length to the relevant Interest Period and, if that rate is less than zero, LIBOR shall be deemed to be zero.

“Limitation Acts” means the Limitation Act 1980 and the Foreign Limitation Periods Act 1984.

“Loan” means the aggregate amount advanced or to be advanced by the Lender to the Borrower under Clause 2 (The Loan) or, where the context permits, the principal amount advanced and for the time being outstanding.

“Management Agreement” means the agreement for the commercial and technical management of the Vessel dated 1 November 2017 between the Borrower and the Managers.

“Managers” means in relation to the commercial and technical management of the Vessel, Eurobulk Ltd. of 80 Broad Street Monrovia, Republic of Liberia or, in either case, such other commercial and/or technical managers of the Vessel nominated by the Borrower as the Lender may approve.

“Managers’ Undertaking” means the written undertaking of the Managers whereby, throughout the Facility Period unless otherwise agreed by the Lender:

(a)

it will remain the commercial or technical manager of the Vessel (as the case may be); and

(b)

it will not, without the prior written consent of the Lender, subcontract or delegate the commercial or technical management of the Vessel (as the case may be) to any third party; and

(c)

the interests of the Managers in the Insurances (other than the right to be reimbursed for protection and indemnity claims under the “pay and be paid” rule) will be assigned to the Lender with first priority; and

(d)

(following the occurrence of an Event of Default which is continuing) all claims of the Managers against the Borrower shall be subordinated to the claims of the Lender under the Finance Documents.

“Margin” means two point seventy (2.70) per cent per annum.

“Market Value” means the value of the Vessel conclusively determined by the arithmetic average of two valuations (and in the case of the Initial Market Value determination shown by one valuation) obtained by two Approved Shipbrokers selected and appointed by the Borrower on behalf of the Lender and approved by and reporting to the Lender on the basis of a charter free sale for prompt delivery and free of encumbrances for cash at arm’s length on normal commercial terms as between a willing seller and a willing buyer and evidenced by two valuations of the Vessel addressed to the Lender certifying a value for the Vessel.

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“Maximum Loan Amount” means the lesser of (a) $4,500,000 and (b) 49.9% of the Market Value of the Vessel evidenced by the valuations received by the Lender under Clause 4.1 (Initial conditions precedent) 20 days prior to the Utilisation Date.

“Mortgage” means the first preferred mortgage referred to in Clause 17.1.1 (Security Documents).

“Nominated Family” means the family disclosed in writing and approved by the Lender prior to the date of this Agreement and “members of the Nominated Family” shall be construed accordingly.

“Obligors” means the Borrower, the Guarantor, the Managers and any other person who may at any time during the Facility Period be liable for, or provide security for, all or any part of the Indebtedness, and “Obligor” means any one of them.

“Original Financial Statements” means the audited consolidated financial statements of the Guarantor for the financial year ended 31 December 2018 (including profit and loss accounts and annual balance sheets).

“Original Jurisdiction” means, in relation to an Obligor, the jurisdiction under whose laws that Obligor is incorporated as at the date of this Agreement.

“Party” means a party to this Agreement.

“Permitted Encumbrance” means:

(a)

any Encumbrance created by the Finance Documents;

(b)

any netting or set-off arrangement entered into by any Obligor in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;

(c)

liens for unpaid master’s and crew’s wages in accordance with first class ship ownership and management practice and not being enforced through arrest;

(d)

liens for salvage;

(e)

liens for master’s disbursements incurred in the ordinary course of trading in accordance with first class ship ownership and management practice and not being enforced through arrest; and

(f)

any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel:

(i)

not as a result of any default or omission by the Borrower; and

(ii)

not being enforced through arrest,

provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested in good faith by appropriate steps).

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

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“Quasi-Security” has the meaning given to that term in Clause 21.9 (Negative pledge).

“Quotation Day” means, in relation to any period for which an interest rate is to be determined (for dollars) two (2) Business Days before the first day of that period, unless market practice differs in the Relevant Interbank Market, in which case the Quotation Day will be determined by the Lender in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).

“Receiver” means a receiver or receiver and manager or administrative receiver of the whole or any part of the Charged Property.

“Reference Bank Rate” means the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Lender at its request by the Reference Banks, in relation to LIBOR, as the rate at which the relevant Reference Bank could borrow funds in the London interbank market in dollars and for the relevant period, were it to do so by asking for and then accepting interbank offers for deposits in reasonable market size in dollars and for that period.

“Reference Banks” means in relation to LIBOR, such banks as may be appointed by the Lender in consultation with the Borrower.

“Relevant Documents” means the Finance Documents and the Management Agreement.

“Relevant Interbank Market” means the London interbank market.

“Relevant Jurisdiction” means, in relation to an Obligor:

(a)

its Original Jurisdiction;

(b)

any jurisdiction where any asset (other than the Vessel) subject to or intended to be subject to a Security Document to be executed by it is situated and, in relation to the Vessel, the flag of the Vessel;

(c)

any jurisdiction where it conducts its business; and

the jurisdiction whose laws govern the perfection of any of the Security Documents entered into by it.

“Repayment Date” means the date for payment of any Repayment Instalment in accordance with Clause 6 (Repayment).

“Repayment Instalment” means any instalment of the Loan to be repaid by the Borrower under Clause 6 (Repayment).

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“Repeating Representations” means each of the representations set out in Clause 18.1.1 (Status) to Clause 18.1.6 (Governing law and enforcement) and Clause 18.1.10 (No default) to Clause 18.1.19 (Pari passu ranking).

“Representative” means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.

“Requisition Compensation” means all compensation or other money which may from time to time be payable to the Borrower 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).

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

(a)

imposed by any law or regulation of the US Department of the Treasury’s Office of Foreign Assets Control, the US Department of State , the United Nations Security Council, the European Union, Her Majesty’s Treasury or the Hong Kong Monetary Authority, whether or not any Obligor or any other member of the Group or any Affiliate is legally bound to comply with the forgoing; or

(b)

otherwise imposed by any law or regulation by which any Obligor, any other member of the Group or any Affiliate of any of them is bound or, as regards a regulation, compliance with which is reasonable in the ordinary course of business of any Obligor, any other member of the Group or any Affiliate of any of them.

“Screen Rate” means, in relation to LIBOR, the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for the relevant currency and period displayed on pages LIBOR01 or LIBOR02 of the Reuters screen (or any replacement Reuters page which displays that rate), in each case, or on the appropriate page of such other information service which publishes that rate from time to time in place of Reuters, If such page or the service ceases to be available, the Lender may specify another page or service displaying the relevant rate after consultation with the Borrower.

“Secured Parties” means the Lender and any Receiver or Delegate.

“Security Cover Ratio” means, at any relevant time, the aggregate of (a) the Market Value of the Vessel, (b) the Cash Collateral Amount and (c) the net realisable value of any additional security provided at that time under Clause 17.14 (Additional security), expressed as a percentage of the Loan.

“Security Documents” means the Mortgage, the Assignments, the Guarantee, the Account Security Deeds and the Managers’ Undertaking or (where the context permits) any one or more of them, and any other agreement or document which may at any time be executed by any person as security for the payment of all or any part of the Indebtedness and “Security Document” means any one of them.

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“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.

“Subsidiary” means a subsidiary within the meaning of section 1159 of the Companies Act 2006.

“Tax Deduction” has the meaning given to it in Clause 12 (Tax Gross-Up and Indemnities).

“Termination Date” means the date falling 36 months from the Utilisation Date.

“Total Loss” means:

(a)

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

(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); or

(c)

the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture of the Vessel (not falling within (b)), unless the Vessel is released and returned to the possession of the Borrower within 60 days after the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture in question.

“Treasury Transaction” means any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price.

“UK Bribery Act” means the United Kingdom Bribery Act 2010.

“Unpaid Sum” means any sum due and payable but unpaid by any Obligor under the Finance Documents.

“US” means the United States of America.

“US Tax Obligor” means:

(a)

an Obligor which is resident for tax purposes in the US; or

(b)

an Obligor some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.

“Utilisation Date” means the date on which the Loan is advanced under Clause 5 (Advance).

“Utilisation Request” means a notice substantially in the form set out in Schedule 2 (Utilisation Request).

“VAT” means:

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(a)

any tax imposed in compliance with the Council Directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112); and

(b)

any other tax of a similar nature, whether imposed in a member state of the European Union in substitution for, or levied in addition to, such tax referred to in (a), or imposed elsewhere.

“Vessel” means the bulk carrier vessel of approximately 75,500 dwt “EIRINI P” with IMO no. 9284879 built in Japan in 2004 registered under the flag of the Republic of Liberia in the ownership of the Borrower and everything now or in the future belonging to her on board and ashore.

1.2	Construction Unless a contrary indication appears, any reference in this Agreement to:

1.2.1

the “Lender”, the “Borrower”, any “Secured Party” or any “Party” shall be construed so as to include its successors in title, permitted assignees and permitted transferees;

1.2.2

a document in “agreed form” is a document which is previously agreed in writing by or on behalf of the Borrower and the Lender or, if not so agreed, is in the form specified by the Lender;

1.2.3

“assets” includes present and future properties, revenues and rights of every description;

1.2.4

“Finance Document”, a “Security Document”, a “Relevant Document” or any other document is a reference to that Finance Document, Security Document, Relevant Document or other document as amended, novated, supplemented, extended or restated from time to time;

1.2.5

“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;

1.2.6

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

1.2.7

a “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 of any regulatory, self-regulatory or other authority or organisation;

1.2.8

a provision of law is a reference to that provision as amended or re-enacted from time to time; and

1.2.9

a time of day (unless otherwise specified) is a reference to London time.

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1.3	Headings Section, Clause and Schedule headings are for ease of reference only.

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

1.5	Default A Default (and/or an Event of Default) is “continuing” if it has not been remedied or waived.

1.6	Currency symbols and definitions “$” “USD” and “dollars” denote the lawful currency of the United States of America,

1.7	Third party rights 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 to enjoy the benefit of any term of this Agreement.

1.8	Offer letter This Agreement supersedes the terms and conditions contained in any correspondence relating to the subject matter of this Agreement exchanged between the Lender and the Borrower or their representatives before the date of this Agreement.

1.9	Contractual recognition of bail-in

1.9.1

In this Clause 1.9:

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

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

“Bail-In Legislation” means:

(a)

(b)

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

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

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

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“Resolution Authority” means any body which has authority to exercise any Write-down and Conversion Powers.

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

“Write-down and Conversion Powers” means:

(a)

(b)

in relation to any other applicable Bail-In Legislation:

(i)

(ii)

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

(c)

in relation to any UK Bail-In Legislation:

(i)

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

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Legislation that are related to or ancillary to any of those powers; and

(ii)

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

1.9.2

Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding between the Parties, each Party acknowledges and accepts that any liability of any Party to any other Party under or in connection with the Finance Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:

(a)

any Bail-In Action in relation to any such liability, including (without limitation):

(i)

a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;

(ii)

a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and

(iii)

a cancellation of any such liability; and

(b)

a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.

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Section 2

The Loan

Subject to the terms of this Agreement, the Lender agrees to make available to the Borrower a term loan in an aggregate amount (in dollars) not exceeding the Maximum Loan Amount.

Purpose

3.1	Purpose The Borrower shall apply the Loan for the purposes referred to in Preliminary (B).

3.2	Monitoring The Lender shall not be bound to monitor or verify the application of any amount borrowed under this Agreement.

4	Conditions of Utilisation

4.1	Initial conditions precedent

The Lender will only be obliged to comply with Clause 5.3 (Lender’s compliance with an Utilisation Request) in relation to the advance of the Loan if on or before the Utilisation Date, the Lender has received all of the documents and other evidence listed in Part I of Schedule 1 (Conditions Precedent) in form and substance satisfactory to the Lender. The Lender shall notify the Borrower promptly upon being so satisfied.

4.2	Further conditions precedent

The Lender will only be obliged to advance the Loan if on the date of the Utilisation Request and on the proposed Utilisation Date:

(a)

no Default is continuing or would result from the advance of the Loan;

(b)

the representations made by the Borrower under Clause 18 (Representations) are true in all material respects; and

(c)

no event or series of events has occurred which is likely to have a Material Adverse Effect.

(d)

Conditions subsequent The Borrower undertakes to deliver or to cause to be delivered to the Lender within 14 days after the Utilisation Date the additional documents and other evidence listed in Part II of Schedule 1 (Conditions Subsequent).

4.3	Conditions subsequent The Borrower undertakes to deliver or to cause to be delivered to the Lender within 14 days after the Utilisation Date the additional documents and other evidence listed in Part II of Schedule 1 (Conditions Subsequent).

4.4	No waiver If the Lender in its sole discretion agrees to advance all or any part of the Loan to the Borrower before all of the documents and evidence required by

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Clause 4.1 (Initial conditions precedent) have been delivered to or to the order of the Lender, the Borrower undertakes to deliver all outstanding documents and evidence to or to the order of the Lender no later than thirty (30) days after the Utilisation Date or such other date specified by the Lender.

The advance of all or any part of the Loan under this Clause 4.4 shall not be taken as a waiver of the Lender’s right to require production of all the documents and evidence required by Clause 4.1 (Initial conditions precedent).

4.5	Form and content All documents and evidence delivered to the Lender under this Clause shall:

4.5.1

be in form and substance acceptable to the Lender; and

4.5.2

if required by the Lender, be certified, notarised, legalised or attested in a manner acceptable to the Lender.

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Advance

5.1	Delivery of an Utilisation Request The Borrower may request the Loan to be advanced by delivery to the Lender of a duly completed Utilisation Request not more than ten and not fewer than three Business Days before the proposed Utilisation Date.

5.2	Completion of an Utilisation Request An Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

5.2.1

it is signed by an authorised signatory of the Borrower;

5.2.2

the proposed Utilisation Date is a Business Day within the Availability Period; and

5.2.3

the proposed Interest Period complies with Clause 9 (Interest Periods).

5.3	Lender’s compliance with an Utilisation Request Subject to Clauses 2 (The Loan), 3 (Purpose) and 4 (Conditions of Utilisation), the Lender shall comply with an Utilisation Request by advancing the Loan through the Facility Office.

5.4	Cancellation of undrawn amount The availability of the Loan shall be cancelled at the end of the Availability Period to the extent that it is undrawn at that time.

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Section 4

Repayment, Prepayment and Cancellation

Repayment

6.1

Repayment of Loan The Borrower agrees to repay the Loan to the Lender by twelve (12) consecutive quarterly instalments, the first (1st) up to including the eleventh (11th) such Instalment each in the sum of two hundred thousand dollars ($200,000), and the twelfth (12th) and final such instalment in the sum of two million three hundred thousand dollars ($2,300,000) (comprising an instalment of two hundred thousand dollars ($200,000), and a balloon payment in the sum of two million one hundred thousand dollars ($2,100,000) (the “Balloon”)), the first instalment falling due on the date which is three (3) calendar months after the Utilisation Date and subsequent instalments falling due at consecutive intervals of three (3) calendar months thereafter.

6.2	Reduction of Repayment Instalments If the aggregate amount advanced to the Borrower is less than $4,500,000, the amount of each Repayment Instalment (including the Balloon) shall be reduced pro rata to the amount actually advanced.

6.3	Reborrowing The Borrower may not reborrow any part of the Loan which is repaid or prepaid.

7	Illegality, Prepayment and Cancellation

7.1	Illegality If it becomes unlawful in any jurisdiction (other than by reason of Sanctions) for the Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain the Loan or it becomes unlawful for any Affiliate of the Lender for the Lender to do so:

7.1.1

the Lender shall promptly notify the Borrower upon becoming aware of that event;

7.1.2

upon the Lender notifying the Borrower, the availability of the Loan will be immediately cancelled; and

7.1.3

the Borrower shall repay the Loan on the last day of the current Interest Period or, if earlier, the date specified by the Lender in the notice delivered to the Borrower (being no earlier than the last day of any applicable grace period permitted by law).

7.2	Voluntary cancellation The Borrower may, if it gives the Lender not less than 14 Business Days’ (or such shorter period as the Lender may agree) prior notice, cancel the whole or any part (being a minimum amount of $200,000) of the undrawn amount of the Loan.

7.3	Voluntary prepayment of Loan The Borrower may prepay the whole or any part of the Loan freely and without penalty on the final day of an Interest Period (but, if in part, being an amount that reduces the Loan by an amount which is an integral multiple of $200,000) subject as follows:

7.3.1

it gives the Lender not less than five Business Days’ (or such shorter period as the Lender may agree) prior notice;

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7.3.2

the Loan may only be prepaid after the last day of the Availability Period; and

7.3.3

any prepayment under this Clause 7.3 shall satisfy the obligations under Clause 6.1 (Repayment of Loan), including the Balloon, on a pro rata basis.

7.4	Right of cancellation and prepayment

7.4.1

If:

(a)

any sum payable to the Lender by the Borrower is required to be increased under Clause 12.2.2 (Tax gross-up); or

(b)

the Lender claims indemnification from the Borrower under Clause 12.3 (Tax indemnity) or Clause 13.1 (Increased costs);

the Borrower may, whilst the circumstance giving rise to the requirement for that increase or indemnification continues, give the Lender notice of cancellation of the Loan and its intention to procure the repayment of the Loan.

7.4.2

On the last day of the Interest Period which ends after the Borrower has given notice under Clause 7.4.1 (or, if earlier, the date specified by the Borrower in that notice), the Borrower shall repay the Loan together with all interest and other amounts accrued under the Finance Documents.

7.5

Mandatory prepayment on sale or Total Loss If the Vessel is sold by the Borrower or becomes a Total Loss, the Borrower shall, simultaneously with any such sale or on the earlier of the date falling 120 days after any such Total Loss and the date on which the proceeds of any such Total Loss are realised, prepay the whole of the Loan.

7.6	Mandatory prepayment on change of ownership of Guarantor

(a)

If, without the prior written consent of the Lender (such consent not be unreasonably withheld), there is a Change of Control, the Borrower shall promptly notify the Lender upon becoming aware of that event and, if the Lender so requires, the Lender shall, by no less than 10 days’ notice to the Borrower declare the Loan, together with accrued interest and all other amounts accrued under the Finance Documents immediately due and payable, whereupon the Loan and all such outstanding interest and amounts will become immediately due and payable provided that in the case of sub-paragraph (ii) below, the Borrower will first have the option to rectify the Security Cover Ratio within 15 Business Days.

(b)

For the purpose of paragraph (a) above, “Change of Control” means:

(i)

the members of the Nominated Family cease to own directly or indirectly more than 10⁰/0 of the shares (and the voting rights attaching to those shares) in the Guarantor; or

(ii)

the members of the Nominated Family own directly or indirectly between 10.1% to 19.9%, (inclusive) of the shares (and the voting

Page 23

rights attaching to those shares) in the Guarantor and the Security Cover Ratio is equal to or less than 143% of the Loan.

7.7

Restrictions Any notice of prepayment or cancellation given under this Clause 7 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant prepayment or cancellation is to be made and the amount of that prepayment or cancellation.

Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs (if paid on a date that is not an Interest Payment Date) and subject to Clause 7.3 (Voluntary prepayment of Loan), Clause 7.5 (Mandatory prepayment on sale or Total Loss) and Clause 7.6 (Mandatory prepayment on change of ownership of Guarantor), without premium or penalty.

The Borrower shall not repay, prepay or cancel all or any part of the Loan except at the times and in the manner expressly provided for in this Agreement.

No amount of the Loan cancelled under this Agreement may be subsequently reinstated.

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Section 5

Costs of Utilisation

Interest

8.1	Calculation of interest The rate of interest on the Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:

8.1.1

Margin; and

8.1.2

LIBOR.

8.2	Payment of interest The Borrower shall pay accrued interest on the Loan on the last day of each Interest Period (and, if the Interest Period is longer than three (3) months, on the dates falling at three (3) monthly intervals after the first day of the Interest Period).

8.3

Default Interest In the event of a failure by the Borrower to pay any amount on the date on which such amount is due and payable pursuant to this Agreement and/or any of the other Finance Documents (unless otherwise specifically provided in any Finance Document) and irrespective of any notice by the Lender or any other person to the Borrower in respect of such failure, the Borrower shall pay interest at the rate of two per cent (2%) higher than the rate provided under Clause 8.2 (Payment of Interest) up to the date of actual payment (both before and after judgment), compounded at such intervals as the Lender shall in its discretion determine. Any interest accruing under this Clause 8.3 (Default Interest) in respect of an unpaid amount shall be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount and shall be due and payable at the end of the period by reference to which it is calculated or such other date or dates as the Lender may specify by written notice to the Borrower.

8.4	Notification of rates of interest The Lender shall promptly notify the Borrower of the determination of a rate of interest under this Agreement.

9	Interest Periods

9.1	Selection of Interest Periods The Borrower may select in a written notice to the Lender the duration of an Interest Period for the Loan subject as follows:

9.1.1

each notice is irrevocable and must be delivered to the Lender by the Borrower not later than 11.00 a.m. on the Quotation Day;

9.1.2

if the Borrower fails to give a notice in accordance with Clause 9.1.1, the relevant Interest Period will, subject to Clauses 9.2 (Interest Periods to meet Repayment Dates) and 9.3 (Non-Business Days), be three (3) months;

9.1.3

subject to this Clause 9, the Borrower may select an Interest Period of three (3), or six (6) or twelve (12) months or any other period agreed between the Borrower and the Lender;

9.1.4

an Interest Period shall not extend beyond the Termination Date; and

9.1.5

each Interest Period shall start on the Utilisation Date or (if the Loan is already made) on the last day of its preceding Interest Period and end on

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the date which numerically corresponds to the Utilisation Date or the last day of the preceding Interest Period in the relevant calendar month except that, if there is no numerically corresponding date In that calendar month, the Interest Period shall end on the last Business Day in that month.

9.2

Interest Periods to meet Repayment Dates If an Interest Period will expire after the next Repayment Date, there shall be a separate Interest Period for a part of the Loan equal to the Repayment Instalment due on that next Repayment Date and that separate Interest Period shall expire on that next Repayment Date.

9.3	Non-Business Days If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

10	Changes to the Calculation of Interest

10.1

Absence of quotations Subject to Clause 10.2 (Market disruption), if LIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by 11.00 am on the Quotation Day, the applicable LIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.

10.2	Market disruption If a Market Disruption Event occurs for any Interest Period, then the rate of interest on the Loan for that Interest Period shall be the percentage rate per annum which is the sum of:

10.2.1

the Margin; and

10.2.2

the rate notified to the Borrower by the Lender as soon as practicable, and in any event by dose of business on the date falling three (3) Business Days after the Quotation Day (or, if earlier, on the date falling three (3) Business Days prior to the date on which interest is due to be paid in respect of that Interest Period), to be that which expresses as a percentage rate per annum the cost to the Lender of funding the Loan from whatever source it may reasonably select.

In this Agreement “Market Disruption Event” means:

(a)

at or about noon on the Quotation Day for the relevant Interest Period LIBOR is to be determined by reference to the Reference Banks and none or only one of the Reference Banks supplies a rate to the Lender to determine LIBOR for dollars and the relevant Interest Period; or

(b)

before close of business in London on the Quotation Day for the relevant Interest Period, the Borrower receives notification from the Lender that the cost to it of funding the Loan from whatever source it may reasonably select would be in excess of LIBOR.

10.3	Alternative basis of interest or funding

10.3.1

If a Market Disruption Event occurs and the Lender or the Borrower so requires, the Lender and the Borrower 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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10.3.2

Any alternative basis agreed pursuant to Clause 10.3.1 shall be binding on all Parties.

10.4	Break Costs The Borrower shall, within three (3) Business Days of demand by the Lender, pay to the Lender its Break Costs attributable to all or any part of the Loan or Unpaid Sum being paid by the Borrower on a day other than the last day of an Interest Period for the Loan or Unpaid Sum.

The Lender shall, as soon as reasonably practicable after a demand by the Borrower, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.

Fees

11.1

Commitment Fee The Borrower shall pay to the Lender a fee computed at the rate of one per cent (1%) per annum on the undrawn amount of the Loan for the period commencing on the date of this Agreement and ending on the earlier to occur of (a) the last day of the Availability Period and (b) the Utilisation Date.

The accrued commitment fee is payable on the last day of each successive period of three (3) months which ends during the Availability Period, on the earlier of (a) the last day of the Availability Period or (b) the Utilisation Date and (on the cancelled amount of the Loan) at the time the cancellation is effective.

11.2	Arrangement fee The Borrower shall pay to the Lender on the Utilisation Date an arrangement fee in an amount equal to zero point five per cent (0.5%) of the final amount to be advanced to the Borrower by the Lender under this Agreement.

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Section 6

Additional Payment Obligations

12	Tax Gross Up and Indemnities

12.1	Definitions In this Agreement:

“Protected Party” means the Lender if it is or will be subject to any liability or required to make any payment for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.

“Qualifying Lender” means the Lender if it is beneficially entitled to interest payable to it in respect of an advance under a Finance Document and:

(a)

is a bank (as defined for the purpose of section 879 of the ITA) making an advance under a Finance Document and is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance or would be within such charge as respects such payments apart from section 18A of the CTA; or in respect of an advance made under a Finance Document by a person that was a bank (as defined for the purpose of section 879 of the ITA) at the time that that advance was made and within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance; or

(b)

is:

(i)

a company resident in the United Kingdom for United Kingdom tax purposes;

(ii)

a partnership each member of which is:

(A)

a company so resident in the United Kingdom; or

(B)

a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of Interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or

(iii)

a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company; or

(c)

is a Treaty Lender.

“Tax Confirmation” means a confirmation by the Lender that the person beneficially entitled to interest payable to the Lender in respect of an advance under a Finance Document is either:

Page 28

(a)

a company resident in the United Kingdom for United Kingdom tax purposes;

(b)

a partnership each member of which is:

(i)

a company so resident in the United Kingdom; or

(ii)

a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or

(c)

“Tax Credit” means a credit against, relief or remission for, or repayment of any Tax.

“Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document, other than a FATCA Deduction.

“Tax Payment” means either the increase in a payment made by an Obligor to the Lender under Clause 12.2 (Tax gross-up) or a payment by the Borrower under Clause 12.3 (Tax indemnity).

“Treaty Lender” means the Lender if it:

(a)

is treated as a resident of a Treaty State for the purposes of the Treaty;

(b)

does not carry on a business in the United Kingdom through a permanent establishment with which the Loan is effectively connected.

“Treaty State” means a jurisdiction having a double taxation agreement (a “Treaty”) with the United Kingdom which makes provision for full exemption from tax imposed by the United Kingdom on interest.

12.2	Tax gross-up The Borrower shall (and shall procure that each other Obligor shall) make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law, subject as follows:

12.2.1

the Borrower shall promptly upon becoming aware that it or any other Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Lender accordingly. Similarly, the Lender shall notify the Borrower and any such other Obligor on becoming so aware in respect of a payment payable to the Lender;

12.2.2

if a Tax Deduction is required by law to be made by the Borrower or any other Obligor, the amount of the payment due from the Borrower or that other Obligor shall be increased to an amount which (after making any Tax

Page 29

Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required;

12.2.3

a payment shall not be increased under Clause 12.2.2 by reason of a Tax Deduction on account of Tax imposed by the United Kingdom, if on the date on which the payment falls due:

(a)

the payment could have been made to the Lender without a Tax Deduction if the Lender had been a Qualifying Lender, but on that date the Lender is not or has ceased to be a Qualifying Lender other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty or any published practice or published concession of any relevant taxing authority; or

(b)

the Lender is a Qualifying Lender solely by virtue of (b) of the definition of Qualifying Lender and:

(i)

an officer of H.M. Revenue & Customs has given (and not revoked) a direction (a “Direction”) under section 931 of the ITA which relates to the payment and that Lender has received from the Borrower or from the other Obligor making the payment a certified copy of that Direction; and

(ii)

the payment could have been made to the Lender without any Tax Deduction if that Direction had not been made; or

(c)

the Lender is a Qualifying Lender solely by virtue of (b) of the definition of Qualifying Lender and:

(i)

the Lender has not given a Tax Confirmation to the Borrower; and

(ii)

the payment could have been made to the Lender without any Tax Deduction if the Lender had given a Tax Confirmation to the Borrower, on the basis that the Tax Confirmation would have enabled the Borrower to have formed a reasonable belief that the payment was an “excepted payment” for the purpose of section 930 of the ITA; or

(d)

the Lender is a Treaty Lender and the Borrower or the other Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without the Tax Deduction had the Lender complied with its obligations under Clause 12.2.6;

12.2.4

if the Borrower or any other Obligor is required to make a Tax Deduction, the Borrower shall (and shall procure that such other Obligor shall) make that Tax Deduction and any payment required in connection with that Tax

Page 30

Deduction within the time allowed and in the minimum amount required by law;

12.2.5

within thirty (30) days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Borrower shall (and shall procure that such other Obligor shall) deliver to the Lender a statement under section 975 of the ITA or other evidence reasonably satisfactory to the Lender that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority;

	12.2.6	(a)	Subject to (b), if the Lender is a Treaty Lender, the Lender and the Borrower shall co-operate (and the Borrower shall procure that each other Obligor which makes a payment to which that Treaty Lender is entitled will co-operate) in completing any procedural formalities necessary for the Borrower or that other Obligor to obtain authorisation to make that payment without a Tax Deduction.
		(b)	If the Lender is a Treaty Lender which holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, the Lender shall confirm its scheme reference number and its jurisdiction of tax residence to the Borrower, and, having done so, the Lender shall be under no obligation pursuant to (a).

12.3	Tax indemnity

12.3.1

The Borrower shall (within three (3) Business Days of demand by the Lender) pay to the Lender, if the Lender is a Protected Party, an amount equal to the loss, liability or cost which the Lender determines will be or has been (directly or indirectly) suffered for or on account of Tax by the Lender in respect of a Finance Document.

12.3.2

Clause 12.3.1 shall not apply:

(a)

with respect to any Tax assessed on the Lender:

(i)

under the law of the jurisdiction in which the Lender is incorporated or, if different, the jurisdiction (or jurisdictions) in which the Lender is treated as resident for tax purposes; or

(ii)

under the law of the jurisdiction in which the Facility Office is located in respect of amounts received or receivable in that jurisdiction, if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by the Lender; or

(b)

to the extent a loss, liability or cost:

(i)

is compensated for by an increased payment under Clause 12.2 (Tax gross-up);

Page 31

(ii)

would have been compensated for by an increased payment under Clause 12.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in Clause 12.2.3 (Tax gross-up) applied; or

(iii)

relates to a FATCA Deduction required to be made by a Party.

12.3.3

If the Lender makes or intends to make a claim under Clause 12.3.1 as a Protected Party, the Lender shall promptly notify the Borrower of the event which will give_r or has given, rise to the claim.

12.4	Tax Credit If the Borrower or any other Obligor makes a Tax Payment and the Lender determines that:

12.4.1

a Tax Credit is attributable to an increased payment of which that Tax Payment forms part, to that Tax Payment or to a Tax Deduction in consequence of which that Tax Payment was required; and

12.4.2

the Lender has obtained and utilised that Tax Credit, the Lender shall pay an amount to the Borrower or to that other Obligor which the Lender determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been made by the Borrower or that other Obligor.

12.5	Stamp taxes The Borrower shall pay and, within five Business Days of written demand, indemnify the Lender against any cost, loss or liability the Lender incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

12.6

VAT

12.6.1

All amounts expressed to be payable under a Finance Document by any Obligor to the Lender which (in whole or In part) constitute the consideration for any supply for VAT purposes are deemed to be exclusive of any VAT which is chargeable on that supply, and accordingly, if VAT is or becomes chargeable on any supply made by the Lender to any Obligor under a Finance Document and the Lender Is required to account to the relevant tax authority for the VAT, that Obligor must pay to the Lender (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of the VAT (and the Lender must promptly provide an appropriate VAT invoice to the Borrower).

12.6.2

Where a Finance Document requires any Obligor to reimburse or indemnify the Lender for any cost or expense, that Obligor shall reimburse or indemnify (as the case may be) the Lender for the full amount of such cost or expense, including such part thereof as represents VAT, save to the extent that the Lender reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority.

12.6.3

Any reference in this Clause 12.6 to any Obligor shall, at any time when such Obligor is treated as a member of a group for VAT purposes, include

Page 32

(where appropriate and unless the context otherwise requires) a reference to the representative member of such group at such time (the term “representative member” to have the same meaning as in the Value Added Tax Act 1994).

12.6.4

In relation to any supply made by the Lender to any Obligor under a Finance Document, if reasonably requested by the Lender, that Obligor must promptly provide the Lender with details of that Obligor’s VAT registration and such other information as is reasonably requested in connection with the Lender’s VAT reporting requirements in relation to such supply.

12.7	FATCA information

12.7.1

Subject to Clause 12.7.3, each Party shall, within ten (10) Business Days of a reasonable request by another Party:

(a)

confirm to that other Party whether it is:

(i)

a FATCA Exempt Party; or

(ii)

not a FATCA Exempt Party; and

(b)

(c)

12.7.2

If a Party confirms to another Party pursuant to Clause 12.7.1(a)(i) that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.

12.7.3

Clause 12.7.1 shall not oblige the Lender to do anything, and Clause (c) shall not oblige any other Party to do anything, which would or might in its reasonable opinion constitute a breach of:

(a)

any law or regulation;

(b)

any fiduciary duty; or

(c)

any duty of confidentiality.

12.7.4

If a 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 Clause(a) or (b) (including, for the avoidance of doubt, where Clause 12.7.3 applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information.

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12.7.5

If the Borrower is a US Tax Obligor or the Lender reasonably believes that its obligations under FATCA or any other applicable law or regulation require it, the Lender shall, within ten Business Days of:

(a)

where the Borrower is a US Tax Obligor, the date of this Agreement; or

(b)

where the Borrower is not a US Tax Obligor, the date of a request from the Borrower,

supply to the Borrower:

(i)

a withholding certificate on Form W-8 or Form W-9 or any other relevant form; or

(ii)

any withholding statement or other document, authorisation or waiver as the Borrower may require to certify or establish the status of the Lender under FATCA or that other law or regulation.

12.7.6

If any withholding certificate, withholding statement, document, authorisation or waiver provided to the Borrower by the Lender pursuant to Clause 12.7.5 is or becomes materially inaccurate or incomplete, the Lender shall promptly update it and provide such updated withholding certificate, withholding statement, document, authorisation or waiver to the Borrower unless it is unlawful for the Lender to do so (In which case the Lender shall promptly notify the Borrower).

12.8	FATCA Deduction

12.8.1

Each Party may make any FATCA Deduction it is required to make by FATCA and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.

12.8.2

Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction) notify the Party to whom it is making the payment.

13	Increased Costs

13.1

Increased costs Subject to Clause 13.3 (Exceptions) the Borrower shall, within five Business Days of a demand by the Lender, pay to the Lender the amount of any Increased Costs incurred by the Lender or any of its Affiliates 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 or any request from or requirement of any central bank or other fiscal, monetary or other authority made after the date of this Agreement (including Basel III (as defined In Clause 13.3) and any other which relates to capital adequacy or liquidity controls or which affects the manner in which the Lender allocates capital resources to obligations under this Agreement or (iii) any change In the risk weight allocated by the Lender to the Borrower after the date of this Agreement.

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In this Agreement “Increased Costs” means:

(a)

a reduction in the rate of return from the Loan or on the Lender’s (or its Affiliate’s) overall capital;

(b)

an additional or increased cost; or

(c)

a reduction of any amount due and payable under any Finance Document,

which is incurred or suffered by the Lender or any of its Affiliates as a result of the events referred to in Clause 13.1 to the extent that it is attributable to the Lender having entered into any Finance Document or funding or performing its obligations under any Finance Document.

13.2	Increased cost claims

13.2.1

If the Lender intends to make a claim pursuant to Clause 13.1 (Increased costs) the Lender shall promptly notify the Borrower of the event giving rise to the claim.

13.2.2

The Lender shall, as soon as practicable after a demand by the Borrower, provide a certificate confirming the amount of its Increased Costs.

13.3	Exceptions Clause 13.1 (Increased costs) does not apply to the extent any Increased Cost is:

13.3.1

attributable to a Tax Deduction required by law to be made by the Borrower;

13.3.2

attributable to a FATCA Deduction required to be made by a Party;

13.3.3

compensated for by Clause 12.3 (Tax indemnity) (or would have been compensated for under Clause 12.3 but was not so compensated solely because any of the exclusions in Clause 12.3 applied); or

13.3.4

attributable to the wilful breach by the Lender or its Affiliates of any law or regulation.

14	Other Indemnities

14.1

Currency indemnity If any sum due from the Borrower under the Finance 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:

14.1.1

making or filing a claim or proof against the Borrower, or

14.1.2

obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

the Borrower shall as an independent obligation, within three (3) Business Days of demand, indemnify the Lender 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)

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the rate or rates of exchange available to the Lender at the time of its receipt of that Sum.

The Borrower waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

14.2	Other indemnities

14.2.1

The Borrower shall, within five Business Days of demand, indemnify the Lender against any cost, loss or liability incurred by the Lender as a result of:

(a)

the occurrence of any Event of Default which is continuing;

(b)

a failure by the Borrower to pay any amount due under a Finance Document on its due date;

(c)

funding, or making arrangements to fund, the Loan following delivery by the Borrower of an Utilisation Request but the Loan not being advanced by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by the Lender alone); or

(d)

the Loan (or part of the Loan) not being prepaid In accordance with a notice of prepayment given by the Borrower.

14.2.2

The Borrower shall promptly indemnify the Lender, each Affiliate of the Lender and each officer or employee of the Lender or its Affiliate (each such person for the purposes of this Clause 14.2 an “Indemnified Person”) against any cost, loss or liability incurred by that Indemnified Person pursuant to or in connection with any litigation, arbitration or administrative proceedings or regulatory enquiry, in connection with or arising out of the entry into and the transactions contemplated by the Finance Documents, having the benefit of any Encumbrance constituted by the Finance Documents or which relates to the condition or operation of, or any incident occurring in relation to, the Vessel, unless such cost, loss or liability is caused by the gross negligence or wilful misconduct of that Indemnified Person.

14.2.3

Subject to any limitations set out in Clause 14.2.2, the indemnity in that Clause shall cover any cost, loss or liability incurred by each Indemnified Person in any jurisdiction:

(a)

arising or asserted under or in connection with any law relating to safety at sea, the ISM Code, any Environmental Law or any Sanctions; or

(b)

in connection with any Environmental Claim.

14.2.4

The Borrower shall promptly indemnify the Lender as holder of any of the Security Documents and every Receiver and Delegate against any cost, loss or liability incurred by any of them as a result of:

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(a)

any failure by the Borrower to comply with its obligations under Clause 16 (Costs and Expenses);

(b)

acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised;

(c)

the taking, holding, protection or enforcement of the Security Documents;

(d)

the exercise of any of the rights, powers, discretions, authorities and remedies vested in the Lender and each Receiver and Delegate by the Finance Documents or by law;

(e)

any default by any Obligor in the performance of any of the obligations expressed to be assumed by it in the Finance Documents to which it is a party; or

(f)

acting as holder of any of the Security Documents, Receiver or Delegate or otherwise relating to any of the Charged Property (otherwise, in each case, than by reason of the relevant Lender’s, Receiver’s or Delegate’s gross negligence or wilful misconduct).

14.3	Indemnity survival The indemnities contained in this Agreement shall survive repayment of the Loan.

15	Mitigation by the Lender

15.1

Mitigation The Lender shall, in consultation with the Borrower, take all reasonable steps to mitigate any circumstances which arise and which would result in the Loan ceasing to be available or any amount becoming payable under or pursuant to any of Clause 7.1 (Illegality), Clause 12 (Tax Gross Up and Indemnities) or Clause 13 (Increased Costs) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office. The above does not in any way limit the obligations of any Obligor under the Finance Documents.

15.2

Limitation of liability The Borrower shall promptly indemnify the Lender for all costs and expenses reasonably incurred by the Lender as a result of steps taken by it under Clause 15.1 (Mitigation). The Lender is not obliged to take any steps under Clause 15.1 if, in its opinion (acting reasonably), to do so might be prejudicial to it.

16	Costs and Expenses

16.1

Transaction expenses The Borrower shall on demand and in any event by not later than thirty (30) days following such demand, pay the Lender the amount of all costs and expenses (including, without limitation, all agreed legal fees, VAT, disbursements and correspondent lawyers’ fees provided that the demand for payment is accompanied by the respective invoice) reasonably incurred by any of them in connection with the negotiation, preparation, printing, execution, syndication and perfection of:

16.1.1

this Agreement and any other documents referred to in this Agreement;

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16.1.2

any other Finance Documents executed after the date of this Agreement;

16.1.3

any other document which may at any time be required by the Lender to give effect to any Finance Document or which the Lender is entitled to call for or obtain under any Finance Document (including, without limitation, any valuation of the Vessel and a Fleet Vessel, subject to Clause 17.15); and

16.1.4

any discharge, release or reassignment of any of the Security Documents.

16.2

Amendment costs If an Obligor requests an amendment, waiver or consent, the Borrower shall, within three Business Days of demand, reimburse the Lender for the amount of all costs and expenses (including legal fees and currency exchange costs) reasonably incurred by the Lender and any Receiver or Delegate in responding to, evaluating, negotiating or complying with that request or requirement provided that no sum shall be payable under this Clause if the relevant request for an amendment, notice, waiver or consent are rejected by the Lender and/or are not granted.

16.3

Enforcement and preservation costs The Borrower shall, within three Business Days of written demand, pay to the Lender and each other Secured Party the amount of all costs and expenses (including legal fees) incurred by the Lender and that other Secured Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document and any proceedings instituted by or against the Lender as a consequence of taking or holding the Security Documents or enforcing those rights including (without limitation) any losses, costs and expenses which the Lender or that other Secured Party may from time to time sustain, incur or become liable for by reason of the Lender or that other Secured Party being mortgagee of the Vessel and/or a lender to the Borrower, or by reason of the Lender or that other Secured Party being deemed by any court or authority to be an operator or controller, or in any way concerned in the operation or control, of the Vessel.

16.4

Other costs The Borrower shall, within three Business Days of written demand, pay to the Lender and each other Secured Party the amount of all sums which the Lender or that other Secured Party may pay or become actually or contingently liable for on account of the Borrower in connection with the Vessel (whether alone or jointly or jointly and severally with any other person) including (without limitation) all sums which the Lender or that other Secured Party may pay or guarantees which it may give in respect of the Insurances, any expenses incurred by the Lender or that other Secured Party in connection with the maintenance or repair of the Vessel or in discharging any lien, bond or other claim relating in any way to the Vessel, and any sums which the Lender or that other Secured Party may pay or guarantees which it may give to procure the release of the Vessel from arrest or detention.

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Section 7

Security and Application of Moneys

17	Security Documents and Application of Moneys

17.1	Security Documents As security for the payment of the Indebtedness, the Borrower shall execute and deliver to the Lender or cause to be executed and delivered to the Lender the following documents in such forms and containing such terms and conditions as the Lender shall require:

17.1.1

a first preferred mortgage over the Vessel;

17.1.2

a first priority deed or deeds of assignment of the Insurances, Earnings, Charter Rights and Requisition Compensation of the Vessel from the Borrower;

17.1.3

a guarantee and indemnity from the Guarantor;

17.1.4

a first priority account security deed in respect of all amounts from time to time standing to the credit of the Earnings Account;

17.1.5

a first priority account security deed in respect of all amounts from time to time standing to the credit of the Cash Collateral Account; and

17.1.6

a letter of undertaking, including an assignment of the Vessel’s Insurances, from the Managers in respect of the Vessel.

17.2	Accounts The Borrower shall maintain the Earnings Account and the Cash Collateral Account with the Account Holder for the duration of the Facility Period free of Encumbrances and rights of set off other than those created by or under the Finance Documents.

17.3	Earnings The Borrower shall procure that all Earnings and any Requisition Compensation are credited to the Earnings Account.

17.4	Application of the Earnings Account The Borrower shall procure that there is transferred from the Earnings Account to the Lender:-

17.4.1

on each Repayment Date, the amount of the Repayment Instalment then due; and

17.4.2

on each Interest Payment Date, the amount of interest then due and the Borrower irrevocably authorises the Lender to instruct the Account Holder to make those transfers.

17.5

Borrower’s obligations not affected If for any reason the amount standing to the credit of the Earnings Account is insufficient to pay any Repayment Instalment or to make any payment of interest when due, the Borrower’s obligation to pay that Repayment Instalment or to make that payment of interest shall not be affected.

17.6	Release of surplus Any amount remaining to the credit of the Earnings Account following the making of any transfer required by Clause 17.4 (Application of the Earnings Account) shall (unless a Default shall have occurred and be continuing) be released to or to the order of the Borrower.

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17.7	Restriction on withdrawal During the Facility Period no sum may be withdrawn from:

17.7.1

the Earnings Account without the prior written consent of the Lender (except in accordance with this Clause 17); and

17.7.2

the Cash Collateral Account without the prior written consent of the Lender. No Account shall be overdrawn.

17.8

Relocation of the Accounts At any time following the occurrence and during the continuation of a Default, the Lender may without the consent of the Borrower instruct the Account Holder to relocate either or both of the Accounts to any other branch of the Account Holder, without prejudice to the continued application of this Clause 17 and the rights of the Secured Parties under the Finance Documents.

17.9

Access to information The Borrower agrees that the Lender (and its nominees) may from time to time during the Facility Period review the records held by the Account Holder (whether in written or electronic form) in relation to the Accounts, and irrevocably waives any right of confidentiality which may exist in relation to those records.

17.10

Statements Without prejudice to the rights of the Lender under Clause 17.9 (Access to information), the Borrower shall procure that the Account Holder provides to the Lender, no less frequently than each calendar month during the Facility Period, written statements of account showing ail entries made to the credit and debit of each of the Accounts during the immediately preceding calendar month.

17.11

Application after acceleration From and after the giving of notice to the Borrower by the Lender under Clause 22.2 (Acceleration), the Borrower shall procure that all sums from time to time standing to the credit of either of the Accounts are immediately transferred to the Lender or any Receiver or Delegate for application in accordance with Clause 17.12 (Application of moneys by Lender) and the Borrower irrevocably authorises the Lender to instruct the Account Holder to make those transfers.

17.12

Application of moneys by Lender The Borrower irrevocably authorises the Lender or any Receiver or Delegate to apply all moneys which it receives and is entitled to receive:

17.12.1

pursuant to a sale or other disposition of the Vessel or any right, title or interest in the Vessel; or

17.12.2

by way of payment of any sum in respect of the Insurances, Earnings, Charter Rights or Requisition Compensation; or

17.12.3

by way of transfer of any sum from either of the Accounts; or

17.12.4

otherwise under or in connection with any Security Document,

In or towards satisfaction of the Indebtedness in the following order:

(a)

first, in or towards payment of any unpaid fees, costs, expenses and default interest due to the Lender and any Receiver or

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Delegate under all or any of the Finance Documents, such application to be apportioned between the Lender and any Receiver or Delegate pro rata to the aggregate amount of such items due to each of them;

(b)

second, in or towards payment of any accrued interest, fee or commission due but unpaid under this Agreement;

(c)

third, in or towards payment of any principal due but unpaid under this Agreement;

(d)

fourth, in or towards payment of any other sum due and payable to the Lender but unpaid under all or any of the Finance Documents,

provided that the balance (if any) of the moneys received shall be paid to the Obligors from whom or from whose assets those sums were received or recovered or to any other person entitled to them.

17.13

Retention on account Moneys to be applied by the Lender or any Receiver or Delegate under Clause 17.12 (Application of moneys by Lender) shall be applied as soon as practicable after the relevant moneys are received by it, or otherwise become available to it.

17.14

Additional security Subject to Clause 7.6 (Mandatory Prepayment on change of ownership of Guarantor), if at any time the aggregate of the Market Value of the Vessel and the value of any additional security (such value to be the face amount of the deposit (in the case of cash), determined conclusively by appropriate advisers appointed by the Lender (in the case of other charged assets), and determined by the Lender in its discretion (in all other cases)) for the time being provided to the Lender under this Clause 17.14 is less than 130% of the Loan then outstanding (the “VTL Coverage”), the Borrower shall, within 30 days of the Lender’s request, at the Borrower’s option:

17.14.1

pay to the Lender or to its nominee a cash deposit in the amount of the shortfall to be secured in favour of the Lender as additional security for the payment of the Indebtedness; or

17.14.2

give to the Lender other additional security in amount and form acceptable to the Lender in its discretion; or

17.14.3

prepay the Loan in the amount of the shortfall.

Clauses 6.3 (Reborrowing), 7.3.3 (Voluntary prepayment of Loan) and 7.7 (Restrictions) shall apply, mutatis mutandis, to any prepayment made under this Clause 17.14 and the value of any additional security provided shall be determined by the Lender in its discretion.

If, at any time after the Borrower has provided additional security in accordance with the Lender’s request under this Clause 17.14, the Lender shall determine when testing compliance with the VTL Coverage that all or any part of that additional security may be released without resulting in a shortfall in the VTL Coverage, then provided that no Default is continuing, the Lender shall effect a release of all or any part of that additional security, but this shall be without prejudice to the Lender’s

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right to make a further request under this Clause 17.14 should the value of the remaining security subsequently merit it,

17.15

Valuation certificates The Lender may obtain at the cost and expense of the Borrower:

17.15.1

one valuation from an Approved Shipbroker in order to certify the Initial Market Value of the Vessel for the purposes of determining the Maximum Loan Amount;

17.15.2

one set of valuations per year from the required number of Approved Shipbrokers (a) for the purposes of determining the relevant percentage referred to in Clause 17.14 (Additional Security) and (b) for the purposes of determining the relevant percentage referred to in Clause 7.6 (Mandatory prepayment on change of ownership of Guarantor);

17.15.3

two sets of valuations from the required number of Approved Shipbrokers for the purposes of determining compliance with Clause 20.1 (Guarantor’s Covenants); and

17.15.4

following the occurrence of an Event of Default which is continuing, as many sets of valuations per year as may be necessary or desirable to the Lender^-from the required number of Approved Shipbrokers in order to certify the Market Value of the Vessel and any Fleet Market Value.

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Section 8

Representations, Undertakings and Events of Default

18	Representations

18.1	Representations The Borrower makes the representations and warranties set out in this Clause 18 to the Lender:-

18.1.1

Status Each of the Obligors:

(a)

is duly incorporated and validly existing under the law of its jurisdiction of incorporation; and

(b)

has the power to own its assets and carry on its business as it is being conducted.

18.1.2

Binding obligations Subject to the Legal Reservations:

(a)

the obligations expressed to be assumed by each of the Obligors in each of the Relevant Documents to which it is a party are legal, valid, binding and enforceable obligations; and

(b)

(without limiting the generality of Clause 18.1.2(a)) each Security Document to which it is a party creates the security interests which that Security Document purports to create and those security interests are valid and effective.

18.1.3

Non-conflict with other obligations The entry into and performance by each of the Obligors of, and the transactions contemplated by, the Relevant Documents do not conflict with:

(a)

any law or regulation applicable to such Obligor;

(b)

the constitutional documents of such Obligor; or

(c)

any agreement or instrument binding upon such Obligor or any of such Obligor’s assets or constitute a default or termination event (however described) under any such agreement or instrument.

18.1.4

Power and authority

(a)

Each of the Obligors has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Relevant Documents to which it is or will be a party and the transactions contemplated by those Relevant Documents.

(b)

No limit on the powers of any Obligor will be exceeded as a result of the borrowing, grant of security or giving of guarantees or indemnities contemplated by the Relevant Documents to which it is a party.

18.1.5

Validity and admissibility in evidence All Authorisations required or desirable:

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(a)

to enable each of the Obligors lawfully to enter into, exercise its rights and comply with its obligations in the Relevant Documents to which it is a party or to enable the Lender to enforce and exercise all its rights under the Relevant Documents; and

(b)

to make the Relevant Documents to which any Obligor is a party admissible in evidence in its Relevant Jurisdictions,

(c)

have been obtained or effected and are in full force and effect, with the exception only of the registrations referred to in Part II of Schedule 1 (Conditions Subsequent).

18.1.6

Governing law and enforcement

(a)

The choice of governing law of any Finance Document will be recognised and enforced in the Relevant Jurisdictions of each relevant Obligor,

(b)

Any judgment obtained in relation to any Finance Document in the jurisdiction of the governing law of that Finance Document will be recognised and enforced in the Relevant Jurisdictions of each relevant Obligor.

18.1.7

Insolvency No corporate action, legal proceeding or other procedure or step described in Clause 22.1.7 (Insolvency proceedings) or creditors’ process described in Clause 22.1.8 (Creditors’ process) has been taken or, to the knowledge of the Borrower, threatened in relation to an Obligor; and none of the circumstances described in Clause 22.1.6 (Insolvency) applies to an Obligor.

18.1.8

No filing or stamp taxes Under the laws of the Relevant Jurisdictions or each relevant Obligor it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in any of those jurisdictions or that any stamp, registration, notarial or similar tax or fees be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents except for the registration of the Mortgage at the Ships Registry where title to the Vessel is registered in the ownership of the Borrower and payment of associated fees, which registration and fees will be made and paid promptly after the date of the relevant Finance Document.

18.1.9

Deduction of Tax None of the Obligors is required under the law of its jurisdiction of incorporation to make any deduction for or on account of Tax from any payment it may make under any Finance Document to a Lender which is:

(a)

a Qualifying Lender falling within (a) of the definition of Qualifying Lender; or, except where a Direction has been given under section 931 of the ITA in relation to the payment concerned, a Qualifying Lender falling within (b) of the definition of Qualifying Lender; or

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(b)

a Treaty Lender and the payment is one specified in a direction given by the Commissioners of Revenue & Customs under Regulation 2 of the Double Taxation Relief (Taxes on Income) (General) Regulations 1970 (SI 1970/488).

18.1.10

No default

(a)

No Event of Default and, on the date of this Agreement and the Utilisation Date, no Default is continuing or is reasonably likely to result from the advance of the Loan or the entry into, the performance of, or any transaction contemplated by, any of the Relevant Documents.

(b)

No other event or circumstance is outstanding which constitutes (or, with the expiry of a grace period, the giving of notice, the making of any determination or any combination of any of the foregoing, would constitute) a default or termination event (howsoever described) under any other agreement or instrument which is binding on any of the Obligors or to which its assets are subject which has or is reasonably likely to have a Material Adverse Effect.

18.1.11

No misleading information Save as disclosed in writing to the Lender prior to the date of this Agreement:

(a)

all material information provided to the Lender by or on behalf of any of the Obligors or any other member of the Group on or before the date of this Agreement and not superseded before that date is accurate and not misleading in any material respect and all projections provided to the Lender on or before the date of this Agreement have been prepared in good faith on the basis of assumptions which were reasonable at the time at which they were prepared and supplied; and

(b)

all other written information provided by any of the Obligors or any other member of the Group (including its advisers) to the Lender was true, complete and accurate in all material respects as at the date it was provided and is not misleading in any respect.

18.1.12

Financial statements

(a)

The Original Financial Statements were prepared in accordance with GAAP consistently applied unless expressly disclosed to the Lender in writing to the contrary.

(b)

The unaudited Original Financial Statements fairly represent the Guarantor’s consolidated financial condition and results of operations for the relevant financial year unless expressly disclosed to the Lender in writing to the contrary prior to the date of this Agreement.

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(c)

The audited Original Financial Statements give a true and fair view of the Guarantor’s consolidated financial condition and results of operations during the relevant financial year unless expressly disclosed to the Lender in writing to the contrary prior to the date of this Agreement.

(d)

There has been no material adverse change in any Obligor’s assets, business or financial condition since the date of the Original Financial Statements.

(e)

The Guarantor’s most recent financial statements delivered pursuant to Clause 19.1 (Financial statements):

(i)

have been prepared in accordance with GAAP as applied to the Original Financial Statements; and

(ii)

give a true and fair view of (if audited) or fairly represent (if unaudited) its consolidated financial condition as at the end of, and consolidated results of operations for, the period to which they relate.

(f)

Since the date of the most recent financial statements delivered pursuant to Clause 19.1 (Financial statements) there has been no material adverse change in the business, assets or financial condition of any of the Obligors.

18.1.13

No proceedings pending or threatened No litigation, arbitration, or administrative proceedings of or before any court, arbitral body or agency which, if adversely determined, are reasonably likely to have a Material Adverse Effect have (to the best of its knowledge and belief) been started or threatened against any of the Obligors.

18.1.14

No breach of laws None of the Obligors or any other member of the Group has breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.

18.1.15

Environmental laws

(a)

Each of the Obligors and each other member of the Group Is in compliance with Clause 21.3 (Environmental compliance) and to the best of its knowledge and belief (having made due and careful enquiry) 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.

(b)

No Environmental Claim has been commenced or (to the best of its knowledge and belief (having made due and careful enquiry)) is threatened against any of the Obligors or any other member of the Group where that claim has or is reasonably likely, if determined against that Obligor or other member of the Group, to have a Material Adverse Effect.

18.1.16

Taxation

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(a)

None of the Obligors is materially overdue in the filing of any Tax returns or is overdue in the payment of any amount in respect of Tax.

(b)

No claims or investigations are being, or are reasonably likely to be, made or conducted against any of the Obligors with respect to Taxes.

(c)

Each of the Obligors (other than the Managers) is resident for Tax purposes only in its Original Jurisdiction.

18.1.17

Anti-corruption law None of the Obligors, or any member of the Group nor to the knowledge of the Borrower, any director, officer, agent, employee, Affiliate or other person acting on behalf of the Borrower or an Obligor any of their Subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of any applicable anti-corruption and anti-bribery law, including but not limited to, the UK Bribery Act and the FCPA. Furthermore, the Borrower and, to the knowledge of the Borrower, its Affiliates any member of the Group and each Obligor have conducted their businesses in compliance with the UK Bribery Act, the FCPA and similar laws, rules or regulations and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.

18.1.18

No Encumbrance or Financial Indebtedness

(a)

No Encumbrance (other than any Permitted Encumbrance) exists over (i) all or any of the present or future assets of the Borrower and (ii) the shares of the Guarantor in the Borrower; and

(b)

The Borrower has no Financial Indebtedness outstanding other than as permitted by this Agreement.

18.1.19

Pari passu ranking The payment obligations of each of the Obligors under the Finance Documents to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

18.1.20

No adverse consequences

(a)

It is not necessary under the laws of the Relevant Jurisdictions of any of the Obligors:

(i)

in order to enable the Lender to enforce its rights under any Finance Document; or

(ii)

by reason of the execution of any Finance Document or the performance by it of its obligations under any Finance Document,

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(iii)

that the Lender should be licensed, qualified or otherwise entitled to carry on business in any of the Relevant Jurisdictions of any of the Obligors.

(b)

The Lender is not and will not be deemed to be resident, domiciled or carrying on business in any of the Relevant Jurisdictions of any of the Obligors by reason only of the execution, performance and/or enforcement of any Finance Document.

18.1.21

Disclosure of material facts The Borrower is not aware of any material facts or circumstances which have not been disclosed to the Lender and which might, if disclosed, have adversely affected the decision of a person considering whether or not to make loan facilities of the nature contemplated by this Agreement available to the Borrower.

18.1.22

Completeness of Relevant Documents The copies of any Relevant Documents provided or to be provided by the Borrower to the Lender in accordance with Clause 4 (Conditions of Utilisation) are, or will be, true and accurate copies of the originals and represent, or will represent, the full agreement between the parties to those Relevant Documents in relation to the subject matter of those Relevant Documents and there are no commissions, rebates, premiums or other payments due or to become due in connection with the subject matter of those Relevant Documents other than in the ordinary course of business or as disclosed to, and approved in writing by, the Lender.

18.1.23

No Immunity No Obligor or any of its assets is immune to any legal action or proceeding.

18.1.24

Money laundering Any borrowing by the Borrower under this Agreement, and the performance of its obligations under this Agreement and under the other Finance Documents, will be for its own account and will not involve any breach by it of any law or regulatory measure relating to ‘‘money laundering”‘ as defined in Article 1 of the Drrective (2005/EC/60) of the European Parliament and of the Council of the European Communities.

18.1.25

Sanctions None of the Obligors, or any of their respective Subsidiaries or any director or officer, or any employee, agent, or Affiliate, of any of the Obligors or any of their respective Subsidiaries is an Individual or entity (“Person”) that is, or is owned or controlled by Persons that are, (I) the target of any sanctions administered or enforced by the US Department of the Treasury’s Office of Foreign Assets Control, the US Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury or the Hong Kong Monetary Authority, or (ii) located, organised or resident in a country or territory that is, or whose government is, the target of Sanctions, including, without limitation, the Crimea region, Cuba, Iran, North Korea, Sudan and Syria.

18.1.26

US Tax Obligor No Obligor is a US Tax Obligor.

18.2	Repetition Each Repeating Representation is deemed to be repeated by the Borrower by reference to the facts and circumstances then existing on the date of

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the Utilisation Request, on the Utilisation Date, on the first day of each Interest Period and, in the case or those contained in Clauses 18.1.12(d) and 18.1.12(f) (Financial statements) and for so long as any amount is outstanding under the Finance Documents or any part of the Loan is undrawn and available, on each day.

19	Information Undertakings

The undertakings in this Clause 19 remain in force for the duration of the Facility Period.

19.1	Financial statements The Borrower shall procure that the Guarantor supplies to the Lender:

19.1.1

as soon as the same become available, but in any event within 180 days after the end of each of the Guarantor’s financial years, the Guarantor’s consolidated audited financial statements (including profit and loss accounts and balance sheets) for that financial year; and

19.1.2

as soon as the same become available, but in any event within 90 days after the end of each half year during each of the Guarantor’s financial years, the Guarantor’s consolidated unaudited semi-annual financial statements for that half year.

19.2	Compliance Certificate

19.2.1

The Borrower shall procure that the Guarantor supplies to the Lender, with each set of its annual consolidated financial statements delivered pursuant to Clause 19.1.1 (Financial statements) and each set of its semi-annual consolidated financial statements delivered pursuant to Clause 19.1.2 (Financial statements), a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 20 (Financial Covenants) as at the date as at which those financial statements were drawn up.

19.2.2

Each Compliance Certificate shall be signed by two directors of the Borrower and the Guarantor shall be reported on by the Guarantor’s auditors in the form agreed by the Borrower, the Guarantor and the Lender before the date of this Agreement.

19.3	Requirements as to financial statements

Each set of financial statements delivered by the Borrower or the Guarantor (as applicable) under Clause 19.1 (Financial statements):

19.3.1

shall be certified by a director of the Guarantor as giving a true and fair view of (in the case of annual financial statements), or fairly representing (in other cases), its financial condition as at the date as at which those financial statements were drawn up;

19.3.2

shall be prepared using GAAP, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements unless, in relation to any set of financial statements, it notifies the Lender that there has been a change in GAAP, the accounting practices or reference periods and its auditors deliver to the Lender:

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(a)

a description of any change necessary for those financial statements to reflect the GAAP, accounting practices and reference periods upon which the Original Financial Statements were prepared; and

(b)

sufficient information, in form and substance as may be reasonably required by the Lender, to enable the Lender to determine whether Clause 20 (Financial Covenants) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and the Original Financial Statements.

Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared.

19.4	Information: miscellaneous The Borrower shall supply to the Lender:

19.4.1

at the same time as they are dispatched, copies of all documents dispatched by the Borrower to its shareholders generally (or any class of them) or dispatched by the Borrower or any other Obligor to its creditors generally (or any class of them);

19.4.2

promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any Obligor and which, if adversely determined, are reasonably likely to have a Material Adverse Effect;

19.4.3

promptly, such information as the Lender may reasonably require about the Charged Property and compliance of the Obligors with the terms of any Security Document including without limitation cash flow analyses and details of the operating costs of the Vessel; and

19.4.4

promptly on request, such further information regarding the financial condition, affairs, commitments, assets and operations of any Obligor or any other member of the Group (including any requested amplification or explanation of any item in the financial statements, budgets or other material provided by any Obligor under this Agreement and an up to date copy of its shareholders’ register (or equivalent in its Original Jurisdiction)) as the Lender may reasonably request.

19.5	Notification of default

19.5.1

The Borrower shall notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

19.5.2

Promptly upon a request by the Lender, the Borrower shall supply to the Lender a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).

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19.6	“Know your customer” checks If:

19.6.1

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

19.6.2

any change in the status of an Obligor after the date of this Agreement; or

19.6.3

a proposed assignment or transfer by the Lender of any of its rights and obligations under this Agreement; or

19.6.4

any of the Lender’s internal compliance rules, policies and procedures,

obliges the Lender (or, in the case of Clause 19.6.3, any prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrower, the Guarantor or any other member of the Group which has a loan with the Lender and has issued registered shares shall promptly upon the request of the Lender, supply, or procure the supply of, such documentation and other evidence as is requested by the Lender at its absolute satisfaction, prior to the date of this Agreement (for itself or, in the case of the event described in Clause 19.6.3, on behalf of any prospective new Lender) in order for the Lender or, in the case of the event described in Clause 19.6.3, any prospective new Lender to carry out and be satisfied it has complied with or has refreshed all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

20	Financial Covenants

20.1	Guarantor’s Covenants The Borrower shall procure that the Guarantor shall maintain at all times during the Facility Period:

20.1.1

Maximum Leverage not higher than 75%;

20.1.2

Liquidity of an amount of not less than $300,000 in respect of each Fleet Vessel; and

20.1.3

Net Worth of not less than fifteen million dollars ($15,000,000)

20.2	Cash Collateral Amount The Borrower shall, throughout the Facility Period, maintain in its name an aggregate amount of not less than the Cash Collateral Amount in the Cash Collateral Account to be pledged in favour of the Lender and to be free of any Encumbrances other than in favour of the Lender.

The expressions used in this Clause shall be construed in accordance with GAAP, and for the purposes of this Agreement:-

“Cash” means, in respect of the Guarantor, cash at bank or in hand which is not subject to any Encumbrance (other than in favour of the Lender or the other financiers of the Group) and to which the Guarantor has free, immediate and direct access.

“Fleet Market Value” means the value of a Fleet Vessel conclusively determined by the arithmetic average of two valuations obtained by two Approved Shipbrokers

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selected and appointed by the Borrower on behalf of the Lender and approved by and reporting to the Lender on the basis of a charter free sale for prompt delivery and free of encumbrances for cash at arm’s length on normal commercial terms as between a willing seller and a willing buyer and evidenced by two valuations of that Fleet Vessel addressed to the Lender certifying a value for that Fleet Vessel.

“Fleet Vessels” means any vessel (including the Vessel) from time to time wholly owned by a Subsidiary of the Guarantor (directly or indirectly) and each a “Fleet Vessel”.

“Liquidity” means, in respect of each period during which the consolidated financial statements delivered pursuant to Clause 19.1 (Financial statements) are delivered by the Guarantor, Cash, as shown in the applicable financial statements of the Guarantor, for such accounting period and determined in accordance with GAAP.

“Maximum Leverage” means, in respect of each period during which financial statements are required to be delivered pursuant to Clause 19.1 (Financial statements), the ratio of Total Consolidated Liabilities, to Value Adjusted Total Assets, as shown in the applicable consolidated financial statements of the Guarantor for such accounting period and determined in accordance with GAAP.

“Net Worth” means equity payments already advanced in respect of the Fleet Vessel less accumulated dividends plus retained earnings of the Fleet Vessels, as each such term is defined in the applicable consolidated financial statements (as provided in Clause 19.1 (Financial statements)) for the Guarantor determined in accordance with GAAP.

“Total Consolidated Liabilities” means, in respect of the Guarantor at any time on a consolidated basis, the ratio of total indebtedness (long-term debt including the current portion of long-term debt) of the Guarantor which would be included in the applicable consolidated financial statements of the Guarantor as total liabilities in accordance with GAAP.

“Total Assets” means the amount of total assets of the Guarantor at any time on a consolidated basis which would be included in the applicable consolidated financial statements (as provided in Clause 19.1 (Financial statements)) of the Guarantor as total assets determined in accordance with GAAP.

“Value Adjusted Total Assets” means the Total Assets of the Guarantor as adjusted for the difference of the book value of the Fleet Vessels (as evidenced in the most recent financial statements (pursuant to Clause 19.1 (Financial statements)) and the Fleet Market Value.

21	General Undertakings

The undertakings in this Clause 20.1 remain in force for the duration of the Facility Period.

21.1	Authorisations The Borrower shall promptly:

21.1.1

obtain, comply with and do all that is necessary to maintain in full force and effect;

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21.1.2

supply certified copies to the Lender of,

any Authorisation required under any law or regulation of a Relevant Jurisdiction to:

(a)

enable any Obligor to perform its obligations under the Finance Documents to which it is a party;

(b)

ensure the legality, validity, enforceability or admissibility in evidence of any Finance Document; and

(c)

enable any Obligor to carry on its business where failure to do so has or is reasonably likely to have a Material Adverse Effect.

21.2	Compliance with laws

21.2.1

The Borrower shall comply (and shall procure that each other Obligor, each other member of the Group and each Affiliate of any of them shall comply), in all respects with all laws to which It may be subject, if (except as regards Sanctions, to which Clause 21.2.2 applies, and anti-corruption laws to which Clause 20.5 applies) failure so to comply has or is reasonably likely to have a Material Adverse Effect.

21.2.2

The Borrower shall comply (and shall procure that each other Obligor, each other member of the Group and each Affiliate of any of them shall comply) in all respects with all Sanctions.

21.3	Environmental compliance

The Borrower shall:

21.3.1

comply with all Environmental Laws;

21.3.2

obtain, maintain and ensure compliance with all requisite Environmental Approvals; and

21.3.3

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.

21.4	Environmental Claims

The Borrower shall promptly upon becoming aware of the same, inform the Lender in writing of:

21.4.1

any Environmental Claim against any of the Obligors or any other member of the Group which is current, pending or threatened; and

21.4.2

any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any of the Obligors or any other member of the Group,

where the claim, if determined against that Obligor or other member of the Group, has or is reasonably likely to have a Material Adverse Effect.

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21.5	Anti-corruption law

21.5.1

No part of the proceeds of the Loan will be used, directly or indirectly, for any payments that could constitute a violation of any applicable anti-bribery law, including, without limitation the UK Bribery Act, the FCPA or other similar legislation in other jurisdictions.

21.5.2

The Borrower shall (and shall procure that each other Obligor, each other member of the Group and each Affiliate of any of them shall):

(a)

conduct its businesses in compliance with applicable anti-corruption laws; and

(b)

maintain policies and procedures designed to promote and achieve compliance with such laws.

21.6

Taxation

21.6.1

The Borrower shall (and shall procure that each other Obligor shall) pay and discharge all Taxes imposed upon it or its assets within the time period allowed without incurring penalties unless and only to the extent that:

(a)

such payment is being contested in good faith;

(b)

adequate reserves are being maintained for those Taxes and the costs required to contest them which have been disclosed in its latest financial statements delivered to the Lender under Clause 19.1 (Financial statements); and

(c)

such payment can be lawfully withheld and failure to pay those Taxes does not have or is not reasonably likely to have a Material Adverse Effect.

21.6.2

The Borrower may not (and no other Obligor may) change its residence for Tax purposes.

21.7

Evidence of good standing The Borrower will from time to time if requested by the Lender provide the Lender with evidence in form and substance satisfactory to the Lender that the Obligors and all corporate shareholders of any of the Obligors (other than in respect of the Guarantor’s corporate shareholders) remain in good standing.

21.8

Pari passu ranking The Borrower shall (and shall procure that each other Obligor shall) ensure that at all times any unsecured and unsubordinated claims of the Lender against it under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.

21.9	Negative pledge

21.9.1

The Borrower:

(a)

shall not create nor permit to subsist any Encumbrance (other than any Permitted Encumbrance) over any of its assets;

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(b)

shall procure that the Guarantor will not create nor permit to subsist any Encumbrance over the shares of the Guarantor in the Borrower.

21.9.2

The Borrower shall not:

(a)

sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by an Obligor;

(b)

sell, transfer or otherwise dispose of any of its receivables on recourse terms;

(c)

enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or

(d)

enter into any other preferential arrangement having a similar effect,

in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.

21.10

Disposals

21.10.1

The Borrower shall not (and shall procure that no other Obligor other than the Guarantor will) enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset.

21.10.2

The Borrower shall procure that the Guarantor shall not enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, transfer or otherwise dispose of its shares in the Borrower.

21.11

Arm’s length basis

21.11.1

The Borrower shall not enter into any transaction with any person except on arm’s length terms and for full market value.

21.11.2

Fees, costs and expenses payable under the Relevant Documents in the amounts set out in the Relevant Documents delivered to the Lender under Clause 4.1 (Initial conditions precedent) or agreed by the Lender shall not be a breach of this Clause 21.11.

21.12

Merger The Borrower shall not (and shall procure that no other Obligor will) enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction without the prior written consent of the Lender.

21.13

Change of business The Borrower shall not (and shall procure that no other Obligor will) make any substantial change to the general nature of its business from that carried on at the date of this Agreement.

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21.14

No other business The Borrower shall not (and shall procure that no other Obligor other than the Guarantor will) engage in any business other than the ownership, operation, chartering and management of the Vessel.

21.15

No acquisitions The Borrower shall not acquire a company or any shares or securities or a business or undertaking (or, in each case, any interest in any of them) or incorporate a company.

21.16

No Joint Ventures The Borrower shall not:

21.16.1

enter into, invest In or acquire (or agree to acquire) any shares, stocks, securities or other interest in any Joint Venture; or

21.16.2

transfer any assets or lend to or guarantee or give an indemnity for or give security for the obligations of a Joint Venture or maintain the solvency of or provide working capital to any Joint Venture (or agree to do any of the foregoing).

21.17

No borrowings The Borrower shall not incur or allow to remain outstanding any Financial Indebtedness (except for the Loan).

21.18

No substantial liabilities Except in the ordinary course of business, the Borrower shall not incur any liability to any third party which is of a substantial nature.

21.19

No loans or credit The Borrower shall not, without the Lender’s prior written consent, be a creditor in respect of any Financial Indebtedness unless it is a loan made in the ordinary course of business in connection with the chartering, operation or repair of the Vessel.

21.20

No guarantees or indemnities The Borrower shall not incur or allow to remain outstanding any guarantee in respect of any obligation of any person.

21.21

No dividends

21.21.1

The Borrower shall not:

(a)

declare, make or pay any dividend, charge, fee or other distribution (or interest on any unpaid dividend, charge, fee or other distribution) (whether in cash or in kind) on or in respect of its share capital (or any class of its share capital);

(b)

repay or distribute any dividend or share premium reserve; or

(c)

redeem, repurchase, defease, retire or repay any of its share capital or resolve to do so,

following (i) any breach of Clause 17.14 (Additional Security), (ii) the occurrence and during the continuation of an Event of Default or (iii) where the making or payment of such dividend or distribution would result in the occurrence of an Event of Default.

21.22

Ownership and management of the Borrower No change in the management or the legal or beneficial ownership of the Borrower shall occur from that advised to the Lender by the Borrower at the date of this Agreement. Subject to Clause 7.6

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(Mandatory prepayment on change of ownership of Guarantor), for the avoidance of doubt, the Lender consents and agrees to any changes relating to the shareholders of the Guarantor’s trading shares in the normal course of business.

21.23

No change of CEO The Borrower shall ensure (and shall procure that the Guarantor shall ensure) that throughout the Facility Period no change in the chief executive officer of the board of directors and/or the chairman of the Guarantor shall occur, without the Lender’s prior written consent.

21.24

Inspection of records The Borrower will permit the inspection of its financial records and accounts from time to time by the Lender or its nominee.

21.25

No change in Relevant Documents The Borrower shall not (and shall procure that no other Obligor will) amend, vary, novate, supplement, supersede, waive or terminate any term of, any of the Relevant Documents which are not Finance Documents, or any other document delivered to the Lender pursuant to Clause 4.1 (Initial conditions precedent) or Clause 4.2 (Further conditions precedent) or Clause 4.3 (Conditions subsequent).

21.26

Sanctions The Borrower will not, directly or indirectly, use the proceeds of the Loan, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person, (i) to fund arty activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the target of Sanctions or (ii) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Loan, whether as underwriter, advisor, investor or otherwise).

21.27

Banking operations The Borrower shall conduct all banking operations in connection with the Vessel through the Lender or any other branch nominated by the Lender in its discretion.

21.28

Vessel’s Trading The Borrower shall not allow the Vessel to trade in areas prohibited by either (a) the law applicable to the Vessel’s flag or (b) the applicable law of the country of incorporation of the Borrower or (c) the applicable law of the nationality of the officers and crew of the Vessel.

21.29

No change of Vessels’ ownership or management There shall be no change in the ownership or management of the Vessel, without the Lender’s prior written consent.

21.30

ISM Code compliance The Borrower shall comply and shall procure that each of the Guarantor and the Manager comply with the ISM Code.

21.31

Further assurance

21.31.1

The Borrower shall (and shall procure that each other Obligor shall) promptly do all such acts or execute all such documents (including assignments, transfers, mortgages, charges, notices and instructions) as the Lender may reasonably specify (and in such form as the Lender may reasonably require in favour of the Lender or its nominee(s)):

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(a)

to perfect any Encumbrance created or intended to be created under or evidenced by the Security Documents (which may include the execution of a mortgage, charge, assignment or other Encumbrance over all or any of the assets which are, or are intended to be, the subject of the Security Documents) or for the exercise of any rights, powers and remedies of the Lender or the Secured Parties provided by or pursuant to the Finance Documents or by law;

(b)

to confer on the Lender or confer on the Secured Parties an Encumbrance over any property and assets of the Borrower (or that other Obligor as the case may be) located in any jurisdiction equivalent or similar to the Encumbrance intended to be conferred by or pursuant to the Security Documents; and/or

(c)

to facilitate the realisation of the assets which are, or are intended to be, the subject of the Security Documents, in respect of which any Encumbrance has become enforceable following the occurrence of an Event of Default which is continuing.

21.31.2

The Borrower shall (and shall procure that each other Obligor shall) take all such action as is available to it (Including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Encumbrance conferred or intended to be conferred on the Lender or the Secured Parties by or pursuant to the Finance Documents.

22	Events of Default

22.1	Events of Default Each of the events or circumstances set out in this Clause 22.1 Is an Event of Default.

22.1.1

Non-payment An Obligor does not pay on the due date any amount payable by it under a Finance Document at the place at and in the currency in which it is expressed to be payable unless:-

(a)

its failure to pay is caused by:

(i)

administrative or technical error; or

(ii)

a Disruption Event; and

(b)

payment is made within two (2) Business Days of its due date.

22.1.2

Other specific obligations

An Obligor does not comply with any obligation in a Finance Document relating to (a) the Insurances or (b) Clause 17.14 (Additional security).

22.1.3

Other obligations

(a)

An Obligor does not comply with any provision of a Finance Document (other than those referred to in Clause 22.1.1 (Non-payment) and Clause 22.1.2 (Other specific obligations).

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(b)

No Event of Default under this Clause 22.1.3 will occur if the failure to comply is capable of remedy and is remedied within ten (10) Business Days of the earlier of (i) the Lender giving notice to the Borrower and (ii) the Borrower becoming aware of the failure to comply.

22.1.4

Misrepresentation Any representation or statement made or deemed to be repeated by an Obligor in any Finance Document or any other document delivered by or on behalf of an Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made.

22.1.5

Cross default Any Financial Indebtedness of an Obligor (other than the Managers):

(a)

is not paid when due nor within any originally applicable grace period; or

(b)

is declared to be, or otherwise becomes, due and payable prior to its specified maturity as a result of an event of default (however described); or

(c)

is capable of being declared by a creditor to be due and payable prior to its specified maturity as a result of such an event.

No Event of Default will occur under this Clause 22.1.5 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within (a) to (c) is less than USD1,000,000 (or its equivalent in any other currency or currencies).

22.1.6

Insolvency

(a)

An Obligor is unable or admits inability to pay its debts as they fall due, is deemed to, or is declared to, be unable to pay its debts under applicable law, suspends or threatens to suspend making payments on any of its debts, or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.

(b)

The value of the assets of an Obligor is less than its liabilities (taking into account contingent and prospective liabilities).

(c)

A moratorium is declared in respect of any indebtedness of an Obligor or any other member of the Group. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.

22.1.7

Insolvency proceedings Any corporate action, legal proceedings or other procedure or step is taken for:

(a)

the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration, bankruptcy or

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reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of an Obligor;

(b)

a composition, compromise, assignment or arrangement with any creditor of an Obligor ;

(c)

the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager, or trustee or other similar officer in respect of an Obligor or any of its assets; or

(d)

enforcement of any Encumbrance over any assets of an Obligor,

or any analogous procedure or step Is taken in any jurisdiction.

This Clause 22.1.7 shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 30 days of commencement.

22.1.8

Creditors’ process Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of the Borrower or the Guarantor.

22.1.9

Ownership of the Borrower The Borrower is not or ceases to be a 100% directly owned Subsidiary of the Guarantor.

22.1.10

Change of chairman or CEO of Guarantor Mr Aristeidis J. Pittas ceases to be throughout the Facility Period the chief executive officer of the board of directors and/or the chairman of the Guarantor.

22.1.11

Delisting of Guarantor The Guarantor is delisted for any reason whatsoever from the Nasdaq stock exchange.

22.1.12

Unlawfulness and invalidity

(a)

It is or becomes unlawful for an Obligor to perform any of its obligations under the Finance Documents to which it is a party or any Encumbrance created or expressed to be created or evidenced by the Security Documents ceases to be effective.

(b)

Any obligation or obligations of any Obligor under any Finance Documents to which it is a party are not (subject to the Legal Reservations) or cease to be legal, valid, binding or enforceable and the cessation individually or cumulatively materially and adversely affects the interests of the Lender under the Finance Documents.

(c)

Any Finance Document ceases to be in full force and effect or any Encumbrance created or expressed to be created or evidenced by the Security Documents ceases to be legal, valid, binding, enforceable or effective or is alleged by a party to it (other than the Lender) to be ineffective.

22.1.13

Cessation of business An Obligor ceases, or threatens to cease, to carry on all or a substantial part of its business.

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22.1.14

Change in management, ownership or control of the Borrower There is any change in the management, beneficial ownership or control of the Borrower from that advised to the Lender by the Borrower at the date of this Agreement. Subject to Clause 7.6 (Mandatory prepayment on change of ownership of Guarantor), for the avoidance of doubt, the Lender consents and agrees to any changes relating to the shareholders of the Guarantor’s trading shares in the normal course of business and confirms that such changes do not violate the terms of this Agreement.

22.1.15

Expropriation The authority or ability of an Obligor to conduct its business is limited or wholly or substantially curtailed by any seizure, expropriation, nationalisation, intervention, restriction or other action by or on behalf of any governmental, regulatory or other authority (excluding requisition of hire not involving requisition of title) or other person in relation to an Obligor or any of its assets.

22.1.16

Repudiation and rescission of agreements

(a)

An Obligor rescinds or purports to rescind or repudiates or purports to repudiate a Finance Document or evidences an intention to rescind or repudiate a Finance Document.

(b)

Subject to Clause 22.1.16 (c), any party to any of the Relevant Documents that is not a Finance Document rescinds or purports to rescind or repudiates or purports to repudiate that Relevant Document in whole or in part where to do so has or is, in the reasonable opinion of the Lender, likely to have a material adverse effect on the interests of the Lender under the Finance Documents.

(c)

The Management Agreement is terminated, cancelled or otherwise ceases to remain in full force and effect at any time prior to its contractual expiry date and is not immediately replaced by a similar agreement in form and substance satisfactory to the Lender.

22.1.17

Conditions subsequent Any of the conditions referred to in Clause 4.3 (Conditions subsequent) is not satisfied within the time reasonably required by the Lender.

22.1.18

Revocation or modification of Authorisation Any Authorisation of any governmental, judicial or other public body or authority which is now, or which at any time during the Facility Period becomes, necessary to enable any of the Obligors or any other person (except the Lender) to comply with any of their obligations under any Relevant Document is not obtained, is revoked, suspended, withdrawn or withheld, or is modified in a manner which the Lender considers is, or may be, prejudicial to the interests of the Lender, or ceases to remain in full force and effect.

22.1.19

Reduction of capital An Obligor (other than the Guarantor) reduces its issued or subscribed capital.

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22.1.20

Loss of Vessel The Vessel suffers a Total Loss or is otherwise destroyed or abandoned, or a similar event occurs in relation to any other vessel which may from time to time be mortgaged to the Lender as security for the payment of all or any part of the Indebtedness, except that a Total Loss (which term shall for the purposes of the remainder of this Clause 22.1.20 include an event similar to a Total Loss in relation to any other vessel) shall not be an Event of Default if:

(a)

the Vessel or other vessel is insured in accordance with the Security Documents and a claim for Total Loss is available under the terms of the relevant insurances; and

(b)

no insurer has refused to meet or has disputed the claim for Total Loss and it is not apparent to the Lender in its discretion that any such refusal or dispute is likely to occur; and

(c)

payment of all insurance proceeds in respect of the Total Loss is made in full to the Lender within 180 days of the occurrence of the casualty giving rise to the Total Loss in question or such longer period as the Lender may in its discretion agree.

22.1.21

Challenge to registration The registration of the Vessel or the Mortgage is contested or becomes void or voidable or liable to cancellation or termination, or the validity or priority of the Mortgage is contested.

22.1.22

War The country of registration of the Vessel becomes involved in war (whether or not declared) or civil war or is occupied by any other power and the Lender in its discretion considers that, as a result, the security conferred by any of the Security Documents is materially prejudiced and the Borrower fails to comply with the Lender’s request to (a) change the flag of the Vessel to a country acceptable to the Lender in its absolute discretion by paying promptly any costs and expenses related to such registration under the new flag, (b) provide any additional documentation including any additional security documents required pursuant to such registration under the new flag and (c) record a substitute mortgage over the Vessel and any additional security required pursuant to such recordation within 15 Business Days.

22.1.23

Notice of determination The Guarantor gives notice to the Lender to determine any obligations under the Guarantee,

22.1.24

Litigation Any litigation, arbitration, administrative, governmental, regulatory or other investigations, proceedings or disputes are commenced or threatened in relation to the Relevant Documents or the transactions contemplated in the Relevant Documents or against an Obligor or its assets which have or are reasonably likely to have a Material Adverse Effect.

22.1.25

Material adverse change Any event or circumstance occurs which the Lender reasonably believes has or is reasonably likely to have a Material Adverse Effect.

22.1.26

Sanctions

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(a)

Any of the Obligors, any other member of the Group or any Affiliate of any of them becomes a Prohibited Person or becomes owned or controlled by, or acts directly or indirectly on behalf of, a Prohibited Person or any of such persons becomes the owner or controller of a Prohibited Person.

(b)

Any proceeds of the Loan are made available, directly or indirectly, to or for the benefit of a Prohibited Person or otherwise is, directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions.

(c)

Any of the Obligors, any other member of the Group or any Affiliate of any of them is not in compliance with all Sanctions.

22.2	Acceleration On and at any time after the occurrence of an Event of Default which is continuing the Lender may:

22.2.1

by notice to the Borrower cancel the availability of the Loan, at which time it shall immediately be cancelled;

22.2.2

by notice to the Borrower declare that the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents are immediately due and payable, at which time they shall become immediately due and payable;

22.2.3

by notice to the Borrower declare that the Loan is payable on demand, at which time it shall immediately become payable on demand by the Lender; and/or

22.2.4

exercise any or all of its rights, remedies, powers or discretions under the Finance Documents.

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Section 9

Changes to Parties

23	Changes to the Lender

23.1	Assignments and transfers by the Lender Subject to this Clause 23, the Lender may:

23.1.1

assign any of its rights; or

23.1.2

transfer by novation any of its rights and obligations,

under any Finance Document to another bank or financial institution or to a trust, fund or other entity which is regularly engaged In or established for the purpose of making, purchasing or Investing in loans, securities or other financial assets (the “New Lender”).

23.2	Conditions of assignment or transfer

23.2.1

The Lender shall not be required to consult with the Borrower or obtain the Borrower’s prior consent in connection with an assignment or transfer pursuant to Clause 23.1 (Assignments and transfers by the Lender).

23.2.2

If:

(a)

the Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and

(b)

as a result of circumstances existing at the date the assignment, transfer or change occurs, the Borrower would be obliged to make a payment to the New Lender or the Lender acting through its new Facility Office under Clause 12 (Tax Gross Up and Indemnities) or Clause 13 (Increased Costs),

then the New Lender or the Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Lender or the Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred.

23.3	Limitation of responsibility of Lender

23.3.1

Unless expressly agreed to the contrary, the Lender makes no representation or warranty and assumes no responsibility to a New Lender for:

(a)

the legality, validity, effectiveness, adequacy or enforceability of the Relevant Documents or any other documents;

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(b)

the financial condition of any Obligor;

(c)

the performance and observance by any Obligor of its obligations under the Relevant Documents or any other documents; or

(d)

the accuracy of any statements (whether written or oral) made in or in connection with any of the Relevant Documents or any other document,

and any representations or warranties implied by law are excluded.

23.3.2

Each New Lender confirms to the Lender that it:

(a)

has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Lender in connection with any of the Relevant Documents; and

(b)

will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities whilst any amount is or may be outstanding under the Finance Documents or any part of the Loan is undrawn and available.

23.3.3

Nothing in any Finance Document obliges the Lender to:

(a)

accept a re-transfer or re-assignment from a New Lender of any of the rights and obligations assigned or transferred under this Clause 23; or

(b)

support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Relevant Documents or otherwise.

23.4	Securitisation The Lender may disclose the size and term of the Loan and the name of each of the Obligors to any investor or potential investor in a securitisation (or similar transaction of broadly equivalent economic effect) of the Lender’s rights or obligations under the Finance Documents.

24	Changes to the Obligors

24.1	No assignment or transfer by Obligors No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

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Section 10

The Lender’s Business

25	Conduct of Business by the Lender

No provision of this Agreement will:

25.1	interfere with the right of the Lender to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

25.2	oblige the Lender to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

25.3	oblige the Lender to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

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Section 11

Administration

26	Payment Mechanics

26.1

Payments to the Lender On each date on which an Obligor is required to make a payment under a Finance Document, that Obligor shall make the same available to the Lender for value on the due date at the time and, in such funds, as required by the Finance Documents or, if not specified therein, as specified by the Lender as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

Payment shall be made to such account in the principal financial centre of the country of that currency with such bank as the Lender specifies.

26.2	Partial payments

26.2.1

If the Lender receives a payment that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Lender shall apply that payment towards the obligations of that Obligor under the Finance Documents, in the following order:

(a)

first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Lender under the Finance Documents;

(b)

second, in or towards payment of any accrued interest, fee or commission due but unpaid under this Agreement;

(c)

third, in or towards payment of any principal due but unpaid under this Agreement;

(d)

fourth, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

26.2.2

The Lender may vary the order set out in Clauses 26.2.1(b) to 26.2.1(d).

26.2.3

Clauses 26.2.1 and 26.2.2 will override any appropriation made by an Obligor.

26.3	No set-off by Obligors All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off, counterclaim, taxes, stamp duties, levies of any governmental or other authority.

26.4	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).

During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.

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26.5	Currency of account

26.5.1

Subject to Clauses 26.5.2 to 26.5.5, dollars is the currency of account and payment for any sum due from an Obligor under any Finance Document.

26.5.2

A repayment or payment of all or part of the Loan or an Unpaid Sum shall be made in the currency in which the Loan or Unpaid Sum is denominated on its due date.

26.5.3

Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.

26.5.4

Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

26.5.5

Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.

26.6

Control account The Lender shall open and maintain on its books a control account in the name of the Borrower showing the advance of the Loan and the computation and payment of interest and all other sums due under this Agreement. The Borrower’s obligations to repay the Loan and to pay interest and all other sums due under this Agreement shall be evidenced by the entries from time to time made in the control account opened and maintained under this Clause 26.6 and those entries will, in the absence of manifest error, be conclusive and binding.

26.7

Disruption to payment systems etc. If either the Lender determines in its discretion that a Disruption Event has occurred or the Lender is notified by the Borrower that a Disruption Event has occurred which negatively affects the ability of the Borrower to repay the Loan and at the same has a Material Adverse Effect:

26.7.1

the Lender may, and shall if requested to do so by the Borrower, consult with the Borrower with a view to agreeing with the Borrower such changes to the operation or administration of the Loan as the Lender may deem necessary In the circumstances;

26.7.2

the Lender shall not be obliged to consult with the Borrower in relation to any changes mentioned in Clause 26.7.1 if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to any such changes;

26.7.3

any such changes agreed upon by the Lender and the Borrower shall (whether or not it is finally determined that a Disruption Event has occurred) be binding upon the Parties as an amendment to (or, as the case may be, waiver of) the terms of the Finance Documents; and

26.7.4

the Lender shall not be liable for any damages, costs or losses whatsoever (including, without limitation, for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Lender) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 26.7.

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Set-Off

27.1

Finance Documents The Lender may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by the Lender) against any matured obligation owed by the Lender to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

Notices

28.1	Communications in writing Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.

28.2	Addresses The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:

28.2.1

in the case of the Borrower, that identified with its name below; and

28.2.2

in the case of the Lender, that identified with its name below,

or any substitute address, fax number, or department or officer as the Party may notify to the other by not less than five Business Days’ notice.

28.3	Delivery Any communication or document made or delivered by one Party to another under or in connection with the Finance Documents will only be effective:

28.3.1

if by way of fax, when received in legible form; or

28.3.2

if by way of letter, when it has been left at the relevant address or five (5) Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address;

and, if a particular department or officer is specified as part of its address details provided under Clause 28.2 (Addresses), if addressed to that department or officer.

Any communication or document to be made or delivered to the Lender will be effective only when actually received by the Lender and then only if it is expressly marked for the attention of the department or officer identified with the Lender’s signature below (or any substitute department or officer as the Lender shall specify for this purpose).

Any communication or document which becomes effective, in accordance with this Clause 28.3, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.

28.4	Electronic communication

28.4.1

Any communication to be made between any two Parties under or in connection with the Finance Documents may be made by electronic mail or

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other electronic means to the extent that those two Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication and if those two 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 five Business Days’ notice.

28.4.2

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

28.4.3

Any electronic communication which becomes effective, in accordance with Clause 28.4.2, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.

28.5	English language Any notice given under or in connection with any Finance Document must be in English. All other documents provided under or in connection with any Finance Document must be:

28.5.1

in English; or

28.5.2

if not in English, and if so required by the Lender, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.

29	Calculations and Certificates

29.1

Accounts In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by the Lender pursuant to Clause 26.6 (Control account) are, in the absence of manifest error, prima facie evidence of the matters to which they relate.

29.2	Certificates and determinations Any certification or determination by the Lender of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

29.3

Day count convention Any interest, commission or fee accruing under a Finance 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 or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.

30	Partial Invalidity

If, at any time, any provision of the Finance Documents 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

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or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

31	Remedies and Waivers

No failure to exercise, nor any delay in exercising, on the part of the Lender or any Secured Party, any right or remedy under a Finance Document shall operate as a waiver of any such right or remedy or constitute an election to affirm any Finance Document. No election to affirm any Finance Document on the part of the Lender or any Secured Party shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

32	Confidentiality

32.1	Confidential Information The Lender agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 32.2 (Disclosure of Confidential Information) and Clause 32.3 (Disclosure to numbering service providers).

32.2	Disclosure of Confidential Information The Lender may disclose:

32.2.1

to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as the Lender shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this Clause 32.2.1 is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;

32.2.2

to any person:

(a)

to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents and to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;

(b)

with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or one or more Obligors and to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;

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(c)

appointed by the Lender or by a person to whom Clause 32.2.2(a) or 32.2.2(b) applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf;

(d)

who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in Clause 32.2.2(a) or 32.2.2(b);

(e)

(f)

to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes;

(g)

who is a Party; or

(h)

with the consent of the Borrower;

in each case, such Confidential Information as the Lender shall consider appropriate if:

(i)

in relation to Clauses 32.2.2(a), 32.2.2(b) and 32.2.2(c), the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;

(ii)

in relation to Clause 32.2.2(d), the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;

(iii)

in relation to Clauses 32.2.2(e) and 32.2.2(f), the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of the Lender, it is not practicable so to do in the circumstances;

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32.2.3

to any person appointed by the Lender or by a person to whom Clause 32.2.2(a) or 32.2.2(b) applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this Clause 32.2.3 if the service provider to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking; and

32.2.4

to any rating agency (including its professional advisers) such Confidential Information as may be required to be disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents and/or the Obligors and/or the Group if the rating agency to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information.

32.3	Disclosure to numbering service providers

32.3.1

The Lender may disclose to any national or international numbering service provider appointed by the Lender to provide identification numbering services in respect of this Agreement, the Loan and/or one or more Obligors the following information:

(a)

names of Obligors;

(b)

country of domicile of Obligors;

(c)

place of incorporation of Obligors;

(d)

date of this Agreement;

(e)

Clause 34 (Governing law);

(f)

date of each amendment and restatement of this Agreement;

(g)

amount of the Loan;

(h)

currencies of the Loan;

(i)

type of Loan;

(j)

ranking of the Loan;

(k)

Termination Date;

(l)

changes to any of the information previously supplied pursuant to (a) to (l); and

(m)

such other information agreed between the Lender and that Obligor,

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to enable such numbering service provider to provide its usual syndicated loan numbering identification services.

32.3.2

The Parties acknowledge and agree that each identification number assigned to this Agreement, the Loan and/or one or more Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider.

32.3.3

The Borrower represents that none of the information set out in Clauses 32.3.1(a) to 32.3.1(m) is, nor will at any time be, unpublished price-sensitive information.

32.4	Entire agreement This Clause 32 constitutes the entire agreement between the Parties In relation to the obligations of the Lender under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.

32.5

Inside information The Lender acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and the Lender undertakes not to use any Confidential Information for any unlawful purpose.

32.6	Notification of disclosure The Lender agrees (to the extent permitted by law and regulation) to inform the Borrower:

32.6.1

of the circumstances of any disclosure of Confidential Information made pursuant to Clause 32.2.2(e) (Disclosure of Confidential Information) except where such disclosure is made to any of the persons referred to in that Clause during the ordinary course of its supervisory or regulatory function; and

32.6.2

upon becoming aware that Confidential Information has been disclosed in breach of this Clause 32.

32.7	Continuing obligations The obligations in this Clause 32 are continuing and, in particular, shall survive and remain binding on the Lender for a period of 12 months from the earlier of:

32.7.1

the date on which all amounts payable by the Obligors under or in connection with the Finance Documents have been paid in full and the Loan has been cancelled or otherwise ceases to be available; and

32.7.2

the date on which the Lender otherwise ceases to be the Lender.

33	Counterparts

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

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Section 12

Governing Law and Enforcement

34	Governing Law

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.

35	Enforcement

35.1

Jurisdiction of English courts The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement) (a “Dispute”). Each Party agrees that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

This Clause 35.1 is for the benefit of the Lender only. As a result, the Lender shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions.

35.2	Service of process

35.2.1

Without prejudice to any other mode of service allowed under any relevant law, the Borrower:

(a)

irrevocably appoints Hill Dickinson Services (London) Ltd of Broadgate Tower, 20 Primrose Street, London EC2A 2E, United Kingdom as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and

(b)

agrees that failure by a process agent to notify the Borrower of the process will not invalidate the proceedings concerned.

35.2.2

If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process or terminates its appointment as agent for service of process, the Borrower must immediately (and in any event within five days of such event taking place) appoint another agent on terms acceptable to the Lender. Failing this, the Lender may appoint another agent for this purpose.

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

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Schedule 1

Part I

Conditions Precedent

Obligors

(a)

Constitutional documents Copies of the constitutional documents of each Obligor together with such other evidence as the Lender may reasonably require that each Obligor is duly incorporated in its country of incorporation and remains in existence with power to enter into, and perform its obligations under, the Relevant Documents to which it is or is to become a party,

(b)

Certificates of good standing A certificate of good standing in respect of each Obligor (if such a certificate can be obtained).

(c)

Board resolutions A copy of a resolution of the board of directors of each Obligor:

(i)

approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party and resolving that it execute those Relevant Documents; and

(ii)

authorising a specified person or persons to execute those Relevant Documents (and all documents and notices to be signed and/or dispatched under those documents) on its behalf.

(d)

Specimen signatures or Copy passports A specimen of the signature or copy of the passport of each person authorised by the resolutions referred to in (c).

(e)

Shareholder resolutions A copy of a resolution signed by all the holders of the issued shares in each Obligor (other than the Guarantor), approving the terms of, and the transactions contemplated by, the Relevant Documents to which that Obligor (other than the Guarantor) is a party.

(f)

Officer’s certificates An original certificate of a duly authorised officer of each Obligor:

(i)

certifying that each copy document relating to it specified in this Part I of Schedule 1 is correct, complete and in full force and effect;

(ii)

setting out the names of the directors, officers and shareholders of that Obligor (other than in respect of the shareholders of the Guarantor) and the proportion of shares held by each shareholder; and

(iii)

confirming that borrowing or guaranteeing or securing, as appropriate, the Loan would not cause any borrowing, guarantee, security or similar limit binding on that Obligor to be exceeded.

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(g)

Powers of attorney The original notarially attested and legalised power of attorney of each of the Obligors under which the Relevant Documents to which it is or is to become a party are to be executed or transactions undertaken by that Obligor.

2	Security and related documents

(a)

Vessel documents Photocopies, certified as true, accurate and complete by a director or the secretary or the legal advisers of the Borrower, of:

(i)

any charterparty or other contract of employment of the Vessel which will be in force on the Utilisation Date;

(ii)

the Management Agreement;

(iii)

the Vessel’s current Safety Construction, Safety Equipment, Safety Radio, Oil Pollution Prevention and Load Line Certificates;

(iv)

evidence of the Vessel’s current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990;

(v)

the Vessel’s current SMC;

(vi)

the ISM Company’s current DOC;

(vii)

the Vessel’s current ISSC;

(viii)

the Vessel’s current IAPPC; and

(ix)

the Vessel’s current Tonnage Certificate;

in each case together with all addenda, amendments or supplements.

(b)

Evidence of Borrower’s title Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of Ships (or equivalent official) of the Vessel’s current flag confirming that (i) the Vessel is permanently registered under the flag stated in Preliminary (A) in the ownership of the Borrower and free of registered encumbrances (other than in favour of the Lender), (ii) the Mortgage will be capable of being registered against the Vessel with first priority and (iii) there are no further Encumbrances registered against the Vessel, other than any mortgage in favour of the Lender in respect of the Existing Indebtedness.

(c)

Evidence of insurance Evidence that the Vessel is insured in the manner required by the Security Documents and that letters of undertaking will be issued in the manner required by the Security Documents, together with (if required by the Lender) the written approval of the Insurances by an insurance adviser appointed by the Lender.

(d)

Confirmation of class A Class Certificate and/or Certificate of Confirmation of Class for hull and machinery confirming that the Vessel is classed with the highest class applicable to vessels of her type with Lloyd’s

Page 77

Register or such other classification society as may be acceptable to the Lender free of any recommendations affecting class.

(e)

Valuation Not more than 20 days prior to the Utilisation Date, a valuation of the Vessel addressed to the Lender from an Approved Shipbroker certifying the Market Value for the Vessel, acceptable to the Lender.

(f)

Security Documents The Security Documents, together with all other documents required by any of them, including, without limitation, all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients.

(g)

Cash Collateral Amount Evidence that Clause 20.2 (Cash Collateral Amount) has been complied with the absolute satisfaction of the Lender.

(h)

Mandates Such duly signed forms of mandate, and/or other evidence of the opening of the Earnings Account, as the Lender may require.

(i)

No disputes The written confirmation of the Borrower that there is no dispute under any of the Relevant Documents as between the parties to any such document.

(j)

Ultimate beneficial owner Evidence of the Borrower’s ultimate beneficial owner(s) in a form and substance acceptable to the Lender prior to the date of this Agreement.

(k)

Other Relevant Documents Copies of each of the Relevant Documents not otherwise comprised in the documents listed in this Part I of Schedule 1.

(l)

Equity Contribution If applicable, evidence of payment to the Lender (in its capacity as lender under the loan agreement relating to the Existing Indebtedness) by the Borrower of any amount required for the satisfaction in full of the Existing Indebtedness, other than any part of the Existing Indebtedness to be financed by the Loan.

3	Legal opinions

The following legal opinions, each addressed to the Lender, or confirmation satisfactory to the Lender that such opinions will be given:

(a)

a legal opinion of Stephenson Harwood LLP, legal advisers to the Lender as to English law substantially in the form provided to the Lender prior to signing this Agreement;

(b)

a legal opinion of the following legal advisers to the Lender:

(i)

Clark, Atcheson and Reisert, as to Liberian law; and

(ii)

Clark, Atcheson and Reisert, as to Marshal Islands law.

4	Other documents and evidence

(a)

Utilisation Request A duly completed Utilisation Request.

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(b)

Process agent Evidence that any process agent referred to in Clause 35.2 (Service of process) and any process agent appointed under any other Finance Document has accepted its appointment.

(c)

Other Authorisations A copy of any other Authorisation or other document, opinion or assurance which the Lender considers to be necessary or desirable (if it has notified the Borrower accordingly) in connection with the entry into and performance of the transactions contemplated by any Relevant Document or for the validity and enforceability of any Relevant Document.

(d)

Financial statements A copy of the Original Financial Statements of the Guarantor.

(e)

Fees Evidence that the fees, costs and expenses then due from the Borrower under Clause 11 (Fees) and Clause 16 (Costs and Expenses) have been paid or will be paid by the Utilisation Date.

(f)

“Know your customer” documents Such documentation and other evidence as is reasonably requested by the Lender prior to the execution of this Agreement in order for the Lender to comply with all necessary “know your customer” or similar identification procedures in relation to the transactions contemplated in the Finance Documents including (without limitation) all documents required under any regulation or laws in force in the United Kingdom and the Regulation 281/2009 of the Central Bank of Greece, such documents to be to the absolute satisfaction of the Lender. The Borrower shall provide the Lender with evidence that the Borrower, the Guarantor and all their respective corporate shareholders (if any) have issued registered shares.

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Part II
Conditions Subsequent

Evidence of Borrower’s title Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of Ships (or equivalent official) of the flag stated in Preliminary (A) confirming that (a) the Vessel is permanently registered under that flag in the ownership of the Borrower, (b) the Mortgage has been registered with first priority against the Vessel and (c) there are no further Encumbrances registered against the Vessel.

2	Letters of undertaking Letters of undertaking in respect of the Insurances as required by the Security Documents together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Lender.

3	Acknowledgements of notices Acknowledgements of all notices of assignment and/or charge given pursuant to the Security Documents.

4	Legal opinions Such of the legal opinions specified in Part I of this Schedule 1 as have not already been provided to the Lender.

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Schedule 2

Utilisation Request

From:

Eirini Shipping Ltd

To:	HSBC BANK plc

Dated:

_______________2019

Dear Sirs

Eirini Shipping Ltd - US$4,500,000 Loan Agreement dated __________2019 (the “Agreement”)

1	We refer to the Agreement. This is the Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.

2	We wish to borrow the Loan on the following terms:

Proposed Utilisation Date: [ ] (or, if that is not a Business Day, the next Business Day)

Currency of Loan: dollars

Amount: [ ]

Interest Period: [ ]

3	We confirm that each condition specified in Clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request.

4	The proceeds of the Loan should be paid towards [ ].

5	This Utilisation Request is irrevocable.

Yours faithfully

………………………..

authorised signatory for

Eirini Shipping Ltd

Page 81

Schedule 3

Form of Compliance Certificate

To:	HSBC BANK plc

From:

Eirini Shipping Ltd
Eurodry Ltd.

Dated:

Dear Sirs

Eirini Shipping Ltd -US$4,500,000 Loan Agreement dated _____________2019 (the “Agreement”)

1	We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

2	We confirm that Eurodry Ltd. maintains:

(a)

Maximum Leverage of not higher than 75%;

(b)

Liquidity of an amount of not less than $300,000 per Fleet Vessel; and

(c)

Net Worth of not less than $15,000,000.

3	We confirm that no Default is continuing.

Signed	……………………………	……………………………
	Director	Director
	of Eirini Shipping Ltd	of Eirini Shipping Ltd


	……………………………	……………………………
	Director	Director
	of	of
	Eurodry Ltd.	Eurodry Ltd.

Page 82

[insert applicable certification language]

…………………………………

[for and on behalf of
[name of auditors of Eurodry Ltd.

Page 83

Signatures

The Borrower

Eirini Shipping Ltd

By: Stefania Karmiri

Address: c/o o Eurobulk Ltd.
4 Messogiou & Evropis
Maroussi, Athens, Greece
Fax no.: +30 211 180 4097
Department/Officer: Legal department

)

/s/ Stefania Karmiri

The Lender

HSBC BANK plc

By: Katerina Eleftheriou

Address: 8 Canada Square,

London E14 5HQ,

England

Fax no.: +44 (0)20 7991 4619

Department/Officer: Alastair Muir/

Head of European Corporate Banking Centre

)

/s/ Katerina Eleftheriou

Page 84

Exhibit 4.24

Guarantee

Dated 20 May 2019

(1) Eurodry Ltd.

(2) HSBC Bank plc

Stephenson Harwood LLP

Ariston Building. 2nd Floor

Filellinon 2 & Akti Miaouli 185 36 Piraeus, Greece

T^. +30 210 429 5160 I F +30 210 429 5166

www.shlegal.corn

Contents

		Page
1	Definitions and Interpretation	1
2	Guarantee and Indemnity	2
3	Protection of Lender	2
4	Additional Payment Obligations	4
5	Application of Moneys	6
6	Representations and Warranties	6
7	Information Undertakings	7
8	Financial Covenants	9
9	General Undertakings	10
10	Payments	11
11	Set-Off	12
12	Calculations and Certificates	12
13	Partial Invalidity	12
14	Remedies and Waivers	13
15	Miscellaneous Provisions of the Loan Agreement	13
16	Notices	13
17	Governing Law	14
18	Enforcement	14
Schedule 1	Form of Compliance Certificate	15

Guarantee

Dated 20 May 2019

By:

(1)	Eurodry Ltd., a company incorporated under the laws of the Republic of the Marshall Islands, with its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands (the “Guarantor”)

In favour of:

(2)	HSBC Bank plc acting through its office at 8 Canada Square, London, E14 5HQ, England (the “Lender”).

Whereas:

(A)

The Lender has agreed to lend to Eirini Shipping Ltd (the “Borrower”) an amount not exceeding the lesser of (a) $4,500,000 and (b) 49.9% of the Market Value of the Vessel (the “Loan”) on the terms and subject to the conditions set out in a loan agreement dated 20 May 2019 made between the Borrower (as borrower) and the Lender (as lender) (the “Loan Agreement”).

(B)	Pursuant to the Loan Agreement, and as a condition precedent to the obligation of the Lender to make the Loan available to the Borrower, the Borrower has, amongst other things, agreed to procure that the Guarantor execute and deliver this Guarantee in favour of the Lender.

This Deed witnesses as follows:

1.	Definitions and Interpretation

1.1	Definitions In this Guarantee:

“Compliance Certificate” means a certificate substantially in the form set out in Schedule 1 to this Guarantee.

“Default Rate” means interest at the rate calculated in accordance with clause 8.3 of the Loan Agreement (Default interest).

“Guarantor Liabilities” means all of the liabilities and obligations of the Guarantor to the Lender under or pursuant to this Guarantee, from time to time, whether in respect of principal, interest, costs or otherwise and whether present, future, actual or contingent.

“Guarantor Security Documents” means this Guarantee and any and all documents which may at any time be executed by the Guarantor as security for the payment of all or any part of the Guarantor Liabilities and “Guarantor Security Document” means any one of them.

“Indebtedness” means the aggregate from time to time of: the amount of the Loan outstanding; all accrued and unpaid interest on the Loan; and all other sums of any

Page 1

nature (together with all accrued and unpaid interest on any of those sums) payable by the Borrower to the Lender under all or any of the Finance Documents.

“Original Financial Statements” means the audited consolidated financial statements of the Guarantor for the financial year ended 31 December 2018.

1.2	Defined terms Unless otherwise specified in this Guarantee, or unless the context otherwise requires, all words and expressions defined or explained in the Loan Agreement shall have the same meanings when used in this Guarantee.

1.3	Construction Clause 1.2 of the Loan Agreement (Construction) shall apply to this Guarantee as if it were incorporated into it with any necessary modifications.

1.4	Headings Clause and Schedule headings are for ease of reference only.

1.5	Third party rights A person who is not a party to this Guarantee has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Guarantee.

1.6	Contractual recognition of bail-in If the Guarantor is not a party to the Loan Agreement, the Guarantor agrees to be bound by clause 1.9 of the Loan Agreement (Contractual recognition of bail-in) as if it is a party to the Loan Agreement.

2.	Guarantee and Indemnity

The Guarantor irrevocably and unconditionally:

2.1	guarantees to the Lender punctual performance by the Borrower of all the Borrower’s obligations under the Finance Documents;

2.2	undertakes with the Lender that whenever the Borrower does not pay any amount when due under or in connection with any Finance Document, the Guarantor shall immediately on demand pay that amount as if it were the principal obligor; and

2.3

agrees with the Lender that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify the Lender immediately on demand against any cost, loss or liability it incurs as a result of the Borrower not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document on the date when it would have been due. The amount payable by the Guarantor under this indemnity will not exceed the amount it would have had to pay under this Guarantee if the amount claimed had been recoverable on the basis of a guarantee.

3.	Protection of Lender

3.1

Continuing Guarantee This Guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any Intermediate payment or discharge in whole or in part. When the whole of Indebtedness has been paid in full and all the Guarantor’s Liabilities have been paid in full, the Lender will, at the cost of and on the request of Guarantor execute and deliver a discharge of the Guarantor’s Security Documents.

Page 2

3.2

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 the Lender 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 Guarantor under this Guarantee will continue or be reinstated as if the discharge, release or arrangement had not occurred.

3.3

Waiver of defences The obligations of the Guarantor under this Guarantee will not be affected by an act, omission, matter or thing which, but for this Clause 3.3, would reduce, release or prejudice any of its obligations under this Guarantee (without limitation and whether or not known to it or the Lender) including:

3.3.1

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

3.3.2

the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any Obligor or any other member of the Group;

3.3.3

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;

3.3.4

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;

3.3.5

any amendment, novation, supplement, extension restatement (however fundamental and whether or not more onerous) or replacement of a Finance Document or any other document or security including, without limitation, any change in the purpose of, any extension of or increase in any facility or the addition of any new facility under any Finance Document or other document or security;

3.3.6

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

3.3.7

any insolvency or similar proceedings.

3.4

Guarantor intent Without prejudice to the generality of Clause 3.3, the 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 for the purposes of or in connection with any of the following: business acquisitions of any nature; increasing working capital; enabling investor distributions to be made; carrying out restructurings; refinancing existing facilities; refinancing any other indebtedness; making facilities available to new borrowers; any other variation or extension of the purposes for which any such

Page 3

facility or amount might be made available from time to time; and any fees, costs and/or expenses associated with any of the foregoing,

3.5

Immediate recourse The Guarantor waives any right it may have of first requiring the Lender (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 the Guarantor under this Guarantee. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.

3.6

Deferral of Guarantors’ rights 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 and unless the Lender otherwise directs, the 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 Guarantee:

3.6.1

to be indemnified by an Obligor;

3.6.2

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

3.6.3

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

3.6.4

to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which any Guarantor has given a guarantee, undertaking or indemnity under Clause 2;

3.6.5

to exercise any right of set-off against any Obligor; and/or

3.6.6

to claim or prove as a creditor of any Obligor in competition with the Lender.

If the Guarantor receives any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Lender by the Obligors under or in connection with the Finance Documents to be repaid in full on trust for the Lender and shall promptly pay or transfer the same to the Lender or as the Lender may direct for application in accordance with clause 26 of the Loan Agreement (Payment Mechanics).

3.7	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 the Lender.

4.	Additional Payment Obligations

4.1	Indemnity to the Lender as security holder The Guarantor shall promptly indemnify the Lender as holder of any of the Security Documents and every Receiver and Delegate on demand against any cost, loss or liability incurred by any of them as a result of:

Page 4

4.1.1

any failure by the Borrower to comply with its obligations under clause 16 of the Loan Agreement (Costs and Expenses);

4.1.2

acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised;

4.1.3

the taking, holding, protection or enforcement of the Security Documents;

4.1.4

the exercise of any of the rights, powers, discretions, authorities and remedies vested in the Lender and each Receiver and Delegate by the Finance Documents or by law;

4.1.5

any default by any Obligor in the performance of any of the obligations expressed to be assumed by it in the Finance Documents; or

4.1.6

acting as holder of any of the Security Documents, Receiver or Delegate under the Finance Documents or which otherwise relates to any of the Charged Property (otherwise, in each case, than by reason of the relevant Lender’s, Receiver’s or Delegate’s gross negligence or wilful misconduct),

together in each case with interest at the Default Rate on the amount demanded from the date of demand until the date of payment, both before and after judgment, which interest shall be compounded with the amount demanded at the end of such periods as the Lender may reasonably select.

4.2

Currency indemnity If any sum due from the Guarantor under this Guarantee (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:

4.2.1

making or filing a claim or proof against the Guarantor, or

4.2.2

obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

the Guarantor shall as an independent obligation, within three Business Days of demand, indemnify the Lender 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 Lender at the time of its receipt of that Sum.

The Guarantor waives any right it may have in any jurisdiction to pay any amount under this Guarantee in a currency or currency unit other than that in which it is expressed to be payable.

4.3

Amendment costs If the Guarantor requests an amendment, waiver or consent in relation to any Guarantor Security Document, the Guarantor shall, within three Business Days of demand, reimburse the Lender for the amount of all costs and expenses (including legal fees) reasonably incurred by the Lender (and by any Receiver or Delegate) in responding to, evaluating, negotiating or complying with that request or requirement provided that (a) no sum shall be payable under this Clause 4.3 if liability for the same matters also accrues under the Loan Agreement

Page 5

and such costs are paid by the Borrower or (b) if the relevant request for an amendment, notice, waiver or consent are rejected by the Lender and/or are not granted.

4.4

Enforcement and preservation costs The Guarantor shall, within three Business Days of demand, pay to the Lender and each other Secured Party the amount of ail costs and expenses (including legal fees) incurred by the Lender in connection with the enforcement of, or the preservation of any rights under, any Guarantor Security Document and any proceedings instituted by or against the Lender as a consequence of taking or holding the Guarantor Security Documents or enforcing those rights.

4.5

Default interest If the Guarantor fails to pay any amount payable by it under a 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) either (a) at the rate (if any) applicable to that amount under the Loan Agreement or (b) (if there is no such rate) at a rate calculated in accordance with clause 8.3 of the Loan Agreement (Default interest). Any interest accruing under this Clause 4.4 shall be immediately payable by the Guarantor on demand by the Lender.

Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

4.6

Additional payment obligations under the Loan Agreement This Clause 4 is without prejudice to the Guarantor Liabilities in respect of the Borrower’s obligations under the clauses of the Loan Agreement numbered 8 (Interest), 14 (Other Indemnities) and 16 (Costs and Expenses) and under similar provisions in any other Finance Documents.

5.	Application of Moneys

5.1

Moneys received by Lender All sums which the Lender receives under or in connection with any Guarantor Security Document shall, unless otherwise agreed by the Lender or otherwise provided in the Loan Agreement, be applied by the Lender in or towards satisfaction of, or retention on account for, the Guarantor Liabilities in such manner as the Lender may in its discretion determine.

6.	Representations and Warranties

6.1	Representations The Guarantor makes the representations and warranties set out in this Clause 6 to the Lender.

6.1.1

Loan Agreement representations and warranties All representations and warranties given by the Borrower in the Loan Agreement in respect of the Guarantor and/or any Guarantor Security Document are and will remain correct and none of them is or will become misleading.

6.1.2

Ownership of Borrower The Borrower is a wholly owned subsidiary of the Guarantor.

Page 6

6.1.3

No Encumbrance No Encumbrance exists over the shares of the Guarantor in the Borrower.

6.1.4

Disclosure of material facts The Guarantor is not aware of any material facts or circumstances which have not been disclosed to the Lender and which might, if disclosed, have adversely affected the decision of a person considering whether or not to make loan facilities of the nature contemplated by the Loan Agreement available to the Borrower.

6.1.5

Copy Loan Agreement The Guarantor has received a copy of the Loan Agreement and approves of, and agrees to, the terms and conditions of the Loan Agreement.

6.2

Repetition Each of the representations set out in Clause 6.1.2 (Ownership of Borrower) to Clause 6.1.5 (Disclosure of material facts) and each Repeating Representation is deemed to be repeated by the Guarantor by reference to the facts and circumstances then existing on the date of the Utilisation Request, on the Utilisation Date, on the first day of each Interest Period and, in the case of those contained in clauses 17.1.12(d) and 17.1.12(f) (Financial statements) of the Loan Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force on each day.

7.	Information Undertakings

The undertakings in this Clause 7 remain in force for the duration of the Facility Period.

7.1	Financial statements The Guarantor shall supply to the Lender:

7.1.1

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, the consolidated audited financial statements of the Guarantor (including profit and loss accounts and balance sheets) for that financial year; and

7.1.2

as soon as the same become available, but in any event within ninety (90) days after the end of each half year during each of the Guarantor’s financial years, the consolidated unaudited semi-annual financial statements of the Guarantor for that half year.

7.2	Compliance Certificate

7.2.1

The Guarantor shall supply to the Lender, with each set of its annual financial statements delivered pursuant to Clause 7.1.1 and each set of its semi-annual consolidated financial statements delivered pursuant to Clause 7.1.2, a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 8 as at the date as at which those financial statements were drawn up.

7.2.2

Each Compliance Certificate shall be signed by two directors of the Guarantor and shall be reported on by the Guarantor’s auditors in the form agreed by the Guarantor and the Lender before the date of the Loan Agreement.

Page 7

7.3	Requirements as to financial statements

Each set of financial statements delivered by the Guarantor under Clause 7.1:

7.3.1

shall be certified by a director of the Guarantor as giving a true and fairview of (in the case of annual consolidated financial statements), or fairly representing (in other cases), Its financial condition as at the date as at which those financial statements were drawn up; and

7.3.2

shall be prepared using GAAP, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements unless, In relation to any set of financial statements, it notifies the Lender that there has been a change in GAAP, the accounting practices or reference periods and its auditors deliver to the Lender:

(a)

a description of any change necessary for those financial statements to reflect the GAAP, accounting practices and reference periods upon which the Original Financial Statements were prepared; and

(b)

sufficient information, in form and substance as may be reasonably required by the Lender, to enable the Lender to determine whether Clause 8 has been complied with and make an accurate comparison between the financial position indicated in those financial statements and the Original Financial Statements.

Any reference in this Guarantee to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared.

7.4	Information: miscellaneous The Guarantor shall supply to the Lender:

7.4.1

at the same time as they are dispatched, copies of all documents dispatched by the Guarantor or to its creditors generally (or any class of them);

7.4.2

promptly upon becoming aware of them, the details of any litigation,arbitration or administrative proceedings which are current, threatened or pending against any Obligor, and which, if adversely determined, are reasonably likely to have a Material Adverse Effect;

7.4.3

promptly, such information as the Lender may reasonably require about theCharged Property and compliance of the Obligors with the terms of any Security Documents including without limitation cash flow analyses and details of the operating costs of the Vessel; and

7.4.4

promptly on request, such further information regarding the financialcondition, affairs, commitments, assets and operations of any Obligor or any other member of the Group (including any requested amplification or explanation of any item in the financial statements, budgets or other material provided by any Obligor under the Loan Agreement and this Guarantee as the Lender may reasonably request.

Page 8

7.5	Notification of default The Guarantor shall notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

8.	Financial Covenants

During the Facility Period the Guarantor shall maintain at all times:

8.1.1

Maximum Leverage not higher than 75%;

8.1.2

Liquidity of an amount of not less than $300,000 in respect of each Fleet Vessel; and

8.1.3

Net Worth of not less than fifteen million dollars ($15,000,000)

The expressions used in this Clause shall be construed in accordance with GAAP, and for the purposes of this Guarantee:-

“Fleet Market Value” means the value of a Fleet Vessel conclusively determined by the arithmetic average of two valuations obtained by two Approved Shipbrokers selected and appointed by the Borrower on behalf of the Lender and approved by and reporting to the Lender on the basis of a charter free sale for prompt delivery and free of encumbrances for cash at arm’s length on normal commercial terms as between a willing seller and a willing buyer and evidenced by two valuations of that Fleet Vessel addressed to the Lender certifying a value for that Fleet Vessel.

“Fleet Vessels” means any vessel (including the Vessel) from time to time wholly owned by a Subsidiary of the Guarantor (directly or indirectly) and each a “Fleet Vessel”.

“Liquidity” means, in respect of each period during which the consolidated financial statements delivered pursuant to Clause 7.1 (Financial statements) are delivered by the Guarantor, Cash, as shown in the applicable financial statements of the Guarantor, for such accounting period and determined in accordance with GAAP.

“Maximum Leverage” means, in respect of each period during which financial statements are required to be delivered pursuant to Clause 7.1 (Financial Statements), the ratio of Total Consolidated Liabilities, to Value Adjusted Total Assets, as shown in the applicable consolidated financial statements of the Guarantor for such accounting period and determined in accordance with GAAP.

“Net Worth” means equity payments already advanced in respect of the Fleet Vessel less accumulated dividends plus retained earnings of the Fleet Vessels, as each such term is defined in the applicable consolidated financial statements (as provided in Clause 7.1 (Financial Statements)) for the Guarantor determined in accordance with GAAP.

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“Total Consolidated Liabilities” means, in respect of the Guarantor at any time on a consolidated basis, the ratio of total indebtedness (long-term debt including the current portion of long-term debt) of the Guarantor which would be included in the applicable financial statements of the Guarantor as total liabilities in accordance with GAAP.

“Total Assets” means the amount of total assets of the Guarantor at any time on a consolidated basis which would be included in the applicable financial statements (as provided in Clause 7.1 (Financial Statements)) of the Guarantor as total assets determined in accordance with GAAP.

“Value Adjusted Total Assets” means the Total Assets of the Guarantor as adjusted for the difference of the book value of the Fleet Vessels (as evidenced in the most recent financial statements (pursuant to Clause 7.1 (Financial Statements)) and the Fleet Market Value.

9.	General Undertakings

The undertakings in this Clause 9 remain in force for the duration of the Facility Period.

9.1

No security The Guarantor has not taken, and will not take without the prior written consent of the Lender (and then only on such terms and subject to such conditions as the Lender may impose), any security from any of the other Obligors in connection with this Guarantee, and any security taken by the Guarantor notwithstanding this Clause 9.1 shall be held by the Guarantor in trust for the Lender absolutely as a continuing security for the Guarantor Liabilities.

9.2	Loan Agreement undertakings The Guarantor will observe and perform any and all covenants and undertakings in the Loan Agreement whose observance and performance by the Guarantor the Borrower has undertaken to procure.

9.3	Authorisations The Guarantor shall promptly:

9.3.1

obtain, comply with and do all that is necessary to maintain in full force and effect; and

9.3.2

supply certified copies to the Lender of,

any Authorisation required under any law or regulation of a Relevant Jurisdiction to:

(a)

enable any Obligor to perform its obligations under the Finance Documents to which it is a party;

(b)

ensure the legality, validity, enforceability or admissibility in evidence of any Finance Document; and

(c)

enable any Obligor to carry on its business where failure to do so has or is reasonably likely to have a Material Adverse Effect.

9.4	Environmental compliance

The Guarantor shall:

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9.4.1

comply with all Environmental Laws;

9.4.2

obtain, maintain and ensure compliance with all requisite Environmental Approvals; and

9.4.3

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.

9.5	Environmental Claims

The Guarantor shall promptly upon becoming aware of the same, inform the Lender in writing of:

9.5.1

any Environmental Claim against any of the Obligors or any other member of the Group which is current, pending or threatened; and

9.5.2

any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any of the Obligors or any other member of the Group,

where the claim, if determined against that Obligor or other member of the Group, has or is reasonably likely to have a Material Adverse Effect.

9.6	Anti-corruption law

9.6.1

9.6.2

The Guarantor shall:

(a)

conduct its businesses in compliance with applicable anti-corruption laws; and

(b)

maintain policies and procedures designed to promote and achieve compliance with such laws.

9.7	Negative pledge The Guarantor shall procure that:

9.7.1

the Borrower shall not create nor permit to subsist any Encumbrance over any of its assets; and

9.7.2

it will not create nor permit to subsist any Encumbrance over the shares of the Guarantor in the Borrower.

10.

Payments

10.1

Payments to the Lender On each date on which the Guarantor is required to make a payment under any Guarantor Security Document, the Guarantor shall make the same available to the Lender for value on the due date at the time and in such funds as required in the Finance Documents, or, if not specified therein, as specified

Page 11

by the Lender as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

Payment shall be made to such account in the principal financial centre of the country of that currency with such bank as the Lender specifies.

10.2	No set-off by Guarantor All payments to be made by the Guarantor under any Guarantor Security Document shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

10.3	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).

10.4	Currency of payments

10.4.1

Subject to Clauses 10.4.2 and 10.4.3, any amount payable under this Guarantee is payable in dollars.

10.4.2

Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

10.4.3

Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.

10.5	Tax gross-up The clauses of the Loan Agreement numbered 12 (Tax Gross Up and Indemnities) and 15 (Mitigation by the Lender) (in so far as that clause 15 applies to that clause 12) shall apply to this Guarantee as if they were incorporated into it with any necessary modifications.

11.

Set-Off

The Lender may set off any matured obligation due from the Guarantor under any Guarantor Security Document (to the extent beneficially owned by the Lender) against any matured obligation owed by the Lender to the Guarantor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

12.	Calculations and Certificates

12.1	Accounts In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by the Lender are in the absence of manifest error, prima facie evidence of the matters to which they relate.

12.2	Certificates and determinations Any certification or determination by the Lender of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

13.	Partial Invalidity

If, at any time, any provision of any Guarantor Security Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction,

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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.

14.	Remedies and Waivers

No failure to exercise, nor any delay in exercising, on the part of the Lender or any Secured Party, any right or remedy under a Finance Document shall operate as a waiver of any such right or remedy or constitute an election to affirm any Finance Document. No election to affirm any Finance Document on the part of the Lender or any Secured Party shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Guarantee and any other Guarantor Security Document are cumulative and not exclusive of any rights or remedies provided by law.

15.	Miscellaneous Provisions of the Loan Agreement

The following clauses of the Loan Agreement shall apply to this Guarantee as if they were incorporated into it with any necessary modifications:

clause 32 (Confidentiality); and

clause 33 (Counterparts).

16.

Notices

16.1	Addresses The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party for any communication or document to be made or delivered under or in connection with this Guarantee and any other Guarantor Security Document is:

16.1.1

in the case of the Guarantor,

Address: c/o Eurobulk Ltd,

4 Messogiou & Evropis

Maroussi, Athens, Greece,

Fax no: +30 211 180 4097,

Department/Officer: Legal department; and

16.1.2

in the case of the Lender,

Address: 8 Canada Square,

London E14 SHQ, England

Fax no: +44 (0)20 7991 4619,

Department/Officer: Head of European Corporate Banking Centre/ Alastair Muir

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or any substitute address, fax number, or department or officer as the party may notify to the other by not less than five Business Days’ notice.

16.2	Loan Agreement provisions The clauses of the Loan Agreement numbered 28.1 (Communications in writing), 28.3 (Delivery), 28.4 (Electronic communication) and 28.5 (English language) shall apply to any notice or demand under or in connection with this Guarantee.

17.	Governing Law

This Guarantee and any non-contractual obligations arising out of or in connection with it are governed by English law.

18.	Enforcement

18.1

Jurisdiction of English courts The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Guarantee (including a dispute relating to the existence, validity or termination of this Guarantee or any non-contractual obligation arising out of or in connection with this Guarantee) (a “Dispute”). The Guarantor agrees that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly it will not argue to the contrary.

This Clause 18.1 is for the benefit of the Lender only. As a result, the Lender shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions.

18.2	Service of process

18.2.1

Without prejudice to any other mode of service allowed under any relevant law, the Guarantor:

(a)

irrevocably appoints Hill Dickinson Service (London) Limited of Broadgate Tower, 20 Primrose Street, London EC2A 2E, United Kingdom as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and

(b)

agrees that failure by a process agent to notify the Guarantor of the process will not invalidate the proceedings concerned.

18.2.2

If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process or terminates its appointment as agent for service of process, the Guarantor must immediately (and in any event within five days of such event taking place) appoint another agent on terms acceptable to the Lender. Failing this, the Lender may appoint another agent for this purpose.

This Guarantee has been executed on the date stated at the beginning of this Guarantee.

Page 14

Schedule 1

Form of Compliance Certificate

To:	HSBC Bank plc

From:

Eurodry Ltd.

Dated:

Dear Sirs

Guarantee dated 2019 between Eurodry Ltd. and HSBC Bank plc (the “Guarantee”) in respect of Loan Agreement dated 2019 between Eirini Shipping Ltd and HSBC Bank plc (the “Loan Agreement”)

1	We refer to the Guarantee. This is a Compliance Certificate. Terms defined in the Guarantee have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

2	We confirm that we maintain:

(a)

Maximum Leverage of not higher than 75%;

(b)

Liquidity of an amount of not less than $300,000 per Fleet Vessel; and

(c)

Net Worth of not less than $15,000,000.

3	We confirm that no Default (as defined in the Loan Agreement) is continuing.

Signed

	Director	Director

	of	of

	Eurodry Ltd.	Eurodry Ltd.




	Director	Director

	of	of

	Eirini Shipping Ltd	Eirini Shipping Ltd

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Execution

The Guarantor

Signed and delivered		)
as a Deed		)
by Eurodry Ltd.		)
acting by Stefania Karmiri		)	/s/ Stefania Karmiri
		)
its duly authorised attorney-in-fact		)
		)
in the presence of:		)

Witness signature:			/s/ Evgenia Anastasopoulou
Name: Evgenia Anastasopoulou
Address:	STEPHENSON HARWOOD ARISTON BUILDING 2 FILELLINON STR. & AKTI MIAOULI PIRAEUS 185 36


The Lender

Signed and delivered		)
as a Deed		)
by HSBC Bank plc		)
acting by Katerina Eleftheriou		)	/s/ Katerina Eleftheriou
		)
its duly authorised attorney-in-fact		)
		)
in the presence of:		)

Witness signature:
Name: Evgenia Anastasopoulou			/s/ Evgenia Anastasopoulou
Address:	STEPHENSON HARWOOD ARISTON BUILDING 2 FILELLINON STR. & AKTI MIAOULI PIRAEUS 185 36

Page 16

Exhibit 8.1

List of Subsidiaries

Subsidiary	Country of Incorporation
Pantelis Shipping Corp.	Liberia
Eirini Shipping Ltd.	Liberia
Ultra One Shipping Ltd.	Liberia
Ultra Two Shipping Ltd.	Liberia
Kamsarmax One Shipping Ltd.	Marshall Islands
Kamsarmax Two Shipping Ltd.	Marshall Islands
Areti Shipping Ltd.	Marshall Islands
Light Shipping Ltd.	Marshall Islands

Exhibit 12.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

I, Aristides J. Pittas, certify that:

1. I have reviewed this annual report on Form 20-F of EuroDry Ltd. (the “Company”);

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 Rule 13a-15(f) and 15d-15(f)) for the Company and have:

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;

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;

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

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; and

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 function):

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

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 16, 2020



/s/ Aristides J. Pittas
Aristides J. Pittas Chief Executive Officer

Exhibit 12.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

I, Anastasios Aslidis, certify that:

1. I have reviewed this annual report on Form 20-F of EuroDry Ltd. (the “Company”);

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 16, 2020


/s/ Anastasios Aslidis
Anastasios Aslidis Chief Financial Officer

Exhibit 13.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with this Annual Report of EuroDry Ltd. (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, Aristides J. Pittas, 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 16, 2020


/s/ Aristides J. Pittas
Chief Executive Officer

Exhibit 13.2

CHIEF FINANCIAL OFFICER CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Annual Report of EuroDry Ltd. (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, Anastasios Aslidis, 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 16, 2020



/s/ Anastasios Aslidis
Chief Financial Officer