SCORPIO BULKERS INC. (Form: 20-F, Received: 03/01/2016 06:30:28)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)



o	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2015
	OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________________ to _________________
	OR
o	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: 001-36231

SCORPIO BULKERS INC.

(Exact name of Registrant as specified in its charter)

(Translation of Registrant’s name into English)

Republic of the Marshall Islands

(Jurisdiction of incorporation or organization)

9, Boulevard Charles III Monaco 98000

(Address of principal executive offices)

Mr. Emanuele Lauro

377-9798-5716

info@scorpiobulkers.com

9, Boulevard Charles III Monaco 98000

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

Securities registered or to be registered pursuant to section 12(b) of the Act.



Title of each class		Name of each exchange on which registered
Common stock, par value $0.01 per share		New York Stock Exchange
Preferred Stock Purchase Rights		New York Stock Exchange
7.50% Senior Notes due 2019		New York Stock Exchange

Securities registered or to be registered pursuant to section 12(g) of the Act.

NONE

(Title of class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

NONE

(Title of class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, 2015 , there were 28,686,561 outstanding shares of common stock, par value $0.01 per share.

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



Yes	No	x

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



Yes	No	x

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

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



Yes	x	No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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	x	No

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



Large accelerated filer o	Accelerated filer x	Non-accelerated filer o

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



x		U.S. GAAP

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

		Other

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



		Item 17		Item 18

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



Yes	No	x

TABLE OF CONTENTS



PART I			1
	ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
	ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	1
	ITEM 3.	KEY INFORMATION	1
	ITEM 4.	INFORMATION ON THE COMPANY	21
	ITEM 4A.	UNRESOLVED STAFF COMMENTS	49
	ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	49
	ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	65
	ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	71
	ITEM 8.	FINANCIAL INFORMATION	76
	ITEM 9.	OFFER AND THE LISTING	77
	ITEM 10.	ADDITIONAL INFORMATION	78
	ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	86
	ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	87

PART II			87
	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	87
	ITEM 16B .	CODE OF ETHICS	87
	ITEM 16C.	PRINCIPAL ACCOUNTING FEES AND SERVICES	87
	ITEM 16D.	EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES	88
	ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	88
	ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	88
	ITEM 16G.	CORPORATE GOVERNANCE	88
	ITEM 16H.	MINE SAFETY DISCLOSURE	88

PART III			88
	ITEM 17.	FINANCIAL STATEMENTS	88
	ITEM 18.	FINANCIAL STATEMENTS	88
	ITEM 19.	EXHIBITS	88

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Scorpio Bulkers Inc. 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 therewith. This document and any other written or oral statements made by the Company or on its behalf may include forward-looking statements, which reflect its current views with respect to future events and financial performance. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. This document includes assumptions, expectations, projections, intentions and beliefs about future events. These statements are intended as “forward-looking statements.” We caution that assumptions, expectations, projections, intentions and beliefs about future events may and often do vary from actual results and the differences can be material. When used in this document, the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “projects,” “likely,” “will,” “would,” “could” and similar expressions or phrases may identify forward-looking statements.

All statements in this document that are not statements of historical fact are forward-looking statements. Forward-looking statements include, but are not limited to, such matters as:


•	our future operating or financial results;


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


•	the strength of world economies;


•	stability of Europe and the Euro;


•	fluctuations in interest rates and foreign exchange rates;


•	general drybulk shipping market conditions, including fluctuations in charter hire rates and vessel values;


•	changes in demand in the drybulk shipping industry, including the market for our vessels;


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


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


•	potential liability from pending or future litigation;


•	general domestic and international political conditions;


•	potential disruption of shipping routes due to accidents or political events;


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


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


•	our ability to successfully employ our existing and newbuilding drybulk vessels;


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


•	risks associated with vessel construction;


•	potential exposure or loss from investment in derivative instruments;


•	potential conflicts of interest involving members of our board and senior management;


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


•	vessel breakdowns and instances of off-hire; and


•	statements about drybulk shipping market trends, charter rates and factors affecting supply and demand.

We have based these statements on assumptions and analyses formed by applying our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in or referred to in this section. We undertake no obligation, and specifically decline any obligation, except as required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this annual report might not occur.

See “Item 3. Key Information—D. Risk Factors” for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. These factors and the other risk factors described in this annual report are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements.

PART I



ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.



ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.



ITEM 3.	KEY INFORMATION

Unless otherwise indicated, references to “Scorpio Bulkers,” the “Company,” “we,” “our,” “us” or similar terms refer to the registrant, Scorpio Bulkers Inc., and its subsidiaries, except where the context otherwise requires. We use the term deadweight tons, or dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, in describing the size of our vessels. Unless otherwise indicated, all references to “U.S. dollars,” “dollars,” “U.S. $” and “$” in this annual report are to the lawful currency of the United States of America.

References in this annual report to our common shares are adjusted to reflect the consolidation of our common shares through a one-for-twelve reverse stock split, which our Board of Directors made effective as of December 31, 2015.


A.	Selected Financial Data

The selected Consolidated Statements of Operations data and the Consolidated Balance Sheet data presented for the years ended December 31, 2015 and 2014, and for the period March 20, 2013 (date of inception) to December 31, 2013 are derived from our audited consolidated financial statements. Such selected financial data should be read in connection with the consolidated financial statements contained in this report.



	Year ended December 31,						Period from March 20, 2013 (date of inception) to December 31,
	2015			2014			2013
In thousands of U.S. dollars, except per share and share data
Consolidated Statement of Operations Data:
Total vessel revenue	62,521			48,987			—
Total operating expenses	554,130			166,475			5,505
Operating loss	(491,609		)	(117,488		)	(5,505		)
Total other loss	(19,180		)	923			(802		)
Net loss	$	(510,789	)	$	(116,565	)	$	(6,307	)

Basic weighted average shares outstanding	21,410,177			11,466,072			3,327,097
Diluted weighted-average shares outstanding	21,410,177			11,466,072			3,327,097

Basic loss per share	$	(23.86	)	$	(10.17	)	$	(1.90	)
Diluted loss per share	$	(23.86	)	$	(10.17	)	$	(1.90	)



	As of December 31,
In thousands of U.S. dollars	2015		2014		2013
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	200,300	$	272,673	$	733,896
Assets held for sale	172,888		43,781		—
Vessels, net	764,454		66,633		—
Vessels under construction	288,282		866,844		371,692
Total assets	1,485,436		1,324,205		1,105,684
Current liabilities (including current portion of bank loans)	127,064		20,342		1,472
Bank loans	350,216		30,250		—
Senior Notes	73,625		73,625		—
Total liabilities	550,905		124,217		1,472
Shareholders’ equity	934,531		1,199,988		1,104,212


B.	Capitalization and Indebtedness

Not applicable.


C.	Reasons for the Offer and Use of Proceeds

Not applicable.


D.	Risk Factors

The following risks relate principally to the industry in which we operate and our business in general. Other risks relate principally to the securities market and ownership of our securities, including our common shares and our 7.50% Senior Notes due 2019, which we refer to as our Notes. The occurrence of any of the events described in this section could significantly and negatively affect our business, financial condition, operating results or cash available for the payment of dividends on our common shares and interest on our Notes, or the trading price of our securities.

INDUSTRY SPECIFIC RISK FACTORS

Charter hire rates for drybulk vessels are volatile and have declined significantly since their historic highs and may remain at low levels or decrease in the future, which may adversely affect our earnings, revenue and profitability and our ability to comply with our loan covenants.

The drybulk shipping industry is cyclical with high volatility in charter hire rates and profitability. The degree of charter hire rate volatility among different types of drybulk vessels has varied widely; however, the continued downturn in the drybulk charter market has severely affected the entire drybulk shipping industry and charter hire rates for drybulk vessels have declined significantly from historically high levels. In the past, and presently, time charter and spot market charter rates for drybulk carriers have declined below operating costs of vessels. The Baltic Dry Index, or the BDI, a daily average of charter rates for key drybulk routes published by the Baltic Exchange Limited, which has long been viewed as the main benchmark to monitor the movements of the drybulk vessel charter market and the performance of the entire drybulk shipping market, declined 94% in 2008 from its high of almost 12,000 in May 2008 and has remained volatile since then. During the year ended December 31, 2015, the BDI fluctuated in a range between 471 and 1,222. On February 10, 2016, the BDI dropped to 290, the lowest level it has ever reached.

Fluctuations in charter rates result from changes in the supply of and demand for vessel capacity and changes in the supply of and demand for the major commodities carried by water internationally. 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 also unpredictable. Since we primarily charter all our vessels in the spot market we are exposed to the cyclicality and volatility of the spot market. Spot market charterhire rates may fluctuate significantly based upon available charters and the supply of and demand for seaborne shipping capacity, and we may be unable to keep our vessels fully employed in these short-term markets. Alternatively, charter rates available in the spot market may be insufficient to enable our vessels to operate profitably. A significant decrease in charter rates would affect asset values and adversely affect our profitability, cash flows and ability to pay dividends, if any, in the future, on our common shares, and interest on our Notes. Furthermore, a significant decrease in charter

rates would cause asset values to decline, or decline further, and we may have to record an impairment charge in our consolidated financial statements which could adversely affect our financial results.

Factors that influence demand for drybulk vessel capacity include:


•	supply of and demand for energy resources, commodities and industrial products;


•	changes in the exploration or production of energy resources, commodities, consumer and industrial products;


•	the location of regional and global production and manufacturing facilities;


•	the location of consuming regions for energy resources, commodities, consumer and industrial products;


•	the globalization of production and manufacturing;


•	global and regional economic and political conditions, including armed conflicts and terrorist activities, embargoes and strikes;


•	natural disasters;


•	disruptions and developments in international trade;


•	changes in seaborne and other transportation patterns, including the distance cargo is transported by sea;


•	environmental and other regulatory developments;


•	currency exchange rates; and


•	weather.

Factors that influence the supply of drybulk vessel capacity include:


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


•	the number of shipyards and ability of shipyards to deliver vessels;


•	port and canal congestion;


•	the scrapping rate of older vessels;


•	speed of vessel operation;


•	vessel casualties; and


•	the number of vessels that are out of service, namely those that are laid-up, drydocked, awaiting repairs or otherwise not available for hire.

In addition to the prevailing and anticipated freight 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 costs, the efficiency and age profile of the existing drybulk 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.

We anticipate that the future demand for our drybulk vessels will be dependent upon economic growth in the world’s economies, including China and India, seasonal and regional changes in demand, changes in the capacity of the global drybulk fleet and the sources and supply of drybulk cargo to be transported by sea. Adverse economic, political, social or other developments could have a material adverse effect on our business and operating results.

Global economic conditions may continue to negatively impact the drybulk shipping industry.

In the current global economy, operating businesses have recently faced tightening credit, weakening demand for goods and services, weak international liquidity conditions, and declining markets. In particular, lower demand for drybulk cargoes as well as diminished trade credit available for the delivery of such cargoes have led to decreased demand for drybulk carriers, creating downward pressure on charter rates and vessel values. The relatively weak global economic conditions have and may continue to have a number of adverse consequences for drybulk and other shipping sectors, including, among other things:


•	low charter rates, particularly for vessels employed on short-term time charters or in the spot market;


•	decreases in the market value of drybulk vessels and limited second-hand market for the sale of vessels;


•	limited financing for vessels;


•	widespread loan covenant defaults; and


•	declaration of bankruptcy by certain vessel operators, vessel owners, shipyards and charterers.

The occurrence of one or more of these events could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Weak economic conditions throughout the world, in particular in China and the rest of the Asia-Pacific region, could negatively affect our results of operations, financial condition, cash flows and ability to obtain financing, and may adversely affect the market price of our common shares.

Negative trends in the global economy that emerged in 2008 continue to adversely affect global economic conditions. In addition, the world economy is currently facing a number of new challenges, recent turmoil and hostilities in various regions, including Russia, Syria, Iraq, North Korea, North Africa and Ukraine. The weakness in the global economy has caused, and may continue to cause, a decrease in worldwide demand for certain goods, and, thus, shipping. Continuing economic instability could have a material adverse effect on our ability to implement our business strategy.

The United States, the European Union and other parts of the world continue to exhibit weak economic trends. The credit markets in the United States and Europe have experienced significant contraction, deleveraging and reduced liquidity, and the U.S. federal and state governments and European authorities have implemented and are considering a broad variety of governmental action and/or new regulation of the financial markets and may implement additional regulations in the future. Securities and futures markets and the credit markets are subject to comprehensive statutes, regulations and other requirements. The Securities and Exchange Commission, or the 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.

Global financial markets and economic conditions have been, and continue to be volatile. Credit markets and the debt and equity capital markets have been distressed and the uncertainty surrounding the future of the global credit markets has resulted in reduced access to credit worldwide. These issues, along with significant write-offs in the financial services sector, the re-pricing of credit risk and the current weak economic conditions, have made, and will likely continue to make, it difficult to obtain additional financing. 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 financing will be available to the extent required, or that we will be able to refinance our credit facilities, on acceptable terms or at all. If financing or refinancing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they come due or we may be unable to enhance our existing business, complete the acquisition of our newbuildings and additional vessel acquisitions or otherwise take advantage of business opportunities as they arise.

We face risks attendant 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 current adverse changes in market conditions and regulatory climate in the United States and worldwide may adversely affect our business or impair our ability to borrow amounts under credit facilities or any future financial arrangements. The recent and developing economic and governmental

factors, together with possible further declines in charter rates and vessel values, may have a material adverse effect on our results of operations, financial condition or cash flows, or the trading price of our common shares.

Continued economic slowdown in the Asia Pacific region, particularly in China, may exacerbate the effect on us, as we anticipate a significant number of the port calls made by our vessels will continue to involve the loading or discharging of drybulk commodities in ports in the Asia Pacific region. Before the global economic financial crisis that began in 2008, China had one of the world’s fastest growing economies in terms of GDP, which had a significant impact on shipping demand. The growth rate of China’s GDP is estimated to have decreased to approximately 6.8% for the year ended December 31, 2015, which is China’s lowest growth rate for the past five years, and continues to remain below pre-2008 levels. It is possible that China and other countries in the Asia Pacific region will continue to experience slowed or even negative economic growth in the future. Moreover, the current economic slowdown in the economies of the United States, the European Union and other Asian countries may further adversely affect economic growth in China and elsewhere. Our business, financial condition and results of operations, ability to pay dividends, if any, as well as our future prospects, will likely be materially and adversely affected by a further economic downturn in any of these countries.

The fair market values of our vessels have declined and may decline further, which could limit the amount of funds that we can borrow, cause us to breach certain financial covenants in our credit facilities, or result in an impairment charge, and we may incur a loss if we sell vessels following a decline in their market value.

The fair market values of drybulk vessels, including our vessels, have generally experienced high volatility and have recently declined significantly. The fair market value of our vessels may continue to fluctuate depending on a number of factors, including:


•	prevailing level of charter rates;


•	general economic and market conditions affecting the shipping industry;


•	types, sizes and ages of vessels;


•	supply of and demand for vessels;


•	other modes of transportation;


•	cost of newbuildings;


•	governmental or other regulations;


•	the need to upgrade vessels as a result of charterer requirements, technological advances in vessel design or equipment or otherwise;


•	technological advances; and


•	competition from other shipping companies and other modes of transportation.

If the fair market values of our vessels decline, or decline further, the amount of funds we may draw down under our secured credit facilities may be limited and we may not be in compliance with certain covenants contained in our secured credit facilities, which may result in an event of default. In such circumstances, we may not be able to refinance our debt or obtain additional financing. If we are not able to comply with the covenants in our secured credit facilities, and are unable to remedy the relevant breach, our lenders could accelerate our debt and foreclose on our fleet. In addition, if we sell one or more of our vessels at a time when vessel prices have fallen, the sale may be less than the vessel’s carrying value on our consolidated financial statements, resulting in a loss and a reduction in earnings.

Conversely, if vessel values are elevated at a time when we wish to acquire additional vessels, the cost of such acquisitions may increase and this could adversely affect our business, results of operations, cash flow and financial condition.

A further reduction in charter rates and other market deterioration may require us to record impairment charges related to our long-lived assets (our vessels) and such charges may be large and have a material impact on our consolidated financial statements.

At December 31, 2015, we had vessels and vessels under construction of $1,052.7 million on our consolidated balance sheet, representing 113% of our shareholders' equity. Additionally, as of December 31, 2015, $433.6 million of installment payments remain on existing newbuilding contracts (excluding payments related to vessels classified as held for sale).

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 international, national, state and local laws, regulations, treaties and conventions in force in international waters and the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. These laws and regulations include, but are not limited to, the U.S. Oil Pollution Act of 1990, or OPA, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, the U.S. Clean Air Act, the U.S. Clean Water Act, or the CWA, and the U.S. Maritime Transportation Security Act of 2002, or the MTSA, and regulations of the International Maritime Organization, or IMO, including the International Convention for the Prevention of Pollution from Ships of 1973 (as from time to time amended and generally referred to as MARPOL) including the designation of Emission Control Areas, or ECAs, thereunder, the International Convention for the Safety of Life at Sea of 1974 (as from time to time amended and generally referred to as SOLAS), the International Convention on Civil Liability for Bunker Oil Pollution Damage, and the International Convention on Load Lines of 1966 (as from time to time amended), or the LL Convention.

Compliance with such laws, regulations and standards, where applicable, may require installation of costly equipment or implementation of operational changes and may affect the resale value or useful lives of our vessels. 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. Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with them 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. For example, the International Convention for the Control and Management of Ships’ Ballast Water and Sediments, or the BWM Convention, adopted by the UN International Maritime Organization in February 2004, calls for the phased introduction of mandatory reducing living organism limits in ballast water over time (as discussed further below). In order to comply with these living organism limits, vessel owners may have to install expensive ballast water treatment systems or make port facility disposal arrangements and modify existing vessels to accommodate those systems. Adoption of the BWM Convention standards could have an adverse material impact on our business, financial condition and results of operations depending on the available ballast water treatment systems and the extent to which existing vessels must be modified to accommodate such systems.

Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the United States.

We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, and certificates with respect to our operations, and satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although we have insurance to cover certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on our business, results of operations, cash flows and financial condition and our ability to pay dividends, if any, in the future, on our common shares, and interest on our Notes.

An over-supply of drybulk carrier capacity may prolong or further depress the current low charter rates, which may limit our ability to operate our drybulk carriers profitably.

The supply of drybulk vessels has increased significantly since the beginning of 2006. According to SSY, as of January 2016, newbuilding orders have been placed for approximately 16.0% of the existing fleet capacity. Vessel supply growth has been outpacing vessel demand growth over the past few years causing downward pressure on charter rates. Until the new supply is fully absorbed by the market, charter rates may continue to be under pressure due to vessel supply in the near to medium term.

World events could affect our results of operations and financial condition.

Past terrorist attacks, as well as the threat of future terrorist attacks around the world, continue to cause uncertainty in the world’s financial markets and may affect our business, operating results and financial condition. Continuing conflicts and recent developments in Russia, Ukraine, the Korean Peninsula, the Middle East, including Iraq, Syria, Egypt and North Africa, and the presence of U.S. or other armed forces in the Middle East, 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 adversely affect our ability to obtain additional financing on terms acceptable to us or at all. In the past, political conflicts have also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea and the Gulf of Aden off the coast of Somalia. Any of these occurrences could have a material adverse impact on our operating results, revenues and costs.

Acts of piracy on ocean-going vessels have had and may continue to have an adverse effect on our business.

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 decreased during 2014 to its lowest level since 2010, the frequency increased in early 2015 and sea piracy incidents continue to occur, particularly in the Gulf of Aden off the coast of Somalia, in the Gulf of Guinea and the West Coast of Africa, with drybulk vessels particularly vulnerable to such attacks. If these piracy attacks result in regions in which our vessels are deployed being characterized as “war risk” zones by insurers, as the Gulf of Aden temporarily was in May 2008, 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 due to employing 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 charter hire 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 results of operations.

Our vessels may call on ports located in countries that are subject to restrictions imposed by the U.S. or other governments, which could adversely affect our reputation and the market for our common shares.

Although we do not expect that our vessels will call on ports located in countries subject to sanctions and embargoes imposed by the U.S. government and other authorities or countries identified by the U.S. government or other authorities as state sponsors of terrorism, such as Cuba, Iran, Sudan and Syria, from time to time on charterers’ instructions, our vessels may call on ports located in such countries in the future. The U.S. sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time. In 2010, the U.S. enacted the Comprehensive Iran Sanctions Accountability and Divestment Act, or CISADA, which amended the Iran Sanctions Act. Among other things, CISADA introduced limits on the ability of companies and persons to do business or trade with Iran when such activities relate to the investment, supply or export of refined petroleum or petroleum products. In 2012, President Obama signed Executive Order 13608 which prohibits foreign persons from violating or attempting to violate, or causing a violation of any sanctions in effect against Iran or facilitating any deceptive transactions for or on behalf of any person subject to U.S. sanctions. Any persons found to be in violation of Executive Order 13608 will be deemed a foreign sanctions evader and will be banned from all contacts with the United States, including conducting business in U.S. dollars. Also in 2012, President Obama signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012, or the Iran Threat Reduction Act, which created new sanctions and strengthened existing sanctions. Among other things, the Iran Threat Reduction Act intensifies existing sanctions regarding the provision of goods, services, infrastructure or technology to Iran’s petroleum or petrochemical sector. The Iran Threat Reduction Act also includes a provision requiring the President of the United States to impose five or more sanctions from Section 6(a) of the Iran Sanctions Act, as amended, on a person the President determines is a controlling beneficial owner of, or otherwise owns, operates, or controls or insures a vessel that was used to transport crude oil from Iran to another country and (1) if the person is a controlling beneficial owner of the vessel, the person had actual knowledge the vessel was so used or (2) if the person otherwise owns, operates, or controls, or insures the vessel, the person knew or should have known the vessel was so used. Such a person could be subject to a variety of sanctions,

including exclusion from U.S. capital markets, exclusion from financial transactions subject to U.S. jurisdiction, and exclusion of that person’s vessels from U.S. ports for up to two years.

On November 24, 2013, the P5+1 (the United States, United Kingdom, Germany, France, Russia and China) entered into an interim agreement with Iran entitled the “Joint Plan of Action”, or the JPOA. Under the JPOA it was agreed that, in exchange for Iran taking certain voluntary measures to ensure that its nuclear program is used only for peaceful purposes, the U.S. and EU would voluntarily suspend certain sanctions for a period of six months. On January 20, 2014, the U.S. and E.U. indicated that they would begin implementing the temporary relief measures provided for under the JPOA. These measures included, among other things, the suspension of certain sanctions on the Iranian petrochemicals, precious metals, and automotive industries from January 20, 2014 until July 20, 2014. The JPOA was subsequently extended twice.

On July 14, 2015, the P5+1 and the EU announced that they reached a landmark agreement with Iran titled the Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program, or the JCPOA, which is intended to significantly restrict Iran’s ability to develop and produce nuclear weapons for 10 years while simultaneously easing sanctions directed toward non-U.S. persons for conduct involving Iran, but taking place outside of U.S. jurisdiction and does not involve U.S. persons. On January 16, 2016, which we refer to as Implementation Day, the United States joined the EU and the UN in lifting a significant number of their nuclear-related sanctions on Iran following an announcement by the International Atomic Energy Agency, or the IAEA, that Iran had satisfied its respective obligations under the JCPOA.

Although we believe that we are in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain such compliance, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in fines or other penalties and could severely impact our ability to access U.S. capital markets and conduct our business, and could result in some investors deciding, or being required, to divest their interest, or not to invest, in us. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, our securities may adversely affect the price at which our securities trade. Moreover, our charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation. In addition, our reputation and the market for our securities may be adversely affected if we engage in certain other activities, such as entering into charters with individuals or entities in countries subject to U.S. sanctions and embargo laws that are not controlled by the governments of those countries, or engaging in operations associated with those countries pursuant to contracts with third parties that are unrelated to those countries or entities controlled by their governments. Investor perception of the value of our securities may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries.

Our operating results will be subject to seasonal fluctuations, which could affect our operating results.

We operate our vessels in markets that have historically exhibited seasonal variations in demand and, as a result, in charter hire rates. This seasonality may result in volatility in our operating results to the extent that we enter into new charter agreements or renew existing agreements during a time when charter rates are weaker or we operate our vessels on the spot market or index based time charters, which may result in quarter-to-quarter volatility in our operating results. The drybulk sector is typically stronger in the fall and winter months in anticipation of increased consumption of coal and other raw materials in the northern hemisphere. 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. As a result, our revenues from our drybulk carriers may be weaker during the fiscal quarters ended June 30 and September 30, and, conversely, our revenues from our drybulk carriers may be stronger in fiscal quarters ended December 31 and March 31.

We are subject to international safety regulations and requirements imposed by our classification societies and the failure to comply with these regulations and requirements 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 International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or the ISM Code. The ISM Code requires ship owners, ship managers and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation of vessels and describing procedures for dealing with emergencies. In addition, vessel classification societies impose significant safety and other requirements on our vessels.

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. Each of the vessels that we have agreed to acquire will be ISM Code-certified when delivered to us. However, if we are subject to increased liability for non-compliance or if our insurance coverage is adversely impacted as a result of non-compliance, it may negatively affect our ability to pay dividends, if any, in the future, on our common shares and interest on our Notes. If any of our vessels are denied access to, or are detained in, certain ports as a result of non-compliance with the ISM Code, our revenues may be adversely impacted.

In addition, the hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention. The cost of maintaining our vessels’ classifications may be substantial. If any vessel does not maintain its class or fails any annual, intermediate or special survey, the vessel will be unable to trade between ports and will be unemployable and uninsurable, which could negatively impact our results of operations and financial condition.

Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.

International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination and trans-shipment points. Inspection procedures may result in the seizure of contents of our vessels, delays in the loading, offloading, trans-shipment or delivery and the levying of customs duties, fines or other penalties against us.

It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. Changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, financial condition and results of operations.

Rising fuel, or bunker, prices may adversely affect our profits.

Since we primarily employ our vessels in the spot market or in spot market-oriented pools, we expect that fuel, or bunkers, will be typically the largest expense in our shipping operations for our vessels. While we believe that we will experience a competitive advantage as a result of increased bunker prices due to the greater fuel efficiency of our vessels compared to the average global fleet, changes in the price of fuel may adversely affect our profitability. 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, or OPEC, and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Further, fuel may become much more expensive in the future, which may reduce our profitability and the competitiveness of our business compared to other forms of transportation.

We operate drybulk vessels worldwide and as a result, our business has inherent operational risks, which may reduce our revenue or increase our expenses, and we may not be adequately covered by insurance.

The international shipping industry is an inherently risky business involving global operations. Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather, mechanical failures, human error, environmental accidents, war, terrorism, piracy and other circumstances or events. In addition, transporting cargoes across a wide variety of international jurisdictions creates a risk of business interruptions due to political circumstances in foreign countries, hostilities, labor strikes and boycotts, the potential for changes in tax rates or policies, and the potential for government expropriation of our vessels. Any of these events may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.

Furthermore, t he operation of certain vessel types, such as drybulk carriers, has certain unique risks. With a drybulk carrier, the cargo itself and its interaction with the vessel can be an operational risk. 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 at 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 vessel’s 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 may have a material adverse effect on our business, results of operations, cash flows, financial condition

and ability to pay dividends, if any, in the future, on our common shares, and interest on our Notes. In addition, the loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator.

In the event of a casualty to a vessel or other catastrophic event, we will rely on our insurance to pay the insured value of the vessel or the damages incurred. We procure insurance for the vessels in our fleet against those risks that we believe the shipping industry commonly insures against. These insurances include marine hull and machinery insurance, protection and indemnity insurance, which include pollution risks and crew insurances, and war risk insurance. Currently, the amount of coverage for liability for pollution, spillage and leakage available to us on commercially reasonable terms through protection and indemnity associations and providers of excess coverage is $1 billion per vessel per occurrence.

We have procured hull and machinery insurance, protection and indemnity insurance, which includes environmental damage and pollution insurance coverage, and war risk insurance for our fleet. We do not maintain for our vessels insurance against loss of hire, which covers business interruptions that result from the loss of use of a vessel. We may not be adequately insured against all risks. We may not be able to obtain adequate insurance coverage for our fleet in the future, and we may not be able to obtain certain insurance coverage. The insurers may not pay particular claims. Our insurance policies may contain deductibles for which we will be responsible and limitations and exclusions which may increase our costs or lower our revenue. Moreover, insurers may default on claims they are required to pay.

We cannot assure you that we will be adequately insured against all risks or that we will be able to obtain adequate insurance coverage at reasonable rates for our vessels in the future. For example, in the past more stringent environmental regulations have led to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. Additionally, our insurers may refuse to pay particular claims. Any significant loss or liability for which we are not insured could have a material adverse effect on our financial condition.

Maritime claimants could arrest or attach one or more of our vessels, which could interrupt 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 a 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 arrest or attachment of one or more of our vessels could interrupt our cash flows and require us to pay large sums of money to have the arrest or attachment lifted. In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel that is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could attempt to assert “sister ship” liability against one vessel in our fleet for claims relating to another of our vessels.

Governments could requisition our vessels during a period of war or emergency, which could negatively impact our business, financial condition, results of operations, and available cash.

A government could requisition one or more of our vessels for title or for hire. Requisition for title occurs when a government takes control of a vessel and becomes its owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes its charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances. Although we would be entitled to compensation in the event of a requisition of one or more of our vessels, the amount and timing of payment would be uncertain. Government requisition of one or more of our vessels may negatively impact our revenues.

Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties, contract terminations 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, or the FCPA. We are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the FCPA. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties and 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.

COMPANY SPECIFIC RISK FACTORS

We are a recently formed company with a limited history of operations.

We were formed in March 2013 and have a limited performance record, operating history and historical financial statements upon which you can evaluate our operations or our ability to implement and achieve our business strategy. We cannot assure you that we will be successful in implementing our business strategy. In addition, while our Chief Executive Officer and the management teams of our commercial and technical managers have experience operating drybulk carriers, other members of our senior management, who have experience operating tanker and other classes of vessels, have limited experience operating drybulk carriers. We believe that the experience of our senior management in the ownership and operation of tanker vessels, which require significant technical expertise to operate and are subject to heightened regulatory oversight and more rigorous vetting procedures from charterers than drybulk carriers, provides our management team with the expertise and qualifications to manage drybulk carriers, however we cannot assure you that they will be able to successfully operate our fleet.

We cannot assure you that we will be able to raise funds sufficient to meet our future capital and operating needs.

We cannot assure you that our available liquidity will be sufficient to meet our ongoing capital and operating needs. As of December 31, 2015, we had commitments for a maximum of $357.1 million of secured debt for newbuilding vessels.

Most of our credit facilities contain loan to value, or LTV ratios. These LTV ratios may effectively limit the amount we can borrow under each such credit facility based on a percentage of the appraised value of the vessels upon their delivery securing the facility. As a result, the maximum amount committed under such facilities may not be available for us to borrow at the time a vessel is delivered, particularly if the appraised value of the vessels securing the facility has decreased at such time due to market conditions or other factors. If the available amount under our credit facilities is not sufficient to make the required payments under our newbuilding contracts, we will be required to use our available liquidity to cover any shortfall, and there can be no assurance that such liquidity will be available at such time on reasonable terms or at all. We are exposed to the cyclicality and volatility of spot market charterhire rates, which have fluctuated, and may continue to fluctuate, significantly based upon available charters and the supply of and demand for seaborne shipping capacity. Current charter rates available in the spot market are insufficient to enable our vessels to operate profitably, which have adversely affected, and could continue to adversely affect, our available liquidity, profitability, cash flows, and financial results. Furthermore, a prolonged period of current charter rates or a significant decrease in charter rates may negatively impact our liquidity position and may cause our vessel values to decline, which could, among other things, affect our ability to comply with the financial covenants in our loan agreements. Please see “-The fair market values of our vessels have declined and may decline further, which could limit the amount of funds that we can borrow, cause us to breach certain financial covenants in our credit facilities, or result in an impairment charge, and we may incur a loss if we sell vessels following a decline in their market value” and “-We are leveraged, which could significantly limit our ability to execute our business strategy, and we may be unable to comply with our covenants in our credit facilities that impose operating and financial restrictions on us, which could result in a default under the terms of these agreements.”

The Scorpio Group Pools in which our vessels operate, or are expected to operate, are newly formed and have limited prior operating history. We cannot assure you that these pools will be successful in finding employment for all of our vessels.

The Scorpio Group Pools, which consist of the Scorpio Kamsarmax Pool and the Scorpio Ultramax Pool in which our vessels operate, are newly formed and have limited prior operating history. We own a large number of vessels that have entered, or will enter, these pools in a relatively short period of time without having previously secured employment. We cannot assure you that these pools will be successful in finding employment for all such vessels in the volatile spot market or whether any such employment will be at profitable rates. We cannot assure you that our vessels will be profitably operated by such pools. In addition, vessels owned by our affiliates, including members of the Scorpio Group, which includes Scorpio Ship Management S.A.M., or SSM, which provides us with vessel technical management services, Scorpio Commercial Management S.A.M., or SCM, which provides us with vessel commercial management services, and Scorpio Services Holding Limited, or SSH, which provides us and other related entities with administrative services and services related to the acquisition of vessels, as well as by unaffiliated third-parties, may participate in such pools. Such vessels may not be of the comparable design or quality to our vessels, negatively impacting the profitability of such pools, while diluting our interest in such profits.

Newbuilding projects are subject to risks that could cause delays, cost overruns or cancellation of our newbuilding contracts.

We are currently party to shipbuilding contracts, with established shipyards in Japan and China for the construction of 16 newbuilding vessels, for an aggregate purchase price of $466.6 million. These vessels are expected to be delivered to us in 2016 and 2017. These construction projects are subject to risks of delay or cost overruns inherent in any large construction project

from numerous factors, including shortages of equipment, materials or skilled labor, unscheduled delays in the delivery of ordered materials and equipment or shipyard construction, failure of equipment to meet quality and/or performance standards, financial or operating difficulties experienced by equipment vendors or the shipyard, unanticipated actual or purported change orders, inability to obtain required permits or approvals, unanticipated cost increases between order and delivery, design or engineering changes and work stoppages and other labor disputes, adverse weather conditions or any other events of force majeure. Significant cost overruns or delays could adversely affect our financial position, results of operations and cash flows. Additionally, failure to complete a project on time may result in the delay of revenue from that vessel.

As of December 31, 2015 we had made total yard payments in the amount of $996.4 million and we have remaining yard installments relating to the 24 newbuilding vessels we had as of that date, in the amount of $433.6 million. As of December 31, 2015 we had a cash balance of $200.3 million and $357.1 million of available borrowings relating to our newbuilding vessels. While we have signed credit facility agreements or received bank commitments in connection with all of the remaining newbuilding vessels in our fleet, if for any reason we fail to make a payment when due, which may result in a default under our newbuilding contracts, or otherwise fail to take delivery of our newbuilding vessels, we would be prevented from realizing potential revenues from these vessels, we could also lose all or a portion of our yard payments that were made by us and we could be liable for penalties and damages under such contracts.

In addition, in the event the shipyards do not perform under their contracts and we are unable to enforce certain refund guarantees with third party banks for any reason, we may lose all or part of our investment, which would have a material adverse effect on our results of operations, financial condition and cash flows.

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 negatively impact our results of operations and cash flows.

We have entered into, and may enter, various contracts, including pooling arrangements, time charters, spot voyage charters, shipbuilding contracts, credit facilities and other 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, and various expenses. Should a counterparty fail to honor its obligations under agreements with us, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, in depressed market conditions, our charterers may no longer need a vessel that is then 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 agreements or avoid their obligations under those contracts. 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 drybulk carrier 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, if any, in the future, on our common shares and interest on our Notes, and comply with covenants in our credit facilities.

We are, and expect to continue to be, dependent on spot market-oriented pools and spot charters and currently low spot charter rates, or any further decrease in spot charter rates in the future will result in significant operating losses.

The Scorpio Group Pools in which our vessels operate are spot market-oriented commercial pools managed by our commercial manager, which are exposed to fluctuations in spot market charter rates. The spot charter market may fluctuate significantly based upon drybulk carrier supply and demand. The successful operation of our vessels in the competitive spot charter market, including within the Scorpio Group Pools, depends on, among other things, obtaining profitable spot charters and minimizing, to the extent possible, time spent waiting for charters and time spent traveling unladen to pick up cargo. The spot market is very volatile, and, currently spot charter rates have declined below the operating cost of vessels. If future spot charter rates do not improve, or decline further, then we may be unable to operate our vessels trading in the spot market profitably, meet our obligations, including payments on indebtedness, or pay dividends in the future. As a result, we have, and may in the future, agree with shipyards to delay taking delivery of certain newbuilding vessels. Furthermore, as charter rates for spot charters are fixed for a single voyage which may last up to several weeks, during periods in which spot charter rates are rising, we will generally experience delays in realizing the benefits from such increases.

Our ability to renew expiring charters or obtain new charters will depend on the prevailing market conditions at the time. If we are not able to obtain new charters in direct continuation with previous charters or for our newbuilding vessels upon their delivery to us, or if new charters are entered into at charter rates substantially below the existing charter rates or on terms otherwise less favorable compared to previous charter terms, our revenues and profitability could be adversely affected.

We cannot assure you that our board of directors will declare dividends.

We currently do not intend to pay dividends to the holders of our common shares. Our board of directors will continue to assess our dividend policy and may in the future determine to pay dividends. The declaration and payment of dividends, if any, will always be subject to the discretion of our board of directors, restrictions contained in our credit facility and the requirements of Marshall Islands law. The timing and amount of any dividends declared will depend on, among other things, our earnings, financial condition and cash requirements and availability, our ability to obtain debt and equity financing on acceptable terms as contemplated by our growth strategy, the terms of our outstanding indebtedness and the ability of our subsidiaries to distribute funds to us. The international drybulk shipping industry is highly volatile, and we cannot predict with certainty the amount of cash, if any, that will be available for distribution as dividends in any period. Also, there may be a high degree of variability from period to period in the amount of cash that is available for the payment of dividends. Until we take delivery of the vessels we have agreed to acquire or identify and acquire additional vessels and deploy them on charters, we will not generate cash from operations for dividends. Accordingly, it may take substantial time before it would be possible for us to pay any dividends.

We may incur expenses or liabilities or be subject to other circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as dividends, including as a result of the risks described herein. Our growth strategy contemplates that we will finance our acquisitions of additional vessels through debt financings or the net proceeds of future equity issuances on terms acceptable to us. If financing is not available to us on acceptable terms, our board of directors may determine to finance or refinance acquisitions with cash from operations, which would reduce the amount of any cash available for the payment of dividends.

In general, under the terms of our credit facilities, we are not permitted to pay dividends if there is a default or a breach of a loan covenant. Please see “Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources” for more information relating to restrictions on our ability to pay dividends under the terms of our proposed credit facilities.

The Republic of Marshall Islands laws generally prohibit 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) or while a company is insolvent or would be rendered insolvent by the payment of such a dividend. We may not have sufficient surplus in the future to pay dividends and our subsidiaries may not have sufficient funds or surplus to make distributions to us. We can give no assurance that dividends will be paid at all.

We may have difficulty managing our planned growth properly.

As of the date of this annual report, we have entered into shipbuilding contracts with established shipyards in Japan and China for the construction of 16 latest generation drybulk vessels. In addition, we charter in three vessels, which we employ in the Scorpio Group Pools. One of our principal strategies is to continue to grow by expanding our operations, and we may, in the future, increase the size of our fleet through timely and selective acquisitions. Our future growth will primarily depend upon a number of factors, some of which may not be within our control. These factors include our ability to:


•	identify suitable drybulk carriers, including newbuilding slots at shipyards and/or shipping companies for acquisitions at attractive prices;


•	obtain required financing for our existing and new operations;


•	identify businesses engaged in managing, operating or owning drybulk carriers for acquisitions or joint ventures;


•	integrate any acquired drybulk carriers or businesses successfully with our existing operations, including obtaining any approvals and qualifications necessary to operate vessels that we acquire;


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


•	identify additional new markets;


•	enhance our customer base; and


•	improve our operating, financial and accounting systems and controls.

Our failure to effectively identify, acquire, develop and integrate any drybulk carriers or businesses, or our inability to effectively manage the size of our fleet, could adversely affect our business, financial condition and results of operations. As a result of the prolonged downturn in the drybulk shipping market, we have recently reduced the size of our fleet through the sale

of certain of our vessels and construction contracts and the termination of certain time charter-in contracts, and we may continue to reduce the size of our fleet in the future.

Furthermore, the number of employees that perform services for us and our current operating and financial systems may not be adequate as we expand the size of our fleet in the drybulk sector, and we may not be able to effectively hire more employees or adequately improve those systems. In addition, if we further expand our fleet, we will need to recruit suitable additional seafarers and shore side administrative and management personnel. We cannot guarantee that we will be able to hire suitable employees as we expand our fleet. If we or our crewing agent encounters business or financial difficulties, we may not be able to adequately staff our vessels. If we are unable to grow our financial and operating systems or to recruit suitable employees as we expand our fleet, our financial performance may be adversely affected and, among other things, the amount of cash available for distribution as dividends to our shareholders may be reduced. Finally, acquisitions may require additional equity issuances, which may dilute our common shareholders if issued at lower prices than the price at which they acquired their shares, or debt issuances (with amortization payments), both of which could lower our available cash. If any such events occur, our financial condition may be adversely affected.

Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel and managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures. The expansion of our fleet may impose significant additional responsibilities on our management and staff, and the management and staff of our commercial and technical managers, and may necessitate that we, and they, increase the number of personnel. We cannot give any assurance that we will be successful in executing our growth plans or that we will not incur significant expenses and losses in connection with our future growth.

If we acquire and operate secondhand vessels, we will be exposed to increased operating costs which could adversely affect our earnings and, as our fleet ages, the risks associated with older vessels could adversely affect our ability to obtain profitable charters.

We may acquire and operate secondhand vessels. While we expect that we would typically inspect secondhand vessels prior to acquisition, this does not provide us with the same knowledge about their condition that we would have had if these vessels had been built for and operated exclusively by us. Generally, purchasers of secondhand vessels do not receive the benefit of warranties from the builders for the secondhand vessels that they acquire.

Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations, or the addition of new equipment to our vessels and may restrict the type of activities in which the vessels may engage. As our vessels age, market conditions may not justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.

The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings.

In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. While all of the vessels in our owned fleet will be newbuildings, as our vessels age typically they will become less fuel-efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations and safety or other equipment standards related to the age of vessels may also require expenditures for alterations or the addition of new equipment to our vessels and may restrict the type of activities in which our vessels may engage. We cannot assure you that, as our vessels age, market conditions will justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.

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

The charter hire rates and the value and operational life of a vessel are determined by a number of factors including the vessel’s efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to load and discharge cargo quickly. Flexibility includes the ability to enter harbors, utilize related docking facilities and pass through canals and straits. The length of a vessel’s physical life is related to its original design and construction, its maintenance and the impact of the stress of operations. If new drybulk carriers 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 charterhire payments we receive for our vessels once their initial charters expire and the resale value of our vessels could significantly decrease. As a result, our business, results of operations, cash flows and financial condition could be adversely affected.

In the highly competitive international shipping industry, we may not be able to compete for charters with new entrants or established companies with greater resources, and as a result, we may be unable to employ our vessels profitably.

Our vessels will be employed in a highly competitive market that is capital intensive and highly fragmented. Competition arises primarily from other vessel owners, some of whom have substantially greater resources than we do. Competition for the transportation of drybulk cargo by sea is intense and depends on price, location, size, age, condition and the acceptability of the vessel and its operators to the charterers. Due in part to the highly fragmented market, competitors with greater resources could enter the drybulk shipping industry and operate larger fleets through consolidations or acquisitions and may be able to offer lower charter rates and higher quality vessels than we are able to offer. If we are unable to successfully compete with other drybulk shipping companies, our results of operations would be adversely impacted.

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, from time to time, involved in various litigation matters. 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.

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

We are a holding company and our subsidiaries conduct all of our operations and own all of our operating assets. We have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to satisfy our financial obligations and to pay dividends to our shareholders depends on our subsidiaries and their ability to distribute funds to us. If we are unable to obtain funds from our subsidiaries, our board of directors may exercise its discretion not to declare or pay dividends.

Because we are organized under the laws of the Marshall Islands, it may be difficult to serve us with legal process or enforce judgments against us, our directors or our management.

We are organized under the laws of the Marshall Islands, and substantially all of our assets are located outside of the United States. In addition, the majority of our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible for someone to bring an action against us or against these individuals in the United States if they believe that their rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict them from enforcing a judgment against our assets or the assets of our directors or officers.

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.

We may have to pay tax on U.S. source income, which would reduce our earnings and cash flow.

Under the U.S. Internal Revenue Code of 1986, as amended, or the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as ourselves and our subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States is characterized as U.S. source shipping income and such income is subject to a 4% U.S. federal income tax without allowance for any deductions, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury regulations promulgated thereunder.

We believe that we qualify for this statutory exemption for our 2015 taxable year and we expect to so qualify for our subsequent taxable years. However, there are factual circumstances beyond our control that could cause us to lose the benefit of

this tax exemption and thereby cause us to become subject to U.S. federal income tax on our U.S. source shipping income. For example, there is a risk that we could no longer qualify for exemption under Section 883 of the Code for a particular taxable year if “non-qualified” shareholders with a five percent or greater interest in our stock were, in combination with each other, to own 50% or more of the outstanding shares of our stock on more than half the days during the taxable year. Due to the factual nature of the issues involved, we can give no assurances on our tax-exempt status or that of any of our subsidiaries.

If we are not entitled to this exemption under Section 883 of the Code for any taxable year, we would be subject for such taxable year to a 4% U.S. federal income tax on our U.S. source shipping income on a gross basis. The imposition of this taxation could have a negative effect on our business and would result in decreased earnings and cash available for distribution to our shareholders and to pay amounts due on our Notes.

U.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to our U.S. shareholders.

A foreign corporation will be treated as a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2) at least 50% of the average value of the corporation’s assets produce or are held for the production of those types of “passive income,” including cash. 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.” U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.

It is possible that we may be considered a PFIC for our 2015 taxable year. Whether we are treated as a PFIC will depend, in part, upon whether the deposits that we make on newbuilding contracts are treated as being held for the production of “passive income” and on the amount of “passive income” that we derive for such years.

For our 2016 taxable year and subsequent taxable years, whether we will be treated as a PFIC will depend upon the nature and extent of our operations. In this regard, we intend to treat the gross income we derive or are deemed to derive from our time chartering activities as services income, rather than rental income. Accordingly, we believe that our income from our time chartering activities does not constitute “passive income,” and the assets that we own and operate in connection with the production of that income do not constitute passive assets. There is, however, no direct legal authority under the PFIC rules addressing our method of operation. Accordingly, no assurance can be given that the United States Internal Revenue Service, or IRS, or a court of law will accept our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any taxable year if there were to be changes in the nature and extent of our operations.

If we were treated as a PFIC for any taxable year, our U.S. shareholders may face adverse U.S. federal income tax consequences and information reporting obligations. Under the PFIC rules, unless those shareholders made an election available under the Code (which election could itself have adverse consequences for such shareholders), such shareholders would be liable to pay U.S. federal income tax upon excess distributions and upon any gain from the disposition of our common shares at the then prevailing income tax rates applicable to ordinary income plus interest as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of our common shares. See “Item 10. Additional Information - E. Taxation - U.S. Federal Income Tax Considerations - U.S. Federal Income Taxation of U.S. Holders - Passive Foreign Investment Company Status and Significant Tax Consequences” for a more comprehensive discussion of the U.S. federal income tax consequences to U.S. holders of our common shares if we are or were to be treated as a PFIC.

Risks Related to Our Relationship with Scorpio Group and its Affiliates

We are dependent on our managers and their ability to hire and retain key personnel, and there may be conflicts of interest between us and our managers that may not be resolved in our favor.

Our success depends to a significant extent upon the abilities and efforts of our technical manager, SSM, our commercial manager, SCM, and our management team. Our success will depend upon our and our managers’ ability to hire and retain key members of our management team. The loss of any of these individuals could adversely affect our business prospects and financial condition.

Difficulty in hiring and retaining personnel could adversely affect our results of operations. We do not maintain “key man” life insurance on any of our officers.

Our technical and commercial managers are affiliates of the Scorpio Group, which is owned and controlled by the Lolli-Ghetti family, of which our founder, Chairman and Chief Executive Officer, Mr. Emanuele Lauro, is a member. Conflicts of interest may arise between us, on the one hand, and our commercial and technical managers, on the other hand. These conflicts may arise in connection with the chartering, purchase, sale and operation of the vessels in our fleet versus vessels managed by other companies affiliated with our commercial or technical managers. In particular, as of the date of this annual report, our commercial and technical managers provide commercial and technical management services to approximately 151 and 73 vessels, respectively, other than the vessels in our fleet, that are operated by entities affiliated with Mr. Lauro, and such entities may operate additional vessels that will compete with our vessels in the future. Such conflicts may have an adverse effect on our results of operations.

Our Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Vice President of Vessel Operations, General Counsel and Secretary do not devote all of their time to our business, which may hinder our ability to operate successfully.

Our Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Vice President of Vessel Operations, General Counsel and Secretary participate in business activities not associated with us, including serving as members of the management team of Scorpio Tankers, and are not required to work full-time on our affairs. We expect that each of our executive officers will continue to devote a substantial portion of their business time to the completion of our Newbuilding Program and management of the Company. Additionally, our Chief Executive Officer, President, Chief Operating Officer, Vice President, Vessel Operations, General Counsel and Secretary serve in similar positions in the Scorpio Group. As a result, such executive officers may devote less time to us than if they were not engaged in other business activities and may owe fiduciary duties to the shareholders of both us as well as shareholders of other companies which they may be affiliated with, including Scorpio Tankers and Scorpio Group companies. This may create conflicts of interest in matters involving or affecting us and our customers and it is not certain that any of these conflicts of interest will be resolved in our favor. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our commercial and technical managers are each privately held companies and there is little or no publicly available information about them.

Our vessels are, or are expected to be upon their delivery to us, commercially managed by SCM and technically managed by SSM. SCM’s and SSM’s ability to render management services will depend in part on their own financial strength. Circumstances beyond our control could impair our commercial manager’s or technical manager’s financial strength, and because each is a privately held company, information about the financial strength of our commercial manager and technical manager is not available. As a result, we and our shareholders might have little advance warning of financial or other problems affecting our commercial manager or technical manager even though their financial or other problems could have a material adverse effect on us.

RISKS RELATED TO OUR INDEBTEDNESS

Servicing our current or future indebtedness limits funds available for other purposes and if we cannot service our debt, we may lose our vessels.

Borrowing under our credit facilities requires us to dedicate a part of our cash flow from operations to paying interest on our indebtedness under such facilities. These payments limit funds available for working capital, capital expenditures and other purposes, including further equity or debt financing in the future. Amounts borrowed under our credit facilities bear interest at variable rates. Increases in prevailing rates could increase the amounts that we would have to pay to our lenders, even though the outstanding principal amount remains the same, and our net income and cash flows would decrease. We expect our earnings and cash flow to vary from year to year due to the cyclical nature of the drybulk carrier industry. If we do not generate or reserve enough cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as:


•	seeking to raise additional capital;


•	refinancing or restructuring our debt;


•	selling drybulk carriers; or


•	reducing or delaying capital investments.

However, these alternative financing plans, if necessary, may not be sufficient to allow us to meet our debt obligations. If we are unable to meet our debt obligations or if some other default occurs under our credit facilities, our lenders could elect to declare that debt, together with accrued interest and fees, to be immediately due and payable and proceed against the collateral vessels securing that debt.

We are exposed to volatility in the London Interbank Offered Rate, or LIBOR, and may selectively enter into derivative contracts, which can result in higher than market interest rates and charges against our income.

The loans under our secured credit facilities are generally advanced at a floating rate based on LIBOR, which has been stable, but was 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 as we have not entered into interest rate hedging arrangements to hedge our exposure to the interest rates applicable to our credit facilities and may not enter into interest rate hedging arrangements any other financing arrangements we may enter into in the future, including those we enter into to finance a portion of the amounts payable with respect to newbuildings. Moreover, even if we have entered 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.

We may enter into derivative contracts to hedge our overall exposure to interest rate risk exposure. Entering into swaps and derivatives transactions is inherently risky and presents various possibilities for incurring significant expenses. The derivatives strategies that we may employ in the future may not be successful or effective, and we could, as a result, incur substantial additional interest costs.

We may be adversely affected by the introduction of new accounting rules for leasing.

The U.S. accounting standard-setting board (the Financial Accounting Standards Board, or the FASB) has issued new accounting guidance that would require lessees to record most leases on their balance sheets as lease assets and liabilities. Entities would still classify leases, but classification would be based on different criteria and would serve a different purpose than it does today. Lease classification would determine how entities recognize lease-related revenue and expense, as well as what lessors record on the balance sheet. Classification would be based on the portion of the economic benefits of the underlying asset expected to be consumed by the lessee over the lease term. Once adopted, the proposals would be expected generally to have the effect of bringing most off-balance sheet leases onto a lessee’s balance sheet as liabilities, which would also change the income and expense recognition patterns of those items. Financial statement metrics such as leverage and capital ratios, as well as EBITDA and Adjusted EBITDA, may also be affected, even when cash flow and business activity have not changed. This may in turn affect covenant calculations under various contracts (such as loan agreements) unless the affected contracts are modified.

We are leveraged, which could significantly limit our ability to execute our business strategy and we may be unable to comply with our covenants in our credit facilities that impose operating and financial restrictions on us, which could result in a default under the terms of these agreements.

As of December 31, 2015 we had $534.1 million of outstanding indebtedness under our outstanding credit facilities and debt securities.

Our credit facilities impose operating and financial restrictions on us, that limit our ability, or the ability of our subsidiaries party thereto to:


•	pay dividends and make capital expenditures if we do not repay amounts drawn under our credit facilities or if there is another default under our credit facilities;


•	incur additional indebtedness, including the issuance of guarantees;


•	create liens on our assets;


•	change the flag, class or management of our vessels or terminate or materially amend the management agreement relating to each vessel;


•	sell our vessels;


•	merge or consolidate with, or transfer all or substantially all our assets to, another person; or


•	enter into a new line of business.

Therefore, we may need to seek permission from our lenders in order to engage in some corporate actions. Our lenders’ interests may be different from ours and we may not be able to obtain our lenders’ permission when needed. This may limit our ability to pay dividends on our common shares if we determine to do so in the future, and interest on our Notes, finance our future operations or capital requirements, make acquisitions or pursue business opportunities.

In addition, our secured credit facilities require us to maintain specified financial ratios and satisfy financial covenants, including ratios and covenants based on the market value of the vessels in our fleet. Should our charter rates or vessel values materially decline in the future, we may seek to obtain waivers or amendments from our lenders with respect to such financial ratios and covenants, or we may be required to take action to reduce our debt or to act in a manner contrary to our business objectives to meet any such financial ratios and satisfy any such financial covenants. Furthermore, we have amended all of our loan facilities to reduce the minimum liquidity covenant. There can be no assurances that our lenders will grant any waivers or amendments in the future.

Events beyond our control, including changes in the economic and business conditions in the shipping markets in which we operate, may affect our ability to comply with these covenants. We cannot assure you that we will meet these ratios or satisfy these covenants or that our lenders will waive any failure to do so or amend these requirements. A breach of any of the covenants in, or our inability to maintain the required financial ratios under, our credit facilities would prevent us from borrowing additional money under our credit facilities and could result in a default under our credit facilities. If a default occurs under our credit facilities, the lenders could elect to declare the outstanding debt, together with accrued interest and other fees, to be immediately due and payable and foreclose on the collateral securing that debt, which could constitute all or substantially all of our assets. Moreover, in connection with any waivers or amendments to our credit facilities that we may obtain, our lenders may impose additional operating and financial restrictions on us or modify the terms of our existing credit facilities. These restrictions may further restrict our ability to, among other things, pay dividends, repurchase our common shares, make capital expenditures, or incur additional indebtedness.

Furthermore, our debt agreements contain cross-default provisions that may be triggered if we default under the terms of any one of our financing agreements. In the event of default by us under one of our debt agreements, the lenders under our other debt agreements could determine that we are in default under such other financing agreements. Such cross defaults could result in the acceleration of the maturity of such debt under these agreements and the lenders thereunder may foreclose upon any collateral securing that debt, including our vessels, even if we were to subsequently cure such default. In the event of such acceleration or foreclosure, we might not have sufficient funds or other assets to satisfy all of our obligations, which would have a material adverse effect on our business, results of operations and financial condition.

Please see “Item 5. Operating Financial Review and Prospects-B. Liquidity and Capital Resources-Credit Facilities and Unsecured Notes.”

RISKS RELATING TO OUR COMMON SHARES

We are incorporated in the Marshall Islands, which does not have a well-developed body of corporate law.

Our corporate affairs are governed by our amended and restated articles of incorporation and bylaws 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 Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the laws 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 the United States. The rights of shareholders of companies incorporated in the Marshall Islands may differ from the rights of shareholders of companies incorporated in the United States. While the BCA provides that it is to be interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and we cannot predict whether Marshall Islands courts would reach the same conclusions as U.S. courts. Thus, you may have more difficulty in protecting your 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 which has developed a relatively more substantial body of case law.

The market price of our common shares has fluctuated widely and may fluctuate widely in the future, or there may be no continuing public market for you to resell our common shares.

The market price of our common shares has fluctuated widely since our common shares began trading on the NYSE in December 2013, and may continue to do so as a result of many factors such as actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry, mergers and strategic alliances in the shipping industry, market conditions in the shipping industry, particularly the drybulk sector, changes in government regulation, shortfalls in our operating results from levels forecast by securities analysts, announcements concerning us or our competitors and the general state of the securities market. Further, there may be no continuing active or liquid public market for our common shares.

If the market price of our common shares remains below $5.00 per share, under NYSE 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 shares as

collateral may lead to sales of such shares creating downward pressure on and increased volatility in the market price of our common shares.

The shipping industry has been highly unpredictable and volatile. The market for common shares in this industry may be equally volatile. Therefore, we cannot assure you that you will be able to sell any of our common shares you may have purchased at a price greater than or equal to its original purchase price, or that you will be able to sell them at all.

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

Our amended and restated articles of incorporation authorize us to issue 56,250,000 common shares, of which we have issued 28,686,561 common shares as of the date of this annual report. Sales of a substantial number of common shares in the public market, or the perception that these sales could occur, may depress the market price for our common shares. These sales could also impair our ability to raise additional capital through the sale of our equity securities in the future. We intend to issue additional common shares in the future. Our shareholders may incur dilution from any future equity offering and upon the issuance of additional common shares upon the exercise of options we grant to certain of our executive officers, upon the issuance of additional common shares pursuant to our equity incentive plan or upon the issuance of common shares to SSH as payment of fees for arranging vessel acquisitions pursuant to the Administrative Services Agreement.

Anti-takeover provisions in our organizational documents could have the effect of discouraging, delaying or preventing a merger or acquisition, or could make it difficult for our shareholders to replace or remove our current board of directors, which could adversely affect the market price of our common shares.

Several provisions of our amended and restated articles of incorporation and bylaws could make it difficult for our shareholders to change the composition of our board of directors in any one year, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable. These provisions include:


•	authorizing our board of directors to issue “blank check” preferred stock without shareholder approval;


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


•	establishing certain advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by shareholders at shareholder meetings;


•	prohibiting cumulative voting in the election of directors;


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


•	authorizing the removal of directors only for cause and only upon the affirmative vote of the holders of a majority of the outstanding common shares entitled to vote for the directors; and


•	establishing supermajority voting provisions with respect to amendments to certain provisions of our amended and restated articles of incorporation and bylaws.

In addition, pursuant to a stockholders rights agreement adopted on June 18, 2015, as amended and restated on January 14, 2016, or the Stockholders Rights Agreement, 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 Stockholders Rights Agreement, 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 shares and your ability to realize any potential change of control premium.

Our costs of operating as a public company is significant, and our management is required to devote substantial time to complying with public company regulations.

We recently became subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the other rules and regulations of the SEC, including the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and as such, we will have significant legal, accounting and other expenses that we did not incur as a private company. These reporting obligations impose various requirements on public companies, including changes in corporate governance practices, and these requirements may continue to evolve. We and our management personnel, and other personnel, if any, need to devote a substantial amount of time to comply with these requirements. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly.

The Sarbanes-Oxley Act requires, among other things, that we maintain and periodically evaluate our internal control over financial reporting and disclosure controls and procedures. In particular, we need to perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 requires that we incur substantial accounting expenses and expend significant management efforts.



ITEM 4.	INFORMATION ON THE COMPANY


A.	History and Development of the Company

Scorpio Bulkers Inc. is an international shipping company that was incorporated in the Republic of the Marshall Islands pursuant to the Marshall Islands BCA on March 20, 2013. In December 2013, we completed our underwritten initial public offering of 2,608,333 common shares at $117.00 per share, and in January 2014, the underwriters in the initial public offering exercised their option to purchase an additional 391,250 common shares. In February 2014, we completed our offer to exchange unregistered common shares that were previously issued in Norwegian equity private placements (other than the common shares owned by affiliates of us) for common shares that were registered under the Securities Act of 1933, as amended, or the Securities Act, which we refer to as the Exchange Offer. Upon completion of the Exchange Offer, holders of 7,980,565 unregistered common shares validly tendered their shares in exchange for such registered common shares, representing a participation rate of 99.7%. On July 31, 2014, we delisted from the Norwegian Over-the-Counter List, or Norwegian OTC List. Our common shares are listed for trading on the New York Stock Exchange, or NYSE, under the symbol “SALT.”

Effective December 31, 2015, our board of directors effected a one-for-twelve reverse stock split of our common shares, par value $0.01 per share, and a reduction in the total number of authorized common shares to 56,250,000 shares. Our shareholders approved the reverse stock split and change in authorized common shares at a special meeting of shareholders held on December 23, 2015. The reverse stock split reduced the number of our outstanding common shares from 344,239,098 shares to 28,686,561 shares. On December 17, 2015, we received notice from the NYSE that we were no longer in compliance with the NYSE's continued listing standards because the average closing share price of our common shares over a consecutive 30 trading-day period ending December 15, 2015 fell below the requirement to be at least $1.00 per share. The increased market price for our common shares that resulted from implementing the reverse stock split cured this deficiency and on January 5, 2016 we received confirmation of that from the NYSE.

Our principal executive offices are located at 9, Boulevard Charles III, Monaco 98000 and our telephone number at that location is +377-9798-5716.


B.	Business Overview

We were formed for the purpose of acquiring and operating the latest generation of newbuilding drybulk carriers with fuel-efficient specifications and carrying capacities of greater than 30,000 dwt. Upon final delivery of the drybulk vessels in our Newbuilding Program all of our owned vessels will have carrying capacities of greater than 60,000 dwt. Our vessels transport a broad range of major and minor bulk commodities, including ores, coal, grains, and fertilizers, along worldwide shipping routes, and are, or are expected to be, employed primarily in the spot market or in spot market-oriented pools of similarly sized vessels. As of the date of this annual report, our operating fleet of 36 vessels consists of 33 wholly-owned drybulk vessels and three chartered-in drybulk vessels, which we refer to collectively as our “Operating Fleet” (see below table for details). We also have contracts for the construction of 16 newbuilding drybulk vessels, which we collectively refer to as our “Newbuilding Program” (see below table for details). Upon final delivery of all of the drybulk vessels in our Newbuilding Program, our owned fleet is expected to have a total carrying capacity of approximately 3.5 million dwt.

Our Fleet

The following tables set forth certain summary information regarding our Operating Fleet and Newbuilding Program as of the date of this annual report:

Operating Fleet

Owned vessels



Vessel Name	Year Built	DWT	Vessel Type
SBI Cakewalk	2014	82,000	Kamsarmax
SBI Charleston	2014	82,000	Kamsarmax
SBI Samba	2015	84,000	Kamsarmax
SBI Rumba	2015	84,000	Kamsarmax
SBI Capoeira	2015	82,000	Kamsarmax
SBI Electra	2015	82,000	Kamsarmax
SBI Carioca	2015	82,000	Kamsarmax
SBI Conga	2015	82,000	Kamsarmax
SBI Flamenco	2015	82,000	Kamsarmax
SBI Bolero	2015	82,000	Kamsarmax
SBI Sousta	2016	82,000	Kamsarmax
SBI Rock	2016	82,000	Kamsarmax
SBI Lambada	2016	82,000	Kamsarmax
SBI Reggae	2016	82,000	Kamsarmax
Total Kamsarmax		1,152,000
SBI Antares	2015	61,000	Ultramax
SBI Athena	2015	64,000	Ultramax
SBI Bravo	2015	61,000	Ultramax
SBI Leo	2015	61,000	Ultramax
SBI Echo	2015	61,000	Ultramax
SBI Lyra	2015	61,000	Ultramax
SBI Tango	2015	61,000	Ultramax
SBI Maia	2015	61,000	Ultramax
SBI Hydra	2015	61,000	Ultramax
SBI Subaru	2015	61,000	Ultramax
SBI Pegasus	2015	64,000	Ultramax
SBI Ursa	2015	61,000	Ultramax
SBI Thalia	2015	64,000	Ultramax
SBI Cronos	2015	61,000	Ultramax
SBI Orion	2015	64,000	Ultramax
SBI Achilles	2016	61,000	Ultramax
SBI Hercules	2016	64,000	Ultramax
SBI Perseus	2016	64,000	Ultramax
SBI Hermes	2016	61,000	Ultramax
Total Ultramax		1,177,000
Aggregate Owned DWT		2,329,000

Time chartered-in vessels

In the first quarter of 2016, we have agreed with the charterers to terminate four time chartered-in contracts for a one-time payment of $10 million. The termination is effective March 19, 2016, and the vessels will be returned on such date. These four vessels are not reflected in the table below.



Vessel Type	Year Built	DWT	Where Built	Daily Base Rate		Earliest Expiry
Kamsarmax	2012	82,000	South Korea	$	15,500	30-Jul-17	⁽¹⁾
Panamax	2004	77,500	China	$	14,000	03-Jan-17	⁽²⁾
Supramax	2008	58,000	China	$	12,250	12-Jun-16	⁽³⁾
Aggregate Time Chartered-in DWT		217,500


(1)	This vessel has been time chartered-in for 39 to 44 months, with such term to be determined at the Company’s option at $15,500 per day. The Company has the option to extend this time charter for one year at $16,300 per day. The vessel was delivered on April 23, 2014.

(2)

This vessel has been time chartered-in for 32 to 38 months, with such term to be determined at the Company’s option at $14,000 per day. The agreement also contains a profit and loss sharing provision whereby, commencing upon the termination of the time charter-in agreement, we split all of the vessel’s profits and losses with the vessel’s owner for a period of two years. The vessel was delivered on May 3, 2014.


(3)	This vessel has been time chartered-in for 21 to 25 months, with such term to be determined at the Company’s option at $12,250 per day. The Company has the option to extend this time charter for one year at $13,000 per day. The vessel was delivered on September 13, 2014.

Newbuilding Program

Drybulk Vessels Under Construction

14 of the drybulk vessels in our Newbuilding Program are currently scheduled to be delivered in 2016 and two are currently scheduled to be delivered in 2017.



Kamsarmax Vessels
	Vessel Name	Expected Delivery	DWT	Shipyard

1	Hull 1093 - TBN SBI Twist	Q2-16	82,000	Yangzijiang
2	Hull S1726A - TBN SBI Zumba	Q3-16	82,000	Hudong
3	Hull S1231 - TBN SBI Macarena	Q4-16	82,000	Hudong
4	Hull S1735A - TBN SBI Parapara	Q4-16	82,000	Hudong
5	Hull S1736A - TBN SBI Mazurka	Q4-16	82,000	Hudong
6	Hull S1232 - TBN SBI Swing	Q1-17	82,000	Hudong
7	Hull S1233 - TBN SBI Jive	Q2-17	82,000	Hudong
	Aggregate Kamsarmax Newbuilding DWT		574,000



Ultramax Vessels
	Vessel Name	Expected Delivery	DWT	Shipyard
1	Hull 1907 - TBN SBI Hera	Q2-16	60,200	Mitsui
2	Hull 1906 - TBN SBI Zeus	Q2-16	60,200	Mitsui
3	Hull 1911 - TBN SBI Poseidon	Q3-16	60,200	Mitsui
4	Hull 1912 - TBN SBI Apollo	Q3-16	60,200	Mitsui
5	Hull NE194 - TBN SBI Hyperion	Q2-16	61,000	Nacks
6	Hull NE195 - TBN SBI Tethys	Q2-16	61,000	Nacks
7	Hull CX0655 - TBN SBI Samson	Q4-16	64,000	Chengxi
8	Hull CX0613 - TBN SBI Phoebe	Q3-16	64,000	Chengxi
9	Hull CX0656 - TBN SBI Phoenix	Q4-16	64,000	Chengxi
	Aggregate Ultramax Newbuilding DWT		554,800
	AGGREGATE DRYBULK		1,128,800


(1)	As used in the table above, “Yangzijiang” refers to Jiangsu Yangzijiang Shipbuilding Co. Ltd., “Hudong” refers to Hudong-Zhonghua Shipbuilding (Group) Co., Inc., “Mitsui” refers to Mitsui Engineering & Shipbuilding Co. Ltd., “Nacks” refers to Nantong COSCO KHI Ship Engineering Co., Ltd., and “Chengxi” refers to Chengxi Shipyard Co., Ltd.

Employment of Our Fleet

We typically operate our vessels in spot market-oriented commercial pools, in the spot market or, under certain circumstances, on time charters.

Spot Market-Oriented Commercial Pools

To increase vessel utilization and thereby revenues, we participate in commercial pools with other shipowners with similar modern, well-maintained vessels. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial managers and operators who have close working relationships with customers and brokers, while technical management is performed by each shipowner. The managers of the pools negotiate charters with customers primarily in the spot market. The size and scope of these pools enable them to enhance vessel utilization rates for pool vessels by securing backhaul voyages, which is when cargo is transported on the return leg of a journey, and contracts of affreightment, or COAs, thus generating higher effective time charter equivalent, or TCE, revenues than otherwise might be obtainable in the spot market, while providing a higher level of service offerings to customers.

All of our chartered-in vessels and owned vessels are employed in a spot market-oriented commercial pool managed by our commercial manager, or a Scorpio Group Pool, which exposes us to fluctuations in spot market charter rates. In addition, we expect that each of the drybulk vessels in our Newbuilding Program, following their delivery to us, will be employed in a Scorpio Group Pool. Our vessels participate in the Scorpio Group Pools under the same contractual terms and conditions as the third party vessels in the pool. Each pool aggregates the revenues and expenses of all of the pool participants and distributes the net earnings calculated on (i) the number of pool points for the vessel, which are based on vessel attributes such as cargo carrying capacity, fuel consumption, and construction characteristics, and (ii) the number of days the vessel operated in the period. SCM, a Monaco corporation controlled by the Lolli-Ghetti family of which our co-founder, Chairman and Chief Executive Officer is a member, is responsible for the administration of the pool and the commercial management of the participating vessels, including marketing the pool, negotiating charters, including voyage charters, short duration time charters and COAs, conducting pool operations, including the distribution of pool cash earnings, and managing bunker (fuel oil) purchases, port charges and administrative services for the vessels. SCM, as operator of the Scorpio Group Pools, charges $300 a day for each vessel, whether owned by us or chartered-in, plus a 1.75% commission on the gross revenues per charter fixture, which commission has been temporarily reduced for all our vessels in our fleet. See “-Management of our Business” below.

The pool participants remain responsible for all other costs including the financing, insurance, manning and technical management of their vessels. The earnings of all of the vessels are aggregated and divided according to the relative performance capabilities of the vessel and the actual earning days each vessel is available.

Spot Market

A spot market voyage charter is generally a contract to carry a specific cargo from a load port to a discharge port for an agreed freight per ton of cargo or a specified total amount. Under spot market voyage charters, we pay specific voyage expenses such as port, canal and bunker costs. Spot charter rates are volatile and fluctuate on a seasonal and year-to-year basis.

Fluctuations derive from imbalances in the availability of cargoes for shipment and the number of vessels available at any given time to transport these cargoes. Vessels operating in the spot market generate revenue that is less predictable than those under time charters, but may enable us to capture increased profit margins during periods of improvements in drybulk vessel charter rates. Downturns in the drybulk industry would result in a reduction in profit margins.

Time Charters

Time charters give us a fixed and stable cash flow for a known period of time. Time charters also mitigate in part the volatility and seasonality of the spot market business, which is generally weaker in the second and third quarters of the year. We currently do not employ any vessels on time charter, but in the future, we may opportunistically look to employ additional vessels under time charter contracts should rates become more attractive. We may also enter into time charter contracts with profit sharing agreements, which enable us to benefit when the spot market rates increase.

Management of Our Business

Commercial and Technical Management

Our vessels are commercially managed by SCM and technically managed by SSM pursuant to a Master Agreement, which may be terminated by either party upon 24 months notice. SCM and SSM are companies affiliated with us. The vessels we charter-in are also commercially managed by SCM. We expect that additional vessels that we may acquire in the future, including the drybulk vessels in our Newbuilding Program, will also be managed under the Master Agreement or on substantially similar terms.

SCM’s services include securing employment for our vessels in the spot market or on time charters. SCM also manages the Scorpio Group Pools in which our vessels are employed. For commercial management of any of our vessels that does not operate in one of these pools, we pay SCM a daily fee of $300 per vessel, plus a 1.75% commission on the gross revenues per charter fixture. The Scorpio Group Pool participants, including us and third-party owners, are each expected to pay SCM a pool management fee of $300 per vessel per day, plus a 1.75% commission on the gross revenues per charter fixture. Effective November 20, 2014, SCM has agreed to reduce with respect to our vessels, the 1.75% commission to 1.00% until the first day on which the closing price of our common shares is not less than $117.00 per share, adjusted to include all equity restructurings and authorized dividends paid on our share capital.

Administrative Services Agreement

We have entered into an Administrative Services Agreement with SSH for the provision of administrative staff, office space and accounting, legal compliance, financial and information technology services. SSH is a company affiliated with us. The services provided to us by SSH may be sub-contracted to other entities within the Scorpio Group. Pursuant to the Administrative Services Agreement, we reimburse SSH for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. We also pay SSH a fee for arranging vessel acquisitions, including newbuildings, which is payable in our common shares. The amount of common shares payable is determined by dividing $250,000 by the market value of our common shares based on the volume weighted average price of our common shares over the 30 trading day period immediately preceding the contract date of a definitive agreement to acquire any vessel. In November 2014, SSH has agreed to waive its fee on vessel acquisitions contracted after November 20, 2014, until the first day on which the closing price of our common shares is not less than $117.00 per share, adjusted to include all equity restructurings and authorized dividends paid on our share capital. As of the date of this annual report, we issued an aggregate of 143,035 common shares to SSH in connection with the deliveries

of eight of our newbuilding vessels, and expect to issue an additional 37,681 common shares to SSH throughout the deliveries of the remaining vessels in our Newbuilding Program.

SSH has agreed with us not to own any drybulk carriers greater than 30,000 dwt for so long as the Administrative Services Agreement is in full force and effect. This agreement may be terminated by SSH after the third anniversary of our initial public offering upon 12 months’ prior written notice.

Recent and Other Developments

Fleet and Newbuilding Program Updates

During the period from January 1, 2016 through February 29, 2016 , we took delivery of the following newbuilding vessels:


•	SBI Sousta, a Kamsarmax vessel, was delivered from Hudong-Zhonghua (Group) Co., Ltd.


•	SBI Behike, a Capesize vessel was delivered from Daehan Shipbuilding Co., Ltd. ⁽¹⁾


•	SBI Rock, a Kamsarmax vessel, was delivered from Jiangsu Yangzijiang Shipbuilding Co., Ltd.


•	SBI Monterrey, a Capesize vessel, was delivered from Daehan Shipbuilding Co., Ltd. ⁽¹⁾


•	SBI Achilles, an Ultramax vessel, was delivered from Imabari Shipbuilding Co., Ltd.


•	SBI Montecristo, a Capesize vessel, was delivered from Sungdong Shipbuilding & Marine Engineering Co., Ltd. ⁽¹⁾


•	SBI Lambada, a Kamsarmax vessel, was delivered from Hudong-Zhonghua (Group) Co., Ltd.


•	SBI Hercules, an Ultramax vessel, was delivered from Imabari Shipbuilding Co., Ltd.


•	SBI Reggae, a Kamsarmax vessel, was delivered from Hudong-Zhonghua (Group) Co., Ltd.


•	SBI Perseus, an Ultramax vessel, was delivered from Chengxi Shipyard Co., Ltd.


•	SBI Aroma, a Capesize vessel, was delivered from Sungdong Shipbuilding & Marine Engineering Co., Ltd. ⁽¹⁾


•	SBI Hermes, an Ultramax vessel, was delivered from Imabari Shipbuilding Co., Ltd


(1)	Vessel sold subsequent to delivery.

During the period from January 1, 2016 to February 29, 2016, we reached agreements, in principle, with shipyards to delay the delivery of two Ultramax vessels and six Kamsarmax vessels under construction by approximately six months each. These vessels, previously expected to be delivered between March 2016 and September 2016, are now expected to be delivered between September 2016 and April 2017.

During the period from January 1, 2016 to February 29, 2016, we sold the three vessels and four vessels under construction that were classified as held for sale as of December 31, 2015.

In the first quarter of 2016, we reached agreements with our charter counterparties to terminate four time chartered-in contracts for a one-time payment of $10 million in aggregate. The termination is effective March 19, 2016, and the vessels will be returned on such date.

As of February 29, 2016 , we have agreements to time charter-in three drybulk vessels as described above. Please see “—Our Fleet” above for information about our fleet.

Fleet Financing Update and Credit Facility Amendments

As of the date of this annual report, we have credit facility agreements in place for the partial funding of all of the 49 vessels in our fleet.

Between September 30, 2015 and October 30, 2015, we reached agreements with our lenders to amend each of our loan facilities such that the interest coverage ratio, as defined in each agreement, will not be applicable until the first quarter of 2017, at which point the ratio will be 1.00 to 1.00 and will be calculated on a year-to-date basis for calendar year 2017. Prior to these amendments, the interest coverage ratio was applicable from the third quarter of 2015 and onwards.

In addition, we agreed in principle with our lenders to amend each of our credit facilities to reduce the minimum cash liquidity covenant to the greater of $25.0 million or $700,000 per owned vessel. In connection with these amendments, we will prepay $41.2 million in aggregate of principal installments on our credit agreements and will not be required to resume making any principal installments on such facilities until 2018.

$10.9 Million Upsize to our $42.0 Million Credit Facility

On February 15, 2016, we increased the amount available under our $42.0 Million Senior Secured Credit Facility by $10.9 million. The proceeds of the upsized commitment financed a portion of the purchase price of one Ultramax vessel that was delivered to us during the third quarter of 2015. On February 17, 2016, we drew down $10.3 million on this facility.

For additional information regarding our credit facilities and other debt arrangements, please see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Credit Facilities and Unsecured Notes.”

Our Customers

We believe that developing strong relationships with the end users of our services allow us to better satisfy their needs with appropriate and capable vessels. A prospective charterer’s financial condition, creditworthiness, and reliability track record are important factors in negotiating our vessels’ employment.

Seasonality

We operate our vessels in markets that have historically exhibited seasonal variations in demand and, as a result, in charter hire rates. This seasonality may result in quarter to quarter volatility in our operating results. 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. In addition, unpredictable weather patterns in these months may disrupt vessel scheduling and supplies of certain commodities. As a result, revenues of drybulk carrier operators in general have historically been weaker during the fiscal quarters ended June 30 and September 30, and, conversely, been stronger in fiscal quarters ended December 31 and March 31. This seasonality may materially affect our operating results and cash available for dividends.

Competition

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 condition of the vessel, as well as on our reputation and that of our commercial manager. We compete primarily with other independent and state-owned drybulk vessel-owners. Our competitors may have more resources than us and may operate vessels that are newer, and therefore more attractive to charterers, than our vessels. Ownership of drybulk vessels is highly fragmented and is divided among publicly listed companies, state-controlled owners and private shipowners.

Industry and Market Conditions

The Drybulk Shipping Industry

Except as otherwise indicated, the statistical information and industry and market data contained in this section is based on or derived from statistical information and industry and market data collated and prepared by SSY Consultancy & Research Ltd (“SSY”). The data is based on SSY's review of such statistical information and market data available at the time (including internal surveys and sources, independent financial information, independent external industry publications, reports or other publicly available information). Due to the incomplete nature of the statistical information and market data available, SSY has had to make some estimates where necessary when preparing the data. The data is subject to change and may differ from similar assessments obtained from other analysts of shipping markets. Whilst reasonable care has been taken in the preparation of the data, SSY has not undertaken any independent verification of the information and market data obtained from published sources.

Industry Overview

Drybulk shipping mainly comprises the shipment of minerals (such as iron ore and coal), other industrial raw materials and various agricultural products. Of these, the major cargoes are iron ore, coal and grain. The remaining minor bulk cargoes include steel products, bauxite/alumina, nickel ore, cement, petroleum coke, forest products, fertilizers and non-grain agricultural products, such as sugar.

Charterers in the drybulk shipping industry range from cargo owners (such as mining companies and grain houses) to end-users (such as steel producers and power utilities) and also include a number of different trading companies and ship operators.

In 2015, total international seaborne drybulk trade is provisionally estimated to have reached a new annual record of 4.18 billion tonnes. This was up by a marginal 0.4% from 2014 and by an estimated 26.2% from the 2010 level. With the exception of

2009 when the global economy was in recession, seaborne drybulk trade has recorded positive annual growth in every year since 1998. While the 2015 trade estimates will be subject to revision as final trade statistics become available, estimates outlined in the table below indicate that last year’s increase in seaborne trade was unevenly distributed between the various cargo types and below the compound annual average growth rate, or CAGR, for the five years to 2015.

World Seaborne Drybulk Trade

(million tonnes)



Cargo/Year	2010	2011	2012	2013	2014	2015	2010-15% Growth	CAGR
Major Bulks	2327	2467	2609	2823	2993	2981	28%	5%
Iron Ore	1036	1107	1138	1256	1391	1415	37%	6%
Coal	960	1022	1118	1198	1179	1121	17%	3%
Grains	332	338	353	369	423	445	34%	6%
Minor Bulks	990	1065	1116	1173	1180	1204	22%	4%
Total	3317	3532	3725	3996	4172	4185	26%	5%

Totals may not add due to rounding

Cargo Types

Iron ore: The key raw material for steelmaking, iron ore trade surged on the back of unprecedented Chinese import demand to be the single largest seaborne drybulk cargo, with annual volumes expanding more than three-fold between 2000 and 2014 to 1,391 million tonnes, or Mt. Last year saw the sequence of annual increases extended to 14 years, but at the slowest rate over the entire period with an estimated 1.7% rise to 1,415 Mt. This was achieved in spite of a decrease in world steel production, lifting the 2015 annual iron ore trade volume 36.6% above the corresponding total in 2010. In addition to China, which as described elsewhere in this section has become the dominant importer accounting for approximately two-thirds of seaborne imports in 2015, the main import markets for iron ore are Japan, Western Europe and South Korea. Exports are dominated by Australia and Brazil, which together account for over 80% of the seaborne market with a large majority of their cargoes carried by Capesize vessels given the favorable unit economies. This market share has increased from 71% in 2010, chiefly due to the introduction of additional Australian export capacity. Other iron ore exporters include Canada, India and South and West Africa.

Coal: At an estimated 1,121 million tonnes in 2015, global seaborne coal trade declined by almost 5.0% from its 2014 level and represented a second consecutive year of decline. This contrasted with a CAGR of 3% for the entire five year period from 2010 to 2015. Coal trade is comprised of two main categories: (1) steam coal (which is chiefly used for electricity generation, but also by industrial users, such as the cement industry) and (2) coking coal (a key input for blast furnace steelmaking). Although the import market for coal has been traditionally dominated by import demand from Japan and Western Europe, the last decade has seen China and India emerge as key importers of both categories of coal.

The leading exporter of coking coal is Australia, followed by the United States and Canada. Indonesia is the largest exporter of steam coal, ahead of Australia, the former Soviet Union, Colombia, South Africa and the United States. Between 2005 and 2013 China was transformed from a major steam coal exporting nation to the single largest importer, such was the strength of the country’s domestic demand for power generation. 2014 did, however, see China record its first annual fall in steam coal imports since 2008, against the background of an oversupplied domestic coal market and government intervention to restrict imports. The rate of decline quickened in 2015, but China was still the world’s third largest importer of coking and steam coal. India was the single largest importer in 2015, even though its annual volumes experienced a net decline after five to ten years of rapid growth. Japan, South Korea and Taiwan, together with Western Europe, remain major import markets, while Latin America and South East Asia have grown in importance as coal import generators. Although investments in new port facilities have enabled the participation of Capesize vessels in the Asia-led coal trade growth in recent years, it has chiefly benefitted demand for Panamax and Handymax type vessels.

Grains: Seaborne grain trade is comprised of wheat, coarse grains (corn, barley, oats, rye and sorghum) and soybeans/meal, which together totaled an estimated new record of 445 Mt in 2015. This was up by 5% on 2014 and close to the CAGR for 2010 to 2015. In addition, the grain trades remain an important source of freight market volatility due to both the seasonality of export flows and year-on-year variations in crop surpluses and deficits.

Soya is the largest of the three main categories of grain trade with Brazil, the United States and Argentina as the leading export countries. The principal markets are in Europe and Far East Asia with China being the world’s single largest soybean importer. Shipments are dominated by Panamax and Handymax vessels. Wheat and coarse grains are also primarily carried by mid-size vessels with the United States, Canada, Russia, Ukraine, Argentina, Brazil, Australia and the European Union as the main

exporting regions. In addition to Far East Asia and Europe, the Middle East, Africa and Latin America are all significant import markets.

Minor Bulks: A diversity of cargo types are covered under this heading with different sets of demand drivers. Nevertheless, together at approximately 1.2 billion tonnes per annum these trades represent a major source of employment for the smaller Handysize and Handymax vessels. Several minor bulk cargoes, including steel products, suffered an especially severe decline in trade volumes during the global financial crisis, but steel trade volumes have since rebounded to record levels and supported an estimated new high for total minor bulk cargoes in 2015. Recent growth in world steel trade has been led by surging steel exports from China, which totaled 112.4 Mt in 2015, compared with 62.3 Mt in 2013.

Another key development in the minor bulk trades over recent years has been the loss of Indonesian bauxite and nickel ore cargoes, following the government’s restrictions on exports of unprocessed mineral ores from January 2014. From a combined 121 Mt in 2013 Indonesian exports of these two cargoes were zero in 2015. The absence of Indonesian supplies, together with limited alternative cargoes from other sources, has been a restraint on minor bulk trade. Bauxite trade did benefit from a sharp increase in exports from Malaysia in 2015, but in early 2016 the Malaysian government announced a temporary suspension of domestic bauxite mining. The estimated CAGR for minor bulk trade volumes for the period from 2010 to 2015 was 4%.

Demand for Drybulk Shipping

Drybulk trade is a function of levels of a) economic activity, b) the industrialization/urbanization of developing countries, c) population growth (plus changes in dietary habits) and d) regional shifts in cargo supply/demand balances (for example, due to the development of new export/import capacity or depletion/development of mineral reserves). The distances shipped chiefly reflect regional commodity surpluses and deficits. Generally, the more concentrated the sources of cargo supply, the greater the average distance shipped .

Ship demand is determined by the overall volumes of cargo moved and the distance that these are shipped (i.e. tonne-mile demand), as well as changes in vessel efficiency. These changes may be caused by such factors as (1) vessel speed (which will change in response to movements in fuel costs and freight market earnings); (2) port delays (which have been a common occurrence in the last 15 years as inland and port logistics in several key export areas struggled to meet surging global demand) and (3) laden to ballast ratios (that is, how much time vessels spend sailing empty on re-positioning voyages). Ballasting has also been on the increase over the last 10 to15 years due to the widening imbalance in cargo flows between the Atlantic and Pacific Basins).

World seaborne drybulk trade followed a steady underlying upward trend during the 1980s and 1990s. The CAGR in the major drybulk cargoes over this period was an estimated 2.5%, before accelerating sharply to 6.3% in the decade from 2000 to 2009 and being sustained at an estimated 5.8% between 2010 and 2015.

The growth in drybulk trade volumes in the 15 years preceding 2014 was primarily due to the rapid industrialization and urbanization of China. From approximately 130 Mt in 2000, Chinese drybulk imports had increased more than ten-fold by 2014, as illustrated in the chart below. Such an expansion was facilitated by investments in new mining and port facilities in key exporting areas around the world in response to Chinese-driven rises in commodity prices from 2004 to 2011.

The table below provides a more detailed comparison of China’s drybulk imports from 2010 and 2015 and shows a net decline from 2014 to 2015. This was the first annual fall in aggregate volumes since 1998 and was primarily due to sharp reductions in coal imports. Chinese imports of iron ore and grain both rose to new annual records in 2015.

Iron ore has been the leading source of growth in Chinese drybulk imports over the last five years. The 334 Mt increase in iron ore imports between 2010 and 2015 reflects not only increases in domestic steel production (and, therefore, iron ore consumption) to meet the needs of an industrializing and urbanizing economy, as well as record exports of steel products, but also the substitution of higher-quality imported iron ore for lower-quality domestic supplies. In 2015, when Chinese steel production recorded a net decline, import growth was driven entirely by the displacement of domestically mined iron ore.

Growth in China’s iron ore trades has mainly been to the benefit of Capesize vessels, hauling cargoes from West Australia and Brazil. Australia and Indonesia are the primary sources of Chinese coal imports, while in the grain trades increased Chinese demand for soybeans from Latin America and the United States has boosted tonne-mile demand for Panamax and Supramax vessels.

Indonesia had been the dominant supplier of bauxite and nickel ore to China until January 2014’s export restrictions. With Chinese buyers struggling to find alternative supplies from elsewhere, the country’s nickel ore imports fell to 35.2 Mt in 2015 from a peak of 71.2 Mt in 2013. By contrast, after falling from 71.6 Mt in 2013 to 36.5 Mt in 2014, China’s bauxite imports

rebounded to 56.1 Mt in 2015, boosted by rising domestic demand and increased cargo availability from Malaysia (where the government has recently introduced mining restrictions).

Chinese Drybulk Imports (Million Tonnes)



	2010	2014	2015	CAGR
Iron Ore	619.1	932.9	953.3	+9%
Steel Products	17.0	14.6	12.8	-5%
Coal*	185.1	291.4	204.2	+2%
Bauxite/Alumina	34.5	41.8	60.8	+12%
Grains	62.1	90.6	114.4	+13%
Fertilizer	7.2	9.6	11.2	+9%
Other**	79.5	122.5	112.9	+7%
Total of above	1,004.5	1,503.4	1,469.6	+8%

* Includes lignite, which is excluded from SSY’s estimates for seaborne coal trade and categorized as a minor bulk.

** Includes mineral ores (e.g. nickel), pulp/woodchip and petroleum coke . Source: Chinese Customs

Outside of China, most of the additional growth in drybulk cargo import demand during the past five years has been generated by other Asian economies. For example, Indian coal imports are estimated to have risen from 110 Mt in 2010 to 224 Mt in 2014 and 215 Mt in 2015, reflecting the strength of demand from electricity generators and the cement and steel industries. Although India has added several Capesize coal import terminals in recent years, a majority of the coal cargoes arriving in the country are shipped by Supramax, Panamax and Kamsarmax vessels. More established Asian import markets, such as Japan and South Korea, have also contributed to the region’s import growth with their combined imports of coal and iron ore increasing by an estimated 36 Mt between 2010 and 2015.

In contrast, European mineral imports have staged only a partial recovery from their cyclical lows in 2009 and have remained below their 2007 totals, partly due to persistently slow economic growth in the eurozone and changes in the region’s energy mix away from coal. Consequently, Far East Asia’s share of world seaborne major bulk imports is estimated to have climbed above 75% from approximately 60% in the middle of the last decade and 50% to 55% in 2000.

As a result, the fastest drybulk trade growth has been seen within the Pacific Basin, which has been supplemented by increases in fronthaul trade from the Atlantic to the Pacific (chiefly iron ore on Capesize vessels and grains on Panamaxes and Supramaxes).

Fleet

The cargoes outlined above are predominantly carried by drybulk carriers of more than 10,000 dwt. Drybulk carriers are single-decked ships that transport dry cargoes in “bulk” form (loose within cargo holds, rather than in bags, crates or on pallets). As of the end of December 2015, the total fleet of 10,000+ dwt drybulk carriers numbered approximately 10,269 vessels of 766.2 million deadweight tonnes, or Mdwt.

This fleet is divided into four principal size segments: Handysize (10,000-39,999 dwt), Handymax (40,000-64,999 dwt), Panamax (65,000-99,999 dwt) and Capesize (100,000+ dwt). Aside from size, the main distinction between drybulk vessel types is whether they are geared (that is, equipped with cranes for loading/discharge) or gearless. The main characteristics of these four vessel types are summarized below, while the accompanying table summarizes the current structure of the fleet by age and size. It shows that in terms of deadweight capacity, the Capesize sector is the largest with 40.4% of the end-December 2015 total, followed by Panamaxes at 25.4%, Handymaxes at 22.9% and Handysizes at 11.3%.

Handysize (10,000-39,999 dwt): These ships carry the widest range of cargoes of any drybulk size segment and are the most dependent on the minor bulks for employment. They are usually equipped with cargo-handling gear (cranes or derricks) and are widely used on routes to and from draft-restricted ports that a) cannot receive larger ships and b) often lack their own land-based cargo-handling equipment. Many such loading or discharge facilities are located in the developing nations. Due to the limited economies of scale that these vessels offer, compared to larger tonnage vessels, many of these ships are extensively employed on intra-regional, shorter-haul trades. Special designs of ship are associated with the carriage of such cargoes as steel products and logs (“open-hatch” and “log-fitted” vessels); while some variants also exist in terms of cargo-handling equipment, such as “grab-fitted” tonnage possessing scoops that facilitate easier unloading of certain cargo types.

Handymax (40,000-64,999 dwt): This segment of the drybulk carrier fleet contains three distinct sub-categories - the traditional Handymax size (40,000-49,999 dwt), the Supramax size (50,000-59,999 dwt) and the Ultramax size (60,000-64,999 dwt. There are some Ultramax newbuilding designs of above 65,000 dwt, but as these are much fewer in number than existing gearless vessels of 65-69.9 kdwt, they currently fall in SSY’s Panamax size range). Despite their increased size, these vessels retain a high degree of trading flexibility as their cargo gear enables them to load and/or discharge at ports with limited facilities. They are more widely deployed on longer-haul routes than Handysizes (due to the greater scale economies that they offer). Whereas the traditional Handymax types have gained market share from the sub-40,000 dwt fleet of Handysizes over the past 20 years, the new generation of Supramax and Ultramax vessels are also competing for business on Panamax routes (such as grains from Latin America).

Panamax (65,000-99,999 dwt): The strict definition of a Panamax bulk carrier is a ship able to transit the Panama Canal fully laden; however, in recent years this definition has become blurred as (1) only a minority of the vessels in this size range pass through the Panama Canal in any 12-month period and (2) shipyards have developed new designs in anticipation of the Panama Canal’s expanded dimensions from 2016 onwards. At present, the Panama Canal can accommodate ships of maximum beam (i.e.

extreme vessel breadth) of 32.3m, maximum length overall (LOA) of 294.1m and maximum draft of 12m tropical fresh water (“TFW”). After the enlargement, which is scheduled to be operational from the second quarter of 2016, these limits will increase to 49m beam, 366m LOA and 15.2m TFW draft. For these reasons our fleet definition stretches from 65,000 to 99,999 dwt, encompassing three main sub-types: traditional Panamaxes (70,000-79,999 dwt), Kamsarmaxes (82,000 to 83,000 dwt, which are currently the largest bulk carrier to transit the Panama Canal fully laden) and post-Panamaxes (85,000-99,999 dwt). The baseload demand for these vessel types is provided by coal and grain cargoes, although Panamax vessels also participate in a number of other trades (including iron ore, bauxite and fertilizers). Only a small minority of vessels in this size range are equipped with cargo gear as most of the ports served have well developed cargo loading or discharge terminals.

Capesize (100,000+ dwt): These ships are almost exclusively deployed in the iron ore and coal trades, which benefit most from their scale economies. There are three main sub-types: small Capes (100-119,999 dwt), standard Capes (160-209,999 dwt, which are mainly concentrated between 170,000 dwt and 180,000 dwt but also include Newcastlemaxes of 200-209,999 dwt) and Very Large Ore Carriers (220,000 dwt and above).

Drybulk Carrier Fleet by Size/Age (Million Dwt):

As at mid-March 2015



Built/Dwt	10-39,999	40-64,999	65-99,999	100,000+	Total
Pre-1991	7.3	4.9	3.5	3.3	18.9
1991-95	3.8	7.0	8.3	22.7	41.8
1996-00	8.7	14.0	20.6	19.0	62.6
2001-05	8.4	22.6	27.7	30.0	88.8
2006-10	20.8	45.6	42.2	89.6	198.2
2011-15	37.7	81.4	92.5	144.8	356.4
Total Fleet	86.6	175.4	194.8	309.4	766.2
Average Age	10 Yrs	8 Yrs	8 Yrs	7 Yrs	8 Yrs

Totals may not add due to rounding

Ownership

Unlike other specialist areas of the world shipping fleet, ownership in the drybulk segment is highly fragmented, with SSY’s database showing approximately 2,000 different owners. The largest 50 owners account for approximately 35% of the fleet in terms of deadweight carrying capacity, but this includes a large number of Chinese-flagged vessels that will trade on domestic, as well as international, routes.

While such analysis will tend to understate levels of market concentration, due to the operation of vessel pools and chartered in fleets, the drybulk segment is sufficiently competitive to ensure that vessel spot market earnings are extremely responsive to fluctuations in the supply/demand balance - both globally and regionally.

Supply of Drybulk Shipping

The supply of drybulk carriers is fundamentally determined by the delivery of new vessels from the world’s shipbuilding industry and the removal of older vessels, mainly through demolition.

Newbuilding deliveries not only reflect the demand from shipowners for new tonnage, but also available shipyard capacity. Following a sharp upswing in demand for new vessels in all of the main sectors of the commercial shipping industry during the last decade, and an accompanying rise in shipbuilding prices to record levels in 2007 to 2008, there was a massive China-led expansion in world shipbuilding capacity. In the case of the drybulk sector, annual newbuilding deliveries surged from 24.4 Mdwt in 2008 (and an average of 19.1 Mdwt p.a. in 2000-07 inclusive) to 44.3 Mdwt in 2009, 79.4 Mdwt in 2010 and a peak of 100.0 Mdwt in 2012.

The resulting impact on freight market balances and vessel earnings, as described elsewhere in this section, led to sharply reduced levels of drybulk carrier ordering in 2011 and 2012, which started to be reflected in a slower pace of newbuilding deliveries in 2013 at an estimated 61.6 Mdwt. The slowdown was maintained in 2014, when the annual total for newbuilding deliveries of 47.8 Mdwt was the lowest since 2009.

There was, however, a revival in drybulk carrier newbuilding investments during 2013, which continued into 2014 and reversed the downward trend in the newbuilding orderbook. These orders were focused on new, more fuel efficient ship designs,

for which shipyard descriptions offer significantly lower fuel consumption compared with existing vessels through a combination of new technology main engines and refinements of hull forms.

The rising costs of bunker fuels over the period 2004 to 2012 are illustrated in the accompanying chart, which is based on the Supramax vessel specifications used by the Baltic Exchange (that is, 30 tonnes (380cst) per day at 14.0 knots laden/14.5 knots ballast) and estimated bunker prices in Singapore. This shows an increase at sea, at full speed, from approximately $5,400 per day in 2004 to approximately $20,000 per day in 2012. Reflecting the general decline in world oil prices, there has been a sharp reduction in bunker fuel costs since September 2014 to an annual average of approximately $8,700 per day in 2015 and $4,800 per day in January 2016 in the case of our Supramax example. We would also stress that (1) there is a wide variance in individual vessel fuel consumptions, even within the same size segments, and (2) that, as described earlier in this section, vessels have been operating at slower speeds in order to lower their daily fuel consumption and costs.

Reflecting the increased ordering of more fuel efficient vessels, there was a small net increase in drybulk carrier newbuilding deliveries in 2015 to 48.6 Mdwt.

The accompanying table summarizes the confirmed drybulk carrier orderbook at end of December 2015, by vessel size and scheduled year of delivery. These delivery dates can be subject to delay with actual deliveries in recent years significantly lagging scheduled totals. For example, 2015 deliveries were an estimated 39% below the scheduled total as of January 1, 2015, which compared with a corresponding average rate of slippage from scheduled delivery dates in the previous five years of approximately 30.5%. At an estimated 120.2 Mdwt, the total tonnage on order at the end of 2015 represented approximately 16.0% of the existing fleet. This was the lowest end-year share since 2003 and compares with end-year highs of 56.5% in 2007, 57.2% in 2009 and 67.3% in 2008, as illustrated in the accompanying chart.

Drybulk Carrier Newbuilding Orderbook by Size Range (Million Dwt):

As at mid-March 2015



Delivery	10-39,999	40-64,999	65-99,999	100,000+	Total
2016	7.9	24.7	18.2	37.9	88.6
2017	3.0	6.6	7.5	8.2	25.4
2018	0.9	1.2	1.3	1.3	4.7
2019+	0.4	0.4	0.2	0.5	1.5
Total	12.2	32.9	27.2	55.2	120.2
% of Fleet	14.1%	18.8%	14.0%	15.5%	15.7%

Totals may not add due to rounding

Typically drybulk carriers are scrapped between the ages of 25 and 30 years, but the removal of vessels of 20 to 24 years is common during periods of freight market weakness (especially in the larger sizes) and there have also been examples from the fleet’s 15 to 19 year old component. In 2015, the average age of Handysize vessels scrapped was 29 years, for Handymax it was 26 years, for Panamax it was 22 years and for Capesize it was 21 years. During January 2016 the corresponding averages were 32 years for Handy, 25 years for Handymax, 21 years for Panamax and 20 years for Capesize. However, demolition is not simply a function of the fleet’s age profile. Several factors will influence an owners’ decision on whether to scrap older vessels, notably (1) actual and anticipated returns from the charter market, (2) the relative running costs of the vessel, (3) prospective expenditure at classification society surveys and (4) the secondhand re-sale value (to the extent it provides a premium to scrap). For much of the decade of 2000 to 2009, returns from the drybulk charter markets supported continued investment in vessel life extension and scrapping volumes fell to minimal levels. This, however, ensured an accumulation of older tonnage in the fleet and, as a result, demolition proved extremely responsive to a deterioration in freight market conditions. For instance, deletions from the drybulk fleet rose from 3.6 Mdwt in 2008 to 14.7 Mdwt in 2009 and a new annual record of 35.4 Mdwt in 2012. Deletions dropped to an estimated annual total of 22.4 Mdwt in 2013 and were followed by a further decrease to 15.7 Mdwt in 2014. However, 2015 saw a sharp rebound in drybulk carrier demolition activity with total annual deletions of 29.5 Mdwt.

As the accompanying chart illustrates, historically high levels of ship demolition contributed to a marked slowdown in the rate of drybulk carrier net fleet growth last year, to 2.6% from 4.5% in 2014, 5.8% in 2013 and an average of 12.7% per annum between 2009 and 2012.

Demolition has also contributed to the uneven development of drybulk carrier fleet supply over the past 5 to 6 years. In particular, the removal of older Handysize vessels, combined with the relatively modest newbuilding program in this sector compared with the other sizes, ensured that the 10,000-39,999 dwt fleet grew at an estimated CAGR of 1.8% between 2010 and 2015, compared with 7.8% for 40,000-64,999 dwt Handymaxes, 9.7% for 65,000-99,999 dwt Panamaxes and 8.0% for 100,000+ dwt Capes. As a result, the Handysize sector’s share of total dwt capacity fell from an estimated 14.9% at the end of 2010 to 11.3% at the end of 2015. By contrast, the share accounted for by 65,000-99,999 dwt Panamaxes rose from 23.0% to 25.4% over the same period. The 100,000+ dwt Capesize sector also increased its share over the same period, from 39.5% to 40.4%, while the 40,000-64,999 dwt Handymax sector recorded a modest rise, from 22.6% to 22.9%.

Despite the demolition in recent years, there remained approximately 19 Mdwt of ships aged 25 years or older in the drybulk carrier fleet at the end of 2015 with a further 41.8 Mdwt aged 20 to 24 years and 62.6 Mdwt aged 15 to 20 years. The highest concentration of 20+ year old vessels was in the Handysize sector, accounting for 12.8% of dwt capacity in this size range at the end of 2015, compared with 6.8% of Handymaxes, 6.1% of Panamaxes and 8.4% of Capesizes.

Charter Market & Freight Rates

The chartering of drybulk vessels can take several different forms, the most typical of which are summarized below.


a)	Single voyage (“spot”) charter

This involves the hire of a vessel for just one stipulated voyage, carrying a designated quantity of a named commodity. For most such charters, an individual ship is specified that will carry out the voyage to be undertaken. The terms of the agreement between the charterer and vessel owner usually define the port (or ports) of cargo loading and discharge, the dates between which the cargo is to be loaded and the cargo-handling terms. The vessel owner will receive from the charterer a mutually agreed payment (normally quoted as a US$ per ton freight rate). In return, the shipowner pays all voyage expenses (such as the costs of fuel consumed on the voyage, plus port expenses), all operating costs (such as insurance and crewing of the vessel), and capital expenses (such as the servicing of any mortgage debt on the ship).


b)	Contract of affreightment (“COA”)

Under a COA, the vessel owner and charterer agree to terms for the carriage of a designated volume of a given commodity on a specified route (or routes), with such shipments being carried out on a regular basis. The agreement does not normally identify an individual ship that will be used to fulfill its terms but includes more general specifications on the vessels to be used (e.g. maximum age). Under the terms of a COA, freight is normally paid on an agreed US$ per ton basis, with the vessel owner then meeting all voyage, operating and capital costs incurred in the execution of such a charter.


c)	Time charter

Under a time charter, the charterer takes the ship on hire for either (1) a trip between designated delivery and re-delivery positions or (2) for a designated period (for example, 12 months). The freight rate agreed between the shipowner and charterer is in terms of a daily hire rate (in US dollars), rather than as a US$ per ton figure. For longer-term period charters, this may escalate at a rate mutually agreed between vessel owner and charterer. Under the terms of such charters, the vessel owner meets the ship’s operating and capital costs, with the charterer paying all variable voyage expenses (mainly fuel costs, plus port and canal dues). In addition, and unless otherwise stipulated in the charter agreement, the period charterer is able to trade the vessel to and from whichever loading and discharge ports that they choose, carrying whichever cargoes they prefer.


d)	Bareboat charter

Under a bareboat charter, the vessel owner effectively relinquishes control of their ship to the charterer (usually for a period of several years). The shipowner receives an agreed level of remuneration (which may again escalate at a mutually agreed rate) for the duration of the charter and remains responsible for the vessel’s capital costs. In return, the charterer assumes total control of

the vessel, thereby becoming responsible for operating the ship and meeting all costs of such operation (such as crewing, repairs and maintenance), as well as the direct voyage expenses incurred (such as fuel costs, port expenses, etc.) when it is trading.

Freight Rates

Freight rates are determined by the balance of tonnage demand and tonnage supply. Primarily as the result of record newbuilding deliveries, fleet utilization rates have dropped sharply from the peak levels of 2007, as illustrated by movements in key freight market indicators.

Given the diversity of routes and cargoes traded by the drybulk fleet, freight market measures tend to focus on average worldwide spot earnings (expressed in United States$/day). The most recognized of these measures are published on a daily basis by the Baltic Exchange in London. In addition to global averages for standard designs of Handysize (28,000 dwt), Supramax (52,454 dwt), Panamax (74,000 dwt) and Capesize (180,000 dwt) vessels, together with a number of component routes, the Baltic Exchange also publishes a daily composite index for the entire drybulk market (the BDI or Baltic Exchange Dry Index).

From its all-time high of almost 12,000 points in May 2008, just prior to the global financial crisis, the BDI fell to below 700 points in December of the same year. After partial recovery in 2009, negative pressure on freight markets returned under the weight of sustained fleet supply growth. At 920 points in 2012, the BDI’s annual average was a 26-year low. The corresponding 2013 level was 1,206 points and included the highest quarterly average for two years in the fourth quarter of 2013 (1,854 points) against the background of sharply reduced fleet supply growth and new peaks for drybulk trade.

Volatility remained a feature of drybulk spot markets in 2014 with the BDI ranging between 2,113 and 723 points, but its annual average of 1,105 points was below the corresponding 2013 level. Spot market weakness intensified in 2015, chiefly due to the sharp slowdown in drybulk trade growth, with the BDI’s annual average of 718 points the lowest since 1986. This was followed by new daily (317 points) and monthly (386 points) lows in January 2016, when weak global steel production, disruptions to cargo availability and lower bunker prices, together with negative seasonal factors, all contributed to the further weakening in the freight market.

The first of the accompanying charts traces developments in representative 12 month time charter rates for the four main sizes from January 2002 to the end of January 2016, encompassing the all-time highs in vessel earnings and the subsequent slump in rates. The second chart looks in more detail at developments since the beginning of 2010. It shows the Capesize-led rebound from mid-2013 to the first quarter of 2014 and subsequent slide to current depressed levels. These assessments are based on existing modern (that is, under ten years of age) vessels. Within these individual size ranges, period rates will vary according to such factors as vessel age, size, fuel consumption and yard of build.

Although both charts show the extent to which vessel earnings in the different size ranges move broadly in tandem, they also highlight that the sharpness of market rises and falls vary in degree. Those size groups that carry the narrowest range of cargoes - or which are employed on the least number of routes - tend to experience the greatest variations in charter rates. Hence, in the drybulk shipping sector, earnings of Capesizes have been prone to fluctuate to a far greater degree than those of smaller vessels (with their greater trading versatility, assisted by the cargo gear on these vessel types).

Asset Values

In addition to the global balance between the demand for new vessels and available shipbuilding capacity, newbuilding prices are also influenced by changes in vessel construction costs, due to such factors as movements in steel plate prices or exchange rates against the US dollar in key shipbuilding nations (principally China, Japan and South Korea).

Panamax bulk carrier newbuilding prices in Japan peaked at $56 million in the third quarter of 2008 and subsequently fell to $29 million in the final quarter of 2012. By the end of 2013 Japanese prices had climbed to a 38-month high of $35 million, chiefly as the result of recovering newbuilding demand, and remained at similar levels through much of 2014. However, they entered a downward trend in 2015 and by January 2016 had fallen to $26.0 million, which equals the lowest level for Japanese Panamax newbuilding prices since 2003.

Secondhand values are primarily shaped by actual and anticipated earnings, newbuilding replacement costs (which are relevant for modern vessels) and residual scrap value (more relevant for older units). To an extent, prices are also influenced by

the availability and cost of ship finance, as this will help to determine whether investors are able to realize their demand for new or secondhand vessels.

The accompanying charts compare the development of representative newbuilding, five and ten year old secondhand prices for Handysize, Handymax, Panamax and Capesize vessels since 2002. Individual vessel prices will vary according to such factors as specific size, age, cargo gear, yard of build and fuel consumption. Following the pattern of the charter markets, prices peaked between mid-2007 and mid-2008. Such was the shortage of shipbuilding capacity during that period, with a lengthening lead time between contracting and delivery, that demand for existing vessels with prompt delivery briefly created the abnormal situation where secondhand vessels were priced at a premium to newbuildings.

Consequently, the percentage decline in secondhand prices between 2008 and 2012 was more severe than for newbuildings. Prices showed a firmer trend from the beginning of 2013 to March 2014, during which time five year old values rose by an average of approximately 50%, led by a 60% to 70% increase in Capesize prices. The onset of generally weaker spot and period charter rates began to erode secondhand values during the latter months of 2014 and downward pressure intensified during 2015, sharply reducing prices over the course of the year. By the end of January 2016, Panamax five year old prices of approximately $12.0 million were at their lowest since the 1980s.

Environmental and Other Regulations

Government regulation significantly affects the ownership and operation of our fleet. We are subject to international conventions and treaties and national, state and local laws and regulations relating to safety and health and environmental protection in force in the countries in which our vessels may operate or are registered. These regulations include requirements relating to 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 may entail significant expense, including vessel modifications and implementation of certain operating procedures.

A variety of government, quasi-governmental and private organizations 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, 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 operation of one or more of our vessels being temporarily suspended.

We believe that the heightened level of environmental and quality concerns among insurance underwriters, regulators and charterers is leading to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to the stricter environmental standards. We are required to maintain operating standards for all of our vessels that 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 will be in substantial compliance with applicable environmental laws and regulations and that our vessels will have all material permits licenses, certificates or other authorizations necessary for the conduct of our operations. However, because such laws and regulations are frequently changed 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, such as the 2010 BP plc Deepwater Horizon oil spill in the Gulf of Mexico, could result in additional legislation or regulations that could negatively affect our profitability.

International Maritime Organization

The International Maritime Organization, the United Nations agency for maritime safety and the prevention of pollution by ships, or the IMO, has adopted the International Convention for the Prevention of Marine Pollution from Ships, 1973, as modified by the related Protocol of 1978 and updated through various amendments (collectively, “MARPOL”). MARPOL entered

into force on October 2, 1983. It has been adopted by over 150 nations, including many of the jurisdictions in which our vessels will operate.

MARPOL 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 packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI relates to air emissions.

In 2012, the IMO’s Marine Environmental Protection Committee, or MEPC, adopted by resolution amendments to the international code for the construction and equipment of ships carrying dangerous chemicals in bulk, or the IBC Code. The provisions of the IBC Code are mandatory under MARPOL and SOLAS. These amendments, which entered into force in June 2014, pertain to revised international certificates of fitness for the carriage of dangerous chemicals in bulk and identifying new products that fall under the IBC Code. We may need to make certain financial expenditures to comply with these amendments.

In 2013 the MEPC adopted by resolution amendments to the MARPOL Annex I Condition Assessment Scheme (CAS). These amendments became effective on October 1, 2014 and pertain to revising references to the inspections of bulk carriers and tankers after the 2011 ESP Code, which enhances the programs of inspections, becomes mandatory. We may need to make certain financial expenditures to comply with these amendments.

Air Emissions

In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution. Effective May 2005, Annex VI set limits on nitrogen oxide emissions from ships whose diesel engines were constructed (or underwent major conversions) on or after January 1, 2000. It also prohibits “deliberate emissions” of “ozone depleting substances,” defined to include certain halons and chlorofluorocarbons. “Deliberate emissions” are not limited to times when the ship is at sea; they can for example include discharges occurring in the course of the ship’s repair and maintenance. 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 (PCBs)) are also prohibited. 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 of sulfur emissions known as “Emission Control Areas,” or “ECAs” (see below).

The IMO’s Maritime Environment Protection Committee, or MEPC, adopted amendments to Annex VI on October 10, 2008, 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. As of January 1, 2012, the amended Annex VI required that fuel oil contain no more than 3.50% sulfur (from the previous cap of 4.50%). By January 1, 2020, sulfur content must not exceed 0.50%, subject to a feasibility review to be completed no later than 2018.

Sulfur content standards are even stricter within certain ECAs. As of January 1, 2015, ships operating within an ECA may not use fuel with sulfur content in excess of 0.10%. Amended Annex VI established procedures for designating new ECAs. The Baltic and North Seas, certain coastal areas of North America and the United States Caribbean Sea are all within designated ECAs. 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 EPA or the states where we operate, compliance with these regulations could entail significant capital expenditures, operational changes, or otherwise increase the costs of our operations.

Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation. The U.S. EPA promulgated equivalent (and in some senses stricter) emissions standards in late 2009.

As of January 1, 2013 MARPOL made mandatory certain measures relating to energy efficiency for ships. This included the requirement that all new ships utilize the Energy Efficiency Design Index, or EEDI, and all ships develop and implement Ship Energy Management Plans, or SEEMPs.

We believe that all our vessels will be compliant in all material respects with these regulations. 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.

Ballast Water Management

The IMO adopted the BWM Convention, in February 2004. 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. The BWM Convention will not become effective until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of the world’s merchant shipping. To date, the BWM

Convention has not yet been ratified but proposals regarding implementation have recently been submitted to the IMO. Many of the implementation dates in the BWM Convention have already passed, so that once the BWM Convention enters into force, the period of installation of mandatory ballast water exchange requirements would be extremely short, with several thousand ships a year needing to install ballast water management systems, or BWMS. For this reason, on December 4, 2013, the IMO Assembly passed a resolution revising the application dates of the BWM Convention so that they are triggered by the entry into force date and not the dates originally in the BWM Convention. This, in effect, makes all vessels constructed before the entry into force date “existing vessels” and allows for the installation of a BWMS on such vessels at the first renewal survey following entry into force of the convention. Furthermore, in October 2014 the MEPC met and adopted additional resolutions concerning the BWM Convention’s implementation. Once mid-ocean ballast exchange or ballast water treatment requirements become mandatory, the cost of compliance could increase for ocean carriers and the costs of ballast water treatments may be material. 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 United States 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. Although we do not believe that the costs of such compliance would be material, it is difficult to predict the overall impact of such a requirement on our operations.

Safety Management System Requirements

The IMO has also adopted SOLAS and the LL Convention, which impose a variety of standards that regulate the design and operational features of ships. The IMO periodically revises the SOLAS and LL Convention standards. Amendments to SOLAS relating to safe manning of vessels that were adopted in May 2012 entered in force on January 1, 2014. The Convention on Limitation of Liability for Maritime Claims (LLMC) was recently amended and the amendments went into effect on June 8, 2015. The amendments alter the limits of liability for loss of life or personal injury claims and property claims against ship owners. We believe that all our vessels will be in substantial compliance with SOLAS and LL Convention standards.

Our operations are also subject to environmental standards and requirements under Chapter IX of SOLAS set forth in the ISM Code. The ISM Code requires the owner of a vessel, or any person who has taken responsibility for operation 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 manager have developed for compliance with the ISM Code. The failure of a ship 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 under the ISM Code unless its manager has been awarded a document of compliance, issued by classification societies under the authority of each flag state. SSM has or will obtain documents of compliance for their offices and will obtain 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 every five years, but the document of compliance is subject to audit verification annually and the safety management certificate at least every 2.5 years.

The flag state, as defined by the United Nations Convention on Law of the Sea, has overall responsibility for implementing and enforcing a broad range of international maritime regulations with respect to all ships granted the right to fly its flag. The “Shipping Industry Guidelines on Flag State Performance” evaluates and reports on flag states based on factors such as sufficiency of infrastructure, ratification, implementation, and enforcement of principal international maritime treaties and regulations, supervision of statutory ship surveys, casualty investigations and participation at IMO and ILO meetings. All of our vessels will be flagged in the Marshall Islands. Marshall Islands flagged vessels have historically received a good assessment in the shipping industry. We recognize the importance of a credible flag state and do not intend to use flags of convenience or flag states with poor performance indicators. 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 U.S. Coast Guard and European Union authorities have indicated that vessels not in compliance with the ISM Code by the applicable deadlines will be prohibited from trading in U.S. and European Union ports, respectively. Each of our vessels will be ISM Code certified. However, there can be no assurance that such certificate will be maintained.

Noncompliance with the ISM Code and other IMO regulations may subject the shipowner or bareboat charterer to increased liability, may lead to decreases in, or invalidation of, available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports.

Pollution Control and Liability Requirements

The IMO has negotiated international conventions that impose liability for oil pollution in international waters and the territorial waters of the signatory to such conventions. Many countries have ratified and follow the liability plan adopted by the IMO and set out in 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, or the CLC. Under this convention and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel’s registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain exceptions. The 1992 Protocol changed certain limits on liability, expressed using the International Monetary Fund currency unit of Special Drawing Rights. The limits on liability have since been amended so that the compensation limits on liability were raised. The right to limit liability is forfeited under the CLC where the spill is caused by the ship owner’s actual fault and under the 1992 Protocol where the spill is caused by the ship owner’s intentional or reckless act or omission where the ship owner knew pollution damage would probably result. The CLC requires ships covered by it to maintain insurance covering the liability of the owner in a sum equivalent to an owner’s liability for a single incident. We believe that our protection and indemnity insurance will cover the liability under the plan adopted by the IMO.

The IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, to impose strict liability on ship owners 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 Convention on Limitation of Liability for Maritime Claims of 1976, as amended). 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.

IMO regulations also require owners and operators of vessels to adopt shipboard oil pollution emergency plans and/or shipboard marine pollution emergency plans for noxious liquid substances in accordance with the guidelines developed by the IMO.

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 may have on our operations.

The U.S. Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation and Liability Act

The U.S. Oil Pollution Act of 1990, or OPA, established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all “owners and operators” whose vessels trade in the United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States’ territorial sea and its 200 nautical mile exclusive economic zone. The United States has also enacted the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of hazardous substances other than oil, 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. OPA applies to oil tankers (which are not operated by us), as well as non-tanker ships that carry fuel oil, or bunkers, to power such ships. CERCLA also applies to 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. OPA defines these other damages broadly to include:


•	injury to, destruction or loss of, or loss of use of, natural resources and the costs of assessment thereof;


•	injury to, or economic losses resulting from, the destruction of real and personal property;


•	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;


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


•	lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources;


•	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.

OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. Effective November 19, 2015, the U.S. Coast Guard adjusted the limits of OPA liability for non-tank vessels to the greater of $1,100 per gross ton or $939,800 (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 where the responsibility 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 damage for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing 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 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 both require owners and operators of vessels to establish and maintain with the U.S. Coast Guard 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 plan to comply with the U.S. Coast Guard’s financial responsibility regulations by providing a certificate of responsibility evidencing sufficient self-insurance.

We currently maintain pollution liability coverage insurance in the amount of $1.0 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 operations.

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. Some states have enacted legislation providing for unlimited liability for oil spills. In some cases, states, which have enacted such legislation have not yet issued implementing regulations defining vessels owners’ responsibilities under these laws. We intend to comply with all existing and future applicable state regulations in the ports where our vessels call.

The 2010 Deepwater Horizon oil spill in the Gulf of Mexico may also result in additional legislative or regulatory initiatives, including the raising of liability caps under OPA or more stringent operational requirements. We cannot predict what additional requirements, if any, may be enacted and what effect, if any, such requirements may have on our operations.

Other Environmental Initiatives

The CWA prohibits the discharge of oil or other substances 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 addition, 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.

The EPA regulates the discharge of ballast water and other substances in U.S. waters under the CWA. EPA regulations require vessels 79 feet in length or longer (other than commercial fishing and recreational vessels) to comply with a Vessel General Permit, or VGP, that authorizes ballast water discharges and other discharges incidental to the operation of vessels. For a new vessel delivered to an owner or operator after September 19, 2009 to be covered by the VGP, the owner must submit a Notice of Intent, or NOI, at least 30 days before the vessel operates in U.S. waters. The VGP imposes technology and water-quality based effluent limits for certain types of discharges and establishes specific inspection, monitoring, record keeping and reporting requirements to ensure the effluent limits are met. The EPA renewed and revised the VGP, effective December 19, 2013. The VGP now contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in U.S. waters and more stringent requirements for exhaust gas scrubbers and requires the use of environmentally acceptable lubricants.

U.S. Coast Guard, or USCG, regulations adopted under the U.S. National Invasive Species Act, or NISA, also impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering or operating in U.S. waters. As of June 21, 2012, the USCG adopted revised ballast water management regulations that established standards for allowable concentrations of living organisms in ballast water discharged from ships in U.S. waters. The USCG must approve any technology before it is placed on a vessel, but has not yet approved the technology necessary for vessels to meet the foregoing standards.

Notwithstanding the foregoing, as of January 1, 2014, vessels are technically subject to the phasing-in of these standards. As a result, the USCG has provided waivers to vessels which cannot install the as-yet unapproved technology. The EPA, on the other hand, has taken a different approach to enforcing ballast discharge standards under the VGP. On December 27, 2013, the EPA issued an enforcement response policy in connection with the new VGP in which the EPA indicated that it would take into account the reasons why vessels do not have the requisite technology installed, but will not grant any waivers.

It should also be noted that in October 2015, the Second Circuit Court of Appeals issued a ruling that directed the EPA to redraft the sections of the 2013 VGP that address ballast water. However, the Second Circuit stated that 2013 VGP will remains in effect until the EPA issues a new VGP. It presently remains unclear how the ballast water requirements set forth by the EPA, the USCG, and IMO BWM Convention, some of which are in effect and some which are pending, will co-exist.

The USCG’s revised ballast water standards are consistent with requirements under the BWM Convention. Compliance with the EPA and the USCG regulations could require 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 cost, or may otherwise restrict our vessels from entering U.S. waters. In addition, certain states have enacted more stringent discharge standards as conditions to their required certification of the VGP.

The U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990, or the CAA, requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels will be subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. Our vessels that operate in such port areas with restricted cargoes will be equipped with vapor recovery systems that satisfy these requirements. The CAA also requires states to adopt State Implementation Plans, or SIPs, designed to attain national health-based air quality standards in primarily major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. As indicated above, our vessels operating in covered port areas will be equipped with vapor recovery systems that satisfy these existing requirements.

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. Member States were required to enact laws or regulations to comply with the directive by the end of 2010. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims. 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.

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, flag, and the number of times the ship has been detained. The European Union also adopted and then 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.

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. The 2015 United Nations Convention on Climate Change Conference in Paris did not result in an agreement that directly limited greenhouse gas emissions from ships. As of January 1, 2013, ships were required to comply with new MEPC mandatory requirements to address greenhouse gas emissions from ships. European Parliament and Council of Ministers are expected to endorse regulations that would require the monitoring and reporting greenhouse gas emissions from marine vessels in the near future. For 2020, the EU made a unilateral

commitment to reduce overall greenhouse gas emissions from its member states from 20% of 1990 levels. The EU also committed to reduce its emissions by 20% under the Kyoto Protocol’s second period, from 2013 to 2020. In April 2015, a regulation was adopted requiring that large ships (over 5,000 gross tons) calling at EU ports from January 2018 collect and publish data on carbon dioxide emissions and other information.

In the United States, the EPA has issued a finding that greenhouse gases endanger the public health and safety, has adopted regulations to limit greenhouse gas emissions from certain mobile sources and has proposed regulations to limit greenhouse gas emissions from large stationary sources. Although the mobile source emissions regulations do not apply to greenhouse gas emissions from vessels, the EPA is considering a petition from the California Attorney General and environmental groups to regulate greenhouse gas emissions from ocean-going vessels. Any passage of climate control legislation or other regulatory initiatives by the IMO, European Union, the U.S. or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol, that restrict 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 more intense weather events.

International Labour Organization

The International Labour Organization (ILO) is a specialized agency of the UN with headquarters in Geneva, Switzerland. The ILO has adopted the Maritime Labor Convention 2006 (MLC 2006). A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance will be required to ensure compliance with the MLC 2006 for all ships above 500 gross tons in international trade. The MLC 2006 came into force on August 20, 2013 and we are in compliance with these results.

Vessel Security Regulations

Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, the MTSA came into effect. To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. The regulations also impose requirements on certain ports and facilities, some of which are regulated by the EPA.

Similarly, in December 2002, amendments to SOLAS created a new chapter of the convention dealing specifically with maritime security. The new Chapter XI-2 became effective in July 2004 and imposes various detailed security obligations on vessels and port authorities, and mandates compliance with the International Ship and Port Facility Security Code, or the ISPS Code. The ISPS Code is designed to enhance the security of ports and ships against terrorism. After July 1, 2004, to trade internationally, a vessel must attain an International Ship Security Certificate, or ISSC, from a recognized security organization approved by the vessel’s flag state. Among the various requirements are:


•	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 a ship security plan;


•	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.

Any vessel operating without a valid certificate may be detained at port until it obtains an ISSC, or it may be expelled from port, or refused entry at port.

The U.S. Coast Guard regulations, intended to align with international maritime security standards, exempt from MTSA vessel security measures non-U.S. vessels provided such vessels have on board a valid ISSC that attests to the vessel’s compliance

with SOLAS security requirements and the ISPS Code. Our managers intend to implement the various security measures addressed by MTSA, SOLAS and the ISPS Code, and we intend that our fleet will comply with applicable security requirements.

Inspection by Classification Societies

Every oceangoing vessel must be “classed” by a classification society. The classification society certifies that the vessel is “in class”, signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel’s country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.

The classification society also undertakes on request other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individual case and/or to the regulations of the country concerned.

For maintenance of the class certification, regular and extraordinary surveys of hull, machinery, including the electrical plant, and any special equipment classed are required to be performed as follows:

Annual Surveys . For seagoing ships, annual surveys are conducted for the hull and the machinery, including the electrical plant and where applicable for special equipment classed, at intervals of 12 months from the date of commencement of the class period indicated in the certificate.

Intermediate Surveys . Extended annual surveys are referred to as intermediate surveys and typically are conducted two and one-half years after commissioning and each class renewal. Intermediate surveys may be carried out on the occasion of the second or third annual survey.

Class Renewal Surveys . Class renewal surveys, also known as special surveys, are carried out for the ship’s hull, machinery, including the electrical plant, and for any special equipment classed, at the intervals indicated by the character of classification for the hull. At the special survey the vessel is thoroughly examined, including audio-gauging to determine the thickness of the steel structures. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one-year grace period for completion of the special survey. Substantial amounts of money may have to be spent for steel renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period was granted, a ship owner has the option of arranging with the classification society for the vessel’s hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five-year cycle. Upon a ship owner’s request, the surveys required for class renewal may be split according to an agreed schedule to extend over the entire period of class. This process is referred to as continuous class renewal.

All areas subject to survey as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each area must not exceed five years. Vessels under five years of age can waive drydocking in order to increase available days and decrease capital expenditures, provided the vessel is inspected underwater.

Most vessels are also drydocked every 30 to 36 months for inspection of the underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a “recommendation” which must be rectified by the ship owner within prescribed time limits.

Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as “in class” by a classification society which is a member of the International Association of Classification Societies, or the IACS. In 2012, the IACS issued draft harmonized Common Structure Rules, that align with the IMO goals standards, and were adopted in winter 2013. All our vessels will be certified as being “in class” by the American Bureau of Shipping, or ABS, and Det Norske Veritas, or DNV, major classification societies. All new and secondhand vessels that we acquire must be certified 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.

Risk of Loss and Liability Insurance

The operation of any drybulk vessel includes risks such as mechanical and structural failure, hull damage, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, piracy, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental

incidents, and the liabilities arising from owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon owners, operators and demise charterers of vessels trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for ship owners and operators trading in the United States market.

We maintain hull and machinery insurance, war risks insurance, protection and indemnity cover, and freight, demurrage and defense cover for our fleet in amounts that we believe to be prudent to cover normal risks in our operations. However, we may not be able to achieve or maintain this level of coverage throughout a vessel’s useful life. In addition, while we believe that the insurance coverage that we have obtained is adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.

Hull & Machinery and War Risks Insurance

We maintain marine hull and machinery and war risks insurance, which will include the risk of actual or constructive total loss, for all of our vessels. Each of our vessels is covered up to at least fair market value with deductibles of $100,000-$150,000 per vessel per incident. We also maintain increased value coverage for most of our vessels. Under this increased value coverage, in the event of total loss of a vessel, we will be able to recover the sum insured under the increased value policy in addition to the sum insured under the hull and machinery policy. Increased value insurance also covers excess liabilities which are not recoverable under our hull and machinery policy by reason of under insurance.

Protection and Indemnity Insurance

Protection and indemnity insurance is provided by mutual protection and indemnity associations, or P&I Associations, which insure liabilities to third parties in connection with our shipping activities. This includes third-party liability and other related expenses resulting from the injury or death of crew, passengers and other third parties, the 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. Our P&I coverage will be subject to and in accordance with the rules of the P&I Association in which the vessel is entered. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or “clubs.” Our coverage is limited to approximately $6.5 billion, except for pollution which is limited to $1 billion.

Our protection and indemnity insurance coverage for pollution will be $1 billion per vessel per incident. The thirteen 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. Each P&I Association has capped its exposure to this pooling agreement at $6.5 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 the group’s claim records as well as the claim records of all other members of the individual associations and members of the pool of P&I Associations comprising the International Group.

Permits and Authorizations

We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates with respect to our vessels. The kinds of permits, licenses and certificates required depend upon several factors, including the commodity transported, the waters in which the vessel operates, the nationality of the vessel’s crew and the age of a vessel. We believe that we have obtained all permits, licenses and certificates currently required to permit our vessels to operate. Additional laws and regulations, environmental or otherwise, may be adopted which could limit our ability to do business or increase the cost of us doing business.


C.	Organizational Structure

Scorpio Bulkers Inc. is a company incorporated under the laws of the Marshall Islands. We own our vessels through separate wholly-owned subsidiaries that are incorporated in the Marshall Islands or Cayman Islands. Please see Exhibit 8.1 to this annual report for a list of our current subsidiaries.


D.	Property, Plants and Equipment

We do not own any material real property. We lease office space in Monaco and in New York, New York. Our only material assets consist of our vessels (including our contracts for the construction of our new vessels) which are owned through our separate wholly owned subsidiaries.

For a description of our fleet, see “Item 4. Information on the Company—A. History and Development of the Company” and “Item 4. Information on the Company—B. Business Overview—Our Fleet.”



ITEM 4A.	UNRESOLVED STAFF COMMENTS

None.



ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS


A.	Operating Results

The following presentation of management’s discussion and analysis of results of operations and financial condition should be read in conjunction with our consolidated financial statements, accompanying notes thereto and other financial information appearing in “Item 18. Financial Statements.” You should also carefully read the following discussion with the sections of this annual report entitled “Item 3. Key Information- D. Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.” Our consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015 and 2014 and the period from March 20, 2013 (date of inception) to December 31, 2013 have been prepared in accordance with U.S. GAAP. Financial results for the year ended December 31, 2014 are not comparable to the period from March 20, 2013 (date of inception) to December 31, 2013 because as of December 31, 2013, we were a development stage company because we had not begun our planned principal operations. Our consolidated financial statements are presented in U.S. dollars ($) unless otherwise indicated. Any amounts converted from another non-U.S. currency to U.S. dollars in this annual report are at the rate applicable at the relevant date, or the average rate during the applicable period.

We generate revenues by charging customers for the transportation of their drybulk cargoes using our vessels. Historically, these services generally have been provided under the following basic types of contractual relationships:


•	Voyage charters , which are charters for short intervals that are priced on current, or “spot,” market rates.


•	Time charters , which are chartered to customers for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates, or current market rates.

•

Commercial Pools , whereby we participate with other shipowners to operate a large number of vessels as an integrated transportation system, which offers customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools negotiate charters primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and COAs (described below), thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market.


•	For all types of vessels in contractual relationships, we are responsible for crewing and other vessel operating costs for our owned vessels and the charterhire expense for vessels that we time charter-in.

The table below illustrates the primary distinctions among these different employment arrangements:



	Voyage Charter	Time Charter	Commercial Pool
Typical contract length	Single voyage	One year or more	Varies
Hire rate basis ⁽¹⁾	Varies	Daily	Varies
Voyage expenses ⁽²⁾	We pay	Customer pays	Pool pays
Vessel operating costs for owned vessels ⁽²⁾	We pay	We pay	We pay
Charterhire expense for vessels chartered-in ⁽²⁾	We pay	We pay	We pay
Off-hire ⁽³⁾	Customer does not pay	Customer does not pay	Pool does not pay


(1)	“Hire rate” refers to the basic payment from the charterer for the use of the vessel.


(2)	See “ Important Financial and Operational Terms and Concepts ” below.


(3)	“Off-hire” refers to the time a vessel is not available for service due primarily to scheduled and unscheduled repairs or drydockings. For time chartered-in vessels, we do not pay the charterhire expense when the vessel is off-hire.

As of the date of this annual report, all of our owned and time chartered-in vessels were operating in the Scorpio Group Pools.

Important Financial and Operational Terms and Concepts

We use a variety of financial and operational terms and concepts. These include the following:

Vessel revenues. Vessel revenues primarily include revenues from time charters, pool revenues and voyage charters. Vessel revenues are affected by hire rates and the number of days a vessel operates. Vessel revenues are also affected by the mix of business between vessels on time charter, vessels in pools and vessels operating on voyage charter. Revenues from vessels in pools and on voyage charter are more volatile, as they are typically tied to prevailing market rates.

Voyage charters. Voyage charters or spot voyages are charters under which the customer pays a transportation charge for the movement of a specific cargo between two or more specified ports. We pay all of the voyage expenses.

Voyage expenses. Voyage expenses primarily include bunkers, port charges, canal tolls, cargo handling operations and brokerage commissions paid by us under voyage charters, as well as brokerage commissions and miscellaneous voyage expenses that we are unable to collect under time charter and pool arrangements. These expenses are subtracted from voyage charter revenues to calculate TCE revenues.

Vessel operating costs. For our owned vessels, we are responsible for vessel operating costs, which include crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, and technical management fees. The two largest components of our vessel operating costs are crewing, and repairs and maintenance.

Additionally, these costs include technical management fees that we paid to SSM, which is controlled by the Lolli-Ghetti family. Pursuant to our Master Agreement, SSM provides us with technical services, and we provide them with the ability to subcontract technical management of our vessels with our approval.

Charterhire. Charterhire is the amount we pay the owner for time chartered-in vessels. The amount is usually for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates, or current market rates. The vessel’s owner is responsible for crewing and other vessel operating costs.

Drydocking. We periodically drydock each of our owned vessels for inspection, repairs and maintenance and any modifications to comply with industry certification or governmental requirements. Generally, each vessel is drydocked every 30 months to 60 months. We capitalize a substantial portion of the costs incurred during drydocking and amortize those costs on a straight-line basis from the completion of a drydocking to the estimated completion of the next drydocking. We immediately expense costs for routine repairs and maintenance performed during drydocking that do not improve or extend the useful lives of the assets. The number of drydockings undertaken in a given period and the nature of the work performed determine the level of drydocking expenditures.

Depreciation. Depreciation expense typically consists of:


•	charges related to the depreciation of the historical cost of our owned vessels (less an estimated residual value) over the estimated useful lives of the vessels; and


•	charges related to the amortization of drydocking expenditures over the estimated number of years to the next scheduled drydocking.

Time charter equivalent (TCE) revenue or rates. We report TCE revenues, a non-GAAP financial measure, because (i) we believe it provides additional meaningful information in conjunction with voyage revenues and voyage expenses, the most directly comparable U.S.-GAAP measure, (ii) it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance, (iii) it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance irrespective of changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods, and (iv) we believe that it presents useful information to investors. TCE revenue is vessel revenue less voyage expenses, including bunkers and port charges. The TCE rate achieved on a given voyage is expressed in U.S. dollars/day and is generally calculated by taking TCE revenue and dividing that figure by the number of revenue days in the period. For a reconciliation of TCE revenue, deduct voyage expenses from revenue on our Statement of Operations.

Revenue days. Revenue days are the total number of calendar days our vessels were in our possession during a period, less the total number of off-hire days during the period associated with repairs or drydockings. Consequently, revenue days represent the total number of days available for the vessel to earn revenue. Idle days, which are days when a vessel is available to earn revenue, yet is not employed, are included in revenue days. We use revenue days to show changes in net vessel revenues between periods.

Contract of affreightment. A contract of affreightment, or COA, relates to the carriage of specific quantities of cargo with multiple voyages over the same route and over a specific period of time which usually spans a number of years. A COA does not designate the specific vessels or voyage schedules that will transport the cargo, thereby providing both the charterer and shipowner greater operating flexibility than with voyage charters alone. The charterer has the flexibility to determine the individual voyage scheduling at a future date while the shipowner may use different vessels to perform these individual voyages. As a result, COAs are mostly entered into by large fleet operators, such as pools or shipowners with large fleets of the same vessel type. We pay the voyage expenses while the freight rate normally is agreed on a per cargo ton basis.

Commercial pools. To increase vessel utilization and revenues, we participate in commercial pools with other shipowners and operators of similar modern, well-maintained vessels. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial charterers and operators who have close working relationships with customers and brokers, while technical management is performed by each shipowner. Pools negotiate charters with customers primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and COAs, thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market while providing a higher level of service offerings to customers.

Operating days . Operating days are the total number of available days in a period with respect to the owned vessels, before deducting available days due to off-hire days and days in drydock. Operating days is a measurement that is only applicable to our owned vessels, not our chartered-in vessels.

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with U.S. GAAP, management uses certain "non-GAAP financial measures" as such term is defined in SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company's operating performance, financial position or cash flows that excludes or includes amounts that are included in, or excluded from, the most directly comparable measure calculated and presented in accordance with U.S. GAAP. For example, non-GAAP financial measures may exclude the impact of certain unique and/or non-operating items such as acquisitions, divestitures, restructuring charges, large write-offs or items outside of management's control. Management believes that the following non-GAAP financial measures described below provide investors and analysts useful insight into our financial position and operating performance.

Adjusted net loss with related per share amounts are non-GAAP financial measures that we believe are useful to assist investors in gaining an understanding of the trends and operating results for our core business. These measures should be viewed in addition to, and not in lieu of, results reported under U.S. GAAP.

Reconciliations of adjusted net loss and related per share amounts as determined in accordance with U.S. GAAP for the years ended December 31, 2015 and 2014 are provided below (dollars in thousands, except per share data). There were no such adjustments during the period from March 20, 2013 (date of inception) to December 31, 2013.



	For the years ended December 31,
	2015						2014
	Amount			Per share			Amount			Per share
Net loss	$	(510,789	)	$	(23.86	)	$	(116,565	)	$	(10.17	)
Adjustments:
Loss / write down on assets held for sale	422,937			19.75			55,487			4.84
Write down of deferred financing cost	16,085			0.75			—			—
Total adjustments	439,022			20.50			55,487			4.84
Adjusted net loss	$	(71,767	)	$	(3.36	)	$	(61,078	)	$	(5.33	)

Time Charter Equivalent (TCE) revenue is defined as voyage revenues less voyage expenses. Such TCE revenue, divided by the number of our available days during the period, or revenue days, is TCE per revenue day, which is consistent with industry standards. TCE per revenue day is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters are generally not expressed in per-day amounts while charter hire rates for vessels on time charters generally are expressed in such amounts.

Overview

Our results for the year ended December 31, 2015 reflect the continued weakness in the drybulk market and the actions we have taken to strengthen our liquidity position and further strengthen our balance sheet. The BDI (a drybulk index) continued to exhibit volatility in 2014 and 2015. Since recording a record high of 2,113 on January 1, 2014, the BDI has declined to record lows. During 2015, the BDI ranged from 1,222 to 471 and finished the year at 478. The BDI has since dropped to 290, the lowest level it has ever reached, on February 10, 2016. Given that all but one of our vessels were chartered at rates tied to the spot market through our participation in vessel pools during 2015, our revenues were adversely impacted.

During the year ended December 31, 2015 we completed the sale of 23 vessels and vessels under construction , including seven vessels under construction that were classified as held for sale at December 31, 2014. As of December 31, 2015, eight vessels and vessels under construction were classified as held for sale, all of which are expected to be sold during the first quarter of 2016. Upon the completion of these sales, we will no longer own any assets in the Capesize vessel class. Due to the depressed market rates and high operating costs, our Capesize vessels lost the most cash per day. Our vessel sales have generated, and the additional vessel sales are expected to further generate, cash and capital expenditure relief in the depressed market.

We had a net loss of $510.8 million or $23.86 loss per diluted share for the year ended December 31, 2015 compared to a net loss of $116.6 million , or $10.17 loss per diluted share for the year ended December 31, 2014. The loss recorded in 2015 included a loss on the sale of assets and a write down of assets held for sale totaling $422.9 million and the related write off of deferred financing costs of $16.1 million. Excluding these items we had a net loss of $71.8 million or $3.36 loss per diluted share (see Non-GAAP Financial Measures). During 2014, we recorded a write down of assets held for sale of $55.5 million . Excluding this write-off we had a net loss in 2014 of $61.1 million or $5.33 loss per diluted share (see Non-GAAP Financial Measures).

During the year ended December 31, 2015, we took delivery of 28 newbuilding vessels from shipyards (of which three were classified as held for sale) and there were 24 vessels remaining in our Newbuilding Program that are scheduled to be delivered during 2016 and 2017. As of December 31, 2015, we had 25 owned vessels in operation.

Results for the year ended December 31, 2015 compared to the year ended December 31, 2014



				Year ended December 31, 2015									Year ended December 31, 2014
	Capesize			Kamsarmax			Ultramax			Corporate			Capesize			Kamsarmax			Ultramax			Corporate
TCE Revenue:
Vessel revenue	$	9,038		$	26,712		$	26,771		$	—		$	—		$	38,770		$	10,217		$	—
Voyage expenses	280			331			176			—			—			3,653			74			—
TCE Revenue	$	8,758		$	26,381		$	26,595		$	—		$	—		$	35,117		$	10,143		$	—
Operating expenses:
Vessel operating costs	5,089			9,986			14,297			—			—			1,600			—			—
Charterhire expense	—			29,509			21,880			—			—			57,909			15,305			—
Vessel depreciation	3,623			4,536			6,104			—			—			686			—			—
General and administrative	275			498			713			33,896			39			103			26			31,593
Loss / write down on assets held for sale	408,318			8,997			5,622			—			52,553			2,934			—			—
Total operating expenses	$	417,305		$	53,526		$	48,616		$	33,896		$	52,592		$	63,232		$	15,331		$	31,593
Operating loss	$	(408,547	)	$	(27,145	)	$	(22,021	)	$	(33,896	)	$	(52,592	)	$	(28,115	)	$	(5,188	)	$	(31,593	)
Other (expense) income:
Interest income	—			—			4			352			—			—			—			1,052
Foreign exchange (loss) gain	(4		)	(10		)	(27		)	29			—			—			—			43
Financial expense, net	—			—			—			(19,524		)	—			—			—			(172		)
Total other (expense) income	(4		)	(10		)	(23		)	(19,143		)	—			—			—			923
Net loss	$	(408,551	)	$	(27,155	)	$	(22,044	)	$	(53,039	)	$	(52,592	)	$	(28,115	)	$	(5,188	)	$	(30,670	)

TCE revenue (see Non-GAAP Financial Measures) was $61.7 million for the year ended December 31, 2015, associated with 20 time chartered-in vessels and 30 owned vessels, compared to TCE revenue of $45.3 million during the year ended December 31, 2014, associated with 24 time chartered-in vessels and two owned vessels. TCE revenue per day was $7,173 and $7,931 for the years ended December 31, 2015 and 2014, respectively. While our newly built fuel-efficient fleet consistently outperformed the market as compared to the BDI, the decrease in TCE revenue per day was due to the weakness in the dry bulk market across all vessel classes, as reflected by the BDI which hit then record lows in 2015. The increase in TCE revenue during the year ended December 31, 2015 compared to the prior year was attributable to the increase in the number of revenue days associated with the increase in vessels.

Voyage expenses for the year ended December 31, 2015 were $0.8 million, compared to $3.7 million for the year ended December 31, 2014. The costs incurred in 2015 are primarily comprised of brokerage commissions on vessels we time charter-out and miscellaneous costs that we are unable to recoup under time charter and pool arrangements. Voyage expenses in 2014 relate primarily to voyage charters for certain vessels we time chartered-in prior to their joining the Scorpio Group Pools.

Vessel operating costs for the year ended December 31, 2015 were $29.4 million related to 30 owned vessels. Vessel operating costs for the year ended December 31, 2014 were $1.6 million related to two owned vessels. Vessel operating costs include expenses incurred upon the delivery of a vessel (takeover costs), which include the crew’s travel costs to the shipyard and training. These takeover costs are expected to decrease as the number of vessels scheduled to be delivered decreases in 2016.

Charterhire expense was $51.4 million and $73.2 million for the years ended December 31, 2015 and 2014, respectively. This decrease is due to fewer vessels chartered-in during 2015 compared to the prior year. Charterhire expense is expected to decrease in 2016 due to a reduction in the number of vessels chartered-in.

Depreciation for the year ended December 31, 2015 was $14.3 million related to 30 owned vessels. Depreciation for the year ended December 31, 2014 was $0.7 million related to two owned vessels.

General and administrative expense was $35.4 million and $31.8 million for the years ended December 31, 2015 and 2014, respectively. Such amounts are primarily not attributable to our operating segments and are therefore considered corporate. These include $24.6 million and $23.9 million of noncash restricted stock amortization in the periods ended December 31, 2015 and 2014, respectively, with the balance primarily related to payroll, directors’ fees, professional fees and insurance in both periods.

During the year ended December 31, 2015, we recorded a loss of $422.9 million associated with writing down 24 vessels and construction contracts that we sold or classified as held for sale during the year ended December 31, 2015, as well as incremental write downs of certain construction contracts for vessels that were classified as held for sale at December 31, 2014. During the year ended December 31, 2014 we recorded a loss of $55.5 million associated with writing down seven construction contracts for vessels that were classified as held for sale at December 31, 2014.

In addition, during the year ended December 31, 2015, we recorded financial expense, net of $19.5 million, which consists primarily of a $16.1 million loss associated with writing off a portion of deferred financing costs accumulated on five credit facilities for which the commitments were reduced pursuant to the removal from the facility of certain vessels that have been classified as held for sale. In addition, during 2015, we recorded interest expense of $1.0 million. During the year ended December 31, 2014, we incurred no write offs and all of our interest expense was capitalized.We expect further increases in interest expense in 2016 as we take delivery of additional vessels from our Newbuilding Program, reducing the amount of interest that qualifies for capitalization.

Results for the year ended December 31, 2014 compared to the period from March 20, 2013 (date of inception) to December 31, 2013

Financial results for the year ended December 31, 2014 are not comparable to the period from March 20, 2013 (date of inception) to December 31, 2013 because as of December 31, 2013, we were a development stage company as we had not begun our planned principal operations.



	Year ended December 31, 2014												Period from March 20, 2013 (date of inception) to December 31, 2013
	Capesize			Kamsarmax			Ultramax			Corporate			Capesize		Kamsarmax		Ultramax		Corporate
TCE Revenue:
Vessel revenue	$	—		$	38,770		$	10,217		$	—		$	—	$	—	$	—	$	—
Voyage expenses	—			3,653			74			—			—		—		—		—
TCE Revenue	$	—		$	35,117		$	10,143		$	—		$	—	$	—	$	—	$	—
Operating expenses:
Vessel operating costs	—			1,600			—			—			—		—		—		—
Charterhire expense	—			57,909			15,305			—			—		—		—		—
Vessel depreciation	—			686			—			—			—		—		—		—
General and administrative	39			103			26			31,593			—		—		—		5,505
Loss / write down on assets held for sale	52,553			2,934			—			—			—		—		—		—
Total operating expenses	$	52,592		$	63,232		$	15,331		$	31,593		$	—	$	—	$	—	$	5,505
Operating loss	$	(52,592	)	$	(28,115	)	$	(5,188	)	$	(31,593	)	$	—	$	—	$	—	$	(5,505	)
Other (expense) income:
Interest income	—			—			—			1,052			—		—		—		341
Foreign exchange (loss) gain	—			—			—			43			—		—		—		(1,135		)
Financial expense, net	—			—			—			(172		)	—		—		—		(8		)
Total other (expense) income	—			—			—			923			—		—		—		(802		)
Net loss	$	(52,592	)	$	(28,115	)	$	(5,188	)	$	(30,670	)	$	—	$	—	$	—	$	(6,307	)

TCE revenue (see Non-GAAP Financial Measures) was $45.3 million for the year ended December 31, 2014, associated with 24 time chartered-in vessels and two owned vessels, for which the time charter equivalent revenue per day was $7,931. TCE revenue per day was adversely affected by the integration of the time chartered vessels into our fleet which required significant time and fuel as they had to be repositioned for their first voyages as well as a depressed rate environment for dry bulk carriers.

Vessel operating costs for the year ended December 31, 2014 were $1.6 million related to two owned Kamsarmax vessels.

Charterhire expense for the year ended December 31, 2014 was $73.2 million relating to the 24 time chartered-in vessels.

Depreciation for the year ended December 31, 2014 was $0.7 million related to two Kamsarmax vessels.

General and administrative expense was $31.8 million for the year ended December 31, 2014 and $5.5 million for the period from March 20, 2013 (date of inception) to December 31, 2013. Such amounts included $23.9 million and $3.4 million, respectively, of noncash restricted stock amortization. The balance primarily related to payroll, directors’ fees, professional fees and insurance in both periods.

During the year ended December 31, 2014 we recorded a loss of $55.5 million associated with writing down seven contracts to construct vessels that we classified as held for sale as of December 31, 2014. These seven contracts to construct vessels include one Kamsarmax construction contract and six LR2 product tanker construction contracts. The sales were completed during 2015.

In addition, during the period from March 20, 2013 (date of inception) to December 31, 2013, we incurred a $1.1 million loss in connection with a shareholder receivable denominated in Norwegian kroner that arose in September 2013 but was not settled in U.S. dollars until October 2013.

Critical Accounting Estimates

Our consolidated financial statements and accompanying notes are prepared in accordance with U.S. GAAP. In many instances, the application of such principles requires management to make estimates or to apply subjective principles to particular facts and circumstances. A change in the estimates or a variance in the application, or interpretation of U.S. GAAP could yield a materially different accounting result. A summary of our critical accounting estimates where we believe that the estimations, judgments or interpretations that we made, if different, would have yielded the most significant differences in our consolidated financial statements, can be found in the notes to the consolidated financial statements. In addition, for a summary of all of our significant accounting policies see Note 1, General information and significant accounting policies , in the notes to the consolidated financial statements.

Vessels and 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. We depreciate our vessels on a straight-line basis over their estimated useful lives, estimated to be 25 years from date the vessel is ready for its first voyage. Depreciation is based on cost less the estimated residual value which is the lightweight tonnage of each vessel multiplied by scrap value per ton. The scrap value per ton is estimated taking into consideration the historical four year average scrap market rates at the balance sheet date with changes accounted for in the period of change and in future periods. We believe that a 25-year depreciable life for our vessels is consistent with that of other ship owners and with its economic useful life. An increase in the useful life of the vessel or in its 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 its residual value would have the effect of increasing the annual depreciation charge. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, or when the cost of complying with such regulations is not expected to be recovered, we will adjust the vessel’s useful life to end at the date such regulations preclude such vessel’s further commercial use. The carrying value of our vessels does not represent the fair market value of such vessels or the amount we could obtain if we were to sell any of our vessels, which could be more or less. Under U.S. GAAP, we would not record a loss if the fair market value of a vessel (excluding its charter) is below our carrying value unless and until we determine to sell that vessel or the vessel is impaired as discussed below under “Impairment of long-lived assets held for use.”

Pursuant to our bank credit facilities, prior to drawdown of loans under the credit facilities we submit to the lenders valuations of the vessels collateralizing the relevant facility. Thereafter, we will regularly submit to the lenders valuations of our vessels on an individual charter free basis in order to evidence our compliance with the collateral maintenance covenants under our bank credit facilities. Such a valuation is not necessarily the same as the amount any vessel may bring upon sale, which may be more or less, and should not be relied upon as such. We have received valuations on six specific vessels between December 2015 and February 2016. If we were to apply those valuations received to the remaining vessels under construction as of December 31, 2015, excluding the eight vessels and vessels under construction classified as held for sale, the carrying value of our 25 vessels and contract price of our 24 vessels under construction would exceed their fair values by an aggregate of $387.5 million, ranging from $4.1 million per vessel to $10.5 million per vessel. The fair values of our vessels can fluctuate depending on the shipyards and the dates of delivery. These assumptions have not been taken into account in the amounts disclosed above.

Impairment of long-lived assets held for use

We follow Accounting Standards Codification or ASC Subtopic 360-10, Property, Plant and Equipment or ASC 360-10, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. If indicators of

impairment are present, we perform an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets.

The current economic and market conditions, including the significant disruptions in the global credit markets, are having broad effects on participants in a wide variety of industries. Since mid-August 2008, the charter rates in the drybulk charter market have declined to historical lows, and drybulk vessel values have also declined as a result of both a slowdown in the availability of global credit and the significant deterioration in charter rates.

When indicators of impairment are present and our estimate of undiscounted future cash flows for any vessel is lower than the vessel’s carrying value, the carrying value is written down, by recording a charge to operations, to the vessel’s fair market value if the fair market value is lower than the vessel’s carrying value.

Our vessels are assessed annually for impairment in the fourth quarter and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of our vessels and vessels under construction below its carrying value. In developing its estimates of undiscounted cash flows, we make assumptions and estimates about vessels’ future performance, with the most significant assumptions relating to (i) charter rates on expiry of existing charters, which are based on the current fixing applicable to five-year time charter rates and thereafter, a reversion to the ten-year historical average for each category of vessel, (ii) off-hire days, which are based on actual off-hire statistics for our fleet, (iii) operating costs, based on current levels escalated over time based on long term trends, (iv) dry docking frequency, duration and cost, (v) estimated useful life which is assessed as a total of 25 years and (vi) estimated scrap values. Specifically, we utilize the rates currently in effect for the duration of their current time charters, without assuming any profit sharing. For periods of time where our vessels are not fixed on time charters, we utilize an estimated daily TCE for our vessels’ unfixed days using the five year time charter average in effect as of December 31, 2015 for the next five years and the ten year historical average for the remainder of the vessels’ useful lives, which is common practice for the industry. Actual equivalent drybulk shipping rates are currently significantly lower than the estimated rate. We further assume a utilization rate of 95% for our vessels and do not apply any inflation to the estimated rates used. We do apply a 3% inflation rate to vessel operating costs and drydocking costs.

During our December 31, 2015 assessment, we determined that the future income streams expected to be generated by our vessels, including vessels under construction and excluding assets held for sale which are carried at balances that approximate their fair values, over their remaining operating lives on an undiscounted basis would be sufficient to recover their carrying values and, accordingly, it confirmed that our vessels were not impaired under U.S. GAAP. Our estimated future undiscounted cash flows exceeded each of our vessels’ carrying values, as well as the expected carrying values of vessels under construction upon their delivery to us by the shipyards, by a considerable margin (approximately 68% - 118% of carrying value). As of December 31, 2015, we owned 25 vessels, excluding those classified as held for sale, which have an average remaining useful life of 24.6 years.

Our vessels remain fully utilized and have a long average remaining useful life in which to generate sufficient cash flows on an undiscounted basis to recover their carrying values as of December 31, 2015.

During our December 31, 2014 assessment, we determined that the future income streams expected to be generated by our vessels, including vessels under construction and excluding assets held for sale which are carried at balances that approximate their fair values, over their remaining operating lives on an undiscounted basis would be sufficient to recover their carrying values and, accordingly, it confirmed that our vessels were not impaired under U.S. GAAP. Our estimated future undiscounted cash flows exceeded each of our vessels’ carrying values, as well as the expected carrying values of vessels under construction upon their delivery to us by the shipyards, by a considerable margin (approximately 116% - 289% of carrying value). Our vessels remain fully utilized and have a relatively long average remaining useful life in which to recover sufficient cash flows on an undiscounted basis to recover their carrying values as of December 31, 2014. As of December 31, 2014, all but two of our vessels under construction had remaining lives of 25 years, and the two Kamsarmax vessels we owned as of December 31, 2014 had an average remaining useful life of 24.7 years.

In our impairment testing, we also examined the sensitivity of the future income streams expected to be earned by our vessels by reviewing other scenarios relative to the initial assumptions we used to see if the resulting impact would have resulted in a different conclusion. Accordingly, we performed sensitivity analyses based on more conservative charter rates and expected useful lives for our vessels. In the first sensitivity analysis, we lowered charter rate assumptions to 86% and 77% of the long-term averages of Kamsarmax and Ultramax vessels, respectively (holding all other critical assumptions constant), while in our second sensitivity analysis; we decreased our vessels’ estimated useful lives by approximately 30% for each vessel class (holding all other critical assumptions constant). We then evaluated the outcomes of the sensitivity analysis performed to assess their impact on our conclusions. In both analyses, we found that there would be no impairment of any of our vessels.

Although we believe that the assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are highly subjective. There can be no assurance as to how long charter rates and vessel values will remain at their currently low levels or whether they will improve by any significant degree. Charter rates may remain at depressed levels for some time, which could adversely affect our revenue and profitability, and future assessments of vessel impairment.

Management will continue to monitor developments in charter rates in the markets in which it participates with respect to the expectation of future rates over an extended period of time that are utilized in the analyses.


B.	Liquidity and Capital Resources

We were formed for the purpose of acquiring and operating latest generation of newbuilding drybulk carriers with fuel-efficient specifications and carrying capacities of greater than 30,000 dwt. As of the date of this annual report, our Operating Fleet consists of 36 drybulk vessels consisting of 33 vessels that we own ( 14 Kamsarmax vessels and 19 Ultramax vessels) and three vessels that we charter-in. At its peak our Newbuilding Program consisted of contracts for the construction of 80 drybulk vessels with established shipyards in Japan, China, South Korea and Romania, which we agreed to acquire for an aggregate purchase price of $3,102.8 million, including 29 Ultramax vessels, 23 Kamsarmax vessels and 28 Capesize vessels. Due to the decline in the dry bulk market, we have since reduced our expected fleet size through a series of sales. We currently expect our fully delivered fleet to consist of 28 Ultramax vessels and 21 Kamsarmax vessels for a total of 49 vessels. We believe that reducing the size of our expected fleet through the sale of 31 vessels and contracts for the construction of vessels will preserve liquidity in that such sales generate cash proceeds and effectively relieve us of the requirement to make the remaining unpaid installments under the contracts. A tabular summary of our contracts for the construction of vessels under our Newbuilding Program is as follows:



	Capesize		Kamsarmax		Ultramax		LR2		LR1		Total
Contracted for in our Newbuilding Program	28		23		29		—		—		80
Delivered from shipyards in 2014	—		(2	)	—		—		—		(2	)
Committed to convert into tankers in 2014	(6	)	—		—		6		—		—
Classified as assets held for sale in 2014	—		(1	)	—		(6	)	—		(7	)
Vessels under construction as of December 31, 2014	22		20		29		—		—		71
Delivered from shipyards in 2015	(5	)	(8	)	(15	)	—		—		(28	)
Committed to convert into tankers in 2015	(3	)	—		—		—		3		—
Classified as assets held for sale in 2015	(14	)	(1	)	(1	)	—		(3	)	(19	)
Vessels under construction as of December 31, 2015	—		11		13		—		—		24

As of December 31, 2015 there were 24 drybulk vessels in our Newbuilding Program (11 Kamsarmax vessels and 13 Ultramax vessels), which have an aggregate purchase price of $702.8 million. Of this, $433.6 million remains to be paid. The aggregate purchase price of the eight vessels and vessels under construction that we intend to sell and classified as held for sale is $460.4 million. Our business is capital intensive and we intend to pay for these vessels with a combination of cash generated from operations, equity capital, and borrowings from commercial banks under one or more secured credit facilities. We expect to rely on operating cash flows as well as equity offerings and long-term borrowings under secured credit facilities to implement our growth plan. We believe that our current cash balance as well as operating cash flows; available borrowings under our credit facilities, including our credit facilities described below, the potential sale of other construction contracts in our Newbuilding Program, and potential issuances of debt and equity securities will be sufficient to meet our liquidity needs for the next 12 months.

During 2015, we made total yard payments and paid other construction costs in the amount of $876.0 million and we have remaining yard installments in the amount of $433.6 million before we take delivery of the remaining 24 vessels in our Newbuilding Program (excluding any vessels and vessels under construction classified as assets held for sale). With respect to the five vessels under construction that were held for sale as of December 31, 2015 , we made total yard payments of $198.7 million and had remaining installments to the yard of $90.2 million as of that date.

Equity Issuances

Upon our formation in March 2013, we issued 125 common shares to SSH. Between July 1, 2013 and July 16, 2013, we issued and sold 2,604,167 common shares, par value $0.01 per share, for net proceeds of $242.8 million; on September 24, 2013, we issued and sold an additional 2,783,333 common shares for net proceeds of $290.5 million ; and on October 31, 2013, we issued

and sold an additional 2,715,867 common shares for net proceeds of $291.0 million, in Norwegian private placement transactions exempt from registration under the Securities Act.

In December 2013, we completed our underwritten initial public offering of 2,608,333 common shares at $117.00 per share, and in January 2014, the underwriters in the initial public offering exercised their option to purchase an additional 391,250 common shares. We received aggregate net proceeds of $326.0 million, which we used to fund newbuilding vessel capital expenditures.

On November 20, 2014, we issued and sold an aggregate of 3,333,333 common shares, par value $0.01 per share, to certain institutional investors, certain of our executive officers and SSH, in a private offering exempt from registration under the Securities Act, pursuant to a Securities Purchase Agreement, for gross proceeds of $150.0 million. In connection with this transaction, we have also entered into a Registration Rights Agreement with the purchasers in the offering, pursuant to which we have filed a registration statement under the Securities Act covering the resale of common shares held by the investors.

On June 16, 2015, we issued 11,083,333 shares of common stock, par value $0.01 per share at $18.00 per share in an underwritten public offering. SSH and certain of our executive officers purchased an aggregate of 833,333 common shares at the public offering price. We received $190.2 million of proceeds from the issuance.

On June 23, 2015, underwriters exercised their option to purchase an additional 1,662,500 additional common shares in connection with the offering. The sale of these common shares resulted in net proceeds to us of approximately $28.4 million, after deducting underwriters’ discounts and commissions.

On December 31, 2015, our board of directors effected a one-for-twelve reverse stock split of our common shares, par value $0.01 per share, and a reduction in the total number of authorized common shares to 56,250,000 shares. Our shareholders approved the reverse stock split and change in authorized common shares at a special meeting of shareholders held on December 23, 2015. The reverse stock split reduced the number of outstanding common shares from 344,239,098 shares to 28,686,561 shares.

Cash Flow

Operating Activities

The table below summarizes the effect of the major components of operating cash flow.



	Year Ended December 31,						Period from March 20, 2013 through December 31,
	2015			2014			2013
Net loss	$	(510,789	)	(116,565		)	$	(6,307	)
Non-cash items included in net loss	479,872			80,192			3,359
Related party balances	(4,878		)	(15,170		)	-
Effect of changes in other working capital and operating assets and liabilities	653			1,203			711
Net cash used in operating activities	$	(35,142	)	$	(50,340	)	$	(2,237	)

The cash flow used in operating activities for the year ended December 31, 2015 was driven by our recorded net loss. Year over year, operating cash flow increased due to a reduction in the amount of working capital injected into the pools as vessels were delivered to such pools. Use of cash in operating activities during the year ended December 31, 2014 reflects an increase in working capital items, associated with commencing our principal operations of operating a fleet of drybulk carriers. We had no principal operations during 2013.

Investing Activities

Net cash used in investing activities reflects the investment we made in our fleet, offset by any proceeds received from the sale of vessels.

Financing Activities

During the year ended December 31, 2015 and 2014, we had cash provided by financing activities of $618.8 million and $271.9 million , respectively. A summary of cash provided by financing activities is as follows:

•

During the year ended December 31, 2015, we received proceeds of $218.0 million relating to its offering in June of 12,745,833 shares of common stock. During the year ended December 31, 2014 , we received $187.6 million from the issuance of 391,250 shares of common stock in January 2014 pursuant to the underwriters exercising their overallotment from our initial public offering of December 12, 2013 and 3,333,333 shares of common stock issued in a private placement transaction in November 2014.

•

During the year ended December 31, 2015, we borrowed $489.6 million on its credit facilities and made principal repayments of $62.7 million on its credit facilities. During the year ended December 31, 2014 , we received $33.6 million of proceeds in November 2014 from borrowings under the $39.6 Million Senior Secured Credit Facility and received proceeds of $73.6 million in September 2014 and October 2014 from the issuance of Senior Notes.


•	During the year ended December 31, 2015, we paid $26.0 million of debt issue costs primarily relating to securing its credit facilities and payment of commitment fees. During the year ended December 31, 2014 , we paid $22.9 million of debt issue costs primarily related to the Senior Notes and credit facilities that closed during 2014.

Credit Facilities and Unsecured Notes

$39.6 Million Senior Secured Credit Facility

On June 27, 2014, we entered into a $39.6 million senior secured credit facility with NIBC Bank N.V. to finance a portion of the market value of two of the vessels in our Newbuilding Program which secure this facility. This facility bears interest at LIBOR plus a margin of 2.925% and has a term of five years. This facility is secured by, among other things, a first priority mortgage on two of the Kamsarmax vessels in our Newbuilding Program and guaranteed by each of the collateral vessel owning subsidiaries. As of December 31, 2015, the outstanding balance on this facility was approximately $30.8 million.

$330.0 Million Senior Secured Credit Facility

On July 29, 2014, we entered into a $330.0 million senior secured credit facility with Credit Agricole Corporate and Investment Bank and Deutsche Bank AG London to finance a portion of the purchase price of 22 of the vessels in our Newbuilding Program, which was subsequently reduced by $15.0 million due to our sale of one of the vessels that was to collateralize this facility. This facility bears interest at LIBOR plus a margin of 2.925% and has a term of seven years. This facility is secured by, among other things, a first preferred cross-collateralized mortgage on each of 21 of our newbuilding vessels (consisting of 15 Ultramax drybulk carriers and six Kamsarmax drybulk carriers) and guaranteed by each of the collateral vessel owning subsidiaries. During the year ended December 31, 2015, we drew down $179.0 million relating to ten Ultramax vessels and two Kamsarmax vessels delivered to us as of December 31, 2015. The remaining nine vessels are under construction and scheduled for delivery in 2016 and 2017 and we expect that we will draw under this facility upon the delivery of each collateral vessel in an amount not to exceed the lesser of 60% of the fair market value of such vessel or a stated drawdown amount. As of December 31, 2015, the outstanding balance on this facility was approximately $173.9 million.

$67.5 Million Senior Secured Credit Facility

On July 30, 2014, we entered into a $67.5 million credit facility with a leading European financial institution. The proceeds of this facility have been, or will be, used to fund a portion of the purchase price of four of the vessels in our Newbuilding Program that secure this facility. This facility has a seven year term from the date of delivery of each such vessel securing the loan, with customary financial and restrictive covenants. This facility bears interest at LIBOR plus a margin of 2.95%, and quarterly principal repayments on each tranche are approximately $0.3 million. The $67.5 Million Senior Secured Credit Facility is secured by, among other things, a first priority mortgage on four of the vessels in our Newbuilding Program (two Ultramax and two Kamsarmax vessels), and a parent company guarantee. During the year ended December 31, 2015, we borrowed $29.7 million associated with drawdowns on two Kamsarmax vessels that were delivered, and the remaining two Ultramax vessels are scheduled to be delivered in 2016.

$409.0 Million Senior Secured Credit Facility

On December 30, 2014, we entered into a $409.0 million senior secured credit facility with Nordea Bank Finland PLC, New York Branch, and Skandinaviska Enskilda Banken AB (publ) to partially finance a portion of our acquisition of 20 of the vessels in our Newbuilding Program (six Ultramax, nine Kamsarmax, and five Capesize vessels). This credit facility was

subsequently reduced by $73.0 million due to the sale of three Capesize vessels that were serving as partial security under the facility, and the addition of one Ultramax vessel to the security package under the facility. As amended, this credit facility is expected to finance a portion of the purchase price of 18 vessels (seven Ultramax, nine Kamsarmax, and two Capesize vessels). During the year ended December 31, 2015, we drew down $95.5 million on six vessels consisting of three Ultramax vessels and two Kamsarmax vessels delivered as of December 31, 2015 and one Kamsarmax vessel that was delivered in January 2016. The remaining 12 vessels, which includes two construction contracts that are classified as held for sale, are expected to be delivered in 2016. This facility bears interest at LIBOR plus a margin of 3.00% and has a term of six years. This facility is secured by, among other things, a first preferred mortgage on each of the 18 newbuilding vessels, including two construction contracts that are classified as held for sale, and guaranteed by each of the collateral vessel owning subsidiaries.

$411.3 Million Senior Secured Credit Facility

On January 15, 2015, we entered into a senior secured credit facility for up to $411.3 million with a group of financial institutions, which was subsequently reduced on March 26, 2015 by $171.0 million to $240.3 million, due to the removal from financing under this facility of five Capesize newbuilding vessels that we had agreed to convert into product tankers, and was further reduced by approximately $136.0 million pursuant to the sale or impending sale of four Capesize vessel contracts. After giving effect to these reductions, we borrowed $84.2 million to finance a portion of the contract price of three Capesize vessels, all of which were delivered as of December 31, 2015. This facility was secured by, among other things, a first preferred mortgage on the three Capesize vessels and guaranteed by each of the collateral vessel owning subsidiaries. Portions of this facility bore interest at LIBOR plus an applicable margin of between 1.90% and 2.95% and a portion had a fixed coupon of 6.25%. This facility was scheduled to mature six years from the delivery of the final vessel securing the facility, and in certain circumstances, the facility was scheduled to mature 12 years after the delivery of each financed vessel. Because the three Capesize vessels collateralizing this facility were classified as held-for-sale as of December 31, 2015, this loan was fully repaid in January 2016 and the vessels were sold.

$42.0 Million Senior Secured Credit Facility

On January 30, 2015, we entered into a senior secured credit facility for up to $42.0 million with a leading European financial institution. The proceeds of this facility were used to finance a portion of the purchase price of two Kamsarmax vessels in our Newbuilding Program, which we took delivery of in 2015, and for which we borrowed an aggregate of $38.0 million. Each tranche has a final maturity of six years from the date of the respective vessel delivery from the yard. This facility bears interest at LIBOR plus a margin of 2.80%. This facility is secured by, among other things, a first preferred mortgage on the two Kamsarmax vessels and guaranteed by each of the collateral vessel owning subsidiaries. As of December 31, 2015, the outstanding balance on this facility was approximately $36.6 million. On February 15, 2016, this facility was upsized by $10.8 million to finance a portion of the purchase price of one Ultramax vessel that was delivered to us during the third quarter of 2015 from Imabari Shipbuilding Co. Ltd., which was also pledged as security under this facility and the margin was increased to 2.97%. On February 17, 2016, we drew down an additional $10.3 million on this facility.

$12.5 Million Senior Secured Credit Facility

On December 22, 2015, we entered into a senior secured credit facility for up to $12.5 million, which was used to finance a portion of the purchase price of one Ultramax vessel which was delivered to us. The facility may be drawn in a single tranche of up to $12.5 million, with quarterly payments of one-sixtieth of the advance commencing on the last day of the quarter in which the advance was drawn and a balloon payment payable at the maturity date which is December 22, 2020. This facility bears interest at LIBOR plus a margin of 3.00%. This facility is secured by, among other things, a first preferred mortgage on the Ultramax newbuilding vessel and guaranteed by the collateral vessel owning subsidiary. In December 2015, we drew down $11.8 million on this facility.

$27.3 Million Senior Secured Credit Facility

On December 22, 2015, we entered into a senior secured credit facility for up to $27.3 million, which was used to finance a portion of the purchase price of two Ultramax vessels in our Newbuilding Program which were delivered during the first quarter of 2016. The facility may be drawn in two tranches of up to 50% of the fair value of each vessel, with 20 quarterly payments, assuming the full amount of the commitment is drawn, of $0.2 million per tranche and a balloon payment of $9.4 million per tranche payable at the maturity date. Each tranche has a maturity of five years from the drawdown date. This facility bears interest at LIBOR plus a margin of 2.95%. This facility is secured by, among other things, a first preferred mortgage on the two Ultramax newbuilding vessels and guaranteed by each of the collateral vessel owning subsidiaries.

Credit facility amendments/prepayments

During February 2016, we agreed in principle with our lenders to amend all of our credit facilities to reduce the minimum cash liquidity covenant to the greater of $25 million or $0.7 million per owned vessel. Pursuant to receiving these amendments, we agreed to prepay approximately $41.2 million in aggregate of principal installments on outstanding borrowings and certain expected future borrowings under our credit agreements, representing the next 12 months of installments on those borrowings, and will not be required to make the installment payments on certain of our borrowings that would have been due during the 12 subsequent months approximating $26.7 million. This $26.7 million will be due upon final maturity of each borrowing. We have made additional prepayments to ensure compliance with certain loan covenants.

As of December 31, 2015, we had $460.4 million of outstanding borrowings under the credit agreements described above as shown in the following table (dollars in thousands):



	As of December 31, 2015		February 25, 2016
	Amount outstanding		Amount outstanding		Amount available
$39.6 Million Senior Secured Credit Facility	$	30,754	$	25,333	$	—
$409 Million Senior Secured Credit Facility	94,473		114,375		115,800
$330 Million Senior Secured Credit Facility	173,950		201,025		105,000
$42 Million Senior Secured Credit Facility	36,588		44,290		—
$67.5 Million Senior Secured Credit Facility	29,666		41,307		16,350
$411.3 Million Senior Secured Credit Facility	83,261		—		—
$12.5 Million Senior Secured Credit Facility	11,750		11,750		—
$27.3 Million Senior Secured Credit Facility	—		23,250		—
Total	$	460,442	$	461,330	$	237,150

Loan Covenants

Certain of our credit facilities discussed above, as we have agreed in principle to amend with each of our lenders, have, among other things, the following financial covenants, the most stringent of which require us to:


•	The ratio of net debt to total capitalization no greater than 0.60 to 1.00 .


•	Consolidated tangible net worth no less than $500.0 million plus (i) 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after December 31, 2013 and (ii) 50% of the value of any new equity issues occurring on or after December 31, 2013.


•	The ratio of EBITDA to net interest expense calculated on a trailing four quarter basis of greater than 1.00 to 1.00 from the quarter ending March 31, 2017 until and including the quarter ending December 31, 2017, calculated on a year to date basis for calendar year 2017 and 2.50 to 1.00 for each quarter thereafter, calculated on a trailing quarter basis.


•	Minimum liquidity of not less than the greater of $25.0 million or $0.7 million per owned vessel, as agreed to in principle with our lenders.

•

Maintain a minimum fair value of the collateral for each credit facility, such that the aggregate fair value of the vessels collateralizing the credit facility be between 140% and 150% through December 31, 2017 and thereafter between 130% and 145%, depending on the credit facility, of the aggregate principal amount outstanding under such credit facility, or, if we do not meet these thresholds to prepay a portion of the loan or provide additional security to eliminate the shortfall.

Our credit facilities discussed above have, among other things, the following restrictive covenants which would restrict our ability to:


•	incur additional indebtedness;


•	sell the collateral vessel, if applicable;


•	make additional investments or acquisitions;


•	pay dividends and


•	effect a change of control of us.

A violation of any of the financial covenants contained in our credit facilities described above may constitute an event of default under our credit facilities, which, unless cured within the grace period set forth under the credit facility, if applicable, or waived or modified by our lenders, provides our lenders with the right to, among other things, require us to post additional collateral, enhance our equity and liquidity, increase our interest payments, pay down our indebtedness to a level where we are in compliance with our loan covenants, sell vessels in our fleet, reclassify our indebtedness as current liabilities and accelerate our indebtedness and foreclose their liens on our vessels and the other assets securing the credit facilities, which would impair our ability to continue to conduct our business.

Furthermore, our credit facilities contain a cross-default provision that may be triggered by a default under one of our other credit facilities. A cross-default provision means that a default on one loan would result in a default on certain of our other loans. Because of the presence of cross-default provisions in certain of our credit facilities, the refusal of any one lender under our credit facilities to grant or extend a waiver could result in certain of our indebtedness being accelerated, even if our other lenders under our credit facilities have waived covenant defaults under the respective credit facilities. If our secured indebtedness is accelerated in full or in part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing and we could lose our vessels and other assets securing our credit facilities if our lenders foreclose their liens, which would adversely affect our ability to conduct our business.

Moreover, in connection with any waivers of or amendments to our credit facilities that we have obtained, or may obtain in the future, our lenders may impose additional operating and financial restrictions on us or modify the terms of our existing credit facilities. These restrictions may further restrict our ability to, among other things, pay dividends, make capital expenditures or incur additional indebtedness, including through the issuance of guarantees. In addition, our lenders may require the payment of additional fees, require prepayment of a portion of our indebtedness to them, accelerate the amortization schedule for our indebtedness and increase the interest rates they charge us on our outstanding indebtedness.

As of December 31, 2015, we were in compliance with all of the financial covenants contained in the credit facilities that we had entered into as of that date.

In addition to the credit agreements described above, which are in effect as of December 31, 2015, we entered into the following agreements which originated and either expired or were terminated during the year ended December 31, 2015:


•	$26.0 Million Senior Credit Facility, originally dated February 27, 2015


•	$19.8 Million Senior Credit Facility, originally dated March 2, 2015


•	$76.5 Million Senior Credit Facility, originally dated October 12, 2015

Please see the notes to our consolidated financial statements for a description of these credit facilities.

Senior Notes due 2019

On September 22, 2014, we issued $65.0 million aggregate principal amount of our 7.50% senior unsecured notes due 2019, or our Notes, in a registered public offering. The Notes will mature on September 15, 2019, and may be redeemed in whole or in part at any time, or from time to time, after September 15, 2016. Interest on the Notes is payable quarterly on each of March 15, June 15, September 15 and December 15, commencing on December 15, 2014. We used the net proceeds we received to fund installment payments due under our Newbuilding Program. On October 16, 2014, we issued an additional $8.625 million aggregate principal amount of our Notes, pursuant to the underwriters’ option to purchase additional Notes. Our 7.50% senior unsecured notes due 2019 commenced trading on the NYSE on September 29, 2014 under the symbol “SLTB.”

The indenture governing our Notes contains certain restrictive covenants, including:


(a)	Limitation on Borrowings . We are prohibited from letting net borrowings equal or exceed 70% of our total assets, which are calculated as all of our assets of the types presented on our consolidated balance sheet.


(b)	Limitation on Minimum Tangible Net Worth . The Company shall ensure that net worth always exceeds $500 million.


(c)	Reports . Following any cross default, the Company shall promptly notify the holders of our Notes of the occurrence of such cross default.

(d)

Limitation on Asset Sales . We shall not, and shall not permit any subsidiary to, in the ordinary course of business or otherwise, sell, lease, convey, transfer or otherwise dispose of any of our of any such subsidiary’s assets (including capital stock and warrants, options or other rights to acquire capital stock) other than pursuant to a “Permitted Asset Sale” or a “Limited Permitted Asset Sale” (as such terms are defined in the indenture governing our Notes and described below), unless (A) the Company receives, or the relevant subsidiary receives, consideration at the time of such asset sale at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the board of directors of the Company, of the assets subject to such asset sale, and (B) within 365 days after the receipt of any net proceeds from an asset sale, the Company or the relevant subsidiary, as the case may be, shall apply all such net proceeds to certain permitted purposes, including the repayment of secured indebtedness, capital expenditures, repayment of unsecured indebtedness, acquire all or substantially all of the assets or, or the capital stock of, a person primarily engaged in a permitted business; provided, that in the case of the acquisition of capital stock of any person, such person is or becomes a subsidiary of the Company.

For purposes of this covenant: a “Permitted Asset Sale” includes certain specified asset sales, certain vessel losses not to exceed 10% of the consolidated aggregate market value of the Company’s assets and any transaction or series of transactions involving assets disposed of for fair market value and having an aggregate market value in any one fiscal year of up to 25% of the consolidated aggregate market value of the Company’s assets; and a “Limited Permitted Asset Sale” includes any transaction or series of transactions during a single fiscal year, the net proceeds of which are not otherwise applied pursuant to the requirements set forth in this clause (d), that results in net proceeds in excess of 25% of the consolidated aggregate market value of the Company’s assets .

As of December 31, 2015, we were in compliance with the financial covenants of our Notes.

If a Limited Permitted Asset Sale occurs, the Company must make an offer to purchase our Notes having a principal amount equal to the excess proceeds of such Limited Permitted Asset Sale at a purchase price of 101% of the principal amount of our Notes to be purchased, plus accrued and unpaid interest.

In addition, if a Change of Control (as defined in the Indenture for the Senior Notes) occurs, holders of our Notes have the right, at their option, to require us to purchase any or all of such holders’ our Notes at a purchase price of 101% of the principal amount of our Notes to be purchased, plus accrued and unpaid interest.

In addition, if an event of default or an event or circumstance which, with the giving of any notice or the lapse of time, would constitute an event of default under our Notes has occurred and is continuing, or we are not in compliance with the covenant described under “Limitation on Borrowings” or “Limitation on Minimum Net Worth” described above, then none of the Company or any subsidiary will be permitted to declare or pay any dividends or return any capital to its equity holders (other than the Company or a wholly-owned subsidiary of the Company) or authorize or make any other distribution, payment or delivery of property or cash to its equity holders (other than the Company or a wholly-owned subsidiary of the Company), or redeem, retire, purchase or otherwise acquire, directly or indirectly, for value, any interest of any class or series of its equity interests (or acquire any rights, options or warrants relating thereto but not including convertible debt) now or hereafter outstanding and held by persons other than the Company or any wholly-owned subsidiary, or repay any subordinated loans to equity holders (other than the Company or a wholly-owned subsidiary of the Company) or set aside any funds for any of the foregoing purposes.


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

Not applicable.


D.	Trend Information

See “Item 4. Information on the Company—B. Business Overview—Industry and Market Conditions.”


E.	Off-Balance Sheet Arrangements

As of December 31, 2015 , we did not have any off-balance sheet arrangements. Currently, we are committed to make charter-hire payments to third parties for certain chartered-in vessels. These arrangements are accounted for as operating leases. Please see “Tabular Disclosure of Contractual Obligations” for our other contractual obligations and commitments.


F.	Tabular Disclosure of Contractual Obligations

The following table sets forth our total contractual obligations at December 31, 2015 :



(in millions of U.S. dollars)	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
Vessels under construction ⁽¹⁾	$	433.6	$	—	$	—	$	—	$	433.6
Assets held for sale ⁽²⁾	90.2		—		—		—		90.2
Time charter-in commitments ⁽³⁾	32.4		9.0		—		—		41.4
Senior Notes ⁽⁴⁾	—		—		73.6		—		73.6
Bank loans ⁽⁵⁾	110.2		57.7		148.9		143.7		460.5
Interest payments ⁽⁶⁾	18.4		33.6		21.2		3.5		76.7
Commitment fees ⁽⁷⁾	2.1		0.1		—		—		2.2
Commercial management fee ⁽⁸⁾	17.5		—		—		—		17.5
Technical management fee ⁽⁹⁾	22.0		—		—		—		22.0
Total	$	726.4	$	100.4	$	243.7	$	147.2	$	1,217.7


(1)	Represents the unpaid installments as of December 31, 2015 of the 24 vessels we had under construction as of that date.


(2)	Represents the unpaid installments as of December 31, 2015 relating to the five contracts for the construction of vessels that we had classified as assets held for sale as of December 31, 2015 . Until these contracts are sold, the Company is obligated to make the future contractual payments.


(3)	Represents the amounts expected to be paid by us on the eight vessels that we have time chartered-in as of December 31, 2015 , assuming we redeliver the vessels to their owners on the earliest redelivery date or actual redelivery date and excluding any option periods which may be exercised by us.


(4)	Represents the repayment of our Notes which mature in September 2019.


(5)	Represents the repayment of installments under the bank loans outstanding as of December 31, 2015 .


(6)	Represents the interest payments on outstanding balances of our Notes at 7.50% per annum and bank loans, for which the interest rate used for each facility is based on interest rates in effect as of December 31, 2015 , which inclusive of margins, ranged from 3.2643% to 6.25%.


(7)	Represents the commitment fees we will pay under our credit facilities at December 31, 2015 on which we are incurring commitment fees. Such fees are calculated on the undrawn portion of these credit facilities and assume that the committed amount of each vessel will be drawn when the vessel collateralizing the credit facility is delivered from the shipyards.

(8)

Represents the fixed component of the termination fees we would have to pay our commercial manager, SCM, of $300 per day for two years for each vessel that we own, and $0.5 million for each vessel under construction as of December 31, 2015 . We are also required to pay SCM for each vessel that we own an amount equal to two years of commissions that SCM would have expected to earn had the contracts not been terminated. Due to the variable nature of the commissions, they have been excluded from the above table.


(9)	Represents the termination fees we would have to pay our technical manager, SSM, of $0.2 million per vessel per year for two years for each vessel that we own, and $0.5 million for each vessel under construction as of December 31, 2015 .



ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


A.	Directors and Senior Management

Set forth below are the names, ages and positions of our directors and executive officers. Our board of directors is elected annually on a staggered basis, and each director elected holds office for a three year term or until his successor shall have been duly elected and qualified, except in the event of his death, resignation, removal or the earlier termination of his term of office.

Our Class A directors will serve for a term expiring at the 2017 annual meeting of shareholders, our Class B directors will serve for a term expiring at the 2018 annual meeting, and our Class C directors will serve for a term expiring at the 2016 annual meeting. Officers are elected from time to time by vote of our board of directors and hold office until a successor is elected. The business address of each of our directors and executive officers listed below is Scorpio Bulkers Inc., 9, Boulevard Charles III, MC 98000 Monaco.



Name	Age	Position
Emanuele A. Lauro	37	Chairman, Class A Director and Chief Executive Officer
Robert Bugbee	55	Class B Director and President
Cameron Mackey	47	Chief Operating Officer
Hugh Baker	48	Chief Financial Officer
Roberto Giorgi	65	Class A Director
Einar Michael Steimler	67	Class B Director
Christian M. Gut	36	Class C Director
Thomas Ostrander	65	Class A Director
James Nish	57	Class C Director
Sergio Gianfranchi	70	Vice President, Vessel Operations
Luca Forgione	39	General Counsel
Anoushka Kachelo	35	Secretary

Biographical information concerning the directors and executive officers listed above is set forth below.

Emanuele A. Lauro, Chairman and Chief Executive Officer

Emanuele A. Lauro, the Company’s co-founder, serves and has served as our Chairman and Class A Director since April 9, 2013 and as our Chief Executive Officer since July 1, 2013. Mr. Lauro also serves and has served as Chairman and Chief Executive Officer of Scorpio Tankers (NYSE: STNG) since its initial public offering in April 2010. He joined Scorpio Group in 2003 and has continued to serve there in a senior management position since 2004. Under Mr. Lauro’s leadership, Scorpio Group has grown from an owner of three vessels in 2003 to become a leading operator and manager of approximately 200 vessels in 2016. Over the course of the last several years, Mr. Lauro has founded and developed all of the Scorpio Group Pools in addition to several other ventures such as Scorpio Logistics, which owns and operates specialized assets engaged in the transshipment of dry cargo commodities and invests in coastal transportation and port infrastructure developments in Asia and Africa since 2007. Mr. Lauro has a degree in international business from the European Business School, London.

Robert Bugbee, President and Director

Robert Bugbee, the Company’s co-founder, serves and has served as our Class B Director since April 9, 2013 and as our President since July 1, 2013. Mr. Bugbee has more than 25 years of experience in the shipping industry. Mr. Bugbee also serves and has served as President and Director of Scorpio Tankers since its initial public offering in April 2010. He joined Scorpio Group in February 2009 and has continued to serve there in senior management. Prior to joining Scorpio Group, Mr. Bugbee was a partner at Ospraie Management LLP between 2007 and 2008, a company which advises and invests in commodities and basic industry. From 1995 to 2007, Mr. Bugbee was employed at OMI Corporation, or OMI, a NYSE-listed tanker company sold in 2007. While at OMI, Mr. Bugbee served as President from January 2002 until the sale of the company, and before that served as Executive Vice President since January 2001, Chief Operating Officer since March 2000 and Senior Vice President of OMI from August 1995 to June 1998. Mr. Bugbee joined OMI in February 1993. Prior to this, he was employed by Gotaas-Larsen Shipping Corporation since 1984. During this time he took a two year sabbatical from 1987 for the M.I.B. Program at the Norwegian School for Economics and Business administration in Bergen. He has a Fellowship from the International Shipbrokers Association and a B.A. (Honors) from London University.

Cameron Mackey, Chief Operating Officer

Cameron Mackey serves and has served as our Chief Operating Officer since July 1, 2013. Mr. Mackey also serves and has served as Chief Operating Officer of Scorpio Tankers since its initial public offering in April 2010 and as a Director since May 2013. He joined Scorpio Group in March 2009, where he continues to serve in a senior management position. Prior to joining Scorpio Group, he was an equity and commodity analyst at Ospraie Management LLC from 2007 to 2008. Prior to that, he was

Senior Vice President of OMI Marine Services LLC from 2004 to 2007, where he was also in Business Development from 2002 to 2004. He has been employed in the shipping industry since 1994 and, earlier in his career, was employed in unlicensed and licensed positions in the merchant navy, primarily on tankers in the international fleet of Mobil Oil Corporation, where he held the qualification of Master Mariner. He has an M.B.A. from the Sloan School of Management at the Massachusetts Institute of Technology, a B.S. from the Massachusetts Maritime Academy and a B.A. from Princeton University.

Hugh Baker, Chief Financial Officer

Hugh Baker serves and has served as our Chief Financial Officer since July 1, 2013. Mr. Baker also serves and has served as a Managing Director of Scorpio USA LLC since July 2012, focusing on business development and finance for Scorpio Tankers and the Scorpio Group. For three years prior to joining Scorpio, Mr. Baker was a Managing Director in the investment banking team at Evercore Partners in New York, concentrating on the shipping industry. Prior to Evercore, he was the Head of Shipping at HSH Nordbank in New York and was previously a Managing Director in the ship finance team at ING Bank in London. Prior to banking, Mr. Baker worked in commercial roles for Greek-owned shipping companies in London. Mr. Baker has a BA from the London School of Economics and a MSc in Shipping, Trade & Finance from Cass Business School. Mr. Baker is a Fellow of the Institute of Chartered Shipbrokers.

Roberto Giorgi, Director

Roberto Giorgi serves and has served as our Class A Director since the closing of our initial public offering in December 2013. Mr. Giorgi also serves and has served as Executive Chairman of Fraser Yachts since September 2014 and as a committee member of Skuld P&I Club since June 2013. From 2014 to 2015, he served as Honorary President and member of the Group Executive of V.Ships, the world’s largest ship management company. From 1988 to 2014, Mr. Giorgi has held various roles within V.Ships, including President of V.Ships Ship Management, Managing Director of V.Ships New York, head of V.Ships Leisure in the cruise sector, and head of V.Ship’s ship management operation from its Monaco office. From 2008 to 2010, Mr. Giorgi also served as President of InterManager, the international trade association for third-party and in-house ship managers, whose members between them are responsible for approximately 3,700 ships and more than 200,000 crew members. Prior to joining the V.Ships Group, he attended the San Giorgio Nautical College in Genoa (1964 – 1969) and sailed from Deck Cadet to First Officer with Navigazione Alta Italia, Italian line and Sitmar Cruises. Before joining the merchant marine, he spent one year (1970/71) in the Naval Academy of Leghorn and sailed with the Italian Navy as Lieutenant.

Einar Michael Steimler, Director

Einar Michael Steimler serves and has served as our Class B Director since the closing of our initial public offering in December 2013. Mr. Steimler also serves and has served as a director of DHT Holdings Inc. (NYSE:DHT), where he is also a member of the Audit and Nominating and Corporate Governance Committees, and the Chairman of the Compensation Committee. Mr. Steimler has over 30 years of experience in the shipping industry. In 2000, he was instrumental in the formation of Tanker (UK) Agencies, the commercial agent to Tankers International. He served as its Chief Executive Officer until the end of 2007, and subsequently as its Chairman until 2011. From 1998 to 2010, Mr. Steimler served as a Director of Euronav NV (EURN:EN Brussels). He has been involved in both sale and purchase and chartering brokerage in the tanker, gas and chemical sectors and was a founder of Stemoco, a Norwegian ship brokerage firm. He graduated from the Norwegian School of Business Management in 1973 with a degree in Economics.

Christian M. Gut, Director

Christian M. Gut serves and has served as our Class C Director since the closing of our initial public offering in December 2013. Mr. Gut has twelve years of experience in the consulting industry in the Asia Pacific region. Mr. Gut started his professional career at ThyssenKrupp Technologies AG (as it then was) in Essen, Germany in 2002. He later joined Singapore based EABC Pte Ltd., or EABC, in 2003 where he was appointed as Director on May 18, 2006. EABC’s services comprise market intelligence and strategy, sales promotion and support to project management in selected Asia Pacific countries, principally Australia. Furthermore, Mr. Gut is a co-founder and past manager of the Stellar Energy Fund, launched in Singapore in 2006, which invested in energy focused private companies to finance projects and expansion plans in Asia, Middle East and Europe in the following industries: oil trading and bunkering, gas E&P, solar, geothermal and power generating heat plants. Mr. Gut has a Bachelor’s degree in international business from the European Business School in London.

Thomas Ostrander, Director

Thomas Ostrander serves and has served as our Class A director since January 2016. From 2013 to 2015, Mr. Ostrander served as Chief Financial Officer of U.S. Alliance Paper Inc., a privately held business involved in consumer tissue converting and marketing in the eastern half of the United States. From 2011 to 2013, he served as a Managing Director at GCA Savvian, a

global investment bank. From 2006 to 2008, Mr. Ostrander served as a Managing Director and Sector Head in the Industrial Group at Banc of America Securities. From 1989 to 2006, he held various roles within Citigroup (legacy Salomon Brothers), where he was most recently Chairman of the Global Industrial Group for North America. Prior to that, he was Head of the Global Industrial Group for North America and Co-Head of the Global group. From 1976 to 1989, he served in various roles, including as a Managing Director, and he was a member of the Board of Directors of New York based Kidder Peabody & Co., where he also was Co-Founder and Co-Head of Equity Capital Markets. Furthermore, Mr. Ostrander was a Director of Westmoreland Coal Company for over 12 years, where he served as Chairman of the Corporate Governance Committee and was a member of the Audit, Compensation and Benefits, Finance and Nominating Committees. Mr. Ostrander has an MBA from Harvard University and an AB from the University of Michigan in Economics and Accounting.

James Nish, Director

James Nish serves and has served as our Class C director since January 2016. Mr. Nish has 28 years of experience in investment banking, serving clients across a variety of international industrial markets. He also serves as a Board member and Chairman of the Audit Committee of Gibraltar Industries, Inc. (NASDAQ: ROCK), a manufacturer and distributor of products for building markets, a position he has held since 2015, and has served as a Board member of the CSG Group since 2014, a private company that provides security alarm monitoring and related services to subscribers in the United States. From 2008 to 2012, Mr. Nish was Group Head of Middle Corporate Investment Banking at J.P.Morgan. From 1986 to 2008, he served as Co-Chairman of the Investment Banking Commitment Committee and Group Head of the Industrial Manufacturing Group of Bear Stearns, where he organized and managed the General Industries Group. Mr. Nish is a Certified Public Accountant and Adjunct Professor in both the Undergraduate Business School and MBA Programs at Baruch College, Zicklin School of Business in New York and at Pace University, Lubin School of Business in New York, where he teaches a number of courses in both the Accounting and Finance departments. Mr. Nish has an MBA from the Wharton School at the University of Pennsylvania and a BS from the State University of New York at Buffalo in Accounting and Business.

Sergio Gianfranchi, Vice President, Vessel Operations

Sergio Gianfranchi serves and has served as our Vice President of Vessel Operations since September 19, 2013. Mr. Gianfranchi also serves and has served as Vice President, Vessel Operations of Scorpio Tankers since its initial public offering in April 2010. He served as Operations Manager of SSM at its headquarters in Monaco from 2002 to 2004. He has been instrumental in launching and operating the Scorpio Group Pools, and was employed as the Fleet Manager of SCM, the Scorpio Group affiliate that manages the commercial operations of approximately 200 vessels grouped in the Scorpio Group Pools. Mr. Gianfranchi is currently employed as the Pool Fleet Manager of SCM. From 1999 to 2001, Mr. Gianfranchi served as the on-site owner’s representative of the Scorpio Group affiliates named Doria Shipping, Tristan Shipping, Milan Shipping and Roma Shipping, to survey the construction of their Panamax and Post-Panamax newbuilding tankers being built at the 3Maj Shipyard in Rijeka, Croatia. When Mr. Gianfranchi joined SSM in 1989, he began as vessel master of its OBOs (multipurpose vessels that carry ore, heavy drybulk and oil). Upon obtaining his Master Mariner License in 1972, he served until 1989 as a vessel master with prominent Italian shipping companies, including NAI and Almare, initially a subsidiary of NAI but later controlled by Finmare, the Italian state shipping financial holding company. In this position he served mostly on OBOs, tankers and drybulk carriers. He graduated from La Spezia Nautical Institute in Italy in 1963.

Luca Forgione, General Counsel

Luca Forgione serves and has served as our General Counsel since July 1, 2013 and served as our Secretary from July 1, 2013 to December 18, 2013. Mr. Forgione also serves and has served as General Counsel of Scorpio Tankers since its initial public offering in April 2010 and served as Secretary until December 2013. He joined Scorpio Group in August 2009 where he continues to serve as General Counsel. He is licensed as a lawyer in his native Italy and as a Solicitor of the Supreme Court of England & Wales. Mr. Forgione has more than ten years of shipping industry experience and has worked in the fields of shipping, offshore logistics, commodity trading and energy since the beginning of his in-house career, most recently with Constellation Energy Commodities Group Ltd. in London, now part of Exelon (NYSE: EXC) from 2007 to 2009, and previously with Coeclerici S.p.a. in Milan from 2004 to 2007. He has experience with all aspects of the supply chain of drybulk and energy commodities (upstream and downstream), and has developed considerable understanding of the regulatory and compliance regimes surrounding the trading of physical and financial commodities as well as the owning, managing and chartering of vessels. Mr. Forgione was a Tutor in International Trade Law and Admiralty Law at University College London (U.K.) and more recently a Visiting Lecturer in International Trade Law at King’s College (U.K.). He has a Master’s Degree in Maritime Law from the University of Southampton (U.K.) and a Law Degree from the University of Genoa (Italy).

Anoushka Kachelo, Secretary

Anoushka Kachelo serves and has served as our Secretary since December 18, 2013. Mrs. Kachelo also serves as Secretary of Scorpio Tankers. She joined Scorpio Group in September 2010 as Senior Legal Counsel. Mrs. Kachelo is a Solicitor of the Supreme Court of England & Wales and has worked in the fields of commodity trading, energy and asset finance. Prior to joining the Scorpio Group, Mrs. Kachelo was Legal Counsel for the Commodities Team at JPMorgan (London) and prior to that in private practice for the London office of McDermott Will & Emery and Linklaters. She has a BA in Jurisprudence from the University of Oxford (U.K.).


B.	Compensation

Each of our non-employee directors receive cash compensation in the aggregate amount of $60,000 annually, plus either (i) an additional fee of $10,000 per year for each committee on which a director serves or (ii) an additional fee of $20,000 per year for each committee for which a director serves as Chairman. In addition, our lead independent director receives an additional fee of $20,000 per year. All actual expenses incurred while acting in their capacity as a director are reimbursed. For each board or committee meeting the non-employee director attends, the director receives $2,000. We do not have a retirement plan for our officers or directors. For the year ended December 31, 2015, we paid an aggregate compensation to our directors and senior management of approximately $4.3 million.

Executive Officers

We have employment agreements with the majority of our executive officers. These employment agreements remain in effect until terminated in accordance with their terms upon no less than 24 months prior written notice. Pursuant to the terms of their respective employment agreements, our executive officers are prohibited from disclosing or unlawfully using any of our material confidential information.

Upon a change in control of us, the annual bonus provided under the employment agreement becomes a fixed bonus of between 150% and 250% of the executive’s base salary, depending on the terms of the employment agreement applicable to each executive.

Any such executive may be entitled to receive upon termination an assurance bonus equal to such fixed bonus and an immediate lump-sum payment in an amount equal to up to three times the sum of the executive’s then current base salary and the assurance bonus. If an executive’s employment is terminated for cause or voluntarily by the employee, he shall not be entitled to any salary, benefits or reimbursements beyond those accrued through the date of his termination, unless he voluntarily terminated his employment in connection with certain conditions. Those conditions include a change in control combined with a significant geographic relocation of his office, a material diminution of his duties and responsibilities, and other conditions identified in the employment agreement.

We believe that it is important to align the interests of our directors and management with that of our shareholders. In this regard, we have determined that it will generally be beneficial to us and to our shareholders for our directors and management to have a stake in our long-term performance. We expect to have a meaningful component of our compensation package for our directors and management consist of equity interests in us in order to provide them on an on-going basis with a meaningful percentage of ownership in us.

Equity Incentive Plan

Our board of directors has adopted an equity incentive plan, which we refer to as the Equity Incentive Plan, under which directors, officers and employees of us and our subsidiaries, as well as employees of affiliated companies are eligible to receive incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and unrestricted common shares. As of December 31, 2015 we reserved a total of 1,480,748 common shares, for issuance under the Equity Incentive Plan, subject to adjustment for changes in capitalization as provided in the Equity Incentive Plan. Our Equity Incentive Plan is administered by our Compensation Committee.

Under the terms of the plan, stock options and stock appreciation rights granted under the plan will have an exercise price equal to the fair market value of a common share on the date of grant, unless otherwise determined by the plan administrator, but in no event will the exercise price be less than the fair market value of a common share on the date of grant. Options and stock appreciation rights will be exercisable at times and under conditions as determined by the plan administrator, but in no event will they be exercisable later than ten years from the date of grant.

The plan administrator may grant shares of restricted stock and awards of restricted stock units subject to vesting, forfeiture and other terms and conditions as determined by the plan administrator.

Adjustments may be made to outstanding awards in the event of a corporate transaction or change in capitalization or other extraordinary event. In the event of a “change in control” (as defined in the plan), unless otherwise provided by the plan administrator in an award agreement, awards then outstanding will become fully vested and exercisable in full.

Our board of directors may amend or terminate the plan and may amend outstanding awards, provided that no such amendment or termination may be made that would materially impair any rights, or materially increase any obligations, of a grantee under an outstanding award. Shareholder approval of plan amendments will be required under certain circumstances. Unless terminated earlier by our board of directors, the plan will expire ten years from the date the plan is adopted.

On June 24, 2015, we granted 135,829 restricted shares to our officers, members of the board of directors and employees. Of these restricted shares, 7,374 restricted shares vest in three equal installments beginning on the first anniversary of the date of grant and 128,455 restricted shares vest in three equal installments beginning on the second anniversary of the date of grant. The aggregate fair value of these awards is $2.8 million.

On July 10, 2015, we granted 41,818 restricted shares to certain employees of the Scorpio Group, which vest in three equal installments beginning on June 24, 2017. The aggregate fair value of these awards is $0.8 million.

On September 18, 2015, we granted 626,388 restricted shares to our officers and members of the board of directors. Of these restricted shares, 35,373 restricted shares vest in three equal installments beginning on the first anniversary of the date of grant and 591,015 restricted shares vest in three equal installments beginning on the second anniversary of the date of grant. The aggregate fair value of these awards is $12.5 million.

Compensation cost is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. Please see Note 10 to our Consolidated Financial Statements included herein for additional information.


C.	Board Practices

Our board of directors currently consists of seven directors, five of whom have been determined by our board of directors to be independent under the rules of the NYSE and the rules and regulations of the SEC. Our board has an Audit Committee, a Nominating and Corporate Governance Committee and a Compensation Committee. Our Audit Committee is comprised of our five independent directors, who are Messrs. Giorgi, Steimler, Gut, Nish and Ostrander. Our Nominating and Corporate Governance Committee and our Compensation Committee are comprised of Messrs. Giorgi, Steimler and Gut. The Audit Committee, which operates under a charter, among other things, reviews our external financial reporting, engages our external auditors and oversees our internal audit activities, procedures and the adequacy of our internal controls. In addition, provided that no member of the Audit Committee has a material interest in such transaction, the Audit Committee is responsible for reviewing transactions that we may enter into in the future with other members of the Scorpio Group that our board believes may present potential conflicts of interests between us and the Scorpio Group. The Nominating and Corporate Governance Committee is responsible for recommending to the board of directors nominees for director and directors for appointment to board committees and advising the board with regard to corporate governance practices. The Compensation Committee oversees our equity incentive plan and recommends director and senior employee compensation. Our shareholders may also nominate directors in accordance with procedures set forth in our bylaws.


D.	Employees

For the years ended December 31, 2015 , 2014, and 2013 we had four, three and one employee (excluding our executive officers), respectively. These employees hold administrative positions in New York, New York.

Our executive officers are employed by us and our support staff is provided by SSH pursuant to an Administrative Services Agreement. Our technical manager is responsible for identifying, screening and recruiting, directly or through a crewing agent, the officers and all other crew members for our vessels that are employed by our vessel-owning subsidiaries.


E.	Share ownership

The common shares beneficially owned by our directors and our executive officers are disclosed in “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”



ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.


A.	Major shareholders.

The following table sets forth information regarding beneficial ownership of our common shares for (i) owners of more than five percent of our common shares and (ii) our directors and executive officers, of which we are aware as of February 25, 2016.



Name	No. of Shares			% Owned ⁽¹⁾
Wellington Management Group LLP(2)	4,015,475	(3	)	14.0	%
Monarch Alternative Capital LP(2)	3,317,565	(4	)	11.6	%
GRM Investments Ltd.	3,170,051	(5	)	11.0	%
Kensico Capital Management Corp.	2,661,064	(6	)	9.3	%
Scorpio Services Holding Limited (7)	2,254,367			7.9	%
Pine River Capital Management L.P.	2,140,551	(8	)	7.5	%
Directors and executive officers as a group	1,351,893			4.7	%

____________________


(1)	Calculated based on 28,713,505 common shares outstanding as of February 25, 2016.


(2)	Includes common shares held by funds managed thereby.


(3)	This information is derived from Schedule 13G filed with the SEC on January 11, 2016.


(4)	This information is derived from Schedule 13D/A filed with the SEC on January 11, 2016.


(5)	This information is derived from Schedule 13G filed with the SEC on February 1, 2016.


(6)	This information is derived from Schedule 13G filed with the SEC on February 16, 2016.


(7)	Ms. Annalisa Lolli-Ghetti may be deemed to be the beneficial owner of these shares by virtue of being the majority shareholder of SSH. Emanuele Lauro, our Director and Chief Executive Officer, Robert Bugbee, our Director and President, and Cameron Mackey, our Chief Operating Officer, own 10%, 10% and 7% of SSH, respectively.


(8)	This information is derived from Schedule 13G filed with the Commission on February 10, 2016.

Our principal shareholders have the same voting rights as other holders of our shares of common stock. On December 21, 2015, we entered into an agreement with one of our institutional shareholders, Monarch Alternative Capital LP, acting on behalf of certain of its advisory clients, relating to certain corporate governance matters. Please see “Item 10. Additional Information-B. Memorandum and Articles of Association” for a description of the material terms of this agreement.

As of February 25, 2016, we had 66 shareholders of record, 18 of which were located in the United States and held an aggregate of 26,680,238 shares of our common stock, representing 92.9% of our outstanding shares of common stock. However, one of the U.S. shareholders of record is Cede & Co., a nominee of The Depository Trust Company, which held 25,900,493 shares of our common stock, as of February 25, 2016.


B.	Related Party Transactions

Management of Our Fleet

Commercial and Technical Management Agreements

SCM’s services include securing employment for our vessels in the spot market and on time charters. SCM also manages the Scorpio Group Pools in which our vessels are, or are expected to be employed. For commercial management of any of our vessels that does not operate in one of these pools, we pay SCM a daily fee of $300 per vessel, plus a 1.75% commission on the gross revenues per charter fixture. The Scorpio Group Pool participants, including us and third-party owners of similar vessels, are each expected to pay SCM a pool management fee of $300 per vessel per day, plus a 1.75% commission on the gross revenues per charter fixture. Effective November 20, 2014, SCM has agreed to reduce, with respect to our vessels, the 1.75% commission to 1.00% until the first day on which the closing price of our common shares is not less than $117.00 per share, adjusted to include all authorized dividends paid on our share capital.

Administrative Services Agreement

We have entered into an Administrative Services Agreement with SSH for the provision of administrative staff, office space and accounting, legal compliance, financial and information technology services. SSH is a company affiliated with us. The services provided to us by SSH may be sub-contracted to other entities within the Scorpio Group. Pursuant to the Administrative Services Agreement, we reimburse SSH for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. We also pay SSH a fee for arranging vessel acquisitions, including newbuildings, which is payable in our common shares. The amount of common shares payable is determined by dividing $250,000 by the market value of our common shares based on the volume weighted average price of our common shares over the 30 trading day period immediately preceding the contract date of a definitive agreement to acquire any vessel. In November 2014, SSH agreed to waive its fee on vessel acquisitions contracted after November 20, 2014, until the first day on which the closing price of our common shares is not less than $117.00 per share, adjusted to include all authorized dividends paid on our share capital. As of the date of this annual report, we issued an aggregate of 143,035 common shares to SSH in connection with the deliveries of eight of our newbuilding vessels, and expect to issue an additional 37,681 common shares to SSH throughout the deliveries of the remaining vessels in our Newbuilding Program.

Transactions with entities controlled by the Lolli-Ghetti family and with Scorpio Tankers (herein referred to as related party affiliates) in the consolidated statement of operations and balance sheet are as follows:

For the year ended December 31, 2015 , and 2014 , we had the following balances with related parties, which have been included in the consolidated statement of operations (tabular amounts in thousands of U.S. dollars). We had no such balances for the period from March 20, 2013 (date of inception) to December 31, 2013.



	For the year ended December 31,
	2015		2014
Vessel revenue
Scorpio Kamsarmax Pool ⁽¹⁾	$	25,151	$	34,986
Scorpio Ultramax Pool ⁽¹⁾	26,338		10,196
Scorpio Capesize Pool ⁽¹⁾	4,857		—
SCM ⁽²⁾	718		31
Total vessel revenue	$	57,064	$	45,213
Voyage expense
SCM ⁽²⁾	$	664	$	148
Vessel operating cost:
SSM ⁽³⁾	$	2,765	$	122
General and administrative expense:
SCM ⁽²⁾	$	258	$	—
SSM ⁽³⁾	—		51
SSH ⁽⁴⁾	1,265		56
SUK ⁽⁵⁾	486		717
Total general and administrative expense	$	2,009	$	824
Write down on assets held for sale
SCM ⁽²⁾	$	12,465	$	—
SSM ⁽³⁾	13,000		—
Total write down on assets held for sale	$	25,465	$	—

At December 31, 2015 and 2014 , we had the following balances with related parties, which have been included in the consolidated balance sheets (tabular amounts and the notes thereto in thousands of U.S. dollars except per share and per vessel data):



	As of December 31,
	2015			2014
Assets
Due from related parties-current:
Scorpio Kamsarmax Pool ⁽¹⁾	$	3,376		$	8,482
Scorpio Ultramax Pool ⁽¹⁾	2,129			2,460
Scorpio Capesize Pool ⁽¹⁾	2,268			—
SCM ⁽²⁾	424
SSM ⁽³⁾	—			154
Scorpio Tankers ⁽⁶⁾	—			31,277
Total due from related parties-current	$	8,197		$	42,373
Due from related parties non-current:
Scorpio Kamsarmax Pool(1)	$	4,868		$	3,272
Scorpio Ultramax Pool(1)	7,657			2,033
Scorpio Capesize Pool ⁽¹⁾	—			—
Total due from related parties non-current	$	12,525		$	5,305
Liabilities
Due to related parties-current:
SCM ⁽²⁾	$	3,415		$	—
SSM ⁽³⁾	4,274			1,131
SSH ⁽⁴⁾	—			56
SUK ⁽⁵⁾	—			$	44
Less balances due to SCM and SSM included in assets held for sale	(7,065		)	—
Total due from related parties-current	$	624		$	1,231

(1)

For the years ended December 31, 2015 and 2014, we earned $25,151 and $34,986 , respectively from chartering our owned and chartered-in vessels to the Scorpio Kamsarmax Pool, $26,338 and $10,196 , respectively from chartering our owned chartered-in vessels to the Scorpio Ultramax Pool and $4,857 for the years ended December 31, 2015 from chartering our owned vessels to the Scorpio Capesize Pool. As of December 31, 2015 , we had balances due from these charterers (primarily consisting of working capital, undistributed earnings and reimbursable costs) which have been classified as current assets of $3,376 , $2,129 , and $2,268 from the Scorpio Kamsarmax Pool, the Scorpio Ultramax Pool and the Scorpio Capesize Pool, respectively. As of December 31, 2014 , we had balances due of $8,482 and $2,460 from the Scorpio Kamsarmax Pool and the Scorpio Ultramax Pool, respectively. As of December 31, 2015 , there were non-current balances due from these charterers which relate to working capital retained by the pools for member vessels that do not have provisions to exit the pool in the next 12 months of $4,868 and $7,657 for the Scorpio Kamsarmax Pool and Scorpio Ultramax Pool respectively. As of December 31, 2014 , there were non-current balances due from these charterers which relate to working capital retained by the pools for member vessels that did not have provisions to exit the pool in the next 12 months of $3,272 and $2,033 for the Scorpio Kamsarmax Pool and Scorpio Ultramax Pool, respectively.

The Scorpio Kamsarmax Pool, the Scorpio Ultramax Pool and the Scorpio Capesize Pool were significant customers for the year ended December 31, 2015 , accounting for 40.8% , 42.5% and 7.9% of our total vessel revenue (including commissions from SCM), respectively. The Scorpio Kamsarmax Pool and the Scorpio Ultramax Pool were significant customers for the year ended December 31, 2014, accounting 71.4% and 20.8% of our total vessel revenue (including commissions), respectively.

(2)

For commercial management of any of our vessels that does not operate in one of these pools, we pay SCM a daily fee of $300 per vessel, plus a 1.75% commission on the gross revenues per charter fixture. Effective November 20, 2014, SCM has agreed to reduce, with respect to our vessels, the 1.75% commission to 1.00% until the first day when the closing price of the Company’s common stock is not less than $117.00 per share, adjusted to include all equity restructuring and authorized

dividends paid on our share capital, at which time the commission will revert to 1.75% . The Scorpio Ultramax Pool, the Scorpio Kamsarmax Pool and the Scorpio Capesize Pool participants, including us and third-party owners of similar vessels, pay SCM a pool management fee of $300 per vessel per day, plus a 1.75% commission on the gross revenues per charter fixture. For the year ended December 31, 2015 and 2014, we recorded vessel revenue of $718 and $100 , respectively, pursuant to the decrease in commissions we were obligated to pay SCM pursuant to an agreement effective November 20, 2014 which reduced SCM’s commission on gross freight from 1.75% to 1.00%. Also, for the year ended December 31, 2014, we incurred $69 of commissions on the gross revenue of certain vessels time chartered-in for which their initial voyage took place before being admitted to the Scorpio Group Pools.

In addition, for the years ended December 31, 2015 and 2014, the Company incurred $664 and $148 , respectively, which is a component of voyage expense to SCM consisting of a fee of $300 per vessel day for the periods in which our time chartered-in vessels were not operating in one of the pools and for fees charged to four time chartered-in vessels which were returned to their owners. As of December 31, 2015, $50 was unpaid for time chartered in vessels returned to their owners. Pursuant to the Master Agreement, contracts for the construction of vessels that are sold prior to the company taking delivery of the vessels results in a termination fee of $500,000 per vessel and the termination fee for a vessel under SCM management is two years of daily fees of $300 , or $219,000 per vessel plus 1% of the estimated revenue SCM would have generated for the vessel over the next two years . This fee was applicable to 27 of the 31 vessels on construction contracts sold or classified as held for sale through December 31, 2015 and accordingly, a write down of Assets held for sale of $12,465 was recorded for the year ended December 31, 2015 , of which $3,365 is unpaid and is reflected as a reduction of the realizable value of the assets held for sale as of December 31, 2015 . In addition, during the year ended December 31, 2015, the Company incurred $258 of general and administrative expenses to SCM, consisting of allocated salaries and rent.

(3)

SSM’s services include providing technical support, such as arranging the hiring of qualified officers and crew, supervising the maintenance and performance of vessels, purchasing supplies, spare parts and new equipment, arranging and supervising drydocking and repairs, and monitoring regulatory and classification society compliance and customer standards. We pay SSM an annual fee of $200,000 per vessel to provide technical management services for each of our vessels upon delivery. For the years ended December 31, 2015 and 2014 we incurred costs to SSM of $2,765 and $122 , respectively, which is a component of vessel operating cost. In addition, representatives of SSM, including certain subcontractors, provide us with construction supervisory services while our vessels are being constructed in shipyards. For these services, we will compensate SSM for its direct expenses, which can vary between $200,000 and $500,000 per vessel. In connection with supervision of the vessels in our Newbuilding Program, during the year ended December 31, 2014, we incurred a cost to SSM of $29,000 per vessel, which aggregates $1,421 , of which $783 relates to vessels the Company sold, and of which $574 and $1,131 was unpaid as of December 31, 2015 and 2014 respectively. For the year ended December 31, 2014, we incurred $51 of rent allocated from SSM. Pursuant to the Master Agreement, contracts for the construction of vessels that are sold prior to the company taking delivery of the vessels results in a termination fee of $500,000 per vessel and the termination fee for a vessel under SSM management is two years of annual fees of $200,000 per vessel, or $400,000 per vessel. This fee was applicable to 27 of the 31 vessels on construction contracts sold or classified as held for sale through December 31, 2015 and accordingly, a write down on Assets held for sale of $13,000 was recorded for the year ended December 31, 2015 , of which $3,700 is unpaid and is reflected as a reduction of the realizable value of the assets held for sale as of December 31, 2015 .


(4)	We incur a fee to SSH for each owned vessel aggregating $1,265 and $56 for the years ended December 31, 2015 and 2014, respectively, which reflects direct and indirect expenses incurred by SSH in providing us with administrative services, which is included in general and administrative expenses. At December 31, 2014, $56 of the fee incurred to SSH was unpaid.


(5)	For the year ended December 31, 2015 and 2014, SUK charged us $486 and $717 , respectively, for allocated salaries of certain SUK employees relating to the services such employees performed for the Company, of which $44 was unpaid at December 31, 2014 .

(6)

In December 31, 2014 , we agreed to sell four LR2 tankers to Scorpio Tankers and granted Scorpio Tankers an option to purchase two additional LR2 tankers (see Note 6). Pursuant to this, we paid Scorpio Tanker $31,277 as a security deposit relating to estimated costs we would incur to the shipyard for converting the vessels from Capesize contracts to LR2 contracts and scheduled installments on vessels expected to occur prior to the closing date of the sale. This deposit was repaid to us upon closing in July 2015.

Share Issuances

Upon our formation in March 2013, we issued 125 common shares to SSH. During July 2013, we issued and sold an additional 104,167 common shares to SSH for $10.0 million as part of a series of Norwegian private transactions exempt from registration under the Securities Act, which were subject to a contractual lock-up until July 2014.

In November 2014, certain of our executive officers and SSH purchased an aggregate of 345,500 common shares in our November 2014 Private Placement.

On June 16, 2015, we issued 11,083,333 shares of common stock, par value of $0.01 per share at $18.00 per share in an underwritten public offering. SSH and certain of our executive officers purchased an aggregate of 833,333 Common Shares at the public offering price. On June 23, 2015, underwriters exercised their option to purchase an additional 1,662,500 additional common shares in connection with the public offering.


C.	INTERESTS OF EXPERTS AND COUNSEL

Not applicable.



ITEM 8.	FINANCIAL INFORMATION


A.	Consolidated Statements and Other Financial Information

See “Item 18. Financial Statements.”

Legal Proceedings

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

Dividend Policy

We currently do not intend to pay dividends to the holders of our common shares but rather to invest our available cash in the growth of our fleet and development of our business. We will continue to assess our dividend policy and our board of directors may determine it is in the best interest of the Company to pay dividends in the future. Any dividends paid by us will be income to a U.S. shareholder. Please see “Item 10. Additional Information - E. Taxation” for additional information relating to the U.S. federal income tax treatment of our dividend payments, if any are declared in the future.

We are a holding company with no material assets other than the equity interests in our wholly-owned subsidiaries. As a result, our ability to pay dividends, if any, depends on our subsidiaries and their ability to distribute funds to us. Our secured credit facilities have restrictions on our ability, and the ability of certain of our subsidiaries, to pay dividends in the event of a default or breach of covenants under the credit facility agreement. Under such circumstances, we or our subsidiaries may not be able to pay dividends so long as we are in default or have breached certain covenants of the credit facility without our lender’s consent or waiver of the default or breach. In addition, Marshall Islands law generally prohibits the payment of dividends (i) other than from surplus (retained earnings and the excess of consideration received for the sale of shares above the par value of the shares) or (ii) when a company is insolvent or (iii) if the payment of the dividend would render the company insolvent.

In addition, we may incur expenses or liabilities, including extraordinary expenses, decreases in revenues, including as a result of unanticipated off-hire days or loss of a vessel, or increased cash needs that could reduce or eliminate the amount of cash that we have available for distribution as dividends.

The declaration and payment of dividends is subject at all times to the discretion of our board of directors. The timing and amount of dividends, if any, depends on our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in the loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors.


B.	Significant Changes.

There have been no significant changes since the date of the consolidated financial statements included in this annual report.



ITEM 9.	OFFER AND THE LISTING


A.	Offer and Listing Details.

Our common shares have traded on the NYSE since December 12, 2013 under the symbol “SALT.” In addition, during the period from July 3, 2013 through July 31, 2014, our common shares minimally traded on the Norwegian OTC under the symbol “SALT.” The following table sets forth the high and low closing prices for our common shares for the periods indicated, as reported by the NYSE.

All share prices have been adjusted to account for the one-for-twelve reverse stock split effected on December 31, 2015.



	NYSE
For the Fiscal Year Ended	High (U.S.$)		Low (U.S.$)

December 31, 2015	$	33.12	$	7.20
December 31, 2014	126.96		22.92
December 31, 2013 (beginning December 12, 2013)	120.60		112.56



	NYSE
For the Quarter Ended	High (U.S.$)		Low (U.S.$)

December 31, 2015	$	19.56	$	7.20
September 30, 2015	22.80		17.04
June 30, 2015	32.16		19.08
March 31, 2015	33.12		15.72
December 31, 2014	72.00		22.92
September 30, 2014	108.48		69.84
June 30, 2014	123.00		100.44
March 31, 2014	126.96		109.92



	NYSE
For the Month	High (U.S.$)		Low (U.S.$)

February 2016 (through and including February 26, 2016)	$	3.28	$	1.84
January 2016	8.34		3.01
December 2015	10.56		7.20
November 2015	16.80		10.08
October 2015	19.56		16.32
September 2015	21.00		17.04
August 2015	22.80		19.32


B.	Plan of Distribution

Not applicable


C.	Markets

Our common shares have traded on NYSE, since December 12, 2013, under the symbol “SALT,” and our 7.50% Senior Notes due 2019 have traded on the NYSE since September 29, 2014 under the symbol “SLTB.” During the period from July 3, 2013 through July 31, 2014, our common shares minimally traded on the Norwegian OTC under the symbol “SALT.”


D.	Selling Shareholders

Not applicable.


E.	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.

Our Amended and Restated Articles of Incorporation and bylaws have been filed as Exhibit 3.1 and Exhibit 3.2, respectively, to our Registration Statement on Form F-1 (Registration No. 333-192246), declared effective by the SEC on December 11, 2013, and are hereby incorporated by reference into this annual report. In December 2015, our shareholders approved an amendment to our Amended and Restated Articles of Incorporation to effect a one-for-twelve reverse stock split of our common shares, par value $0.01 per share, and to reduce the total number of authorized common shares to 56,250,000 shares.

Information regarding the rights, preferences and restrictions attaching to each class of our shares is described in the section entitled “Description of Capital Stock” in the accompanying prospectus to our Registration Statement on Form F-3 (File No. 333-201354) declared effective by the SEC on January 15, 2015, provided that since the date of such Registration Statement, our total issued and outstanding common shares has increased to 28,713,505 as of the date of this annual report.

Agreement with Institutional Investor

On December 21, 2015, we entered into an agreement with one of our institutional shareholders, Monarch Alternative Capital LP, or Monarch, acting on behalf of certain of its advisory clients, relating to certain corporate governance matters. Pursuant to the agreement, we increased the size of our board of directors from five to seven members, and appointed two independent directors to fill the newly created vacancies, one of whom was a suggested appointee of Monarch and who also now serves on the audit committee. In addition, we also agreed to amend our stockholders rights agreement to change the definition of "acquiring person" to any person that beneficially owns 20% or more of our issued and outstanding common shares.

Stockholders Rights Agreement

On January 14, 2016, we entered into the First Amended and Restated Stockholders Rights Agreement, or the Stockholders Rights Agreement, with Computershare Trust Company, N.A., as Rights Agent, which amended and restated in its entirety the Stockholders Rights Agreement dated June 18, 2015. Under the Stockholders Rights Agreement, we declared a dividend payable of one preferred stock purchase right, or Right, for each outstanding share of our common stock, to our stockholders of record at the close of business on June 29, 2015. Each Right entitles the registered holder to purchase from us a unit consisting of one one-thousandth of a share of our Series A Participating Preferred Stock, par value $0.01 per share. The Rights will separate from the common stock and become exercisable after the earlier of (1) the 10th calendar day (or such later date as determined by our board of directors) after the public announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of 20% or more of shares of our common stock or (2) the 10th business day (or such later date as determined by our board of directors) after a person or group announces a tender or exchange offer, that would result in ownership by that person or group of 20% or more of shares of our common stock. On the distribution date, each holder of a Right will be entitled to purchase for $50.00, or the Exercise Price, a fraction (1/1000th) of one share of our Series A Participating Preferred Stock, which has similar economic terms as one share of our common stock.

If an acquiring person, or an Acquiring Person, acquires more than 20% of the shares of our common stock, then each holder of a Right (except that Acquiring Person) will be entitled to buy at the Exercise Price, a number of shares of our common stock which has a market value of twice the Exercise Price. Any time after the date an Acquiring Person obtains more than 20% of shares of our common stock and before that Acquiring Person acquires more than 50% of outstanding shares of our common stock, we may exchange the Rights, in whole or in part, for common shares at an exchange ratio of one common share per Right, and in certain circumstances, we may elect to exchange the Rights for cash or other securities having a value approximately equal to one common share. The Rights expire on the earliest of (i) June 18, 2016 or (ii) the redemption or exchange of the Rights by us as described above. We can redeem the Rights at any time on or prior to the earlier of the 10 ^th business day following the public announcement that a person has acquired ownership of 20% or more of shares of our common stock. The terms of the Rights and the Stockholders Rights Agreement may be amended to make changes that do not adversely affect the rights of the Rights holders (other than the Acquiring Person). The Rights do not have any voting rights. The Rights have the benefit of certain customary anti-dilution protections.


C.	Material contracts.

Attached as exhibits to this annual report are the contracts we consider to be both material and outside the ordinary course of business during the two-year period immediately preceding the date of this annual report. We refer you to “Item 4. Information on the Company”, “Item 6. Directors, Senior Management and Employees—B. Compensation” and “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” for a discussion of these agreements.

Other than as set forth above, there were no material contracts, other than contracts entered into in the ordinary course of business, to which we were a party during the two year period immediately preceding the date of this annual report.


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 common shares.


E.	Taxation

The following is a discussion of the material Marshall Islands and U.S. federal income tax considerations of the ownership and disposition by a U.S. Holder and a Non-U.S. Holder, each as defined below, with respect to the common shares. This discussion does not purport to deal with the tax consequences of owning common shares to all categories of investors, some of which, such as dealers in securities or commodities, financial institutions, insurance companies, tax-exempt organizations, U.S. expatriates, persons liable for the alternative minimum tax, persons who hold common shares as part of a straddle, hedge, conversion transaction or integrated investment, U.S. Holders whose functional currency is not the United States dollar and investors that own, actually or under applicable constructive ownership rules, 10% or more of the Company’s common shares, may be subject to special rules. This discussion deals only with holders who hold the common shares as a capital asset. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under U.S. federal, state, local or foreign law of the ownership of common shares.

Marshall Islands Tax Considerations

In the opinion of Seward & Kissel LLP, the following are the material Marshall Islands tax consequences of our activities to us and of our common shares to our shareholders. 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 our shareholders.

U.S. Federal Income Tax Considerations

In the opinion of Seward & Kissel LLP, our U.S. counsel, the following are the material U.S. federal income tax consequences of our activities to us, and of the ownership of common shares to U.S. Holders and Non-U.S. Holders, each as defined below. The following discussion of U.S. federal income tax matters is based on the, Code, judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the U.S. Department of the Treasury, or the Treasury Regulations, all of which are subject to change, possibly with retroactive effect.

U.S. Federal Income Taxation of Operating Income: In General

We anticipate that we will earn substantially all our income from the hiring or leasing of vessels for use on a spot or time charter basis, from participation in a pool or from the performance of services directly related to those uses, all of which we refer to as “shipping income.”

Unless we qualify from an exemption from U.S. federal income taxation under Section 883 of the Code, or Section 883, as discussed below, a foreign corporation will be subject to U.S. federal income taxation on its “shipping income” that is treated as derived from sources within the United States, to which we refer as “U.S. source shipping income.” For U.S. federal income tax purposes, “U.S. source shipping income” includes 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.

Shipping income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from sources entirely outside the United States. Shipping income derived from sources outside the United States will not be subject to any U.S. federal income tax.

Shipping income attributable to transportation exclusively between U.S. ports is considered to be 100% derived from U.S. sources. However, we are not permitted by U.S. law to engage in the transportation that produces 100% U.S. source shipping income.

In the absence of exemption from tax under Section 883, we anticipate that our gross U.S. source shipping income would be subject to a 4% U.S. federal income tax imposed without allowance for deductions, as described below.

Exemption of Operating Income from U.S. Federal Income Taxation

Under Section 883 and the Treasury Regulations thereunder, a foreign corporation will be exempt from U.S. federal income taxation of its U.S. source shipping income if:

(1) it is organized in a “qualified foreign country” which is one that grants an “equivalent exemption” from tax to corporations organized in the U.S. in respect of each category of shipping income for which exemption is being claimed under Section 883; and

(2) one of the following tests is met: (A) more than 50% of the value of its shares is beneficially owned, directly or indirectly, by “qualified shareholders,” which as defined includes individuals who are “residents” of a qualified foreign country, to which we refer as the “50% Ownership Test”; or (B) its shares are “primarily and regularly traded on an established securities market” in a qualified foreign country or in the United States, to which we refer as the “Publicly-Traded Test.”

The Republic of the Marshall Islands, the jurisdiction where we are incorporated, has been officially recognized by the IRS as a qualified foreign country that grants the requisite “equivalent exemption” from tax in respect of each category of shipping income we earn and currently expect to earn in the future. Therefore, we will be exempt from U.S. 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.

Given the widely held nature of our common shares, we do not currently anticipate circumstances under which we would be able to satisfy the 50% Ownership Test.

Publicly-Traded Test

The Treasury Regulations promulgated under Section 883 provide, in pertinent part, that shares 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 are traded during any taxable year on all established securities markets in that country exceeds the number of shares in each such class that are traded during that year on established securities markets in any other single country. Our common shares, which constitute our sole class of issued and outstanding stock, are “primarily traded” on the NYSE, which is an established market for these purposes.

Under the Treasury Regulations, our common shares will be considered to be “regularly traded” on an established securities market if one or more classes of our shares representing more than 50% of our outstanding stock, by both total combined voting power of all classes of stock entitled to vote and total value, are listed on such market, to which we refer as the “listing threshold.” Our common shares, which constitutes our sole class of issued and outstanding stock, is listed on the NYSE. Accordingly, we will satisfy the listing threshold.

The Treasury Regulations also require that with respect to each class of stock relied upon to meet the listing threshold, (1) such class of stock 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, which we refer to as the “trading frequency test”; and (2) the aggregate number of shares

of such class of stock traded on such market during the taxable year must be at least 10% of the average number of shares of such class of stock outstanding during such year or as appropriately adjusted in the case of a short taxable year, which we refer to as the “trading volume” test. Even if this were not the case, the Treasury Regulations provide that the trading frequency and trading volume tests will be deemed satisfied if, as is expected to be the case with our common shares, such class of stock is traded on an established securities market in the United States and such shares are regularly quoted by dealers making a market in such shares.

Notwithstanding the foregoing, the Treasury 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 outstanding stock, to which we refer as the “5% 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 shares, or “5% Shareholders,” the Treasury Regulations permit us to rely on those persons that are identified on Schedule 13G and Schedule 13D filings with the SEC, as owning 5% or more of our common shares. The Treasury 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 5% Override Rule is triggered, the Treasury Regulations provide that the 5% Override Rule will nevertheless not apply if we can establish that within the group of 5% Shareholders, qualified shareholders (as defined for purposes of Section 883) own sufficient number of shares to preclude non-qualified shareholders in such group from owning 50% or more of our common shares for more than half the number of days during the taxable year.

We believe that we satisfy the Publicly-Traded Test for the 2015 taxable year and were not subject to the 5% Override Rule, and we intend to take that position on our 2015 U.S. federal income tax returns.

Taxation in Absence of Section 883 Exemption

If the benefits of Section 883 are unavailable, our U.S. source shipping income would be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions, or the “4% gross basis tax regime,” to the extent that such income is not considered to be “effectively connected” with the conduct of a U.S. trade or business, as described below. Since under the sourcing rules described above, no more than 50% of our shipping income would be treated as being U.S. source shipping income, the maximum effective rate of U.S. federal income tax on our shipping income would never exceed 2% under the 4% gross basis tax regime.

To the extent our U.S. source shipping income is considered to be “effectively connected” with the conduct of a U.S. trade or business, as described below, any such “effectively connected” U.S. source shipping income, net of applicable deductions, would be subject to U.S. federal income tax, currently imposed at rates of up to 35%. In addition, we would generally be subject to the 30% “branch profits” tax on earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of our U.S. trade or business.

Our U.S. source shipping income would be considered “effectively connected” with the conduct of a U.S. trade or business only if:


(1)	we have, or are considered to have, a fixed place of business in the U.S. involved in the earning of U.S. source shipping income; and


(2)	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 sailing to or from the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of our shipping operations and other activities, it is anticipated that none of our U.S. source shipping income will be “effectively connected” with the conduct of a U.S. trade or business.

U.S. Taxation of Gain on Sale of Vessels

Regardless of whether we qualify for exemption under Section 883, we will not be subject to U.S. federal income tax with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under U.S.

federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the U.S. for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by us will be considered to occur outside of the United States.

U.S. Federal Income Taxation of U.S. Holders

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

If a partnership holds the common shares, 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 the common shares, 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 shares to a U.S. Holder will generally constitute dividends to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of such earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder’s tax basis in its common shares and thereafter as capital gain. Because we are not a U.S. corporation, U.S. Holders that are corporations will not be entitled to claim a dividends received deduction with respect to any distributions they receive from us. Dividends paid with respect to our common shares will generally be treated as foreign source dividend income and will generally constitute “passive category income” for purposes of computing allowable foreign tax credits for U.S. foreign tax credit purposes.

Dividends paid on our common shares to certain non-corporate U.S. Holders will generally be treated as “qualified dividend income” that is taxable to such U.S. Holders at preferential tax rates provided that (1) the common shares are readily tradable on an established securities market in the U.S. (such as the NYSE); (2) we are not a passive foreign investment company for the taxable year during which the dividend is paid or the immediately preceding taxable year (as discussed in detail below); (3) the non-corporate U.S. Holder has owned the common shares for more than 60 days in the 121-day period beginning 60 days before the date on which the common shares become ex-dividend; and (4) certain other conditions are met.

There is no assurance that any dividends paid on our common shares will be eligible for these preferential rates in the hands of such non-corporate U.S. Holders. Any dividends paid by us which are not eligible for these preferential rates will be taxed as ordinary income to a non-corporate U.S. Holder.

Special rules may apply to any “extraordinary dividend”-generally, a dividend in an amount which is equal to or in excess of 10% of a shareholder’s adjusted tax basis in a common share-paid by us. If we pay an “extraordinary dividend” on our common shares that is treated as “qualified dividend income,” then any loss derived by certain non-corporate U.S. Holders from the sale or exchange of such common shares will be treated as long term capital loss to the extent of such dividend.

Sale, Exchange or Other Disposition of Common Shares

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 shares in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder’s tax basis in such shares. Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder’s holding period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated as U.S. source income or loss, as applicable, for U.S. foreign tax credit purposes. Long-term capital gains of certain non-corporate U.S. Holders are currently eligible for reduced rates of taxation. 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 U.S. federal income tax rules apply to a U.S. Holder that holds shares in a foreign corporation classified as a “passive foreign investment company,” or a PFIC, for U.S. federal income tax purposes. In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which such holder holds our common shares, either


(1)	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), which we refer to as the income test; or


(2)	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 the asset test.

For purposes of determining whether we are a PFIC, cash will be treated as an asset which is held for the production of passive income. In addition, 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.

It is possible that we may be considered a PFIC for our 2015 taxable year. Whether we are treated as a PFIC for our 2015 taxable year will depend, in part, upon whether the deposits that we make on newbuilding contracts are treated as being held for the production of “passive income” and on the amount of “passive income” that we derive in our 2015 taxable year. In making the determination as to whether we are a PFIC, we intend to treat the deposits that we make on our newbuilding contracts as assets which are not held for the production of passive income for purposes of determining whether we are a PFIC. We note that there is no direct authority on this point and it is possible that the IRS may disagree with our position.

For our 2016 taxable year and subsequent taxable years, whether we will be treated as a PFIC will depend upon the nature and extent of our operations. In making the determination as to whether we are a PFIC, we intend to treat the gross income that we derive or that are deemed to derive from the spot chartering and time chartering activities of us or any of our subsidiaries as 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 should not constitute passive assets for purposes of determining whether we are a PFIC. We believe that there is substantial legal authority supporting our position consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. 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, we cannot assure you 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, a U.S. Holder would be subject to different 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 shares, as discussed below. If we were treated as a PFIC, a U.S. Holder will generally be required to file IRS Form 8621 with respect to its ownership of our common shares.

Taxation of U.S. Holders Making a Timely QEF Election

If a U.S. Holder makes a timely QEF election, which U.S. Holder we refer to as an “Electing Holder,” the Electing Holder must report for U.S. federal income tax purposes its pro rata share of our ordinary earnings and net capital gain, if any, for each of our taxable years during which we are a PFIC that ends with or within the taxable year of the Electing Holder, regardless of whether distributions were received from us by the Electing Holder. No portion of any such inclusions of ordinary earnings will be treated as “qualified dividend income.” Net capital gain inclusions of certain non-corporate U.S. Holders may be eligible for preferential capital gains tax rates. The Electing Holder’s adjusted tax basis in the common shares will be increased to reflect any income included under the QEF election. Distributions of previously taxed income will not be subject to tax upon distribution but will decrease the Electing Holder’s tax basis in the common shares. An Electing Holder would not, however, be entitled to a deduction for its pro rata share of any losses that we incur with respect to any taxable year. An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of our common shares. A U.S. Holder would make a timely QEF election for our common shares by filing IRS Form 8621 with his U.S. federal income tax return for the first year in which he held such shares when we were a PFIC. If we determine that we are a PFIC for any taxable year, we intend to provide each U.S. Holder with information necessary for the U.S. Holder to make the QEF election described above. If we were treated as a PFIC for our 2015 taxable year, we anticipate that, based on our current projections, we would not have a significant amount of taxable income or gain that would be required to be taken into account by U.S. Holders making a QEF election effective for such taxable year.

Taxation of U.S. Holders Making a “Mark-to-Market” Election

Alternatively, if we were to be treated as a PFIC for any taxable year and, as we anticipate will be the case, our shares are treated as “marketable stock,” a U.S. Holder would be allowed to make a “mark-to-market” election with respect to our common shares, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the common shares at the end of the taxable year over such Holder’s adjusted tax basis in the common shares. The U.S. Holder would also be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder’s adjusted tax basis in the common shares over its fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Holder’s tax basis in his common shares would be adjusted to reflect any such income or loss amount recognized. Any gain realized on the sale, exchange or other disposition of our common shares would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common shares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included by the U.S. Holder.

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

If we were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make either a QEF election or a “mark-to-market” election for that year, whom we refer to as a “Non-Electing Holder,” would be subject to special rules with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on the common shares in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder’s holding period for the common shares), and (2) any gain realized on the sale, exchange or other disposition of our common shares. Under these special rules:


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


(2)	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 would not be “qualified dividend income”; and


(3)	the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed tax deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.

U.S. Federal Income Taxation of “Non-U.S. Holders”

As used herein, the term “Non-U.S. Holder” means a holder that, for U.S. federal income tax purposes, is a beneficial owner of common shares (other than a partnership) and who is not a U.S. Holder.

If a partnership holds our common shares, 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 shares, you are encouraged to consult your tax adviser.

Dividends on Common Shares

A Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on dividends received from us with respect to our common shares, unless that income is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States. In general, if the Non-U.S. Holder is entitled to the benefits of an applicable U.S. income tax treaty with respect to those dividends, that income is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States.

Sale, Exchange or Other Disposition of Common Shares

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


(1)	the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States; in general, in the case of a Non-U.S. Holder entitled to the benefits of an applicable U.S. income tax treaty with respect to that gain, that gain is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States; or


(2)	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 who also meets other conditions.

Income or Gains Effectively Connected with a U.S. Trade or Business

If the Non-U.S. Holder is engaged in a U.S. trade or business for U.S. federal income tax purposes, dividends on the common shares and gain from the sale, exchange or other disposition of the shares, that is effectively connected with the conduct of that trade or business (and, if required by an applicable U.S. income tax treaty, is attributable to a U.S. permanent establishment), will generally be subject to regular U.S. federal income tax in the same manner as discussed in the previous section relating to the taxation of U.S. Holders. In addition, in the case of a corporate Non-U.S. Holder, its earnings and profits that are attributable to the effectively connected income, which are subject to certain adjustments, may be subject to an additional U.S. federal branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable U.S. income tax treaty.

Backup Withholding and Information Reporting

In general, dividend payments, or other taxable distributions, and the payment of gross proceeds on a sale or other disposition of our common shares, made within the United States to a non-corporate U.S. Holder will be subject to information reporting. Such payments or distributions may also be subject to backup withholding if the non-corporate U.S. Holder:


(1)	fails to provide an accurate taxpayer identification number;


(2)	is notified by the IRS that it has have failed to report all interest or dividends required to be shown on its U.S. federal income tax returns; or


(3)	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 with respect to dividends payments or other taxable distribution on our common shares by certifying their status on an applicable IRS Form W-8. If a Non-U.S. Holder sells our common shares to or through a U.S. office of a broker, the payment of the proceeds is subject to both U.S. backup withholding and information reporting unless the Non-U.S. Holder certifies that it is a non-U.S. person, under penalties of perjury, or it otherwise establish an exemption. If a Non-U.S. Holder sells our common shares through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid outside the U.S., then information reporting and backup withholding generally will not apply to that payment. However, U.S. information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made outside the United States, if a Non-U.S. Holder sells our common shares through a non-U.S. office of a broker that is a U.S. person or has some other contacts with the United States. Such information reporting requirements will not apply, however, if the broker has documentary evidence in its records that the Non-U.S. Holder is not a U.S. person and certain other conditions are met, or the Non-U.S. Holder otherwise establishes an exemption.

Backup withholding is not an additional tax. Rather, a refund may generally be obtained of any amounts withheld under backup withholding rules that exceed the taxpayer’s U.S. federal income tax liability by filing a timely refund claim with the IRS.

Individuals who are U.S. Holders (and to the extent specified in applicable Treasury Regulations, Non-U.S. Holders and certain U.S. entities) who hold “specified foreign financial assets” (as defined in Section 6038D of the Code) are required to file IRS Form 8938 with information relating to the asset for each taxable year in which the aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year (or such higher dollar amount as prescribed by applicable Treasury Regulations). Specified foreign financial assets would include, among other assets, our common shares, unless the common shares are held in an account maintained with a U.S. financial institution. Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, in the event an individual U.S. Holder (and to the extent specified in applicable Treasury Regulations, a Non-U.S. Holder or a U.S. entity) that is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three years after the date that the required information is filed. U.S. Holders (including U.S. entities) and Non-U.S. Holders are encouraged consult their own tax advisors regarding their reporting obligations in respect of our common shares.


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 its 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.

Shareholders may also request a copy of our filings at no cost, by writing to us at the following address: 9, Boulevard Charles III, Monaco, 98000 or telephoning us at + 377 9798 5716.


I.	Subsidiary Information

Not applicable.



ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to the impact of interest rate changes primarily through our unhedged variable-rate borrowings. Significant increases in interest rates could adversely affect our operating margins, results of operations and our ability to service our debt. As of December 31, 2015, we have variable-rate borrowings totaling $445.1 million. A one percent increase in LIBOR rates would increase our interest payments by $4.5 million per year from January 1, 2016.

Spot Market Rate Risk

The cyclical nature of the tanker industry causes significant increases or decreases in the revenue that we earn from our vessels, particularly those vessels that operate in the spot market or participate in pools that are concentrated in the spot market such as the Scorpio Group Pools. Our owned and chartered-in vessels operated for 8,298 days in the spot market or in the Scorpio Group Pools during 2015. Additionally, we have the ability to remove our vessels from the pools on relatively short notice if attractive time charter opportunities arise. A $1,000 per day increase or decrease in spot rates for all of our vessel classes would have increased or decreased our operating loss by $8.3 million for the year ended December 31, 2015.

Foreign Exchange Rate Risk

Our primary economic environment is the international shipping market. This market utilizes the U.S. dollar as its functional currency. Consequently, virtually all of our revenues and the majority of our operating expenses will be in U.S. dollars. However, we will incur some of our combined expenses in other currencies, particularly the Euro. The amount and frequency of some of these expenses (such as vessel repairs, supplies and stores) may fluctuate from period to period. Depreciation in the value of the U.S. dollar relative to other currencies will increase the U.S. dollar cost of us paying such expenses. The portion of our business conducted in other currencies could increase in the future, which could expand our exposure to losses arising from currency fluctuations.

There is a risk that currency fluctuations will have a negative effect on our cash flows. We have not entered into any hedging contracts to protect against currency fluctuations. However, we have some ability to shift the purchase of goods and services from one country to another and, thus, from one currency to another, on relatively short notice. We may seek to hedge this currency fluctuation risk in the future.

Inflation

We do not expect inflation to be a significant risk to direct expenses in the current and foreseeable economic environment.



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

None.



ITEM 15.	CONTROLS AND PROCEDURES


A.	Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our controls and procedures are designed to provide reasonable assurance of achieving their objectives.

We carried out an evaluation under the supervision, and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15e under the Securities Act) as of December 31, 2015. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2015 to provide reasonable assurance that (1) information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

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.


B.	Management’s Annual Report on Internal Control Over Financial Reporting.

In accordance with Rule 13a-15(f) of the Exchange Act, the management of the Company is responsible for the establishment and maintenance of adequate internal controls over financial reporting for the Company. Internal control over financial reporting is a process designed 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. The Company’s system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (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 of the Company are being made only in accordance with authorizations of management and directors of the Company; 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 the financial statements. Management has performed an assessment of the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2015 based on the provisions of Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission or COSO in 2013. Based on our assessment, management determined that the Company’s internal controls over financial reporting were effective as of December 31, 2015 based on the criteria in Internal Control—Integrated Framework issued by COSO (2013).

The Company’s internal control over financial reporting, at December 31, 2015, has been audited by PricewaterhouseCoopers Audit, an independent registered public accounting firm, who also audited the Company’s consolidated

financial statements for that year, which are filed as a part of this annual report. PricewaterhouseCoopers Audit has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting.

C. Attestation Report of the Registered Public Accounting Firm.

The attestation report of PricewaterhouseCoopers Audit is presented on page F-2 of the Financial Statements filed as part of this annual report.


D.	Changes in Internal Control Over Financial Reporting.

None



ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that Mr. Einar Michael Steimler, who serves on the Audit Committee, qualifies as an “audit committee financial expert” and that he is “independent” according to SEC rules.



ITEM 16B.	CODE OF ETHICS

We have adopted a code of ethics that applies to all entities controlled by the Company and its employees, directors, officers and agents. A copy of our code of ethics has been filed as an exhibit to our Registration Statement on Form F-1 (Registration No. 333-192246) and is incorporated by reference herein.

Shareholders may also request a copy of our code of ethics at no cost, by writing to us at 9, Boulevard Charles III, Monaco, 98000 or telephoning us at + 377 9798 5716.



ITEM 16C.	PRINCIPAL ACCOUNTING FEES AND SERVICES


A.	Audit Fees

Our principal accountant for the year ended December 31, 2015 and December 31, 2014 was PricewaterhouseCoopers Audit, and the audit fees for those periods were $268,000 and $202,000, respectively.

During 2015, our principal accountant, PricewaterhouseCoopers Audit, provided services related to our public offering of 11,083,333 shares of common stock. The fee for this service was $45,000.

During 2014, PricewaterhouseCoopers Audit provided services related to the issuance of our Senior Notes that was completed in September 2014 and for the registration of 3,333,333 shares of common stock issued in a private placement that was completed in November 2014; the fees for these services were $71,357 and $71,475, respectively.


B.	Audit-Related Fees

None.


C.	Tax Fees

None.


D.	All Other Fees

None.


E.	Audit Committee’s Pre-Approval Policies and Procedures

Our Audit Committee pre-approves all audit, audit-related and non-audit services not prohibited by law to be performed by our independent auditors and associated fees prior to the engagement of the independent auditor with respect to such services.


F.	Audit Work Performed by Other Than Principal Accountant if Greater Than 50%

Not applicable.



ITEM 16D.	EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.



ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Name

Period

(a) No. of Common Shares Purchased (1)

(b) Average Price Paid per Common Share

(d) Maximum Number of Common Shares that May Yet Be Purchased Under the Plans or Programs

Scorpio Services Holding Ltd.

July 2015

87,500

22.58

N/A

Scorpio Services Holding Ltd.

August 2015

129,373

20.42

N/A

Scorpio Services Holding Ltd.

September 2015

235,898

18.96

N/A

Einar Michael Steimler

September 2015

8,333

18.00

N/A

(1) These common shares were purchased in the open market.



ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

None.



ITEM 16G.	CORPORATE GOVERNANCE

Pursuant to an exception for foreign private issuers, we, as a Marshall Islands company, are not required to comply with the corporate governance practices followed by U.S. companies under the NYSE listing standards. We believe that our established practices in the area of corporate governance are in line with the spirit of the NYSE standards and provide adequate protection to our shareholders. In this respect, we have voluntarily adopted NYSE required practices, such as (i) having a majority of independent directors, (ii) establishing audit, compensation and nominating committees and (iii) adopting a Code of Ethics.

There are two significant differences between our corporate governance practices and the practices required by the NYSE. The NYSE requires that non-management directors meet regularly in executive sessions without management. The NYSE also requires that all independent directors meet in an executive session at least once a year. The Marshall Islands law and our bylaws do not require our non-management directors to regularly hold executive sessions without management. During 2015 and through the date of this annual report, our non-management directors met in executive session four times. The NYSE requires companies to adopt and disclose corporate governance guidelines. The guidelines must address, among other things: director qualification standards, director responsibilities, director access to management and independent advisers, director compensation, director orientation and continuing education, management succession and an annual performance evaluation. We are not required to adopt such guidelines under Marshall Islands law and we have not adopted such guidelines.



ITEM 16H.	MINE SAFETY DISCLOSURE

Not applicable.

PART III



ITEM 17.	FINANCIAL STATEMENTS

See “Item 18. Financial Statements.”



ITEM 18.	FINANCIAL STATEMENTS

The financial statements, together with the report of PricewaterhouseCoopers Audit thereon, beginning on page F-1, are filed as a part of this annual report.



ITEM 19.				EXHIBITS

Number				Description

1.1				Amended and Restated Articles of Incorporation of the Company (1)
1.2				Amendment to the Amended and Restated Articles of Incorporation of the Company(8)
1.3				Certificate of Correction to the Amended and Restated Articles of Incorporation of the Company
1.4				Amended and Restated Bylaws of the Company (1)
2.1				Form of Common Share Certificate
2.2				Base Indenture, dated September 22, 2014, by and between the Company and Deutsche Bank Trust Company Americas, relating to the 7.50% Senior Notes due 2019 (5)
2.3				First Supplemental Indenture, dated September 22, 2014, by and between the Company and Deutsche Bank Trust Company Americas (5)
4.1				Master Agreement (1)
4.2				Administrative Services Agreement (1)
4.3				Equity Incentive Plan (1)
4.4				Form of Shipbuilding Contract of Chengxi Shipyard Co. Ltd (1)
4.5				Form of Shipbuilding Contract of Dalian COSCO KHI Ship Engineering Co. Ltd. (1)
4.6				Form of Shipbuilding Contract of Hudong-Zhongdua Shipbuilding (Group) Co., Inc. (1)
4.7				Form of Shipbuilding Contract of Imabari Shipbuilding Co. Ltd. (1)
4.8				Form of Shipbuilding Contract of Daewoo Mangalia Heavy Industries S.A. (1)
4.9				Form of Shipbuilding Contract of Tsuneishi Group (Zhoushan) Shipbuilding Inc. (1)
4.10				Form of Shipbuilding Contract of Mitsui Engineering & Shipbuilding Co. Ltd. (1)
4.11				Form of Shipbuilding Contract of Nantong COSCO KHI Ship Engineering Co., Ltd. (1)
4.12				Form of Shipbuilding Contract of Jiangsu Yangzijian Shipbuilding Co. Ltd. (1)
4.13				Form of Shipbuilding Contract of Shanghai Jiangnan-Changxing Shipbuilding Co., Ltd. (1)
4.14				Form of Shipbuilding Contract of Sungdong Shipbuilding & Marine Engineering Co., Ltd. (2)
4.15				Form of Shipbuilding Contract of Daehan Shipbuilding Co., Ltd. (2)
4.16				Registration Rights Agreement, dated November 18, 2014 (4)
4.17				Share Purchase Agreement, dated November 18, 2014 (4)
4.18				$67.5 Million Senior Secured Credit Facility (2)
4.19				$330.0 Million Senior Secured Credit Facility (2)
4.20				$39.6 Million Senior Secured Credit Facility (2)
4.21				$409.0 Million Senior Secured Credit Facility(6)
4.22				$411.3 Million Senior Secured Credit Facility(6)
4.23				$42.0 Million Senior Secured Credit Facility(6)
4.24				$26.0 Million Senior Secured Credit Facility(6)



4.25				$19.8 Million Senior Secured Credit Facility(6)
4.26				$76.5 Million Senior Secured Credit Facility
4.27				$12.5 Million Senior Secured Credit Facility
4.28				$27.3 Million Senior Secured Credit Facility
4.29				First Amended and Restated Stockholders Rights Agreement(9)
4.30				Agreement with Institutional Investor(7)
8.1				List of Subsidiaries
11.1				Code of Ethics (1)
12.1				Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
12.2				Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
13.1				Certification of Principal 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 Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1				Consent of Independent Registered Public Accounting Firm
15.2				Consent of SSY Consultancy & Research Ltd
101. INS				XBRL Instance Document
101. SCH				XBRL Taxonomy Extension Schema
101. CAL				XBRL Taxonomy Extension Schema Calculation Linkbase
101. DEF				XBRL Taxonomy Extension Schema Definition Linkbase
101. LAB				XBRL Taxonomy Extension Schema Label Linkbase
101. PRE				XBRL Taxonomy Extension Schema Presentation Linkbase


(1)	Incorporated by reference to the Company’s Registration Statement on Form F-1, which was declared effective by the SEC on December 11, 2013 (File No. 333-192246).


(2)	Incorporated by reference to the Company’s Registration Statement on Form F-1, which was declared effective by the SEC on September 15, 2015 (File No. 333-197949).


(3)	Incorporated by reference to the Company’s Annual Report on Form 20-F, filed with the SEC on April 2, 2014.


(4)	Incorporated by reference to the Company’s Report on Form 6-K, filed with the SEC on November 18, 2014.


(5)	Incorporated by reference to the Company’s Report on Form 6-K, filed with the SEC on September 25, 2014.


(6)	Incorporated by reference to the Company’s Annual Report on Form 20-F, filed with the SEC on April 2, 2015.


(7)	Incorporated by reference to the Company’s Report on Form 6-K, filed with the SEC on December 23, 2015.


(8)	Incorporated by reference to the Company’s Report on Form 6-K, filed with the SEC on January 4, 2016.


(9)	Incorporated by reference to the Company’s Report on Form 6-K, filed with the SEC on January 15, 2016.

SIGNATURES

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



Dated February 29, 2016
	Scorpio Bulkers Inc.
	(Registrant)

	/s/ Emanuele Lauro

	Emanuele Lauro
	Chief Executive Officer

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



	Page
Report of Independent Registered Public Accounting Firm	F- 2
Consolidated Balance Sheets as of the years ended December 31, 2015 and 2014	F- 3
Consolidated Statements of Operations for the years ended December 31, 2015 and 2014 and the period from March 20, 2013 (Date of Inception) to December 31, 2013	F- 4

Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2015 and 2014 and the period from March 20, 2013 (Date of Inception) to December 31, 2013	F- 5

Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014 and the period from March 20, 2013 (Date of Inception) to December 31, 2013	F- 6

Notes to the Consolidated Financial Statements	F- 7

F- 1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Scorpio Bulkers Inc

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Scorpio Bulkers Inc and its subsidiaries at December 31, 2015 and December 31, 2014 and the results of their operations and their cash flows for the two years then ended December 31, 2015 and for the period from March 20, 2013 (date of inception) to December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under item 15. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our audits (which were integrated audits in 2015 and 2014). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (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 of the company are being made only in accordance with authorizations of management and directors of the company; 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 the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PRICEWATERHOUSECOOPERS AUDIT

Monaco, Principality of Monaco

February 29, 2016

F- 2

Scorpio Bulkers Inc. and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except per share data)



	As of December 31,
Assets	2015			2014
Current assets
Cash and cash equivalents	$	200,300		$	272,673
Due from related parties	8,197			42,373
Prepaid expenses and other current assets	11,247			3,872
Assets held for sale	172,888			43,781
Total current assets	392,632			362,699
Non-current assets
Vessels, net	764,454			66,633
Vessels under construction	288,282			866,844
Deferred financing cost, net	12,807			3,181
Other assets	14,736			19,543
Due from related parties	12,525			5,305
Total non-current assets	1,092,804			961,506
Total assets	$	1,485,436		$	1,324,205

Liabilities and shareholders’ equity
Current liabilities
Bank loans	$	110,226		$	3,300
Accounts payable and accrued expenses	16,214			15,811
Due to related parties	624			1,231
Total current liabilities	127,064			20,342
Non-current liabilities
Bank loans	350,216			30,250
Senior Notes	73,625			73,625
Total non-current liabilities	423,841			103,875
Total liabilities	550,905			124,217
Commitment and contingencies (Note 7)
Shareholders’ equity
Common stock, $0.01 par value per share; authorized 56,250,000 shares; issued and outstanding 28,686,561and 15,024,974 shares as of December 31, 2015 and December 31, 2014, respectively	287			1,803
Paid-in capital	1,567,905			1,321,057
Accumulated deficit	(633,661		)	(122,872		)
Total shareholders’ equity	934,531			1,199,988
Total liabilities and shareholders’ equity	$	1,485,436		$	1,324,205

See notes to the consolidated financial statements.

F- 3

Scorpio Bulkers Inc. and Subsidiaries

Consolidated Statement of Operations

(Dollars in thousands, except per share data)



	Year ended December 31,						Period from March 20, 2013 (date of inception) to December 31,
	2015			2014			2013
Revenue:
Vessel revenue	$	5,457		$	3,774		$	—
Vessel revenue-related party pools	57,064			45,213			—
Total vessel revenue	62,521			48,987			—
Operating expenses:
Voyage expenses	123			3,579			—
Voyage expenses-related party	664			148			—
Vessel operating costs	26,607			1,478			—
Vessel operating costs-related party	2,765			122			—
Charterhire expense	51,389			73,214			—
Vessel depreciation	14,263			686			—
General and administrative expenses	33,373			30,937			5,505
General and administrative expenses-related party	2,009			824			—
Loss / write down on assets held for sale	397,472			55,487			—
Loss / write down on assets held for sale-related party	25,465			—			—
Total operating expenses	554,130			166,475			5,505
Operating loss	(491,609		)	(117,488		)	(5,505		)
Other income (expense):
Interest income	356			1,052			341
Foreign exchange gain (loss)	(12		)	43			(1,135		)
Financial expense, net	(19,524		)	(172		)	(8		)
Total other (loss) income	(19,180		)	923			(802		)
Net loss	$	(510,789	)	$	(116,565	)	$	(6,307	)
Weighted-average shares outstanding:
Basic	21,410,177			11,466,072			3,327,097
Diluted	21,410,177			11,466,072			3,327,097
Loss per common share:
Basic	$	(23.86	)	$	(10.17	)	$	(1.90	)
Diluted	$	(23.86	)	$	(10.17	)	$	(1.90	)

See notes to the consolidated financial statements.

F- 4

Scorpio Bulkers Inc. and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity

(Dollars in thousands)



	Number of shares outstanding		Common stock			Paid-in capital			Accumulated deficit			Total
Balance at March 20, 2013 (date of inception)	—		$	—		$	—		$	—		$	—
Net loss									(6,307		)	(6,307		)
Shares issued upon formation	125
Net proceeds from common stock offerings:
Norwegian private placements	8,103,368		972			823,307						824,279
Initial public offering	2,608,333		313			282,568						282,881
Issuance of shares of restricted stock	405,168		49			(49		)				—
Restricted stock amortization						3,359						3,359
Balance as of December 31, 2013	11,116,994		$	1,334		$	1,109,185		$	(6,307	)	$	1,104,212
Net loss									(116,565		)	(116,565		)
Net proceeds from common stock offering:
Overallotment of initial public offering	391,250		47			42,298						42,345
Private placement	3,333,333		400			145,227						145,627
Common Stock issued to SSH	4,366		1			499						500
Issuance of shares of restricted stock	179,031		21			(21		)				—
Restricted stock amortization						23,869						23,869
Balance as of December 31, 2014	15,024,974		$	1,803		$	1,321,057		$	(122,872	)	$	1,199,988
Net loss									(510,789		)	$	(510,789	)
Net proceeds from common stock offering:
Private placement						250						250
Public offering	11,083,333		1,330			188,343						189,673
Overallotment of public offering	1,662,500		200			28,230						28,430
Reverse stock split	(29	)	(3,155		)	3,155						—
Common Stock issued to SSH	111,725		13			2,367						2,380
Issuance of shares of restricted stock	804,058		96			(96		)				—
Restricted stock amortization						24,599						24,599
Balance as of December 31, 2015	28,686,561		$	287		$	1,567,905		$	(633,661	)	$	934,531

See notes to the consolidated financial statements.

F- 5

Scorpio Bulkers Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)



	Year ended December 31,						Period from March 20, 2013 (date of inception) to December 31,
	2015			2014			2013
Operating activities
Net loss	$	(510,789	)	$	(116,565	)	$	(6,307	)
Adjustment to reconcile net loss to net cash used by operating activities:
Restricted stock amortization	24,599			23,869			3,359
Vessel depreciation	14,263			686			—
Amortization of deferred financing costs	1,988			150			—
Write off of deferred financing costs	16,085			—			—
Loss / write down on assets held for sale	397,472			55,487			—
Loss / write down on assets held for sale-related party	25,465			—			—
Changes in operating assets and liabilities:
Increase in prepaid expenses and other current assets	(4,669		)	(3,811		)	(96		)
Increase in accounts payable accrued expenses	5,372			5,014			807
Related party balances	(4,928		)	(15,170		)	—
Net cash used in operating activities	(35,142		)	(50,340		)	(2,237		)
Investing activities
Security deposit refunded (paid) on assets held for sale	31,277			(31,277		)	—
Proceeds from sale of assets held for sale	281,050			—			—
Payments on assets classified as held for sale	(92,433		)	—			—
Payments for vessels and vessels under construction	(875,970		)	(651,505		)	(371,692		)
Net cash used by investing activities	(656,076		)	(682,782		)	(371,692		)
Financing activities
Proceeds from issuance of common stock	217,997			187,615			1,107,825
Proceeds from issuance of debt	489,561			33,550			—
Repayments of long term debt	(62,669		)	—			—
Proceed from Senior Notes offering	—			73,625			—
Debt issue cost paid	(26,044		)	(22,891		)	—
Net cash provided by financing activities	618,845			271,899			1,107,825
(Decrease) increase in cash and cash equivalents	(72,373		)	(461,223		)	733,896
Cash at cash equivalents, beginning of period	272,673			733,896			—
Cash and cash equivalents, end of period	$	200,300		$	272,673		$	733,896
Supplemental cash flow information:
Interest paid	$	12,874		$	1,273		$	—
Non-cash investing and financing activities
Amounts payable vessels and vessels under construction	$	2,800		$	7,568		$	—
Deferred financing cost payable	85			532			—
Issuance of common stock	—			357			665
Interest capitalized	11,886			1,600			—

See notes to the consolidated financial statements.

F- 6

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)


1.	General information and significant accounting policies

Company

Scorpio Bulkers Inc. and its subsidiaries (together “we”, “us” or the “Company”) is a company formed for the purpose of acquiring and operating the latest generation newbuilding drybulk carriers with fuel-efficient specifications and carrying capacities of greater than 30,000 dwt in the international shipping markets. Scorpio Bulkers Inc. was incorporated in the Republic of the Marshall Islands on March 20, 2013.

As of December 31, 2015 , the Company owned 25 vessels consisting ten Kamsarmax vessels, 15 Ultramax vessels and has ordered 24 newbuilding drybulk carriers, which it intends to operate. As of December 31, 2015 the Company has classified eight Capesize vessels as held for sale.

Our vessels are commercially managed by Scorpio Commercial Management S.A.M. (“SCM”), which is majority owned by the Lolli-Ghetti family of which, Emanuele Lauro, our Chairman and Chief Executive Officer is a member. SCM’s services include securing employment, in pools, in the spot market and on time charters.

Our vessels are mainly technically managed by Scorpio Ship Management S.A.M. (“SSM”), which is majority owned by the Lolli-Ghetti family. SSM facilitates vessel support such as crew, provisions, deck and engine stores, insurance, maintenance and repairs, and other services as necessary to operate the vessels such as drydocks and vetting/inspection under a technical management agreement.

We also have an administrative services agreement with Scorpio Services Holding Limited (“SSH”), which is majority owned by the Lolli-Ghetti family. The administrative services provided under this agreement primarily include accounting, legal compliance, financial, information technology services, the provision of administrative staff and office space, and the reimbursement of any direct or indirect expenses that they incur in providing these services.

Basis of accounting

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for the fair presentation of results. Certain reclassifications have been made to prior year Voyage expenses - related party and General and administrative expense - related party included in the Consolidated Statement of Operations to conform to current year presentation.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reporting amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets, liabilities, revenues and expenses. Actual results could differ from those estimates.

Reverse stock split

On December 31, 2015, the Company effected a one-for-twelve reverse stock split. All share and per share information has been retroactively adjusted to reflect the reverse stock split. The par value was not adjusted as a result of the reverse stock split.

Going concern

The Company’s revenue is derived from time charter revenue, voyage revenue and pool revenue. The bulker shipping industry is volatile and has been experiencing a sustained cyclical downturn. If the downturn continues, this could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

The fair market values of the Company’s vessels also experience high volatility. The fair market value of the vessels may increase or decrease depending on a number of factors including, but not limited to, the prevailing level of charter rates and day rates, general economic and market conditions affecting the international shipping industry, types, sizes and ages of vessels, supply and demand for vessels, availability of or developments in other modes of transportation, competition from other shipping companies, cost of newbuildings, governmental or other regulations and technological advances. In addition, as vessels grow older, they

F- 7

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

generally decline in value. If the fair market value of vessels declines, the Company may not be in compliance with certain provisions of its credit facilities and it may not be able to refinance its debt and obtain additional financing. The prepayment of certain credit facilities may be necessary for the Company to maintain compliance with certain covenants in the event that the value of its vessels falls below a certain level. Additionally, if the Company sells one or more of its vessels at a time when vessel prices have fallen, the sale price may be less than the vessel’s carrying value on its consolidated financial statements, resulting in a loss on sale or an impairment loss being recognized, ultimately leading to a reduction in earnings. Furthermore, if vessel values fall significantly, this could indicate a decrease in the recoverable amount for the vessel which may result in an impairment adjustment in the carrying value of the vessel.

As described in Note 7, the Company has commitments to pay for its vessels currently under construction that exceed the amount of financing presently secured for these. If the Company is not able to borrow additional funds, raise other capital or utilize available cash on hand, it may not be able to acquire these newbuilding vessels, which could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, nor to the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.

Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements represent the consolidation of the accounts of Scorpio Bulkers Inc. and its subsidiaries in conformity with U.S. GAAP. All intercompany accounts and transactions have been eliminated in consolidation.

Accounting estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosures of contingent assets, liabilities, revenues and expenses.

In addition to the estimates noted above, significant estimates include vessel valuations, useful life of vessels, and residual value of vessels.

Revenue recognition

Vessel revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, and other sales-related or value added taxes.

Vessel revenue is comprised of either time charter revenue, voyage revenue and/or pool revenue.


(1)	Time charter revenue is recognized ratably as services are performed based on the daily rates specified in the time charter contract. We do not recognize revenue when a vessel is off hire.

(2)

Voyage charter agreements are charter hires, where a contract is made in the spot market for the use of a vessel for a specific voyage for a specified charter rate. Revenue from voyage charter agreements is recognized on a pro rata basis based on the relative transit time in each period. The period over which voyage revenues are recognized commences at the time the vessel departs from its last discharge port and ends at the time the discharge of cargo at the next discharge port is completed. We do not begin recognizing revenue until a charter has been agreed to by the customer and us, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next voyage. Estimated losses on voyages are provided for in full at the time such losses become evident. In the application of this policy, we do not begin recognizing revenue until (i) the amount of revenue can be measured reliably, (ii) it is probable that the economic benefits associated with the transaction will flow to the entity, (iii) the transactions’ stage of completion at the balance sheet date can be measured reliably and (iv) the costs incurred and the costs to complete the transaction can be measured reliably.

F- 8

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)


(3)	Pool revenue for each vessel is determined in accordance with the profit sharing terms specified within each pool agreement. In particular, the pool manager aggregates the revenues and expenses of all of the pool participants and distributes the net earnings to participants based on:


•	the pool points (vessel attributes such as cargo carrying capacity, fuel consumption, and construction characteristics are taken into consideration); and


•	the number of days the vessel participated in the pool in the period.

We recognize pool revenue on a monthly basis, when the vessel has participated in a pool during the period and the amount of pool revenue for the month can be estimated reliably. We receive estimated vessel earnings based on the known number of days the vessel has participated in the pool, the contract terms, and the estimated monthly pool revenue.

Voyage expenses

Voyage expenses, which primarily include bunkers, port charges, canal tolls, cargo handling operations and brokerage commissions paid by us under voyage charters, as well as brokerage commissions and miscellaneous voyage expenses that the Company is unable to recoup under time charter and pool arrangements, are expensed as incurred.

Charterhire expense

Charterhire expense is the amount we pay the owner for time chartered-in vessels. The amount is usually for a fixed period of time at charter rates that are generally fixed, but may contain a variable component based on drybulk indices, inflation, interest rates, profit sharing , or current market rates. The vessel’s owner is responsible for crewing and other vessel operating costs. Charterhire expense is recognized ratably over the charterhire period.

Operating leases

Costs in respect of operating leases are charged to the Consolidated Statement of Operations on a straight line basis over the lease term.

Vessel operating costs

Vessel operating costs, which include crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, and technical management fees, are expensed as incurred.

Additionally, these costs include technical management fees that we pay to SSM (See Note 13). Pursuant to an agreement, or the Master Agreement, SSM provides us with technical services, and we provide them with the ability to subcontract technical management of our vessels with our approval.

Foreign currencies

The individual financial statements of Scorpio Bulkers Inc. and each of its subsidiaries are presented in the currency of the primary economic environment in which we operate (its functional currency), which in all cases is U.S. dollars. For the purpose of the consolidated financial statements, our results and financial position are also expressed in U.S. dollars.

In preparing the financial statements of Scorpio Bulkers Inc. and each of its subsidiaries, transactions in currencies other than the U.S. dollar are recorded at the rate of exchange prevailing on the dates of the transactions. Any change in exchange rate between the date of recognition and the date of settlement may result in a gain or loss which is included in the Consolidated Statement of Operations. At the end of each reporting period, monetary assets and liabilities denominated in other currencies are retranslated into the functional currency at rates ruling at that date. All resultant exchange differences are included in the Consolidated Statement of Operations.

F- 9

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly-liquid investments with original maturities of three months or less, and that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Inventories

Inventories, which are included in prepaid expenses and other current assets in the Consolidated Balance Sheet, consist of lubricating oils and other items including stock provisions, and are stated at the lower of cost and net realizable value. Cost is determined using the first in first out method. Stores and spares are charged to vessel operating costs when purchased.

Assets held for sale

Assets held for sale include vessels and contracts for the construction of vessels and are classified in accordance with ASC 360, Property, Plant, and Equipment . The Company considers such assets to be held for sale when all of the following criteria are met:


•	management commits to a plan to sell the property;


•	it is unlikely that the disposal plan will be significantly modified or discontinued;


•	the property is available for immediate sale in its present condition;


•	actions required to complete the sale of the property have been initiated;


•	sale of the property is probable and we expect the completed sale will occur within one year; and


•	the property is actively being marketed for sale at a price that is reasonable given its current market value.

Upon designation as an asset held for sale, the Company records the asset at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and, if the asset is a vessel, the Company ceases depreciation.

Vessels, net

Vessels, net is stated at historical cost less accumulated depreciation. Included in vessel costs are acquisition costs directly attributable to the acquisition of a vessel and expenditures made to prepare the vessel for its initial voyage. The Company also capitalizes interest costs for a vessel under construction as a cost which is directly attributable to the acquisition cost of a vessel. Vessels are depreciated on a straight-line basis over their estimated useful lives, determined to be 25 years from the date the vessel is ready for its first voyage. Depreciation is based on cost less the estimated residual value which is the lightweight tonnage of each vessel multiplied by scrap value per ton. The scrap value per ton is estimated taking into consideration the historical four years average scrap market rates at the balance sheet date with changes accounted for in the period of change and in future periods. The Company believes that a 25 -year depreciable life for its vessels is consistent with that of other ship owners and with its economic useful life. An increase in the useful life of the vessel or in its 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 its residual value would have the effect of increasing the annual depreciation charge. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, or when the cost of complying with such regulations is not expected to be recovered, we will adjust the vessel’s useful life to end at the date such regulations preclude such vessel’s further commercial use. The carrying value of the Company’s vessels does not represent the fair market value of such vessels or the amount it could obtain if it were to sell any of its vessels, which could be more or less. Under U.S. GAAP, the Company would not record a loss if the fair market value of a vessel (excluding its charter) is below our carrying value unless and until it determines to sell that vessel or the vessel is impaired as discussed below under “Impairment of long-lived assets held for use.”

Vessels under construction

Vessels under construction are measured at cost and include costs incurred that are directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. These costs include installment payments made to the shipyards, capitalized interest, professional fees and other costs deemed directly attributable to the construction of the asset. Vessels under construction are not depreciated.

F- 10

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

Deferred drydocking costs

The vessels are required to undergo planned drydocks for replacement of certain components, major repairs and maintenance of other components, which cannot be carried out while the vessels are operating, approximately every 30 months or 60 months depending on the nature of work and external requirements. These drydock costs are capitalized and depreciated on a straight-line basis over the estimated period until the next drydock. When the drydock expenditure is incurred prior to the expiry of the period, the remaining balance is expensed. The Company had no drydocking activity during the years ended December 31, 2015 , 2014 and for the period from March 20, 2013 (date of inception) to December 31, 2013.

We only include in deferred drydocking those direct costs that are incurred as part of the drydocking to meet regulatory requirements, or are expenditures that add economic life to the vessel, increase the vessel’s earnings capacity or improve the vessel’s efficiency. Direct costs include shipyard costs as well as the costs of placing the vessel in the shipyard; cost of travel, lodging and subsistence of personnel sent to the drydocking site to supervise; and the cost of hiring a third party to oversee the drydocking. Expenditures for normal maintenance and repairs, whether incurred as part of the drydocking or not, are expensed as incurred.

Other assets

Other assets consist primarily of deferred financing costs relating to loan facilities that have not yet been drawn down. As the loan facilities are drawn down, the related portion of costs incurred relating to such facilities will be reclassified to deferred financing costs and amortized over the life of the related debt using the effective interest rate method.

Impairment of long-lived assets held for use

In accordance with ASC subtopic 360-10, Property, Plant and Equipment , long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the fair value of the asset as estimated using a cash flow model. Long-lived assets to be disposed of are reporting at the lower of carrying amount or fair value less costs to sell.

On December 31, 2015 , the Company performed impairment tests of the Company’s vessels due to the prevailing conditions in the shipping industry. The Company compared undiscounted cash flows to the carrying values for each of the Company’s vessels to determine if the assets were impaired. In developing its estimates of undiscounted cash flows, the Company makes assumptions and estimates about vessels’ future performance, with the most significant assumptions relating to (i) charter rates on expiry of existing charters, which are based on the current fixing applicable to five -year time charter rates and thereafter, a reversion to the ten -year historical average for each category of vessel (ii) off-hire days, which are based on actual off-hire statistics for the Company’s fleet (iii) operating costs, based on current levels escalated over time based on long term trends (iv) dry docking frequency, duration and cost, (v) estimated useful life which is assessed as a total of 25 years and (vi) estimated scrap values. In the case of an indication of impairment, the results of a recoverability test would also be sensitive to the discount rate applied.

The assumptions used involve a considerable degree of estimation. Actual conditions may differ significantly from the assumptions and thus actual cash flows may be significantly different to those expected with a material effect on the recoverability of each vessel’s carrying amount.

No impairment charges were recorded on the Company’s long-lived assets held for use as at December 31, 2015 and 2014 based on the assumptions made, the expected undiscounted future cash flows exceeding the vessels’ carrying amounts.

Fair value of financial instruments

Substantially all of the Company’s financial instruments are carried at fair value or amounts approximating fair value. Cash and cash equivalents, amounts due to / from charterers, accounts payable and long-term debt, are carried at market value or estimated fair value.

F- 11

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

Deferred financing costs, net

Deferred financing costs, included in other assets, consist of fees, commissions and legal expenses associated with obtaining loan facilities, amending existing loan facilities and write downs of deferred financing cost. These costs are amortized over the life of the related debt using the effective interest rate method and are included in interest expense. Amortization was $1,988 and $150 , respectively for years ended December 31, 2015 and 2014. There was no such amortization expense in 2013. Deferred financing costs of $14,935 and $3,331 , and accumulated amortization was $2,128 and $150 as of December 31, 2015 and 2014, respectively. Amortization for the next 5 years based on balances as of December 31, 2015 are $2,982 in 2016, $2,789 in 2017, $2,599 in 2018, $2,181 in 2019 and $1,559 in 2020.

The Company wrote off $16,085 and $585 during the years ended December 31, 2015 and 2014, respectively, associated with the portion of deferred financing costs accumulated on credit facilities for which the commitments were reduced pursuant to the removal from the facility certain vessels that have been sold or designated as held for sale.

Earnings per share

Basic earnings per share is determined by dividing the net income (loss) by the weighted average number of common shares outstanding, while diluted earnings per share is determined by dividing net income (loss) by the average number of common stock adjusted for the dilutive effect of common stock equivalents by application of the treasury stock method. Common stock equivalents are excluded from the diluted calculation if their effect is anti-dilutive.

Share-based Compensation

We follow ASC Subtopic 718-10, Compensation-Stock Compensation , for restricted stock issued under our equity incentive plans. Share-based compensation expense requires measurement of compensation cost for shared based awards at fair value and recognition of compensation cost over the vesting period, net of estimated forfeitures. The restricted stock awards granted to our employees and directors have graded vesting schedules and contain only service conditions. The Company recognizes compensation cost on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

The fair value of restricted stock awards is based on the fair value of the Company’s common stock on the grant date.

Income tax

Scorpio Bulkers Inc. and its subsidiaries are incorporated in the Republic of the Marshall Islands and the Cayman Islands, and in accordance with the income tax laws of the Marshall Islands and the Cayman Islands, are not subject to Marshall Islands or Cayman Islands income tax. We are also exempt from income tax in other jurisdictions including the United States of America due to tax treaties or domestic tax laws; therefore, we will not have any tax charges, benefits, or balances.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk are amounts due from charterers and from related parties. With respect to balances due from the Scorpio Ultramax Pool, the Scorpio Kamsarmax Pool and the Scorpio Capesize Pool (see Note 13), the Company, through SCM, limits its credit risk by performing ongoing credit evaluations and, when deemed necessary, requires letters of credit, guarantees or collateral. The Company earned 40.8% , 42.5% and 7.9% of its revenues (including commissions from SCM) from three customers during the year ended December 31, 2015 . The Company earned 71.4% and 20.8% of its revenues (including commissions from SCM) from two customers during the year ended December 31, 2014. Management does not believe significant risk exists in connection with the Company’s concentrations of credit at December 31, 2015 .

At December 31, 2015 , the Company maintains all of its cash and cash equivalents with eight financial institutions. None of the Company’s cash and cash equivalent balances are covered by insurance in the event of default by these financial institutions.

Interest rate risk

The Company is exposed to the impact of interest rate changes primarily through its variable-rate borrowings which consist of borrowings under its secured credit facilities. Significant increases in interest rates could adversely affect our operating margins, results of operations and our ability to service our debt.

F- 12

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments.

We manage liquidity risk by maintaining adequate reserves and borrowing facilities and by continuously monitoring forecast and actual cash flows.

Current economic conditions make forecasting difficult, and there is the possibility that our actual trading performance during the coming year may be materially different from expectations. Based on internal forecasts and projections that take into account reasonably possible changes in our trading performance, we believe that we have adequate financial resources to continue in operation and meet our financial commitments (including but not limited to newbuilding installments, debt service obligations and charterhire commitments) for a period of at least 12 months from the balance sheet date. Accordingly, we continue to adopt the going concern basis in preparing our financial statements.

Currency and exchange rate risk

The international shipping industry’s functional currency is the U.S. Dollar. Virtually all of our revenues and most of our operating costs are in U.S. Dollars. We incur certain operating expenses in currencies other than the U.S. Dollar, and the foreign exchange risk associated with these operating expenses is immaterial.

Recent accounting pronouncements

On February 25, 2016 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases”, which is intended to improve financial reporting about leasing transactions. The ASU affects all companies that lease assets. The ASU will require organizations that lease assets, or lessees, to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with terms of more than twelve months. The accounting by organizations that own the assets leased by the lessee, the lessor, will remain largely unchanged from current U.S. GAAP. The ASU will also require additional quantitative and qualitative disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The ASU is effective for fiscal years and interim periods beginning after December 15, 2018 although early adoption is permitted. The ASU requires reporting organizations to take a modified retrospective transition approach. The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs ”, which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of the ASU on its Consolidated Balance Sheet.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern”. ASU 2014-15 provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and on related required footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. ASU 2014-15 is applicable to all entities and is effective for annual reporting periods ending after December 15, 2016 and for annual and interim reporting periods thereafter. Early application is permitted. The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle is that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. This Update defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP.ASU 2014-09 was originally going to be effective January 1, 2017; however, the FASB recently issued ASU 2015-14, which deferred the effective date of ASU 2014-09 by one year to January 1, 2018. The Company is currently evaluating the potential impact of ASU 2014-09 on its consolidated financial statements.

F- 13

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)


2.	Cash and cash equivalents

Included in cash and cash equivalents as of December 31, 2015 and 2014 is $20,066 and $75,029 , respectively, of short-term deposits with original maturities of less than three months .


3.	Earnings Per Common Share

The following is a reconciliation of the basic and diluted earnings per share computations:



	For the years ended December 31,						Period from March 20,2013 (date of inception) to December 31,
	2015			2014			2013
Net loss for basic and diluted earnings per share	$	(510,789	)	$	(116,565	)	$	(6,307	)

Common shares outstanding and common stock equivalents:
Weighted average shares basic	21,410,177			11,466,072			3,327,097
Effect of dilutive securities	—			—			—
Weighted average common shares - diluted	21,410,177			11,466,072			3,327,097

Loss per share:
Basic	$	(23.86	)	$	(10.17	)	$	(1.90	)
Diluted	$	(23.86	)	$	(10.17	)	$	(1.90	)

The following is a summary of anti-dilutive equity awards not included in detailed earnings per share computations due to the net loss realized for the years ended December 31, 2015 and 2014 and for the period from March 20, 2013 (date of inception) to December 31, 2013.



	For the years ended December 31,		Period from March 20,2013 (date of inception) to December 31,
	2015	2014	2013
Share equivalents	1,248,163	581,671	405,156

F- 14

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)


4.	Vessels

At December 31, 2015 the Company owned, ten Kamsarmax vessels and 15 Ultramax vessels. A rollforward of activity within vessels is as follows:



Balance, December 31, 2013	$	—
Transfer from vessels under construction	67,319
Depreciation	(686		)
Balance December 31, 2014	$	66,633
Transfer from vessels under construction and other additions	1,002,912
Depreciation	(14,263		)
Transferred to assets held for sale	(290,828		)
Balance December 31, 2015	$	764,454

During 2015, vessels and accumulated depreciation were reduced by approximately $294,451 and $3,623 , respectively, for vessels that were sold or are currently classified as held for sale. All of our vessels serve as collateral against existing loan facilities.

Owned vessels



Vessel Name	Year Built	DWT	Vessel Type
SBI Antares	2015	61,000	Ultramax
SBI Athena	2015	64,000	Ultramax
SBI Bravo	2015	61,000	Ultramax
SBI Leo	2015	61,000	Ultramax
SBI Echo	2015	61,000	Ultramax
SBI Lyra	2015	61,000	Ultramax
SBI Tango	2015	61,000	Ultramax
SBI Maia	2015	61,000	Ultramax
SBI Hydra	2015	61,000	Ultramax
SBI Subaru	2015	61,000	Ultramax
SBI Pegasus	2015	64,000	Ultramax
SBI Ursa	2015	61,000	Ultramax
SBI Thalia	2015	64,000	Ultramax
SBI Cronos	2015	61,000	Ultramax
SBI Orion	2015	64,000	Ultramax
Total Ultramax		927,000
SBI Cakewalk	2014	82,000	Kamsarmax
SBI Charleston	2014	82,000	Kamsarmax
SBI Samba	2015	84,000	Kamsarmax
SBI Rumba	2015	84,000	Kamsarmax
SBI Capoeira	2015	82,000	Kamsarmax
SBI Electra	2015	82,000	Kamsarmax
SBI Carioca	2015	82,000	Kamsarmax
SBI Conga	2015	82,000	Kamsarmax
SBI Flamenco	2015	82,000	Kamsarmax
SBI Bolero	2015	82,000	Kamsarmax
Total Kamsarmax		824,000
Total Owned Vessels DWT		1,751,000

F- 15

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)


5.	Vessels under construction

Vessels under construction was $288,282 and $866,844 as of December 31, 2015 and 2014, respectively. These balances consist primarily of installments paid to shipyards on our newbuilding contracts.

A rollforward of activity within vessels under construction is as follows:



Balance, March 20, 2013 (date of inception)	$	—
Installment payments and other capitalized expenses	371,692
Balance, December 31, 2013	$	371,692
Installment payments and other	657,974
Capitalized interest	1,600
Transferred to vessels	(67,319		)
Transferred to assets held for sale	(97,103		)
Balance December 31, 2014	$	866,844
Installment payments and other	875,970
Capitalized interest	11,886
Transferred to vessels	(1,001,808		)
Transferred to assets held for sale	(464,610		)
Balance December 31, 2015	$	288,282

All vessels under construction serve as collateral for related loan facilities. The estimated cost of these 24 newbuildings is approximately $702,837 of which we have paid $269,240 through December 31, 2015 .

A summary of our vessels under construction is as follows:



Ultramax Vessels
	Vessel Name	Expected Delivery	DWT	Shipyard
1	Hull 1907 - TBN SBI Hera	Q2-16	60,200	Mitsui Engineering & Shipbuilding Co., Ltd.
2	Hull 1906 - TBN SBI Zeus	Q2-16	60,200	Mitsui Engineering & Shipbuilding Co., Ltd.
3	Hull 1911 - TBN SBI Poseidon	Q2-16	60,200	Mitsui Engineering & Shipbuilding Co., Ltd.
4	Hull 1912 - TBN SBI Apollo	Q2-16	60,200	Mitsui Engineering & Shipbuilding Co., Ltd.
5	Hull S-A098 - TBN SBI Achilles	Q1-16	61,000	Imabari Shipbuilding Co., Ltd.
6	Hull S-A090 - TBN SBI Hermes	Q1-16	61,000	Imabari Shipbuilding Co., Ltd.
7	Hull NE194 - TBN SBI Hyperion	Q2-16	61,000	Nantong COSCO KHI Ship Engineering Co. Ltd.
8	Hull NE195 - TBN SBI Tethys	Q2-16	61,000	Nantong COSCO KHI Ship Engineering Co. Ltd.
9	Hull CX0653 - TBN SBI Hercules	Q1-16	64,000	Chengxi Shipyard Co. Ltd.
10	Hull CX0627 - TBN SBI Perseus	Q1-16	64,000	Chengxi Shipyard Co. Ltd.
11	Hull CX0655 - TBN SBI Samson	Q2-16	64,000	Chengxi Shipyard Co. Ltd.
12	Hull CX0613 - TBN SBI Phoebe	Q3-16	64,000	Chengxi Shipyard Co. Ltd.
13	Hull CX0656 - TBN SBI Phoenix	Q2-16	64,000	Chengxi Shipyard Co. Ltd.
	Ultramax NB DWT		804,800

F- 16

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)



Kamsarmax Vessels
	Vessel Name	Expected Delivery	DWT	Shipyard
1	Hull 1092 - TBN SBI Rock	Q1-16	82,000	Jiangsu Yangzijiang Shipbuilding Co., Ltd.
2	Hull 1093 - TBN SBI Twist	Q2-16	82,000	Jiangsu Yangzijiang Shipbuilding Co., Ltd.
3	Hull S1229 - TBN SBI Carioca	Q1-16	82,000	Hudong-Zhonghua (Group) Co., Ltd.
3	Hull S1724A - TBN SBI Sousta	Q1-16	82,000	Hudong-Zhonghua (Group) Co., Ltd.
4	Hull S1725A - TBN SBI Reggae	Q1-16	82,000	Hudong-Zhonghua (Group) Co., Ltd.
5	Hull S1726A - TBN SBI Zumba	Q1-16	82,000	Hudong-Zhonghua (Group) Co., Ltd.
6	Hull S1231 - TBN SBI Macarena	Q2-16	82,000	Hudong-Zhonghua (Group) Co., Ltd.
7	Hull S1735A - TBN SBI Parapara	Q1-16	82,000	Hudong-Zhonghua (Group) Co., Ltd.
8	Hull S1736A - TBN SBI Mazurka	Q2-16	82,000	Hudong-Zhonghua (Group) Co., Ltd.
9	Hull S1230 - TBN SBI Lambada	Q1-16	82,000	Hudong-Zhonghua (Group) Co., Ltd.
10	Hull S1232 - TBN SBI Swing	Q3-16	82,000	Hudong-Zhonghua (Group) Co., Ltd.
11	Hull S1233 - TBN SBI Jive	Q3-16	82,000	Hudong-Zhonghua (Group) Co., Ltd.
	Kamsarmax NB DWT		902,000
	Total Newbuild DWT		1,706,800


6.	Assets Held for Sale

The Company sold 23 vessels for net proceeds aggregating $281,050 during the year ended December 31, 2015, including seven vessels that were classified as held for sale at December 31, 2014.

During the fourth quarter of 2015 the Company classified six owned Capesize vessels and five newbuilding Capsize vessels as held for sale upon reaching sales agreements with unaffiliated third parties totaling $394,204 . As of December 31, 2015 the Company sold three of those vessels and the remaining three Capesize vessels and five newbuilding Capesize vessels made up the $172,888 balance in assets held for sale at December 31, 2015. The sales of the remaining vessels and contracts are expected to be completed in the first quarter of 2016. The Company recorded a write down of $271,025 representing the amount by which balances in vessels under construction for these contracts exceeded the selling prices (less selling costs) net of remaining installment payments.

During the second quarter of 2015, the Company classified nine contracts to construct vessels as held for sale, upon reaching agreements to sell such contracts. This included eight newbuilding Capesize vessels and one newbuilding Kamsarmax vessel. We recorded a related write-down of $116,502 during 2015 related to these nine contracts. The sale of these nine contracts was completed during the third quarter of 2015.

During the first quarter of 2015, the Company classified four contracts to construct vessels as held for sale, including one Kamsarmax construction contract and three contracts for the construction of LR1 product tankers, which were modified from Capesize construction contracts. We recorded a write down of $30,994 in during 2015 related to the reclassification of these four contracts. The sale of these four contracts was completed during the second quarter of 2015.

In December 2014, the Company (i) reached agreements with shipyards in South Korea and Romania to modify six newbuilding contracts for Capesize bulk carriers into newbuilding contracts for LR2 product tankers, (ii) reached an agreement to sell four of these LR2 newbuilding contracts to Scorpio Tankers Inc., a related party, and (iii) granted options to Scorpio Tankers Inc. to purchase the two remaining LR2 newbuilding contracts. The sale price for each of the four LR2 newbuilding contracts is $51,000 . The two option contracts expired on May 31, 2015 unexercised and the vessels were sold to unaffiliated third parties during 2015. The Company also entered into an agreement to sell one Kamsarmax newbuilding drybulk vessel for approximately $30,650 . The vessel was constructed at Tsuneishi Group (Zhoushan) Shipbuilding Inc., and was delivered in the third quarter of 2015. The sale was completed upon delivery.

The Company recorded a write down on assets held for sale aggregating $55,487 for the year ended December 31, 2014 which includes (i) the amount by which balances in vessels under construction for these contracts exceeded the selling prices of the

F- 17

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

contracts net of remaining installments yet to be made under the contracts, including modifications to contract prices of the three LR1 product tanker contracts, and (ii) costs expected to be incurred to suppliers relating to the cancellation of orders for the purchase of components that would have been used in the construction of the Capesize vessels prior to their modification. An additional $4,415 loss was recorded in 2015 related to these contracts for additional costs and adjustments to estimates, the majority of which relates to the two LR2 newbuilding contracts for which Scorpio Tankers declined the option to purchase and the contracts were subsequently sold for lower amounts.

Additionally, the Company recorded losses of $16,085 and $585 for the years ended December 31, 2015 and 2014, respectively, associated with writing off a portion of deferred financing costs accumulated on credit facilities for which the commitments were reduced pursuant to the removal from the facility certain vessels that have been sold or designated as held for sale.

A summary of assets held for sale as of December 31, 2015 is as follows:



	Vessel Name	Expected Delivery / Delivered	DWT	Shipyard / Owned
1	Hull S1212 - TBN SBI Montecristo	Q1-16	180,000	Sungdong Shipbuilding & Marine Engineering Co., Ltd.
2	Hull S1213 - TBN SBI Aroma	Q1-16	180,000	Sungdong Shipbuilding & Marine Engineering Co., Ltd.
3	Hull S1214 - TBN SBI Cohiba	Q1-16	180,000	Sungdong Shipbuilding & Marine Engineering Co., Ltd.
4	Hull HN1058 - TBN SBI Behike	Q1-16	180,000	Daehan Shipbuilding Co., Ltd.
5	Hull HN1059 - TBN SBI Monterrey	Q1-16	180,000	Daehan Shipbuilding Co., Ltd.
6	SBI Camacho	2015	180,000	Owned
7	SBI Montesino	2015	180,000	Owned
8	SBI Magnum	2015	180,000	Owned
			1,440,000

A summary of assets held for sale as of December 31, 2014 is as follows:



	Vessel Name	Expected Delivery	DWT	Shipyard
1	Hull S3120 - TBN SBI Parejo	Q3-16	115,000	Sungdong Shipbuilding & Marine Engineering Co., Ltd.
2	Hull S3121 - TBN SBI Tuscamina	Q3-16	115,000	Sungdong Shipbuilding & Marine Engineering Co., Ltd.
3	Hull H5023 - TBN SBI Panatela	Q4-16	112,000	Daewoo Mangalia Heavy Industries S.A.
4	Hull H5024 - TBN SBI Robusto	Q1-17	112,000	Daewoo Mangalia Heavy Industries S.A.
5	Hull H.5003 - TBN SBI Macanudo	Q1-16	115,000	Daehan Shipbuilding Co., Ltd.
6	Hull H.5004 - TBN SBI Cuaba	Q2-16	115,000	Daehan Shipbuilding Co., Ltd.
	Total LR2 HFS NB DWT		684,000
	Kamsarmax Held for Sale
7	Hull SS164 - TBN SBI Salsa	Q3-15	81,600	Tsuneishi Group (Zhoushan) Shipbuilding Inc.
	Total Kamsarmax NB DWT		81,600
	Total HFS DWT		765,600


7.	Commitment and Contingencies

Legal Matters

The Company is periodically involved in litigation and various legal matters that arise in the normal course of business. Such matters are subject to many uncertainties and outcomes that are not predictable. At the current time, the Company does not believe that any of these matters will have a material adverse effect on its financial position or future results of operations and therefore has no t recorded any reserves as of December 31, 2015.

F- 18

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

Capital Commitments

Our Newbuilding Program consists of contracts for the construction of 49 dry bulk vessels. As of December 31, 2015 , the Company has $433,596 of contractual obligations remaining on the 24 undelivered vessels scheduled to be paid in 2016. As of December 31, 2015 , we had either signed credit facility agreements or received commitments for each of our vessels, as well as a cash balance of $200,300 to fund future newbuilding commitments. However, the amount of debt we can draw upon is dependent upon the fair value of our vessels. If the fair market values of our vessels decline, the amount we may draw down under our secured credit facilities may be limited. If we are not able to borrow sufficient funds, raise other capital or utilize available cash on hand, we may not be able to acquire these newbuilding vessels, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The Company also had $90,230 of commitments for five Capesize vessels under construction classified as held for sale as of December 31, 2015 which are schedule to be paid during 2016.

Time chartered-in vessels

The Company time charters in vessels, which were entered into and operated out of spot market-oriented commercial pools managed by our commercial manager. The Company has agreed to charter-in eight drybulk vessels. The terms of the time charter-in contracts are summarized as follows:



Vessel Type	Year Built	DWT	Where Built	Daily Base Rate	Earliest Expiry
Post-Panamax	2012	98,700	China	$13,000	07-Nov16
Kamsarmax	2012	82,000	South Korea	$15,500	30-Jul-17
Kamsarmax	2011	81,500	South Korea	$15,000	22-Feb-16
Panamax	2004	77,500	China	$14,000	03-Jan-17
Ultramax	2010	61,000	Japan	$14,200	29-Jan-17
Supramax	2008	58,000	China	$12,250	12-Jun-16
Supramax	2015	55,000	Japan	$14,000	12-Nov-17
Handymax	2002	48,500	Japan	$12,000	16-Mar-17
Aggregate TC DWT		562,200

Future minimum obligations under non-cancelable time charter-in agreements are as follows:



Year Ending December 31,
2016	$	32,370
2017	9,049
Total	$	41,419

Debt

See Note 11, Debt, to the consolidated financial statements for a schedule of debt payments at December 31, 2015.

Other

The Company also has certain commitments related to the commercial and technical management of its vessels. As of December 31, 2015 , we would be obligated to pay a termination fee of $39,475 to SCM and SSM if we were to cancel our service agreements with them as of December 31, 2015.

F- 19

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)


8.	Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:



	As of
	December 31, 2015		December 31, 2014
Accounts payable	$	11,934	$	7,934
Accrued operating	2,371		6,111
Accrued administrative	1,909		1,766
Accounts payable and accrued expenses	$	16,214	$	15,811

Accrued operating relates to obligations arising from operation of the Company’s owned and chartered-in vessels and construction of the Company’s fleet, such as operating costs and installments on vessels under construction. Accrued administrative relates to obligations that are corporate or financing in nature, such as payroll, professional fees, interest and commitment fees.


9.	Common Shares

On March 20, 2013, the Company issued 125 common shares in connection with its formation.

Between July 1, 2013 and July 16, 2013, the Company issued and sold 2,604,167 common shares, par value $0.01 per share, for net proceeds of $242,800 .

On September 24, 2013, the Company issued and sold an additional 2,783,333 common shares for net proceeds of $290,490 , as denominated in Norwegian kroner (NOK) as of that date, in Norwegian private placement transactions exempt from registration under the Securities Act. As of September 24, 2013, the Company recorded a receivable from shareholders of $289,956 , denominated in NOK, which was not paid until October 2013 when the Company received $288,822 in full settlement of that receivable. The $1,134 difference between the amount initially recorded as a shareholder receivable and the amount subsequently collected was attributable to a change in exchange rate and recorded as foreign exchange loss on the Company’s Consolidated Statement of Operations.

In November 2013, the Company received $291,000 of proceeds from the sale of 2,715,867 common shares that had been consummated in October 2013 in a Norwegian private transaction exempt from registration under the Securities Act.

On December 17, 2013, the Company received $284,018 of proceeds from the sale of 2,608,333 common shares in its initial public offering.

In January 2014, the underwriters in the Company’s initial public offering, which closed on December 17, 2013, exercised in full their option to purchase an additional 391,250 common shares at the public offering price of $117.00 per share. The sale of these common shares resulted in net proceeds to the Company of approximately $42,360 , after deducting underwriters’ discounts and commissions.

During the third quarter of 2014, the Company issued a total of 4,366 shares to Scorpio Services Holding Limited, or SSH, pursuant to the Administrative Services Agreement relating to two Kamsarmax Vessels delivered under our Newbuilding program. The aggregate value of these shares was $500 .

On November 20, 2014 the Company issued 3,333,333 Common shares through a Securities Purchase Agreement with certain institutional investors for the private placement of shares of its common stock, par value $0.01 per share for $150,000 . Of this share issuance, SSH acquired 333,333 shares for $15,000 .

On June 16, 2015, the Board of Directors (the “Board”) approved a Shareholders’ Rights Plan, as subsequently amended and restated on January 14, 2016 (“Rights Plan”) and authorized and declared a dividend distribution of one right for each outstanding share of common stock of the Company to stockholders. Each right entitles the holder to purchase from the Company one one-thousandth of a share of preferred stock at an exercise price of $50.00 per one one-thousandth of a preferred share.

F- 20

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

The Rights Plan is intended to protect stockholders’ rights in the event of an unsolicited takeover attempt. It is not intended to prevent a takeover of the Company on terms that are favorable and fair to all shareholders and will not interfere with a merger approved by the Board of Directors.

The rights will generally become exercisable only if a person or group acquires beneficial ownership of 20% or more of the Company’s common stock in a transaction not approved by the Board and the Board does not redeem the rights within ten business days of such an event. If triggered, the right could entitle the holder to one of the following:


•	To purchase, for the exercise price, a number of common shares having a then current market value of twice the exercise price


•	To purchase, for the exercise price, one-thousandth of a share of preferred stock, or


•	The Board may exchange the rights, in whole or in part, for common shares at an exchange ratio of one to one or for cash or other securities having a value approximately equal to one share

The rights expire on June 18, 2016, if not redeemed earlier.

On June 16, 2015, the Company issued 11,083,333 shares of common stock, par value $0.01 per share at $18.00 per share in an underwritten public offering (the “Offering”). Scorpio Services Holdings Limited and certain of our executive officers purchased an aggregate of 833,333 Common Shares at the public offering price. The company received $190,175 of proceeds from the issuance.

On June 23, 2015, underwriters exercised their option to purchase an additional 1,662,500 additional common shares in connection with the Offering. The sale of these common shares resulted in net proceeds to the Company of approximately $28,429 , after deducting underwriters’ discounts and commissions.

During 2015, the Company issued a total of 111,725 shares to SSH pursuant to the Administrative Services Agreement relating to the delivery of 28 vessels and the sale of 20 vessels. The aggregate value of these shares was $2,380 .

Effective December 31, 2015, the Company’s Board of Directors (the "Board") determined to effect a one-for-twelve reverse stock split of the Company's common shares, par value $0.01 per share, and a reduction in the total number of authorized common shares to 56,250,000 shares. The Company's shareholders approved the reverse stock split and change in authorized common shares at the Company's special meeting of shareholders held on December 23, 2015. This will reduce the number of outstanding common shares from 344,239,098 shares to 28,686,561 shares. On December 17, 2015, the Company received notice from the NYSE that the Company was no longer in compliance with the NYSE's continued listing standards because the average closing share price of its common shares over a consecutive 30 trading-day period ending December 15, 2015 fell below the requirement to be at least $1.00 per share. The purpose of the reverse stock split was to increase the market price of the Company's common shares. The Company believes that the increased market price for its common shares that is expected as a result of implementing the reverse stock split will cure this deficiency.

As of December 31, 2015 we had:


•	28,686,561 common shares outstanding, the $0.01 par value of which is recorded as common stock of $287 .


•	Paid-in capital of $1,567,905 which substantially represents the excess of net proceeds from common stock issuances over the par value as well as the amount of cumulative restricted stock amortization.


10.	Equity Incentive Plan

The Scorpio Bulkers Inc. 2013 Equity Incentive Plan (the “Plan”) was approved by the Company’s Board and became effective on September 30, 2013 and was last amended effective on May 26, 2015, and September 15, 2015. Adjustments may be made to outstanding awards in the event of a corporate transaction or change in capitalization or other extraordinary event. In the event of a “change in control” (as defined in the plan), unless otherwise provided by the plan administrator in an award agreement, awards then outstanding will become fully vested and exercisable in full. Our Board may amend or terminate the plan and may amend outstanding awards, provided that no such amendment or termination may be made that would materially impair any rights, or materially increase any obligations, of a grantee under an outstanding award. Shareholder approval of plan amendments will be required under certain circumstances. As of December 31, 2015 we reserved a total of 1,480,748 common shares, for issuance under the Plan, subject to adjustment for changes in capitalization as provided in the Plan. Our Plan is administered by our

F- 21

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

Compensation Committee. The Plan will remain in effect until the tenth anniversary of the date on which the Plan was adopted by the Board, unless terminated, or extended by the Board. After this date, no further awards shall be granted pursuant to the Plan, but previously granted awards will remain outstanding in accordance with their applicable terms and conditions.

Under the Plan, the Company is permitted to grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and unrestricted common shares.

Under the terms of the Plan, stock options and stock appreciation rights granted under the Plan will have an exercise price equal to the fair market value of a common share on the date of grant, unless otherwise determined by the plan administrator, but in no event will the exercise price be less than the fair market value of a common share on the date of grant. Options and stock appreciation rights will be exercisable at times and under conditions as determined by the plan administrator, but in no event will they be exercisable later than ten years from the date of grant. The Company did not grant any option awards or stock appreciation rights under the Plan during the two years ended December 31, 2015 or during the period from March 20, 2013 (date of inception) to December 31, 2013.

The plan administrator may grant shares of restricted stock and awards of restricted stock units subject to vesting, forfeiture and other terms and conditions as determined by the plan administrator. Generally, restricted stock granted under the Plan vests in one of the following manners: (a) annually in three equal installments, if the independent director has continued to serve on the board of directors from the grant date to the applicable vesting date or (b) serial vest on each of the second, third and fourth anniversaries of the date of grant so long as the award recipient is employed on such date. The Company recognizes share-based compensation expense (see Note 1, Summary of Significant Accounting Polices ) over this three-year period or four-year period, as applicable.

The company recorded share-based compensation expense of $24,599 , $23,869 and $3,359 for the years ended December 31, 2015 and 2014 and for the period from March 20, 2013 (date of inception) to December 31, 2013, respectively, related to restricted stock awards.

A summary of activity for restricted stock awards during the years ended December 31, 2015 and 2014 and for the period from March 20, 2013 (date of inception) to December 31, 2015:



	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding and nonvested, March 20, 2013	—		$	—
Granted	405,156		115.97
Vested	—		—
Outstanding and nonvested, December 31, 2013	405,156		115.97
Granted	179,014		111.71
Vested	(2,499	)	116.40
Outstanding and nonvested, December 31, 2014	581,671		114.66
Granted	804,035		20.03
Vested	(137,543	)	115.90
Outstanding and nonvested, December 31, 2015	1,248,163		$	53.56

As of December 31, 2015 , unrecognized compensation cost of $31,262 relating to unvested restricted stock will be recognized over the weighted average period of 1.06 years During 2015, restricted stock with a fair value of approximately $2,249 vested. No awards were forfeited or canceled during 2015.

F- 22

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)


11.	Debt

The Company’s long-term debt consists of Senior Notes and bank loans, summarized as follows:



	As of December 31,
	2015			2014

Senior Notes	$	73,625		$	73,625

Bank Loans:
$39.6 Million Credit Facility	$	30,754		$	33,550
$409 Million Credit Facility	94,473			—
$330 Million Credit Facility	173,950			—
$42 Million Credit Facility	36,588			—
$67.5 Million Credit Facility	29,666			—
$411.3 Million Credit Facility	83,261			—
$12.5 Million Credit Facility	11,750			—
	460,442			33,550
Less: Current portion	(110,226		)	(3,300		)
	$	350,216		$	30,250

The future principal repayments under the Company’s long-term debt over the next five years on our Senior Notes and the seven credit facilities for which we had balances as of December 31, 2015 is as follows:



	2016		2017		2018		2019		2020			Thereafter		Total
Senior Notes	$	—	$	—	$	—	$	73,625	$	—		$	—	$	73,625
$39.6 Million Credit Facility	2,796		1,915		1,915		24,128		—			—		30,754
$409 Million Credit Facility	6,102		6,370		6,370		6,370		69,261			—		94,473
$330 Million Credit Facility	14,913		14,913		14,913		14,913		14,913			99,385		173,950
$42 Million Credit Facility	2,566		2,567		2,567		2,567		2,567			23,754		36,588
$411.3 Million Credit Facility	83,261		—		—		—		—			—		83,261
$67.5 Million Credit Facility	—		2,284		2,284		2,284		2,284		—	20,530		29,666
$12.5 Million Credit Facility	588		783		783		783		8,813			—		11,750
Total	$	110,226	$	28,832	$	28,832	$	124,670	$	97,838		$	143,669	$	534,067

Unsecured Senior Notes

On September 22, 2014, the Company issued $65,000 in aggregate principal amount of 7.5% Senior Notes due September 2019 (the “Senior Notes”) and on October 16, 2014 the Company issued an additional $8,625 aggregate principal amount of Senior Notes when the underwriters partially exercised their option to purchase additional Senior Notes on the same terms and conditions.

All terms mentioned are defined in the indenture.

The Senior Notes will mature on September 15, 2019 and bear interest at a rate of 7.5% per year, payable quarterly on each March 15, June 15, September 15 and December 15, commencing on December 15, 2014. The Senior Notes are redeemable at the Company’s option in whole or in part, at any time on or after September 15, 2016 at a redemption price equal to 100% of the principal amount to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

F- 23

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

The Senior Notes are our senior unsecured obligations and rank equally with all of our existing and future senior unsecured and unsubordinated debt and are effectively subordinated to our existing and future secured debt, to the extent of the value of the assets securing such debt, and will be structurally subordinated to all existing and future debt and other liabilities of our subsidiaries. No sinking fund is provided for the Senior Notes. The Senior Notes were issued in minimum denominations of $25.00 and integral multiples of $25.00 in excess thereof and are listed on the New York Stock Exchange under the symbol “SLTB.”The Senior Notes require us to comply with certain covenants, including financial covenants; restrictions on consolidations, mergers or sales of assets and prohibitions on paying dividends or returning capital to equity holders if a covenant breach or an event of default has occurred or would occur as a result of such payment. If the Company undergoes a change of control, holders may require us to repurchase for cash all or any portion of their notes at a change of control repurchase price equal to 101% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the change of control purchase date.

The financial covenants include:


•	Net borrowings shall not equal or exceed 70% of total assets.


•	Net worth shall always exceed $500,000 .

The outstanding balance at December 31, 2015 was $73,625 , which is classified as long-term, and we were in compliance with the financial covenants relating to the Senior Notes as of that date.

Secured Credit Facilities

As of December 31, 2015 , the Company had eight credit agreements in place, which are collateralized by certain of the Company’s vessels.

On June 27, 2014, the Company signed a $39,600 loan agreement (the “ $39.6 Million Credit Facility”) which was used to finance a portion of the market value of two Kamsarmax vessels which have been delivered to the Company as of December 31, 2014. The Company was permitted to draw down in two tranches of $19,800 , one for each vessel, against which the Company drew down an aggregate of $33,550 in November 2014. The remaining $6,050 was no longer available to be drawn down upon. This facility, which is secured by those two Kamsarmax vessels with an aggregate carrying value of $64,319 as of December 31, 2015 , bears interest at LIBOR plus a margin of 2.925% per annum, bore a commitment fee of 1.17% per annum through November 2014 on the undrawn portion of the facility, and matures on June 27, 2019 . Quarterly principal repayments for each tranche are $349 for the first eight installments and $239 thereafter with the balance due at maturity. As of December 31, 2015 and 2014, principal amounts outstanding under this facility were $30,754 and $33,550 , respectively.

On July 29, 2014, the Company signed a $330,000 loan agreement (the “$330 Million Credit Facility”) which was subsequently reduced by $15,000 due to the sale of one Ultramax vessel, for which the Company wrote off $460 of deferred financing costs associated with the portion of credit facility that was no longer available. The proceeds of this facility will be used to finance a portion of the contract price of 15 Ultramax and six Kamsarmax vessels. During the year ended December 31, 2015 , the Company drew down $178,950 relating to ten Ultramax vessels and two Kamsarmax vessels delivered to us as of December 31, 2015 . These 12 vessels have an aggregate carrying value of $352,388 as of December 31, 2015 . The remaining nine vessels are under construction and scheduled for delivery in 2016 and 2017. This facility, which is secured by those vessels, bears interest at LIBOR plus a margin of 2.925% per annum, bears a commitment fee of 1.17% per annum on the undrawn portion of the facility, and matures on July 29, 2021 .

The Company may draw down 21 tranches of up to $15,000 , one for each vessel. For each tranche, repayment is to be made in quarterly installments with the balance due on the maturity date. For each tranche, repayment is to be made in quarterly installments of $313 if the full $15,000 relating to the tranche is drawn, with the balance due on the maturity date. As of December 31, 2015 , principal amount outstanding under this facility was $173,950 .

On July 30, 2014, the Company signed a loan agreement for up to $67,500 (the “ $67.5 Million Credit Facility”) which will be used to finance a portion of the contract price of two Ultramax vessels and two Kamsarmax vessels, of which two Kamsarmax have been delivered as of December 31, 2015 , which have an aggregate carrying value of $61,205 as of December 31, 2015 , and the remaining two vessels currently under construction are scheduled for delivery in 2016. This facility, which is secured by those vessels, bears interest at LIBOR plus a margin of 2.95% per annum, bears a commitment fee of 1.25% per annum on the undrawn portion of the facility, and each tranche matures on the earlier of seven years from its drawdown or December 31, 2023.

F- 24

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

Under the $67.5 Million Credit Facility, the Company may draw down tranches of up to $16,350 for each of the two Ultramax vessels and up to $17,400 for each of the two Kamsarmax vessels. For each tranche, repayment is to be made in quarterly installments with the balance due on the maturity date. For the Ultramax tranches, if the full amount of the tranche is drawn, installments are made in 28 quarterly payments of $292 with a balloon installment of $8,174 due with the 28th installment. For the Kamsarmax tranches, if the full amount of the tranche is drawn, installments are made in 28 quarterly payments of $311 with a balloon installment of $8,692 due with the 28th installment. Pursuant to an amendment to this credit facility in September 2015, the amount drawn down is reduced by any quarterly installments that would have been paid through December 31, 2016 and the quarterly payments would not begin until 2017. In October 2015, the Company drew down $29,666 relating to the two Kamsarmax tranches. As of December 31, 2015 , principal amount outstanding under this facility was $29,666 .

On December 30, 2014, the Company signed a $408,976 senior secured loan facility with two leading European financial institutions (the “ $409 Million Credit Facility”). This credit facility was subsequently reduced by $73,000 due to the sale of three Capesize vessels that were serving as partial security under the facility, and the addition of one Ultramax vessel to the security package under the facility. Pursuant to these reductions in the commitment of this credit facility, the Company recorded a write off of $2,083 during the year ended December 31, 2015 , representing the portion of accumulated deferred financing costs no longer available, which is included in financing costs in its Consolidated Statements of Operations. The proceeds of this facility are expected to finance a portion of the purchase price of 18 of the vessels in our Newbuilding Program ( seven Ultramax, nine Kamsarmax, and two Capesize vessels, which have been classified as held for sale) of which the Company has drawn down $95,476 on six vessels during 2015 consisting of three Ultramax vessels and two Kamsarmax vessels delivered as of December 31, 2015 and one Kamsarmax vessel was delivered in January 2016. These five vessels and one vessel under construction have an aggregate carrying value of $186,254 as of December 31, 2015 , and the remaining 12 vessels,which includes two vessel construction contracts that are classified as held for sale, are expected to be delivered in 2016. This facility matures on December 30, 2020 and has customary financial and restrictive covenants, and interest at LIBOR plus a margin of 3.00% and has a term of six years . This facility is secured by, among other things, a first preferred mortgage on each of the 18 newbuilding vessels and guaranteed by each of the collateral vessel owning subsidiaries, including two vessel construction contracts that are classified as held for sale. As of December 31, 2015, the available remaining commitment for the remaining 12 vessels is $225,179 . The commitment with respect to the two vessel construction contracts that are classified as held for sale was reduced by $63,037 on January 13, 2016. Therefore, the amount of the commitment that the Company could constructively draw down upon as of December 31, 2015, was $162,142 with respect to the remaining ten vessels which the Company expects to take delivery of during 2016. The Company will record a loss of approximately $2,315 during 2016 which will be included in financing costs in its Consolidated Statements of Operations pursuant to the reduction in this commitment representing the portion that is no longer available.

As of December 31, 2015, the outstanding balance of this facility is $94,473 .

On January 15, 2015, the Company signed a loan agreement for up to $411,264 (the “$411.3 Million Credit Facility”), which was subsequently reduced on March 26, 2015 by $171,000 to $240,264 due to the removal from financing under this facility of five Capesize newbuilding vessels that the Company had agreed to convert into product tankers. This facility was further reduced by approximately $136,000 pursuant to the sale of four Capesize vessel contracts. Pursuant to these reductions in the commitment of this credit facility, the Company recorded a write off of $7,713 during the year ended December 31, 2015, representing the portion of accumulated deferred financing costs no longer available, which is included in financing costs in its Consolidated Statements of Operations. After giving effect to these reductions, the proceeds of $84,225 were used to finance a portion of the contract price of three Capesize vessels, all of which have been delivered as of December 31, 2015 . This facility is secured by, among other things, a first preferred mortgage on the three Capesize vessels and guaranteed by each of the collateral vessel owning subsidiaries. Portions of this facility bear interest at LIBOR plus an applicable margin of between 1.90% and 2.95% and a portion has a fixed coupon of 6.25% . This facility matures six years from the delivery of the final vessel securing the facility, and in certain circumstances, the facility matures 12 years after the delivery of each financed vessel. As of December 31, 2015, the outstanding balance of this facility was $83,261 , respectively. Because the three Capesize vessels collateralizing the facility have been classified as held for sale as of December 31, 2015, having an aggregate carrying value of $92,975 this loan was fully repaid in January 2016 and the vessels were sold.

On January 30, 2015, the Company signed a loan agreement for up to $42,000 (the “$42 Million Credit Facility”) which were used to finance a portion of the contract price of two Kamsarmax vessels which were delivered in to the Company in 2015. The facility may be drawn in two tranches of up to $21,000 , with quarterly payments of $355 per tranche if the tranche is fully drawn and a balloon payment of $12,132 payable at the maturity date. Each tranche has a maturity of six years from the date of the respective vessel delivery from the yard. This facility bears interest at LIBOR plus a margin of 2.80% . This facility is secured by, among other things, a first preferred mortgage on the two Kamsarmax newbuilding vessels and guaranteed by each of the collateral vessel owning subsidiaries. During the year ended December 31, 2015, the Company drew down $37,995 on this facility upon

F- 25

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

delivery of the two vessels, which have an aggregate carrying value of $69,158 as of December 31, 2015. As of December 31, 2015, the outstanding balance of this facility are $36,588 .

On December 22, 2015, the Company signed a loan agreement for up to $12,500 (the “$12.5 Million Credit Facility”) which was used to finance a portion of the purchase price of one Ultramax vessel which was delivered to the Company in 2015. The facility may be drawn in a single tranche of up to $12,500 , with quarterly payments of one-sixtieth of the advance commencing on the last day of the quarter following the quarter in which the advance was drawn and a balloon payment payable at the maturity date which is December 22, 2020 . This facility bears interest at LIBOR plus a margin of 3.00% . This facility is secured by, among other things, a first preferred mortgage on the Ultramax newbuilding vessel and guaranteed by the collateral vessel owning subsidiary. In December 2015, the Company drew down $11,750 on this facility. As of December 31, 2015, the Ultramax vessel had a carrying value of $31,976 .

On December 22, 2015, the Company signed a loan agreement for up to $27,250 (the “$27.3 Million Credit Facility”) which will be used to finance a portion of the purchase price of two Ultramax vessels in our Newbuilding Program which are expected to be delivered during the first quarter of 2016. The facility may be drawn in two tranches of up to 50% of the fair value of each vessel, with 20 quarterly payments, assuming the full amount of the commitment is drawn, of $213 per tranche and a balloon payment of $9,365 per tranche payable at the maturity date. Each tranche has a maturity of five years from the drawdown date. This facility bears interest at LIBOR plus a margin of 2.95% . This facility is secured by, among other things, a first preferred mortgage on the two Ultramax newbuilding vessels and guaranteed by each of the collateral vessel owning subsidiaries.

Each of these eight credit agreements, as amended through December 31, 2015, has financial covenants with which we must comply (based on terms defined in the credit agreements), the most stringent by facility are as follows:


•	The ratio of net debt to total capitalization no greater than 0.60 to 1.00 .


•	Consolidated tangible net worth no less than $500,000 plus (i) 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after December 31, 2013 and (ii) 50% of the value of any new equity issues occurring on or after December 31, 2013.


•	The ratio of EBITDA to net interest expense calculated on a trailing four quarter basis of greater than 1.00 to 1.00 from the quarter ending March 31, 2017 until and including the quarter ending December 31, 2017, calculated on a year to date basis from January 1, 2017 and 2.50 to 1.00 for each quarter thereafter, calculated on a trailing quarter basis.


•	Minimum liquidity of not less than the greater of $50,000 or $850 per owned vessel.


•	Maintain a minimum fair value of the collateral for each credit facility, such that the aggregate fair value of the vessels collateralizing the credit facility be between 140% and 150% through December 31, 2017 and thereafter between 130% to 145% , depending on the credit facility, of the aggregate principal amount outstanding under such credit facility.

In addition to the credit agreements described above, which are in effect as of December 31, 2015, the Company entered into the following credit agreements which originated and either expired or were terminated during the year ended December 31, 2015:

On February 27, 2015, the Company signed a loan agreement for up to $26,000 (the “$26 Million Credit Facility”) with ABN AMRO Bank N.V., the Netherlands. The proceeds of this facility were used to finance a portion of the purchase price of one Capesize vessel, which was delivered to us during the first quarter of 2015. This facility, as amended, matured on October 30, 2015 and was repaid on that date. This facility bore interest at LIBOR plus an initial margin of 2.00% with monthly step ups of 0.25% until a margin of 3.25% is reached. This facility was secured by, among other things, a first preferred mortgage on the Capesize newbuilding vessel and a parent company guarantee.

On March 2, 2015, the Company signed a loan agreement for up to $19,800 (the “$19.8 Million Credit Facility”). The facility was arranged by ABN AMRO Bank N.V., the Netherlands, with insurance cover provided from Sinosure. The proceeds of this facility were expected to be used to finance a portion of the purchase price of one Kamsarmax vessel under construction at Tsuneishi with expected delivery during the first quarter of 2016. The facility was to mature ten years from the date of delivery of the vessel and was to bear interest at LIBOR plus a margin of 2.50% . This facility was to be secured by, among other things, a first priority mortgage on one Kamsarmax newbuilding vessel and a parent company guarantee. Pursuant to the sale of this Kamsarmax vessel, this credit facility was canceled in April 2015. Pursuant to this, the Company recorded a write off of $344 during the year ended December 31, 2015, representing the accumulated deferred financing costs incurred, which is included in financing costs in its Consolidated Statements of Operations.

F- 26

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

On October 12, 2015, the Company signed a loan agreement of up to $76,500 (the “$76.5 Million Credit Facility”) which was to be used to finance a portion of the purchase price of three Capesize vessels delivered during 2015 (including the vessel relating to the $26 Million Credit Facility). The terms and conditions of this facility, including covenants, were similar to those in the Company's existing credit facilities and customary for financings of this type. During November 2015, the Company drew down $25,500 relating to the delivery of one of the vessels. Pursuant to the three vessels collateralizing this facility being classified as held-for-sale in November 2015, this facility was canceled in December 2015 and the $25,500 was repaid. Pursuant to this, the Company recorded a write off of $1,254 during the year ended December 31, 2015, representing the accumulated deferred financing costs incurred, which is included in financing costs in its Consolidated Statements of Operations.

Our credit facilities discussed above have, among other things, the following restrictive covenants which would restrict our ability to:


•	incur additional indebtedness;


•	sell the collateral vessel, if applicable;


•	make additional investments or acquisitions;


•	pay dividends; and


•	effect a change of control of us.

In addition, our credit facilities contain customary events of default, including cross-default provisions. As of December 31, 2015 , we are in compliance with the financial covenants of each of our eight credit facilities.

Interest rates on all of the Company’s secured credit facilities during the year ended December 31, 2015 ranged from 2.17% to 6.25% . The Company records its interest expense, all of which was capitalized until the fourth quarter of 2015, as a component of Financial expense, net on its consolidated statement of operations. For the years ended December 31, 2015 and 2014 and for the period from March 20, 2013 (date of inception) to December 31, 2013, Financial expense, net consists of:



	Year ended December 31,				Period from March 20, 2013 (date of inception) to December 31,
	2015		2014		2013
Interest expense	$	998	$	—	$	—
Amortization of deferred financing costs	1,988		150		—
Write off	16,085		—		—
other, net	453		22		8
	$	19,524	$	172	$	8

F- 27

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

A summary of our outstanding balances and amounts available under our credit facilities as of December 31, 2015 is as follows:



	As of December 31, 2015
	Amount outstanding		Amount available
$39.6 Million Credit Facility	$	30,754	$	—
$409 Million Credit Facility	94,473		162,141
$330 Million Credit Facility	173,950		135,000
$42 Million Credit Facility	36,588		—
$67.5 Million Credit Facility	29,666		32,700
$411.3 Million Credit Facility	83,261		—
$12.5 Million Credit Facility	11,750		—
$27.3 Million Credit Facility	—		27,250
Total available	$	460,442	$	357,091

The above table excludes $63,037 of commitments available on December 31, 2015 on the $409 Million Credit Facility relating to two vessels under construction that had been classified as held for sale for which the commitment was formally reduced on January 13, 2016.


12.	Fair value of financial instruments

The carrying amount and fair value of financial instruments at December 31, 2015 and 2014 were as follows:



As of December 31, 2015	2015				2014
	Carrying value		Fair Value		Carrying value		Fair Value
Financial assets:
Cash and cash equivalents	$	200,300	$	200,300	$	272,673	$	272,673

Financial liabilities:
Bank loans	460,442		460,442		33,550		33,550
Senior Notes	73,625		36,813		73,625		57,133

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, various methods are used including market, income and cost approaches. Based on these approaches, certain assumptions that market participants would use in pricing the asset or liability are used, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable firm inputs. Valuation techniques that are used maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, fair value measured financial instruments are categorized according to the fair value hierarchy prescribed by ASC 820, Fair Value Measurements and Disclosures . The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:


•	Level 1: Fair value measurements using unadjusted quoted market prices in active markets for identical, unrestricted assets or liabilities.


•	Level 2: Fair value measurements using correlation with (directly or indirectly) observable market-based inputs, unobservable inputs that are corroborated by market data, or quoted prices in markets that are not active.


•	Level 3: Fair value measurements using inputs that are significant and not readily observable in the market.

F- 28

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

insignificant risk of changes in value. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments.

The Senior Notes are publicly traded on the New York Stock Exchange and are considered a level 1 item.

Certain of the Company’s assets and liabilities are carried at contracted amounts that approximate fair value. Assets and liabilities that are recorded at contracted amounts approximating fair value consist primarily of balances with related parties, prepaid expenses and other current assets, accounts payable and accrued expenses.

The Company believes the carrying amounts of its bank loans at December 31, 2015 and 2014 approximate fair value because the interest rates on these instruments change with, or approximate, market interest rates.

Certain items are measured at fair value on a non-recurring basis. The table below details the portion of those items that were re-measured at fair value during 2015 and the resultant loss recorded:



	Fair Value Using
Year ended December 31, 2015	Total		Level 1		Level 2		Level 3		Total Losses
Assets held for sale	$	338,048	$	—	$	—	$	338,048	$	418,521
Total	$	338,048	$	—	$	—	$	338,048	$	418,521



	Fair Value Using
Year ended December 31, 2014	Total		Level 1		Level 2		Level 3		Total Losses
Assets held for sale	$	43,781	$	—	$	—	$	43,781	$	55,487
Total	$	43,781	$	—	$	—	$	43,781	$	55,487

Assets Held for Sale

The fair value of assets held for sale (see Note 6) was determined based on the selling price, net of estimated costs to sell, of such assets based on negotiated contracts, and are considered to be Level 3 items. During 2015, assets held for sale with a carrying value of $756,569 were written down to its implied fair value of $338,048 , resulting in a charge of $418,521 . During 2014, assets held for sale with a carrying value of $99,268 were written down to its implied fair value of $43,781 , resulting in a charge of $55,487 . An additional $4,415 loss was recorded in 2015 related to those contracts classified as held for sale for additional costs and adjustments to estimates.


13.	Related Party Transactions

Our Co-Founder, Chairman and Chief Executive Officer, Mr. Emanuele Lauro, is a member of the Lolli-Ghetti family, which in 2009 founded Scorpio Tankers Inc. (NYSE: “STNG”), or Scorpio Tankers, a large international shipping company engaged in seaborne transportation of refined petroleum products, of which Mr. Lauro is currently the Chairman and Chief Executive Officer. The Lolli-Ghetti family also owns and controls the Scorpio Group, which includes Scorpio Ship Management S.A.M., or SSM, which provides us with vessel technical management services, Scorpio Commercial Management S.A.M., or SCM, which provides us with vessel commercial management services, Scorpio Services Holding Limited, or SSH, which provides us and other related entities with administrative services and services related to the acquisition of vessels and Scorpio UK Limited, or SUK which provides us with chartering services. Our Co-Founder, President and Director, Mr. Robert Bugbee is also the President and a Director of Scorpio Tankers, and has a senior management position at the Scorpio Group. SSM and SCM also provide technical and commercial management services to Scorpio Tankers as well as unaffiliated vessel owners.

We entered into an Administrative Services Agreement with SSH, a party related to us, for the provision of administrative staff, office space and accounting, legal compliance, financial and information technology services. SSH also arranges vessel sales and purchases for us. The services provided to us by SSH may be sub-contracted to other entities within the Scorpio Group. We incur costs to SSH which will increase as the vessels in our Newbuilding Program are delivered to us.

Pursuant to the Administrative Services Agreement, we reimburse SSH for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. We also pay SSH a fee for arranging vessel acquisitions, including

F- 29

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

newbuildings, payable in shares of our common stock. The number of shares to be issued was 2,604 shares for each of the first 17 vessels ordered under our Newbuilding Program. For the remaining newbuildings ordered, the number of shares for each vessel ordered was determined by dividing $250,000 by the market value of our common shares based on the volume weighted average price of our common shares over the 30 trading day period immediately preceding the contract date of a definitive agreement to acquire any vessel. For the vessels in our Newbuilding Program, an aggregate of 180,716 shares will be issued to SSH, ranging from 2,124 shares to 2,604 shares for each vessel. These shares will be issued to SSH upon the delivery of each vessel (or, in the case of a vessel disposal prior to delivery at the time such disposal completes). Of this total, we issued 68,454 shares of our common stock to SSH for the 28 vessels delivered during the year ended December 31, 2015 and 4,366 shares of our common stock to SSH for the two vessels delivered to us in 2014. During the year ended December 31, 2015 we issued 43,271 shares of our common shares to SSH for 20 vessels for which the sale was completed. We will deliver 53,906 shares upon delivery of 24 vessels currently under construction and 10,719 shares upon completion of the sale of the remaining five vessels under construction currently classified as held for sale. In addition, SSH has agreed with us not to own any drybulk carriers greater than 30,000 dwt for so long as the Administrative Services Agreement is in full force and effect. This agreement may be terminated by SSH after the third anniversary of our initial public offering upon 12 months ’ notice or by us with 24 months ’ notice.

During July 2013, we issued and sold 104,167 common shares to SSH for $10,000 as part of a series of Norwegian private equity offerings exempt from registration under the Securities Act. These common shares were subject to a contractual lock-up until July 2014. During November 2014, we issued and sold 333,333 shares to SSH for $15,000 as part of a private placement transaction.

During June 2015, we issued and sold 833,333 shares to SSH for $15,000 as part of a public offering.

Our vessels are commercially managed by SCM and technically managed by SSM pursuant to a Master Agreement, which may be terminated by either party upon 24 months ’ notice. We expect that additional vessels that we may acquire in the future will also be managed under the Master Agreement or on substantially similar terms.

SCM’s services include securing employment for our vessels in the spot market and on time charters. SCM also manages the Scorpio Group Pools (spot market-oriented vessel pools) which include Scorpio Ultramax Pool, the Scorpio Kamsarmax Pool and the Scorpio Capesize Pool in which our owned and time chartered-in vessels are employed.

Transactions with entities controlled by the Lolli-Ghetti family and with Scorpio Tankers (herein referred to as related party affiliates) in the Consolidated Statement of Operations and Consolidated Balance Sheet are as follows:

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SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

For the years ended December 31, 2015 and 2014, we had the following balances with related parties, which have been included in the consolidated statement of operations (tabular amounts in thousands of U.S. dollars). We had no such balances for the period from March 20, 2013 (date of inception) to December 31, 2013.



	Year ended December 31,
	2015		2014
Vessel revenue
Scorpio Kamsarmax Pool ⁽¹⁾	$	25,151	$	34,986
Scorpio Ultramax Pool ⁽¹⁾	26,338		10,196
Scorpio Capesize Pool ⁽¹⁾	4,857		—
SCM ⁽²⁾	718		31
Total vessel revenue	$	57,064	$	45,213
Voyage expense:
SCM ⁽²⁾	$	664	$	148
Vessel operating cost:
SSM ⁽³⁾	$	2,765	$	122
General and administrative expense:
SCM ⁽²⁾	$	258	$	—
SSM ⁽³⁾	—		51
SSH ⁽⁴⁾	1,265		56
SUK ⁽⁵⁾	486		717
Total general and administrative expense	$	2,009	$	824
Write down on assets held for sale
SCM ⁽²⁾	$	12,465	$	—
SSM ⁽³⁾	13,000		—
Total write down on assets held for sale	$	25,465	$	—

F- 31

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

At December 31, 2015 and December 31, 2014 , we had the following balances with related parties, which have been included in the Consolidated Balance Sheet:



	As of December 31,
	2015			2014
Assets
Due from related parties-current:
Scorpio Kamsarmax Pool ⁽¹⁾	$	3,376		$	8,482
Scorpio Ultramax Pool ⁽¹⁾	2,129			2,460
Scorpio Capesize Pool ⁽¹⁾	2,268			—
SCM ⁽²⁾	424			—
SSM ⁽³⁾	—			154
Scorpio Tankers ⁽⁶⁾	—			31,277
Total due from related parties-current	$	8,197		$	42,373
Due from related parties non-current:
Scorpio Kamsarmax Pool ⁽¹⁾	$	4,868		$	3,272
Scorpio Ultramax Pool ⁽¹⁾	7,657			2,033
Total due from related parties non-current	$	12,525		$	5,305
Liabilities
Due to related parties-current :
SCM ⁽²⁾	$	3,415		$	—
SSM ⁽³⁾	4,274			1,131
SSH ⁽⁴⁾	—			56
SUK ⁽⁵⁾	—			44
Less balances due to SCM and SSM included in assets held for sale	(7,065		)	—
Total due from related parties-current	$	624		$	1,231

(1)

(2)

F- 32

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

dividends paid on the Company’s share capital, at which time the commission will revert to 1.75% . The Scorpio Ultramax Pool, the Scorpio Kamsarmax Pool and the Scorpio Capesize Pool participants, including us and third-party owners of similar vessels, pay SCM a pool management fee of $300 per vessel per day, plus a 1.75% commission on the gross revenues per charter fixture. For the year ended December 31, 2015 and 2014, the Company recorded vessel revenue of $718 and $100 , respectively, pursuant to the decrease in commissions we were obligated to pay SCM pursuant to an agreement effective November 20, 2014 which reduced SCM’s commission on gross freight from 1.75% to 1.00% . Also, for the year ended December 31, 2014, the Company incurred $69 of commissions on the gross revenue of certain vessels time chartered-in for which their initial voyage took place before being admitted to the Scorpio Group Pools.

(3)


(4)	We incur a fee to SSH for each owned vessel aggregating $1,265 and $56 for the years ended December 31, 2015 and 2014, respectively, which reflects direct and indirect expenses incurred by SSH in providing us with administrative services, which is included in general and administrative expenses. At December 31, 2014, $56 of the fee incurred to SSH was unpaid.


(5)	For the year ended December 31, 2015 and 2014, SUK charged us $486 and $717 , respectively, for allocated salaries of certain SUK employees relating to the services such employees performed for the Company, of which $44 was unpaid at December 31, 2014 .

(6)

F- 33

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)


14.	Segments

The Company is organized by vessel type into three operating segments through which the Company’s chief operating decision maker manages the Company’s business. The Capesize, Kamsarmax and Ultramax Operations segments provide the following:


•	Capesize - includes vessels of approximately 180,000 DWT


•	Kamsarmax - includes vessels ranging from approximately 77,500 DWT to 98,700 DWT


•	Ultramax - includes vessels ranging from approximately 48,500 DWT to 64,000 DWT

Although each vessel within its respective class qualifies as an operating segment under U.S. GAAP, each vessel also exhibits similar long-term financial performance and similar economic characteristics to the other vessels within the respective vessel class, thereby meeting the aggregation criteria in U.S. GAAP. We have therefore chosen to present our segment information by vessel class using the aggregated information from the individual vessels.

The Company’s vessels regularly move between countries in international waters, over dozens of trade routes and, as a result, the disclosure of financial information about geographic areas is impracticable.

Certain of the corporate general and administrative expenses incurred by the Company are not attributable to any specific segment. Accordingly, these costs are not allocated to any of the Company’s segments and are included in the results below as “Corporate”.

The following schedule presents segment information about the Company’s operations for the years ended December 31, 2015 and 2014 and for the period from March 20, 2013 (date of inception) to December 31, 2013.



December 31, 2015	Capesize			Kamsarmax			Ultramax			Corporate			Total
Vessel revenue	$	9,038		$	26,712		$	26,771		$	—		$	62,521
Voyage expenses	(280		)	(331		)	(176		)	—			(787		)
Vessel operating cost	(5,089		)	(9,986		)	(14,297		)	—			(29,372		)
Charterhire expense	—			(29,509		)	(21,880		)				(51,389		)
Vessel depreciation	(3,623		)	(4,536		)	(6,104		)	—			(14,263		)
General and administrative expenses	(275		)	(498		)	(713		)	(33,896		)	(35,382		)
Loss / write down on assets held for sale	(408,318		)	(8,997		)	(5,622		)	—			(422,937		)
Interest income	—			—			4			352			356
Foreign exchange gain	(4		)	(10		)	(27		)	29			(12		)
Financial expense, net	—			—			—			(19,524		)	(19,524		)
Segment loss	$	(408,551	)	$	(27,155	)	$	(22,044	)	$	(53,039	)	$	(510,789	)



December 31, 2014	Capesize			Kamsarmax			Ultramax			Corporate			Total
Vessel revenue	$	—		$	38,770		$	10,217		$	—		$	48,987
Voyage expenses	—			(3,653		)	(74		)	—			(3,727		)
Vessel operating cost	—			(1,600		)	—			—			(1,600		)
Charterhire expense	—			(57,909		)	(15,305		)	—			(73,214		)
Vessel depreciation	—			(686		)	—			—			(686		)
General and administrative expenses	(39		)	(103		)	(26		)	(31,593		)	(31,761		)
Loss / write down on assets held for sale	(52,553		)	(2,934		)	—			—			(55,487		)
Interest income	—			—			—			1,052			1,052
Foreign exchange loss	—			—			—			43			43
Financial expense, net	—			—			—			(172		)	(172		)
Segment loss	$	(52,592	)	$	(28,115	)	$	(5,188	)	$	(30,670	)	$	(116,565	)

A write down on assets held for sale of $585 , that was reflected under Corporate at December 31, 2014 was reallocated to the Capesize segment in 2015.

F- 34

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

General and administrative expenses incurred by the Company during 2013 were not attributable to any specific segment. As such, these costs were not allocated to any of the Company’s segments and are considered Corporate.

Identifiable assets, classified by the segment by which the Company operates, are as follows:



Identifiable assets
	December 31, 2015		December 31, 2014
Held by vessel owning subsidiaries or allocated to segments:
Capesize	$	180,850	$	438,256
Kamsarmax	468,875		236,278
Ultramax	626,304		288,828
Held by parent and other subsidiaries, not allocated to segments:
Cash and cash equivalents	178,103		265,818
Other	31,304		95,025
Total identifiable assets	$	1,485,436	$	1,324,205

F- 35

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)


15.	Unaudited Quarterly Results of Operations

In the opinion of the Company’s management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation have been included on a quarterly basis.



	2015 Quarter Ended
	Mar-31			Jun-30			Sept-30			Dec-31
Revenues	$	12,270		$	12,781		$	15,182		$	22,017
Operating loss	(48,399		)	(135,856		)	(16,255		)	(291,137		)

Net loss	(52,065		)	(138,645		)	(18,052		)	(302,036		)

Net loss per share Basic ⁽²⁾	$	(3.60	)	$	(8.50	)	$	(0.66	)	$	(11.02	)

Net loss per share Diluted ⁽²⁾	$	(3.60	)	$	(8.50	)	$	(0.66	)	$	(11.02	)

Weighted average common shares outstanding- Basic	14,454,515			16,303,064			27,277,307			27,399,103
Weighted average common shares outstanding- Diluted	14,454,515			16,303,064			27,277,307			27,399,103



	2014 Quarter Ended
	Mar-31			Jun-30			Sept-30			Dec-31
Revenues	$	5,467		$	13,180		$	12,608		$	17,732
Operating loss	(11,157		)	(15,289		)	(19,069		)	(71,973		)

Net loss	(10,656		)	(15,002		)	(18,909		)	(71,998		)

Net loss per share Basic ⁽²⁾	$	(0.96	)	$	(1.35	)	$	(1.70	)	$	(5.72	)

Net loss per share Diluted ⁽²⁾	$	(0.96	)	$	(1.35	)	$	(1.70	)	$	(5.72	)

Weighted average common shares outstanding- Basic	11,050,909			11,103,076			11,104,001			12,593,330
Weighted average common shares outstanding- Diluted	11,050,909			11,103,076			11,101,001			12,593,330


(1)	Operating loss and net loss for first, second, third and fourth quarters of 2015 includes a loss / write down on assets held for sale of $31,752 , $119,604 , $324 and $261,793 , respectively. Operating loss and net loss for the fourth quarter of 2014 includes a loss / write down on assets held for sale of $55,487 .


(2)	Amounts may not sum to annual loss because each quarter and year are calculated separately based on basic and diluted weighted-average common shares outstanding during that period.


16.	Subsequent Events

Delivery of vessels from shipyards

During the period from January 1, 2016 to February 29, 2016, we took delivery of the following eight vessels that were under construction as of December 31, 2015 (see Note 5):

F- 36

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)


•	SBI Sousta, a Kamsarmax vessel


•	SBI Rock, a Kamsarmax vessel


•	SBI Achilles, an Ultramax vessel


•	SBI Lambada, a Kamsarmax vessel


•	SBI Hercules, an Ultramax vessel


•	SBI Reggae, a Kamsarmax vessel


•	SBI Perseus, an Ultramax vessel


•	SBI Hermes, an Ultramax vessel

Agreements to delay delivery and modification of shipbuilding contracts

During the period from January 1, 2016 to February 29, 2016, we reached agreements in principle with shipyards to delay the delivery of two Ultramax vessels and six Kamsarmax vessels under construction by approximately six months each. These vessels, previously expected to be delivered between March 2016 and September 2016 are now expected to be delivered between September 2016 and April 2017. Pursuant to these delays, $40,744 that was previously expected to be paid to shipyards during 2016 (see Note 7) is now expected to be paid in 2017.

In February 2016, we reached an agreement with a shipyard in China to reduce the price to be paid under the final installments of the construction contracts in respect to two Ultramax vessels to be delivered in Q2 2016 by $900 in aggregate.

Sale of assets held for sale

During the period from January 1, 2016 to February 29, 2016, we sold the three vessels and four of the vessels under construction that we classified as held for sale as of December 31, 2015 for amounts approximating their carrying values as of December 31, 2015 (see Note 6).

Pursuant to these sales, we repaid $83,261 under our $411.3 Million Credit Facility and have reduced our available commitment under the $409 Million Credit Facility by $63,037 .

Borrowings and repayments under secured credit facilities

During the period from January 1, 2016 to February 29, 2016, we borrowed an aggregate amount of $103,355 under our secured credit facilities.

During the period from January 1, 2016 to February 29, 2016, we repaid an aggregate amount of $105,263 on our secured credit facilities, including the $83,261 repaid upon the sale of three vessels held for sale described above. A summary of our outstanding borrowing under our credit facilities as of December 31, 2015 and February 29, 2016 is as follows:



	As of December 31, 2015		February 29, 2016
	Amount outstanding		Amount outstanding		Amount available
$39.6 Million Credit Facility	$	30,754	$	22,537	$	—
$409 Million Credit Facility	94,473		114,375		115,800
$330 Million Credit Facility	173,950		201,025		105,000
$42 Million Credit Facility	36,588		44,290		—
$67.5 Million Credit Facility	29,666		41,307		16,350
$411.3 Million Credit Facility	83,261		—		—
$12.5 Million Credit Facility	11,750		11,750		—
$27.3 Million Credit Facility	—		23,250		—
Total	$	460,442	$	458,534	$	237,150

F- 37

SCORPIO BULKERS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share, per day and per vessel data)

Credit facility amendments/prepayments

During February 2016, the Company agreed in principle with its lenders to amend all of its credit facilities to reduce the minimum cash liquidity covenant to the greater of $25,000 or $700 per owned vessel. Pursuant to receiving these amendments, the Company will prepay approximately $41,200 of principal installments on outstanding borrowings and certain expected future borrowings under its credit agreements, representing 12 months of installments on those borrowings, and will not be required to make the installment payments on certain of the borrowings that would have been due during the 12 subsequent months approximating $26,700 . This $26,700 will be due upon final maturity of each borrowing. We have made additional prepayments to ensure compliance with certain loan covenants.

Cancellation of four time charter-in contracts

During February 2016, the Company reached agreement with the counterparties of four of its time charter-in agreements to terminate the agreements by March 19, 2016. Pursuant to this agreement, the Company paid $10,000 to the counterparties. These time charter-in agreements, which are above the current market rates, are expected to reduce the Company’s future charterhire payments, inclusive of the $10,000 payment, by $10,302 .

F- 38

Exhibit1.3

Exhibit1.3

Exhibit1.3

Exhibit 2.1

Exhibit 2.1

Exhibit 2.1

Exhibit 4.26

Execution version

$76,500,000 Secured Loan Agreement

Dated 12, October 2015

(1) SBI Puro Shipping Company Limited

SBI Valrico Shipping Company Limited

SBI Maduro Shipping Company Limited

(as Borrowers)

(2) Scorpio Bulkers Inc.
(as Guarantor)

(3) The Financial Institutions
listed in Schedule 1
(as Original Lenders)

(4) ABN AMRO Bank N.V.

The Export-Import Bank of China

(as Arrangers)

(5) ABN AMRO Bank N.V.
(as Agent)

(6) ABN AMRO Bank N.V.

(as Swap Provider)

(7) ABN AMRO Bank N.V.
(as Security Agent)

(8) ABN AMRO Bank N.V., Singapore Branch
(as Sinosure Agent)

Contents

Page

Section 1 Interpretation 3

1 Definitions and Interpretation 3

Section 2 The Loan 26

2 The Loan 26

3 Purpose 26

4 Conditions of Utilisation 26

Section 3 Utilisation 29

5 Advance 29

Section 4 Repayment, Prepayment and Cancellation 31

6 Repayment 31

7 Illegality, Prepayment and Cancellation 31

Section 5 Costs of Utilisation 35

8 Interest 35

9 Interest Periods 35

10 Changes to the Calculation of Interest 36

11 Fees 37

Section 6 Additional Payment Obligations 39

12 Tax Gross Up and Indemnities 39

13 Increased Costs 43

14 Other Indemnities 45

15 Mitigation by the Lenders 47

16 Costs and Expenses 48

Section 7 Security and Application of Moneys 50

17 Security Documents and Application of Moneys 50

18 Guarantee and Indemnity 55

Section 8 Representations, Undertakings and Events of Default 59

19 Representations 59

20 Information Undertakings 64

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21 Financial Covenants 67

22 General Undertakings 70

23 Events of Default 78

Section 9 Changes to Parties 85

24 Changes to the Lenders 85

25 Changes to the Security Parties 90

Section 10 The Finance Parties 91

26 Role of the Agent, the Security Agent, the Sinosure Agent and the Arrangers 91

27 Conduct of Business by the Finance Parties 103

28 Sharing among the Finance Parties 103

29 Sinosure 105

Section 11 Administration 108

30 Payment Mechanics 108

31 Set-Off 112

32 Notices 112

33 Calculations and Certificates 114

34 Partial Invalidity 115

35 Remedies and Waivers 115

36 Amendments and Waivers 115

37 Confidentiality 118

38 Disclosure of Lender Details by Agent 122

39 Counterparts 124

40 Joint and Several Liability 124

Section 12 Governing Law and Enforcement 126

41 Governing Law 126

42 Enforcement 126

43 Patriot Act Notice 127

Schedule 1 The Original Lenders 128

Schedule 2 Part I Conditions Precedent: Initial Conditions Precedent 129

Part II Conditions Precedent: Conditions Precedent to Release 133

Part III Conditions Subsequent 136

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Schedule 3 Drawdown Request 137

Schedule 4 Mandatory Cost Formula 139

Schedule 5 Form of Transfer Certificate 142

Schedule 6 Form of Assignment Agreement 145

Schedule 7 Form of Compliance Certificate 148

LONLIVE\21312160.7

Loan Agreement

Dated 12, October 2015

Between:

SBI Puro Shipping Company Limited (" Borrower A "), SBI Valrico Shipping Company Limited (" Borrower B ") and SBI Maduro Shipping Company Limited (" Borrower C " and together with Borrower A and Borrower B, the " Borrowers " and each a " Borrower "), each a company incorporated under the laws of the Republic of the Marshall Islands, with registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960; and


(1)	Scorpio Bulkers Inc. , a company incorporated under the laws of the Republic of the Marshall Islands, with registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960 (the " Guarantor "); and


(2)	The Financial Institutions listed in Schedule 1 ( The Original Lenders ), each acting through its Facility Office (together the " Original Lenders " and each an " Original Lender "); and


(3)	ABN AMRO Bank N.V. , acting as arranger through its office at Coolsingel 93, 3012 AE Rotterdam, The Netherlands and The Export-Import Bank of China , acting as arranger through its office at No. 30, Fu Xing Men Nei Street, Xicheng District, Beijing 100031, The People's Republic of China (together, and in such capacity, the " Arrangers " and each an " Arranger "); and


(4)	ABN AMRO Bank N.V. , acting as agent through its office at Daalsesingel 71, 3511 SW Utrecht, The Netherlands (in that capacity, the " Agent "); and


(5)	ABN AMRO Bank N.V. , acting as swap provider through its office at Coolsingel 93, 3012 AE Rotterdam, The Netherlands (in that capacity, the " Swap Provider "); and


(6)	ABN AMRO Bank N.V. , acting as security agent through its office at Daalsesingel 71, 3511 SW Utrecht, The Netherlands (in that capacity, the " Security Agent "); and


(7)	ABN AMRO Bank N.V., Singapore Branch , acting as Sinosure agent through its office at One Raffles Quay, South Tower, #26, Singapore 048583 (in that capacity, the " Sinosure Agent ").

Preliminary


(A)	Borrower A is the registered owner of Vessel A and Vessel A is registered under the flag of the Republic of the Marshall Islands and each other Borrower has agreed to purchase the relevant Vessel from the relevant Seller on the terms of the relevant MOA, and each other Borrower intends to register that Vessel under the flag of the Republic of the Marshall Islands.


(B)	Each of the Original Lenders has agreed to advance to the Borrowers on a joint and several basis its Commitment aggregating, with all the other Commitments, up to $76,500,000 to assist the Borrowers to (i) finance part of the purchase price of the Newbuilding Vessels and (ii) refinance the SBI Puro Indebtedness.


(C)	Sinosure has agreed to provide a buyer's credit insurance policy covering up to 90% of the political and commercial risks associated with each Tranche.

It is agreed as follows:

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Section 1	Interpretation


1	Definitions and Interpretation


1.1	Definitions In this Agreement:

" Acceptable Bank " means a bank or financial institution which has a rating for its long-term unsecured and non-credit-enhanced debt obligations of BBB- or higher by Standard & Poor's Rating Services or Fitch Ratings Ltd or Baa3 or higher by Moody's Investors Service Limited or a comparable rating from an internationally recognised credit rating agency.

" Accounts " means the Earnings Accounts and the Retention Accounts and " Account " means any one of them.

" Account Bank " means ABN AMRO Bank N.V., acting through its branch at Coolsingel 93, 3012 AE Rotterdam, The Netherlands or any other bank or financial institution which at any time, with the Security Agent's prior written consent, holds the Account.

" Account Security Deeds " means the account security deeds referred to in Clause 17.1.4 ( Security Documents ) and " Account Security Deed " means any one of them.

" 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 provided that in respect of the Guarantor only an Affiliate of the Guarantor shall only include (i) any Subsidiary of the Guarantor or (ii) any Holding Company of the Guarantor that either (a) directly or indirectly owns more than 20% of any class of the capital stock of the Guarantor or (b) has possession, directly or indirectly, of the power to vote more than 20% of the voting stock of the Guarantor.

" 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 Closing Procedure " means, in respect of each Newbuilding Vessel, a procedure whereby a Tranche may be combined with funds of the relevant Borrower to pay all sums payable by the relevant Borrower to the relevant Seller pursuant to the relevant MOA by being remitted at least four banking days (days excluding Saturday, Sunday, and national holidays and public holidays in Geneva, Shanghai, Tokyo, London, New York, Monaco and The Netherlands) prior to the relevant Delivery Date, to enable the relevant Borrower to credit that sum to the relevant Seller's bank at least three banking days (days excluding Saturday, Sunday, and national holidays and public holidays in Geneva, Shanghai, Tokyo, London, New York, Monaco and The Netherlands) prior to the relevant Delivery Date as required pursuant to the relevant MOA, on the request of the relevant Borrower to a suspense account held with the relevant Seller's bank on the basis of instructions set out in an MT199 SWIFT message providing that such amount is to be held to the order of the Agent and not to be released to the relevant Seller until a named representative of the Agent either signs a release instruction in favour of the relevant Seller or countersigns the protocol of delivery and acceptance for the relevant Vessel as between the relevant Borrower and the relevant Seller, such MT199 SWIFT message to include such other terms as the Agent may require including, without limitation, a return of proceeds provision if the Delivery Date of the relevant Vessel has not occurred within 10 Business Days of the date of the MT199 SWIFT message.

" Approved Pooling Arrangement " means, in relation to a Vessel, the Scorpio Cape Pool and any other pooling arrangement:


(a)	proposed by a Borrower;


(a)	run by any Affiliate of the Commercial Manager; and


(b)	approved in writing by the Agent prior to that Vessel's entry into such pooling arrangement.

LONLIVE\21312160.7 Page 3

" Approved Sub-manager " means Zenith Ship Management, Atlas Maritime Hellespont Ship Management, Astor Shipmanagement, Synergy Marine, C.P. Offen, Optimum Ship Services Ltd and any Affiliates or Subsidiary of the Technical Manager and the Commercial Manager.

" Approved Shipbroker " means each of Arrow Sale and Purchase Limited, Braemar Seascope Limited, Clarkson PLC, Astrup Fearnleys AS, Howe Robinson, Maersk Brokers, Galbraith's Ltd. and Affinity Shipping LLP.

" Assignments " means all the forms of assignment referred to in Clause 17.1.2 ( Security Documents ).

" Assignment Agreement " means an agreement substantially in the form set out in Schedule 6 ( Form of Assignment Agreement ) or any other form agreed between the relevant assignor and assignee.

" Authorisation " means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

" Availability Period " means, in respect of each Tranche, the period from and including the date of this Agreement to and including:


(a)	in relation to each Newbuilding Vessel, the earlier of:


(i)	the date that is three months after the Delivery Date of that Newbuilding Vessel;


(i)	31 December 2016; and


(ii)	one month after the issue of the Sinosure Policy in respect of the relevant Newbuilding Vessel; and


(b)	in relation to Vessel A, one month after the issue of the Sinosure Policy in respect of Vessel A.

" Break Costs " means the amount (if any) by which:


(a)	the interest (excluding the Margin) which a Lender should have received for the period from the date of receipt of all or any part of its participation in 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)	the amount which that 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 Shanghai Waigaoqiao Shipbuilding Co., Ltd., a corporation organised and existing under the laws of the People's Republic of China whose registered office is at 3001 Zhouhai Road, Pudong New District, Shanghai 200137, the People's Republic of China.

" Building Contracts " means the contracts each dated 1 April 2013 entered into by the Builder and in favour of Seller B and Seller C respectively on the terms and subject to the conditions of which the Builder has agreed to construct Vessel B and Vessel C for, and deliver the Vessel B and Vessel C to, the relevant Seller, and " Building Contract " means any one of them.

" Business Day " means a day (other than a Saturday or Sunday) on which banks are open for general business in London, New York, Amsterdam, Singapore and Beijing.

LONLIVE\21312160.7 Page 4

" Capitalized Lease " means, as applied to any person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such person, as lessee, in conformity with US GAAP, is required to be capitalized on the balance sheet of such person and " Capitalized Lease Obligation " is defined to mean the rental obligations, as aforesaid, under a Capitalized Lease.

" Charged Property " means all of the assets of the Security Parties which from time to time are, or are expressed to be, the subject of the Security Documents.

" Charter " means any charter or contract of employment in respect of a Vessel that, inclusive of options, is capable of exceeding 12 months in duration, but excluding:


^(a)	any charter pursuant to an Approved Pooling Arrangement; and


^(b)	any other charter or contract of employment in respect of a Vessel that a Borrower enters into with a company within the Group.

" Code " means the US Internal Revenue Code of 1986.

" Commercial Manager " means Scorpio Commercial Management S.A.M., a company incorporated under the laws of Monaco with its registered office at Le Millenium, 9, Boulevard Charles III, MC-98000 Monaco.

" Commitment " means:


(a)	in relation to an Original Lender, the amount set opposite its name under the heading "Commitment" in Schedule 1 ( The Original Lenders ) and the amount of any other Commitment transferred to it under this Agreement; and


(b)	in relation to any other Lender, the amount of any Commitment transferred to it under this Agreement,

to the extent not cancelled, reduced or transferred by it under this Agreement.

" Commitment Fee " means the commitment fee to be paid by the Borrowers to the Agent under Clause 11.1 ( Commitment Fee ).

" Compliance Certificate " means a certificate substantially in the form set out in Schedule 7 ( Form of Compliance Certificate ) .

" Confidential Information " means all information relating to any Security Party, the Finance Documents or the Loan of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Loan from either:


(a)	any Security Party or any of its advisers; or


(b)	another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any Security Party 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 that Finance Party of Clause 37 ( Confidentiality ); or


(ii)	is identified in writing at the time of delivery as non-confidential by any Security Party or any of its advisers; or

LONLIVE\21312160.7 Page 5

(iii)

is known by that Finance Party before the date the information is disclosed to it in accordance with (a) or (b) or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with any Security Party and which, in either case, as far as that Finance Party 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.

" Confirmation " means a Confirmation exchanged or deemed to be exchanged between the Swap Provider and the Borrowers as contemplated by the Master Agreement.

" Contract Price " means:


(a)	in respect of Vessel A, $56,500,000;


(b)	in respect of Vessel B, $56,500,000; and


(c)	in respect of Vessel C, $56,500,000.

" Credit Support Document " means any document described as such in the Master Agreement and any other document referred to in any such document which has the effect of creating security in favour of any of the Finance Parties.

" Credit Support Provider " means any person (other than a Borrower) described as such in the Master Agreement.

" 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, attorney or co-trustee appointed by the Security Agent.

" Delivery Date " means the date of actual delivery of a Newbuilding Vessel to a Borrower by the relevant Seller under the relevant MOA.

" 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


(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.

LONLIVE\21312160.7 Page 6

" 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.

" Drawdown Date " means the date on which the relevant Tranche is advanced under Clause 5 ( Advance ).

" Drawdown Request " means a notice substantially in the form set out in Schedule 3 ( Drawdown Request ).

" Earnings " means all hires, freights, pool income and other sums payable to or for the account of a Borrower in respect of a Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of a Vessel.

" Earnings Accounts " means the bank accounts to be opened in the name of each Borrower with the Account Bank and each designated an "Earnings Account" and " Earnings Account " means any one of them.

" 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 a Vessel or into or upon the air, sea, land or soils (including the seabed) or surface water of Environmentally Sensitive Material within or from a Vessel; or

(b)

any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, sea, land or soils (including the seabed) or surface water from a vessel other than a Vessel and which involves a collision between a Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection with which a Vessel is actually or potentially liable to be arrested, attached, detained or injuncted and/or a Vessel and/or any Security Party and/or any operator or manager of a 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 a Vessel and in connection with which a Vessel is actually or potentially liable to be arrested and/or where any Security Party and/or any operator or manager of a 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.

LONLIVE\21312160.7 Page 7

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.

" ERISA " means the Employee Retirement Income Security Act of 1974, as amended, and any successor thereto.

" ERISA Affiliate " means each person (and defined in Section 3(9) of ERISA) which together with a Borrower or the Guarantor would be deemed to be a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of the Uniform Commercial Code (as from time to time in effect in any applicable jurisdiction).

" Event of Default " means any event or circumstance specified as such in Clause 23 ( Events of Default ).

" Facility Office " means the office or offices notified by a Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days' written notice) as the office or offices through which it will perform its obligations under this Agreement.

" Facility Period " means the period beginning on the date of this Agreement and ending on the date when the whole of the Indebtedness has been paid in full and the Security Parties have ceased to be under any further actual or contingent liability to the Finance Parties under or in connection with the Finance Documents.

" 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 (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 Application Date " means:


(a)	in relation to a "withholdable payment" described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014;


(b)	in relation to a "withholdable payment" described in section 1473(1)(A)(ii) of the Code (which relates to "gross proceeds" from the disposition of property of a type that can produce interest from sources within the US), 1 January 2017; or


(c)	in relation to a "passthru payment" described in section 1471(d)(7) of the Code not falling within (a) or (b), 1 January 2017,

or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement.

" 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.

LONLIVE\21312160.7 Page 8

" Fee Letter " means any letter or letters dated on or about the date of this Agreement between the Arrangers, the Borrowers and the Guarantor (or the Agent, the Borrowers and the Guarantor or the Security Agent, the Borrowers and the Guarantor) setting out any of the fees referred to in Clause 11 ( Fees ).

" Finance Documents " means this Agreement, the Master Agreement, the Security Documents, the Fee Letter and any other document designated as such by the Agent and the Borrowers and " Finance Document " means any one of them.

" Finance Parties " means the Arrangers, the Agent, the Security Agent, the Swap Provider, the Lenders and the Sinosure Agent and " Finance Party " means any one of them.

" Financial Indebtedness " means, with respect to any person (the " Debtor ") at any date of determination (without duplication):


(a)	all obligations of the Debtor for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the Debtor;


(b)	all obligations of the Debtor evidenced by bonds, debentures, notes or other similar instruments;


(c)	all obligations of the Debtor in respect of any acceptance credit, guarantee or letter of credit facility or equivalent made available to the Debtor (including reimbursement obligations with respect thereto);


(d)	all obligations of the Debtor to pay the deferred purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery thereto or the completion of such services, except trade payables;


(e)	all Capitalized Lease Obligations of the Debtor as lessee;

(f)

all such Financial Indebtedness as described in sub paragraphs (a) to (e) of persons other than the Debtor secured by an Encumbrance on any asset of the Debtor, whether or not such Financial Indebtedness is assumed by the Debtor, provided that the amount of such Financial Indebtedness shall be the lesser of (i) the fair market value of such asset at such date of determination and (ii) the amount of such Financial Indebtedness; and


(g)	all such Financial Indebtedness as described in sub-paragraphs (a) to (e) of persons other than the Debtor under any guarantee, indemnity to similar obligation entered into by the Debtor to the extent such Financial Indebtedness is guaranteed, indemnified, etc. by the Debtor.

The amount of Financial Indebtedness of any Debtor at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations described in (f) and (g) above, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided that (i) the amount outstanding at any time of any Financial Indebtedness issued with an original issue discount is the face amount of such Financial Indebtedness less the remaining unamortized portion of such original issue discount of such Financial Indebtedness at such time, and (ii) Financial Indebtedness shall not include any liability for taxes.

" FMV " means the fair market value of a Vessel as conclusively determined by the arithmetic average of valuations issued by two Approved Shipbrokers on the basis of a charter-free sale for prompt delivery for cash at arm's length on normal commercial terms as between a willing seller and a willing buyer.

" Group " means the Guarantor and its Subsidiaries.

" Guarantee " means the guarantee and indemnity of the Guarantor contained in Clause 18 ( Guarantee and Indemnity ) and referred to in Clause 17.1.3 ( Security Documents ).

LONLIVE\21312160.7 Page 9

" 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 a Vessel issued under Annex VI.

" Impaired Agent " means the Agent at any time when:


(a)	it has failed to make (or has notified a Party that it will not make) a payment required to be made by it under the Finance Documents by the due date for payment;


(b)	the Agent otherwise rescinds or repudiates a Finance Document; or


(c)	an Insolvency Event has occurred and is continuing with respect to the Agent;

unless, in the case of (a):


(i)	its failure to pay is caused by:

(A) administrative or technical error; or

(B) a Disruption Event; and

payment is made within three Business Days of its due date; or


(ii)	the Agent is disputing in good faith whether it is contractually obliged to make the payment in question.

" 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 any of the Finance Parties under all or any of the Finance Documents.

" Insolvency Event " in relation to an entity means that the entity:


(a)	is dissolved (other than pursuant to a consolidation, amalgamation or merger);


(b)	becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due;


(c)	makes a general assignment, arrangement or composition with or for the benefit of its creditors;

(d)

institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official;

(e)

has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition is instituted or presented by a person or entity not described in (d) and:


(i)	results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation; or


(ii)	is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof;

LONLIVE\21312160.7 Page 10


(f)	has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);


(g)	seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets (other than, for so long as it is required by law or regulation not to be publicly disclosed, any such appointment which is to be made, or is made, by a person or entity described in (d));


(h)	has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter;


(i)	causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in (a) to (h); or

takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts.

" 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 a Vessel or her increased value or her Earnings and (where the context permits) all benefits under such contracts and policies, including all claims of any nature and returns of premium.

" Intercompany Loan Agreement " means any loan agreement entered into during the Facility Period between an entity within the same group as the Borrowers as lender and a Borrower as borrower.

" Intercompany Loan Assignment " means any assignment of an Intercompany Loan Agreement entered into pursuant to Clause 22.18 ( No borrowings ) and referred to in Clause 17.1.7 ( Security Documents ) and to be in a form acceptable to the Agent.

" Intercompany Loans " means any loan or loans to be made available to a Borrower pursuant to an Intercompany Loan Agreement.

" Intercompany Subordination and Assignment Agreement " means any subordination and assignment agreement in respect of any Intercompany Loans entered into pursuant to Clause 22.18 ( No borrowings ) and referred to in Clause 17.1.8 ( Security Documents ) and to be in a form acceptable to the Agent.

" 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 ).

" Interpolated Screen Rate " means, in relation to LIBOR, the rate which results from interpolating on a linear basis between:


(a)	the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the relevant Interest Period; and


(b)	the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the relevant Interest Period,

each as of 11.00 a.m. on the Quotation Day for dollars.

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" ISM Code " means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention.

" ISM Company " means, at any given time, the company responsible for a Vessel's compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.

" ISPS Code " means the International Ship and Port Facility Security Code.

" ISSC " means a valid international ship security certificate for a 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 the Agent under Clause 4.1 ( Initial conditions precedent ) or Clause 4.3 ( Conditions subsequent ).

" 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 the Legal Opinions.

" Lender " means:


(a)	any Original Lender; and


(b)	any bank, financial institution or other entity which has become a Party as a Lender in accordance with Clause 24 ( Changes to the Lenders ),

which in each case has not ceased to be a Lender in accordance with the terms of this Agreement.

" LIBOR " means, in relation to any Tranche:


(a)	the applicable Screen Rate; or


(b)	(if no Screen Rate is available for the relevant Interest Period) the Interpolated Screen Rate; or


(c)	(if (i) no Screen Rate is available for the currency of that Tranche or (ii) no Screen Rate is available for the relevant Interest Period for that Tranche and it is not possible to calculate the Interpolated Screen Rate) the Reference Bank Rate,

as of 11.00 a.m. (London time) on the Quotation Day for the offering of deposits in dollars in an amount comparable to that Tranche (or any relevant part of that Tranche) and for a period comparable to the relevant Interest Period and, if that rate is less than zero, LIBOR shall be deemed to be zero.

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" Loan " means the aggregate amount of the Tranches advanced or to be advanced by the Lenders to the Borrowers under Clause 2 ( The Loan ) or, where the context permits, the principal amount of the Tranches advanced and for the time being outstanding.

" Majority Lenders " means a Lender or Lenders whose Commitments aggregate more than 66 ² / ₃ % of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66 ² / ₃ % of the Total Commitments immediately prior to the reduction).

" Management Agreement " means the master agreement dated 27 September 2013 entered into between Scorpio Bulkers Inc., the Technical Manager and the Commercial Manager:


(a)	as acceded to in respect of the commercial management of the Vessels pursuant to confirmation letters each dated 17 September 2014 between the relevant Borrower, Scorpio Bulkers Inc. and the Commercial Manager; and


(b)	as acceded to in respect of the technical management of the Vessels pursuant to confirmation letters each dated 18 July 2014 between the relevant Borrower, Scorpio Bulkers Inc. and the Technical Manager.

" Managers " means:


(a)	in relation to the commercial management of the Vessels, the Commercial Manager; and


(b)	in relation to the technical management of the Vessels, the Technical Manager,

or any Approved Sub-manager, and such other commercial and/or technical managers of a Vessel nominated by the Borrowers as the Agent (acting on the instructions of the Majority Lenders) may approve.

" Managers' Undertakings " means the written undertakings of the Managers whereby, throughout the Facility Period unless otherwise agreed by the Agent:


(a)	they will remain the commercial or technical managers of the Vessels (as the case may be);


(b)	they will not, without the prior written consent of the Agent, subcontract or delegate the commercial or technical management of the Vessels (as the case may be) to any third party other than an Approved Sub-manager provided that the Borrowers shall procure from such Approved Sub-manager a Manager's Undertaking;


(c)	if reasonably required by the Agent, the interests of the Managers in the Insurances will be assigned to the Security Agent with first priority; and


(d)	(following the occurrence of an Event of Default) all claims of the Managers against the Borrowers shall be subordinated to the claims of the Finance Parties under the Finance Documents.

" Mandatory Cost " means the percentage rate per annum calculated by the Agent in accordance with Schedule 4 ( Mandatory Cost Formula ).

" Margin " means 2.50% per annum.

" Master Agreement " means any ISDA Master Agreement (or any other form of master agreement relating to interest or currency exchange transactions) entered into between the Swap Provider and the Borrowers during the Facility Period, including each Schedule to any Master Agreement and each Confirmation exchanged under any Master Agreement.

LONLIVE\21312160.7 Page 13

" Master Agreement Proceeds " means any and all sums due and payable to the Borrowers or any of them under the Master Agreement following an Early Termination Date (subject always to all rights of netting and set-off contained in the Master Agreement) and all rights to require and enforce the payment of those sums.

" Master Agreement Proceeds Assignments " means the deeds of assignment referred to in Clause 17.1.6 ( Security Documents ).

" Material Adverse Effect " means in the reasonable opinion of the Majority Lenders a material adverse effect on:


(a)	the business, property or financial condition of a Borrower or the Guarantor; or


(b)	the ability of any Security Party to perform its obligations under any Finance Document; or


(c)	the validity or enforceability of, or the effectiveness or ranking of any Encumbrance granted or purporting to be granted pursuant to any of, the Finance Documents or the rights or remedies of any Finance Party under any of the Finance Documents; or


(d)	the rights or remedies of any Finance Party under any of the Finance Documents.

" Maximum Loan Amount " means the aggregate of the Maximum Tranche A Amount, the Maximum Tranche B Amount and the Maximum Tranche C Amount.

" Maximum Tranche Amount " means the Maximum Tranche A Amount, the Maximum Tranche B Amount and the Maximum Tranche C Amount.

" Maximum Tranche A Amount " means the amount up to the lesser of (i) $25,500,000; (ii) 60% of the Contract Price for Vessel A; and (iii) 60% of the FMV of Vessel A evidenced by the valuation received by the Agent under Clause 4.1 ( Initial conditions precedent ).

" Maximum Tranche B Amount " means the amount up to the lesser of (i) $25,500,000; (ii) 60% of the Contract Price for Vessel B; and (iii) 60% of the FMV of Vessel B evidenced by the valuation received by the Agent under Clause 4.1 ( Initial conditions precedent ).

" Maximum Tranche C Amount " means the amount up to the lesser of (i) $25,500,000; (ii) 60% of the Contract Price for Vessel C; and (iii) 60% of the FMV of Vessel C evidenced by the valuation received by the Agent under Clause 4.1 ( Initial conditions precedent ).

" MOAs " means the memoranda of agreement each dated 6 January 2014 on the terms and subject to the conditions of which the relevant Seller will sell the relevant Newbuilding Vessel to the relevant Borrower for the relevant Contract Price, and each one a " MOA ".

" Mortgages " means the first preferred mortgages referred to in Clause 17.1.1 ( Security Documents ) and " Mortgage " means any one of them.

" Newbuilding Vessels " means Vessel B and Vessel C, and " Newbuilding Vessel " means any one of them.

" New Lender " has the meaning given to that term in Clause 24.1 ( Assignments and transfers by the Lenders ).

" Non-Consenting Lender " has the meaning given to that term in Clause 36.3.4 ( Replacement of Lender ).

" Operating Expenses " means expenses reasonably incurred by a Borrower in connection with the ownership of a Vessel including but not limited to operation, employment, maintenance, repair and insurance of a Vessel.

" Original Financial Statements " means the audited consolidated financial statements of the Guarantor for the financial year ended 31 December 2013.

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" Original Jurisdiction " means, in relation to a Security Party, the jurisdiction under whose laws that Security Party is incorporated as at the date of this Agreement.

" Party " means a party to this Agreement.

" Patriot Act " means the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Improvement and Reauthorization Act of 2005 (H.R. 3199).

" Permitted Disposal " means any sale, lease, licence, transfer or other disposal which is on arm's length terms:


(a)	of assets in exchange for other assets comparable or superior as to type, value and quality;


(b)	of obsolete or redundant vehicles, plant and equipment for cash; and


(c)	arising as a result of any Permitted Encumbrance.

" Permitted Encumbrance " means:


(a)	any Encumbrance which has the prior written approval of the Agent;


(b)	any Encumbrance created pursuant to a Finance Document;


(c)	any Encumbrance arising by operation of law and in the ordinary course of trading and not as a result of any default or omission by a Security Party;


(d)	any Quasi-Security arising as a result of a disposal which is a Permitted Disposal;


(e)	any liens for current crews' wages and salvage and liens incurred in the ordinary course of trading a Vessel up to an aggregate amount at any time not exceeding $1,000,000 in respect of any Vessel; or


(f)	until the Drawdown Date in respect of Tranche A, any Encumbrance arising out of or pursuant to the SBI Puro Finance Documents.

" Plan " means any "employee benefit plan" as defined in Section 3(3) of ERISA that is subject to Title IV of ERISA which is or was sponsored, maintained or contributed to by, or required to be contributed to by any Security Party or any of their respective ERISA Affiliates.

" 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.

" Quasi-Security " has the meaning given to that term in Clause 22.10 ( Negative pledge ).

" 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 Agent 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 Agent at its request by the Reference Banks as the rate at which the relevant Reference Banks 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.

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" Reference Banks " means, in relation to LIBOR and Mandatory Cost, ABN AMRO Bank N.V., and The Export-Import Bank of China or such other banks as may be appointed by the Borrowers with the prior written approval of the Agent.

" 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 Documents " means the Finance Documents, the MOAs, the Management Agreement, the Manager's Undertakings, any Intercompany Loan Agreement and each Sinosure Policy.

" Relevant Interbank Market " means the London interbank market.

" Relevant Jurisdiction " means, in relation to a Security Party:


(a)	its Original Jurisdiction;


(b)	any jurisdiction where any asset subject to or intended to be subject to a Security Document to be executed by it is situated; and


(c)	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 a Tranche to be repaid by the Borrowers under Clause 6 ( Repayment ).

" Repeating Representations " means each of the representations set out in Clause 19.1.1 ( Status ) to Clause 19.1.6 ( Governing law and enforcement ), Clause 19.1.10 ( No default ) to Clause 19.1.19 ( Pari passu ranking ) and Clause 19.1.26 ( Patriot Act ).

" 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 a Borrower as a result of a Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).

" Restricted Person " means a person that is (i) listed on, or owned or controlled by a person listed on any Sanctions List; (ii) located in, incorporated under the laws of, or owned or controlled by, or acting on behalf of, a person located in or organised under the laws of a country or territory that is the target of country-wide Sanctions (including, without limitation, at the date of this agreement Cuba, Iran, Myanmar (Burma), North Korea, Syria and Sudan); or (iii) otherwise a target of Sanctions.

" Retention Accounts " means the bank accounts to be opened in the name of each Borrower with the Account Bank and each designated a "Retention Account" and " Retention Account " means any one of them.

" Sanctions " means any economic sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by: (i) the United States government; (ii) the United Nations; (iii) the European Union or its Member States, including without limitation, the United Kingdom; (iv) any country to which any Security Party or any other member of the Group or any Affiliate of any of them is bound; or (v) the respective governmental institutions and agencies of any of the foregoing, including without limitation, the Office of Foreign Assets Control of the US Department of Treasury (" OFAC "), the United States Department of State, and Her Majesty’s Treasury (" HMT ", and together the " Sanctions Authorities ").

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" Sanctions List " means the “Specially Designated Nationals and Blocked Persons” list issued by OFAC, the Consolidated List of Financial Sanctions Targets and Investment Ban List issued by HMT, or any similar list issued or maintained or made public by any of the Sanctions Authorities.

" SBI Puro Bridge Loan Agreement " means the secured loan facility agreement dated 27 February 2015 made between, among others, Borrower A as borrower, the Guarantor as guarantor, the financial institutions listed in schedule 1 thereto as lenders, the Agent as agent and the Security Agent as security agent, arranger and swap provider.

" SBI Puro Indebtedness " means the "Indebtedness" as defined in the SBI Puro Bridge Loan Agreement.

" SBI Puro Finance Documents " means the "Finance Documents" as defined in the SBI Puro Bridge Loan Agreement

" Scorpio Cape Pool " means, in relation to a Vessel, a pooling arrangement whereby the pool is managed by the Commercial Manager.

" 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 the relevant currency and period displayed on pages LIBOR01 or LIBOR02 of the Reuters screen (or any replacement 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 Reuters. If such page or the service ceases to be available, the Agent may specify another page or service displaying the relevant rate after consultation with the Borrowers.

" Secured Parties " means each Finance Party from time to time party to this Agreement and any Receiver or Delegate.

" Security Documents " means the Mortgages, the Assignments, the Guarantee, the Account Security Deeds, the Share Pledges, the Master Agreement Proceeds Assignments, any Intercompany Loan Assignment, any Intercompany Subordination and Assignment Agreement and any other Credit Support Documents or (where the context permits) any one or more of them, and any other agreement or document which may at any time be executed by any person as security for the payment of all or any part of the Indebtedness and " Security Document " means any one of them.

" Security Parties " means each Borrower, the Guarantor, any other Credit Support Provider, and any other person who may at any time during the Facility Period be liable for, or provide security for, all or any part of the Indebtedness (excluding always the Managers), and " Security Party " means any one of them.

" Sellers " means:


(a)	in respect of Vessel A, Great Wave Navigation 1 Ltd., a company incorporated under the laws of the Cayman Islands with its registered office at Ugland House, Grand Cayman, KY 1-1104, Cayman Islands (" Seller A ");


(b)	in respect of Vessel B, Great Wave Navigation 2 Ltd., a company incorporated under the laws of the Cayman Islands with its registered office at Ugland House, Grand Cayman, KY 1-1104, Cayman Islands (" Seller B "); and


(c)	in respect of Vessel C, Great Wave Navigation 3 Ltd., a company incorporated under the laws of the Cayman Islands with its registered office at Ugland House, Grand Cayman, KY 1-1104, Cayman Islands (" Seller C "),

and each a " Seller ".

" Share Pledges " means the charges of the issued share capital of the Borrowers referred to in Clause 17.1.5 ( Security Documents ).

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" Sinosure " means China Export & Credit Insurance Corporation, a corporation organised and existing under the laws of The People's Republic of China and having its principle place of business at 2 Fortune Times Building, No. 11 Fenghuiyuan, Xicheng District, Beijing 100032, The People's Republic of China.

" Sinosure Insurance Premium " means the premium payable to Sinosure in respect of each Sinosure Policy in accordance with Clause 11 ( Fees ).

" Sinosure Insurance Proceeds " means all sums payable by Sinosure to or for the account of the Lenders or the Sinosure Agent on behalf of the Lenders under or in connection with any Sinosure Policy.

" Sinosure Policy " means the buyer's export credit insurance policy issued or to be issued by Sinosure in respect of each Vessel and providing in the aggregate political and commercial cover for 90% of the Tranche in respect of the relevant Vessel outstanding from time to time and accrued interest thereunder, in form and substance satisfactory to the Lenders, and together the " Sinosure Policies ".

" SMC " means a valid safety management certificate issued for a Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.

" Subsidiary " means a subsidiary undertaking within the meaning of section 1162 of the Companies Act 2006.

" 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).

" Technical Manager " means Scorpio Ship Management S.A.M., a company incorporated under the laws of Monaco with its registered office at Le Millenium, 9, Boulevard Charles III, MC-98000 Monaco.

" Termination Date " means,


(a)	in respect of each Tranche relating to a Newbuilding Vessel, the date falling ten years after the Delivery Date of the relevant Newbuilding Vessel; and


(b)	in respect of Tranche A, 6 February 2025.

" Total Commitments " means the aggregate of the Commitments.

" Total Loss " means:


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


(b)	the requisition for title or compulsory acquisition of a Vessel by any government or other competent authority (other than by way of requisition for hire); or


(c)	the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture of a Vessel (not falling within (b)), unless that Vessel is released and returned to the possession of the relevant Borrower within 30 days after the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture in question.

" Tranche A " means the part of the Loan up to the Maximum Tranche A Amount to be made available in one advance pursuant to Clause 5 ( Advance ) or where the context permits, the amount thereof advanced and for the time being outstanding.

" Tranche B " means the part of the Loan up to the Maximum Tranche B Amount to be made available in one advance pursuant to Clause 5 ( Advance ) or where the context permits, the amount thereof advanced and for the time being outstanding.

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" Tranche C " means the part of the Loan up to the Maximum Tranche C Amount to be made available in one advance pursuant to Clause 5 ( Advance ) or where the context permits, the amount thereof advanced and for the time being outstanding.

" Tranches " means Tranche A, Tranche B and Tranche C and " Tranche " means any one of them.

" Transaction " means a transaction entered into between the Swap Provider and the Borrowers governed by the Master Agreement.

" Transfer Certificate " means a certificate substantially in the form set out in Schedule 5 ( Form of Transfer Certificate ) or any other form agreed between the Agent and the Borrowers.

" Transfer Date " means, in relation to an assignment or a transfer, the later of:


(a)	the proposed Transfer Date specified in the relevant Assignment Agreement or Transfer Certificate; and


(b)	the date on which the Agent executes the relevant Assignment Agreement or Transfer Certificate.

" Treasury Transactions " means any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price.

" Trust Property " means:


(a)	all benefits derived by the Security Agent from Clause 17 ( Security and Application of Moneys ); and


(b)	all benefits arising under (including, without limitation, all proceeds of the enforcement of) each of the Security Documents,

with the exception of any benefits arising solely for the benefit of the Security Agent.

" Unpaid Sum " means any sum due and payable but unpaid by any Security Party under the Finance Documents.

" US " means the United States of America.

" US GAAP " means generally accepted accounting principles in the United States of America as in effect from time to time.

" US Tax Obligor " means:


(a)	a Security Party which is resident for tax purposes in the US; or


(b)	a Security Party some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.

" 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 (a), or imposed elsewhere.

" Vessels " means:

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(a)	the 180,000 dwt capesize bulk carrier m.v. "SBI PURO" (" Vessel A ") registered under the flag of the Marshall Islands in the ownership of Borrower A, and everything now or in the future belonging to her on board and ashore; and


(b)	the following vessels each currently under construction by the Builder with the Builders' hull numbers set out below on the terms of the relevant Building Contract and on delivery to the relevant Seller and intended to be sold by that Seller to the relevant Borrower set out below, and intended to be registered under the respective flags set out below:



Designation	Type of Vessel	Hull Number	Borrower	Flag
" Vessel B "	180,000 dwt capsize bulk carrier	H1310	Borrower B	Marshall Islands
" Vessel C "	180,000 dwt capsize bulk carrier	H1311	Borrower C	Marshall Islands

and " Vessel " means any one of them.


1.2	Construction Unless a contrary indication appears, any reference in this Agreement to:


1.2.1	any " Lender ", any " Borrower ", the " Guarantor ", any " Arranger ", the " Agent ", the " Swap Provider ", any " Secured Party ", the " Security Agent ", any " Finance Party ", the " Sinosure Agent ", " Sinosure " or any " Party " shall be construed so as to include its successors in title, permitted assignees and permitted transferees;


1.2.2	" assets " includes present and future properties, revenues and rights of every description;


1.2.3	a " 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;


1.2.4	a " group of Lenders " includes all the Lenders;


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.


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.

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1.5	Default A 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


1.7.1	Subject to Clause 1.7.2, 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.


1.7.2	Sinosure may enforce or enjoy the benefit of any term of this Agreement under the Third Parties Act.


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 any Finance Party and the Borrowers or their representatives before the date of this Agreement.


Section 2	The Loan


2	The Loan


2.1	Amount Subject to the terms of this Agreement, the Lenders agree to make available to the Borrowers on a joint and several basis a term loan comprising all of the Tranches and not exceeding in aggregate the Maximum Loan Amount.


2.2	Finance Parties' rights and obligations


2.2.1	The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.


2.2.2	The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from a Security Party shall be a separate and independent debt.


2.2.3	A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.


3	Purpose


3.1	Purpose The Borrowers shall apply the Loan for the purposes referred to in Preliminary (B).


3.2	Monitoring No Finance Party is bound to monitor or verify the application of any amount borrowed under this Agreement.


4	Conditions of Utilisation


4.1	Initial conditions precedent

4.1.1

In respect of Tranche A, the Lenders will only be obliged to comply with Clause 5.3 ( Lenders' participation ) in relation to the advance of Tranche A if, on or before the relevant Drawdown Date, the Agent has received all of the documents and other evidence listed in Part I and Part II of Schedule 2 ( Conditions Precedent ) in form and substance satisfactory to the Agent, save that references in Section 2 of that Part I and references in Part II to "the Vessel" or to any person or document relating to a Vessel shall be deemed to relate solely to Vessel A or to any person or document relating to Vessel A. The Agent shall notify the Borrowers and the Lenders promptly upon being so satisfied.

The Agent shall not be obliged to give such notification unless it has received confirmation from the Sinosure Agent that Sinosure has received all of the documents and evidence listed in paragraph 4(d) ( Other documents ) of Part I of Schedule 2 ( Conditions Precedent ) in respect of the Sinosure Policy in respect of Tranche A in form and substance satisfactory to Sinosure.

4.1.2 In respect of Tranche B and Tranche C:

(a) the Lenders will only be obliged to comply with Clause 5.3 ( Lenders' participation ) in relation to the advance of Tranche B or Tranche C in accordance with the Approved Closing Procedure if, on or before the relevant Drawdown Date, the Agent has received all of the documents and other evidence listed in Part I of Schedule 2 ( Conditions Precedent ) in form and substance satisfactory to the Agent, save that references in Section 2 of that Part I to “the Vessel” or "the Newbuilding Vessel" or to any person or document relating to a Vessel shall be deemed to relate solely to the Vessel specified in the relevant Drawdown Request or to any person or document relating to that Vessel respectively; and

4.1.3 the Agent shall only release Tranche B or Tranche C in accordance with the Approved Closing Procedure if the Agent has received all of the documents and other evidence listed in Part II of Schedule 2 ( Conditions Precedent ) in form and substance satisfactory to the Agent, save that references in Part II to “the Vessel” or "the Newbuilding Vessel" or to any person or document relating to a Vessel shall be deemed to relate solely to the Vessel specified in the relevant Drawdown Request or to any person or document relating to that Vessel respectively,

and in each case the Agent shall notify the Borrowers and the Lenders promptly upon being so satisfied.

The Agent shall not be obliged to give such notification unless it has received confirmation from the Sinosure Agent that Sinosure has received all of the documents and evidence listed in paragraph 4(d) ( Other documents ) of Part I of Schedule 2 ( Conditions Precedent ) in respect of the Sinosure Policy in respect of the relevant Tranche in form and substance satisfactory to Sinosure.


4.1.4	Other than to the extent that the Majority Lenders notify the Agent in writing to the contrary before the Agent gives the notification described in Clause 4.1.1 or Clause 4.1.2, the Lenders authorise (but do not require) the Agent to give that notification. The Agent shall not be liable for any damages, costs or losses whatsoever as a result of giving any such notification.


4.2	Further conditions precedent

4.2.1 The Lenders will only be obliged to:


(b)	in respect of Tranche A, advance Tranche A if on the date of the relevant Drawdown Request and on the proposed Drawdown Date; and


(c)	in respect of Tranche B and Tranche C, advance and release the relevant Tranche in accordance with the Approved Closing Procedure if on the date of the relevant Drawdown Request, on the proposed Drawdown Date and on the proposed date of the release of the relevant Tranche,

the following are complied with:


(i)	no Default has occurred and is continuing or would result from the advance of that Tranche; and


(ii)	the representations made by each Borrower and the Guarantor under Clause 19 ( Representations ) are true.


4.2.2	The Lenders will only be obliged to advance a Tranche if that Tranche is not in excess of the relevant Maximum Tranche Amount.


4.2.3	The Lenders will only be obliged to advance a Tranche if that Tranche will not increase the Loan to a sum in excess of the Maximum Loan Amount.

4.3

Conditions subsequent The Borrowers undertake to deliver or to cause to be delivered to the Agent within 15 days after each Drawdown Date the additional documents and other evidence listed in Part III of Schedule 2 ( Conditions Subsequent ), save that references in that Part III to "the Vessel" or to any person or document relating to a Vessel shall be deemed to relate solely to the Vessel specified in the relevant Drawdown Request or to any person or document relating to that Vessel respectively.

4.4

No waiver If the Lenders in their sole discretion agree to advance all or any part of a Tranche to the Borrowers before all of the documents and evidence required by Clause 4.1 ( Initial conditions precedent ) have been delivered to or to the order of the Agent, the Borrowers undertake to deliver all outstanding documents and evidence to or to the order of the Agent no later than seven days after the Drawdown Date or such other date specified by the Agent (acting on the instructions of all the Lenders).

The advance of all or any part of a Tranche under this Clause 4.4 shall not be taken as a waiver of the Lenders' 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 Agent under this Clause shall:


4.5.1	be in form and substance acceptable to the Agent; and


4.5.2	if required by the Agent, be certified, notarised, legalised or attested in a manner acceptable to the Agent.


Section 3	Utilisation


5	Advance

5.1

Delivery of a Drawdown Request The Borrowers may request a Tranche to be advanced, in a single advance, by delivery to the Agent of a duly completed Drawdown Request not more than ten and not fewer than four Business Days before the proposed Drawdown Date. Any Drawdown Request which becomes effective, in accordance with Clause 32.3, after 10.00 a.m. (Amsterdam time) in the place of receipt shall be deemed only to become effective on the following day.

In respect of Tranche A, the Borrowers must request that Tranche A is advanced to ABN AMRO Bank N.V. to refinance the SBI Puro Indebtedness.

In respect of Tranche B, the Borrowers must request that Tranche B is advanced either (i) to Seller B in accordance with the relevant MOA or (ii) to Borrower B in the event that the Borrowers provide evidence together with the relevant Drawdown Notice that Borrower B is the registered owner of Vessel B.

In respect of Tranche C, the Borrowers must request that Tranche C is advanced either (i) to Seller C in accordance with the relevant MOA or (ii) to Borrower C in the event that the Borrowers provide evidence together with the relevant Drawdown Notice that Borrower C is the registered owner of Vessel C.


5.2	Completion of a Drawdown Request A Drawdown 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 each Borrower;


5.2.2	the proposed Drawdown 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	Lenders' participation


5.3.3	Subject to Clauses 2 ( The Loan ), 3 ( Purpose ) and 4 ( Conditions of Utilisation ), each Lender shall make its participation in any Tranche available by the relevant Drawdown Date through its Facility Office.


5.3.4	The amount of each Lender's participation in any Tranche will be equal to the proportion borne by its Commitment to the Total Commitments.


5.4	Cancellation of Commitment The Total Commitments shall be cancelled on the earlier of (i) the Drawdown Date of the 3 ^rd Tranche to be advanced (ii) the end of the Availability Period of the last Tranche to be advanced, to the extent that it is unutilised at that time.


5.5	Notice to Sinosure The Sinosure Agent shall provide Sinosure with a written notice of the disbursement of a Tranche within ten days after the relevant Drawdown Date.


5.6	Termination of Lenders' obligations


5.6.1	Notwithstanding anything contained in the Finance Documents, the obligations of the Lenders to make a Tranche available shall terminate in the event that any of the following events take place:


(a)	the Sinosure Policy in respect of that Tranche is cancelled, terminated, rescinded, repudiated or suspended or becomes invalid, illegal or invalid or otherwise ceases to remain in full force or does not constitute legal, valid, binding and enforceable obligations of any party thereto; or


(b)	if it becomes unlawful or impossible for Sinosure to discharge any liability under the Sinosure Policy in respect of that Tranche or to comply with any obligation which are material under the Sinosure Policy in respect of that Tranche; or


(c)	any consent necessary to enable Sinosure to:


(i)	issue and maintain the Sinosure Policy in respect of that Tranche;


(ii)	discharge any liability under the Sinosure Policy in respect of that Tranche; or


(iii)	comply with any provision of the Sinosure Policy in respect of that Tranche which any of the Lenders considers material,

is not granted, expires without being renewed or is revoked or any condition thereof is not satisfied; or


(d)	the Agent, the Sinosure Agent or any Lender has received notice in writing of Sinosure's intention to repudiate, terminate or suspend the application of the Sinosure Policy in respect of that Tranche.

5.6.2

If any of the events described in Clause 5.6.1 takes place, the Agent on behalf of the Lenders shall facilitate negotiation with the Borrowers in good faith for a maximum period of 30 days with a view to reaching a potential restructuring of the relevant Tranche or to arranging a new financing facility for the relevant Vessel to mitigate the loss of the Sinosure Policy in respect of the relevant Tranche on such terms and conditions as are acceptable to the Lenders, provided always that no Lender shall be committed to agree to any such potential restructuring of the relevant Tranche or such new financing facility notwithstanding other Lenders may have agreed to do so.


Section 4	Repayment, Prepayment and Cancellation


6	Repayment


6.1	Repayment of each Tranche The Borrowers agree to repay:

6.1.4

Tranche A to the Agent for the account of the Lenders by consecutive quarterly instalments, each in the sum of $531,250 together with a balloon payment of all amounts outstanding pursuant to Tranche A on the Termination Date which balloon payment shall fall due on the Termination Date in respect of Tranche A, which shall reduce the amount outstanding in respect of Tranche A to nil, the first instalment in respect of Tranche A falling due on the 21 ^st day of the last month of the next financial quarter, with subsequent instalments falling due at consecutive intervals of three calendar months thereafter, and the final instalment together with the relevant balloon payment falling due on the Termination Date in respect of Tranche A; and

6.1.5

Tranche B and Tranche C to the Agent for the account of the Lenders by 40 consecutive quarterly instalments, each in the sum of $531,250 together with a balloon payment of $4,250,000 falling due on the Termination Date in respect of the relevant Tranche, which shall reduce the amount outstanding in respect of that Tranche to nil, the first instalment in respect of each Tranche falling due on the 21 ^st day of the last month of the next financial quarter, with subsequent instalments falling due at consecutive intervals of three calendar months thereafter, and the final instalment together with the relevant balloon payment falling due on the Termination Date in respect of the relevant Tranche.


6.2	Termination Date On the Termination Date in relation to any Tranche, such Tranche shall be repaid in full. On the Termination Date of the final Tranche (without prejudice to any other provision of this Agreement) the Loan and any amounts owing to any Finance Party under any of the Finance Documents shall be repaid in full.


6.3	Reduction of Repayment Instalments If the aggregate amount advanced to the Borrowers in respect of a Tranche is less than $25,500,000, the amount of each Repayment Instalment and the relevant balloon payment in respect of the relevant Tranche shall be reduced pro rata to the amount actually advanced.


6.4	Reborrowing The Borrowers 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 a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in the Loan or it becomes unlawful for any Affiliate of a Lender for that Lender to do so:


7.1.5	that Lender shall promptly notify the Agent upon becoming aware of that event;


7.1.6	upon the Agent notifying the Borrowers, the Commitment of that Lender will be immediately cancelled; and


7.1.7	the Borrowers shall repay that Lender's participation in each Tranche on the last day of its current Interest Period or, if earlier, the date specified by that Lender in the notice delivered to the Agent and notified by the Agent to the Borrowers (being no earlier than the last day of any applicable grace period permitted by law).


7.2	Voluntary cancellation The Borrowers may, if they give the Agent not less than 15 Business Days' (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being an amount which is an integral multiple of $1,000,000) of the undrawn amount of a Tranche. Any cancellation under this Clause 7.2 shall reduce the Commitments of the Lenders rateably.


7.3	Voluntary prepayment of Loan The Borrowers may prepay the whole or any part of the Loan (but, if in part, being an amount which is an integral multiple of $1,000,000) subject as follows:


7.3.1	they give the Agent not less than 15 Business Days' (or such shorter period as the Majority Lenders may agree) prior notice;

7.3.2

they pay to the Agent for the account of the Lenders, in addition to the amount prepaid, a fee of an amount equal to one per cent of the amount prepaid, which fee shall be paid on the date of the prepayment in the event that such a prepayment occurs on or prior to the second anniversary of the earlier to occur of (i) the Drawdown Date of the 3 ^rd Tranche to be advanced, or (ii) the last date of the Availability Period; and


7.3.3	any prepayment under this Clause 7.3 shall be applied in prepayment of the remaining Repayment Instalments in respect of the Loan in inverse order of maturity.


7.4	Right of cancellation and prepayment in relation to a single Lender


7.4.3	If:


(a)	any sum payable to any Lender by the Borrowers is required to be increased under Clause 12.2.2 ( Tax gross-up ); or


(b)	any Lender claims indemnification from the Borrowers under Clause 12.3 ( Tax indemnity ) or Clause 13.1 ( Increased costs ),

the Borrowers may, whilst the circumstance giving rise to the requirement for that increase or indemnification continues, give the Agent notice of cancellation of the Commitment(s) of that Lender and their intention to procure the repayment of that Lender's participation in the Loan.


7.4.4	On receipt of a notice referred to in Clause 7.4.1 in relation to a Lender, the Commitment(s) of that Lender shall immediately be reduced to zero.


7.4.5	On the last day of the Interest Period in respect of each Tranche which ends after the Borrowers have given notice under Clause 7.4.1 in relation to a Lender (or, if earlier, the date specified by the Borrowers in that notice), the Borrowers shall repay that Lender's participation in that Tranche together with all interest and other amounts accrued under the Finance Documents.

^7.5

Mandatory prepayment on sale or Total Loss If a Vessel is sold by a Borrower or becomes a Total Loss, the Borrowers shall, simultaneously with any such sale or on the earlier of the date falling 6 months after any such Total Loss and the date on which the proceeds of any such Total Loss are realised, prepay the whole of the Tranche in respect of that Vessel then outstanding. Any such prepayment shall be applied in prepayment of the remaining Repayment Instalments in respect of that Tranche in inverse order of maturity.

In the event that no Default is continuing, any surplus sale or Total Loss monies following the prepayment of the whole of the relevant Tranche (a " Surplus ") shall be released to the Borrowers. In the event that an Event of Default is continuing, any Surplus shall be applied in prepayment of the remaining Repayment Instalments pro rata against each Tranche in inverse order of maturity. In the event that a Default other than an Event of Default is continuing, any Surplus shall be retained until either:


7.5.1	such Default becomes an Event of Default in which case the such Surplus shall be applied in prepayment of the remaining Repayment Instalments pro rata against each Tranche in inverse order of maturity; or


^7.5.2	such Default ceases to be continuing in which case such Surplus shall be released to the Borrowers.


^7.6	Cancellation on default under a Building Contract or a MOA In the event that:


^7.6.1	any of the events or circumstances specified in Clauses 23.1.6 ( Insolvency ), 23.1.7 ( Insolvency proceedings ) and 23.1.8 ( Creditors' process ) occurs in relation to a Seller or the Builder;


^7.6.2	a MOA is terminated, cancelled or otherwise ceases to remain in full force and effect at any time prior to its contractual expiry date; or


^7.6.3	a Building Contract is terminated, cancelled or otherwise ceases to remain in full force and effect at any time prior to its contractual expiry date,

the Agent may give the Borrowers notice of the cancellation of the Commitments of the Lenders in respect of the applicable Tranche.


7.7	Mandatory prepayment on termination of Sinosure Policy If:


7.7.1	a Sinosure Policy is cancelled, terminated, rescinded, repudiated or suspended or becomes invalid, illegal or invalid or otherwise ceases to remain in full force or does not constitute legal, valid, binding and enforceable obligations of any party thereto; or


7.7.2	it becomes unlawful or impossible for Sinosure to discharge any liability under a Sinosure Policy or to comply with any obligation which are material under a Sinosure Policy; or


7.7.3	any consent necessary to enable Sinosure to:


(a)	issue and maintain a Sinosure Policy;


(b)	discharge any liability under a Sinosure Policy; or


(c)	comply with any provision of a Sinosure Policy which any of the Lenders considers material,

is not granted, expires without being renewed or is revoked or any condition thereof is not satisfied; and/or


7.7.4	the Agent, the Sinosure Agent or any Lender has received notice in writing of Sinosure's intention to repudiate, terminate or suspend the application of a Sinosure Policy; or


7.7.5	the Lenders are unable to rely on a Sinosure Policy for any reason whatsoever,

the Agent on behalf of the Lenders shall facilitate negotiation with the Borrowers in good faith for a maximum period of 30 days with a view to reaching a potential restructuring of the Tranche relating to the relevant Sinosure Policy or to arranging a new financing facility for the Vessel relating to the relevant Sinosure Policy to mitigate the loss of the relevant Sinosure Policy on such terms and conditions as are acceptable to the Lenders, provided always that no Lender shall be committed to agree to any such potential restructuring of the Tranche relating to the relevant or such new financing facility notwithstanding other Lenders may have agreed to do so.

In the event that the parties do not agree on such a solution within such 30 day period, the Borrowers shall immediately on the Agent's written demand make a full prepayment of the Tranche relating to the relevant Sinosure Policy.


7.8	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 and subject to Clause 7.3.2 ( Voluntary prepayment of Loan ), without premium or penalty.

In the event of a prepayment under this Agreement the Borrowers shall, if applicable, terminate such Transactions as to ensure compliance with the provisions of Clause 22.27 ( Permitted Transactions ).

The Borrowers 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 Total Commitments cancelled under this Agreement may be subsequently reinstated.

If the Agent receives a notice under this Clause 7 it shall promptly forward a copy of that notice to the Borrowers or the affected Lender, as appropriate.


Section 5	Costs of Utilisation


8	Interest


8.1	Calculation of interest The rate of interest on each Tranche for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:


8.1.1	Margin;


8.1.2	LIBOR; and


8.1.3	Mandatory Cost, if any


8.2	Payment of interest Interest shall accrue day to day, shall be calculated on the basis of a 360 day year, and the Borrowers shall pay accrued interest on each Tranche on the last day of each Interest Period (and, if the Interest Period is longer than three months, on the dates falling at three monthly intervals after the first day of the Interest Period).

8.3

Default interest If the Borrowers fail to pay any amount payable by them under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which is two per cent higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted the Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing under this Clause 8.3 shall be immediately payable by the Borrowers on demand by the Agent.

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.


8.4	Notification of rates of interest The Agent shall promptly notify the Borrowers of the determination of a rate of interest under this Agreement.


9	Interest Periods

9.1

Duration of Interest Periods The duration of each Interest Period shall be three months save for the first Interest Period in respect of each Tranche which shall commence on the relevant Drawdown Date and end on either (i) the 21 ^st day of the last month of the then current financial quarter or (ii) if the relevant Drawdown Date is after the 21 ^st day of the last month of the then current financial quarter, the 21 ^st day of the last month of the next financial quarter. Each Interest Period shall start on the Drawdown Date of the relevant Tranche or (if that Tranche has already been advanced) on the last day of the preceding Interest Period of that Tranche and end on the next Repayment Date in respect of that Tranche.

9.2

Interest Periods to meet Repayment Dates If an Interest Period will expire after the next Repayment Date in respect of the relevant Tranche, there shall be a separate Interest Period for a part of that Tranche equal to the Repayment Instalment due in respect of the relevant Tranche on that next Repayment Date of that Tranche 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 each Lender's share of the relevant Tranche for that Interest Period shall be the percentage rate per annum which is the sum of:


10.2.1	the Margin;

10.2.2

the rate notified to the Agent by that Lender as soon as practicable, and in any event by close of business on the date falling three Business Days after the Quotation Day (or, if earlier, on the date falling three 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 that Lender of funding its participation in the relevant Tranche from whatever source it may reasonably select; and


10.2.3	the Mandatory Cost, if any, applicable to that Lender's participation in the relevant Tranche.

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 Agent 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 Agent receives notifications from a Lender or Lenders (whose participations in the relevant Tranche exceed 66 ² / ₃ % of that Tranche) that the cost to it of funding its participation in that Tranche 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 Agent or the Borrowers so require, the Agent and the Borrowers shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest.


10.3.2	Any alternative basis agreed pursuant to Clause 10.3.1 shall, with the prior consent of all the Lenders and the Borrowers, be binding on all Parties.


10.4	Break Costs The Borrowers shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Tranche or Unpaid Sum being paid by the Borrowers on a day other than the last day of an Interest Period for that Tranche or Unpaid Sum.

Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.


11	Fees

11.1

Commitment Fee The Borrowers shall pay to the Agent (for the account of the Lenders in proportion to their Commitments) a fee computed at the rate of one per cent per annum of the undrawn portion of the Total Commitments during the period commencing on the date of this Agreement to and including the earlier to occur of (i) the Drawdown Date in respect of the 3 ^rd Tranche to be advanced and (ii) the end of the Availability Period.

The accrued commitment fee is payable on:


11.1.4	the last day of each successive period of six months which ends during the period commencing on the date of this Agreement to and including the earlier to occur of (i) the Drawdown Date in respect of the 3 ^rd Tranche to be advanced and (ii) the end of the Availability Period of the 3 ^rd Tranche; and


11.1.5	on the earlier of (i) each Drawdown Date and (ii) the end of the Availability Period.


11.2	Upfront fee The Borrowers shall pay to the Arrangers an upfront fee in the amount and at the times agreed in a Fee Letter.


11.3	Structuring The Borrowers shall pay to the Arrangers a structuring fee in the amount and at the times agreed in a Fee Letter


11.4	Sinosure Insurance Premium The Borrowers:


11.4.1	acknowledge that the Sinosure Agent (acting on behalf of the Lenders) shall procure the placement of a Sinosure Policy in respect of each Tranche and the Lenders shall benefit from each Sinosure Policy throughout the duration of the Facility Period;


11.4.2	agree to pay:


(i)	the Sinosure Insurance Premium to allow each Sinosure Policy to be issued;


(ii)	any related costs and expenses that are incurred by Sinosure in respect of the issue of each Sinosure Policy;


(iii)	any additional Sinosure Insurance Premium (if applicable, as determined by Sinosure) when there is any amendment or waiver of any term of a Finance Document; and


(iv)	any related costs and expenses that are incurred by Sinosure when there is any amendment or waiver of any term of a Finance Document,

each as determined by Sinosure;


11.4.3	agree that their obligation to make the payments set out in Clause 11.4.2 in respect of the Sinosure Insurance Premium (or any part of it) shall be an absolute obligation and shall not be affected by any matter whatsoever;


11.4.4	acknowledge that any refund of the Sinosure Insurance Premium (or any part of it) shall be made in accordance with the general terms of the relevant Sinosure Policy and any applicable regulations of Sinosure; and


11.4.5	acknowledge that no Finance Party is in any way involved in the determination of any amount of the Sinosure Insurance Premium and agree that the Borrowers shall have no claim or defence against any Finance Party in connection with the amount of such Sinosure Insurance Premium.


11.5	Agency Fee The Borrowers shall pay to each of the Agent and Security Agent an annual agency and an annual security agency fee in the amounts and at the times agreed in Fee Letters.


Section 6	Additional Payment Obligations


12	Tax Gross Up and Indemnities


12.1	Definitions In this Agreement:

" Protected Party " means a Finance Party which 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.

" 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 a Security Party to a Finance Party under Clause 12.2 ( Tax gross-up ) or a payment by a Borrower under Clause 12.3 ( Tax indemnity ).

Unless a contrary indication appears, in this Clause 12 a reference to "determines" or "determined" means a determination made in the absolute discretion of the person making the determination.


12.2	Tax gross-up Each Borrower shall (and shall procure that each other Security Party shall) make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law, subject as follows:

12.2.6

a Borrower shall promptly upon becoming aware that it or any other Security Party must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent accordingly. Similarly, a Lender shall notify the Agent on becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from a Lender it shall notify the Borrowers and any such other Security Party;


12.2.7	if a Tax Deduction is required by law to be made by a Borrower or any other Security Party, the amount of the payment due from that Borrower or that other Security Party 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;


12.2.8	if a Borrower or any other Security Party is required to make a Tax Deduction, that Borrower shall (and shall procure that such other Security Party 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; and

12.2.9

within 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 (and shall procure that such other Security Party shall) deliver to the Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.


12.3	Tax indemnity


12.3.6	Each Borrower shall (within three Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.


12.3.7	Clause 12.3.1 shall not apply:


(a)	with respect to any Tax assessed on a Finance Party:


(i)	under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or


(ii)	under the law of the jurisdiction in which that Finance Party'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 that Finance Party; 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 ); or


(ii)	relates to a FATCA Deduction required to be made by a Party.


12.3.8	A Protected Party making, or intending to make a claim under Clause 12.3.1 shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the Borrowers.


12.3.9	A Protected Party shall, on receiving a payment from a Borrower under this Clause 12.3, notify the Agent.


12.4	Tax Credit If a Borrower or any other Security Party makes a Tax Payment and the relevant Finance Party 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	that Finance Party has obtained and utilised that Tax Credit,

that Finance Party shall pay an amount to that Borrower or to that other Security Party which that Finance Party 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 that Borrower or that other Security Party.


12.5	Stamp taxes The Borrowers shall pay and, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability that Finance Party 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 Party or any Security Party to a Finance Party 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, subject to Clause 12.6.2, if VAT is or becomes chargeable on any supply made by any Finance Party to any Party or any Security Party under a Finance Document and such Finance Party is required to account to the relevant tax authority for the VAT, that Party or Security Party must pay to such Finance Party (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 such Finance Party must promptly provide an appropriate VAT invoice to the Borrowers).

12.6.2

If VAT is or becomes chargeable on any supply made by any Finance Party (the " Supplier ") to any other Finance Party (the " Recipient ") under a Finance Document, and any Party other than the Recipient (the " Relevant Party ") is required by the terms of any Finance Document to pay an amount equal to the consideration for that supply to the Supplier (rather than being required to reimburse or indemnify the Recipient in respect of that consideration):

(a)

(where the Supplier is the person required to account to the relevant tax authority for the VAT) the Relevant Party must also pay to the Supplier (at the same time as paying that amount) an additional amount equal to the amount of the VAT. The Recipient must (where this Clause 12.6.2(a) applies) promptly pay to the Relevant Party an amount equal to any credit or repayment the Recipient receives from the relevant tax authority which the Recipient reasonably determines relates to the VAT chargeable on that supply; and

(b)

(where the Recipient is the person required to account to the relevant tax authority for the VAT) the Relevant Party must promptly, following demand from the Recipient, pay to the Recipient an amount equal to the VAT chargeable on that supply but only to the extent that the Recipient reasonably determines that it is not entitled to credit or repayment from the relevant tax authority in respect of that VAT.

12.6.3

Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any cost or expense, that Party shall reimburse or indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part thereof as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority.


12.6.4	Any reference in this Clause 12.6 to any Party shall, at any time when such Party is treated as a member of a group for VAT purposes, include (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).


12.6.5	In relation to any supply made by a Finance Party to any Party under a Finance Document, if reasonably requested by such Finance Party, that Party must promptly provide such Finance Party with details of that Party's VAT registration and such other information as is reasonably requested in connection with such Finance Party'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 Business Days of a reasonable request by another Party:


(c)	confirm to that other Party whether it is:


(iii)	a FATCA Exempt Party; or


(iv)	not a FATCA Exempt Party;


(d)	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


(e)	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.


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 any Finance Party to do anything, and Clause 12.7.1(c) shall not oblige any other Party to do anything, which would or might in its reasonable opinion constitute a breach of:


(c)	any law or regulation;


(d)	any fiduciary duty; or


(e)	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 12.7.1(a) or 12.7.1(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.


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 and, in addition, shall notify the Borrowers and the Agent and the Agent shall notify the other Finance Parties.


13	Increased Costs

13.1

Increased costs Subject to Clause 13.3 ( Exceptions ) the Borrowers shall, within three Business Days of a demand by the Agent, pay to the Agent for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party 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 and any other which relates to capital adequacy or liquidity controls or which affects the manner in which that Finance Party allocates capital resources to obligations under this Agreement and/or the Master Agreement) or (iii) the implementation or application of or compliance with Basel III, CRR or CRD IV or any other law or regulation which implements Basel III, CRR or CRD IV (whether such implementation, application or compliance is by a government, regulator, a Lender or any Affiliate of a Lender) or (iv) any change in the risk weight allocated by that Finance Party to the Borrowers after the date of this Agreement.

In this Agreement:

(a) " Increased Costs " means:


(iii)	a reduction in the rate of return from the Loan or on a Finance Party's (or its Affiliate's) overall capital;


(iv)	an additional or increased cost; or


(v)	a reduction of any amount due and payable under any Finance Document,

which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into any Finance Document or funding or performing its obligations under any Finance Document;

(b)

" 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";


13.1.10	" CRR " means 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), as amended, supplemented or restated; and


13.1.11	" CRD IV " means 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, as amended, supplemented or restated.


13.2	Increased cost claims


13.2.10	A Finance Party intending to make a claim pursuant to Clause 13.1 ( Increased costs ) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrowers.


13.2.11	Each Finance Party shall, as soon as practicable after a demand by the Agent, 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:


13.3.3	attributable to a Tax Deduction required by law to be made by a Borrower;


13.3.4	attributable to a FATCA Deduction required to be made by a Party;


13.3.5	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);


13.3.6	compensated for by the payment of the Mandatory Cost;


13.3.7	attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation; or

13.3.8

attributable to the implementation or application of or compliance with the "International Convergence of Capital Measurement and Capital Standards, a Revised Framework" published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement (but excluding any amendment arising out of Basel III) (" Basel II ") or any other law or regulation which implements Basel II (whether such implementation, application or compliance is by a government, regulator, Finance Party or any of its Affiliates).

In this Clause 13.3, a reference to a " Tax Deduction " has the same meaning given to the term in Clause 12.1 ( Definitions ).


14	Other Indemnities


14.1	Currency indemnity If any sum due from a Borrower or the Guarantor 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:


14.1.12	making or filing a claim or proof against that Borrower or the Guarantor (as the case may be), or


14.1.13	obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

that Borrower or the Guarantor (as the case may be) shall as an independent obligation, within three Business Days of demand, indemnify each Finance Party to whom that Sum is due 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 Finance Party at the time of its receipt of that Sum.

Each Borrower and the Guarantor 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


14.2.9	The Borrowers shall, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability incurred by that Finance Party as a result of:


(a)	the occurrence of any Event of Default;


(b)	a failure by a Borrower to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 28 ( Sharing among the Finance Parties );


(c)	funding, or making arrangements to fund, a Tranche following delivery by the Borrowers of a Drawdown Request but that Tranche 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 a Finance Party alone); or


(d)	a Tranche (or part of a Tranche) not being prepaid in accordance with a notice of prepayment given by the Borrowers.

14.2.10

The Borrowers shall promptly indemnify each Finance Party, each Affiliate of a Finance Party and each officer or employee of a Finance Party 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, a Vessel, unless such cost, loss or liability is caused by the gross negligence or wilful misconduct of that Indemnified Person.


14.2.11	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 applicable Sanctions; or


(b)	in connection with any Environmental Claim.


14.3	Indemnity to the Agent The Borrowers shall promptly indemnify the Agent against:


14.3.1	any cost, loss or liability incurred by the Agent (acting reasonably) as a result of:


(a)	investigating any event which it reasonably believes is a Default; or


(b)	acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; or


(c)	instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under this Agreement; and

14.3.2

any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by the Agent (otherwise than by reason of the Agent's gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 30.12 ( Disruption to Payment Systems etc .) notwithstanding the Agent's negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) in acting as Agent under the Finance Documents.


14.4	Indemnity to the Security Agent The Borrowers and the Guarantor shall promptly indemnify the Security Agent and every Receiver and Delegate against any cost, loss or liability incurred by any of them as a result of:


14.4.6	any failure by the Borrowers to comply with their obligations under Clause 16 ( Costs and Expenses );


14.4.7	acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised;


14.4.8	the taking, holding, protection or enforcement of the Security Documents;


14.4.9	the exercise of any of the rights, powers, discretions, authorities and remedies vested in the Security Agent and each Receiver and Delegate by the Finance Documents or by law;


14.4.10	any default by any Security Party in the performance of any of the obligations expressed to be assumed by it in the Finance Documents; or


14.4.11	acting as Security Agent, 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 Security Agent's, Receiver's or Delegate's gross negligence or wilful misconduct).

14.5

Sinosure indemnity The Borrowers shall indemnify the Sinosure Agent and each Lender on demand and hold each of those parties harmless from and against any duly evidenced additional premiums, cost or expense as provided for under a Sinosure Policy which Sinosure may charge, invoice or set-off against amounts owing to the Sinosure Agent or the Lenders, including without limitation as a result of a change of the delivery schedule of a Vessel or otherwise properly incurred by the Sinosure Agent or the Lenders in connection with compliance with a Sinosure Policy.


14.6	Indemnity survival The indemnities contained in this Agreement shall survive repayment of the Loan.


15	Mitigation by the Lenders

15.1

Mitigation Each Finance Party shall, in consultation with the Borrowers, take all reasonable steps to mitigate any circumstances which arise and which would result in 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 Security Party under the Finance Documents.


15.2	Limitation of liability The Borrowers shall promptly indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 15.1 ( Mitigation ). A Finance Party 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 Borrowers shall promptly on demand pay the Agent, the Security Agent, the Sinosure Agent, Sinosure and the Arrangers the amount of all costs and expenses (including legal fees) reasonably incurred by any of them (and, in the case of the Security Agent, by any Receiver or Delegate) in connection with:


16.1.3	the negotiation, preparation, printing, execution, syndication and perfection of this Agreement and any other documents referred to in this Agreement;


16.1.4	the negotiation, preparation, printing, execution and perfection of any other Finance Documents executed after the date of this Agreement;


16.1.5	any other document which may at any time be required by a Finance Party to give effect to any Finance Document or which a Finance Party is entitled to call for or obtain under any Finance Document (including, without limitation, any valuation of a Vessel); and


16.1.6	any discharge, release or reassignment of any of the Security Documents.

16.2

Amendment costs If (a) a Security Party requests an amendment, waiver or consent or (b) an amendment is required under Clause 30.11 ( Change of currency ), the Borrowers shall, within three Business Days of demand, reimburse each of the Agent, the Security Agent, the Sinosure Agent and Sinosure for the amount of all duly documented costs and expenses (including legal fees) reasonably incurred by the Agent, the Security Agent, the Sinosure Agent and Sinosure (and, in the case of the Security Agent, by any Receiver or Delegate) in responding to, evaluating, negotiating or complying with that request or requirement.

16.3

Enforcement and preservation costs The Borrowers shall, within three Business Days of demand, pay to each Finance Party, Sinosure and each other Secured Party the amount of all costs and expenses (including legal fees) incurred by that Finance 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 Security Agent as a consequence of taking or holding the Security Documents or enforcing those rights including (without limitation) any losses, costs and expenses which that Finance Party or other Secured Party may from time to time sustain, incur or become liable for by reason of that Finance Party or other Secured Party being mortgagee of a Vessel and/or a lender to a Borrower, or by reason of that Finance Party or 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 a Vessel.

16.4

Other costs The Borrowers shall, within three Business Days of demand, pay to each Finance Party, Sinosure and each other Secured Party the amount of all sums which that Finance Party or other Secured Party may pay or become actually or contingently liable for on account of a Borrower in connection with a Vessel (whether alone or jointly or jointly and severally with any other person) including (without limitation) all sums which that Finance Party or other Secured Party may pay or guarantees which it may give in respect of the Insurances, any expenses incurred by that Finance Party or other Secured Party in connection with the maintenance or repair of a Vessel or in discharging any lien, bond or other claim relating in any way to a Vessel, and any sums which that Finance Party or other Secured Party may pay or guarantees which it may give to procure the release of a Vessel from arrest or detention.


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 Borrowers shall execute and deliver to the Security Agent or cause to be executed and delivered to the Security Agent the following documents in such forms and containing such terms and conditions as the Security Agent shall require:


17.1.12	first preferred mortgages over the Vessels;


17.1.13	first priority deeds of assignment of the Insurances, Earnings, any Charter and Requisition Compensation of the Vessels; and the first priority assignments of Insurances from the Managers contained in the Managers' Undertakings;


17.1.14	the guarantee and indemnity from the Guarantor;


17.1.15	account security deeds in respect of all amounts from time to time standing to the credit of the Accounts;


17.1.16	first priority charges of all the issued shares of the Borrowers;


17.1.17	a first priority deed of assignment over the Master Agreement Proceeds;


17.1.18	first priority deeds of assignment of any Intercompany Loan Agreement; and


17.1.19	subordination agreements by which the rights of any lender under any Intercompany Loan are fully subordinated to the rights of the Finance Parties under the Finance Documents.


17.2	Earnings and Retention Accounts The Borrowers shall maintain the Accounts with the Account Bank 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 and rights of set-off in favour of the Account Bank as account holder.


17.3	Earnings The Borrowers shall procure that all Earnings, proceeds from any Insurances, any liquidated damages, any Requisition Compensation and the relevant advanced Tranche are credited to the Earnings Account of the relevant Borrower.


17.4	Transfers to Retention Accounts On the 21 ^st day in each calendar month during the Facility Period, the Borrowers shall procure that there is transferred from the relevant Earnings Account to the relevant Retention Account:


17.4.1	one-third of the amount of the Repayment Instalment in respect of the relevant Tranche due on the next Repayment Date in respect of the relevant Tranche (which shall be deemed to be the day for that transfer if that day is a Repayment Date); and

17.4.2

the amount of interest in respect of the relevant Tranche due on the next Interest Payment Date in respect of the relevant Tranche (which shall be deemed to be the day for that transfer if that day is an Interest Payment Date) divided by the number of months between the last Interest Payment Date in respect of the relevant Tranche (or, if none, the Drawdown Date in respect of that Tranche) and that next Interest Payment Date in respect of the relevant Tranche,

and the Borrowers irrevocably authorise the Security Agent to instruct the Account Bank to make those transfers.

17.5

Additional payments to Retention Accounts If for any reason the amount standing to the credit of the relevant Earnings Account is insufficient to make any transfer to the relevant Retention Account required by Clause 17.4 ( Transfers to Retention Account ), the Borrowers shall, without demand, procure that there is credited to the relevant Retention Account, on the date on which the relevant amount would have been transferred from the relevant Earnings Account, an amount equal to the amount of the shortfall.


17.6	Application of Accounts The Borrowers shall procure that there is transferred from the relevant Retention Account to the Agent for the account of the Lenders:


17.6.1	on each Repayment Date in respect of the relevant Tranche, the amount of the Repayment Instalment in respect of the relevant Tranche then due; and


17.6.2	on each Interest Payment Date in respect of the relevant Tranche, the amount of interest in respect of relevant Tranche then due,

and the Borrowers irrevocably authorise the Security Agent to instruct the Account Bank to make those transfers.


17.7	Borrowers' obligations not affected If for any reason the amount standing to the credit of the relevant Retention Account is insufficient to pay any Repayment Instalment or to make any payment of interest when due, the Borrowers' obligation to pay that Repayment Instalment or to make that payment of interest shall not be affected.


17.8	Application of Earnings During the Facility Period the Earnings are to be applied as follows:


17.8.1	firstly, towards payment of Operating Expenses;


17.8.2	secondly, towards payment of all other sums other than principal and interest owing to the Finance Parties under the Finance Documents and Sinosure under the Sinosure Policies;


17.8.3	thirdly, towards payment of debt service under this Agreement; and


17.8.4	fourthly, towards payment of debt service under the Master Agreement,

and subject to no Event of Default being continuing, the balance of the funds in the Earnings Accounts will be freely available to the Borrowers.


17.9	Relocation of Accounts On and at any time an Event of Default is continuing, the Security Agent may without the consent of the Borrowers instruct the Account Bank to relocate the Accounts to any other branch of the Account Bank, without prejudice to the continued application of this Clause 17 and the rights of the Finance Parties under the Finance Documents.


17.10	Access to information The Borrowers agree that the Security Agent (and its nominees) may from time to time during the Facility Period review the records held by the Account Bank (whether in written or electronic form) in relation to the Accounts, and irrevocably waive any right of confidentiality which may exist in relation to those records.

^17.11

Statements Without prejudice to the rights of the Security Agent under Clause 17.10 ( Access to information ), the Borrowers shall procure that the Account Bank provides to the Security Agent, no less frequently than each calendar month during the Facility Period, written statements of account showing all entries made to the credit and debit of each of the Accounts during the immediately preceding calendar month.

17.12

Application after acceleration From and after the giving of notice to the Borrowers by the Agent under Clause 23.2 ( Acceleration ), the Borrowers shall procure that all sums from time to time standing to the credit of any of the Accounts are immediately transferred to the Security Agent or any Receiver or Delegate for application in accordance with Clause 17.13 ( Application of moneys by Security Agent ) and the Borrowers irrevocably authorise the Security Agent to instruct the Account Bank to make those transfers.


17.13	Application of moneys by Security Agent The Borrowers and the Finance Parties irrevocably authorise the Security Agent or any Receiver or Delegate to apply all moneys which it receives and is entitled to receive:


17.13.1	pursuant to a sale or other disposition of a Vessel or any right, title or interest in a Vessel; or


17.13.2	by way of payment of any sum in respect of the Master Agreement Proceeds, any Intercompany Loan Agreement, the Insurances, Earnings, any Charter or any Requisition Compensation; or


17.13.3	by way of transfer of any sum from any of the Accounts; or


17.13.4	otherwise under or in connection with any Security Document,

in or towards satisfaction of the Indebtedness in the following order:


17.13.5	first, any unpaid fees, costs, expenses and default interest due to the Agent and the Security Agent (and, in the case of the Security Agent, to any Receiver or Delegate) under all or any of the Finance Documents, such application to be apportioned between the Agent and the Security Agent pro rata to the aggregate amount of such items due to each of them;


17.13.6	second, any unpaid fees, costs, expenses (including any sums paid by the Lenders under Clause 26.11 ( Indemnity )) of the Lenders due under this Agreement, such application to be apportioned between the Lenders pro rata to the aggregate amount of such items due to each of them;


17.13.7	third, any accrued but unpaid default interest due to the Lenders under this Agreement, such application to be apportioned between the Lenders pro rata to the aggregate amount of such default interest due to each of them;


17.13.8	fourth, any other accrued but unpaid interest due to the Lenders under this Agreement, such application to be apportioned between the Lenders pro rata to the aggregate amount of such interest due to each of them;


17.13.9	fifth, any principal of the Loan due and payable but unpaid under this Agreement, such application to be apportioned between the Lenders pro rata to the aggregate amount of such principal due to each of them; and


17.13.10	sixth, any other sum due and payable to any Finance Party but unpaid under all or any of the Finance Documents, such application to be apportioned between the Finance Parties pro rata to the aggregate amount of any such sum due to each of them,

Provided that any part of the Indebtedness arising out of the Master Agreement shall be satisfied only after every other part of the Indebtedness for the time being due and payable has been satisfied in full; and

Without prejudice to the foregoing, if Sinosure has paid and the Sinosure Agent or the Lenders have received all amounts payable under any Sinosure Policy, Sinosure may provide for a different manner of application from that set out in Clause 17.13 above either as regards a specified sum or sums or as regards sums in a specified category or categories.


17.1	Sinosure Insurance Proceeds

17.1.20

If the Sinosure Agent or the Lenders receive any Sinosure Insurance Proceeds pursuant to a Sinosure Policy, the Sinosure Agent or the Lenders (as the case may be) shall pay the amount actually received by it to the Security Agent to be applied in or towards satisfaction of any principal of the Tranche relating to the relevant Sinosure Policy that is due and payable but unpaid under this Agreement, such application to be apportioned between the Lenders pro rata to the aggregate amount of such principal due to each of them in respect of the relevant Tranche. Any Sinosure Insurance Proceeds received by the Sinosure Agent or the Lenders (as the case may be) or applied by the Security Agent pursuant to this Clause 17.14.1 shall not be deemed to satisfy, reduce, release or prejudice any of the obligations of any Security Party under any Finance Document in whole or in part which obligations shall remain due and payable notwithstanding the receipt or application of such Sinosure Insurance Proceeds.

17.1.21

Notwithstanding any provision to the contrary in any Finance Document, in the event Sinosure pays out in full or in part the Sinosure Insurance Proceeds in accordance with a Sinosure Policy, the obligations of the Security Parties under the Finance Documents shall not be reduced or affected and Sinosure shall be entitled, to the extent of such payment, to exercise the rights the Finance Parties may hold (whether presently or in the future) against any Security Party pursuant to the relevant Finance Document or any relevant laws and/or regulations, as the case may be (but without prejudice to the exercise of such rights by the Finance Parties) unless and until such Sinosure Insurance Proceeds and the interest accrued thereon are fully reimbursed to Sinosure and with respect to the obligations of the Security Parties owed to the Finance Parties under the Finance Documents (or any of them), such obligations shall additionally be owed to Sinosure by way of subrogation of the rights of the Finance Parties.

17.1.22

Each of the Lenders agrees that as soon as Sinosure irrevocably and unconditionally pays in full all moneys due under a Sinosure Policy then each of the Lenders shall promptly transfer to Sinosure their respective Commitments in proportion to and in accordance with the schedule of payments made by Sinosure under that Sinosure Policy whereupon Sinosure shall, upon receipt by the Agent of a duly completed Transfer Certificate in accordance with the provisions of Clause 24.5 ( Procedure for transfer ), and modified to the extent agreed between the Finance Parties and Sinosure for consistency with the terms and conditions of the relevant Sinosure Policy, be a transferee and as such shall be entitled to the rights and benefits of the Lenders under the Finance Documents to the extent of its interest. Notwithstanding any provisions to the contrary in any Finance Document, the Borrowers consent to such assignment and transfer.

17.1.23

The Borrowers shall indemnify Sinosure, the Sinosure Agent and the Lenders in respect of any costs or expenses (including legal fees) suffered or incurred by Sinosure, the Sinosure Agent and the Lenders in connection with the transfer referred to hereinabove or in connection with any review by Sinosure of any Default or dispute between any Security Party and any of the Finance Parties occurring prior to the transfer referred to this Clause 17.14.

17.2

Retention on account Moneys to be applied by the Security Agent or any Receiver or Delegate under Clause 17.13 ( Application of moneys by Security Agent ) or Clause 17.14 ( Sinosure Insurance Proceeds ) shall be applied as soon as practicable after the relevant moneys are received by it, or otherwise become available to it, save that (without prejudice to any other provisions contained in any of the Security Documents) the Security Agent or any Receiver or Delegate may retain any such moneys by crediting them to a suspense account for so long and in such manner as the Security Agent or such Receiver or Delegate may from time to time determine with a view to preserving the rights of the Finance Parties or any of them to prove for the whole of the Indebtedness (or any relevant part) against the Borrowers or any of them or any other person liable.

17.3

Additional security If at any time the aggregate of the FMV of the Vessels and the value of any additional security (such value to be the face amount of the deposit (in the case of cash), determined conclusively by appropriate advisers appointed by the Agent (in the case of other charged assets), and determined by the Agent in its discretion (in all other cases)) for the time being provided to the Security Agent under this Clause 17.16 is less than 130% of the amount of the Loan then outstanding (the " VTL Coverage "), the Borrowers shall, within 30 days of the Agent's request, at the Borrowers' option:


17.3.3	pay to the Security Agent or to its nominee a cash deposit in the amount of the shortfall to be secured in favour of the Security Agent as additional security for the payment of the Indebtedness; or


17.3.4	give to the Security Agent other additional security in amount and form acceptable to the Security Agent in its discretion; or


17.3.5	prepay the Loan in the amount of the shortfall.

Clauses 6.4 ( Reborrowing ), 7.3.3 ( Voluntary prepayment of Loan ) and 7.8 ( Restrictions ) shall apply, mutatis mutandis , to any prepayment made under this Clause 17.16 and the value of any additional security provided shall be determined by the Agent in its discretion.

If the Borrowers have provided additional security in accordance with the Agent's request under this Clause 17.16, the Borrowers may no less than six months after the Borrowers have provided additional security in accordance with the Agent's request under this Clause 17.16 request that the Agent test compliance with the VTL Coverage. The Borrowers shall bear the cost of valuations obtained by the Agent pursuant to this paragraph to determine the FMV of a Vessel and the value of any additional security provided in accordance with the Agent's request under this Clause 17.16. If the Agent shall determine when testing compliance with the VTL Coverage pursuant to this paragraph that all or any part of that additional security may be released without resulting in a shortfall in the VTL Coverage, provided that no Event of Default is continuing then the Security Agent shall effect a release of all or any part of that additional security in accordance with the Agent's instructions, but this shall be without prejudice to the Agent's right to make a further request under this Clause 17.16 should the value of the remaining security subsequently merit it.

The Agent may obtain valuations to determine the FMV of a Vessel for the purpose of testing compliance of this Clause 17.16 at any time. The Agent shall bear the cost of valuations obtained by the Agent to determine the FMV of a Vessel for the purpose of testing compliance of this Clause 17.16 provided that if an Event of Default is continuing the Borrowers shall bear the cost of valuations obtained by the Agent to determine the FMV of a Vessel for the purpose of testing compliance of this Clause 17.16.

17.4

Contingent Amount The Borrowers and the Swap Provider have agreed to enter into the Master Agreement for the hedging of the Borrowers' exposure to interest rate fluctuations. The Borrowers and the Swap Provider have agreed that the Mortgages shall secure any obligations payable by the Borrowers to the Swap Provider at any time pursuant to the Master Agreement in a maximum aggregate amount of up to $30,600,000. The Borrower and the Swap Provider have further agreed that each of the other Security Documents shall not have any limitation as to the amount payable by the Borrowers to the Swap Provider at any time pursuant to the Master Agreement which is secured by such other Security Documents.


18	Guarantee and Indemnity


18.1	Guarantee and indemnity The Guarantor irrevocably and unconditionally jointly and severally:


18.1.5	guarantees to each Finance Party punctual performance by each other Security Party of all that Security Party's obligations under the Finance Documents;


18.1.6	undertakes with each Finance Party that whenever another Security Party 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 was the principal obligor; and

18.1.7

agrees with each Finance Party that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify that Finance Party immediately on demand against any cost, loss or liability it incurs as a result of a Security Party 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 Clause 18 if the amount claimed had been recoverable on the basis of a guarantee.


18.2	Continuing Guarantee This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Security Party under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.

18.3

Reinstatement If any discharge, release or arrangement (whether in respect of the obligations of any Security Party or any security for those obligations or otherwise) is made by a Finance Party in whole or in part on the basis of any payment, security or other disposition which is avoided or must be restored in insolvency, liquidation, administration or otherwise, without limitation, then the liability of the Guarantor under this Clause 18 will continue or be reinstated as if the discharge, release or arrangement had not occurred.


18.4	Waiver of defences The obligations of the Guarantor under this Clause 18 will not be affected by an act, omission, matter or thing which, but for this Clause 18.4, would reduce, release or prejudice any of its obligations under this Clause 18 (without limitation and whether or not known to it or any Finance Party) including:


18.4.1	any time, waiver or consent granted to, or composition with, any Security Party or other person;


18.4.2	the release of any other Security Party or any other person under the terms of any composition or arrangement with any creditor of any Security Party;


18.4.3	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 Security Party 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;


18.4.4	any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of a Security Party or any other person;


18.4.5	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;


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


18.4.7	any insolvency or similar proceedings.

18.5

Guarantor intent Without prejudice to the generality of Clause 18.4 ( Waiver of defences ), 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 facility or amount might be made available from time to time; and any fees, costs and/or expenses associated with any of the foregoing.


18.6	Immediate recourse The Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from the Guarantor under this Clause 18. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.


18.7	Appropriations Until all amounts which may be or become payable by the Security Parties under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:


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


18.7.6	hold in an interest-bearing suspense account any moneys received from the Guarantor or on account of the Guarantor's liability under this Clause 18.

18.8

Deferral of Guarantor's rights Until all amounts which may be or become payable by the Security Parties under or in connection with the Finance Documents have been irrevocably paid in full and unless the Agent 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 Clause 18:


18.8.1	to be indemnified by a Security Party;


18.8.2	to claim any contribution from any other guarantor of any Security Party's obligations under the Finance Documents;


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


18.8.4	to bring legal or other proceedings for an order requiring any Security Party to make any payment, or perform any obligation, in respect of which the Guarantor has given a guarantee, undertaking or indemnity under Clause 18.1 ( Guarantee and indemnity );


18.8.5	to exercise any right of set-off against any Security Party; and/or


18.8.6	to claim or prove as a creditor of any Security Party in competition with any Finance Party.

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 Finance Parties by the Security Parties under or in connection with the Finance Documents to be repaid in full on trust for the Finance Parties and shall promptly pay or transfer the same to the Agent or as the Agent may direct for application in accordance with Clause 30 ( Payment mechanics ).


^18.9	Additional security This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Finance Party.

18.10

Subordination The Guarantor agrees and undertakes with the Finance Parties that all claims of whatsoever nature which it has or may have at any time against the Borrowers or any of them or any other Security Party or any of their respective property or assets shall rank after and be in all respects subordinate to any and all claims, whether actual or contingent, which the Finance Parties have or may have at any time against the Borrowers or any of them or such other Security Party or any of its property or assets and that it will not without the prior written consent of the Agent (acting on the instructions of the Majority Lenders):


18.10.1	demand or accept payment in whole or in part of any moneys owing to it by the Borrowers or any of them or any other Security Party;


18.10.2	take any steps to enforce its rights to recover any moneys owing to it by the Borrowers or any of them or any other Security Party and more particularly (but without limitation) take or issue any judicial or other legal proceedings against the Borrowers or any of them or other Security Party or any of their respective property or assets; or


18.10.3	prove in the liquidation or other dissolution of the Borrowers or any of them or other Security Party in competition with a Finance Party.


Section 8	Representations, Undertakings and Events of Default


19	Representations


19.1	Representations Each Borrower and the Guarantor make the representations and warranties set out in this Clause 19 to each Finance Party.


19.1.6	Status Each of the Security Parties:


(a)	is a corporation 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.


19.1.7	Binding obligations Subject to the Legal Reservations:


(c)	the obligations expressed to be assumed by each of the Security Parties in each of the Relevant Documents to which it is a party are legal, valid, binding and enforceable obligations; and


(d)	(without limiting the generality of Clause 19.1.2(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.


19.1.8	Non-conflict with other obligations The entry into and performance by each of the Security Parties of, and the transactions contemplated by, the Relevant Documents do not conflict with:


(a)	any law or regulation applicable to such Security Party;


(b)	the constitutional documents of such Security Party; or


(c)	any agreement or instrument binding upon such Security Party or any of such Security Party's assets or constitute a default or termination event (however described) under any such agreement or instrument.


19.1.9	Power and authority


(a)	Each of the Security Parties 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 Security Party 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.


19.1.10	Validity and admissibility in evidence All Authorisations required or desirable:


(a)	to enable each of the Security Parties 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 each Finance Party to enforce and exercise all its rights under the Relevant Documents; and


(b)	to make the Relevant Documents to which any Security Party is a party admissible in evidence in its Relevant Jurisdictions,

have been obtained or effected and are in full force and effect.


19.1.11	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 Security Party.


(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 Security Party.


19.1.12	Insolvency No corporate action, legal proceeding or other procedure or step described in Clause 23.1.7 ( Insolvency proceedings ) or creditors' process described in Clause 23.1.8 ( Creditors' process ) has been taken or threatened in relation to a Security Party; and none of the circumstances described in Clause 23.1.6 ( Insolvency ) applies to a Security Party.

19.1.13

No filing or stamp taxes Under the laws of the Relevant Jurisdictions of each relevant Security Party 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 registration of each Mortgage at the Ships Registry where title to the relevant Vessel is registered in the ownership of the relevant Borrower and payment of associated fees, which registration, filing, taxes and fees will be made and paid promptly after the date of the relevant Finance Document.


19.1.14	Deduction of Tax None of the Security Parties 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.


19.1.15	No default


(a)	No Event of Default and, on the date of this Agreement and each Drawdown Date, no Default has occurred and is continuing or is reasonably likely to result from the advance of any Tranche 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 Security Parties or to which its assets are subject which has or is reasonably likely to have a Material Adverse Effect.


19.1.16	No misleading information Save as disclosed in writing to the Agent and the Arrangers prior to the date of this Agreement:

(a)

all material information provided to a Finance Party by or on behalf of any of the Security Parties 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 any Finance Party 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 Security Parties (including its advisers) to a Finance Party was true, complete and accurate in all material respects as at the date it was provided and is not misleading in any respect.


19.1.17	Financial statements


(a)	The Original Financial Statements were prepared in accordance with US GAAP consistently applied.


(b)	The audited Original Financial Statements give a true and fair view of the Guarantor's financial condition and results of operations during the relevant financial year.


(c)	There has been no material adverse change in the Guarantor's assets, business or financial condition since the date of the Original Financial Statements.


(d)	The Guarantor's most recent financial statements delivered pursuant to Clause 20.1 ( Financial statements ):


(i)	have been prepared in accordance with US 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.


(e)	Since the date of the most recent financial statements delivered pursuant to Clause 20.1 ( Financial statements ) there has been no material adverse change in the business, assets or financial condition of the Guarantor.


19.1.18	No proceedings pending or threatened No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which are reasonably likely to have a Material Adverse Effect have been started or threatened against any of the Security Parties.


19.1.19	No breach of laws None of the Security Parties has breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.


19.1.20	Environmental laws


(a)	Each of the Security Parties is in compliance with Clause 22.3 ( Environmental compliance ) and 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 is threatened against any of the Security Parties where that claim has or is reasonably likely, if determined against that Security Party, to have a Material Adverse Effect.


19.1.21	Taxation


(a)	None of the Security Parties 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 Security Parties with respect to Taxes.


(c)	Each of the Security Parties is resident for Tax purposes only in its Original Jurisdiction.


19.1.22	Anti-corruption law Each of the Security Parties and each Affiliate of any of them has conducted its businesses in compliance with applicable anti-corruption laws and has instituted and maintained policies and procedures designed to promote and achieve compliance with such laws.


19.1.23	No Encumbrance or Financial Indebtedness


(a)	Other than any Encumbrance arising out of or pursuant to the SBI Puro Finance Documents which shall be released on the Drawdown Date in respect of Tranche A, no Encumbrance exists over all or any of the present or future assets of the Borrowers.


(b)	The Borrowers do not have any Financial Indebtedness outstanding other than (i) as permitted by this Agreement and (ii) in respect of Borrower A the SBI Puro Indebtedness which shall be refinanced on the Drawdown Date in respect of Tranche A.


19.1.24	Pari passu ranking The payment obligations of each of the Security Parties 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.


19.1.25	No adverse consequences


(a)	It is not necessary under the laws of the Relevant Jurisdictions of any of the Security Parties:


(i)	in order to enable any Finance Party to enforce its rights under any Finance Document; or


(ii)	by reason of the execution of any Finance Document or the performance by it of its obligations under any Finance Document,

that any Finance Party should be licensed, qualified or otherwise entitled to carry on business in any of the Relevant Jurisdictions of any of the Security Parties.


(b)	No Finance Party is or will be deemed to be resident, domiciled or carrying on business in any of the Relevant Jurisdictions of any of the Security Parties by reason only of the execution, performance and/or enforcement of any Finance Document.


19.1.26	Disclosure of material facts No Borrower nor the Guarantor is aware of any material facts or circumstances which have not been disclosed to the Agent and which might, if disclosed, have adversely affected the decision of a person considering whether or not to make loan facilities of the nature contemplated by this Agreement available to the Borrowers.

19.1.27

Completeness of Relevant Documents The copies of any Relevant Documents provided or to be provided by the Borrowers to the Agent in accordance with Clause 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 Agent.


^19.1.28	No Immunity No Security Party or any of its assets is immune to any legal action or proceeding

19.1.29

Money laundering Any borrowing by a 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 Directive (2005/EC/60) of the European Parliament and of the Council of the European Communities.


19.1.30	Sanctions As regards Sanctions:


(a)	none of the Security Parties or any Affiliate of any of them is a Prohibited Person or is owned or controlled by, or acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person and none of such persons owns or controls a Prohibited Person;


(b)	no proceeds of the Loan shall be made available, directly or indirectly, to or for the benefit of a Prohibited Person or otherwise shall be, directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions; and


(c)	each of the Security Parties and each Affiliate of any of them is in compliance with all Sanctions.

19.1.31

Patriot Act To the extent applicable the Borrowers and the Guarantor are in compliance with (i) the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 C.F.R, Subtitle B, Chapter V) and any other enabling legislation or executive order relating thereto and (ii) the Patriot Act. No part of the proceeds of the Loan will be used, directly or indirectly, for any payments to any government official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.


19.2	Repetition Each Repeating Representation is deemed to be repeated by each Borrower and the Guarantor by reference to the facts and circumstances then existing on the date of each Drawdown Request, on each Drawdown Date, on the first day of each Interest Period.

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20	Information Undertakings

The undertakings in this Clause 20 remain in force for the duration of the Facility Period.


20.1	Financial statements The Guarantor shall supply to the Agent in sufficient copies for all of the Lenders:


20.1.3	as soon as the same become available, but in any event within 120 days after the end of each of its financial years, its audited consolidated financial statements for that financial year; and


20.1.4	as soon as the same become available, but in any event within 90 days after the end of each half year during each of its financial years, its unaudited consolidated semi-annual management accounts for that half year.


20.2	Compliance Certificate

20.2.8

Each Borrower shall supply to the Agent, with each set of its annual financial statements delivered pursuant to Clause 20.1.1 ( Financial statements ) and each set of its management accounts delivered pursuant to Clause 20.1.2 ( Financial statements ) , a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 21 ( Financial Covenants ) as at the date as at which those financial statements were drawn up.


20.2.9	Each Borrower shall supply to the Agent on 31 December and 30 June of each year during the Facility Period a Compliance Certificate stating only that no Event of Default is continuing.

20.2.10

Each Borrower shall supply to the Agent, with each set of its annual financial statements delivered pursuant to Clause 20.1.1 ( Financial statements ) , valuations issued no more than 30 days prior to such date by two Approved Shipbrokers evidencing the FMV of the relevant Vessel which the Agent shall use in order to determine compliance with Clause 17.16 ( Additional Security ), such valuations being at the cost of the Borrowers .


^20.2.11	Each Compliance Certificate shall be signed by the chief financial officer of the Guarantor and, in the case of each Compliance Certificate issued together with its annual financial statements, by the Borrowers' auditors.


20.3	Requirements as to financial statements

Each set of financial statements delivered by the Guarantor under Clause 20.1 ( Financial statements ):


20.3.3	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; and


20.3.4	shall be prepared using US 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 Agent that there has been a change in US GAAP, the accounting practices or reference periods and its auditors deliver to the Agent:


(e)	a description of any change necessary for those financial statements to reflect the US GAAP, accounting practices and reference periods upon which the Original Financial Statements were prepared; and


(f)	sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Agent to determine whether Clause 21 ( 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.

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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.


20.4	Information: miscellaneous Each Borrower and the Guarantor shall supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests):


20.4.1	at the same time as they are dispatched, copies of all documents dispatched by that Borrower to its shareholders generally (or any class of them) or dispatched by that Borrower or any other Security Party to its creditors generally (or any class of them);


20.4.2	promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any Security Party, and which are reasonably likely to have a Material Adverse Effect;


20.4.3	promptly, such information as the Security Agent may reasonably require about the Charged Property and compliance of the Security Parties with the terms of any Security Documents including without limitation cash flow analyses and details of the operating costs of any Vessel;

20.4.4

promptly on request, such further information regarding the financial condition, assets and operations of any Security Party (including any requested amplification or explanation of any item in the financial statements, budgets or other material provided by any Security Party under this Agreement, any changes to management of a Borrower or the Guarantor and an up to date copy of its shareholders' register (or equivalent in its Original Jurisdiction)) as any Finance Party through the Agent may reasonably request; and


20.4.5	promptly on request, such further information as any Finance Party through the Agent may reasonably request.


20.5	Notification of default


20.5.7	Each Borrower and the Guarantor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.


20.5.8	Promptly upon a request by the Agent, each Borrower shall supply to the Agent a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).


20.6	"Know your customer" checks


20.6.7	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 Security Party after the date of this Agreement; or


(c)	a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,

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Lender (for itself or, in the case of the event described in Clause 20.6.1(c), on behalf of any prospective new Lender) in order for the Agent, such Lender or, in the case of the event described in Clause 20.6.1(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 the Finance Documents including without limitation obtaining, verifying and recording certain information and documentation that will allow the Agent and any Lender to identify each Security Party in accordance with the requirements to the Patriot Act.

20.6.8

Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.


21	Financial Covenants

The following financial covenants shall apply to the Guarantor on a consolidated basis throughout the Facility Period, to be tested by reference to each set of its annual financial statements delivered pursuant to Clause 20.1.1 ( Financial statements ) and each set of its management accounts delivered pursuant to Clause 20.1.2 ( Financial statements ):

21.1

Minimum Liquidity Cash and Cash Equivalents shall at all times be the greater of (i) $50,000,000 or (ii) $850,000 per vessel owned by the Group (the “ Minimum Liquidity ”). For the purpose of this test, Cash and Cash Equivalents can include unutilised and freely available parts of revolving credit facilities with a maturity date in excess of 12 months after the date of the annual financial statements delivered pursuant to Clause 20.1.1 ( Financial statements ) or the set of management accounts delivered pursuant to Clause 20.1.2 ( Financial statements ) (as the case may be) provided that 66 ² / ₃ % of the Minimum Liquidity shall at all times consist of Cash.

21.2

Minimum Tangible Net Worth The Guarantor shall maintain a Consolidated Tangible Net Worth of not less than $500,000,000 plus (a) 25% of the Guarantor's cumulative, positive consolidated net income for each fiscal quarter commencing on or after 31 December 2013 and (b) 50% of the value of the equity proceeds realized from any issuance of equity interests in the Guarantor occurring on or after 31 December 2013.


21.3	Maximum Leverage A ratio of Net Debt to Consolidated Total Capitalisation of not more than 0.60 to 1.00.


21.4	Minimum Interest Coverage A ratio of Consolidated EBITDA to Consolidated Net Interest Expense calculated on a four quarter trailing basis greater than:


21.4.9	for the period commencing on 30 September 2015 to 31 December 2016, 1.00 to 1.00;


21.4.10	for the period commencing on 1 January 2017 to 31 December 2017, 2.00 to 1.00; and


21.4.11	for the period commencing on 1 January 2018 for the remainder of the Facility period, 2.50 to 1.00.

Following the date of this Agreement, should US GAAP requirements materially change so as to impact the covenants detailed in this Clause 21, the Guarantor and the Agent shall discuss the required amendments to the covenants detailed in this Clause 21 so as to reflect such changes to US GAAP.

The following definitions shall apply to this Clause 21:

“ Cash ” means any credit balance on any deposit, savings, current or other account, and any cash in hand held with banks or other financial institutions of the Group which is:


21.4.12	not subject to any Encumbrance (other than pursuant to any Security Document);


21.4.13	denominated and payable in a freely transferable and freely convertible currency; and


21.4.14	capable of being remitted to the Group.

“ Cash Equivalents ” means:


(a)	unencumbered securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof);


(b)	time deposits, certificates of deposit or deposits (in each case, unencumbered) in the interbank market of any commercial bank of recognized standing organized under the laws of the United States of America, any state thereof or any foreign jurisdiction having capital and surplus in excess of $500,000,000; and


(c)	such other securities or instruments as the Majority Lenders shall agree in writing,

and in respect of both (a) and (b) above, with a rating category of at least “A - ” by Standard & Poor's Rating Services and “A” by Moody's Investors Service Limited (or the equivalent used by another rating agency) ( provided that , in the case of (b) above only, such rating category shall not be applicable for time deposits, certificates of deposit or deposits (in each case, unencumbered) in the interbank market of any commercial bank which is a Lender), and in each case having maturities of not more than ninety (90) days from the date of acquisition.

“ Consolidated EBITDA ” means, for any accounting period, the consolidated net income of the Guarantor for that accounting period:


(a)	plus , to the extent deducted in computing the net income of the Guarantor for that accounting period, the sum, without duplication, of:


(i)	all federal, state, local and foreign income taxes and tax distributions;


(ii)	Consolidated Net Interest Expense;


(iii)	depreciation, depletion, amortization of intangibles and other non-cash charges or non-cash losses (including non-cash transaction expenses and the amortization of debt discounts) and any extraordinary losses not incurred in the ordinary course of business;


(iv)	expenses incurred in connection with a special or intermediate survey (including any underwater survey done in lieu thereof) of a vessel owned by the Group during such period; and


(v)	any drydocking expenses;


(b)	minus , to the extent added in computing the consolidated net income of the Guarantor for that accounting period, (i) any non-cash income or losses, non-cash gains or losses and (ii) any extraordinary gains or losses on asset sales not incurred in the ordinary course of business.

“ Consolidated Funded Debt ” means, for any accounting period, the sum of the following for the Guarantor determined (without duplication) on a consolidated basis for such period and in accordance with US GAAP consistently applied:


(a)	all Financial Indebtedness; and


(a)	all obligations to pay a specific purchase price for goods or services whether or not delivered or accepted (including take-or-pay and similar obligations which in accordance with US GAAP would be shown on the liability side of a balance sheet),

provided that balance sheet accruals for future dry docking expenses shall not be classified as Consolidated Funded Debt.

“ Consolidated Net Interest Expense ” means the aggregate of all interest, commissions, discounts and other costs, charges or expenses accruing that are due from the Guarantor and all of its Subsidiaries during the relevant accounting period less (i) interest income received, (ii) commitment fees and (iii) amortization of deferred charges and arrangement fees, determined on a consolidated basis in accordance with US GAAP and as shown in the consolidated statements of income for the Guarantor.

“ Consolidated Tangible Net Worth ” means, on a consolidated basis, the total shareholders’ equity (including retained earnings) of the Guarantor, minus goodwill.

“ Consolidated Total Capitalization ” means Consolidated Tangible Net Worth plus Consolidated Funded Debt.

“ Net Debt ” means Financial Indebtedness less Cash and Cash Equivalents.


22	General Undertakings

The undertakings in this Clause 22 remain in force for the duration of the Facility Period.


22.1	Authorisations Each Borrower and the Guarantor shall promptly:


22.1.5	obtain, comply with and do all that is necessary to maintain in full force and effect; and


22.1.6	supply certified copies to the Agent of,

any Authorisation required under any law or regulation of a Relevant Jurisdiction to:


(a)	enable any Security Party 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 Security Party to carry on its business where failure to do so has or is reasonably likely to have a Material Adverse Effect.


22.2	Compliance with laws

Each Borrower and the Guarantor shall comply (and shall procure that each other Security Party 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 anti-corruption laws, to which Clause 22.5 applies) failure so to comply has or is reasonably likely to have a Material Adverse Effect.


22.3	Environmental compliance

Each Borrower and the Guarantor shall:


22.3.15	comply with all Environmental Laws;


22.3.16	obtain, maintain and ensure compliance with all requisite Environmental Approvals; and


22.3.17	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.


22.4	Environmental Claims

Each Borrower and the Guarantor shall promptly upon becoming aware of the same, inform the Agent in writing of:


22.4.9	any Environmental Claim against any of the Security Parties which is current, pending or threatened; and


22.4.10	any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any of the Security Parties,

where the claim, if determined against that Security Party, has or is reasonably likely to have a Material Adverse Effect.


22.5	Anti-corruption law


22.5.1	Each Borrower and the Guarantor shall not (and shall procure that no other Security Party will) directly or indirectly use the proceeds of the Loan for any purpose which would breach the Bribery Act 2010, the United States Foreign Corrupt Practices Act of 1977 or other similar legislation in other jurisdictions.


22.5.2	Each Borrower and the Guarantor shall (and shall procure that each other Security Party and each Affiliate of any of them shall):


(d)	conduct its businesses in compliance with applicable anti-corruption laws; and


(e)	maintain policies and procedures designed to promote and achieve compliance with such laws.


22.6	Taxation


22.6.4	Each Borrower and the Guarantor shall (and shall procure that each other Security Party 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 Agent under Clause 20.1 ( 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.


22.6.5	No Borrower nor the Guarantor may (and no other Security Party may) change its residence for Tax purposes.


22.7	Evidence of good standing Each Borrower will from time to time if requested by the Agent provide the Agent with evidence in form and substance satisfactory to the Agent that the Security Parties and all corporate shareholders of any of the Security Parties remain in good standing.


22.8	Pari passu ranking Each Borrower and the Guarantor shall ensure that at all times any unsecured and unsubordinated claims of a Finance Party 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.


22.9	Protection of Sinosure Policy

22.9.1

If at any time in the opinion of the Agent, the Sinosure Agent or Sinosure, any provision of a Finance Document contradicts or conflicts with any provision of a Sinosure Policy or Sinosure requires any further action to be taken or documents to be entered into for a Sinosure Policy to remain in full force and effect, each Borrower shall take such action as the Agent, the Sinosure Agent or Sinosure shall require to remove any contradiction or conflict and to ensure such Sinosure Policy remains in full force and effect.


22.9.2	Without prejudice to Clause 22.9.1, each Borrower and the Guarantor shall:


(a)	take such action or refrain from taking such action as the Agent, the Sinosure Agent or Sinosure shall require in order to ensure that the beneficiaries under each Sinosure Policy comply with and continue to benefit from each Sinosure Policy or to maintain the effectiveness of each Sinosure Policy; and


(b)	not do or omit to do or cause anything to be done or omitted which might be contrary to or incompatible with the obligations undertaken by the Lenders under or in connection with a Sinosure Policy;


(c)	execute all such documents and instruments and do all such other acts and things as Sinosure or any Finance Party may:


(i)	reasonably require in order to comply with, and carry out the transactions contemplated by, the Finance Documents and any documents required to be delivered under the Finance Documents; and


(ii)	require in order for the beneficiaries under each Sinosure Policy to comply with and continue to benefit from each Sinosure Policy or to maintain the effectiveness of each Sinosure Policy.

22.9.3 Each Borrower will:


(a)	cooperate with the Agent, the Sinosure Agent or the Lenders on their reasonable request to take all steps necessary on the part of the Borrowers to ensure that each Sinosure Policy remains in full force and effect throughout the Facility Period; and


(b)	use reasonable endeavours to assist the Sinosure Agent or the Lenders in making any claim under a Sinosure Policy to the extent they are able to.


22.9.4	Each Borrower will promptly supply to the Sinosure Agent or the Lenders copies of all financial or other information reasonably required by the Sinosure Agent or the Lenders to satisfy any request for information made by Sinosure to the Sinosure Agent or the Lenders pursuant to a Sinosure Policy.


22.10	Negative pledge

In this Clause 22.10 " Quasi-Security " means an arrangement or transaction described in Clause 22.10.2.

Except as permitted under Clause 22.10.3:


22.10.1	no Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) create nor permit to subsist any Encumbrance over any of its assets; and


22.10.2	no Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will):


(c)	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 Security Party;


(d)	sell, transfer or otherwise dispose of any of its receivables on recourse terms;


(e)	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


(f)	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.


22.10.3	Clauses 22.10.1 and 22.10.2 do not apply to any Encumbrance or (as the case may be) Quasi-Security, which is a Permitted Encumbrance.


22.11	Disposals


22.11.1	Except as permitted under Clause 22.11.2, no Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) without the prior written consent of the Agent 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.


22.11.2	Clause 22.11.1 does not apply to any sale, lease, transfer or other disposal which is a Permitted Disposal.


22.12	Arm's length basis


22.12.1	Except as permitted under Clause 22.12.2, no Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) enter into any transaction with any person except on arm's length terms and for full market value.


22.12.2	Fees, costs and expenses payable under the Relevant Documents in the amounts set out in the Relevant Documents delivered to the Agent under Clause 4.1 ( Initial conditions precedent) or agreed by the Agent shall not be a breach of this Clause 22.12.


22.13	Merger No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction.


22.14	Change of business No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) make any substantial change to the general nature of its business from that carried on at the date of this Agreement.


22.15	No other business No Borrower shall engage in any business other than the ownership, operation, chartering and management of the relevant Vessel.


22.16	No acquisitions No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) 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.


22.17	No Joint Ventures No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will):


22.17.1	enter into, invest in or acquire (or agree to acquire) any shares, stocks, securities or other interest in any Joint Venture; or


22.17.2	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).


22.18	No borrowings No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) incur or allow to remain outstanding any Financial Indebtedness except for:


22.18.1	the Loan


22.18.2	any Intercompany Loans made available pursuant to an Intercompany Loan Agreement provided that :


(a)	the rights of any lender under such Intercompany Loan are (i) fully subordinated to the rights of the Finance Parties under the Finance Documents and (ii) assigned to the Security Agent pursuant to an Intercompany Subordination and Assignment Agreement; and


(b)	the rights of a Borrower under such Intercompany Loan Agreement are assigned to the Security Agent pursuant to an Intercompany Loan Assignment,

and in each case any lender under such Intercompany Loan and the relevant Borrower shall enter into such supporting and ancillary documentation in respect of such Intercompany Subordination and Assignment Agreement and Intercompany Loan Assignment as the Agent may reasonably request and the Agent shall be permitted to obtain such legal opinions in respect of such Intercompany Subordination and Assignment Agreement and Intercompany Loan Assignment as the Agent may reasonably require (the costs in respect of which shall be for the account of the Borrowers);


22.18.3	under the Master Agreement;


22.18.4	any Financial Indebtedness arising in the ordinary course of business in connection with the chartering, operation or repair of a Vessel; or


22.18.5	the SBI Puro Indebtedness.


22.19	No substantial liabilities Except in the ordinary course of business, no Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) incur any liability to any third party which is in the Agent's opinion of a substantial nature.


22.20	No loans or credit No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) 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 relevant Vessel.


22.21	No guarantees or indemnities No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) incur or allow to remain outstanding any guarantee in respect of any obligation of any person.


22.22	No dividends or payments pursuant to Intercompany Loans In the event that an Event of Default is continuing or an Event of Default would result from undertaking any of the below no Borrower shall:


(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;


(c)	redeem, repurchase, defease, retire or repay any of its share capital or resolve to do so;


(d)	issue any new shares in its share capital or resolve to do so; or


(e)	make any payment or repayment pursuant to any Intercompany Loan or Intercompany Loan Agreement.


22.23	Inspection of records Each Borrower and the Guarantor will permit the inspection of its financial records and accounts from time to time by the Agent or its nominee.

22.24

No change in Relevant Documents No Borrower nor the Guarantor shall (and shall procure that no other Security Party will) amend, vary, novate, supplement, supersede, waive or terminate any term of, any of the Relevant Documents which are not Finance Documents and excluding the MOAs (save that no reduction to a Contract Price shall be permitted) and the Management Agreement, or any other document delivered to the Agent pursuant to Clause 4.1 ( Initial conditions precedent ) or Clause 4.2 ( Further conditions precedent ) or Clause 4.3 ( Conditions subsequent ).


22.25	Further assurance


22.25.1	Each Borrower and the Guarantor shall (and shall procure that each other Security Party shall) promptly do all such acts or execute all such documents (including assignments, transfers, mortgages, charges, notices and instructions) as the Security Agent may reasonably specify (and in such form as the Security Agent may reasonably require in favour of the Security Agent or its nominee(s)):

(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 Security Agent or the Finance Parties provided by or pursuant to the Finance Documents or by law;


(b)	to confer on the Security Agent or confer on the Finance Parties an Encumbrance over any property and assets of that Borrower (or that other Security Party 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.

22.25.2

Each Borrower and the Guarantor shall (and shall procure that each other Security Party 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 Security Agent or the Finance Parties by or pursuant to the Finance Documents.


^22.26	No dealings with Master Agreement No Borrower shall assign, novate or encumber or in any other way transfer any of its rights or obligations under the Master Agreement, nor enter into any interest rate exchange or hedging agreement with anyone other than the Swap Provider.


^22.27	Permitted Transactions No Borrower shall maintain outstanding Transactions the aggregate notional amount of which shall exceed the amount of the relevant Tranche from time to time.


^22.28	No change of ownership of the Borrowers The Guarantor will not permit any change in the beneficial ownership or control of the Borrowers or any of them from that advised to the Agent by the Borrowers at the date of this Agreement and will procure that each Borrower will remain a wholly owned subsidiary of the Guarantor.

^22.29

Employees and ERISA Compliance No Borrower nor the Guarantor shall employ any individuals, sponsor, maintain or become obligated to contribute to any Plan or any other pension scheme. Each Borrower and the Guarantor shall provide prompt written notice to the Agent in the event that such Borrower or the Guarantor becomes aware that it has incurred or is reasonably likely to incur any liability with respect to any Plan or any other pension scheme, that, individually or in the aggregate with any other such liability would be reasonably expected to have a Material Adverse Effect


22.30	Sanctions


22.30.1	Each Borrower and the Guarantor:


(a)	undertakes that it, each Security Party, any other member of the Group, or any Affiliate of any of them, or any director, officer, agent, employee or person acting on behalf of any of the foregoing, is not a Restricted Person and does not act directly or indirectly on behalf of a Restricted Person;


(b)	shall, and shall procure that each Security Party, each other member of the Group, and each Affiliate of any of them, shall, not use any revenue or benefit derived from any activity or dealing with a Restricted Person in discharging any obligation due or owing to the Finance Parties;


(c)	shall procure that no proceeds from any activity or dealing with a Restricted Person are credited to any bank account held with any Finance Party in its name, in the name of any Security Party, in the name of any other member of the Group, or any Affiliate of any of them;


(d)	undertakes that it, each Security Party, each other member of the Group, and each Affiliate of any of them, has taken reasonable measures to ensure compliance with Sanctions;


(e)	shall, and shall procure that each Security Party and each other member of the Group shall, to the extent permitted by law promptly upon becoming aware of them supply to the Agent details of any claim, action, suit, proceedings or investigation against it with respect to Sanctions by any Sanctions Authority; and


(f)	shall not accept, obtain or receive any goods or services from any Restricted Person, except (without limiting Clause 22.2 ( Compliance with laws )), to the extent relating to any warranties and/or guarantees given and/or liabilities incurred in respect of an activity or dealing with a Restricted Person by a Security Party in accordance with this Agreement.


22.30.2	Each Party acknowledges and agrees that the Borrowers and the Guarantor do not undertake the requirements under Clause 22.30.1 in favour of any Lender incorporated or having its registered office in the Federal Republic of Germany and no such Lender shall have any right thereunder and shall be deemed not to be a party to the provisions of this Clause 22.30.


22.31	Assignment of Claims The Guarantor shall not assign any claims that it may have against another Security Party, against a Vessel or in respect of a Relevant Document.


22.32	Use of proceeds

22.32.1

No Borrower nor the Guarantor shall, and shall procure that each Security Party, any other member of the Group, and any Affiliate of any of them, shall not, permit or authorise any other person to, directly or indirectly, use, lend, make payments of, contribute or otherwise make available, all or any part of the proceeds of the Loan or other transactions contemplated by this Agreement to fund or facilitate trade, business or other activities: (i) involving or for the benefit of any Restricted Person; or (ii) in any other manner that could result in any Security Party or a Finance Party being in breach of any Sanctions or becoming a Restricted Person.


22.32.2	Each Party acknowledges and agrees that the Borrowers and the Guarantor do not undertake the requirements under Clause 22.32.1 in favour of any Lender incorporated or having its registered office in the Federal Republic of Germany and no such Lender shall have any right thereunder and shall be deemed not to be a party to the provisions of this Clause 22.32.

22.33

Master Agreement Proceeds Assignment In the event that any Borrower and the Swap Provider enter into a Master Agreement during the Facility Period, any such Borrower shall on the same date as the Master Agreement enter into a Master Agreement Proceeds Assignment which shall be in a form acceptable to the Agent and shall on such date deliver the Master Agreement Proceeds Assignment to the Agent duly executed by any such Borrower together with such supporting documentation and evidence as the Agent may reasonably require.


23	Events of Default


23.1	Events of Default Each of the events or circumstances set out in this Clause 23.1 is an Event of Default.


23.1.6	Non-payment A Security Party 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 Business Days of its due date.


23.1.7	Other specific obligations


(a)	Any requirement of Clause 21 ( Financial Covenants ) is not satisfied.


(b)	A Security Party does not comply with any obligation in a Finance Document relating to the Insurances or with Clause 17.16 ( Additional security ).


23.1.8	Other obligations


(d)	A Security Party does not comply with any provision of a Finance Document (other than those referred to in Clause 23.1.1 ( Non-payment ) and Clause 23.1.2 ( Other specific obligations ).


(e)	No Event of Default under this Clause 23.1.3 will occur if the failure to comply is capable of remedy and is remedied within ten Business Days of the earlier of (i) the Agent giving notice to the Borrowers and (ii) the Borrowers becoming aware of the failure to comply.


23.1.9	Misrepresentation Any representation or statement made or deemed to be repeated by a Security Party in any Finance Document or any other document delivered by or on behalf of a Security Party under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made.


23.1.10	Cross default Any Financial Indebtedness of the Borrowers or the Guarantor:


(g)	is not paid when due nor within any originally applicable grace period; or


(h)	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


(i)	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 23.1.5 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within (a) to (c) is either (i) in the case of any Borrower, less than $500,000 or its equivalent in any other currency or currencies (unless such sum is being contested in good faith) or (ii) in the case of the Guarantor, less than $10,000,000 or its equivalent in any other currency or currencies (unless such sum is being contested in good faith).


23.1.11	Insolvency

(a)

A Borrower or the Guarantor 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 a Security Party is less than its liabilities (taking into account contingent and prospective liabilities).


(c)	A moratorium is declared in respect of any indebtedness of a Security Party. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.


23.1.12	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 reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of a Borrower or the Guarantor;


(b)	a composition, compromise, assignment or arrangement with any creditor of a Borrower or the Guarantor;


(c)	the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager, or trustee or other similar officer in respect of a Borrower or the Guarantor or any of its assets; or


(d)	enforcement of any Encumbrance over any assets of a Borrower or the Guarantor,

or any analogous procedure or step is taken in any jurisdiction.

This Clause 23.1.7 shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within five days of commencement.


23.1.13	Creditors' process Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of a Security Party.


23.1.14	Unlawfulness and invalidity


(a)	It is or becomes unlawful for a Security Party to perform any of its obligations under the Finance Documents 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 Security Party under any Finance Documents 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 Lenders 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 a Finance Party) to be ineffective.


23.1.15	Cessation of business A Borrower or the Guarantor ceases, or threatens to cease, to carry on all or a substantial part of its business.


23.1.16	Change in ownership or control of a Borrower A Borrower ceases to be ultimately owned and controlled by the Guarantor or ceases to be a wholly owned subsidiary of the Guarantor.


23.1.17	Expropriation The authority or ability of a Borrower or the 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 a Borrower or the Guarantor or any of its assets.


23.1.18	Repudiation and rescission of agreements


(c)	A Security Party 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.


(d)	Subject to Clause 23.1.13(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 Majority Lenders, likely to have a material adverse effect on the interests of the Lenders under the Finance Documents.


(e)	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 Majority Lenders.


23.1.19	Conditions subsequent Any of the conditions referred to in Clause 4.3 ( Conditions subsequent ) is not satisfied within the time reasonably required by the Agent.

23.1.20

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 Security Parties or any other person (except a Finance Party) 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 Agent considers is, or may be, prejudicial to the interests of any Finance Party, or ceases to remain in full force and effect.


23.1.21	Reduction of capital A Borrower reduces its authorised or issued or subscribed capital.

23.1.22

Loss of Vessel A 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 Security Agent 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 23.1.17 include an event similar to a Total Loss in relation to any other vessel) shall not be an Event of Default if:


(a)	that 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 Agent 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 Security Agent within 6 months of the occurrence of the casualty giving rise to the Total Loss in question or such longer period as the Agent may in its discretion agree.


23.1.23	Challenge to registration The registration of a Vessel or a Mortgage is contested or becomes void or voidable or liable to cancellation or termination, or the validity or priority of a Mortgage is contested.

This Clause 23.1.18 shall not apply to any challenge or contest which is frivolous or vexatious and is discharged, stayed or dismissed within five days of commencement.


23.1.24	War The country of registration of a Vessel becomes involved in war (whether or not declared) or civil war or is occupied by any other power and the Agent in its discretion considers that, as a result, the security conferred by any of the Security Documents is materially prejudiced.

No Event of Default under this Clause 23.1.19 will occur if within ten Business Days of the earlier of (i) the Agent giving notice to the Borrowers and (ii) the Borrowers becoming aware of such events and circumstances described in this Clause 23.1.19 occurring, the relevant Borrower registers that Vessel under a different flag acceptable to the Agent (acting reasonably), registers a Mortgage over that Vessel with first priority in favour of the Security Agent (such Mortgage being in a form and substance acceptable to the Agent (acting reasonably)) and provides such supporting corporate authorisations, legal opinions and other supporting documents reasonably requested by the Agent.

^23.1.25

Master Agreement termination A notice is given by the Swap Provider under section 6(a) of the Master Agreement, or by any person under section 6(b)(iv) of the Master Agreement, in either case designating an Early Termination Date for the purpose of the Master Agreement, or the Master Agreement is for any other reason terminated, cancelled, suspended, rescinded, revoked or otherwise ceases to remain in full force and effect.

This Clause 23.1.20 shall not apply to any Transactions that are terminated pursuant to Clause 7.8 ( Restrictions ).


^23.1.26	Notice of determination The Guarantor gives notice to the Security Agent to determine any obligations under the Guarantee.


23.1.27	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 a Security Party or its assets which have or are reasonably likely to have a Material Adverse Effect.

This Clause 23.1.22 shall not apply to any litigation, arbitration, administrative, governmental, regulatory or other investigations, proceedings or disputes which are frivolous or vexatious and is discharged, stayed or dismissed within 30 days of commencement.


23.1.28	Material adverse change Any event or circumstance occurs which the Majority Lenders reasonably believe has or is reasonably likely to have a Material Adverse Effect.


23.1.29	Sanctions


(g)	Any of the Security Parties 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.


(h)	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.


(i)	Any of the Security Parties or any Affiliate of any of them is not in compliance with all Sanctions.


23.2	Acceleration On and at any time after the occurrence of an Event of Default which is continuing the Agent may, and shall if so directed by the Majority Lenders:


23.2.18	by notice to the Borrowers cancel the Total Commitments, at which time they shall immediately be cancelled;


23.2.19	by notice to the Borrowers 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;


23.2.20	by notice to the Borrowers declare that the Loan is payable on demand, at which time it shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders; and/or


23.2.21	exercise or direct the Security Agent to exercise any or all of its rights, remedies, powers or discretions under the Finance Documents.


23.3	Sinosure The Agent agrees that it will consult with Sinosure and the Sinosure Agent prior to issuing a notice pursuant to Clause 23.2 ( Acceleration ).


Section 9	Changes to Parties


24	Changes to the Lenders


24.1	Assignments and transfers by the Lenders Subject to this Clause 24, a Lender (the " Existing Lender ") may:


24.1.22	assign any of its rights; or


24.1.23	transfer by novation any of its rights and obligations,

under any Finance Document to another bank or financial institution which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets or to Sinosure pursuant to Clause 17.14 ( Sinosure Insurance Proceeds ) (the " New Lender ").


24.2	Conditions of assignment or transfer


24.2.11	An Existing Lender must obtain the prior written consent of Sinosure before it may make an assignment or transfer in accordance with Clause 24.1 ( Assignments and transfers by the Lenders ).


24.2.12	An assignment will only be effective on:


(d)	receipt by the Agent of written confirmation from the New Lender (in form and substance satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties as it would have been under if it was an Original Lender; and


(e)	performance by the Agent of all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to such assignment to a New Lender, the completion of which the Agent shall promptly notify to the Existing Lender and the New Lender.


24.2.13	A transfer will only be effective if the procedure set out in Clause 24.5 ( Procedure for transfer ) is complied with.


24.2.14	If:


(a)	a 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, a Borrower would be obliged to make a payment to the New Lender or 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 Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred. This Clause 24.2.4 shall not apply in respect of an assignment or transfer made in the ordinary course of the primary syndication of the Loan.

24.2.15

Each New Lender confirms, for the avoidance of doubt, that the Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the transfer or assignment becomes effective in accordance with this Agreement and that it is bound by that decision to the same extent as the Existing Lender would have been had it remained a Lender.


24.3	Assignment or transfer fee Unless the Agent otherwise agrees and excluding an assignment or transfer (i) to an Affiliate of a Lender, (ii) to a Related Fund or (iii) made in connection with primary syndication of the Loan, the New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Agent (for its own account) a fee of $3,000.


24.4	Limitation of responsibility of Existing Lenders


24.4.6	Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:


(j)	the legality, validity, effectiveness, adequacy or enforceability of the Relevant Documents or any other documents;


(k)	the financial condition of any Security Party;


(l)	the performance and observance by any Security Party of its obligations under the Relevant Documents or any other documents; or


(m)	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.


24.4.7	Each New Lender confirms to the Existing Lender and the other Finance Parties that it:


(d)	has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Security Party 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 Existing Lender in connection with any of the Relevant Documents; and


(e)	will continue to make its own independent appraisal of the creditworthiness of each Security Party and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.


24.4.8	Nothing in any Finance Document obliges an Existing Lender to:


(e)	accept a re-transfer or re-assignment from a New Lender of any of the rights and obligations assigned or transferred under this Clause 24; or


(f)	support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Security Party of its obligations under the Relevant Documents or otherwise.


24.5	Procedure for transfer

24.5.1

Subject to the conditions set out in Clause 24.2 ( Conditions of assignment or transfer ) a transfer is effected in accordance with Clause 24.5.3 when the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to Clause 24.2.2(b), as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.


24.5.2	The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.


24.5.3	Subject to Clause 24.9 ( Pro rata interest settlement ), on the Transfer Date:

(f)

to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents each Borrower and the Guarantor and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and their respective rights against one another shall be cancelled (being the " Discharged Rights and Obligations ");


(g)	each Borrower and the Guarantor and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Borrower and the Guarantor and the New Lender have assumed and/or acquired the same in place of that Borrower and the Guarantor and the Existing Lender;

(h)

the Agent, the Security Agent, the Arranger, the Sinosure Agent, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Agent, the Security Agent, the Arranger, the Sinosure Agent, and the Existing Lender shall each be released from further obligations to each other under this Agreement; and


(i)	the New Lender shall become a Party as a "Lender".


24.6	Procedure for assignment

24.6.11

Subject to the conditions set out in Clause 24.2 ( Conditions of assignment or transfer ) an assignment may be effected in accordance with Clause 24.6.3 when the Agent executes an otherwise duly completed Assignment Agreement delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to Clause 24.6.2, as soon as reasonably practicable after receipt by it of a duly completed Assignment Agreement appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Assignment Agreement.


24.6.12	The Agent shall only be obliged to execute an Assignment Agreement delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary "know your customer" or similar checks under all applicable laws and regulations in relation to the assignment to such New Lender.


24.6.13	Subject to Clause 24.9 ( Pro rata interest settlement ), on the Transfer Date:


(a)	the Existing Lender will assign absolutely to the New Lender its rights under the Finance Documents and in respect of any Encumbrance created or expressed to be created or evidenced by the Security Documents and expressed to be the subject of the assignment in the Assignment Agreement;


(b)	the Existing Lender will be released from the obligations (the " Relevant Obligations ") expressed to be the subject of the release in the Assignment Agreement (and any corresponding obligations by which it is bound in respect of any Encumbrance created or expressed to be created or evidenced by the Security Documents); and


(c)	the New Lender shall become a Party as a "Lender" and will be bound by obligations equivalent to the Relevant Obligations.

24.6.14

Lenders may utilise procedures other than those set out in this Clause 24.6 to assign their rights under the Finance Documents (but not, without the consent of the relevant Security Party or unless in accordance with Clause 24.5 ( Procedure for transfer ), to obtain a release by that Security Party from the obligations owed to that Security Party by the Lenders nor the assumption of equivalent obligations by a New Lender) provided that they comply with the conditions set out in Clause 24.2 ( Conditions of assignment or transfer ).


24.7	Copy of Transfer Certificate or Assignment Agreement to Borrowers The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate or an Assignment Agreement, send to the Borrowers a copy of that Transfer Certificate or Assignment Agreement.

24.8

Security over Lenders' rights In addition to the other rights provided to Lenders under this Clause 24, each Lender may without consulting with or obtaining consent from any Security Party, at any time charge, assign or otherwise create Encumbrances in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation:


24.8.4	any charge, assignment or other Encumbrance to secure obligations to a federal reserve or central bank; and


24.8.5	in the case of any Lender which is a fund, any charge, assignment or other Encumbrance granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities,

except that no such charge, assignment or Encumbrance shall:


(a)	release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Encumbrance for the Lender as a party to any of the Finance Documents; or


(b)	require any payments to be made by a Security Party 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 relevant Lender under the Finance Documents.


24.9	Pro rata interest settlement

24.9.3

If the Agent has notified the Lenders that it is able to distribute interest payments on a "pro rata basis" to Existing Lenders and New Lenders then (in respect of any transfer pursuant to Clause 24.5 ( Procedure for transfer ) or any assignment pursuant to Clause 24.6 ( Procedure for assignment ) the Transfer Date of which is after the date of such notification and is not on the last day of an Interest Period):

(g)

any interest or fees in respect of the relevant participation which are expressed to accrue by reference to the lapse of time shall continue to accrue in favour of the Existing Lender up to but excluding the Transfer Date (" Accrued Amounts ") and shall become due and payable to the Existing Lender (without further interest accruing on them) on the last day of the current Interest Period (or, if the Interest Period is longer than three months, on the next of the dates which falls at three monthly intervals after the first day of that Interest Period); and


(h)	the rights assigned or transferred by the Existing Lender will not include the right to the Accrued Amounts, so that, for the avoidance of doubt:


(i)	when the Accrued Amounts become payable, those Accrued Amounts will be payable to the Existing Lender; and


(ii)	the amount payable to the New Lender on that date will be the amount which would, but for the application of this Clause 24.9, have been payable to it on that date, but after deduction of the Accrued Amounts.


24.9.4	In this Clause 24.9 references to "Interest Period" shall be construed to include a reference to any other period for accrual of fees.


25	Changes to the Security Parties


25.1	No assignment or transfer by Security Parties No Security Party may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.


Section 10	The Finance Parties


26	Role of the Agent, the Security Agent, the Sinosure Agent and the Arrangers


26.1	Appointment of the Agent, the Security Agent and the Sinosure Agent


26.1.3	Each of the Arrangers, the Sinosure Agent and the Lenders appoints the Agent to act as its agent under and in connection with the Finance Documents and each of the Arrangers, the Sinosure Agent, the Lenders and the Agent appoints the Security Agent to act as its security agent for the purpose of the Security Documents.

26.1.4

Each of the Arrangers, the Sinosure Agent and the Lenders authorises the Agent and each of the Arrangers, the Sinosure Agent, the Lenders and the Agent authorises the Security Agent to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Agent or the Security Agent (as the case may be) under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.


^26.1.5	The Swap Provider appoints the Security Agent to act as its security agent for the purpose of the Security Documents and authorises the Security Agent to exercise the rights, powers, authorities and discretions specifically given to the Security Agent under or in connection with the Security Documents together with any other incidental rights, powers, authorities and discretions.


^26.1.6	Except in Clause 26.15 ( Replacement of the Agent ) or where the context otherwise requires, references in this Clause 26 to the " Agent " shall mean the Agent, the Security Agent individually and collectively and references in this Clause 26 to the " Finance Documents " or to any " Finance Document " shall not include the Master Agreement.


^26.1.7	Each Lender hereby appoints and authorises the Sinosure Agent to act as its agent in connection herewith and for all purposes under each Sinosure Policy, with power to take all actions on behalf of the Lenders under each Sinosure Policy.


26.2	Instructions


26.2.9	The Agent shall:


(c)	unless a contrary indication appears in a Finance Document, exercise or refrain from exercising any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by:


(i)	all Lenders if the relevant Finance Document stipulates the matter is an all Lender decision; and


(ii)	in all other cases, the Majority Lenders; and


(d)	not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with Clause 26.2.1(a).

26.2.10

The Agent shall be entitled to request instructions, or clarification of any instruction, from the Majority Lenders (or, if the relevant Finance Document stipulates the matter is a decision for any other Lender or group of Lenders, the Sinosure Agent or Sinosure, from that Lender, group of Lenders, the Sinosure Agent or Sinosure) as to whether, and in what manner, it should exercise or refrain from exercising any right, power, authority or discretion and the Agent may refrain from acting unless and until it receives any such instructions or clarification that it has requested.

26.2.11

Save in the case of decisions stipulated to be a matter for any other Lender, group of Lenders, the Sinosure Agent or Sinosure under the relevant Finance Document and unless a contrary indication appears in a Finance Document, any instructions given to the Agent by the Majority Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties.

26.2.12

The Agent may refrain from acting in accordance with any instructions of any Lender or group of Lenders, the Sinosure Agent or Sinosure until it has received any indemnification and/or security that it may in its discretion require (which may be greater in extent than that contained in the Finance Documents and which may include payment in advance) for any cost, loss or liability which it may incur in complying with those instructions.


26.2.13	In the absence of instructions, the Agent may act (or refrain from acting) as it considers to be in the best interest of the Lenders.


26.2.14	The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender's consent) in any legal or arbitration proceedings relating to any Finance Document. This Clause 26.2.6 shall not apply to any legal or arbitration proceeding relating to the perfection, preservation or protection of rights under the Finance Documents or the enforcement of the Finance Documents.


26.3	Duties of the Agent


26.3.4	The Agent's duties under the Finance Documents are solely mechanical and administrative in nature.


26.3.5	Subject to Clause 26.3.3, the Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Agent for that Party by any other Party.


26.3.6	Without prejudice to Clause 24.7 ( Copy of Transfer Certificate or Assignment Agreement to Borrowers ), Clause 26.3.1 shall not apply to any Transfer Certificate or any Assignment Agreement.


26.3.7	Except where a Finance Document specifically provides otherwise, the Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.


26.3.8	If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the Finance Parties.


26.3.9	If the Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent, the Arrangers, the Sinosure Agent or the Security Agent) under this Agreement it shall promptly notify the other Finance Parties.


26.3.10	The Agent shall have only those duties, obligations and responsibilities expressly specified in the Finance Documents to which it is expressed to be a party (and no others shall be implied).


26.4	Role of the Arrangers Except as specifically provided in the Finance Documents, the Arrangers have no obligations of any kind to any other Party under or in connection with any Finance Document.


26.5	No fiduciary duties


26.5.5	Subject to Clause 26.12 ( Trust ) which relates to the Security Agent only, nothing in any Finance Document constitutes the Agent, the Sinosure Agent or an Arranger as a trustee or fiduciary of any other person.


26.5.6	Neither the Agent, the Sinosure Agent nor the Arrangers shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.


26.6	Business with Security Parties The Agent, the Sinosure Agent and Arrangers may accept deposits from, lend money to and generally engage in any kind of banking or other business with any Borrower and any other Security Party or its Affiliate.


26.7	Rights and discretions of the Agent


26.7.5	The Agent may:


(f)	rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised;


(g)	assume that:


(i)	any instructions received by it from the Majority Lenders, any Lenders or any group of Lenders are duly given in accordance with the terms of the Finance Documents; and


(ii)	unless it has received notice of revocation, that those instructions have not been revoked; and


(iii)	rely on a certificate from any person:


(A)	as to any matter of fact or circumstance which might reasonably be expected to be within the knowledge of that person; or


(B)	to the effect that such person approves of any particular dealing, transaction, step, action or thing,

as sufficient evidence that that is the case and, in the case of (A), may assume the truth and accuracy of that certificate.


26.7.6	The Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders or security agent for the Finance Parties (as the case may be)) that:


(d)	no Default has occurred (unless it has actual knowledge of a Default arising under Clause 23.1 ( Events of Default ));


(e)	any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised; and


(f)	any notice or request made by the Borrowers (other than a Drawdown Request) is made on behalf of and with the consent and knowledge of all the Security Parties.


26.7.7	The Agent may engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts.


26.7.8	Without prejudice to the generality of Clause 26.7.3 or Clause 26.7.5, the Agent may at any time engage and pay for the services of any lawyers to act as independent counsel to the Agent (and so separate from any lawyers instructed by the Lenders) if the Agent in its reasonable opinion deems this to be desirable.


26.7.9	The Agent may rely on the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (whether obtained by the Agent or by any other Party) and shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of its so relying.


26.7.10	The Agent may act in relation to the Finance Documents through its officers, employees and agents and the Agent shall not:


(d)	be liable for any error of judgment made by any such person; or


(e)	be bound to supervise, or be in any way responsible for any loss incurred by reason of misconduct, omission or default on the part, of any such person,

unless such error or such loss was directly caused by the Agent's gross negligence or wilful misconduct.


26.7.11	Unless a Finance Document expressly provides otherwise the Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.


26.7.12	Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor an Arranger is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.


26.7.13	The Agent is not obliged to disclose to any Finance Party any details of the rate notified to the Agent by any Lender or the identity of any such Lender for the purpose of Clause 10.2.2 ( Market Disruption ).

26.7.14

Notwithstanding any provision of any Finance Document to the contrary, the Agent is not obliged to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties, obligations or responsibilities or the exercise of any right, power, authority or discretion if it has grounds for believing the repayment of such funds or adequate indemnity against, or security for, such risk or liability is not reasonably assured to it.


26.8	Responsibility for documentation Neither the Agent nor either Arranger is responsible or liable for:


26.8.3	the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Agent, an Arranger, a Security Party or any other person given in or in connection with any Relevant Document or the transactions contemplated in the Finance Documents; or


26.8.4	the legality, validity, effectiveness, adequacy or enforceability of any Relevant Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Relevant Document; or


26.8.5	any determination as to whether any information provided or to be provided to any Finance Party is non-public information the use of which may be regulated or prohibited by applicable law or regulation relating to insider dealing or otherwise.


26.9	No duty to monitor The Agent shall not be bound to enquire:


26.9.1	whether or not any Default has occurred;


26.9.2	as to the performance, default or any breach by any Party of its obligations under any Finance Document; or


26.9.3	whether any other event specified in any Finance Document has occurred.


26.10	Exclusion of liability


26.10.1	Without limiting Clause 26.10.2 (and without prejudice to any other provision of any Finance Document excluding or limiting the liability of the Agent) the Agent shall not be liable (including, without limitation, for negligence or any other category of liability whatsoever) for:


(e)	any damages, costs or losses to any person, any diminution in value, or any liability whatsoever arising as a result of taking or not taking any action under or in connection with any Finance Document or any Encumbrance created or expressed to be created or evidenced by the Security Documents, unless directly caused by its gross negligence or wilful misconduct;

(f)

exercising, or not exercising, any right, power, authority or discretion given to it by, or in connection with, any Finance Document, any Encumbrance created or expressed to be created or evidenced by the Security Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Finance Document or any Encumbrance created or expressed to be created or evidenced by the Security Documents;


(g)	any shortfall which arises on the enforcement or realisation of the Trust Property; or


(h)	without prejudice to the generality of Clauses 26.10.1(a), 26.10.1(b) and 26.10.1(c), any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of:


(iv)	any act, event or circumstance not reasonably within its control; or


(v)	the general risks of investment in, or the holding of assets in, any jurisdiction,

including (in each case and without limitation) such damages, costs, losses, diminution in value or liability arising as a result of: nationalisation, expropriation or other governmental actions; any regulation, currency restriction, devaluation or fluctuation; market conditions affecting the execution or settlement of transactions or the value of assets (including any Disruption Event); breakdown, failure or malfunction of any third party transport, telecommunications, computer services or systems; natural disasters or acts of God; war, terrorism, insurrection or revolution; or strikes or industrial action.

26.10.2

No Party (other than the Agent) may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Relevant Document and any officer, employee or agent of the Agent may rely on this Clause subject to Clause 1.7 ( Third Party Rights ) and the provisions of the Third Parties Act.


26.10.3	The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose.


26.10.4	Nothing in this Agreement shall oblige the Agent or either Arranger to carry out:


(c)	any "know your customer" or other checks in relation to any person;


(d)	any check on the extent to which any transaction contemplated by this Agreement might be unlawful for any Lender,

on behalf of any Lender and each Lender confirms to the Agent and the Arrangers that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or the Arrangers.

26.10.5

Without prejudice to any provision of any Finance Document excluding or limiting the Agent's liability, any liability of the Agent arising under or in connection with any Finance Document or any Encumbrance created or expressed to be created or evidenced by the Security Documents shall be limited to the amount of actual loss which has been finally judicially determined to have been suffered (as determined by reference to the date of default of the Agent or, if later, the date on which the loss arises as a result of such default) but without reference to any special conditions or circumstances known to the Agent at any time which increase the amount of that loss. In no event shall the Agent be liable for any loss of profits, goodwill, reputation, business opportunity or anticipated saving, or for special, punitive, indirect or consequential damages, whether or not the Agent has been advised of the possibility of such loss or damages.


26.11	Lenders' indemnity to the Agent

26.11.1

Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent and every Receiver and Delegate, within three Business Days of demand, against any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by any of them (otherwise than by reason of the relevant Agent's, Receiver's or Delegate's gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 30.12 ( Disruption to payment systems etc. ) notwithstanding the Agent's negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) in acting as Agent, Receiver or Delegate under, or exercising any authority conferred under, the Finance Documents (unless the relevant Agent, Receiver or Delegate has been reimbursed by a Security Party pursuant to a Finance Document).


26.11.2	Subject to Clause 26.11.3, the Borrowers shall immediately on demand reimburse any Lender for any payment that Lender makes to the Agent pursuant to Clause 26.11.1


26.11.3	Clause 26.11.2 shall not apply to the extent that the indemnity payment in respect of which the Lender claims reimbursement relates to a liability of the Agent to a Security Party.

26.12

Trust The Security Agent agrees and declares, and each of the other Finance Parties acknowledges, that, subject to the terms and conditions of this Clause 26.12, the Security Agent holds the Trust Property on trust for the Finance Parties absolutely. Each of the other Finance Parties agrees that the obligations, rights and benefits vested in the Security Agent shall be performed and exercised in accordance with this Clause 26.12. The Security Agent shall have the benefit of all of the provisions of this Agreement benefiting it in its capacity as security agent for the Finance Parties, and all the powers and discretions conferred on trustees by the Trustee Act 1925 (to the extent not inconsistent with this Agreement). In addition:

26.12.1

the Security Agent and any Delegate may indemnify itself or himself out of the Trust Property against all liabilities, costs, fees, damages, charges, losses and expenses sustained or incurred by it or him in relation to the taking or holding of any of the Trust Property or in connection with the exercise or purported exercise of the rights, trusts, powers and discretions vested in the Security Agent or any Delegate by or pursuant to the Security Documents or in respect of anything else done or omitted to be done in any way relating to the Security Documents;


26.12.2	the other Finance Parties acknowledge that the Security Agent shall be under no obligation to insure any property nor to require any other person to insure any property and shall not be responsible for any loss which may be suffered by any person as a result of the lack or insufficiency of any insurance;


26.12.3	the Finance Parties agree that the perpetuity period applicable to the trusts declared by this Agreement shall be the period of 125 years from the date of this Agreement;

26.12.4

the Security Agent shall not be liable for any failure, omission, or defect in perfecting the security constituted or created by any Finance Document including, without limitation, any failure to register the same in accordance with the provisions of any of the documents of title of any Security Party to any of the assets thereby charged or effect or procure registration of or otherwise protect the security created by any Security Document under any registration laws in any jurisdiction and may accept without enquiry such title as any Security Party may have to any asset;

26.12.5

the Security Agent shall not be under any obligation to hold any title deed, Finance Document or any other documents in connection with the Finance Documents or any other documents in connection with the property charged by any Finance Document or any other such security in its own possession or to take any steps to protect or preserve the same, and may permit any Security Party to retain all such title deeds, Finance Documents and other documents in its possession; and

26.12.6

save as otherwise provided in the Finance Documents, all moneys which under the trusts therein contained are received by the Security Agent may be invested in the name of or under the control of the Security Agent in any investment for the time being authorised by English law for the investment by trustees of trust money or in any other investments which may be selected by the Security Agent, and the same may be placed on deposit in the name of or under the control of the Security Agent at such bank or institution (including the Security Agent) and upon such terms as the Security Agent may think fit.

The provisions of Part I of the Trustee Act 2000 shall not apply to the Security Agent or the Trust Property.


26.13	Parallel Debt

26.13.3

Notwithstanding any other provision of this Agreement, each Borrower and the Guarantor hereby irrevocably and unconditionally undertake to pay to the Security Agent as creditor in its own right and not as representative of the other Finance Parties, sums equal to and in the currency of each amount payable by the Borrowers or any of them or the Guarantor (as the case may be) to each of the Finance Parties under each of the Finance Documents as and when that amount falls due for payment under the relevant Finance Document (the " Parallel Debt "). Any security granted to secure such Parallel Debt shall not be held on trust by the Security Agent.


26.13.4	The Security Agent shall have its own independent right to demand payment of the amounts payable by the Borrowers or any of them and the Guarantor (including, without limitation, through any suit, execution, enforcement of security, recovery of guarantees and applications for and voting in any kind of insolvency proceeding) under this Clause 26.

26.13.5

Any amount due and payable by the Borrowers or any of them or the Guarantor (as the case may be) to the Security Agent under this Clause 26 shall be decreased to the extent that the other Finance Parties have received payment in full or in part (which payment has not been rescinded or otherwise restored or returned) of the corresponding amount under the other provisions of the Finance Documents, and any amount due and payable by the Borrowers or any of them or the Guarantor (as the case may be) to the other Finance Parties under those provisions shall be decreased to the extent that the Security Agent has received payment in full or in part (which payment has not been rescinded or otherwise restored or returned) of the corresponding amount under this Clause 26.


26.14	Resignation of the Agent


26.14.6	The Agent may resign and appoint one of its Affiliates acting through an office as successor by giving notice to the other Finance Parties, Sinosure and the Borrowers.


26.14.7	Alternatively the Agent may resign by giving 30 days' notice to the other Finance Parties, Sinosure and the Borrowers, in which case the Majority Lenders (after consultation with the Borrowers) may appoint a successor Agent.


26.14.8	If the Majority Lenders have not appointed a successor Agent in accordance with Clause 26.14.2 within 20 days after notice of resignation was given, the retiring Agent (after consultation with the Borrowers) may appoint a successor Agent.

26.14.9

If the Agent wishes to resign because (acting reasonably) it has concluded that it is no longer appropriate for it to remain as agent and the Agent is entitled to appoint a successor Agent under Clause 26.14.3, the Agent may (if it concludes (acting reasonably) that it is necessary to do so in order to persuade the proposed successor Agent to become a party to this Agreement as Agent) agree with the proposed successor Agent amendments to this Clause 26 and any other term of this Agreement dealing with the rights or obligations of the Agent consistent with then current market practice for the appointment and protection of corporate trustees together with any reasonable amendments to the agency fee payable under this Agreement which are consistent with the successor Agent's normal fee rates and those amendments will bind the Parties.

26.14.10

The retiring Agent shall, make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents. The Borrowers shall, within three Business Days of demand, reimburse the retiring Agent for the amount of all costs and expenses (including legal fees) properly incurred by it in making available such documents and records and providing such assistance.


26.14.11	The Agent's resignation notice shall only take effect upon the appointment of a successor and (in the case of the Security Agent) the transfer of all the Trust Property to that successor.

26.14.12

Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under Clause 26.14.5) but shall remain entitled to the benefit of Clause 14.3 ( Indemnity to the Agent ) and this Clause 26 (and any agency fees for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date). Any successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.


26.14.13	The Agent shall resign in accordance with Clause 26.14.2 (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to Clause 26.14.3) if on or after the date which is three months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either:


(j)	the Agent fails to respond to a request under Clause 12.7 ( FATCA information ) and a Lender reasonably believes that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;


(k)	the information supplied by the Agent pursuant to Clause 12.7 ( FATCA information ) indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or


(l)	the Agent notifies the Borrowers and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;

and (in each case) a Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the Agent were a FATCA Exempt Party, and that Lender, by notice to the Agent, requires it to resign.


26.15	Replacement of the Agent


26.15.1	After consultation with the Borrowers, the Majority Lenders may, by giving 30 days' notice to the Agent (or, at any time the Agent is an Impaired Agent, by giving any shorter notice determined by the Majority lenders) replace the Agent by appointing a successor Agent.


26.15.2	The retiring Agent shall (at its own cost if it is an Impaired Agent and otherwise at the expense of the Lenders) make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its function as Agent under the Finance Documents.

26.15.3

The appointment of the successor Agent shall take effect on the date specified in the notice from the Majority Lenders to the retiring Agent. As from this date, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under Clause 26.15.2 but shall remain entitled to the benefit of Clause 14.3 ( Indemnity to the Agent ) and this Clause 26 (and any agency fees for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date).


26.15.4	Any successor Agent and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.


26.16	Confidentiality


26.16.1	In acting as agent for the Finance Parties, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.


26.16.2	If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it.


26.16.3	Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor either Arranger is obliged to disclose to any other person (i) any Confidential Information or (ii) any other information if the disclosure would or might in its reasonable opinion constitute a breach of any laws or a breach of a fiduciary duty.


26.17	Relationship with the Lenders


26.17.1	Subject to Clause 24.9 ( Pro rata interest settlement ), the Agent may treat the person shown in its records as Lender at the opening of business (in the place of the Agent's principal office as notified to the Finance Parties from time to time) as the Lender acting through its Facility Office:


(a)	entitled to or liable for any payment due under any Finance Document on that day; and


(b)	entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day,

unless it has received not less than five Business Days' prior notice from that Lender to the contrary in accordance with the terms of this Agreement.


26.17.2	Each Lender shall supply the Agent with any information required by the Agent in order to calculate the Mandatory Cost in accordance with Schedule 4 ( Mandatory Cost Formula ).

26.17.3

Any Lender may by notice to the Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or dispatched to that Lender under the Finance Documents. Such notice shall contain the address, fax number and (where communication by electronic mail or other electronic means is permitted under Clause 32.6 ( Electronic communication )) electronic mail address and/or any other information required to enable the sending and receipt of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, fax number, electronic mail address, department and officer by that Lender for the purposes of Clause 32.2 ( Addresses ) and Clause 32.6.1(b) ( Electronic communication ) and the Agent shall be entitled to treat such person as the person entitled to receive all such notices, communications, information and documents as though that person were that Lender.

26.18

Credit appraisal by the Lenders Without affecting the responsibility of any Security Party for information supplied by it or on its behalf in connection with any Relevant Document, each Lender confirms to the Agent and the Arrangers that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Relevant Document including but not limited to:


26.18.2	the financial condition, status and nature of each Security Party;


26.18.3	the legality, validity, effectiveness, adequacy or enforceability of any Relevant Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Relevant Document;


26.18.4	whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Relevant Document, the transactions contemplated by the Relevant Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of under or in connection with any Relevant Document; and


26.18.5	the right or title of any person in or to, or the value or sufficiency of any part of the Charged Property, the priority of any Encumbrance created or expressed to be created or evidenced by the Security Documents or the existence of any Encumbrance affecting the Charged Property.


26.19	Reference Banks If a Reference Bank ceases to be a Lender, the Agent shall (in consultation with the Borrowers) appoint another bank to be a Reference Bank to replace that Reference Bank.

26.20

Agent's management time Any amount payable to the Agent under Clause 14.3 ( Indemnity to the Agent ), Clause 14.4 ( Indemnity to the Security Agent ), Clause 16 ( Costs and expenses ) and Clause 26.11 ( Lenders' indemnity to the Agent ) shall include the cost of utilising the Agent's management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as the Agent may notify to the Borrowers and the Lenders, and is in addition to any fee paid or payable to the Agent under Clause 11 ( Fees ).

26.21

Deduction from amounts payable by the Agent If any Party owes an amount to the Agent under the Finance Documents the Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.


27	Conduct of Business by the Finance Parties

No provision of this Agreement will:


27.1	interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;


27.2	oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or


27.3	oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.


28	Sharing among the Finance Parties


28.1	Payments to Finance Parties If a Finance Party (a " Recovering Finance Party ") receives or recovers any amount from a Security Party other than in accordance with Clause 30 ( Payment Mechanics ) (a " Recovered Amount ") and applies that amount to a payment due under the Finance Documents then:


28.1.11	the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery, to the Agent;


28.1.12	the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with Clause 30 ( Payment Mechanics ), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and


28.1.13	the Recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the " Sharing Payment ") equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 30.6 ( Partial payments ).


28.2	Redistribution of payments The Agent shall treat the Sharing Payment as if it had been paid by the relevant Security Party and distribute it between the Finance Parties (other than the Recovering Finance Party) (the " Sharing Finance Parties ") in accordance with Clause 30.6 ( Partial payments ) towards the obligations of that Security Party to the Sharing Finance Parties.


28.3	Recovering Finance Party's rights On a distribution by the Agent under Clause 28.2 ( Redistribution of payments ) of a payment received by a Recovering Finance Party from a Security Party, as between the relevant Security Party and the Recovering Finance Party, an amount of the Recovered Amount equal to the Sharing Payment will be treated as not having been paid by that Security Party.


28.4	Reversal of redistribution If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:

28.4.6

each Sharing Finance Party shall, upon request of the Agent, pay to the Agent for the account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay) (the " Redistributed Amount "); and


28.4.7	as between the relevant Security Party and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will be treated as not having been paid by that Security Party.


28.5	Exceptions


28.5.15	This Clause 28 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and enforceable claim against the relevant Security Party.


28.5.16	A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:


(a)	it notified that other Finance Party of the legal or arbitration proceedings; and


(b)	that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.


29	Sinosure


29.1	Sinosure Policies Each Lender represents and warrants to each other Lender that:


29.1.15	it has reviewed each Sinosure Policy and is aware of the provisions thereof;


29.1.16	the representations and warranties made by each Lender under each Sinosure Policy are true and correct with respect to such Lender in all respects;


29.1.17	no information provided by such Lender in writing to Sinosure prior to the date hereof was incomplete, untrue or incorrect in any respect except to the extent that such Lender, in the exercise of reasonable care and due diligence prior to the giving of the information, could not have discovered the error or omission; and


29.1.18	it has not taken (or failed to take), and agrees that it shall not take (or fail to take), any action that would result in any Lender being in breach of any of their respective obligations as insured parties under any Sinosure Policy.

29.2

Communication relating to a Sinosure Policy Each Lender and the Sinosure Agent agree to furnish promptly to each Lender, a copy of each written communication received by it from, or sent by it to, Sinosure expressly relating to a Sinosure Policy. Each Lender agrees not to take any action under a Sinosure Policy without the consent of all of the Lenders (which consent shall not be unreasonably withheld), unless it has reasonably determined that such action would not be material to the coverage provided to the Lenders thereunder.


29.3	Claims under a Sinosure Policy Each Lender acknowledges and agrees that it shall have no entitlement to make any claim or to take any action whatsoever under or in connection with a Sinosure Policy unless a notice has been issued pursuant to Clause 23.2 and in accordance with a Sinosure Policy.

29.4

Sinosure Agent actions The Sinosure Agent agrees to take such actions under a Sinosure Policy (including with respect to any amendment, modification or supplement to a Sinosure Policy) as may be directed on the unanimous instructions of the Lenders from time to time; provided that, anything herein or in a Sinosure Policy to the contrary notwithstanding, the Sinosure Agent shall not be obliged to take any such action or to expend or risk its own funds or otherwise incur any liability in the performance of any of its duties or the exercise of any of its rights or powers hereunder or thereunder if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it or if such action would be contrary to applicable law.

29.5

Sinosure Agent indemnity Each Lender severally agrees to indemnify, in proportion to their Commitment, the Sinosure Agent and its affiliates, and its and their respective officers, directors, employees and agents for all liabilities, damages, costs and expenses sustained or incurred by, or asserted against the Sinosure Agent or any of its affiliates or its or their respective officers, directors, employees or agents arising out of or by reason of any action taken by the Sinosure Agent or any of its affiliates or its or their respective officers, directors, employees or agents or as a result of any misrepresentations and/or other breaches under Clause 29 ( Sinosure Policy ), provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or wilful misconduct of the Sinosure Agent. Each Lender expressly confirms and agrees that the Sinosure Agent shall not be liable for any loss caused as a result of the breach by any such Lender of its obligations under Clause 29.1 ( Sinosure Policies ). The provisions of Clause 26.14 ( Resignation of the Agent ), pertaining to the procedures to be followed in connection with the appointment of a successor Agent shall constitute, mutatis mutandis, the procedures to be followed in connection with the appointment of a successor Sinosure Agent.

29.6

Reimbursement of premium Each Lender agrees to reimburse the Sinosure Agent and each other Lender in their proportion of the Commitment in respect of the Sinosure Insurance Premium (or any part thereof) if any such premium (or any part thereof) is paid by the Sinosure Agent or another Lender and the Sinosure Agent or that other Lender is not put in funds or fully reimbursed in accordance with the terms of Clause 14.5 ( Sinosure Indemnity ).


29.7	Prior consultation with Sinosure Each Borrower acknowledges that the Lenders, the Sinosure Agent and the Agent may, under the terms of a Sinosure Policy be required:


29.7.6	to consult with Sinosure, prior to the exercise of certain decisions under the Finance Documents to which they are a party (including the exercise of such voting rights in relation to any substantial amendment to any Finance Document); and


29.7.7	to follow certain instructions given by Sinosure.

Each Finance Party will be deemed to have acted reasonably if it has acted on the instructions of Sinosure (in accordance with the terms of the relevant Sinosure Policy) in the making of any such decision or the taking or refraining to take any action under any Finance Document to which it is a party.

29.8

Action contrary to Sinosure instructions or to a Sinosure Policy If, in respect of any matter in relation to or arising out of any of the Finance Documents where the approval, consent, authorisation or instruction of Sinosure is required under the terms of the Finance Documents or a Sinosure Policy, the Lenders or any one or more of them wish to take any step or action under or in relation to which conflicts with, or is contrary to, the provisions of a Sinosure Policy, the approval, consent, authorisation or instruction of Sinosure, such step or action may only be taken with the consent of all the Lenders.


29.9	Sinosure override


29.9.7	Each of the Agent, the Sinosure Agent and the Security Agent shall be authorised to take all such actions as they may deem necessary to ensure that all requirements of Sinosure under or in connection with a Sinosure Policy are complied with (unless all the Lenders instruct otherwise in writing).


29.9.8	Neither the Agent, the Sinosure Agent nor the Security Agent shall be obliged to do anything if, in their opinion (upon consultation with Sinosure), to do so could result in a breach of any requirements of Sinosure under or in connection with a Sinosure Policy or affect the validity of a Sinosure Policy (unless all the Lenders instruct otherwise in writing).


29.10	Liability of Sinosure Agent Neither the Sinosure Agent nor any of its directors, officers, employees or agents shall be liable to the Lenders for anything done or omitted to be done by the Sinosure Agent under or in connection with a Sinosure Policy, unless as a result of the Sinosure Agent's gross negligence or wilful misconduct.


Section 11	Administration


30	Payment Mechanics

30.1

Payments to the Agent On each date on which a Security Party or a Lender is required to make a payment under a Finance Document (other than the Master Agreement), that Security Party or that Lender shall make the same available to the Agent for value on the due date at the time and in such funds specified by the Agent 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 Agent specifies.

30.2

Distributions by the Agent Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 30.3 ( Distributions to a Security Party ) and Clause 30.4 ( Clawback and pre-funding ) be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Agent by not less than five Business Days' notice with a bank specified by that Party in the principal financial centre of the country of that currency.

30.3

Distributions to a Security Party The Agent may (with the consent of a Security Party or in accordance with Clause 31 ( Set-Off )) apply any amount received by it for that Security Party in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Security Party under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.


30.4	Clawback and pre-funding


30.4.6	Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.

30.4.7

Unless Clause 30.4.3 applies, if the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Agent shall on demand refund the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds.


30.4.8	If the Agent is willing to make available amounts for the account of a Borrower before receiving funds from the Lenders then if and to the extent that the Agent does so but it proves to be the case that it does not then receive funds from a Lender in respect of a sum which it paid to a Borrower:


(f)	the Borrower to whom that sum was made available shall on demand refund it to the Agent; and


(g)	the Lender by whom those funds should have been made available or, if that Lender fails to do so, the Borrower to whom that sum was made available, shall on demand pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent against any funding cost incurred by it as a result of paying out that sum before receiving those funds from that Lender.


30.5	Impaired Agent


30.5.4	If, at any time, the Agent becomes an Impaired Agent, a Security Party or a Lender which is required to make a payment under the Finance Documents to the Agent in accordance with Clause 30.1 ( Payments to the Agent ) may instead either:


(g)	pay that amount direct to the required recipient(s); or

(h)

if in its absolute discretion it considers that it is not reasonably practicable to pay that amount direct to the required recipient(s), pay that amount or the relevant part of that amount to an interest-bearing account held with an Acceptable Bank in relation to which no Insolvency Event has occurred and is continuing, in the name of the Security Party or the Lender making the payment (the " Paying Party ") and designated as a trust account for the benefit of the Party or Parties beneficially entitled to that payment under the Finance Documents (the " Recipient Party " or " Recipient Parties ").

In each case such payments must be made on the due date for payment under the Finance Documents.


30.5.5	All interest accrued on the amount standing to the credit of the trust account shall be for the benefit of the Recipient Party or the Recipient Parties pro rata to their respective entitlements.


30.5.6	A Party which has made a payment in accordance with this Clause 30.5 shall be discharged of the relevant payment obligation under the Finance Documents and shall not take any credit risk with respect to the amounts standing to the credit of the trust account.

30.5.7

Promptly upon the appointment of a successor Agent in accordance with Clause 26.15 ( Replacement of the Agent ), each Paying Party shall (other than to the extent that that Party has given an instruction pursuant to Clause 30.5.5) give all requisite instructions to the bank with whom the trust account is held to transfer the amount (together with any accrued interest) to the successor Agent for distribution to the relevant Recipient Party or Recipient Parties in accordance with Clause 30.2 ( Distributions by the Agent ).


30.5.8	A Paying Party shall, promptly upon request by a Recipient Party and to the extent:


(f)	that it has not given an instruction pursuant to Clause 30.5.4; and


(g)	that it has been provided with the necessary information by that Recipient Party,

give all requisite instructions to the bank with whom the trust account is held to transfer the relevant amount (together with any accrued interest) to that Recipient Party.


30.6	Partial payments


30.6.8	If the Agent receives a payment that is insufficient to discharge all the amounts then due and payable by a Security Party under the Finance Documents (other than the Master Agreement), the Agent shall apply that payment towards the obligations of that Security Party under the Finance Documents (other than the Master Agreement) in the following order:


(c)	first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent or the Security Agent under the Finance Documents;


(d)	secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;


(e)	thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and


(f)	fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents,

provided that any part of the Indebtedness arising out of the Master Agreement shall be satisfied only after every other part of the Indebtedness for the time being due and payable has been satisfied in full.


30.6.9	The Agent shall, if so directed by the Majority Lenders, vary the order set out in Clauses 30.6.1(b) to 30.6.1(d).


30.6.10	Clauses 30.6.1 and 30.6.2 will override any appropriation made by a Security Party.


30.7	No set-off by Security Parties All payments to be made by a Security Party under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.


30.8	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.


30.9	Currency of account


^30.9.6	Subject to Clauses 30.9.2 to 30.9.5, dollars is the currency of account and payment for any sum due from a Security Party under any Finance Document.


30.9.7	A repayment or payment of all or part of a Tranche or an Unpaid Sum shall be made in the currency in which that Tranche or Unpaid Sum is denominated on its due date.


30.9.8	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.


30.9.9	Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.


^30.9.10	Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.

30.10

Control account The Agent shall open and maintain on its books a control account in the names of the Borrowers showing the advance of the Loan and the computation and payment of interest and all other sums due under this Agreement. The Borrowers' obligations to repay the Loan and to pay interest and all other sums due under this Agreement shall be evidenced by the entries from time to time made in the control account opened and maintained under this Clause 30.10 and those entries will, in the absence of manifest error, be conclusive and binding.


30.11	Change of currency


30.11.5	Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:


(d)	any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (after consultation with the Borrowers); and


(e)	any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent (acting reasonably).


30.11.6	If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Borrowers) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.


30.12	Disruption to payment systems etc. If either the Agent determines in its discretion that a Disruption Event has occurred or the Agent is notified by the Borrowers that a Disruption Event has occurred:


30.12.4	the Agent may, and shall if requested to do so by the Borrower, consult with the Borrowers with a view to agreeing with the Borrowers such changes to the operation or administration of the Loan as the Agent may deem necessary in the circumstances;


30.12.5	the Agent shall not be obliged to consult with the Borrowers in relation to any changes mentioned in Clause 30.12.1 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;


30.12.6	the Agent may consult with the Finance Parties in relation to any changes mentioned in Clause 30.12.1 but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances;


30.12.7	any such changes agreed upon by the Agent and the Borrowers 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 notwithstanding the provisions of Clause 36 ( Amendments and Waivers );


30.12.8	the Agent 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 Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 30.12; and


30.12.9	the Agent shall notify the Finance Parties of all changes agreed pursuant to Clause 30.12.4.


31	Set-Off

31.1

Set-off A Finance Party may set off any matured obligation due from a Borrower or any of them or the Guarantor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Borrower or the Guarantor (as the case may be), regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.


^31.2	Master Agreement rights The rights conferred on the Swap Provider by this Clause 31 shall be in addition to, and without prejudice to or limitation of, the rights of netting and set off conferred on the Swap Provider by the Master Agreement.


32	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 fax, letter or electronic mail.


32.2	Addresses The address, fax number and electronic mail address (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:


32.2.9	in the case of each Borrower, that identified with its name below;


^32.2.10	in the case of the Guarantor, that identified with its name below;


32.2.11	in the case of each Lender, that notified in writing to the Agent on or prior to the date on which it becomes a Party;


^32.2.12	in the case of the Swap Provider, that identified with its name below;


^32.2.13	in the case of an Arranger, that identified with its name below;


32.2.14	in the case of the Agent or the Security Agent, that identified with its name below; and


32.2.15	in the case of the Sinosure Agent, that identified with its name below,

or any substitute address, fax number, or department or officer as the Party may notify to the Agent (or the Agent may notify to the other Parties, if a change is made by the Agent) by not less than five Business Days' notice.


32.3	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:


32.3.9	if by way of fax, when received in legible form;


32.3.10	if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or


32.3.11	if by way of electronic mail, then in accordance with Clause 32.6.2 and Clause 32.6.3,

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.

Any communication or document to be made or delivered to the Agent or the Security Agent will be effective only when actually received by the Agent or the Security Agent and then only if it is expressly marked for the attention of the department or officer identified with the Agent's or the Security Agent's signature below (or any substitute department or officer as the Agent or the Security Agent shall specify for this purpose).

All notices from or to a Security Party (save in respect of the Master Agreement) shall be sent through the Agent.

Subject to Clause 5.1 ( Delivery of a Drawdown Request ), any communication or document which becomes effective, in accordance with this Clause 32.3, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.


32.4	Notification of address and fax number Promptly upon changing its address, fax number or electronic mail address, the Agent shall notify the other Parties.

32.5

Communication when Agent is Impaired Agent If the Agent is an Impaired Agent the Parties may, instead of communicating with each other through the Agent, communicate with each other directly and (while the Agent is an Impaired Agent) all the provisions of the Finance Documents which require communications to be made or notices to be given to or by the Agent shall be varied so that communications may be made and notices given to or by the relevant Parties directly. This provision shall not operate after a replacement Agent has been appointed.


32.6	Electronic communication


32.6.9	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 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.


32.6.10	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 Agent or the Security Agent only if it is addressed in such a manner as the Agent or the Security Agent shall specify for this purpose.


32.6.11	Any electronic communication which becomes effective, in accordance with Clause 32.6.2, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.


32.7	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:


32.7.11	in English; or


32.7.12	if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.


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 Agent pursuant to Clause 30.10 ( Control account ) are prima facie evidence of the matters to which they relate.


33.2	Certificates and determinations Any certification or determination by the Agent 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 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 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 any Finance Party or 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 any Finance Party or 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.


36	Amendments and Waivers


36.1	Required consents


36.1.4	Subject to Clause 36.2 ( Exceptions ) any term of the Finance Documents (other than the Master Agreement) may be amended or waived only with the consent of the Majority Lenders, Sinosure and the Borrowers and any such amendment or waiver will be binding on all Parties.


36.1.5	The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 36.


36.1.6	Without prejudice to the generality of Clauses 26.7.3, 26.7.4 and 26.7.5 ( Rights and discretions of the Agent ), the Agent may engage, pay for and rely on the services of lawyers in determining the consent level required for and effecting any amendment, waiver or consent under this Agreement.


36.2	Exceptions


36.2.12	An amendment, waiver or (in the case of a Security Document) a consent of, or in relation to, any term of any Finance Document that has the effect of changing or which relates to:


(a)	the definition of " Majority Lenders " in Clause 1.1 ( Definitions );


(b)	an extension to the date of payment of any amount under the Finance Documents;


(c)	a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;


(d)	a change in currency of payment of any amount under the Finance Documents;


(e)	an increase in any Commitment, an extension of the Availability Period or any requirement that a cancellation of Commitments reduces the Commitments of the Lenders rateably;


(f)	any provision which expressly requires the consent of all the Lenders;


(g)	Clause 2.2 ( Finance Parties' rights and obligations ), Clause 24 ( Changes to the Lenders ), this Clause 36, Clause 41 ( Governing Law ) or Clause 42.1 ( Jurisdiction of English courts );


(h)	(other than as expressly permitted by the provisions of any Finance Document) the nature or scope of:


(i)	any Guarantee;


(ii)	the Charged Property; or


(iii)	the manner in which the proceeds of enforcement of the Security Documents are distributed; or

(i)

the release of the Guarantee or of any Encumbrance created or expressed to be created or evidenced by the Security Documents unless permitted under this Agreement or any other Finance Document or relating to a sale or disposal of an asset which is the subject of any Encumbrance created or expressed to be created or evidenced by the Security Documents where such sale or disposal is expressly permitted under this Agreement or any other Finance Document;

shall not be made, or given, without the prior consent of all the Lenders and Sinosure.


36.2.13	An amendment or waiver which relates to the rights or obligations of the Agent, the Security Agent or the Arrangers (each in their capacity as such) may not be effected without the consent of the Agent, the Security Agent or, as the case may be, the Arranger.

36.2.14

Except with Sinosure's prior consent, the Agent shall not be entitled to exercise or refrain from exercising any right, power, authority or discretion, or give or withhold any consent, the exercise or giving of which is, by the terms of this Agreement or a Sinosure Policy, would require Sinosure's prior consent and any amendment or waiver which relates to any matter which, by the terms of any Finance Document, requires the prior consent of Sinosure shall not be entered into or provided by the Agent until Sinosure has agreed to its terms.


36.3	Replacement of Lender


36.3.13	If:


(a)	any Lender becomes a Non-Consenting Lender (as defined in Clause 36.3.4); or


(b)	a Borrower or any other Security Party becomes obliged to repay any amount in accordance with Clause 7.1 ( Illegality ) or to pay additional amounts pursuant to Clause 12.2 ( Tax gross-up ), Clause 12.3 ( Tax Indemnity ) or Clause 13.1 ( Increased costs ) to any Lender,

then the Borrowers may, on ten Business Days' prior written notice to the Agent and such Lender, replace such Lender by requiring such Lender to (and, to the extent permitted by law, such Lender shall) transfer pursuant to Clause 24 ( Changes to the Lenders ) all (and not part only) of its rights and obligations under this Agreement to a Lender or other bank, financial institution, trust, fund or other entity (a " Replacement Lender ") selected by the Borrower, which confirms its willingness to assume and does assume all the obligations of the transferring Lender in accordance with Clause 24 ( Changes to the Lenders ) for a purchase price in cash payable at the time of transfer in an amount equal to the outstanding principal amount of such Lender's participation in the outstanding Loan and all accrued interest (to the extent that the Agent has not given a notification under Clause 24.9 ( Pro rata interest settlement ), Break Costs and other amounts payable in relation thereto under the Finance Documents.


36.3.14	The replacement of a Lender pursuant to this Clause 36.3 shall be subject to the following conditions:


(m)	the Borrowers shall have no right to replace the Agent or Security Agent;


(n)	neither the Agent nor the Lender shall have any obligation to the Borrowers to find a Replacement Lender;


(o)	in the event of a replacement of a Non-Consenting Lender such replacement must take place no later than 15 Business Days after the date on which that Lender is deemed a Non-Consenting Lender;


(p)	in no event shall the Lender replaced under this Clause 36.3 be required to pay or surrender to such Replacement Lender any of the fees received by such Lender pursuant to the Finance Documents; and


(q)	the Lender shall only be obliged to transfer its rights and obligations pursuant to Clause 36.3.1 once it is satisfied that it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to that transfer.


36.3.15	A Lender shall perform the checks described in Clause 36.3.2(e) as soon as reasonably practicable following delivery of a notice referred to in Clause 36.3.1 and shall notify the Agent and the Borrowers when it is satisfied that it has complied with those checks.


36.3.16	In the event that:


(a)	the Borrowers or the Agent (at the request of the Borrowers) have requested the Lenders to give a consent in relation to, or to agree to a waiver or amendment of, any provisions of the Finance Documents;


(b)	the consent, waiver or amendment in question requires the approval of all the Lenders; and


(c)	Lenders whose Commitments aggregate more than 66 ² / ₃ % of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66 ² / ₃ % of the Total Commitments prior to that reduction) have consented or agreed to such waiver or amendment,

then any Lender who does not and continues not to consent or agree to such waiver or amendment shall be deemed a " Non-Consenting Lender ".


37	Confidentiality

37.1

Confidential Information Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 37.2 ( Disclosure of Confidential Information ) and Clause 37.3 ( Disclosure to numbering service providers ), 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.


37.2	Disclosure of Confidential Information Any Finance Party may disclose:

37.2.17

to Sinosure, 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 that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this Clause 37.2.1 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 provided that Sinosure shall be permitted to disclose Confidential Information to 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;


37.2.18	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 or which succeeds (or which may potentially succeed) it as Agent or Security Agent and, in each case, 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 Security Parties and to any of that person's Affiliates, Related Funds, Representatives and professional advisers;


(c)	appointed by any Finance Party or by a person to whom Clause 37.2.2(a) or 37.2.2(b) applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf (including, without limitation, any person appointed under Clause 26.17.2 ( Relationship with the Lenders ));


(d)	who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in Clause 37.2.2(a) or 37.2.2(b);


(e)	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;


(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)	to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 24.8 ( Security over Lenders' rights );


(h)	who is either an insurance company, a reinsurance company, an insurance broker or a reinsurance broker that in either case is providing or may potentially provide insurance cover either (i) in respect of the assets that are the subject of the Finance Document or (ii) pursuant to and in accordance with the terms of the Finance Documents;


(i)	who is a Party; or


(j)	with the consent of the Borrowers;

in each case, such Confidential Information as that Finance Party shall consider appropriate if:


(i)	in relation to Clauses 37.2.2(a), 37.2.2(b) and 37.2.2(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 37.2.2(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 37.2.2(e), 37.2.2(f) and 37.2.2(g), 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 that Finance Party, it is not practicable so to do in the circumstances;

37.2.19

to any person appointed by that Finance Party or by a person to whom Clause 37.2.2(a) or 37.2.2(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 37.2.3 if the service provider to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking; and

^37.2.20

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 Security Parties 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.


37.3	Disclosure to numbering service providers


37.3.14	Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Loan and/or one or more Security Parties the following information:


(a)	names of Security Parties;


(b)	country of domicile of Security Parties;


(c)	place of incorporation of Security Parties;


(d)	date of this Agreement;


(e)	Clause 41 ( Governing law );


(f)	the names of the Agent and the Arranger;


(g)	date of each amendment and restatement of this Agreement;


(h)	amount of Total Commitments;


(i)	currencies of the Loan;


(j)	type of Loan;


(k)	ranking of the Loan;


(l)	Termination Date;


(m)	changes to any of the information previously supplied pursuant to (a) to (l); and


(n)	such other information agreed between such Finance Party and that Security Party,

to enable such numbering service provider to provide its usual syndicated loan numbering identification services.


37.3.15	The Parties acknowledge and agree that each identification number assigned to this Agreement, the Loan and/or one or more Security Parties 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.


37.3.16	Each Borrower represents that none of the information set out in Clauses 37.3.1(a) to 37.3.1(n) is, nor will at any time be, unpublished price-sensitive information.


37.3.17	The Agent shall notify the Borrowers and the other Finance Parties of:


(k)	the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Loan and/or one or more Security Parties; and


(l)	the number or, as the case may be, numbers assigned to this Agreement, the Loan and/or one or more Security Parties by such numbering service provider.


37.4	Entire agreement This Clause 37 constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.

37.5

Inside information Each of the Finance Parties 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 each of the Finance Parties undertakes not to use any Confidential Information for any unlawful purpose.


37.6	Notification of disclosure Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Borrowers:


37.6.4	of the circumstances of any disclosure of Confidential Information made pursuant to Clause 37.2.2(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


37.6.5	upon becoming aware that Confidential Information has been disclosed in breach of this Clause 37.


37.7	Continuing obligations The obligations in this Clause 37 are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of 12 months from the earlier of:


37.7.6	the date on which all amounts payable by the Security Parties 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


37.7.7	the date on which such Finance Party otherwise ceases to be a Finance Party.


38	Disclosure of Lender Details by Agent

38.1

Supply of Lender details to Borrowers The Agent shall provide to the Borrowers within ten Business Days of a request by the Borrowers (but no more frequently than once per calendar month) a list (which may be in electronic form) setting out the names of the Lenders as at the date of that request, their respective Commitments, the address and fax number (and the department or officer, if any, for whose attention any communication is to be made) of each Lender for any communication to be made or document to be delivered under or in connection with the Finance Documents, the electronic mail address and/or any other information required to enable the sending and receipt of information by electronic mail or other electronic means to and by each Lender to whom any communication under or in connection with the Finance Documents may be made by that means and the account details of each Lender for any payment to be distributed by the Agent to that Lender under the Finance Documents.


38.2	Supply of Lender details at Borrowers' direction


38.2.18	The Agent shall, at the request of the Borrowers, disclose the identity of the Lenders and the details of the Lenders' Commitments to any:


(a)	other Party or any other person if that disclosure is made to facilitate, in each case, a refinancing of the Financial Indebtedness arising under the Finance Documents or a material waiver or amendment of any term of any Finance Document; and


(b)	Security Party.


38.2.19	Subject to Clause 38.2.3, the Borrowers shall procure that the recipient of information disclosed pursuant to Clause 38.2.1 shall keep such information confidential and shall not disclose it to anyone and shall ensure that all such information is protected with security measures and a degree of care that would apply to the recipient's own confidential information.

38.2.20

The recipient may disclose such information to any of its officers, directors, employees, professional advisers, auditors and partners as it shall consider appropriate if any such person is informed in writing of its confidential nature, except that there shall be no such requirement to so inform if that person is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by duties of confidentiality in relation to the information.


38.3	Supply of Lender details to other Lenders


38.3.7	If a Lender (a " Disclosing Lender ") indicates to the Agent that the Agent may do so, the Agent shall disclose that Lender's name and Commitment to any other Lender that is, or becomes, a Disclosing Lender.


38.3.8	The Agent shall, if so directed by the Requisite Lenders, request each Lender to indicate to it whether it is a Disclosing Lender.


38.4	Lender enquiry If any Lender believes that any entity is, or may be, a Lender and:


38.4.10	that entity ceases to have an Investment Grade Rating; or


38.4.11	an Insolvency Event occurs in relation to that entity,

the Agent shall, at the request of that Lender, indicate to that Lender the extent to which that entity has a Commitment.


38.5	Lender details definitions In this Clause 38:

" Investment Grade Rating " means, in relation to an entity, a rating for its long-term unsecured and non-credit-enhanced debt obligations of BBB- or higher by Standard & Poor's Rating Services or Fitch Ratings Ltd or Baa3 or higher by Moody's Investors Service Limited or a comparable rating from an internationally recognised credit rating agency.

" Requisite Lenders " means a Lender or Lenders whose Commitments aggregate 15 per cent (or more) of the Total Commitments (or if the Total Commitments have been reduced to zero, aggregated 15 per cent (or more) of the Total Commitments immediately prior to that reduction).


39	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.


40	Joint and Several Liability


40.1	Nature of liability The representations, warranties, covenants, obligations and undertakings of the Borrowers contained in this Agreement shall be joint and several so that each Borrower shall be jointly and severally liable with all the Borrowers for all of the same and such liability shall not in any way be discharged, impaired or otherwise affected by:


40.1.9	any forbearance (whether as to payment or otherwise) or any time or other indulgence granted to any other Borrower or any other Security Party under or in connection with any Finance Document;


40.1.10	any amendment, variation, novation or replacement of any other Finance Document;


40.1.11	any failure of any Finance Document to be legal valid binding and enforceable in relation to any other Borrower or any other Security Party for any reason;


40.1.12	the winding-up or dissolution of any other Borrower or any other Security Party;


40.1.13	the release (whether in whole or in part) of, or the entering into of any compromise or composition with, any other Borrower or any other Security Party; or


40.1.14	any other act, omission, thing or circumstance which would or might, but for this provision, operate to discharge, impair or otherwise affect such liability.

40.2

No rights as surety Until the Indebtedness has been unconditionally and irrevocably paid and discharged in full, each Borrower agrees that it shall not, by virtue of any payment made under this Agreement on account of the Indebtedness or by virtue of any enforcement by a Finance Party of its rights under this Agreement or by virtue of any relationship between, or transaction involving, the relevant Borrower and any other Borrower or any other Security Party:


40.2.12	exercise any rights of subrogation in relation to any rights, security or moneys held or received or receivable by a Finance Party or any other person; or


40.2.13	exercise any right of contribution from any other Borrower or any other Security Party under any Finance Document; or


40.2.14	exercise any right of set-off or counterclaim against any other Borrower or any other Security Party; or


40.2.15	receive, claim or have the benefit of any payment, distribution, security or indemnity from any other Borrower or any other Security Party; or


40.2.16	unless so directed by the Agent (when the relevant Borrower will prove in accordance with such directions), claim as a creditor of any other Borrower or any other Security Party in competition with any Finance Party

and each Borrower shall hold in trust for the Finance Parties and forthwith pay or transfer (as appropriate) to the Agent any such payment (including an amount equal to any such set-off), distribution or benefit of such security, indemnity or claim in fact received by it.


Section 12	Governing Law and Enforcement


41	Governing Law

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.


42	Enforcement

42.1

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 42.1 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, any Finance Party may take concurrent proceedings in any number of jurisdictions.

42.2

Waiver of Jury Trial EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MIGHT HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE FINANCE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER FINANCE DOCUMENTS BY, AMONGST OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS CLAUSE 42.


42.3	Service of process


42.3.1	Without prejudice to any other mode of service allowed under any relevant law, each Borrower and the Guarantor:


(f)	irrevocably appoints Scorpio UK Limited currently of 10 Lower Grosvenor Place, London SW1W 0EN, England (Attention: General Counsel) as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and


(g)	agrees that failure by a process agent to notify that Borrower or the Guarantor (as the case may be) of the process will not invalidate the proceedings concerned.

42.3.2

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 relevant Borrower or the Guarantor (as the case may be) must immediately (and in any event within five days of such event taking place) appoint another agent on terms acceptable to the Agent. Failing this, the Agent may appoint another agent for this purpose.


43	Patriot Act Notice

Each of the Finance Parties hereby notifies the Borrowers and the Guarantor that pursuant to the requirements of the Patriot Act and the policies and practices of the Finance Parties, the Finance Parties are required to obtain, verify and record certain information and documentation that identifies each Security Party, which information includes the name and address of each Security Party and such other information that will allow the Finance Parties to identify each Security Party in accordance with the Patriot Act.

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

Schedule 1
The Original Lenders



Name of Original Lender	Commitment
ABN AMRO Bank N.V.	$38,250,000
The Export-Import Bank of China	$38,250,000

Schedule 2
Part I
Conditions Precedent: Initial Conditions Precedent


1	Security Parties

(a)

Constitutional documents Copies of the constitutional documents of each Borrower and the Guarantor together with such other evidence as the Agent may reasonably require that each Borrower and the Guarantor are each 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 Borrower and the Guarantor (if such a certificate can be obtained).


(c)	Board resolutions A copy of a resolution of the board of directors of the each Borrower and the Guarantor:


(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 A specimen of the signature of each person authorised by the resolutions referred to in (c).


(e)	Officer's certificates An original certificate of a duly authorised officer of each Borrower and the Guarantor:


(i)	certifying that each copy document relating to it specified in this Part I of Schedule 2 is correct, complete and in full force and effect;


(ii)	setting out the names of the directors, officers and shareholders of each Borrower and the Guarantor (as the case may be) 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 Security Party to be exceeded.


(f)	Powers of attorney The original notarially attested and legalised power of attorney of each of the Borrowers and the Guarantor under which the Relevant Documents to which it is or is to become a party are to be executed or transactions undertaken by each Borrower and the Guarantor.


2	Security and related documents


(a)	Vessel documents Photocopies, certified as true, accurate and complete by a director, the secretary or the legal advisers of the Borrower, of:

(i) in relation to Vessel B and Vessel C, the relevant MOA;


(iv)	any Charter in respect of the Vessel; and


(v)	the Management Agreement together with a confirmation from the parties thereto that the Vessel has been delivered into the Management Agreement,

in each case together with all addenda, amendments or supplements.

(b)

Evidence of insurance and insurance report Evidence that the Vessel is insured in the manner required by the Security Documents and that letters of undertaking will be issued in the manner required by the Security Documents, together with (if required by the Agent) the written approval of the Insurances by way of a written report from an insurance adviser appointed by the Agent, but at the expense of the Borrower.


(c)	Valuation Two valuations dated not more than 30 days prior to the Drawdown Date evidencing the FMV of the Vessel, certifying that the amount of the Tranche requested to be advanced pursuant to the Drawdown Request is no greater than 60% of the FMV of the Vessel, such valuations to be obtained by the Agent at the expense of the Borrower.

(d)

Security Documents The Security Documents (other than the Mortgages, the Assignments and the Master Agreement Proceeds Assignment), together with all other documents required by any of them, including, without limitation, (i) all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients and (ii) all share certificates, certified copy share registers or registers of members, transfer forms, proxy forms, letters of resignation and letters of undertaking.


^(e)	Mandates Such duly signed forms of mandate, and/or other evidence of the opening of the Accounts, as the Security Agent may require.


(f)	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.


^(g)	Account Bank's confirmation The written confirmation of the Account Bank that the Accounts have been opened with the Account Bank and to its actual knowledge are free from Encumbrances other than as created by or pursuant to the Security Documents and rights of set off in favour of the Account Bank as account holder.


(h)	Intercompany Loan Agreement A photocopy, certified as true, accurate and complete by a director, the secretary or the legal advisers of the Borrower, of any Intercompany Loan Agreement.


3	Legal opinions

The following legal opinions, each addressed to the Agent, the Security Agent, the Swap Provider, the Sinosure Agent and the Lenders and capable of being relied upon by any persons who become Lenders pursuant to the primary syndication of the Loan or confirmation satisfactory to the Agent that such opinions will be given:


(a)	a legal opinion of Stephenson Harwood LLP, legal advisers to the Agent as to English law substantially in the form distributed to the Lenders prior to signing this Agreement;


(b)	a legal opinion of the following legal advisers to the Agent:


(i)	Seward and Kissel LLP as to Marshall Islands law;


(ii)	Clifford Chance LLP as to Netherlands law; and


(iii)	King and Wood as to PRC law.


4	Sinosure related documents


(a)	Evidence of Sinosure authority Evidence satisfactory to the Agent (acting on the unanimous instructions of the Lenders) that the Sinosure Policy in respect of the relevant Tranche has been duly authorised by Sinosure.


(b)	Sinosure Policy A copy of the Sinosure Policy in respect of the relevant Tranche duly executed by Sinosure, in form and substance acceptable to the Agent (acting on the unanimous instructions of the Lenders), which translation shall be at the expense of the Borrowers, pursuant to which 90% of the relevant Tranche together with interest thereon shall be covered.


(a)	Sinosure Insurance Premium A copy of the debit note issued by Sinosure evidencing the amount of the Sinosure Insurance Premium in respect of the relevant Sinosure Policy which is then due and payable to Sinosure.


(b)	Other documents Such other documentation and evidence as may be requested by Sinosure under the Sinosure Policy in respect of the relevant Tranche not otherwise comprised in the documents listed in this Part I of Schedule 2.


(c)	Sinosure Confirmation Confirmation from the Sinosure Agent that the Sinosure Agent has received the notice of effectiveness from Sinosure evidencing that the Sinosure Policy in respect of the relevant Tranche is effective.


5	Other documents and evidence


(a)	Drawdown Request A duly completed Drawdown Request.


(b)	Process agent Evidence that any process agent referred to in Clause 42.2 ( 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 Agent considers to be necessary or desirable (if it has notified the Borrowers accordingly) in connection with the entry into and performance of the transactions contemplated by any 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 The Fee Letter and 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 relevant Drawdown Date.


(f)	"Know your customer" documents Such documentation and other evidence as is reasonably requested by the Agent and the Sinosure Agent in order for the Lenders and Sinosure to comply with all necessary "know your customer" or similar identification procedures in relation to the transactions contemplated in the Finance Documents.


(g)	Capital injected In relation to each Newbuilding Vessel, evidence satisfactory to the Agent that all sums payable by the Borrower pursuant to the relevant MOA that are not financed pursuant to the Tranche will be paid in accordance with the relevant MOA.

Part II
Conditions Precedent: Conditions Precedent to Release


1	Security and related documents


(a)	Vessel documents Photocopies, certified as true, accurate and complete by a director, the secretary or the legal advisers of the Borrower, of:


(i)	in relation to Vessel A, the builder's certificate and/or bill of sale transferring title in Vessel A to Seller A under the building contract in respect of Vessel A free of all encumbrances, maritime liens or other debts;


(ii)	in relation to Vessel B and Vessel C, the builder's certificate and/or bill of sale transferring title in Vessel B or Vessel C (as the case may be) to the relevant Seller under the relevant Building Contract free of all encumbrances, maritime liens or other debts;


(iii)	in relation to Vessel A, the bill of sale transferring title in Vessel A from Seller A to the relevant Borrower under the memorandum of agreement in respect of Vessel A free of all encumbrances, maritime liens or other debts;


(iv)	in relation to Vessel B and Vessel C, the bill of sale transferring title in Vessel B or Vessel C (as the case may be) to the relevant Borrower under the relevant MOA free of all encumbrances, maritime liens or other debts;


(v)	in relation to Vessel A, the protocol of delivery and acceptance evidencing the unconditional physical delivery of Vessel A by the Builder to Seller A pursuant to the building contract in respect of Vessel A;


(vi)	in relation to Vessel B and Vessel C, the protocol of delivery and acceptance evidencing the unconditional physical delivery of Vessel B or Vessel C (as the case may be) by the Builder to the relevant Seller pursuant to the relevant Building Contract;


(vii)	in relation to Vessel A, the protocol of delivery and acceptance evidencing the unconditional physical delivery of Vessel A by Seller A to the relevant Borrower pursuant to the memorandum of agreement in respect of the Vessel A;


(viii)	in relation to Vessel B and Vessel C, the protocol of delivery and acceptance evidencing the unconditional physical delivery of Vessel B or Vessel C (as the case may be) by the relevant Seller to the relevant Borrower pursuant to the relevant MOA;


(ix)	in relation to Vessel A, the commercial invoice issued by Seller A in respect of the contract price of Vessel A pursuant to the memorandum of agreement in respect of the Vessel A;


(x)	in relation to Vessel B and Vessel C, the commercial invoice issued by the relevant Seller in respect of the contract price of Vessel B or Vessel C (as the case may be) pursuant to the relevant MOA;


(xi)	in relation to Vessel B and Vessel C, evidence that the deposit to be paid by the relevant Borrower pursuant to clause 5(a) of the relevant MOA has been paid or evidence that the relevant deposit to be paid by the relevant Borrower pursuant to clause 5(a) of the relevant MOA has been released to the relevant Seller in accordance with clause 5(a) of the relevant MOA;


(xii)	in relation to Vessel B and Vessel C, such other documents that are to be delivered by the relevant to the relevant Borrower pursuant to the terms and conditions of the relevant MOA;


(xiii)	the Vessel's current Safety Construction, Safety Equipment, Safety Radio and Load Line Certificates;


(xiv)	evidence of the Vessel's current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990;


(xv)	the Vessel's current SMC;


(xvi)	the ISM Company's current DOC;


(xvii)	the Vessel's current ISSC;


(xviii)	the Vessel's current IAPPC; and


(xix)	the Vessel's current Tonnage Certificate,

in each case together with all addenda, amendments or supplements.


(b)	Security Documents The Mortgage in respect of the Vessel and the Assignment in respect of the Vessel together with all other documents required by either of them, including, without limitation, all notices of assignment and evidence that those notices will be duly acknowledged by the recipients.


(c)	Evidence of Borrower's title In relation to Vessel A, a certificate of ownership and encumbrance (or equivalent) issued by the Registrar of the Marshall Islands confirming that Vessel A is owned by Borrower A under the laws and flag of the Republic of the Marshall Islands and free of registered Encumbrances and the Mortgage will be capable of being registered against Vessel A with first priority.


(d)	Evidence of Borrower's title In relation to the each Newbuilding Vessel, evidence that on the Delivery Date the Newbuilding Vessel will be at least provisionally registered under the laws and flag of the Republic of the Marshall Islands in the ownership of the Borrower and the Mortgage will be capable of being registered against the Vessel with first priority.


(e)	Confirmation of class In relation to Vessel A, a Class Certificate, and in relation to each New Building, an interim Class Certificate, for hull and machinery confirming that the Vessel is classed with the highest class applicable to vessels of her type with Lloyds Register or such other classification society as may be acceptable to the Agent.


^(f)	Managers' Undertakings The Managers' Undertakings in respect of the Vessel.


(g)	Capital injected In relation to each Newbuilding Vessel, evidence satisfactory to the Agent that all sums payable by the Borrower pursuant to the relevant MOA that are not financed pursuant to the Tranche have been paid in accordance with the relevant MOA.


(a)	SBI Puro Indebtedness In relation to Vessel A, evidence satisfactory to the Agent that on or prior to the Drawdown Date the SBI Puro Indebtedness will be repaid in full and the SBI Puro Finance Documents will have been released and discharged.

Part III
Conditions Subsequent


2	Evidence of Borrower's title Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of the Marshall Islands 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.


3	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 Finance Parties.


4	Acknowledgements of notices Acknowledgements of all notices of assignment and/or charge given pursuant to any Security Documents received by the Agent pursuant to Part I and Part II of this Schedule 2.


5	Legal opinions Such of the legal opinions specified in Part I of this Schedule 2 as have not already been provided to the Agent.


6	Master's receipt The master's receipt for the Mortgage.

Sinosure Policy An original counterpart of the Sinosure Policy in respect of the relevant Tranche duly executed by Sinosure, including an English translation in form and substance acceptable to the Agent (acting on the unanimous instructions of the Lenders), which translation shall be at the expense of the Borrowers, pursuant to which 90% of the relevant Tranche together with interest thereon shall be covered.


8	Sinosure Insurance Premium A copy of the invoice issued by Sinosure evidencing the amount of the Sinosure Insurance Premium paid in respect of the relevant Sinosure Policy.

Schedule 3
Drawdown Request


From:	SBI Puro Shipping Company Limited

SBI Valrico Shipping Company Limited

SBI Maduro Shipping Company Limited


To:	ABN AMRO Bank N.V. (as Agent)

Dated:

Dear Sirs

SBI Puro Shipping Company Limited, SBI Valrico Shipping Company Limited and SBI Maduro Shipping Company Limited – $76,500,000 Loan Agreement dated [ ] 2015 (the "Agreement")


1	We refer to the Agreement. This is a Drawdown Request. Terms defined in the Agreement have the same meaning in this Drawdown Request unless given a different meaning in this Drawdown Request.


2	We wish to borrow the Tranche in respect of the Vessel specified below on the following terms:


Proposed Drawdown Date:	[ ] (or, if that is not a Business Day, the next Business Day)

Amount: $[ ]


Interest Period:	[From the Drawdown Date until the 21 ^st day of the last month of the [current][next] financial quarter

Tranche: [ ]

Vessel: [ ]


3	We confirm that each condition specified in Clause 4.2 ( Further conditions precedent ) is satisfied on the date of this Drawdown Request.

The proceeds of the Tranche should be paid in accordance with the provisions of the [attached redemption statement issued by ABN AMRO Bank N.V. in respect of the SBI Puro Bridge Loan Agreement in prepayment SBI Puro Indebtedness]/[MOA in respect of the above Vessel towards payment of the purchase price of the above Vessel] to the following account of [ABN AMRO Bank N.V.]/[the Seller in accordance with the Approved Closing Procedure]:

[A ccount details ]


5	This Drawdown Request is irrevocable.

Yours faithfully

…………………………………

authorised signatory for

SBI Puro Shipping Company Limited

SBI Valrico Shipping Company Limited

SBI Maduro Shipping Company Limited

Schedule 4
Mandatory Cost Formula

The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England, the Financial Conduct Authority and/ or the Prudential Regulation Authority (or, in either case, any other authority which replaces all or any of its functions), (b) the requirements of the European Central Bank or (c) the Swiss National Bank and/or the Swiss Financial Market Supervisory Authority (or, in either case, any other authority which replaces all or any of its functions).

On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the "Additional Cost Rate") for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders' Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the Loan) and will be expressed as a percentage rate per annum.

The Additional Cost Rate for any Lender lending from a Facility Office in a Participating Member State or Switzerland will be the percentage notified by that Lender to the Agent. This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender's participation in the Loan made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank or the Swiss National Bank and/or the Swiss Financial Market Supervisory Authority in respect of loans made from that Facility Office.


4	The Additional Cost Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Agent as follows:

E x 0.01/300 per cent per annum

Where:

E is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Agent pursuant to paragraph 6 below and expressed in pounds per £1,000,000.

For the purposes of this Schedule:


(a)	" Fees Rules " means the rules on periodic fees contained in the Financial Conduct Authority and Prudential Regulation Authority Fees or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;


(b)	" Fee Tariffs " means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (disregarding any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate);


(c)	" Participating Member State " means any member state of the European Community that adopts or has adopted the Euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union;


(d)	" Tariff Base " has the meaning given to it in, and will be calculated in accordance with, the Fees Rules; and


(e)	" £ " means the lawful currency for the time being of Great Britain and Northern Ireland.

If requested by the Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Conduct Authority and the Prudential Regulation Authority, supply to the Agent, the rate of charge payable by that Reference Bank to the Financial Conduct Authority and the Prudential Regulation Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Conduct Authority and the Prudential Regulation Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.


6	Each Lender shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate. In particular, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:

(a) the jurisdiction of its Facility Office; and


(b)	any other information that the Agent may reasonably require for such purpose.


7	The rates of charge of each Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraphs 5 and 6 above.


8	The Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 3, 5 and 6 above is true and correct in all respects.


9	The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 3, 5 and 6 above.


10	Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.

The Agent may from time to time, after consultation with the Borrowers and the Lenders, determine and notify to all Parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Conduct Authority, the Prudential Regulation Authority, the European Central Bank, the Swiss National Bank and/or the Swiss Financial Market Supervisory Authority (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.

Schedule 5
Form of Transfer Certificate

To: ABN AMRO Bank N.V. as Agent and ABN AMRO Bank N.V. as Security Agent


From:	[ The Existing Lender ] (the " Existing Lender ") and [ The New Lender ] (the " New Lender ")

Dated:

SBI Puro Shipping Company Limited, SBI Valrico Shipping Company Limited and SBI Maduro Shipping Company Limited – $76,500,000 Loan Agreement dated [ ] 2015 (the "Loan Agreement")


1	We refer to the Loan Agreement. This agreement (the " Agreement ") shall take effect as a Transfer Certificate for the purposes of the Loan Agreement. Terms defined in the Loan Agreement have the same meaning in this Agreement unless given a different meaning in this Agreement.


2	We refer to Clause 24.5 ( Procedure for transfer ) of the Loan Agreement:

(a)

The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender by novation and in accordance with Clause 24.5 ( Procedure for transfer ) all of the Existing Lender's rights and obligations under the Loan Agreement and the other Finance Documents which relate to that portion of the Existing Lender's Commitment(s) and participations in the Loan under the Loan Agreement as specified in the Schedule.


(b)	The proposed Transfer Date is [ ].


(c)	The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 32.2 ( Addresses ) are set out in the Schedule.


3	The New Lender expressly acknowledges the limitations on the Existing Lender's obligations set out in Clause 24.4.1(c) ( Limitation of responsibility of Existing Lenders ).


4	This Agreement 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 this Agreement.


5	This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.


6	This Agreement has been entered into on the date stated at the beginning of this Agreement.

Note:

The execution of this Transfer Certificate may not transfer a proportionate share of the Existing Lender's interest in any Encumbrance created or expressed to be created or evidenced by the Security Documents in all jurisdictions. It is the responsibility of the New Lender to ascertain whether any other documents or other formalities are required to perfect a transfer of such a share in any jurisdiction and, if so, to arrange for execution of those documents and completion of those formalities.

The Schedule

Commitment/rights and obligations to be transferred

[ insert relevant details ]

[ Facility Office address, fax number and attention details for notices and account details for payments, ]

[Existing Lender] [New Lender]

By: By:

This Agreement is accepted as a Transfer Certificate for the purposes of the Loan Agreement by the Agent and the Transfer Date is confirmed as [ ].

ABN AMRO Bank N.V. as Agent

By:

ABN AMRO Bank N.V. as Security Agent

By:

Schedule 6
Form of Assignment Agreement


To:	ABN AMRO Bank N.V. as Agent, ABN AMRO Bank N.V. as Security Agent and SBI Puro Shipping Company Limited, SBI Valrico Shipping Company Limited and SBI Maduro Shipping Company Limited as Borrowers, for and on behalf of each Security Party


From:	[the Existing Lender ] (the " Existing Lender ") and [the New Lender ] (the " New Lender ")

Dated:

SBI Puro Shipping Company Limited, SBI Valrico Shipping Company Limited and SBI Maduro Shipping Company Limited - $76,500,000 Loan Agreement dated [ ] 2015 (the "Loan Agreement")


1	We refer to the Loan Agreement. This is an Assignment Agreement. This agreement (the " Agreement ") shall take effect as an Assignment Agreement for the purpose of the Loan Agreement. Terms defined in the Loan Agreement have the same meaning in this Agreement unless given a different meaning in this Agreement.


2	We refer to Clause 24.6 ( Procedure for assignment ) of the Loan Agreement:

(a)

The Existing Lender assigns absolutely to the New Lender all the rights of the Existing Lender under the Loan Agreement, the other Finance Documents and in respect of any Encumbrance created or expressed to be created or evidenced by the Security Documents which correspond to that portion of the Existing Lender's Commitment(s) and participations in the Loan under the Loan Agreement as specified in the Schedule.


(b)	The Existing Lender is released from all the obligations of the Existing Lender which correspond to that portion of the Existing Lender's Commitment(s) and participations in the Loan under the Loan Agreement specified in the Schedule.


(c)	The New Lender becomes a Party as a Lender and is bound by obligations equivalent to those from which the Existing Lender is released under paragraph (b).


3	The proposed Transfer Date is [ ].


4	On the Transfer Date the New Lender becomes Party to the relevant Finance Documents as a Lender.


5	The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 32.2 ( Addresses ) are set out in the Schedule.


6	The New Lender expressly acknowledges the limitations on the Existing Lender's obligations set out in Clause 24.4.3 ( Limitation of responsibility of Existing Lenders ).


7	This Agreement acts as notice to the Agent (on behalf of each Finance Party) and, upon delivery in accordance with Clause 24.7 ( Copy of Transfer Certificate or Assignment Agreement to Borrowers ), to the Borrowers (on behalf of each Security Party) of the assignment referred to in this Agreement.


8	This Agreement 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 this Agreement.


9	This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.


10	This Agreement has been entered into on the date stated at the beginning of this Agreement.

Note:

The execution of this Assignment Agreement may not transfer a proportionate share of the Existing Lender's interest in any Encumbrance created or expressed to be created or evidenced by the Security Documents in all jurisdictions. It is the responsibility of the New Lender to ascertain whether any other documents or other formalities are required to perfect a transfer of such a share in any jurisdiction and, if so, to arrange for execution of those documents and completion of those formalities.

The Schedule

Commitment/rights and obligations to be transferred by assignment, release and accession

[ insert relevant details ]

[ Facility office address, fax number and attention details for notices and account details for payments ]

[Existing Lender] [New Lender]

By: By:

This Agreement is accepted as an Assignment Agreement for the purposes of the Loan Agreement by the Agent and the Transfer Date is confirmed as [ ].

Signature of this Agreement by the Agent constitutes confirmation by the Agent of receipt of notice of the assignment referred to in this Agreement, which notice the Agent receives on behalf of each Finance Party.

ABN AMRO Bank N.V. as Agent

By:

ABN AMRO Bank N.V. as Security Agent

By:

LONLIVE\21312160.7 Page 24

Schedule 7
Form of Compliance Certificate

To: ABN AMRO Bank N.V. (as Agent)

From: Scorpio Bulkers Inc.

Dated:

Dear Sirs

SBI Puro Shipping Company Limited, SBI Valrico Shipping Company Limited and SBI Maduro Shipping Company Limited – $76,500,000 Loan Agreement dated [ ] 2015 (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 we maintain:


(a)	Cash of $[ ];


(b)	Cash Equivalents of $[ ];


(c)	Minimum Liquidity of $[ ], of which [ ]% consists of Cash;


(d)	Consolidated Tangible Net Worth of $[ ];


(e)	a ratio of Net Debt to Consolidated Total Capitalisation of [ ]:1.0; and


(f)	a ratio of Consolidated EBITDA to Consolidated Net Interest Expense of [ ]:1.0.


3	[We confirm that no Default is continuing.] ^*



Signed:	………………………………………………
	Chief Financial Officer
	of
	Scorpio Bulkers Inc.

LONLIVE\21312160.7 Page 25

Signatures

The Borrowers

SBI Puro Shipping Company )

Limited )

)

By: /s/ Cameron Mackey )

)

Address: )

c/o Scorpio Bulkers Inc. )

9, Boulevard Charles III )

MC 98000 Monaco )

Fax no.: +377 97 77 8346 )

Department/Officer: General Counsel )

SBI Valrico Shipping Company )

Limited )

)

By: /s/ Cameron Mackey )

)

Address: )

c/o Scorpio Bulkers Inc. )

9, Boulevard Charles III )

MC 98000 Monaco )

Fax no.: +377 97 77 8346 )

Department/Officer: General Counsel )

SBI Maduro Shipping Company )

Limited )

)

By: /s/ Cameron Mackey )

)

Address: )

c/o Scorpio Bulkers Inc. )

9, Boulevard Charles III )

MC 98000 Monaco )

Fax no.: +377 97 77 8346 )

Department/Officer: General Counsel )

LONLIVE\21312160.7 Page 26

The Guarantor

Scorpio Bulkers Inc. )

)

By: /s/ Cameron Mackey )

)

Address: )

9, Boulevard Charles III )

MC 98000 Monaco )

Fax no.: +377 97 77 8346 )

Department/Officer: General Counsel )

The Arrangers

ABN AMRO Bank N.V. )

)

By: /s/ Roderick McGeachy )

)

Address: )

Coolsingel 93 )

3012 AE Rotterdam )

The Netherlands )

Fax no.: +31 10 401 5323 )

Department/Officer: )

ECT / Transportation Mid-Office )

Email: )

magda.braam-heijnen@nl.abnamro.com, )

alper.sanliunal@nl.abnamro.com, )

martijn.m.van.den.berg@nl.abnamro.com )

and )

tom.van.vonderen@nl.abnamro.com )

The Export-Import Bank of China )

)

By: /s/ Gao Zefeng )

)

Address: )

No.30 Fu Xing Men Nei Street )

Xicheng District )

Beijing 100031 )

The People's Republic of China )

Fax no.: +86 10 8357 8428/9 )

Department/Officer: Jenny Jie Mi/Wei )

Zhenyu/Transport Finance Department )

Email: mijie@eximbank.gov.cn )

LONLIVE\21312160.7 Page 27

and )

weizhenyu@eximbank.gov.cn )

The Agent

ABN AMRO Bank N.V. )

)

By: /s/ Roderick McGeachy )

)


Address:	)


Daalsesingel 71	)


3511 SW Utrecht	)

The Netherlands )

Fax no.: +31 20 628 69 85 )

Department/Officer: )

Agency Syndicated Loans (PAC EA8550) )

Email: )

agency.shipping@nl.abnamro.com )

The Security Agent

ABN AMRO Bank N.V. )

)

By: /s/ Roderick McGeachy )

)

Address: )


Daalsesingel 71	)


3511 SW Utrecht	)

The Netherlands )

Fax no.: +31 20 628 69 85 )

Department/Officer: )

Agency Syndicated Loans (PAC EA8550) )

Email: )

agency.shipping@nl.abnamro.com )

LONLIVE\21312160.7 Page 28

The Original Lenders

ABN AMRO Bank N.V. )

)

By: /s/ Roderick McGeachy )

The Export-Import Bank of China )

)

By:/s/ Gao Zefeng )

The Swap Provider

ABN AMRO Bank N.V. )

)

By: /s/ Roderick McGeachy )

)

Address: )

Coolsingel 93 )

3012 AE Rotterdam )

The Netherlands )

Fax no.: +31 10 401 5323 )

Department/Officer: )

ECT / Transportation Mid-Office )

Email: )

magda.braam-heijnen@nl.abnamro.com, )

alper.sanliunal@nl.abnamro.com, )

martijn.m.van.den.berg@nl.abnamro.com )

and )

tom.van.vonderen@nl.abnamro.com )

LONLIVE\21312160.7 Page 29

The Sinosure Agent

ABN AMRO Bank N.V., )

Singapore Branch )

)

By: /s/ S.J.R Panday

/s/ Jacqueline Kingcott )

)

Address: )

One Raffles Quay )

South Tower, #26 )

Singapore 048583 )

Department/Officer: Jacqueline Kingcott )

Email: )

jacqueline.kingcott@sg.abnamro.com )

LONLIVE\21312160.7 Page 30

Exhibit 4.27

Date: as of December 22, 2015

SCORPIO BULKERS INC.

as Borrower

SBI CRONOS SHIPPING COMPANY LIMITED

as Guarantor

THE BANKS AND FINANCIAL INSTITUTIONS
listed in Schedule 1
as Lenders

and

CRÉDIT AGRICOLE CORPORATE AND
INVESTMENT BANK,

as Mandated Lead Arranger, Administrative Agent,

Security Trustee and Account Bank

________________________________________

CREDIT AGREEMENT

________________________________________

relating to senior secured term credit facility in the amount of up to US$12,500,000

TABLE OF CONTENTS

Page

1. INTERPRETATION 1

1.1 Definitions 1

1.2 Construction of certain terms 22

1.3 Meaning of “month” 24

1.4 Meaning of “subsidiary” 24

1.5 General interpretation 24

1.6 Headings 25

1.7 Accounting Terms 25

1.8 Inferences Regarding Materiality 25

2. FACILITY 25

2.1 Amount of Facility 25

2.2 Lenders’ participations in Advance 25

2.3 Purpose of Advance 25

2.4 Reduction and Cancellation of Total Commitments 26

3. POSITION OF THE LENDERS 26

3.1 Interests Several 26

3.2 Individual Right of Action 26

3.3 Proceedings Requiring Required Lender Consent 26

3.4 Obligations Several 26

3.5 Replacement of a Lender 26

4. DRAWDOWN 28

4.1 Request for Advance 28

4.2 Availability 28

4.3 Notification to Lenders of Receipt of the Drawdown Notice 28

4.4 Drawdown Notice Irrevocable 28

4.5 Lenders to Make Available Contributions 28

4.6 Disbursement of Advance 28

4.7 Disbursement of Advance to Third Party 29

4.8 Promissory Note 29

5. INTEREST 29

5.1 Normal Rate of Interest 29

5.2 Payment of Normal Interest 29

5.3 Payment of Accrued Interest 30

5.4 Notification of Interest Periods and Rates of Normal Interest 30

5.5 Notice of Prepayment 30

5.6 Prepayment; Termination of Commitments 30

5.7 Application of Prepayment 30

5.8 Market Disruption 30

6. INTEREST PERIODS 31

6.1 Commencement of Interest Periods 32

6.2 Duration of Normal Interest Periods 32

6.3 Duration of Interest Periods for Repayment Installments 32

6.4 Non-availability of Matching Deposits for Interest Period Selected 32

7. DEFAULT INTEREST 32

7.1 Payment of Default Interest on Overdue Amounts 32

7.2 Default Rate of Interest 32

7.3 Calculation of default rate of interest 33

7.4 Notification of Interest Periods and Default Rates 33

7.5 Payment of Accrued Default Interest 33

8. REPAYMENT AND PREPAYMENT 33

8.1 Amount of Repayment Installments 33

8.2 Repayment Dates 33

8.3 Maturity Date 34

8.4 Voluntary Prepayment 34

8.5 Conditions for Voluntary Prepayment 34

8.6 Effect of Notice of Prepayment 34

8.7 Notification of Notice of Prepayment 34

8.8 Application of Partial Prepayment 34

8.9 Mandatory Prepayment 34

8.10 Amounts Payable on Prepayment 35

8.11 No Reborrowing 35

8.12 Release of Borrower and/or Collateral Vessel Owning Guarantor 35

9. CONDITIONS PRECEDENT 35

9.1 Documents, Fees and No Default 35

9.2 Waiver of Conditions Precedent 36

10. REPRESENTATIONS AND WARRANTIES 36

10.1 General 37

10.2 Status 37

10.3 Company Power; Consents 37

10.4 Consents in Force 38

10.5 Title 38

10.6 Legal Validity; Effective Security Interests 38

10.7 No Third Party Security Interests 39

10.8 No Conflicts 39

10.9 Taxes 39

10.10 No Default 40

10.11 Information 41

10.12 No Litigation 41

10.13 ISM Code and ISPS Code Compliance 41

10.14 No Rebates, etc. 41

10.15 Compliance with Law; Environmentally Sensitive Material 42

10.16 Ownership Structure 42

10.17 Pension Plans 42

10.18 Margin Stock 43

10.19 Investment Company, Public Utility, etc. 43

10.20 Asset Control 43

10.21 No Money Laundering 44

10.22 Anti-bribery, anti-corruption and anti-money laundering 44

10.23 Collateral Vessel 44

10.24 Place of Business 44

10.25 Solvency 45

10.26 Borrower’s Business; Guarantor’s Business 45

10.27 Immunity; Enforcement; Submission to Jurisdiction; Choice of Law 45

10.28 Status of Secured Liabilities 46

11. GENERAL AFFIRMATIVE AND NEGATIVE COVENANTS 46

11.1 Affirmative Covenants 46

11.2 Negative Covenants 54

12. FINANCIAL COVENANTS 57

12.1 General 57

12.2 Maximum Leverage 57

12.3 Minimum Tangible Net Worth 57

12.4 Free Liquidity 57

13. MARINE INSURANCE COVENANTS 57

13.1 General 57

13.2 Maintenance of Obligatory Insurances 57

13.3 Terms of Obligatory Insurances 58

13.4 Further Protections for the Creditor Parties 58

13.5 Renewal of Obligatory Insurances 59

13.6 Copies of Policies; Letters of Undertaking 60

13.7 Copies of Certificates of Entry 61

13.8 Deposit of Original Policies 61

13.9 Payment of Premiums 61

13.10 Guarantees 61

13.11 Compliance with Terms of Insurances 61

13.12 Alteration to Terms of Insurances 62

13.13 Settlement of Claims 62

13.14 Provision of Copies of Communications 62

13.15 Provision of Information 63

13.16 Mortgagee’s Interest, Additional Perils and Political Risk Insurances 63

13.17 Review of Insurance Requirements 63

13.18 Modification of Insurance Requirements 64

13.19 Compliance with Instructions 64

14. COLLATERAL VESSEL COVENANTS 64

14.1 General 64

14.2 Collateral Vessel’s Name and Registration 64

14.3 Repair and Classification 64

14.4 Classification Society Instructions 65

14.5 Modification 66

14.6 Removal of Parts 66

14.7 Surveys 66

14.8 Inspection 66

14.9 Prevention of and Release from Arrest 66

14.10 Compliance with Laws etc. 67

14.11 Provision of Information 67

14.12 Notification of Certain Events 68

14.13 Restrictions on Chartering, Appointment of Managers etc. 68

14.14 Notice of Mortgage 69

14.15 ISPS Code 69

15. SECURITY MAINTENANCE COVER RATIO 70

15.1 General 70

15.2 Security Maintenance Cover Ratio 70

15.3 Provision of Additional Security; Prepayment 70

15.4 Value of Additional Vessel Security 70

15.5 Valuations Binding 70

15.6 Provision of Information 71

15.7 Payment of Valuation Expenses 71

15.8 Application of Prepayment 71

16. GUARANTEE 71

16.1 Guarantee and Indemnity 71

16.2 Continuing Guarantee 71

16.3 Performance of Guaranteed Obligations; Obligations pari passu 72

16.4 Reinstatement 72

16.5 Liability Absolute and Unconditional 73

16.6 Waiver of Promptness, etc. 73

16.7 Waiver of Revocation, etc. 74

16.8 Waiver of Certain Defenses 74

16.9 Waiver of Disclosure, etc. 74

16.10 Immediate Recourse 74

16.11 Acknowledgment of Benefits 74

16.12 Independent Obligations 74

16.13 Deferral of Guarantor’s Rights 74

16.14 Limitation of Liability 75

16.15 Reliance of Creditor Parties 75

17. PAYMENTS AND CALCULATIONS 75

17.1 Currency and Method of Payments 75

17.2 Payment on Non-Business Day 76

17.3 Basis for Calculation of Periodic Payments 76

17.4 Distribution of Payments to Creditor Parties 76

17.5 Permitted Deductions by Agent 76

17.6 Agent Only Obliged to Pay When Monies Received 76

17.7 Refund to Agent of Monies Not Received 77

17.8 Agent May Assume Receipt 77

17.9 Creditor Party Accounts 77

17.10 Agent’s Memorandum Account 77

17.11 Accounts Prima Facie Evidence 77

18. APPLICATION OF RECEIPTS 77

18.1 Normal Order of Application 77

18.2 Variation of Order of Application 78

18.3 Notice of Variation of Order of Application 78

18.4 Appropriation Rights Overridden 78

18.5 Payments in Excess of Contribution 78

19. APPLICATION OF EARNINGS, SALES PROCEEDS, INSURANCE PROCEEDS AND EARNINGS ACCOUNT 79

19.1 General 79

19.2 Payment of Earnings 79

19.3 Location of Accounts 79

19.4 Borrower’s Obligations Unaffected 80

19.5 Debt for Expenses etc. 80

19.6 Use of Proceeds in Earnings Accounts 80

20. EVENTS OF DEFAULT 80

20.1 Events of Default 80

20.2 Actions Following an Event of Default 83

20.3 Termination of Commitments 84

20.4 Acceleration of Loan 84

20.5 Multiple Notices; Action Without Notice 84

20.6 Notification of Creditor Parties and Security Parties 84

20.7 Creditor Party Rights Unimpaired 84

20.8 Exclusion of Creditor Party Liability 84

21. FEES AND EXPENSES 85

21.1 Arrangement and Up-Front Fees 85

21.2 Costs of Negotiation, Preparation, etc. 85

21.3 Costs of Variations, Amendments, Enforcement, etc. 85

21.4 Documentary Taxes 86

21.5 Certification of Amounts 86

22. INDEMNITIES 86

22.1 Indemnities Regarding Borrowing and Repayment of Loan 86

22.2 Breakage Costs 86

22.3 Miscellaneous Indemnities 87

22.4 Currency Indemnity 87

22.5 Certification of Amounts 88

22.6 Sums Deemed Due to a Lender 88

22.7 Survival of Indemnities 88

23. NO SET-OFF OR TAX DEDUCTION; TAX INDEMNITY; FATCA 88

23.1 No Deductions 88

23.2 Grossing-Up for Taxes 88

23.3 Evidence of Payment of Taxes 88

23.4 Indemnity for Taxes 89

23.5 Exclusion from Indemnity and Gross-Up for Taxes 89

23.6 Delivery of Tax Forms 90

23.7 FATCA Information 90

23.8 FATCA Withholding 91

23.9 FATCA Mitigation 92

23.10 Additional Borrowers and/or Guarantors 93

23.11 Tax Credits 93

24. ILLEGALITY, ETC 93

24.1 Illegality 93

24.2 Notification of Illegality 93

24.3 Prepayment; Termination of Commitment 94

24.4 Mitigation 94

25. INCREASED COSTS 94

25.1 Increased Costs 94

25.2 Meaning of “ Increased Costs ” 95

25.3 Notification to Borrower of Claim for Increased Costs 95

25.4 Payment of Increased Costs 95

25.5 Notice of Prepayment 96

25.6 Prepayment; Termination of Commitment 96

25.7 Application of Prepayment 96

26. SET-OFF 96

26.1 Application of Credit Balances 96

26.2 Existing Rights Unaffected 96

26.3 Sums Deemed Due to a Lender 97

26.4 No Security Interest 97

27. TRANSFERS AND CHANGES IN LENDING OFFICES 97

27.1 Transfer by Borrower or Guarantor 97

27.2 Transfer by a Lender 97

27.3 Transfer Certificate, Delivery and Notification 98

27.4 Effective Date of Transfer Certificate 98

27.5 No Transfer Without Transfer Certificate 98

27.6 Lender Re-Organization; Waiver of Transfer Certificate 98

27.7 Effect of Transfer Certificate 98

27.8 Maintenance of Register of Lenders 99

27.9 Reliance on Register of Lenders 100

27.10 Authorization of Agent to Sign Transfer Certificates 100

27.11 Registration Fee 100

27.12 Sub-Participation; Subrogation Assignment 100

27.13 Disclosure of Information 100

27.14 Change of Lending Office 100

27.15 Notification 100

27.16 Security Over Lenders’ Rights 100

27.17 Replacement of Reference Bank 101

28. VARIATIONS AND WAIVERS 101

28.1 Variations, Waivers, Etc. by Required Lenders 101

28.2 Variations, Waivers, Etc. Requiring Agreement of All Lenders 101

28.3 Variations, Waivers, Etc. Relating to the Servicing Banks 102

28.4 Exclusion of Other or Implied Variations 102

29. NOTICES 103

29.1 General 103

29.2 Addresses for Communications 103

29.3 Effective Date of Notices 104

29.4 Service Outside Business Hours 104

29.5 Illegible Notices 105

29.6 Valid Notices 105

29.7 English Language 105

29.8 Meaning of “N otice ” 105

30. SUPPLEMENTAL 105

30.1 Rights Cumulative, Non-Exclusive 105

30.2 Severability of Provisions 105

30.3 Counterparts 105

30.4 Binding Effect 106

31. THE SERVICING BANKS AND PARALLEL DEBT 106

31.1 Appointment and Granting 106

31.2 Scope of Duties 107

31.3 Reliance 108

31.4 Knowledge 108

31.5 Security Trustee and Agent as Lenders 109

31.6 Indemnification of Security Trustee and Agent 109

31.7 Reliance on Security Trustee or Agent 109

31.8 Actions by Security Trustee and Agent 110

31.9 Resignation and Removal 110

31.10 Release of Collateral 111

31.11 Parallel Debt 111

31.12 Instructions to Agent/Security Trustee 112

32. LAW AND JURISDICTION 112

32.1 Governing Law 112

32.2 Consent to Jurisdiction 112

32.3 Creditor Party Rights Unaffected 113

32.4 Meaning of “ Proceedings ” 113

32.5 Waiver of Sovereign Immunity 113

32.6 Waiver of Damages 113

33. WAIVER OF JURY TRIAL 114

33.1 WAIVER 114

34. PATRIOT ACT NOTICE 114

34.1 PATRIOT Act Notice 114

EXECUTION PAGE 123

SCHEDULE 1 LENDERS AND COMMITMENTS 126

SCHEDULE 2 GUARANTOR AND COLLATERAL VESSEL 128

SCHEDULE 3 DRAWDOWN NOTICE 131

SCHEDULE 4 DOCUMENTS REQUIRED AS CONDITIONS PRECEDENT 134

SCHEDULE 5 TRANSFER CERTIFICATE 142

SCHEDULE 6 LIST OF APPROVED BROKERS 146

SCHEDULE 7 PAYMENT DATES AND AMOUNTS 147

SCHEDULE 8 MANDATORY COST FORMULA 149

APPENDIX A FORM OF CHARTER ASSIGNMENT 152

APPENDIX B FORM OF COMPLIANCE CERTIFICATE 153

APPENDIX C FORM OF EARNINGS ACCOUNT PLEDGE 154

APPENDIX D FORM OF EARNINGS ASSIGNMENT 156

APPENDIX E FORM OF FIRST PREFERRED SHIP MORTGAGE 158

APPENDIX F FORM OF MANAGER’S UNDERTAKING 159

APPENDIX G FORM OF NOTE 160

APPENDIX H FORM OF SHARES PLEDGE 161

APPENDIX I FORM OF INSURANCE ASSIGNMENT 162

THIS CREDIT AGREEMENT (this “ Agreement ”) is made as of December ___, 2015

AMONG


(1)	SCORPIO BULKERS INC., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960, as borrower (the “ Borrower ”);


(2)	SBI CRONOS SHIPPING COMPANY LIMITED, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960, as guarantor (the “ Guarantor ”);


(3)	THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as lenders (the “ Lenders ”, which expression includes their respective successors, transferees and assigns);


(4)	CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as mandated lead arranger (the “ Mandated Lead Arranger ”, which expression includes its successors, transferees and assigns);


(5)	CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as administrative agent for the Lenders (in such capacity, the “ Agent ”, which expression includes its successors, transferees and assigns), acting in such capacity through its principal office at 9 quai du President Paul Doumer, 92920 Paris La Defense Cedex, France;


(6)	CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as security trustee for the Lenders (in such capacity, the “ Security Trustee ”, which expression includes its successors, transferees and assigns), acting in such capacity through its principal office at 9 quai du President Paul Doumer, 92920 Paris La Defense Cedex, France; and


(7)	CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as account bank acting in such capacity through its principal office at 9 quai du President Paul Doumer, 92920 Paris La Defense Cedex, France.

BACKGROUND

The Lenders have agreed to make available to the Borrower a credit facility of up to $12,500,000 for the purpose of refinancing part of the acquisition cost of the Collateral Vessel.

IT IS AGREED as follows:


1.	INTERPRETATION


1.1	Definitions.

“ Account Bank ” means Crédit Agricole Corporate and Investment Bank, acting through its principal office at 9 quai du President Paul Doumer, 92920 Paris La Defense Cedex, France or ABN AMRO Bank N.V.;

“ Advance ” means the borrowing of the Total Commitment by the Borrower or (as the context may require) the outstanding principal amount of such borrowing at any relevant time;

“ Affiliate ” means, as to any person, any other person that, directly or indirectly, controls, is controlled by or is under common control with such person or is a director or officer of such person, and for purposes of this definition, the term “ control ” (including the terms “ controlling ”, “ controlled by ” and “ under common control with ”) of a person means the possession, direct or indirect, of the power to vote 20% or more of the Voting Stock of such person or to direct or cause direction of the management and policies of such person, whether through the ownership of Voting Stock, by contract or otherwise;

“ Approved Broker ” means any of the companies listed on Schedule 6 or such other company proposed by the Borrower which the Agent may, with the consent of all Lenders (such consent not to be unreasonably withheld or delayed), approve from time to time for the purpose of valuing the Collateral Vessel who shall act as an expert and not as arbitrator and whose valuation shall be conclusive and binding on all parties to this Agreement;

“ Approved Commercial Management Agreement ” means, in relation to the Collateral Vessel in respect of its commercial management, a management agreement between the Guarantor and an Approved Commercial Manager which shall be on the BIMCO Shipman 2009 form or such other form of management agreement, which the Agent may reasonably approve on behalf of all Lenders;

“ Approved Commercial Manager ” means SCM, Scorpio Services Holdings Ltd or any other reputable commercial management company proposed by the Borrower which the Agent, with the consent of all Lenders, may reasonably approve from time to time as the commercial manager of the Collateral Vessel;

“ Approved Flag ” means the Marshall Islands or Liberian flag or such other flag as the Agent may, with the consent of all Lenders (such consent not to be unreasonably withheld, conditioned or delayed), approve from time to time in writing as the flag on which the Collateral Vessel shall be registered;

“ Approved Management Agreement ” means, as the context requires, any of (i) an Approved Commercial Management Agreement, (ii) an Approved Technical Management Agreement, or (iii) the master agreement dated September 27, 2013 as amended by an addendum number one dated June 2, 2014 each entered into between Scorpio Bulkers Inc., the Approved Technical Manager and the Approved Commercial Manager:

(a) as acceded to in respect of the commercial management of the Collateral Vessel pursuant to confirmation dated September 17, 2014 between the Guarantor, the Borrower and the Approved Commercial Manager; and

(b) as acceded to in respect of the technical management of the Collateral Vessel pursuant to confirmation dated July 18, 2014 between the Guarantor, the Borrower and the Approved Technical Manager;

“ Approved Manager ” means either an Approved Commercial Manager or an Approved Technical Manager, as the context requires;

“ Approved Technical Management Agreement ” means, in relation to the Collateral Vessel in respect of its technical management, a management agreement between the Guarantor and an Approved Technical Manager which shall be on the BIMCO Shipman 98 form or such other form of management agreement, which the Agent may reasonably approve on behalf of the Required Lenders;

“ Approved Technical Manager ” means SSM, Optimum Ship Services, Zenith A.S. or any other reputable technical manager proposed by the Borrower which the Agent, with the consent of the Required Lenders, may reasonably approve from time to time as technical manager of the Collateral Vessel;

“ Availability Period ” means the period commencing on the Effective Date and ending on the earlier of:


(a)	February 29, 2016 (or such later date as the Agent may, with the consent of all Lenders, agree with the Borrower); or


(b)	the date on which the Total Commitment is fully borrowed, cancelled or terminated;

“ Available Commitments ” means amounts readily available for drawing by the Borrower under committed revolving credit facilities with a maturity date in excess of twelve (12) months and which remain undrawn and could be drawn for general working capital or other general corporate purposes and provided that no event of default has occurred and is continuing under any such revolving credit facility and the Borrower is entitled to borrow under such committed revolving credit facility;

“ Balloon Installment ” has the meaning given in Clause 8.1;

“ Bank Secrecy Act ” means the United States Bank Secrecy Act of 1970, as amended;

“ Base Prepayment Amount ” means $500,000;

“ Basel III ” means any of the changes designed to strengthen any capital standards or introduce minimum liquidity or other requirements referenced in the publication of the Groups of Governors and Heads of Supervision of the Basel Committee on Banking Supervision (the “ Basel Committee ”) dated December 16, 2010, or any subsequent paper or document published by the Basel Committee on any of those requirements;

“ Business Day ” means a day on which banks are open in London, England; Paris, France and New York, New York, U.S.A.;

“ Capitalized Lease ” means, as applied to any person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such person, as lessee, in conformity with US GAAP, is required to be capitalized on the balance sheet of such person; and “ Capitalized Lease Obligation ” is defined to mean the rental obligations, as aforesaid, under a Capitalized Lease;

“ Cash Equivalents ” means:


(a)	securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof);


(b)	time deposits, certificates of deposit or deposits held with any commercial bank of recognized standing organized under the laws of the United States of America, any state thereof or any foreign jurisdiction having capital and surplus in excess of $500,000,000;


(c)	time deposits, certificates of deposit or deposits held with any Lender; and


(d)	such other securities or instruments as the Required Lenders shall agree in writing;

and in respect of both (a) and (b) above, with a Rating Category of at least “A+” by S&P and “A” by Moody’s (or the equivalent used by another Rating Agency) in each case having maturities of not more than ninety (90) days from the date of acquisition;

“ Change of Control ” means:


(a)	in respect of the Guarantor, the occurrence of any act, event or circumstance that without prior written consent of all Lenders results in the Borrower owning directly or indirectly less than 100% of the issued and outstanding Equity Interests in the Guarantor; and


(b)	in respect of the Borrower, means:

(i)

a “ person ” or “ group ” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act as in effect on the Effective Date), other than any holders of the Borrower’s Equity Interests as of the Effective Date, becomes the ultimate “ beneficial owner ” (as defined in Rule 13d-3 and 13d-5 under the Exchange Act and including by reason of any change in the ultimate “ beneficial ownership ” of the Equity Interests of the Borrower) of more than

35% of the total voting power of the Voting Stock of the Borrower (calculated on a fully diluted basis); or

(ii)

individuals who at the beginning of any period of two consecutive calendar years constituted the Board of Directors or equivalent governing body of the Borrower (together with any new directors (or equivalent) whose election by such Board of Directors or equivalent governing body or whose nomination for election was approved by a vote of at least two-thirds of the members of such Board of Directors or equivalent governing body then still in office who either were members of such Board of Directors or equivalent governing body at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least 35% of the members of such Board of Directors or equivalent governing body then in office;

“ Charter ” means any time or consecutive voyage charter or other contract for the employment in respect of the Collateral Vessel, including, but not limited to, a contract of affreightment, for a term which exceeds, or which by virtue of any optional extensions may exceed, 12 months (other than any charter relating to the contribution of the Collateral Vessel to a pool and any other charter or contract of employment in respect of the Collateral Vessel that the Guarantor enters into with the Borrower or any affiliate thereof);

“ Charter Assignment ” means in relation to the Collateral Vessel, an assignment of the relevant Charter in the form set out in Appendix A;

“ CISADA ” means the United States Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010;

“ Classification Society ” means, in relation to the Collateral Vessel, American Bureau of Shipping, Det Norske Veritas, Lloyd’s Register, Bureau Veritas or such other vessel classification society that is a member of IACS that the Agent may approve from time to time;

“ Code ” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated and rulings issued thereunder;

“ Collateral ” means all property (including, without limitation, any proceeds thereof) referred to in the Finance Documents that is subject to any Security Interest in favor of the Security Trustee, for the benefit of the Lenders, securing the Secured Liabilities;

“ Collateral Vessel ” means the vessel identified in Schedule 2;

“ Commission ” or “ SEC ” means the United States Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act;

“ Commitment ” means, in relation to a Lender, the amount set forth opposite its name in Schedule 1, or, as the case may require, the amount specified in the relevant Transfer Certificate, as that amount may be reduced, cancelled or terminated in accordance with this Agreement (and “ Total Commitments ” means the aggregate of the Commitments of all the Lenders);

“ Compliance Certificate ” means a certificate executed by the Chief Financial Officer of the Borrower in the form set out in Appendix B;

“ Consolidated Funded Debt ” means, for any accounting period, the sum of the following for the Borrower determined (without duplication) on a consolidated basis for such period and in accordance with US GAAP consistently applied:


(a)	all Financial Indebtedness; and


(b)	all obligations to pay a specific purchase price for goods or services whether or not delivered or accepted (including take-or-pay and similar obligations which in accordance with US GAAP would be shown on the liability side of a balance sheet);

provided that balance sheet accruals for future dry-dock expenses shall not be classified as Consolidated Funded Debt;

“ Consolidated Liquidity ” means, on a consolidated basis at any time, the sum of (a) cash, (b) Cash Equivalents, in each case held by the Borrower on a freely available and unencumbered basis, and (c) Available Commitments; provided, however, that 66 2/3% of Consolidated Liquidity shall at all times consist of cash;

“ Consolidated Tangible Net Worth ” means, on a consolidated basis, the total shareholders’ equity (including retained earnings) of the Borrower, minus goodwill;

“ Consolidated Total Capitalization ” means Consolidated Tangible Net Worth plus Consolidated Funded Debt;

“ Contractual Currency ” has the meaning given in Clause 22.4;

“ Contribution ” means, in relation to a Lender, the part of the Loan which is owing to that Lender;

“ Creditor Party ” means the Agent, the Mandated Lead Arranger, the Security Trustee or any Lender, whether as at the date of this Agreement or at any later time;

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

“ Drawdown Date ” means, in relation to the Advance, the date requested by the Borrower for the Advance to be made, or (as the context requires) the date on which the Advance is actually made;

“ Drawdown Notice ” means a notice in the form set out in Schedule 3 (or in any other form which the Agent approves or reasonably requires);

“ Earnings ” means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Guarantor or the Security Trustee and which arise out of the use or operation of the Collateral Vessel, including (but not limited to):


(a)	except to the extent that they fall within paragraph (b):


(i)	all freight, hire and passage moneys;


(ii)	compensation payable to the Guarantor or the Security Trustee in the event of requisition of the Collateral Vessel for hire;


(iii)	remuneration for salvage and towage services;


(iv)	demurrage and detention moneys;


(v)	damages for breach (or payments for variation or termination) of any charter party or other contract for the employment of the Collateral Vessel; and


(vi)	all moneys which are at any time payable under Insurances in respect of loss of hire; and

(b)

if and whenever the Collateral Vessel is employed on terms whereby any moneys falling within paragraphs (a)(i) to (vi) 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 Collateral Vessel together with any and all other distributions of moneys made by such pool or sharing entity to or for the account or benefit of the Collateral Vessel or the Guarantor including, but not limited to, returns of working capital, deposit or retention moneys and any other moneys of any nature whatsoever that are retained by such pool or sharing entity for the account of the Collateral Vessel or the Guarantor;

“ Earnings Account ” means (i) an account in the name of the Guarantor with Crédit Agricole Corporate and Investment Bank, as an Account Bank and designated as the “Earnings Account” or (ii) any other account which is designated by the Agent as an “Earnings Account” for the purpose of this Agreement;

“ Earnings Account Pledge ” means the pledge of the Earnings Account in the form set out in Appendix C;

“ Earnings Assignment ” means with respect to the Collateral Vessel an assignment of the Earnings and Requisition Compensation of the Collateral Vessel, in the form set out in Appendix D;

“ EDGAR ” means the Electronic Data Gathering, Analysis, and Retrieval system maintained by the SEC;

“ Effective Date ” means the date on which this Agreement is executed and delivered by the parties hereto;

“ Environmental Claim ” means:


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


(b)	any claim by any other person which relates to an Environmental Incident or to an alleged Environmental Incident,

and “ claim ” means a claim for damages, compensation, indemnification, contribution, fines, penalties or any other payment of any kind whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset;

“ Environmental Incident ” means:


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

(b)

any incident in which Environmentally Sensitive Material is released and which involves a collision or allision between the Collateral Vessel and another vessel or object, or some other incident of navigation or operation, in any case, in connection with which the Collateral Vessel is actually liable to be arrested, attached, detained or injuncted and/or the Collateral Vessel and/or the Guarantor and/or any operator or manager of the Collateral Vessel is at fault or otherwise liable to any legal or administrative action; or


(c)	any other incident in which Environmentally Sensitive Material is released otherwise than from the Collateral Vessel and in connection with which the Collateral Vessel is actually or potentially liable to be arrested and/or where the Guarantor and/or any operator or manager of the Collateral Vessel is at fault or otherwise liable to any legal or administrative action;

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

“ Environmental Permit ” means any permit, approval, identification number, license, exemption or other authorization required under any applicable Environmental Law;

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

“ Equity Interests ” of any person means:


(a)	any and all shares and other equity interests (including common stock, preferred stock, limited liability company interests and partnership interests) in such person; and


(b)	all rights to purchase, warrants or options or convertible debt (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) such shares or other interests in such person;

“ Equity Proceeds ” means the net cash proceeds from the issuance of common or preferred stock of the Borrower (excluding the issuance of restricted stock);

“ ERISA ” means the United States Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated and rulings issued thereunder;

“ ERISA Affiliate ” means any affiliate or subsidiary that, together with the Borrower, would be deemed to be a single employer under Section 414 of the Code;

“ ERISA Funding Event ” means:


(a)	any failure by any Plan to satisfy the minimum funding standards (for purposes of Section 412 of the Code or Section 302 of ERISA), whether or not waived;


(b)	the filing pursuant to Section 412 of the Code or Section 303 of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan;


(c)	the failure by the Borrower or any ERISA Affiliate to make any required contribution to a Multiemployer Plan;


(d)	a determination that any Plan is, or is expected to be, in “at risk” status (within the meaning of Section 430(i) of the Code);


(e)	the incurrence by the Borrower or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or


(f)	a determination that a Multiemployer Plan is, or is expected to be, in endangered status within the meaning of Section 432 of the Code or Section 305 of ERISA;

“ ERISA Termination Event ” means:


(a)	the imposition of any lien in favor of the PBGC of any Plan or Multiemployer Plan;


(b)	the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Multiemployer Plan or to appoint a trustee to administer any Plan or Multiemployer Plan under Section 4042 of ERISA;


(c)	the receipt by the Borrower or any ERISA Affiliate of any notice that a Multiemployer Plan is in critical status within the meaning of Section 432 of the Code or Section 305 of ERISA; or


(d)	the filing of a notice of intent to terminate a Plan under Section 4041 of ERISA;

“ Estate ” has the meaning assigned such term in Clause 31.1(b)(ii);

“ Event of Default ” means any of the events or circumstances described in Clause 20.1;

“ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended, and any successor act thereto, and (unless the context otherwise requires) includes the rules and regulations of the Commission promulgated thereunder;

“ Executive Order ” means an executive order issued by the President of the United States of America;

“ Fair Market Value ” means the market value of the Collateral Vessel at any date that is shown by the average of two (2) valuations each prepared for the Borrower and addressed to the Agent:


(a)	as at a date not more than 30 days prior to the date such valuation is delivered to the Agent;


(b)	by Approved Brokers selected by the Borrower;


(c)	with or without physical inspection of the Collateral Vessel (as the Agent may require); and


(d)	on the basis of a sale for prompt delivery for cash on normal arm’s length commercial terms as between a willing seller and a willing buyer, free of any existing charter or other contract of employment (and with no value to be given to any pooling arrangements);

provided that if a range of market values is provided in a particular appraisal, then the market value in such appraisal shall be deemed to be the mid-point within such range; and provided

further that if consented to by the Borrower, the Agent shall have the option to have the market value of the Collateral Vessel determined by a single Approved Broker selected by the Required Lenders;

“ FATCA ” means Section 1471 through 1474 of the Code as amended and any Treasury regulations or other official administrative guidance (including any Revenue Ruling, Revenue Procedure, Notice or similar guidance issued by the Internal Revenue Service) promulgated thereunder or any intergovernmental agreement to implement FATCA;

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

“ FATCA Exempt Party ” means a FATCA Relevant Party who is entitled under FATCA to receive payments free from any FATCA Deduction;

“ FATCA Non-Exempt Lender ” means any Lender who is a FATCA Non-Exempt Party;

“ FATCA Non-Exempt Party ” means a FATCA Relevant Party who is not a FATCA Exempt Party;

“ FATCA Relevant Party ” means each Creditor Party and each Security Party;

“ Finance Documents ” means:


(a)	this Agreement;


(b)	any Charter Assignment;


(c)	the Earnings Account Pledge;


(d)	the Earnings Assignment;


(e)	the Insurance Assignment;


(f)	the Mortgage;


(g)	the Note;


(h)	the Shares Pledge; and


(i)	any other document (whether creating a Security Interest or not) which is executed at any time by any person as security for, or to establish any form of subordination or priorities arrangement in relation to (other than a Manager’s Undertaking), any amount payable to the Lenders under this Agreement or any of the other documents referred to in this definition;

“ Financial Indebtedness ” means, with respect to any person (the “ Debtor ”) at any date of determination (without duplication):


(a)	all obligations of the Debtor for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the Debtor;


(b)	all obligations of the Debtor evidenced by bonds, debentures, notes or other similar instruments;


(c)	all obligations of the Debtor in respect of any acceptance credit, guarantee or letter of credit facility or equivalent made available to the Debtor (including reimbursement obligations with respect thereto);


(d)	all obligations of the Debtor to pay the deferred purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery thereto or the completion of such services, except trade payables;


(e)	all Capitalized Lease Obligations of the Debtor as lessee;


(f)	all Financial Indebtedness of persons other than the Debtor secured by a Security Interest on any asset of the Debtor, whether or not such Financial Indebtedness is assumed by the Debtor, provided that the amount of such Financial Indebtedness shall be the lesser of (i) the fair market value of such asset at such date of determination and (ii) the amount of such Financial Indebtedness; and


(g)	all Financial Indebtedness of persons other than the Debtor under any guarantee, indemnity or similar obligation entered into by the Debtor to the extent such Financial Indebtedness is guaranteed, indemnified, etc. by the Debtor.

“ Fiscal Year ” means, in relation to any person, each period of one (1) year commencing on January 1 of each year and ending on December 31 of such year in respect of which its accounts are or ought to be prepared;

“ Foreign Pension Plan ” means any plan, fund (including without limitation, any superannuation fund) or other similar program established or maintained outside the United States of America by the Borrower or the Guarantor or any one or more of their respective subsidiaries primarily for the benefit of employees of such Security Party or such subsidiaries

residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code;

“ Guaranteed Obligations ” has the meaning given in Clause 16.1;

“ IACS ” means the International Association of Classification Societies;

“ Insurance Assignment ” means in relation to the Collateral Vessel, an Assignment of Insurances in the form set out in Appendix I;

“ Insurances ” means:


(h)	all policies and contracts of insurance, including entries of the Collateral Vessel in any protection and indemnity or war risks association, effected in respect of the Collateral Vessel, the Earnings or otherwise in relation to the Collateral Vessel; and


(i)	all rights and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium;

“ Interest Period ” means a period determined in accordance with Clause 6;

“ ISM Code ” means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organization, as the same may be amended or supplemented from time to time (and the terms “ safety management system ”, “ Safety Management Certificate ” and “ Document of Compliance ” have the same meanings as are given to them in the ISM Code);

“ ISM Code Documentation ” includes, in respect of the Collateral Vessel:


(a)	the Document of Compliance and Safety Management Certificate issued pursuant to the ISM Code in relation to the Collateral Vessel within the periods specified by the ISM Code;


(b)	all other documents and data which are relevant to the safety management system and its implementation and verification which the Agent may reasonably require; and


(c)	any other documents which are prepared or which are otherwise relevant to establish and maintain the Collateral Vessel’s compliance or the compliance of the Guarantor or the relevant Approved Manager with the ISM Code which the Agent may require;

“ ISPS Code ” means the International Ship and Port Facility Security Code as adopted by the International Maritime Organization, as the same may be amended or supplemented from time to time;

“ ISPS Code Documentation ” includes:


(a)	the ISSC; and


(b)	all other documents and data which are relevant to the ISPS Code and its implementation and verification which the Agent may require;

“ ISSC ” means a valid and current International Ship Security Certificate issued under the ISPS Code;

“ Lending Office ” means, with respect to any Lender, the office of such Lender specified as its “ Lending Office ” under its name on Schedule 1 or in the relevant Transfer Certificate pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent;

“ LIBOR ” means, in relation to any period for which an interest rate is to be determined under any provision of a Finance Document, the rate per annum equal to the offered quotation for deposits in Dollars for a period equal to, or as near as possible equal to, such period which appears on Reuters Page LIBOR01 at or about 11:00 a.m. (London time) on the Quotation Date for the relevant period (and, for the purposes of this Agreement, “Reuters Page LIBOR01” means the display designated as “Page LIBOR01” on the Reuters Service or such other page as may replace Page LIBOR01 on that service for the purpose of displaying rates comparable to that rate or such other service as may be nominated by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) as the information vendor for the purpose of displaying ICE Benchmark Administration Limited’s Interest Settlement Rates for Dollars in the London interbank market) and if LIBOR falls below zero, such rate is deemed to be zero;

“ Loan ” means the principal amount from time to time outstanding under this Agreement;

“ Major Casualty ” means any casualty to the Collateral Vessel in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $2,500,000 or the equivalent in any other currency;

“ Manager’s Undertaking ” means, in relation to the Collateral Vessel, the letter executed and delivered by an Approved Manager, in the form set out in Appendix F;

“ Mandatory Cost ” means the percentage rate per annum calculated by the Agent in accordance with Schedule 8;

“ Margin ” means 3.0% per annum;

“ Margin Stock ” has the meaning specified in Regulation U of the Board of Governors of the United States Federal Reserve System and any successor regulations thereto, as in effect from time to time;

“ Material Adverse Effect ” means the existence of one or more events and/or conditions that have had, or could reasonably be expected by the Lenders to have, (i) a material adverse effect on the business, operations, properties, assets, liabilities or condition (financial or otherwise) of the Borrower and/or the Guarantor taken as a whole, or (ii) a material adverse effect on the validity or enforceability of, or a material impairment of the rights, remedies or benefits available to any Creditor Party under any of the Finance Documents or (iii) a material adverse effect on the ability of any Security Party to perform any of its obligations under any of the Finance Documents;

“ Maturity Date ” means for the Loan, the earlier of the fifth (5 ^th ) anniversary of the Effective Date and the date on which the Loan is accelerated pursuant to Clause 20.4;

“ Moody’s ” means Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation, and its successors;

“ Mortgage ” means the first preferred or first priority ship mortgage on the Collateral Vessel, in agreed form; provided that a mortgage in respect of the Collateral Vessel registered under the Marshall Islands flag shall be in the form set out in Appendix E;

“ Multiemployer Plan ” means, at any time, a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate has any liability or obligation to contribute or has within any of the six preceding plan years had any liability or obligation to contribute;

“ Negotiation Period ” has the meaning given in Clause 5.8(b);

“ Net Debt ” means Financial Indebtedness less cash and Cash Equivalents;

“ Non-indemnified Tax ” means (a) any tax on the net income of a Creditor Party (but not a tax on gross income or individual items of income), whether collected by deduction or withholding or otherwise, which is levied by a taxing jurisdiction which:


(iii)	is located in the country under whose laws such entity is formed (or in the case of a natural person is a country of which such person is a citizen); or


(iv)	with respect to any Lender, is located in the country of its Lending Office; or


(v)	with respect to any Creditor Party other than a Lender, is located in the country from which such party has originated its participation in this transaction; or


(a)	any FATCA Deduction made on account of a payment to a FATCA Non-Exempt Party;

“ Note ” means a promissory note of the Borrower, payable to the order of the Agent, evidencing the aggregate indebtedness of the Borrower under this Agreement, in the form set out in Appendix G;

“ Notifying Lender ” has the meaning given in Clause 24.1 or Clause 25.1 as the context requires;

“ OFAC ” means the Office of Foreign Assets Control of the United States Department of the Treasury;

“ Parallel Debt ” has the meaning given in Clause 31.11(a);

“ pari passu ”, when used with respect to the ranking of any Financial Indebtedness of any person in relation to other Financial Indebtedness of such person, means that each such Financial Indebtedness:


(a)	either (i) is not subordinated in right of payment to any other Financial Indebtedness of such person or (ii) is subordinate in right of payment to the same Financial Indebtedness of such person as is the other and is so subordinate to the same extent; and


(b)	is not subordinate in right of payment to the other or to any Financial Indebtedness of such person as to which the other is not so subordinate;

“ PATRIOT Act ” means the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Improvement and Reauthorization Act of 2005 (H.R. 3199);

“ Payment Currency ” has the meaning given in Clause 22.4;

“ PBGC ” means the Pension Benefit Guarantee Corporation and its successors;

“ Permitted Security Interests ” means:


(a)	Security Interests created by the Finance Documents;

(b)

pledges of certificates of deposit or other cash collateral securing the Guarantor’s reimbursement obligations in connection with letters of credit now or hereafter issued for the account of the Guarantor in connection with the establishment of the financial responsibility of the Guarantor under 33 C.F.R. Part 130 or 46 C.F.R. Part 540, as the case may be, as the same may be amended or replaced;

(c)

Security Interests to secure obligations under workmen’s compensation laws or similar legislation, deposits to secure public or statutory obligations, warehousemen’s or other like liens, or deposits to obtain the release of such liens and deposits to secure surety, appeal or customs bonds on which the Guarantor is the principal, as to all of the foregoing, only to the extent arising and continuing in the ordinary course of business;


(d)	Security Interests for loss, damage or expense which are fully covered by insurance, subject to applicable deductibles;


(e)	Security Interests for unpaid master’s and crew’s wages in accordance with usual maritime practice that are not more than thirty (30) days past due;


(f)	Security Interests for salvage;


(g)	Security Interests arising by operation of law for not more than two (2) months’ prepaid hire under any charter or other contract of employment in relation to the Collateral Vessel not otherwise prohibited by this Agreement or any other Finance Document;

(h)

Security Interests for master’s disbursements incurred in the ordinary course of trading of the Collateral Vessel and any other Security Interests arising by operation of law or otherwise in the ordinary course of the Collateral Vessel’s business, provided such Security Interests do not secure amounts more than 30 days overdue (unless the overdue amount is being contested by the Guarantor in good faith by appropriate steps) and subject, in the case of Security Interests for repair or maintenance, to Clause 14.13(h);


(i)	any Security Interest created in favor of a plaintiff or defendant in any proceedings or arbitration as security for costs and expenses where the Guarantor is actively prosecuting or defending such proceedings or arbitration in good faith and such Security Interest does not (and is not likely to) result in any sale, forfeiture or loss of the Collateral Vessel;


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


(k)	Security Interests incidental to the conduct of the business of each Security Party or the ownership of such Security Party’s property and assets, which Security Interests do not in the aggregate materially detract

from the value of each such Security Party’s property or assets or materially impair the use thereof in the operation of its business;

“ Pertinent Document ” means:


(a)	any Finance Document;


(b)	any policy or contract of insurance contemplated by or referred to in Clause 13 or any other provision of this Agreement or another Finance Document;


(c)	any other document contemplated by or referred to in any Finance Document; and


(d)	any document which has been or is at any time sent by or to a Servicing Bank in contemplation of or in connection with any Finance Document or any policy, contract or document falling within paragraphs (b) or (c);

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


(a)	the jurisdiction under the laws of which the company is incorporated or formed;


(b)	a jurisdiction in which the company has the center of its main interests or in which the company’s central management and control is or has recently been exercised;


(c)	a jurisdiction in which the overall net income of the company is subject to corporation tax, income tax or any similar tax;


(d)	a jurisdiction in which assets of the company (other than securities issued by, or loans to, related companies) having a substantial value are situated, in which the company maintains a branch or permanent place of business, or in which a Security Interest created by the company must or should be registered in order to ensure its validity or priority; or


(e)	a jurisdiction the courts of which have jurisdiction to make a winding up, administration or similar order in relation to the company whether as a main or territorial or ancillary proceedings or which would have such jurisdiction if their assistance were requested by the courts of a country referred to in paragraphs (a) or (b) above;

“ Pertinent Matter ” means:


(a)	any transaction or matter contemplated by, arising out of, or in connection with a Pertinent Document; or


(b)	any statement relating to a Pertinent Document or to a transaction or matter falling within paragraph (a),

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

“ Plan ” means any employee benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect to which a Security Party or ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA;

“ Principal Obligations ” mean, in relation to the Borrower or the Guarantor all monetary obligations (other than its Parallel Debt) which now or at any time hereafter may be or become due, owing or incurred by the Borrower or the Guarantor to any Creditor Party, whether due or not, whether contingent or not and whether alone or jointly with others, as principal, surety or otherwise, under or in connection with or pursuant to the Finance Documents, as such obligations may be extended, restated, prolonged, amended, renewed or novated from time to time;

“ Quarterly Payment Date ” means March 31, June 30, September 30 and December 31 of each year during the term of the Loan;

“ Quotation Date ” means, in relation to any period for which an interest rate is to be determined under any provision of a Finance Document, the day which is two (2) Business Days before the first day of that period, unless market practice differs in the London interbank market for a currency, in which case the Quotation Date will be determined by the Agent in accordance with market practice in the London interbank market (and if quotations would normally be given by leading banks in the London interbank market on more than one day, the Quotation Date will be the last of those days);

“ Rating Agencies ” means:


(a)	S&P and Moody’s; or


(b)	if S&P or Moody’s or both of them are not making ratings of securities publicly available, a nationally recognized United States rating agency or agencies, as the case may be, selected by the Agent with the consent of the Required Lenders, which will be substituted for S&P or Moody’s or both, as the case may be;

“Rating Category ” means:


(a)	with respect to S&P, any of the following categories (any of which may include a “+” or “-”): AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories);


(b)	with respect to Moody’s, any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories); and


(c)	the equivalent of any such categories of S&P or Moody’s used by another Rating Agency, if applicable;

“ Reference Bank ” means the Agent;

“ Registry ” means in respect of the Collateral Vessel, such registrar, commissioner or representative of the relevant Approved Flag who is duly authorized to register the Collateral Vessel, the Guarantor’s title to the Collateral Vessel and the Mortgage over the Collateral Vessel under the laws of such Approved Flag;

“ Repayment Date ” means a date on which a repayment is required to be made under Clause 8;

“ Required Lenders ” means: (a) before the Loan has been made, Lenders whose Commitments total 66.67% or more of the Total Commitments; and (b) after the Loan has been made, Lenders whose Contributions total 66.67% or more of the Loan;

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

“ Restricted Party ” means a person that is: (a) listed on, owned or controlled by a person listed on any Sanctions List; (b) located in, incorporated under the laws of, or owned or controlled by, or acting on behalf of, a person located in or organized under the laws of a country or territory which is a subject of country- or territory-wide Sanctions; or (c) otherwise a target of Sanctions;

“ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies Inc., and its successors;

“ Sanctions ” means any trade, economic or financial sanctions, laws, regulations, embargoes or restrictive measures (a) enacted, enforced or imposed by the United States Government (including CISADA), the United Nations Security Council, the European Union or its Member States (including, without limitation, the United Kingdom and France), or the respective governmental institutions and agencies of any of the foregoing, including without limitation, OFAC, the United States Department of State, and Her Majesty’s Treasury (“ HMT ”) (together, the “ Sanctions Authorities ”); or (b) otherwise imposed by any law or regulation binding on a Security Party;

“ Sanctions List ” means the Specially Designated Nationals and Blocked Persons list maintained by OFAC, the Consolidated List of Financial Sanctions Targets maintained by HMT, or any similar list maintained and made public by the United Nations Security Council or any of the Sanctions Authorities;

“ SCM ” means Scorpio Commercial Management S.A.M., a Monaco company, an Approved Commercial Manager of the Collateral Vessel;

“ Secured Liabilities ” means all liabilities which the Security Parties or any of them have at the date of this Agreement or at any later time or times, under or in connection with any Finance Document or any judgment relating to any Finance Documents and for this purpose, there shall be disregarded any total or partial discharge of these liabilities, or variation of their terms, which is effected by, or in connection with, any bankruptcy, liquidation, arrangement or other procedure under the insolvency laws of any country;

“ Security Interest ” means:


(a)	a mortgage, encumbrance, charge (whether fixed or floating) or pledge, any maritime or other lien or privilege or any other security interest of any kind;


(b)	the security rights of a plaintiff under an action in rem; and

(c)

any arrangement entered into by a person (A) the effect of which is to place another person (B) in a position which is similar, in economic terms, to the position in which B would have been had he held a security interest over an asset of A; but this paragraph (c) does not apply to a right of set off or combination of accounts conferred by the standard terms of business of a bank or financial institution;

“ Security Maintenance Cover Ratio ” has the meaning given in Clause 15.2;

“ Security Party ” means the Borrower, the Guarantor and any other person (except a Creditor Party and an Approved Manager) who, as a surety, guarantor, mortgagor, assignor or pledgor, as a party to any subordination or priorities arrangement, or in any similar capacity, executes a Finance Document;

“ Security Period ” means the period commencing on the Effective Date and ending on the date on which the Agent notifies the Borrower (such notice not to be unreasonably withheld or delayed) that:


(a)	all amounts which have become due for payment by the Borrower or any other Security Party under the Finance Documents have been paid in full;


(b)	no amount is owing or has accrued (without yet having become due for payment) under any Finance Document; and


(c)	neither the Borrower nor any other Security Party has any liability under Clause 21, 22 or 23 or any other provision of this Agreement or another Finance Document;

“ Servicing Bank ” means the Agent or the Security Trustee;

“ Shares Pledge ” means a pledge by the Borrower of the Equity Interests of the Guarantor, in the form set out in Appendix H;

“ SMC Threshold ” has the meaning given in Clause 15.2;

“ SSM ” means Scorpio Ship Management S.A.M., a Monaco company, an Approved Technical Manager of the Collateral Vessel;

“ Total Loss ” means:


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

(b)

any expropriation, confiscation, requisition or acquisition of the Collateral Vessel, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority (excluding a requisition for hire for a fixed period not exceeding one (1) year without any right to an extension), unless it is within three (3) months redelivered to the full control of the Guarantor; or


(c)	any arrest, capture, seizure or detention of the Collateral Vessel (including any hijacking or theft) unless it is within three (3) months redelivered to the full control of the Guarantor;

“ Total Loss Date ” means in relation to the Collateral Vessel:


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


(b)	in the case of a constructive, compromised, agreed or arranged total loss of the Collateral Vessel, the earliest of:


(vi)	the date on which a notice of abandonment is given to the insurers; and


(vii)	the date of any compromise, arrangement or agreement made by or on behalf of the Guarantor with the Collateral Vessel’s insurers in which the insurers agree to treat the Collateral Vessel as a total loss; and


(c)	in the case of any other type of total loss, on the date (or the most likely date) on which it reasonably appears to the Agent that the event constituting the total loss occurred;

“ Transfer Certificate ” has the meaning given in Clause 27.2;

“ Transferee Lender ” has the meaning given in Clause 27.2;

“ Transferor Lender ” has the meaning given in Clause 27.2;

“ UCC ” means the Uniform Commercial Code of the State of New York;

“ US GAAP ” means generally accepted accounting principles in the United States of America as in effect from time to time; and

“ Voting Stock ” of any person as of any date means the Equity Interests of such person that are at the time entitled to vote in the election of the board of directors or similar governing body of such person.


1.2	Construction of certain terms . In this Agreement:

“ approved ” means, for the purposes of Clause 13, approved in writing by the Agent;

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

“ company ” includes any corporation, limited liability company, partnership, joint venture, unincorporated association, joint stock company and trust;

“ consent ” includes an authorization, consent, approval, resolution, license, exemption, filing, registration, notarization and legalization;

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

“ continuing ” means with respect to an Event of Default that it has not been (i) waived; or (ii) cured during the applicable grace period;

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

“ 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 Collateral Vessel in consequence of its insured value being less than the value at which the Collateral Vessel is assessed for the purpose of such claims;

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

“ law ” includes any order or decree, any form of delegated legislation, any treaty or international convention and any statute, regulation or resolution of the United States of

America, any state thereof, the Council of the European Union, the European Commission, the United Nations or its Security Council or any other Pertinent Jurisdiction;

“ legal or administrative action ” means any legal proceeding or arbitration and any administrative or regulatory action or investigation;

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

“ months ” shall be construed in accordance with Clause 1.3;

“ obligatory insurances ” means, in relation to the Collateral Vessel, all insurances effected, or which the Guarantor is obliged to effect, under Clause 13 or any other provision of this Agreement or another Finance Document;

“ parent company ” has the meaning given in Clause 1.4;

“ person ” includes natural persons; any company; any state, political sub-division of a state and local or municipal authority; and any international organization;

“ policy ”, in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;

“ protection and indemnity risks ” means the usual risks covered by a protection and indemnity association, 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 Time Clauses (Hulls)(1/11/02 or 1/11/03) or clause 8 of the Institute Time Clauses (Hulls) (1/10/83) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;

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

“ subsidiary ” has the meaning given in Clause 1.4;

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

“ tax ” includes any present or future tax, duty, impost, levy or charge of any kind which is imposed by any state, any political sub-division of a state or any local or municipal authority or any other governmental authority authorized to levy such tax (including any such tax imposed in connection with exchange controls), and any related penalties, interest or fines; and

“ war risks ” includes the risk of mines and all risks excluded by clause 29 of the Institute Hull Clauses (1/11/02 or 1/11/03) or clause 24 of the Institute Time clauses (Hulls) (1/11/1995) or clause 23 of the Institute Time Clauses (Hulls) (1/10/83).


1.3	Meaning of “month” . A period of one or more “ months ” ends on the day in the relevant calendar month numerically corresponding to the day of the calendar month on which the period started (the “ numerically corresponding day ”), but:


(a)	on the Business Day following the numerically corresponding day if the numerically corresponding day is not a Business Day or, if there is no later Business Day in the same calendar month, on the Business Day preceding the numerically corresponding day; or


(b)	on the last Business Day in the relevant calendar month, if the period started on the last Business Day in a calendar month or if the last calendar month of the period has no numerically corresponding day,

and “ month ” and “ monthly ” shall be construed accordingly.


1.4	Meaning of “subsidiary” . A company (S) is a subsidiary of another company (P) if:


(a)	a majority of the issued Equity Interests in S (or a majority of the issued Equity Interests in S which carry unlimited rights to capital and income distributions) are directly owned by P or are indirectly attributable to P; or


(b)	P has direct or indirect control over a majority of the voting rights attaching to the issued Equity Interests of S; or


(c)	P has the direct or indirect power to appoint or remove a majority of the directors (or equivalent) of S; or


(d)	P otherwise has the direct or indirect power to ensure that the affairs of S are conducted in accordance with the wishes of P;

and any company of which S is a subsidiary is a parent company of S.


1.5	General interpretation . In this Agreement:


(a)	references to, or to a provision of, a Finance Document or any other document are references to it as amended, supplemented and/or restated, whether before the date of this Agreement or otherwise;


(b)	references in Clause 1.1 to a document being in the form of a particular Appendix include references to that form with any modifications to that form which the Agent approves or reasonably requires and which are acceptable to the Borrower;


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


(d)	words denoting the singular number shall include the plural and vice versa; and


(e)	Clauses 1.1 to 1.5 apply unless the contrary intention appears.


1.6	Headings . In interpreting a Finance Document or any provision of a Finance Document, all clause, sub-clause and other headings in that and any other Finance Document shall be entirely disregarded.


1.7	Accounting Terms . Unless otherwise specified herein, all accounting terms used in this Agreement and in the other Finance Documents shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to any Creditor Party under this Agreement shall be prepared, in accordance with US GAAP.

1.8

Inferences Regarding Materiality . To the extent that any representation, warranty, covenant or other undertaking of a Security Party in this Agreement or any other Finance Document is qualified by reference to those matters which are not reasonably expected to result in a Material Adverse Effect or language of similar import, no inference shall be drawn therefrom that any Creditor Party has knowledge or approves of any noncompliance by such Security Party with any law or regulation.


2.	FACILITY


2.1	Amount of Facility . Subject to the other provisions of this Agreement, the Lenders severally agree to make available to the Borrower a credit facility in the principal amount of up to $12,500,000 in a single Advance. The amount of the Advance shall not exceed the lesser of (a) $12,500,000 or (b) fifty percent (50%) of the Fair Market Value of the Collateral Vessel on the Drawdown Date.


2.2	Lenders’ participations in Advance . Subject to the other provisions of this Agreement, each Lender shall participate in the Advance in the proportion which its Commitment bears to the Total Commitments.


2.3	Purpose of Advance . The Borrower undertakes with each Creditor Party to use the Advance only to (a) refinance or (b) reimburse the Borrower for part of the acquisition cost of the Collateral Vessel. No Creditor Party shall have any responsibility for the application of the Advance by the Borrower.


2.4	Reduction and Cancellation of Total Commitments . Any portion of the Total Commitments not disbursed to the Borrower in the Advance shall be cancelled and terminated automatically on the Drawdown Date.


3.	POSITION OF THE LENDERS


3.1	Interests Several . The rights of the Lenders under this Agreement are several.


3.2	Individual Right of Action . Each Lender shall be entitled to sue for any amount which has become due and payable by a Security Party to it under this Agreement without joining the Agent, the Security Trustee or any other Lender as additional parties in the proceedings.


3.3	Proceedings Requiring Required Lender Consent . Except as provided in Clause 3.2, no Lender may commence proceedings against any Security Party in connection with a Finance Document without the prior consent of the Required Lenders.


3.4	Obligations Several . The obligations of the Lenders under this Agreement are several; and a failure of a Lender to perform its obligations under this Agreement shall not result in:


(a)	the obligations of the other Lenders being increased; nor


(b)	the Borrower, any other Security Party or any other Lender being discharged (in whole or in part) from its obligations under any Finance Document,

and in no circumstances shall a Lender have any responsibility for a failure of another Lender to perform its obligations under this Agreement.


3.5	Replacement of a Lender .


(a)	If at any time:


(i)	any Lender becomes a Non-Consenting Lender (as defined in paragraph (c) below);


(ii)	the Borrower or any other Security Party becomes obliged in the absence of an Event of Default to repay any amount in accordance with Clause 24 or to pay additional amounts pursuant to Clause 23 or Clause 25 to any Lender in excess of amounts payable to other Lenders generally; or


(iii)	any Lender fails to make its portion of an Advance available pursuant to the terms of Clause 2.2,

then the Borrower may, on 30 Business Days’ prior written notice to the Agent and such Lender, replace such Lender by requiring such Lender to (and such Lender shall) transfer pursuant to Clause 27 on the last day of an Interest Period all (and not part only) of its rights and obligations under this Agreement to a Lender or other bank or financial institution (a “ Replacement Lender ”) selected by the Borrower, which is acceptable to the Agent, which confirms its willingness to assume and by its execution of a Transfer Certificate does assume all the obligations of the transferring Lender (including the assumption of the transferring Lender’s participations on the same basis as the transferring Lender) for a purchase price in cash payable at the time of transfer equal to the outstanding principal amount of such Lender’s participation in the outstanding Advances and all accrued interest and/or other quantifiable customary and actual breakage costs, for which reasonable evidence of calculation has been provided to the Borrower, and amounts payable in relation thereto under the Finance Documents.


(b)	The replacement of a Lender pursuant to this Clause 3.5 shall be subject to the following conditions:


(i)	the Borrower shall have no right to replace the Agent or the Security Trustee in such capacities;


(ii)	neither the Agent nor any Lender shall have any obligation to the Borrower to find a Replacement Lender but nothing contained herein shall preclude them from doing so;


(iii)	in the event of a replacement of a Non-Consenting Lender such replacement must take place no later than 30 Business Days after the date the Borrower notifies the Non-Consenting Lender and the Agent of its intent to replace the Non-Consenting Lender pursuant to Clause 3.5(a); and


(iv)	in no event shall the Lender replaced under this paragraph (b) be required to pay or surrender to such Replacement Lender any of the fees received by such Lender pursuant to the Finance Documents.


(i)	the Borrower or the Agent has requested the Lenders to give a consent in relation to or to agree to a waiver or amendment of any provisions of the Finance Documents;


(ii)	the consent, waiver or amendment in question requires the approval of all Lenders; and


(iii)	Lenders whose Commitments aggregate more than 50.00% percent of the Total Commitments have consented to or agreed to such waiver or amendment,

then any Lender who does not and continues not to consent or agree to such waiver or amendment shall be deemed a “ Non-Consenting Lender ”.


4.	DRAWDOWN


4.1	Request for Advance . Subject to the following conditions, the Borrower may request the Advance to be made by delivering to the Agent a completed Drawdown Notice not later than 11:00 a.m. (Paris time) three (3) Business Days prior to the intended Drawdown Date for the Advance.


4.2	Availability . The conditions referred to in Clause 4.1 are that:


(f)	the Drawdown Date must be a Business Day during the Availability Period;


(g)	the amount of the Advance shall not exceed the lesser of (i) $12,500,000 or (ii) fifty percent (50%) of the Fair Market Value of the Collateral Vessel on the date of the Drawdown Notice for the Advance; and


(h)	the applicable conditions precedent stated in Clause 9 hereof shall have been satisfied or waived as provided therein.


4.3	Notification to Lenders of Receipt of the Drawdown Notice . The Agent shall promptly notify the Lenders that it has received the Drawdown Notice and shall inform each Lender of:


(c)	the amount of the Advance and the Drawdown Date;


(d)	the amount of that Lender’s participation in the Advance; and


(e)	the duration of the first Interest Period.


4.4	Drawdown Notice Irrevocable . The Drawdown Notice must be signed by an officer or a duly authorized attorney-in-fact of the Borrower and once served, it cannot be revoked without the prior consent of the Agent, acting on the authority of the Required Lenders.


4.5	Lenders to Make Available Contributions . Subject to the provisions of this Agreement, each Lender shall, before 10:00 a.m. (Paris time) on and with value on the Drawdown Date, make available to the Agent for the account of the Borrower the amount due from that Lender under Clause 2.2.


4.6	Disbursement of Advance . Subject to the provisions of this Agreement, the Agent shall on the Drawdown Date pay to the Borrower the amounts which the Agent receives from the Lenders under Clause 4.5 and that payment to the Borrower shall be made:


(a)	to the account which the Borrower specifies in the Drawdown Notice; and


(b)	in the like funds as the Agent received the payments from the Lenders.


4.7	Disbursement of Advance to Third Party . The payment by the Agent under Clause 4.6 to the account of a third party designated by the Borrower in the Drawdown Notice shall constitute the making of the Advance and the Borrower shall at that time become indebted, as principal and direct obligor, to each Lender in an amount equal to that Lender’s Contribution.


4.8	Promissory Note .


(a)	The obligation of the Borrower to pay the principal of, and interest on, the Loan shall be evidenced by the Note, which shall be dated the date of the Drawdown Date.


(b)	Each Lender shall record on its internal records the amount of its participation in the Advance and each payment in respect thereof, and the unpaid balance of such participation in the Advance shall, absent manifest error and to the extent not inconsistent with the notations made by the Agent on the grid attached to the Note, be as so recorded.


(c)	The failure of the Agent or any Lender to make any such notation shall not affect the obligation of the Borrower in respect of the Advance or the Loan nor affect the validity of any transfer by the Agent of the Note.

(d)

On receipt of satisfactory evidence that the Note has been lost, mutilated or destroyed and on surrender of the remnants thereof, if any, the Borrower shall promptly replace the Note, without charge to the Creditor Parties, with a similar Note. If such replacement Note replaces a lost Note it shall bear an endorsement to that effect. Any lost Note subsequently found shall be surrendered to the Borrower and cancelled. The Agent shall indemnify the Borrower from any losses, claims or damages resulting from the loss of such Note.


5.	INTEREST


5.1	Normal Rate of Interest . Subject to the provisions of this Agreement, the rate of interest on the Loan in respect of an Interest Period shall be the percentage rate per annum which is the aggregate of the Margin, LIBOR and Mandatory Costs, if any, for that Interest Period.


5.2	Payment of Normal Interest . Subject to the provisions of this Agreement, interest on the Loan in respect of each Interest Period shall be paid by the Borrower on the last day of that Interest Period.


5.3	Payment of Accrued Interest . In the case of an Interest Period longer than three (3) months, accrued interest shall be paid every three (3) months during that Interest Period and on the last day of that Interest Period.


5.4	Notification of Interest Periods and Rates of Normal Interest . The Agent shall notify the Borrower and each Lender of:


(a)	each rate of interest; and


(b)	the duration of each Interest Period (as determined under Clause 6.2), as soon as reasonably practicable after each is determined (but in all cases, not later than two (2) Business Days before the start of each Interest Period.


5.5	Notice of Prepayment . If the Borrower does not agree with an interest rate notified by the Agent under Clause 5.4, the Borrower may give the Agent not less than ten (10) Business Days’ notice of its intention to prepay (without premium or penalty) the Loan at the end of the interest period set by the Agent.


5.6	Prepayment; Termination of Commitments . A notice under Clause 5.5 shall be irrevocable; the Agent shall promptly notify the Lenders of the Borrower’s notice of intended prepayment and:


(a)	on the date on which the Agent serves that notice, the Total Commitments shall be cancelled; and


(b)	the Borrower shall prepay (without premium or penalty) the Loan, together with accrued interest thereon plus any sums payable pursuant to Clause 22.1(b) at the end of the Interest Period set by the Agent.


5.7	Application of Prepayment . The provisions of Clause 8 shall apply in relation to the prepayment.


5.8	Market Disruption .


(a)	If with respect to any Interest Period:


(i)	the Agent determines that LIBOR is not available for such Interest Period; or


(ii)	at least one (1) Business Day prior to the start of such Interest Period, Lenders owning or holding Contributions in the aggregate greater than 50% of the Loan (or if the Loan has not been made,

Commitments in the aggregate greater than 50% of the Total Commitments) notify the Agent that LIBOR fixed by the Agent would not accurately reflect the cost to those Lenders of funding their respective Contributions (or any part thereof) during the Interest Period in the relevant interbank market at or about 11:00 a.m. (London time) on the Quotation Date for such Interest Period,

then the Agent shall promptly notify the Borrower and each of the Lenders stating the circumstances falling within this Clause 5.8(a) which have caused its notice to be given and shall provide the Borrower with reasonably available details in connection with such circumstances;

(b)

After the Agent’s notice under clause 5.8(a) is served the Borrower, the Agent or the Lenders shall use reasonable commercial efforts in good faith and fair dealing, to agree, within the thirty (30) days after the date on which the Agent serves its notice under clause 5.8(a) (the “ Negotiation Period ”), an alternative interest rate or (as the case may be) an alternative basis for the affected Lenders to fund or continue to fund their or its Contribution during the Interest Period concerned.


(c)	Any alternative interest rate or an alternative basis which is agreed during the Negotiation Period shall take effect in accordance with the terms agreed.

(d)

If an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation Period, then the Agent shall, with the agreement of each Lender for each one month period, set an interest rate representing the actual cost of funding of the Lenders in Dollars of their or its Contribution plus the Margin and Mandatory Costs (if any). Such alternative pricing agreed upon pursuant to this Clause 5.8(d) shall be binding on all parties hereto. The procedure provided for by this Clause 5.8 shall be repeated if the relevant circumstances are continuing at the end of each one month period.


(e)	If the Borrower does not agree with the interest rate set by the Agent under this Clause 5.8, the Borrower may give the Agent not less than seven (7) Business Days’ notice of its intention to prepay the Loan.


(f)	A notice by the Borrower under Clause 5.8(e) shall be irrevocable; the Agent shall promptly notify the Lenders of the Borrower’s notice of intended prepayment; and


(i)	on the date on which the Agent serves the notice, the Total Commitments shall be cancelled; and


(ii)	the Borrower shall prepay (without premium or penalty) the Loan together with accrued interest thereon plus any sums payable pursuant to Clause 22.1(b) on the last Business Day of the Interest Period set by the Agent.


6.	INTEREST PERIODS


6.1	Commencement of Interest Periods . The first Interest Period applicable to the Advance shall commence on the Drawdown Date and shall end on the first Quarterly Payment Date. Each subsequent Interest Period for the Advance shall commence on the expiry of the preceding Interest Period.


6.2	Duration of Normal Interest Periods . Subject to Clauses 6.3 and 6.4, except with respect to the first Interest Period of the Advance provided for in Clause 6.1, each Interest Period shall be:


(c)	three (3) months or six (6) months; or


(d)	such other period as the Agent may, with the authorization of all Lenders, agree with the Borrower.


6.3	Duration of Interest Periods for Repayment Installments . In respect of an amount due to be repaid under Clause 8 on a particular Repayment Date, an Interest Period shall end on that Repayment Date.

6.4

Non-availability of Matching Deposits for Interest Period Selected . If, after the Borrower has selected and the Lenders have agreed an Interest Period longer than three (3) months, any Lender notifies the Agent by 11:00 a.m. (Paris time) on the Business Day following the Business Day on which the Agent provided notification pursuant to Clause 5.4 that it is not satisfied that deposits in Dollars for a period equal to the Interest Period will be available to it in the London interbank market when the Interest Period commences, the Interest Period shall be three (3) months.


7.	DEFAULT INTEREST


7.1	Payment of Default Interest on Overdue Amounts . A Security Party shall pay interest in accordance with the following provisions of this Clause 7 on any amount payable by such Security Party under any Finance Document which the Agent, the Security Trustee or any other designated payee does not receive on or before the relevant date, that is:


(e)	the date on which the Finance Documents provide that such amount is due for payment; or


(f)	if a Finance Document provides that such amount is payable on demand, the date on which the demand is served; or


(g)	if such amount has become immediately due and payable under Clause 20.4, the date on which it became immediately due and payable.


7.2	Default Rate of Interest . Interest shall accrue on an overdue amount from (and including) the relevant date until the date of actual payment (as well after as before judgment) at the rate per annum determined by the Agent to be two percent (2%) above:


(c)	in the case of an overdue amount of principal, the higher of the rates set out at Clauses 7.3(a) and (b); or


(d)	in the case of any other overdue amount, the rate set out at Clause 7.3(b).


7.3	Calculation of default rate of interest . The rates referred to in Clause 7.2 are:


(c)	the rate applicable to the overdue principal amount immediately prior to the relevant date (but only for any unexpired part of any then current Interest Period); and


(d)	the Margin plus, in respect of successive periods of any duration (including at call) up to three (3) months which the Agent may, with the consent of the Required Lenders, select from time to time:


(iii)	LIBOR; or


(iv)	if the Agent determines that Dollar deposits for any such period are not being made available by leading banks in the London interbank market in the ordinary course of business, a rate from time to time determined by the Agent by reference to the actual cost of funds to the Lenders from such other sources as the Agent may from time to time reasonably determine.

7.4

Notification of Interest Periods and Default Rates . The Agent shall promptly notify the Lenders and each relevant Security Party of each interest rate determined by the Agent under Clause 7.3 and of each period selected by the Agent for the purposes of paragraph (b) of that Clause; but this shall not be taken to imply that such Security Party is liable to pay such interest only with effect from the date of the Agent’s notification.


7.5	Payment of Accrued Default Interest . Subject to the other provisions of this Agreement, any interest due under this Clause shall be paid on the last day of the period by reference to which it was determined; and the payment shall be made to the Agent for the account of the Creditor Party to which the overdue amount is due.


8.	REPAYMENT AND PREPAYMENT

8.1

Amount of Repayment Installments . Subject to the provisions of Clause 8.9, the Borrower shall repay the Loan by consecutive quarterly installments equal to 1/60 ^th (one sixtieth) of the original amount of the Advance, together with a balloon payment in the amount of the outstanding principal balance of the Advance (the “ Balloon Installment ”) payable concurrently with the last repayment installment on the Maturity Date.

8.2

Repayment Dates . The first repayment installment for the Loan shall be paid on the last day of the last month of the fiscal quarter immediately following the fiscal quarter of the Drawdown Date. Each subsequent repayment installment for the Loan shall be paid on each subsequent Quarterly Payment Date, and the last installment together with the Balloon Installment shall be paid on the Maturity Date for the Loan all as set forth in Schedule 7.


8.3	Maturity Date . On the Maturity Date for the Loan, the Borrower shall additionally pay to the Agent for the account of the Creditor Parties all other sums then accrued or owing under any Finance Document with respect to the Loan.


8.4	Voluntary Prepayment . Subject to the following conditions, the Borrower may prepay the whole or any part of the Loan at any time without premium or penalty, provided that in the event that such prepayment occurs at any time other than on the last day of an Interest Period applicable thereto, it will be subject to payment by the Borrower of breakage costs.


8.5	Conditions for Voluntary Prepayment . The conditions referred to in Clause 8.4 are that:


(g)	a partial prepayment shall be at least equal to the Base Prepayment Amount or such higher amount which shall be equal to the Base Prepayment Amount plus an integral multiple of $500,000 (or such lesser amount acceptable to the Agent); and


(h)	the Agent has received from the Borrower at least five (5) Business Days’ prior written notice specifying the amount to be prepaid for the Loan and the date on which the prepayment is to be made.


8.6	Effect of Notice of Prepayment . A prepayment notice may not be withdrawn or amended without the consent of the Agent, given with the authorization of the Required Lenders, and the amount specified in the prepayment notice shall become due and payable by the Borrower on the date for prepayment specified in the prepayment notice.


8.7	Notification of Notice of Prepayment . The Agent shall notify the Lenders promptly upon receiving a prepayment notice, and shall provide any Lender which so requests with a copy of any document delivered by the Borrower under Clause 8.5(b).


8.8	Application of Partial Prepayment . Each partial prepayment shall be applied against the repayment installments for the Loan as specified by the Borrower in the applicable prepayment Notice.


8.9	Mandatory Prepayment . If the Collateral Vessel is sold or refinanced, becomes a Total Loss or if a Change of Control shall occur, the Borrower shall prepay the Loan in full:


(a)	in the case of a sale, on or before the date on which the sale is completed by delivery of the Collateral Vessel to the buyer;


(b)	in the case of a refinancing, on or before the date on which the refinancing is completed;


(c)	in the case of a Total Loss, on the earlier of the Maturity Date, the date falling 180 days after the Total Loss Date and the date of receipt by the Security Trustee of the proceeds of insurance relating to such Total Loss; or


(d)	in the case of a Change of Control, on or before the date falling 60 days from the earlier of (i) the date the Borrower becomes aware of the Change of Control or (ii) the date on which through reasonable diligence the Borrower should have become aware of the Change of Control.


8.10	Amounts Payable on Prepayment . A voluntary prepayment under Clause 8.4 and a mandatory prepayment under Clause 8.9 shall be made together with:


(a)	accrued interest (and any other amount payable under Clause 22 or otherwise) in respect of the amount prepaid; and


(b)	if the prepayment is not made on the last day of an Interest Period, any sums payable under Clause 22.1(b), but without premium or penalty.


8.11	No Reborrowing . No amount prepaid may be reborrowed.

8.12

Release of Borrower and/or Collateral Vessel Owning Guarantor . Upon the full prepayment or repayment of the Loan or the voluntary cancellation of all Commitments pursuant to the terms of this Agreement, the Creditor Parties agree, at the expense of the Borrower, to execute all such documents as the Borrower may reasonably require to discharge the Finance Documents relating to (i) the Borrower; and (ii) the Guarantor and the Collateral Vessel and the Guarantor shall be released as a Guarantor from under this Agreement and from its obligations under any other Finance Documents to which it is a party.


9.	CONDITIONS PRECEDENT


9.1	Documents, Fees and No Default . Each Lender’s obligation to contribute to the Advance is subject to the following conditions precedent:


(e)	on or before the Effective Date, the Agent shall have received or is satisfied it will receive the documents described in Part A of Schedule 4 in form and substance satisfactory to the Agent;

(f)

that, on or prior to the Drawdown Date of the Advance for the Collateral Vessel but prior to the making of the Advance, (i) the Agent shall have received or is satisfied that it will receive on the making of the Advance the documents described in Part B of Schedule 4 in form and substance satisfactory to it and (ii) the Agent shall have confirmed that the amount of the Advance requested complies with the requirements of Clause 2.1;


(g)	that, on or before the service of the Drawdown Notice, the Agent shall have received payment of the expenses referred to in Clause 21.2;


(h)	that both at the date of the Drawdown Notice and at the Drawdown Date:


(i)	no Event of Default or event or circumstances which, with the giving of notice and/or lapse of time would constitute an Event of Default has occurred and is continuing or would result from the borrowing of the Advance;


(ii)	the representations and warranties in Clause 10 and those of the Borrower or any other Security Party which are set out in the other Finance Documents (other than those relating to a specific date) would be true and not misleading if repeated on each of those dates with reference to the circumstances then existing;


(iii)	none of the circumstances contemplated by Clause 5.8 has occurred and is continuing, unless the Agent is satisfied that an alternate rate of interest can be set pursuant to Clause 5.8;


(iv)	there has been no material adverse change in the consolidated financial condition, operations or business prospects of the Borrower since June 30, 2015;


(v)	there has been no Change of Control; and


(vi)	there is no judgment, order, injunction or other restraint issued in connection with any legal or administration action prohibiting or imposing any material adverse conditions with respect to the performance by any party of its obligation under any of the Finance Documents or the transactions provided for in the Finance Documents; and


(i)	that the Agent has received, and found to be reasonably acceptable to it and in full force and effect, any further opinions, consents, agreements and documents in connection with the Finance Documents which the Agent may, with the authorization of all of the Lenders, reasonably request by notice to the Borrower prior to the Drawdown Date.

9.2

Waiver of Conditions Precedent . Notwithstanding anything in Clause 9.1 to the contrary, if the Agent, with the consent of all Lenders, permits the Advance to be borrowed before certain of the conditions referred to in Clause 9.1 are satisfied, the Borrower shall ensure that such conditions are satisfied within ten (10) Business Days after the Drawdown Date (or such longer period as the Agent may specify).


10.	REPRESENTATIONS AND WARRANTIES


10.1	General . The Borrower and the Guarantor jointly and severally represent and warrant to each Creditor Party as of the Effective Date and the Drawdown Date as follows.


10.2	Status . Each Security Party is:


(e)	duly incorporated or formed and validly existing and in good standing under the law of its jurisdiction of incorporation or formation; and

(f)

duly qualified and in good standing as a foreign company in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where, in each case, the failure to so qualify or be licensed and be in good standing could not reasonably be expected to have a material adverse effect on its business, assets or financial condition or which may affect the legality, validity, binding effect or enforceability of the Finance Documents, and there are no proceedings or actions pending or contemplated by any Security Party, or to the knowledge of the Borrower or the Guarantor contemplated by any third party, seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property.


10.3	Company Power; Consents . Each Security Party has the capacity and has taken all action, and no consent of any person is required, for:


(i)	it to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted;


(j)	it to execute each Finance Document to which it is or is to become a party;


(k)	it to have purchased and paid for the Collateral Vessel and to have registered the Collateral Vessel in its name under an Approved Flag;


(l)	it to comply with its obligations under each Finance Document to which it is or is to become a party;


(m)	it to grant the Security Interests granted or to be granted by it pursuant to the Finance Documents to which it is or is to become a party;


(n)	the perfection or maintenance of the Security Interests created by the Finance Documents (including the first priority nature thereof); and


(o)	the exercise by any Creditor Party of their rights under any of the Finance Documents or the remedies in respect of the Collateral pursuant to the Finance Documents to which it is or is to become a party,

except, in each case, for consents which have been duly obtained, taken, given or made and are in full force and effect.


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	Title .


(a)	Each Security Party owns in the case of owned personal property, good and valid title to, or, in the case of leased personal property, valid and enforceable leasehold interests in, all of its properties and assets, tangible and intangible, of any nature whatsoever, free and clear in each case of all Security Interests or claims, except for Permitted Security Interests.

(b)

Each Security Party has not created nor is it contractually bound to create any Security Interest on or with respect to any of its assets, properties, rights or revenues, except for Permitted Security Interests, and except as provided in this Agreement, the Guarantor is not restricted by contract, applicable law or regulation or otherwise from creating Security Interests on any of its assets, properties, rights or revenues.

(c)

The Guarantor has received all deeds, assignments, waivers, consents, non-disturbance and attornment or similar agreements, bills of sale and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect the Guarantor’s right, title and interest in and to the Collateral Vessel and other properties and assets (or arrangements, for such recordings, filings and other actions shall have been made).


10.6	Legal Validity; Effective Security Interests . Subject to any relevant insolvency laws affecting creditors’ rights generally:


(a)	the Finance Documents to which each Security Party is a party, constitute or, as the case may be, will constitute upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents), such Security Party’s legal, valid and binding obligations enforceable against it in accordance with their respective terms; and


(b)	the Finance Documents to which each Security Party is a party, create or, as the case may be, will create upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents), legal, valid and binding Security Interests enforceable in accordance with their respective terms over all the assets to which they, by their terms, relate.


10.7	No Third Party Security Interests . Without limiting the generality of Clauses 10.5 and 10.6, at the time of the execution and delivery of each Finance Document:


(e)	the relevant Security Party will have the right to create all the Security Interests which that Finance Document purports to create; and


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


10.8	No Conflicts . The execution of each Finance Document, the borrowing of the Loan, and compliance with each Finance Document, will not involve or lead to a contravention of:


(c)	any present law or regulation applicable to the relevant Security Party;


(d)	the constitutional documents of any Security Party; or


(e)	any contractual or other obligation or restriction which is binding on any Security Party or any of its assets.


10.9	Taxes .


(a)	All payments which a Security Party is liable to make under the Finance Documents to which it is a party can properly be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent Jurisdiction.


(b)	Each Security Party has timely filed or has caused to be filed all tax returns and other reports that it is required by law or regulation to file in

any Pertinent Jurisdiction, and has paid or caused to be paid all taxes, assessments and other similar charges that are due and payable in any Pertinent Jurisdiction, other than taxes and charges:


(i)	which (A) are not yet due and payable or (B) are being contested in good faith by appropriate proceedings and for which adequate reserves have been established and as to which such failure to have paid such tax does not create any risk of sale, forfeiture, loss, confiscation or seizure of the Collateral Vessel or of criminal liability; or


(ii)	the non-payment of which could not reasonably be expected to have a material adverse effect on the financial condition of such Security Party.

The charges, accruals, and reserves on the books of each Security Party respecting taxes are adequate in accordance with US GAAP.


(c)	No material claim for any tax has been asserted in writing against a Security Party by any Pertinent Jurisdiction or other taxing authority other than claims that are included in the liabilities for taxes in the most recent balance sheet of such person or disclosed in the notes thereto, if any.

(d)

The execution, delivery, filing and registration or recording (if applicable) of the Finance Documents and the consummation of the transactions contemplated thereby will not cause any of the Creditor Parties to be required to make any registration with, give any notice to, obtain any license, permit or other authorization from, or file any declaration, return, report or other document with any governmental authority in any Pertinent Jurisdiction.


(e)	No taxes are required by any governmental authority in any Pertinent Jurisdiction to be paid with respect to or in connection with the execution, delivery, filing, recording, performance or enforcement of any Finance Document.

(f)

The execution, delivery, filing, registration, recording, performance and enforcement of the Finance Documents by any of the Creditor Parties will not cause such Creditor Party to be deemed to be resident, domiciled or carrying on business in any Pertinent Jurisdiction of any Security Party or subject to taxation under any law or regulation of any governmental authority in any Pertinent Jurisdiction of any Security Party.


(g)	Other than the recording of the Mortgage in accordance with the laws of the Approved Flag and such filings as may be required in a Pertinent Jurisdiction in respect of certain of the Finance Documents, and the

payment of fees consequent thereto, it is not necessary for the legality, validity, enforceability or admissibility into evidence of this Agreement or any other Finance Document that any of them or any document relating thereto be registered, filed recorded or enrolled with any court or authority in any relevant jurisdiction or that any stamp, registration or similar taxes be paid on or in relation to this Agreement or any of the other Finance Documents.

10.10

No Default . No Event of Default or event or circumstances which, with the giving of notice and/or lapse of time would constitute an Event of Default, has occurred or would result from the borrowing of the Advance and no other circumstances exist which constitute or (with the giving of notice, lapse of time, determination of materiality or the fulfillment of any other applicable condition or any combination of the foregoing) would constitute a default under any document which is binding on a Security Party or any of its assets and which may have a material adverse effect on the ability of a Security Party to perform its obligations under the Finance Documents to which it is or is to be a party.


10.11	Information . All financial statements, information and other data furnished by or on behalf of a Security Party to any of the Creditor Parties:


(a)	was true, accurate and complete in all material respects at the time it was given;


(b)	have, in the case of financial statements, been prepared in accordance with US GAAP and accurately and fairly represent (i) the financial condition of such Security Party as of the date or respective dates thereof and (ii) the results of operations of such Security Party for the period or respective periods covered by such financial statements;


(c)	there are no other facts or matters the omission of which would have made or make any such information false or misleading;


(d)	there has been no material adverse change in the financial condition, operations or business prospects of any Security Party since the date on which such information was provided other than as previously disclosed to the Agent in writing which might reasonably be expected to have a Material Adverse Effect; and


(e)	none of the Security Parties has any contingent obligations, liabilities for taxes or other outstanding financial obligations which are material in the aggregate except as disclosed in such statements, information and data.


10.12	No Litigation . No legal or administrative action involving a Security Party (including any action relating to any alleged or actual breach of the ISM Code, the ISPS Code or any Environmental Law) has been commenced or taken by any

person, or, to the Borrower’s or the Guarantor’s knowledge, has been threatened which, in either case, if adversely determined, would be reasonably expected to have a material adverse effect on the business, assets or financial condition of a Security Party or which may affect the legality, validity, binding effect or enforceability of the Finance Documents.


10.13	ISM Code and ISPS Code Compliance . The Guarantor has obtained or has caused to be obtained all necessary ISM Code Documentation and ISPS Code Documentation in connection with the Collateral Vessel and its operation and has caused the Collateral Vessel and the Approved Manager to be in full compliance with the ISM Code and the ISPS Code to the extent applicable.

10.14

No Rebates, etc. There is no agreement or understanding to allow or pay any rebate, premium, commission, discount or other benefit or payment (howsoever described) to any Borrower, Guarantor, any Affiliate of the Borrower, or any third party in connection with the acquisition of the Collateral Vessel except as disclosed in the public filings of the Borrower or as otherwise disclosed to the Agent in writing.


10.15	Compliance with Law; Environmentally Sensitive Material. Except to the extent the following could not reasonably be expected to have a material adverse effect on the business, assets or financial condition of any Security Party, or affect the legality, validity, binding effect or enforceability of the Finance Documents:


(a)	the operations and properties of each Security Party comply with all applicable laws and regulations, including without limitation Environmental Laws, all necessary Environmental Permits have been obtained and are in effect for the operations and properties of such Security Party and each Security Party is in compliance in all material respects with all such Environmental Permits; and

(b)

none of the Security Parties has been notified in writing by any person that it or any of its subsidiaries or Affiliates is potentially liable for the remedial or other costs with respect to treatment, storage, disposal, release, arrangement for disposal or transportation of any Environmentally Sensitive Material, except for costs incurred in the ordinary course of business with respect to treatment, storage, disposal or transportation of such Environmentally Sensitive Material.


10.16	Ownership Structure .


(a)	The Guarantor has no subsidiaries.


(b)	100% of the Equity Interests of the Guarantor have been validly issued, are fully paid, non-assessable and free and clear of all Security Interests

other than Permitted Security Interests and are owned beneficially and directly of record by the Borrower.

(c)

None of the Equity Interests of the Guarantor is subject to any existing option, warrant, call, right, commitment or other agreement of any character to which the Guarantor is a party requiring, and there are no Equity Interests of the Guarantor outstanding which upon conversion or exchange would require, the issuance, sale or transfer of any additional Equity Interests of the Guarantor or other Equity Interests convertible into, exchangeable for or evidencing the right to subscribe for or purchase Equity Interests of the Guarantor.


10.17	Pension Plans . On the Effective Date, no Security Party is a party to any Plan or Multiemployer Plan or Foreign Pension Plan.


(a)	The execution and delivery of this Agreement and the consummation of the transaction hereunder will not constitute a non-exempt “prohibited transaction” for the purpose of Section 406 of ERISA or Section 4975 of the Code.


(b)	No ERISA Termination Event has occurred.


(c)	No ERISA Funding Event exists or has occurred.


10.18	Margin Stock . Neither the Borrower nor the Guarantor is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock and no proceeds of the Loan will be used to buy or carry any Margin Stock or to extend credit to others for the purpose of buying or carrying any Margin Stock.


10.19	Investment Company, Public Utility, etc. Neither the Borrower nor the Guarantor is:


(a)	an “investment company ,” or an “ affiliated person ” of, or “ promoter ” or “ principal underwriter ” for, an “ investment company ,” as such terms are defined in the Investment Company Act of 1940, as amended; or


(b)	a “ public utility ” within the meaning of the United States Federal Power Act of 1920, as amended.


10.20	Asset Control .


(a)	Neither the Borrower nor the Guarantor (nor any of their subsidiaries, directors, officers, or, to the best of their knowledge, any of their affiliates or employees) (a) is a “ national ” of any “ designated foreign country ”, within the meaning of the Foreign Assets Control Regulations or the Cuban Asset Control Regulations of the United States Department of the

Treasury, 31 C.F.R., Subtitle B, Chapter V, as amended, (b) is a Restricted Party, (c) is owned or controlled by, or acting directly or indirectly on behalf of or for the benefit of, a Restricted Party, (d) owns or controls a Restricted Party, (e) is subject to any claim, proceedings, formal notice or investigation with respect to Sanctions or (e) has taken any action resulting in a violation by such person of Sanctions.


(b)	Neither the making of the Advance nor the use of the proceeds thereof nor the performance by the Borrower or the Guarantor of its obligations under any of the Finance Documents to which it is a party violates any law, regulation or Executive Order restricting loans to, investments in, or the export of assets to, foreign countries or entities doing business there.

(c)

Neither the making of the Advance nor the use of the proceeds thereof nor the performance by the Borrower or the Guarantor of its obligations under any of the Finance Documents to which it is a party violates any Sanctions, or shall be made available, directly or indirectly, to or for the benefit of a Restricted Party or otherwise shall be, directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions.


10.21	No Money Laundering . Without prejudice to the generality of Clause 2.3, in relation to the borrowing by the Borrower of the Loan, the performance and discharge of its obligations and liabilities under the Finance Documents, and the transactions and other arrangements affected or contemplated by the Finance Documents to which the Borrower is a party, the Borrower confirms that:


(a)	it is acting for its own account;


(b)	it will use the proceeds of the Loan for its own benefit, under its full responsibility and exclusively for the purposes specified in this Agreement; and

(c)

the foregoing will not involve or lead to a contravention of any law, official requirement or other regulatory measure or procedure implemented to combat “ money laundering ” (as defined in Article 1 of Directive 2005/60/EC of the European Parliament and of the Council) and comparable United States federal and state laws, including without limitation the PATRIOT Act and the Bank Secrecy Act, or comparable United Nations or European Union legislation.

10.22

Anti-bribery, anti-corruption and anti-money laundering . Neither the Borrower nor the Guarantor (nor any of their subsidiaries, directors, officers, or, to the best of their knowledge, any of their affiliates or employees) has engaged in any activity or conduct which would violate any applicable anti-bribery, anti-corruption or anti-money laundering laws or regulations in any applicable jurisdiction and the Borrower and the Guarantor have instituted and maintain

policies and procedures designated to prevent violation of such laws, regulations and rules.


10.23	Collateral Vessel . The Collateral Vessel is:


(a)	in the sole and absolute ownership of the Guarantor and duly registered in the Guarantor’s name under the law of an Approved Flag, unencumbered save and except for the Mortgage thereon in favor of the Security Trustee recorded against it and as permitted thereby;


(b)	seaworthy for hull and machinery insurance warranty purposes and in every way fit for its intended service; and


(c)	insured in accordance with the provisions of this Agreement and the requirements hereof in respect of such Insurances will have been complied with.


10.24	Place of Business . For purposes of the UCC, each Security Party has only one place of business located at, or, if it has more than one place of business, the chief executive office from which it manages the main part of its business operations and conducts its affairs is located at:

9, Boulevard Charles III
Monaco 98000

None of the Security Parties has a place of business in the United States of America, the District of Columbia, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States of America, other than its representative office at:

150 East 58th Street
New York, New York 10155


10.25	Solvency . In the case of the Borrower and the Guarantor:


(a)	the sum of its assets, at a fair valuation, does and will exceed its liabilities, including, to the extent they are reportable as such in accordance with US GAAP, contingent liabilities;


(b)	the present fair market saleable value of its assets is not and shall not be less than the amount that will be required to pay its probable liability on its then existing debts, including, to the extent they are reportable as such in accordance with US GAAP, contingent liabilities, as they mature;


(c)	it does not and will not have unreasonably small working capital with which to continue its business; and


(d)	it has not incurred, does not intend to incur and does not believe it will incur, debts beyond its ability to pay such debts as they mature.

10.26

Borrower’s Business; Guarantor’s Business . From the date of its incorporation until the date hereof, neither the Borrower nor the Guarantor have conducted any business other than in connection with, or for the purpose of, owning, managing, chartering and/or operating the Collateral Vessel and other vessels owned by the Borrower’s subsidiaries and, in the case of the Borrower, owning the Equity Interest in the Guarantor and its other subsidiaries.


10.27	Immunity; Enforcement; Submission to Jurisdiction; Choice of Law .


(a)	Each Security Party is subject to civil and commercial law with respect to its obligations under the Finance Documents, and the execution, delivery and performance by each Security Party of the Finance Documents to which it is a party constitute private and commercial acts rather than public or governmental acts.


(b)	No Security Party or any of its properties has any immunity from suit, court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment or from any other legal process in relation to any Finance Document.

(c)

It is not necessary under the laws of any Security Party’s jurisdiction of incorporation or formation, in order to enable any Creditor Party to enforce its rights under any Finance Document or by reason of the execution of any Finance Document or the performance by the any Security Party of its obligations under any Finance Document, that such Creditor Party should be licensed, qualified or otherwise entitled to carry on business in such Security Party’s jurisdiction of incorporation or formation.


(d)	None of the Creditor Parties will be deemed to be resident, domiciled or carrying on business in any Security Party’s jurisdiction of incorporation or formation by reason only of the execution, performance and/or enforcement of any Finance Document.


(e)	Under the law of each Security Party’s jurisdiction of incorporation or formation, the choice of the law of New York to govern this Agreement and the other Finance Documents to which New York law is applicable is valid and binding.


(f)	The submission by the Security Parties to the jurisdiction of the courts of New York State and the U.S. Federal court sitting in New York County pursuant to Clause 32.2(a) is valid and binding and not subject to revocation, and service of process effected in the manner set forth in

Clause 32.2(d) will be effective to confer personal jurisdiction over the Security Parties in such courts.


10.28	Status of Secured Liabilities . The Secured Liabilities constitute direct, unconditional and general obligations of each Security Party and rank (a) senior to all subordinated Financial Indebtedness and (b) not less than pari passu (as to priority of payment and as to security) with all other Financial Indebtedness of each Security Party except for obligations mandatorily preferred by law.


11.	GENERAL AFFIRMATIVE AND NEGATIVE COVENANTS

11.1

Affirmative Covenants . From the Effective Date until all amounts payable hereunder have been paid in full, the Borrower and the Guarantor, as the case may be, undertake with each Creditor Party to comply or cause compliance with the following provisions of this Clause 11.1, except as the Agent, with the consent of the Required Lenders, may approve from time to time in writing such consent not to be unreasonably withheld, conditioned or delayed, provided, however, that such consent and approval shall be subject always to Clauses 28.1 and 28.2 of this Agreement:


(g)	Performance of Obligations . Each Security Party shall duly observe and perform its obligations under each Charter and each Finance Document to which it is or is to become a party.


(h)	Notification of Defaults (etc.) . The Borrower and the Guarantor shall promptly notify the Agent, upon becoming aware of the same, of:


(i)	the occurrence of an Event of Default or event or circumstances which, with the giving of notice and/or lapse of time would constitute an Event of Default or any other event (including any litigation) which is reasonably likely to have a Material Adverse Effect;


(ii)	any material breach by any party to a Charter; and


(iii)	any damage or injury caused by or to the Collateral Vessel requiring repairs the cost of which exceeds $2,500,000.


(i)	Confirmation of No Default . The Borrower will, within two (2) Business Days after service by the Agent of a written request, serve on the Agent a notice which is signed by an officer of the Borrower and which states that:


(iii)	no Event of Default or event or circumstances which, with the giving of notice and/or lapse of time would constitute an Event of Default has occurred and is continuing; or


(iv)	no Event of Default has occurred and is continuing, except for a specified event or matter, of which all material details are given.

The Agent may serve requests under this Clause 11.1(c) from time to time but only if asked to do so by a Lender or Lenders having Contributions exceeding 33% of the Loan or (if the Advance has not been made) Commitments exceeding 33% of the Total Commitments, and this Clause 11.1(c) does not affect the Borrower’s obligations under Clause 11.1(b).

(j)

Notification of Litigation . The Borrower will provide the Agent with relevant details of any legal or administrative action involving the Borrower, any other Security Party or the Collateral Vessel, the Earnings or the Insurances as soon as the Borrower becomes aware that such action is instituted, unless it is likely that the legal or administrative action cannot be considered material in the context of any Finance Document.


(k)	Provision of Further Information . The Borrower will, as soon as practicable after receiving the request, provide the Agent with any additional financial or other information relating to:


(i)	the Borrower or the Guarantor or any of their respective subsidiaries; or


(ii)	any other matter relevant to, or to any provision of, a Finance Document, which may be requested by the Agent.

(l)

Books of Record and Account . The Borrower and the Guarantor shall keep proper books of record and account, in which full and materially correct entries shall be made of all financial transactions and the assets and business of the Borrower and the Guarantor in accordance with US GAAP, and the Agent shall have the right to examine the books and records of the Borrower and the Guarantor wherever the same may be kept from time to time as it sees fit, in its sole reasonable discretion, or to cause an examination to be made by a firm of accountants selected by it, provided that any examination shall be done without undue interference with the day to day business of the Borrower or the Guarantor, as the case may be.


(m)	Financial Reports .

The Borrower shall furnish to the Agent:


(i)	as soon as reasonably practicable and in any event within 60 days after the end of each of the first three fiscal quarters in each Fiscal Year and within 90 days after the end of the final fiscal quarter in each Fiscal Year, quarterly reports on Form 6-K (or any successor form) containing unaudited consolidated financial statements

(including a balance sheet and statement of income, changes in stockholders’ equity and cash flow) for and as of the end of such fiscal quarter (with comparable financial statements for the corresponding fiscal quarter of the immediately preceding Fiscal Year) together with a Compliance Certificate;


(ii)	as soon as reasonably practicable and in any event within 120 days after the end of each Fiscal Year, an annual report on Form 20-F (or any successor form) containing the audited consolidated financial and other information required to be contained therein for such Fiscal Year together with a Compliance Certificate;


(iii)	at or prior to such times as would be required to be filed or furnished to the SEC all such other reports and information that the Borrower is required to file or furnish to the SEC under Sections 13(a) or 15(d) of the Exchange Act;


(iv)	as soon as reasonably practicable and in any event within 90 days after the end of each Fiscal Year, cash flow projections (including a statement of profit and loss, balance sheet and statement of cash flows for the Borrower and its subsidiaries (on a consolidated basis) for the following four calendar years; and

(v)

such other financial statements (including without limitation details of all off-balance sheet and time charter hire commitments), annual budgets, statements of profit and loss, balance sheets, statements of cash flows, projections and compliance certificates together with quarterly reports and cash flow projections as may be reasonably requested by the Agent for the Borrower and/or any of its subsidiaries (including the Guarantor), each to be in such form as the Agent may reasonably request,

provided that to the extent that the Borrower ceases to qualify as a “foreign private issuer” within the meaning of the Exchange Act, the Borrower will furnish to the Agent all reports and other information that it would be required to file with (or furnish to) the Commission pursuant Sections 13(a) or 15(d) of the Exchange Act if it were required to file such documents under the Exchange Act as follows:


(1)	if the Borrower is then subject to Sections 13(a) or 15(d) of the Exchange Act, within 30 days of the respective dates on which the Borrower is required to file such documents pursuant to the Exchange Act; or


(2)	if the Borrower is not then subject to Sections 13(a) or 15(d) under the Exchange Act, the applicable time periods described above with respect to quarterly, annual and other reports and information.

Notwithstanding the foregoing, the Borrower will be deemed to have furnished to the Agent such reports and information referred to above if the Borrower has filed such reports and information with the Commission via the EDGAR system (or any successor system) and such reports and information are publicly available.


(n)	Appraisals of Fair Market Value . The Borrower shall procure and deliver to the Agent two written appraisal reports or one written appraisal report (as the case may be) setting forth the Fair Market Value of the Collateral Vessel as follows:


(i)	at the Borrower’s expense, for inclusion with each Compliance Certificate required to be delivered together with the second quarterly and annual financial statements that the Borrower delivers under Clause 11.1(g)(i) and (ii); and


(ii)	at the Lenders’ expense at all other times upon the request of the Agent or the Required Lenders, unless an Event of Default has occurred and is continuing, in which case the Borrower shall procure it at its expense as often as requested,

provided that, if the two appraisals differ by more than 10% of the higher appraisal, the Agent shall appoint a third Approved Broker to submit an appraisal report at the Borrower’s cost and the Fair Market Value shall then be the arithmetic mean of the valuations obtained from the three Approved Brokers.

(o)

Taxes . Each Security Party shall prepare and timely file all tax returns required to be filed by it and pay and discharge all taxes imposed upon it or in respect of any of its property and assets before the same shall become in default, as well as all lawful claims (including, without limitation, claims for labor, materials and supplies) which, if unpaid, might become a Security Interest upon the Collateral or any part thereof, except in each case, for any such taxes (i) as are being contested in good faith by appropriate proceedings, (ii) as to which such failure to have paid does not create any risk of sale, forfeiture, loss, confiscation or seizure of the Collateral Vessel or criminal liability, or (iii) the failure of which to pay or discharge would not be likely to have a material adverse effect on the business, assets or financial condition of any of the Borrower or any other Security Party or to affect the legality, validity, binding effect or enforceability of the Finance Documents.

(p)

Consents . Each Security Party shall obtain or cause to be obtained, maintain in full force and effect and comply with the conditions and restrictions (if any) imposed in connection with, every consent and do all other acts and things which may from time to time be necessary or required for the continued due performance of all of its obligations under any Charter and each Finance Document to which it is or is to become a

party, and shall deliver a copy of all such consents to the Agent promptly upon its request.

(q)

Compliance with Applicable Law . Each Security Party shall comply in all material respects with all applicable federal, state, local and foreign laws, ordinances, rules, orders and regulations now in force or hereafter enacted, including, without limitation, all Environmental Laws and regulations relating thereto, the failure to comply with which would be likely to have a material adverse effect on the financial condition of such Security Party or affect the legality, validity, binding effect or enforceability of any Charter and each Finance Document to which it is or is to become a party.


(r)	Existence . Each Security Party shall do or cause to be done all things necessary to preserve and keep in full force and effect its existence in good standing under the laws of its jurisdiction of incorporation or formation.


(s)	Borrower and Guarantor’s Business .

(i)

The Borrower shall conduct business in connection with, or for the purpose of, managing, chartering and operating the Collateral Vessel and other vessels and directly or indirectly owning the Equity Interest of the Guarantor and other vessel owning companies, provided, however, that the business of the Borrower and its subsidiaries shall be limited to the dry bulk shipping business except to the extent that any non-dry bulk shipping business and/or assets acquired by the Borrower and/or any of its subsidiaries shall be limited solely to maritime and/or logistics business and/or assets and shall not at any time constitute more than fifteen percent (15%) of the Consolidated Total Capitalization of the Borrower; and


(ii)	The Guarantor shall conduct business only in connection with, or for the purpose of, owning, managing, chartering and operating the Collateral Vessel in the dry bulk shipping business.

(t)

Properties . Except to the extent the failure to do so could not reasonably be expected to have a material adverse effect on the business, assets or financial condition of a Security Party or affect the legality, validity, binding effect or enforceability of the Finance Documents, each Security Party shall maintain and preserve all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.


(u)	Loan Proceeds . The Borrower shall use the proceeds of the Advance solely to partially finance, refinance or reimburse itself for the payment of the acquisition cost for the Collateral Vessel.


(v)	Change of Place of Business . Each Security Party shall notify promptly the Agent of any change in the location of the place of business where it or any other Security Party conducts its affairs and keeps its records.


(w)	Pollution Liability . Each Security Party shall take, or cause to be taken, such actions as may be reasonably required to mitigate potential liability to it arising out of pollution incidents or as may be reasonably required to protect the interests of the Creditor Parties with respect thereto.


(x)	Subordination of Loans . Each Security Party shall cause all loans made to it by any Affiliate, parent or subsidiary and all sums and other obligations (financial or otherwise) owed by it to any Affiliate, parent or subsidiary to be fully and unconditionally subordinated to all Secured Liabilities.


(y)	OFAC; Money Laundering; CISADA . Each Security Party shall to the best of its knowledge and ability:


(i)	ensure that no person who owns a controlling interest in or otherwise controls the Borrower, the Guarantor or any parent or subsidiary thereof is a Restricted Party;

(ii)

comply, and cause each of their subsidiaries to comply, with any applicable law, official requirement or other regulatory measure or procedure implemented to combat “money laundering” (as defined in Article 1 of Directive 2005/60/EC of the European Parliament and of the Council) and comparable United States federal and state laws, including without limitation the PATRIOT Act and the Bank Secrecy Act, or comparable United Nations or European Union legislation;


(iii)	not use or permit the use of the proceeds of the Loan to violate any Sanctions, or be made available, directly or indirectly, to or for the benefit of a Restricted Party or otherwise shall be, directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions; and


(iv)	not knowingly permit or authorize and shall to the best of its abilities prevent the Collateral Vessel being used directly or indirectly by or for the benefit of any Restricted Party and/or in any trade which will expose the Collateral Vessel, any Security Party or the insurers of the Collateral Vessel to enforcement

proceedings or any other consequences whatsoever arising from Sanctions.


(z)	ERISA . Promptly upon becoming aware of:


(i)	the occurrence of any ERISA Termination Event; or


(ii)	the occurrence or existence of any ERISA Funding Event;

the Borrower shall furnish or cause to be furnished to the Agent written notice thereof and the action, if any, which the Borrower has taken and proposes to take with respect thereto.


(aa)	Information Provided to be Accurate . All financial and other information which is provided in writing by or on behalf of any Security Party under or in connection with any Finance Document will be true and not misleading and will not omit any material fact or consideration.


(bb)	Shareholder and Creditor Notices . The Borrower and the Guarantor will send the Agent, at the same time as they are dispatched, copies of all communications which are dispatched to their (i) shareholders or any class of them or (ii) their creditors generally.


(cc)	Maintenance of Security Interests . The Borrower and the Guarantor will:


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

(ii)

without limiting the generality of paragraph (i), at its own cost, promptly register, file, record or enroll any Finance Document with any court or authority in all Pertinent Jurisdictions, pay any stamp, registration or similar tax in all Pertinent Jurisdictions in respect of any Finance Document, give any notice or take any other step which, in the opinion of the Required Lenders, is or has become reasonably necessary or desirable for any Finance Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which it creates.


(dd)	“Know your customer” checks . If:


(i)	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;


(ii)	any change in the status of any Security Party after the date of this Agreement; or


(iii)	a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,

obliges the Agent or any Lender (or, in the case of paragraph (iii), 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 and the Guarantor shall promptly upon the reasonable request of the Agent or the Lender concerned supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or the Lender concerned (for itself or, in the case of the event described in paragraph (iii), on behalf of any prospective new Lender) in order for the Agent, the Lender concerned or, in the case of the event described in paragraph (iii), any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.


(ee)	Copies of Charters; Charter Assignment . Provided that all approvals necessary under Clause 14.13 have been previously obtained, the Borrower shall:


(i)	furnish promptly to the Agent a true and complete copy of any Charter for the Collateral Vessel and a true and complete copy of each material amendment thereof; and


(ii)	in respect of any such Charter, (a) execute and deliver to the Agent a Charter Assignment and (b) use reasonable commercial efforts to cause the charterer to execute and deliver to the Security Trustee a consent and acknowledgement to such Charter Assignment in the form required thereby.


(ff)	Further Assurances . From time to time, at its expense, the Borrower and the Guarantor shall duly execute and deliver to the Agent such further documents and assurances as the Agent may reasonably request to effectuate the purposes of this Agreement, the other Finance Documents or obtain the full benefit of any of the Collateral.


11.2	Negative Covenants . From the Effective Date until the Total Commitments have terminated and all amounts payable hereunder have been paid in full, the

Borrower and the Guarantor, as the case may be, undertakes with each Creditor Party to comply or cause compliance with the following provisions of this Clause 11.2, except as the Agent, with the consent of the Required Lenders, may approve from time to time in writing such consent not to be unreasonably withheld, conditioned or delayed, provided, however, that such consent and approval shall be subject always to Clauses 28.1 and 28.2 of this Agreement:


(p)	Security Interests . The Guarantor will not create, assume or permit to exist any Security Interest whatsoever upon any of its properties or assets, whether now owned or hereafter acquired, except for Permitted Security Interests and the Borrower will not create, assume or permit to exist any Security Interest on the shares of the Guarantor, other than those in favor of the Security Trustee.

(q)

Sale of Assets; Merger . Each of the Borrower and the Guarantor shall not sell, transfer or lease (other than at market value on arm’s length terms or in connection with a Charter) all or substantially all of its properties and assets, or enter into any transaction of merger or consolidation or liquidate, windup or dissolve itself (or suffer any liquidation or dissolution), provided that the Guarantor may sell the Collateral Vessel pursuant to the terms and conditions of this Agreement.

(r)

Affiliate Transactions . No Security Party will enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate, parent or subsidiary, other than on terms and conditions substantially as favorable to such person as would be obtainable by such person at the time in a comparable arm’s-length transaction with a person other than an Affiliate, parent or subsidiary.

(s)

Change of Business . The Guarantor will not change the nature of its business or commence any business other than in connection with, or for the purpose of, owning, managing, chartering and operating the Collateral Vessel. The Borrower will not change the nature of its business or commence any business other than in connection with, or for the purpose of, owning, managing, chartering and operating vessels and directly or indirectly owning the Equity Interests of the Guarantor and other subsidiaries.


(t)	Change of Control; Negative Pledge . The Borrower and the Guarantor will not permit any act, event or circumstance that would result in a Change of Control, and the Guarantor will not permit any pledge or assignment of its Equity Interests except in favor of the Security Trustee to secure the Secured Liabilities.


(u)	Increases in Capital . The Guarantor will not increase its capital by way of the issuance of any class or series of Equity Interests or create any new

class of Equity Interests that is not subject to a Security Interest to secure the Secured Liabilities.

(v)

Financial Indebtedness . The Guarantor shall not incur any Financial Indebtedness other than (i) the Loan, (ii) Financial Indebtedness incurred in the ordinary course of business provided that such indebtedness does not give to rise to any Security Interests other than Permitted Security Interests, (iii) existing indebtedness outstanding on the date of this Agreement which is disclosed to, and acceptable to, the Required Lenders and (iv) intercompany loans and advances (which at all times shall be fully and unconditionally subordinated to all Secured Liabilities).

(w)

Dividends . So long as an Event of Default has occurred and is continuing, or if an Event of Default would result therefrom, or if the Borrower is not in compliance with any of Clauses 12.2 through and including 12.4, the Borrower and the Guarantor shall not declare or pay any dividends or return any capital to its equity holders or authorize or make any other distribution, payment or delivery of property or cash to its equity holders, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for value, any interest of any class or series of its Equity Interests (or acquire any rights, options or warrants relating thereto but not including convertible debt) now or hereafter outstanding, or repay any subordinated loans to equity holders or set aside any funds for any of the foregoing purposes.


(x)	No Amendment to the Charters . The Guarantor will not agree to any material amendment or supplement to, or waive or fail to enforce a Charter or any of its material provisions without the prior consent of the Agent acting on behalf of the Required Lenders.


(y)	No Employees; VAT Group; Ordinary Course of Business .


(iii)	The Guarantor shall not have any employees other than the master, the officers and the crew of the Collateral Vessel.


(iv)	The Guarantor shall not be or become a member of any VAT (value added tax) group.


(v)	The Guarantor shall not enter into any transaction or series of related transactions other than in the ordinary course of business.


(z)	Loans and Investments . Except for any capital expenditures or investments related to ordinary upgrades or maintenance work of the Collateral Vessel, the Guarantor shall not make any loan or advance to, make any investment in, or enter into any working capital maintenance or similar agreement with respect to any person, whether by acquisition of

Equity Interests or indebtedness, by loan, guarantee or otherwise unless (i) after giving effect to any such investment, the Guarantor is in pro forma compliance with the financial covenants in Clause 12 and (ii) no event or circumstances which, with the giving of notice and/or lapse of time would constitute an Event of Default or Event of Default exists at the time of incurrence thereof or would result therefrom.


(aa)	Acquisition of Capital Assets . The Guarantor shall not acquire any capital assets (including any vessel other than the Collateral Vessel) by purchase, charter or otherwise, provided that for the avoidance of doubt nothing in this Clause 11.2(l) shall prevent or be deemed to prevent capital improvements being made to the Collateral Vessel.

(bb)

Changes to Fiscal Year and Accounting Policies . The Borrower and the Guarantor shall not (i) change its Fiscal Year without the prior written consent of the Required Lenders or (ii) make or permit any change in accounting policies affecting (a) the presentation of financial statements or (b) reporting practices, except in either case in accordance with US GAAP or pursuant to the requirements of applicable laws or regulations.


(cc)	Jurisdiction of Incorporation or Formation; Amendment of Constitutional Documents . No Security Party shall change the jurisdiction of its incorporation or formation or materially amend its constitutional documents without the prior written consent of the Required Lenders.


(dd)	Sale of Collateral Vessel . The Guarantor will not consummate the sale of the Collateral Vessel without paying or causing to be paid all amounts due and owing under this Agreement or in connection therewith and the other Finance Documents prior to or simultaneously with the consummation of such sale.


(ee)	Change of Location . No Security Party shall change the location of its chief executive office or the office where its corporate records are kept or open any new office for the conduct of its business on less than thirty (30) days prior written notice to the Agent.

(ff)

Money Laundering . The Borrower and the Guarantor shall not contravene any law, official requirement or other regulatory measure or procedure implemented to combat “money laundering” (as defined in Article 1 of Directive 2005/60/EC of the European Parliament and of the Council and comparable United States federal and state laws, including without limitation the Bank Secrecy Act and the PATRIOT Act.


(gg)	Location of bank accounts . The Guarantor shall not open or maintain a bank account with a bank or other financial institution other than an Account Bank.


12.	FINANCIAL COVENANTS

12.1

General . From the Effective Date until all amounts payable hereunder have been paid in full, the Borrower undertakes with each Creditor Party to comply or cause compliance with the following provisions of this Clause 12 except as the Agent, with the consent of the Required Lenders, may approve from time to time in writing, such approval not to be unreasonably withheld, conditioned or delayed, provided, however, that such consent and approval shall be subject always to Clauses 28.1 and 28.2 of this Agreement.


12.2	Maximum Leverage . The Borrower shall maintain a ratio of Net Debt to Consolidated Total Capitalization of not more than 0.60 to 1.00, to be tested on the last day of each fiscal quarter.

12.3

Minimum Tangible Net Worth . The Borrower shall maintain a Consolidated Tangible Net Worth of not less than $500,000,000 plus (a) 25% of the Borrower’s cumulative, positive consolidated net income for each fiscal quarter commencing on or after December 31, 2013 and (b) 50% of the value of the Equity Proceeds realized from any issuance of Equity Interest in the Borrower occurring on or after December 31, 2013, to be tested on the last day of each fiscal quarter.

12.4

Free Liquidity . The Borrower shall maintain Consolidated Liquidity of not less than the greater of (i) $50,000,000, or (ii) $850,000 per vessel owned by the Borrower or any subsidiary of the Borrower, to be tested on the last day of each fiscal quarter. For the avoidance of doubt, Consolidated Liquidity shall include all amounts held in the Earnings Account or in any other accounts of the Borrower or its subsidiaries with any of the Lenders.


13.	MARINE INSURANCE COVENANTS


13.1	General . From the Drawdown Date until all amounts payable hereunder have been paid in full, the Guarantor undertakes with each Creditor Party to comply or cause compliance with the following provisions of this Clause 13 except as the Agent, with the consent of the Required Lenders, may approve from time to time in writing, such approval not to be unreasonably withheld, conditioned or delayed.


13.2	Maintenance of Obligatory Insurances . The Guarantor shall keep the Collateral Vessel insured at its expense against:


(d)	fire and usual marine risks (including hull and machinery and excess risks);


(e)	war risks (including without limitation terrorism and piracy and war risk P&I and London blocking and trapping addendum);


(f)	protection and indemnity risks (including FD&D coverage for all periods that the Collateral Vessel operates on a time charter);


(g)	any other risks against which the Security Trustee considers, having regard to practices and other circumstances prevailing at the relevant time, it would be reasonable in the opinion of the Security Trustee for the Guarantor to insure and which are specified by the Security Trustee by notice to the Borrower and the Guarantor.


13.3	Terms of Obligatory Insurances . The Guarantor shall effect such insurances in respect of the Collateral Vessel:


(c)	in Dollars;


(d)	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:


(iv)	110% of the Loan; and


(v)	the Fair Market Value of the Collateral Vessel;

provided that not less than 80% of the insured value established pursuant to (i) or (ii) above shall be on a hull and machinery basis.


(e)	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 (currently 1 billion US dollars);


(f)	in relation to protection and indemnity risks in respect of the full tonnage of the Collateral Vessel;


(g)	on approved terms (such approval not to be unreasonably withheld); and


(h)	through approved brokers and with approved insurance companies and/or underwriters or, in the case of war risks and protection and indemnity risks, in approved war risks and protection and indemnity risks associations that are members of the International Group of P&I Clubs.


13.4	Further Protections for the Creditor Parties . In addition to the terms set out in Clause 13.3, the Guarantor shall procure that the obligatory Insurances effected by it shall:


(g)	subject always to paragraph (b), name the Guarantor and Approved Manager as the only named assureds unless the interest of every other named assured is limited:


(i)	in respect of any obligatory Insurances for hull and machinery and war risks;


(A)	to any provable out-of-pocket expenses that 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, where requested in writing by the Security Trustee, every other named assured has undertaken in writing to the Security Trustee (in such form as it reasonably requires) that any deductible shall be apportioned between the Guarantor and every other named assured in proportion to the aggregate claims made or paid by each of them and that it shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances;


(h)	name the Security Trustee as loss payee with such directions for payment as the Security Trustee may specify;

(i)

to the extent permitted by the terms of the Insurances, provide that all payments by or on behalf of the insurers under the obligatory insurances to the Security Trustee shall be made without set-off, counterclaim or deductions or condition whatsoever save for the deduction of unpaid premiums or other amounts applicable to the Guarantor and the Collateral Vessel and not applicable to any other vessel or person;


(j)	provide that such obligatory insurances shall be primary without right of contribution from other Insurances which may be carried by the Security Trustee or any other Creditor Party; and


(k)	provide that the Security Trustee may make proof of loss if the Guarantor fails to do so.


13.5	Renewal of Obligatory Insurances . The Guarantor shall:


(f)	at least 14 days before the expiry of any obligatory Insurance:


(iii)	notify the Security Trustee of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Guarantor proposes to renew that obligatory Insurance and of the proposed terms of renewal; and


(iv)	obtain the Security Trustee’s approval to the matters referred to in paragraph (i);


(g)	at least 7 days before the expiry of any obligatory Insurance, renew that obligatory Insurance in accordance with the Security Trustee’s approval pursuant to paragraph (a); and


(h)	procure that the approved brokers and/or the war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal notify the Security Trustee in writing of the terms and conditions of the renewal.

13.6

Copies of Policies; Letters of Undertaking . The Guarantor shall ensure that all approved brokers provide the Security Trustee with statements detailing the intended cover of all policies relating to the obligatory Insurances which they are to effect or renew and of a letter or letters or undertaking in a form required by the Security Trustee and including undertakings by the approved brokers that:


(h)	they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment in accordance with the Insurance Assignment;


(i)	they will hold such policies, and the benefit of such insurances, to the order of the Security Trustee in accordance with the said loss payable clause;


(j)	they will advise the Security Trustee immediately of any material change to the terms of the obligatory Insurances or if they cease to act as brokers;


(k)	they will notify the Security Trustee, not less than 14 days before the expiry of the obligatory Insurances, in the event of their not having received notice of renewal instructions from the relevant Security Party or its agents and, in the event of their receiving instructions to renew, they will promptly notify the Security Trustee of the terms of the instructions; and


(l)	in each case to the extent permitted by the terms of the Insurances, they will not set off against any sum recoverable in respect of a claim relating

to the Collateral Vessel under such obligatory Insurances any premiums or other amounts due to them or any other person in respect of any vessel other than the Collateral Vessel, 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 related to vessels other than the Collateral Vessel or persons other than the Borrower, and they will not cancel such obligatory Insurances by reason of non-payment of such premiums or other amounts related to vessels other than the Collateral Vessel or persons other than the Guarantor, and will arrange for a separate policy to be issued in respect of the Collateral Vessel forthwith upon being so requested by the Security Trustee.


13.7	Copies of Certificates of Entry . The Guarantor shall ensure that any protection and indemnity and/or war risks associations in which the Collateral Vessel is entered provides the Security Trustee with:


(a)	a certified copy of the certificate of entry for the Collateral Vessel;


(b)	a letter or letters of undertaking in such form as may be required by the Security Trustee;

(c)

where required to be issued under the terms of insurance/indemnity provided by the protection and indemnity association, but only if and when so requested by the Agent, a certified copy of each United States of America voyage quarterly declaration (or other similar document or documents) made by the Guarantor in relation to the Collateral Vessel in accordance with the requirements of such protection and indemnity association; and


(d)	a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to the Collateral Vessel.


13.8	Deposit of Original Policies . The Guarantor shall ensure that all policies relating to obligatory Insurances are deposited with the approved brokers through which the Insurances are effected or renewed.

13.9

Payment of Premiums . The Guarantor shall punctually pay all premiums or other sums payable in respect of the obligatory insurances and produce all relevant receipts when so required by the Security Trustee; provided, however, that should the Guarantor fail to pay such premiums or other sums, the Security Trustee shall have the right but not the obligation to pay such premiums or other sums as it deems advisable in its sole discretion.


13.10	Guarantees . The Guarantor 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.


13.11	Compliance with Terms of Insurances . The Guarantor shall neither do nor omit to do (nor permit to be done or not to be done) any act or thing which would or might render any obligatory Insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory Insurance repayable in whole or in part; and, in particular:


(a)	the Guarantor shall take all necessary action and comply with all requirements which may from time to time be applicable to the obligatory Insurances, and (without limiting the obligation contained in Clause 13.6(c)) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Security Trustee has not given its prior approval;


(b)	the Guarantor shall not make any changes relating to the classification or classification society or manager or operator of the Collateral Vessel unless approved by the underwriters of the obligatory Insurances;

(c)

the Guarantor shall make (and promptly supply copies to the Agent of) all quarterly or other voyage declarations which may be required by the protection and indemnity risks association in which the Collateral Vessel is entered to maintain cover for trading to the United States of America’s Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990 or any other applicable legislation); and


(d)	the Guarantor shall not employ the Collateral Vessel, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory Insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.


13.12	Alteration to Terms of Insurances . The Guarantor shall neither make nor agree to any alteration to the terms of any obligatory Insurance nor waive any right relating to any obligatory Insurance without the prior written consent of the Required Lenders (which consent shall not be unreasonably withheld, conditioned or delayed).


13.13	Settlement of Claims . The Guarantor shall not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty, and shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory Insurances.


13.14	Provision of Copies of Communications . The Guarantor shall provide the Security Trustee, at the time of each such communication, copies of all written communications between such Security Party and:


(d)	the approved insurance brokers;


(e)	the approved protection and indemnity and/or war risks associations; and


(f)	the approved insurance companies and/or underwriters, which relate directly or indirectly to:


(i)	the Guarantor’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 Guarantor and any of the persons referred to in paragraphs (a) or (b) relating wholly or partly to the effecting or maintenance of the obligatory insurances.


13.15	Provision of Information . In addition, the Guarantor shall promptly provide the Security Trustee (or any persons which it may designate) with any information which the Security Trustee (or any such designated person) reasonably 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 13.16 or dealing with or considering any matters relating to any such Insurances; and the Guarantor shall, forthwith upon demand, indemnify the Security Trustee in respect of all fees and other expenses incurred by or for the account of the Security Trustee in connection with any such report as is referred to in paragraph (a).

13.16

Mortgagee’s Interest, Additional Perils and Political Risk Insurances . The Security Trustee shall be entitled from time to time to effect, maintain and renew a mortgagee’s interest additional perils insurance, a mortgagee’s political risks insurance and a mortgagee’s interest marine insurance in such amounts (not to exceed 110% of the Loan), on such terms, through such insurers and generally in such manner as the Security Trustee may from time to time consider appropriate and the Borrower and the Guarantor shall upon demand fully indemnify the Security Trustee in respect of all premiums and other expenses which are incurred in connection with or with a view to effecting, maintaining or renewing any such insurance or dealing with, or considering, any matter arising out of any such insurance.

13.17

Review of Insurance Requirements . The Security Trustee may and, on instruction of the Required Lenders, shall review, at the expense of the Borrower and the Guarantor, the requirements of this Clause 13 from time to time in order to take account of any changes in circumstances after the date of this Agreement which are, in the reasonable opinion of the Agent or the Required Lenders significant and capable of affecting the Guarantor or the Collateral Vessel and its insurance (including, without limitation, changes in the availability or the cost of insurance coverage or the risks to which the Guarantor may be subject.)

13.18

Modification of Insurance Requirements . The Security Trustee shall notify the Borrower and the Guarantor of any proposed modification under Clause 13.17 to the requirements of this Clause 13 which the Security Trustee may or, on instruction of the Required Lenders, shall reasonably consider necessary and appropriate in the circumstances and such modification shall take effect on and from the date it is notified in writing to the Borrower as an amendment to this Clause 13 and shall bind the Borrower and the Guarantor accordingly.

13.19

Compliance with Instructions . The Security Trustee shall be entitled (without prejudice to or limitation of any other rights which it may have or acquire under any Finance Document) to require the Collateral Vessel to remain at any safe port or to proceed to and remain at any safe port designated by the Security Trustee until the Guarantor implements any amendments to the terms of the obligatory insurances and any operational changes required as a result of a notice served under Clause 13.18.


14.	COLLATERAL VESSEL COVENANTS

14.1

General . From the Drawdown Date until all amounts payable hereunder have been paid in full, the Borrower and the Guarantor, as the case may be, undertakes with each Creditor Party to comply or cause compliance with the following provisions of this Clause 14, except as the Agent, with the consent of the Required Lenders, may approve from time to time in writing such consent not to be unreasonably withheld, conditioned or delayed, provided, however, that such consent and approval shall be subject always to Clauses 28.1 and 28.2 of this Agreement.


14.2	Collateral Vessel’s Name and Registration . The Guarantor shall:


(i)	keep the Collateral Vessel registered in its name under the law of an Approved Flag;


(j)	not do, omit to do or allow to be done anything as a result of which such registration might be cancelled or imperiled; and


(k)	not change the name or port of registry on which the Collateral Vessel was registered when it became subject to the Mortgage.


14.3	Repair and Classification . The Guarantor shall keep the Collateral Vessel in a good and safe condition and state of repair:


(l)	consistent with first-class ship ownership and management practice;


(m)	so as to maintain the highest class for the Collateral Vessel with the Classification Society, free of any overdue recommendations and conditions affecting the Collateral Vessel’s class; and


(n)	so as to comply with all laws and regulations applicable to vessels registered under the law of the Approved Flag on which the Collateral Vessel is registered or to vessels trading to any jurisdiction to which the Collateral Vessel may trade from time to time, including but not limited to the ISM Code and the ISPS Code, to the extent applicable in the discretion of the Agent.


14.4	Classification Society Instructions . The Guarantor shall instruct the Classification Society referred to in Clause 14.3(b):


(i)	to send to the Agent, following receipt of a written request from the Agent, copies of all original class records held by the Classification Society in relation to the Collateral Vessel;

(j)

to allow the Security Trustee (or its agents), at any time and from time to time, to inspect the original class and related records of the Guarantor and the Collateral Vessel either (i) electronically (through the Classification Society directly or by way of indirect access via the Guarantor’s account manager and designating the Security Trustee as a user or administrator of the system under its account) or (ii) in person at the offices of the Classification Society, and to take copies of them electronically or otherwise;


(k)	to notify the Security Trustee immediately in writing if the Classification Society:


(i)	receives notification from the Guarantor or any other person that the Collateral Vessel’s 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 Collateral Vessel’s class under the rules or terms and conditions of the Guarantor or the Collateral Vessel’s membership of the Classification Society;


(l)	following receipt of a written request from the Security Trustee:


(i)	to confirm that the Guarantor is not in default of any of its contractual obligations or liabilities to the Classification Society and, without limiting the foregoing, that it has paid in full all fees or other charges due and payable to the Classification Society; or


(ii)	if the Guarantor is in default of any of its contractual obligations or liabilities to the Classification Society, to specify to the Security Trustee in reasonable detail the facts and circumstances of such default, the consequences of such default, and any remedy period agreed or allowed by the Classification Society.


14.5	Modification . The Guarantor shall not make any modification or repairs to, or replacement of, the Collateral Vessel or equipment installed on the Collateral Vessel which would or is reasonably likely to materially negatively alter the structure, type or performance characteristics of the Collateral Vessel or materially reduce its value.

14.6

Removal of Parts . The Guarantor shall not remove any material part owned by it from the Collateral Vessel, or any item of equipment owned by it installed on, the Collateral Vessel unless the part or item so removed has become obsolete or is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed, is free from any Security Interest or any right in favor of any person other than the Security Trustee and becomes on installation on the Collateral Vessel, the property of that Security Party and subject to the security constituted by the Mortgage, provided that the Guarantor may install and remove equipment owned by a third party if the equipment can be removed without material damage to the Collateral Vessel.


14.7	Surveys . The Guarantor shall submit the Collateral Vessel, at its sole expense, regularly to all periodical or other surveys which may be required for classification purposes and, if so required by the Security Trustee provide the Security Trustee, at the Guarantor’s expense, with copies of all survey reports.

14.8

Inspection . The Guarantor shall permit the Security Trustee (by surveyors or other persons appointed by it for that purpose at the cost of the Guarantor) to board the Collateral Vessel up to once per year to inspect its condition or to satisfy themselves about proposed or executed repairs and shall afford all proper facilities for such inspections provided, however , that the Security Trustee shall be entitled to inspect the Collateral Vessel at any time following a Major Casualty (a “ Post Casualty Inspection ”) until the Collateral Vessel is repaired and such Post Casualty Inspection shall not constitute an annual inspection as provided herein and provided, further , that the first Post Casualty Inspection for the Collateral Vessel shall be at the cost of the Guarantor and any subsequent Post Casualty Inspections related to such Major Casualty conducted by the Security Trustee shall be at its cost. The Security Trustee shall use reasonable endeavors to ensure that the operation of the Collateral Vessel is not adversely affected as a result of

such inspections. Notwithstanding the foregoing, at any time after an Event of Default has occurred and is continuing the Security Trustee (by surveyors or other persons appointed by it at the cost of the Borrower and the Guarantor) shall have the right to board the Collateral Vessel at any time or place for any purpose.


14.9	Prevention of and Release from Arrest . The Guarantor shall promptly discharge:


(a)	all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against the Collateral Vessel, the Earnings or the Insurances;


(b)	all taxes, dues and other amounts charged in respect of the Collateral Vessel, the Earnings or the Insurances; and


(c)	all other accounts payable whatsoever in respect of the Collateral Vessel, the Earnings or the Insurances,

and, forthwith upon (and in any event, not more than 30 days after) receiving notice of the arrest of the Collateral Vessel, or of its detention in exercise or purported exercise of any lien or claim, the Guarantor shall procure its release by providing bail or otherwise as the circumstances may require.


14.10	Compliance with Laws etc . The Guarantor shall:


(e)	comply, or procure compliance with the ISM Code, the ISPS Code, all Environmental Laws and all other applicable laws or regulations relating to the Collateral Vessel, its ownership, operation and management or to the business of the Guarantor;


(f)	not employ the Collateral Vessel nor allow its employment in any manner contrary to any applicable law or regulation in any relevant jurisdiction including but not limited to the ISM Code and the ISPS Code; and


(g)	in the event of hostilities in any part of the world (whether war is declared or not), not cause or permit the Collateral Vessel to enter or trade to any zone which is declared a war zone by the Collateral Vessel’s war risks insurers unless the Guarantor has (at its expense) effected any special, additional or modified insurance cover which its war risks insurers may require.


14.11	Provision of Information . The Guarantor shall promptly provide the Security Trustee with any information which it requests regarding:


(c)	the Collateral Vessel, its employment, position and engagements;


(d)	the Earnings and payments and amounts due to the Collateral Vessel’s master and crew;


(e)	any expenses incurred, or likely to be incurred, in connection with the operation, maintenance or repair of the Collateral Vessel and any payments made in respect of the Collateral Vessel;


(f)	any towages and salvages;


(g)	the Guarantor’s, the Approved Manager’s or the Collateral Vessel’s compliance with the ISM Code and the ISPS Code; and


(h)	the latest technical reports on the Collateral Vessel from the Approved Manager, and, upon the Security Trustee’s request, provide copies of any current charter and charter guarantee relating to the Collateral Vessel, and copies of the Guarantor’s or the Approved Manager’s Document of Compliance.


14.12	Notification of Certain Events . The Guarantor shall immediately notify the Security Trustee by fax or email, confirmed forthwith by letter, of:


(d)	any casualty which is or is likely to be or to become a Major Casualty;


(e)	any occurrence as a result of which the Collateral Vessel has become or is, by the passing of time or otherwise, likely to become a Total Loss;


(f)	any requirement or condition made by any insurer, Classification Society or by any competent authority which is not immediately complied with;


(g)	any arrest or detention of the Collateral Vessel, any exercise or purported exercise of any Security Interest on the Collateral Vessel or the Earnings or any requisition of the Collateral Vessel for hire;


(h)	any intended dry docking of the Collateral Vessel;


(i)	any Environmental Claim in excess of $2,500,000 made against the Guarantor or in connection with the Collateral Vessel, or any Environmental Incident in excess of $2,500,000;


(j)	any claim for breach of the ISM Code or the ISPS Code being made against the Guarantor, the Approved Manager or otherwise in connection with the Collateral Vessel; or


(k)	any other matter, event or incident, actual or threatened, the effect of which will or could lead to the ISM Code or the ISPS Code not being complied with;

and the Guarantor shall keep the Security Trustee advised in writing on a regular basis and in such detail as the Security Trustee shall require of the Guarantor’s, the Approved Manager’s or any other person’s response to any of those events or matters.


14.13	Restrictions on Chartering, Appointment of Managers etc . The Guarantor shall not, unless consented to by the Agent or in the case of any Charter, the Required Lenders (such consent not to be unreasonably withheld, conditioned or delayed):


(g)	let the Collateral Vessel on demise charter for any period;


(h)	let the Collateral Vessel on any time or consecutive voyage charter for a term which exceed, or which by virtue of any optional extension may exceed, 18 months;


(i)	enter into any charter in relation to the Collateral Vessel under which more than two (2) months’ hire (or the equivalent) is payable in advance;


(j)	charter the Collateral Vessel otherwise than on bona fide arm’s length terms at the time when the Collateral Vessel is fixed;

(k)

appoint a manager of the Collateral Vessel other than the Approved Manager or agree to any material alteration to the material terms of the Approved Management Agreement, provided, however, that any manager so appointed including an Approved Manager appointed after the Effective Date shall enter into a Manager’s Undertaking in favor of the Security Trustee in form and substance acceptable to the Agent;


(l)	de-activate or lay up the Collateral Vessel;


(m)	change the Classification Society other than to another Classification Society; or

(n)

put the Collateral Vessel in to the possession of any person for the purpose of work being done upon it in an amount exceeding or likely to exceed $1,000,000 (or the equivalent in any other currency) unless that person has first given to the Security Trustee and in terms satisfactory to it a written undertaking not to exercise any Security Interest on the Collateral Vessel or the Earnings for the cost of such work or for any other reason.


14.14	Notice of Mortgage . The Guarantor shall keep the Mortgage registered against the Collateral Vessel as a valid first preferred mortgage, carry on board the Collateral Vessel a certified copy of the Mortgage and place and maintain in a conspicuous place in the navigation room and the Master’s cabin of the Collateral

Vessel a framed printed notice stating that the Collateral Vessel is mortgaged by the Guarantor to the Security Trustee.


14.15	ISPS Code . The Guarantor shall comply with the ISPS Code and in particular, without limitation, shall:


(c)	procure that the Collateral Vessel and the company responsible for the Collateral Vessel’s compliance with the ISPS Code comply with the ISPS Code; and


(d)	maintain for the Collateral Vessel an ISSC; and


(e)	notify the Agent immediately in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC.


15.	SECURITY MAINTENANCE COVER RATIO


15.1	General . From the Drawdown Date until all amounts payable hereunder have been paid in full, the Borrower undertakes with each Creditor Party to comply with the following provisions of this Clause 15 except as the Agent, with the consent of all Lenders, may approve from time to time in writing, such approval not to be unreasonably withheld, conditioned or delayed.


15.2	Security Maintenance Cover Ratio . If, at any time, the Agent notifies the Borrower that the ratio of:


(o)	the aggregate Fair Market Value of the Collateral Vessel delivered to the Guarantor; plus


(p)	the net realizable value of any additional Collateral previously provided under this Clause 15, to:


(q)	the Loan;

(such ratio being the “ Security Maintenance Cover Ratio ”) is below the SMC Threshold, the Agent shall require the Borrower to comply with the requirements of Clause 15.3, unless otherwise agreed by all Lenders. For the purpose of this Clause 15.2, the “ SMC Threshold ” means (i) 150% of the outstanding principal balance of the Loan from the Drawdown Date through December 31, 2017 and (ii) thereafter 145% of the outstanding principal balance of the Loan.


15.3	Provision of Additional Security; Prepayment . When the Agent serves a notice on the Borrower under Clause 15.2, the Borrower shall, within thirty (30) days after the date on which the Agent’s notice is served, either:

(m)

provide, or ensure that a third party provides, additional Collateral which, in the reasonable opinion of the Lenders, is in form and substance acceptable to the Lenders and has a net realizable value at least equal to the shortfall and is documented in such terms as may be reasonably satisfactory to the Security Trustee acting with the authorization of all Lenders (it being understood that cash collateral comprised of U.S. Dollars is satisfactory and that it shall be valued at par); or


(n)	prepay the Loan in such amount as will eliminate the shortfall.


15.4	Value of Additional Vessel Security . The net realizable value of any additional Collateral which is provided under Clause 15.3 and which consists of a Security Interest over a vessel shall be that shown by a valuation complying with the definition of Fair Market Value.


15.5	Valuations Binding . Any valuation under Clause 15.3 or 15.4 shall be binding and conclusive as regards the Borrower and the Lenders, as shall be any valuation which the Agent makes of any additional security which does not consist of or include a Security Interest.

15.6

Provision of Information . The Borrower shall promptly provide the Agent and any Approved Broker or other expert acting under Clause 15.4 with any information which the Agent or the Approved Broker or other expert may request for the purposes of the valuation; and, if the Borrower fails to provide the information by the date specified in the request, the valuation may be made on any basis and assumptions which the Approved Broker or the Agent (or the expert appointed by the Agent) consider prudent.

15.7

Payment of Valuation Expenses . Without prejudice to the generality of the Borrower’s obligations under Clauses 21.2, 21.3 and 22.3, the Borrower shall, on demand, pay the Agent the amount of the fees and expenses of any Approved Broker or other expert instructed by the Agent under this Clause 15 and all legal and other expenses incurred by any Creditor Party in connection with any matter arising out of Clause 15.3 or 15.4.


15.8	Application of Prepayment . Clause 8 shall apply in relation to any prepayment pursuant to Clause 15.3(b).


16.	GUARANTEE


16.1	Guarantee and Indemnity . In order to induce the Lenders to make the Loan to the Borrower, the Guarantor irrevocably and unconditionally:


(r)	guarantees, as a primary obligor and not merely as a surety, to each Creditor Party, the punctual payment and performance by the Borrower when due, whether at stated maturity, by acceleration or otherwise, of all

Secured Liabilities of the Borrower, whether for principal, interest, fees, expenses or otherwise (collectively, the “ Guaranteed Obligations ”);


(s)	undertakes with each Creditor Party that whenever the Borrower does not pay any Guaranteed Obligation when due, the Guarantor shall immediately on demand pay the Guaranteed Obligation as if they were the primary obligors; and

(t)

indemnifies each Creditor Party immediately on demand against any cost, loss or liability suffered or incurred by that Creditor Party (i) if any Guaranteed Obligation is or becomes unenforceable, invalid or illegal or (ii) by operation of law as a consequence of the transactions contemplated by the Finance Documents. The amount of the cost, loss or liability shall be equal to the amount which that Creditor Party would otherwise have been entitled to recover.


16.2	Continuing Guarantee . This guarantee:


(o)	is a continuing guarantee;


(p)	is joint and several with any other guarantee given in respect of the Guaranteed Obligations and shall not in any way be prejudiced by any other guarantee or security now or subsequently held by any Creditor Party in respect of the Guaranteed Obligations;


(q)	shall remain in full force and effect until the later of the termination of the Total Commitments and the payment and performance in full of the Guaranteed Obligations and all other amounts payable hereunder regardless of any intermediate payment or discharge in whole or in part;


(r)	shall be binding upon the Guarantor, its successors and permitted assigns; and


(s)	is a guarantee of payment not collection.


16.3	Performance of Guaranteed Obligations; Obligations pari passu .


(m)	The Guarantor agrees that the Guaranteed Obligations will be performed and paid strictly in accordance with the terms of the relevant Finance Document regardless of any law or regulation or order of any court:


(i)	affecting (A) any term of such Finance Document or the rights of any of the Creditor Parties with respect thereto or (B) the Borrower’s ability or obligation to make or render, or right of any Creditor Party to receive, any payments or performance due thereunder; or


(ii)	which might otherwise constitute a defense to, or a legal or equitable discharge of, the Borrower.


(n)	The obligations of the Guarantor under this guarantee shall rank pari passu with all other unsecured obligations of the Guarantor.


16.4	Reinstatement . If any payment of any of the Guaranteed Obligations is rescinded, discharged, avoided or reduced or must otherwise be returned by a Creditor Party or any other person upon the insolvency, bankruptcy or reorganization of the Borrower or any other Security Party or otherwise:


(e)	this guarantee shall continue to be effective or be reinstated, and the liability of the Guarantor hereunder shall continue or be reinstated, as the case may be, as if the payment, discharge, avoidance or reduction had not occurred; and


(f)	each Creditor Party shall be entitled to recover the value or amount of that payment from the Guarantor, as if the payment, discharge, avoidance or reduction had not occurred.

16.5

Liability Absolute and Unconditional . The obligations of the Guarantor under this Clause 16 shall be irrevocable, absolute and unconditional and shall not be affected by an act, omission, matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 16, and the Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:


(f)	any time, waiver or consent granted to, or composition with, any Security Party or other person;


(g)	the release of any other Security Party or any other person under the terms of any composition or arrangement with any creditor of any Security Party;


(h)	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 Security Party 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 realize the full value of any security;


(i)	any incapacity or lack of power, authority or legal personality of or dissolution or change in the corporate or company structure or status of a Security Party or any other person (including without limitation any change in the holding of such Security Party’s or other person’s Equity Interests);


(j)	any amendment to or replacement of a Finance Document or any other document or security;


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


(l)	any bankruptcy, insolvency or similar proceedings; or


(m)	any other circumstance whatsoever that might otherwise constitute a defense available to, or a legal or equitable discharge of, any Security Party.

16.6

Waiver of Promptness, etc. The Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of non-performance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this guarantee and any requirement that a Creditor Party protect, secure, perfect or insure any Security Interest or any property subject thereto or exhaust any right or take any action against any Security Party or any other person or entity or any Collateral.


16.7	Waiver of Revocation, etc. The Guarantor hereby unconditionally and irrevocably waives any right to revoke this guarantee.


16.8	Waiver of Certain Defenses . The Guarantor hereby unconditionally and irrevocably waives:

(h)

any defense arising by reason of any claim or defense based upon an election of remedies by a Creditor Party that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of the Guarantor or other rights of the Guarantor to proceed against the Borrower, any of the other Security Parties, any other guarantor or any other person or entity or any Collateral; and


(i)	any defense based on any right of set-off or counterclaim against or in respect of the obligations of the Guarantor hereunder.

16.9

Waiver of Disclosure, etc. The Guarantor hereby unconditionally and irrevocably waives any duty on the part of any Creditor Party to disclose to the Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower, any other Security Party or any of their respective subsidiaries now or hereafter known by any Creditor Party.


16.10	Immediate Recourse . The Guarantor waives any right it may have of first requiring any Creditor Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from the Guarantor under this Clause 16. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.


16.11	Acknowledgment of Benefits . The Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Finance Documents and that the waivers set forth in this Clause 16 are knowingly made in contemplation of such benefits.

16.12

Independent Obligations . The obligations of the Guarantor under or in respect of this guarantee are independent of the Guaranteed Obligations or any other obligations of the Borrower or any other Security Party under or in respect of the Finance Documents, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce this guarantee irrespective of whether any action is brought against the Borrower or any other Security Party or whether the Borrower or any other Security Party is joined in any such action or actions.


16.13	Deferral of Guarantor’s Rights . Until the Guaranteed Obligations have been irrevocably paid and performed in full and unless the Agent 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:


(f)	to be indemnified by another Security Party;


(g)	to claim any contribution from any other guarantor of any Security Party’s obligations under the Finance Documents; and/or


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

16.14

Limitation of Liability . The Guarantor and each of the Creditor Parties hereby confirms that it is its intention that the Guaranteed Obligations do not constitute a fraudulent transfer or conveyance for purposes of the United States Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar law. To effectuate the foregoing intention, the Guarantor and each of the Creditor Parties hereby irrevocably agrees that the Guaranteed Obligations guaranteed by the Guarantor shall be limited to such amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of the Guarantor that are relevant under such laws, result in the Guaranteed Obligations of the Guarantor in respect of such maximum amount not constituting a fraudulent transfer or conveyance.


16.15	Reliance of Creditor Parties . Each of the Creditor Parties has entered into this Agreement in reliance upon, among other things, this guarantee.


17.	PAYMENTS AND CALCULATIONS


17.1	Currency and Method of Payments . All payments to be made by the Lenders or by the Security Parties under a Finance Document shall be made to the Agent or to the Security Trustee, in the case of an amount payable to it:


(t)	by not later than 11:00 a.m. (Paris time) on the due date;


(u)	in same day Dollar funds settled through the New York Clearing House Interbank Payments System (or in such other Dollar funds and/or settled in such other manner as the Agent shall specify as being customary at the time for the settlement of international transactions of the type contemplated by this Agreement);


(v)	in the case of an amount payable by a Lender to the Agent or by another Security Party to the Agent or any Lender, to the account of the Agent as the Agent may from time to time notify to the Borrower, the other Security Parties and the other Creditor Parties; and


(w)	in the case of an amount payable to the Security Trustee, to such account as it may from time to time notify to the Borrower and the other Creditor Parties.


17.2	Payment on Non-Business Day . If any payment by any Security Party under a Finance Document would otherwise fall due on a day which is not a Business Day:


(o)	the due date shall be extended to the next succeeding Business Day; or


(p)	if the next succeeding Business Day falls in the next calendar month, the due date shall be brought forward to the immediately preceding Business Day;

and interest shall be payable during any extension under paragraph (a) at the rate payable on the original due date.


17.3	Basis for Calculation of Periodic Payments . All interest and any other payments under any Finance Document which are of an annual or periodic nature shall accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a 360 day year.


17.4	Distribution of Payments to Creditor Parties . Subject to Clauses 17.5, 17.6 and 17.7

(n)

any amount received by the Agent under a Finance Document for distribution or remittance to a Lender or the Security Trustee shall be made available by the Agent to that Lender or, as the case may be, the Security Trustee by payment, with funds having the same value as the funds received, to such account as the Lender or the Security Trustee may have notified to the Agent not less than five (5) Business Days previously; and


(o)	amounts to be applied in satisfying amounts of a particular category which are due to the Lenders generally shall be distributed by the Agent to each Lender pro rata to the amount in that category which is due to it.

17.5

Permitted Deductions by Agent . Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent may, before making an amount available to a Lender, deduct and withhold from that amount any sum which is then due and payable to the Agent from that Lender under any Finance Document or any sum which the Agent is then entitled under any Finance Document to require that Lender to pay on demand.


17.6	Agent Only Obliged to Pay When Monies Received . Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent shall not be obliged to make available to the Borrower or any Lender any sum which the Agent is expecting to receive for remittance or distribution to the Borrower or that Lender until the Agent has satisfied itself that it has received that sum.


17.7	Refund to Agent of Monies Not Received . If and to the extent that the Agent makes available a sum to the Borrower or a Lender, without first having received that sum, the Borrower or (as the case may be) the Lender concerned shall, on demand:


(j)	refund the sum in full to the Agent; and


(k)	pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent against any funding or other loss, liability or expense incurred by the Agent as a result of making the sums available before receiving it.


17.8	Agent May Assume Receipt . Clause 17.7 shall not affect any claim which the Agent has under the law of restitution, and applies irrespective of whether the Agent had any form of notice that it had not received the sum which it made available.


17.9	Creditor Party Accounts . Each Creditor Party shall maintain accounts showing the amounts owing to it by the Borrower and each other Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrower and any other Security Party.


17.10	Agent’s Memorandum Account . The Agent shall maintain a memorandum account showing the amounts advanced by the Lenders and all other sums owing to the Agent, the Security Trustee and each Lender from the Borrower and each other Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrower and any other Security Party.


17.11	Accounts Prima Facie Evidence . If any accounts maintained under Clauses 17.9 and 17.10 show an amount to be owing by the Borrower or any other Security Party to a Creditor Party, those accounts shall be prima facie evidence that that amount is owing to that Creditor Party.


18.	APPLICATION OF RECEIPTS


18.1	Normal Order of Application . Except as any Finance Document may otherwise provide, any sums which are received or recovered by any Creditor Party under or by virtue of any Finance Document shall be applied:


(q)	FIRST: in or towards satisfaction of any amounts then due and payable under the Finance Documents in the following order and proportions:

(i)

first , in or towards satisfaction pro rata of all amounts then due and payable to the Creditor Parties under the Finance Documents other than those amounts referred to at paragraphs (ii) and (iii) (including, but without limitation, all amounts payable by the Borrower under Clauses 21, 22 and 23 of this Agreement or by the Borrower or any other Security Party under any corresponding or similar provision in any other Finance Document);


(ii)	second , in or towards satisfaction pro rata of any and all amounts of interest or default interest payable to the Creditor Parties under the Finance Documents; and


(iii)	third , in or towards satisfaction pro rata of any and all amounts of principal payable to the Lenders under this Agreement;

(r)

SECOND: in retention of an amount equal to any amount not then due and payable under any Finance Document but which the Agent, by notice to the Borrower, the other Security Parties and the other Creditor Parties, states in its opinion will or may become due and payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction of them in accordance with the provisions of Clause 18.1(a); and


(s)	THIRD: any surplus shall be paid to the Borrower or to any other person appearing to be entitled to it.


18.2	Variation of Order of Application . The Agent may, with the authorization of all Lenders, by notice to the Borrower, the other Security Parties and the other Creditor Parties provide for a different manner of application from that set out in Clause 18.1 either as regards a specified sum or sums or as regards to sums in a specified category or categories.


18.3	Notice of Variation of Order of Application . The Agent may give notices under Clause 18.2 from time to time; and such a notice may be stated to apply not only to sums which may be received or recovered in the future, but also to any sum which has been received or recovered on or after the third Business Day before the date on which the notice is served.


18.4	Appropriation Rights Overridden . This Clause 18 and any notice which the Agent gives under Clause 18.2 shall override any right of appropriation possessed, and any appropriation made, by the Borrower or any other Security Party.


18.5	Payments in Excess of Contribution .

(d)

If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, counterclaim or otherwise) in excess of its Contribution, such Lender shall forthwith purchase from the other Lenders such participation in their respective Contributions as shall be necessary to share the excess payment ratably with each of them, provided that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each other Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (a) the amount of such Lender’s required repayment to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered.


(e)	The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Clause 18.5 may, to the fullest extent permitted by law, exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.


(f)	Notwithstanding paragraphs (a) and (b) of this Clause 18.5, any Lender which shall have commenced or joined (as a plaintiff) in an action or proceeding in any court to recover sums due to it under any Finance Document and pursuant to a judgment obtained therein or a settlement or compromise of that action or proceeding shall have received any amount,

such Lender shall not be required to share any proportion of that amount with a Lender which has the legal right to, but does not, join such action or proceeding or commence and diligently prosecute a separate action or proceeding to enforce its rights in the same or another court.


(g)	Each Lender exercising or contemplating exercising any rights giving rise to a receipt or receiving any payment of the type referred to in this Clause 18.5 or instituting legal proceedings to recover sums owing to it under this Agreement shall, as soon as reasonably practicable thereafter, give notice thereof to the Agent who shall give notice to the other Lenders.


19.	APPLICATION OF EARNINGS, SALES PROCEEDS, INSURANCE PROCEEDS AND EARNINGS ACCOUNT

19.1

General . From the Drawdown Date until all amounts payable hereunder have been paid in full, the Borrower and the Guarantor undertakes with each Creditor Party to comply or cause compliance with the following provisions of this Clause 19 except as the Agent, with the consent of the Required Lenders, may approve from time to time in writing, such approval not to be unreasonably withheld, conditioned or delayed.


19.2	Payment of Earnings . The Borrower and the Guarantor undertake with each Creditor Party to ensure that subject only to the provisions of any Charter Assignment or Earnings Assignment, all of the Earnings of the Collateral Vessel are paid to the Earnings Account.


19.3	Location of Accounts . The Borrower and the Guarantor shall promptly:


(a)	comply with any requirement of the Agent as to the location or re-location of the Earnings Account; and


(b)	execute the Earnings Account Pledge with respect to the Earnings Account and/or any other documents which the Agent specifies to create or maintain in favor of the Security Trustee a Security Interest over (and/or rights of set-off, consolidation or other rights in relation to) the Earnings Account.


19.4	Borrower’s Obligations Unaffected . The provisions of this Clause 19 do not affect:


(h)	the liability of the Borrower to make payments of principal and interest on the due dates; or


(i)	any other liability or obligation of the Borrower or any other Security Party under any Finance Document.


19.5	Debt for Expenses etc. The Agent shall be entitled (but not obliged) from time to time to debit the Earnings Account with prior notice to the Borrower in order to discharge any amount due and payable under Clause 21 or Clause 22 to a Creditor Party or payment of which any Creditor Party has become entitled to demand under Clause 21 or 22.


19.6	Use of Proceeds in Earnings Accounts . Unless and until an Event of Default occurs, the Earnings of the Collateral Vessel shall be freely available to the Guarantor and the Borrower.


20.	EVENTS OF DEFAULT


20.1	Events of Default . An Event of Default occurs if:

(p)

the Borrower or any other Security Party fails to pay when due any principal or interest payable under a Finance Document or under any document relating to a Finance Document, unless its failure to pay is caused by a technical or administrative error and payment is made within three (3) Business Days of its due date, or, in the case of all other amounts and sums payable on demand, within five (5) Business Days after the date when first demanded; or


(q)	any breach occurs of any of Clauses 8.9, 9.2, 10.20, 11.1(l), 11.1(s), 11.2(b), 11.2(p), 13 or 15.3; or

(r)

any breach by the Borrower or any other Security Party occurs of any provision of a Finance Document (other than a breach covered by paragraphs (a), (b), (e) or (m) of this Clause 20.1) which, in the opinion of the Agent acting on behalf of the Required Lenders, is capable of remedy, and such default continues unremedied 30 days after written notice from the Agent requesting action to remedy the same; or


(s)	(subject to any applicable grace period specified in the Finance Document) any breach by the Borrower or any other Security Party occurs of any provision of a Finance Document (other than a breach falling within paragraphs (a), (b), (c) or (e) of this Clause 20.1); or


(t)	any representation, warranty or statement made or repeated by, or by an officer or director of, the Borrower or any other Security Party in a Finance Document or in the Drawdown Notice or any other notice or document relating to a Finance Document is untrue or misleading in any material respect when it is made or repeated; or


(u)	an event of default, or an event or circumstance which, with the giving of any notice, the lapse of time or both would constitute an event of default, has occurred on the part of a Security Party under any contract or

agreement (other than the Finance Documents) with an aggregate amount outstanding in excess of $10,000,000 to which such Security Party is a party, and such event of default has not been cured within any applicable grace period;

(v)

any Financial Indebtedness of a Security Party in excess of $2,500,000 is not paid when due (or if there is an applicable grace period within such applicable grace period) or, only in the case of sums payable on demand, when first demanded, except for any such Financial Indebtedness which is being contested by such Security Party in good faith and through appropriate proceedings and in a manner that does not involve any risk of sale, forfeiture, loss, confiscation or seizure of the Collateral Vessel; or


(w)	the Borrower or the Guarantor shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or

(x)

any proceeding shall be instituted by or against the Borrower or the Guarantor seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property, and solely in the case of an involuntary proceeding:


(i)	such proceeding shall remain undismissed or unstayed for a period of 60 days; or


(ii)	any of the actions sought in such involuntary proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or

(y)

all or a material part of the undertakings, assets, rights or revenues of, or shares or other ownership interest in, any Security Party are seized, nationalized, expropriated or compulsorily acquired by or under authority of any government provided that, in the reasonable opinion of the Agent (acting with the authorization of the Required Lenders), such occurrence would adversely affect any Security Party’s ability to perform its obligations under the Finance Documents to which it is a party; or


(z)	a creditor attaches or takes possession of, or a distress, execution, sequestration or process (each an “ action ”) is levied or enforced upon or

sued out against, a material part of the undertakings, assets, rights or revenues (the “ assets ”) of any Security Party in relation to a claim by such creditor which, in the reasonable opinion of the Required Lenders, is likely to materially and adversely affect the ability of such Security Party to perform all or any of its material obligations under or otherwise to comply with the terms of any Finance Document to which it is a party and such Security Party does not (i) procure that such action is lifted, released or expunged within 30 Business Days of such action being (A) instituted and (B) notified to such Security Party; or (ii) provide additional security in such form and for such amounts as the Lenders may require; or


(aa)	the Borrower or the Guarantor ceases or suspends or threatens to cease or suspend the carrying on of its business, except in the case of a sale or a proposed sale of the Collateral Vessel by the Guarantor; or

(bb)

the Collateral Vessel becomes a Total Loss or suffers a Major Casualty and (i) in the case of a Total Loss, insurance proceeds are not collected or received by the Security Trustee from the underwriters or the Borrower has not repaid the Loan within 180 days of the Total Loss Date or (ii) in the case of a Major Casualty, the Collateral Vessel has not been otherwise repaired in a proper fashion; or


(cc)	it becomes unlawful or impossible:


(i)	for any Security Party to discharge any liability under a Finance Document or to comply with any other obligation which the Required Lenders consider material under a Finance Document;


(ii)	for the Agent, the Security Trustee or the Lenders to exercise or enforce any right under, or to enforce any Security Interest created by, a Finance Document; or

(dd)

any consent necessary to enable the Guarantor to own, operate or charter the Collateral Vessel or to enable the Borrower or any other Security Party to comply with any provision which the Required Lenders consider material of a Finance Document or a Charter is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent is not fulfilled; or


(ee)	any material provision of a Finance Document proves to have been or becomes invalid or unenforceable, or a Security Interest created by a Finance Document proves to have been or becomes invalid or unenforceable or such a Security Interest proves to have ranked after, or loses its priority to, another Security Interest or any other third party claim or interest;


(ff)	an event or series of events occurs which, in the reasonable opinion of the Required Lenders, may have a material adverse effect on the Borrower’s ability to meet its obligations under the Finance Documents to which it is a party; or


(gg)	an ERISA Funding Event or an ERISA Termination Event has occurred and is continuing which, in the reasonable opinion of the Required Lenders, could reasonably be expected to result in a material adverse effect on the Security Parties’ business, assets or financial conditions or which may affect the legality, validity, binding effect and/or enforceability of any of the Finance Documents.


20.2	Actions Following an Event of Default . On, or at any time after, the occurrence of an Event of Default (after the expiration of any applicable grace periods):


(c)	the Agent may, and if so instructed by the Required Lenders, the Agent shall:


(vi)	serve on the Borrower a notice stating that the Commitments and all other obligations of each Lender to the Borrower under this Agreement are cancelled; and/or

(vii)

serve on the Borrower a notice stating that the Loan, all accrued interest and all other amounts accrued or owing under this Agreement are immediately due and payable or are due and payable on demand, provided that in the case of an Event of Default under either of Clauses 20.1(h) or (i), the Loan and all accrued interest and other amounts accrued or owing hereunder shall be deemed immediately due and payable without notice or demand therefor; and/or


(viii)	take any other action which, as a result of the Event of Default or any notice served under paragraph (i) or (ii), the Agent and/or the Lenders are entitled to take under any Finance Document or any applicable law; and/or


(d)	the Security Trustee may, and if so instructed by the Agent, acting with the authorization of the Required Lenders, the Security Trustee shall, take any action which, as a result of the Event of Default or any notice served under paragraph (a) (i) or (ii), the Security Trustee, the Agent and/or the Lenders are entitled to take under any Finance Document or any applicable law.


20.3	Termination of Commitments . On the service of a notice under Clause 20.2(a)(i), the Commitments and all other obligations of each Lender to the Borrower under this Agreement shall be cancelled.

20.4

Acceleration of Loan . On the service of a notice under Clause 20.2(a)(ii), the Loan, all accrued interest and all other amounts accrued or owing from the Borrower or any other Security Party under this Agreement and every other Finance Document shall become immediately due and payable or, as the case may be, payable on demand, and the Security Trustee shall forthwith be entitled to enforce the Security Interests created by this Agreement and any other Finance Document in any manner available to it and in such sequence as the Security Trustee may, in its absolute discretion, determine.


20.5	Multiple Notices; Action Without Notice . The Agent may serve notices under Clauses 20.2(a)(i) and (ii) simultaneously or on different dates and it and/or the Security Trustee may take any action referred to in Clause 20.2 if no such notice is served or simultaneously with or at any time after the service of both or either of such notices.

20.6

Notification of Creditor Parties and Security Parties . The Agent shall send to each Lender, the Security Trustee and each Security Party a copy of the text of any notice which the Agent serves on the Borrower under Clause 20.2. Such notice shall become effective when it is served on the Borrower, and no failure or delay by the Agent to send a copy or the text of the notice to any other person shall invalidate the notice or provide the Borrower or any Security Party with any form of claim or defense.


20.7	Creditor Party Rights Unimpaired . Nothing in this Clause shall be taken to impair or restrict the exercise of any right given to individual Lenders under a Finance Document or the general law; and, in particular, this Clause is without prejudice to Clause 3.1.


20.8	Exclusion of Creditor Party Liability . No Creditor Party, and no receiver or manager appointed by the Security Trustee, shall have any liability to any Security Party:


(c)	for any loss caused by an exercise of rights under, or enforcement of a Security Interest created by, a Finance Document or by any failure or delay to exercise such a right or to enforce such a Security Interest; or


(d)	as mortgagee in possession or otherwise, for any income or principal amount which might have been produced by or realized from any asset comprised in such a Security Interest or for any reduction (however caused) in the value of such an asset,

provided that nothing in this Clause 20.8 shall exempt a Creditor Party or a receiver or manager from liability for losses shown to have been caused by the gross negligence or the willful misconduct of such Creditor Party’s own officers and employees or (as the case may be) such receiver’s or manager’s own partners or employees.


21.	FEES AND EXPENSES


21.1	Arrangement and Up-Front Fees . The Borrower shall pay to the Agent:


(e)	for the account of the Arranger an upfront arrangement fee in the amount of $218,750 and payable on the Effective Date;


(f)	for the account of the Agent an annual agency fee of $5,000 which shall be payable on the Drawdown Date and thereafter on each anniversary of the Drawdown Date; and

21.2

Costs of Negotiation, Preparation, etc. The Borrower shall pay to the Agent on its demand the amount of all expenses incurred by the Agent or the Security Trustee in connection with the negotiation, preparation, execution or registration of any Finance Document or any related document or with any transaction contemplated by a Finance Document or a related document, including, without limitation, the reasonable fees and disbursements of a Creditor Party’s legal counsel and any local counsel retained by them.


21.3	Costs of Variations, Amendments, Enforcement, etc . The Borrower shall pay to the Agent, on the Agent’s demand, for the account of the Creditor Party concerned, the amount of all expenses incurred by a Creditor Party in connection with:


(l)	any amendment or supplement to a Finance Document, or any proposal for such an amendment to be made;


(m)	any consent or waiver by the Lenders, the Required Lenders or the Creditor Party concerned under or in connection with a Finance Document, or any request for such a consent or waiver;


(n)	the valuation of any Collateral provided or offered under Clause 15 or any other matter relating to such Collateral; or


(o)	any step taken by the Security Trustee, a Lender with a view to the protection, exercise or enforcement of any right or Security Interest created by a Finance Document or for any similar purpose.

There shall be recoverable under paragraph (d) the full amount of all reasonable legal expenses, whether or not such as would be allowed under rules of court or any taxation or other procedure carried out under such rules.


21.4	Documentary Taxes . The Borrower shall promptly pay any tax payable on or by reference to any Finance Document, and shall, on the Agent’s demand, fully indemnify each Creditor Party against any claims, expenses, liabilities and losses resulting from any failure or delay by the Borrower to pay such a tax.

21.5

Certification of Amounts . A notice which is signed by an officer of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 21 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.


22.	INDEMNITIES

22.1

Indemnities Regarding Borrowing and Repayment of Loan . The Borrower shall fully indemnify the Agent and each Lender on the Agent’s demand and the Security Trustee on its demand in respect of all claims, expenses, liabilities and losses which are made or brought against or incurred by that Creditor Party, or which that Creditor Party reasonably and with due diligence estimates that it will incur, as a result of or in connection with:


(j)	the Advance not being borrowed on the date specified in the Drawdown Notice for any reason other than a default by the Lender claiming the indemnity;


(k)	the receipt or recovery of all or any part of the Loan or an overdue sum otherwise than on the last day of an Interest Period or other relevant period;


(l)	any failure (for whatever reason) by the Borrower to make payment of any amount due under a Finance Document on the due date or, if so payable, on demand (after giving credit for any default interest paid by the Borrower on the amount concerned under Clause 7); or


(m)	the occurrence of an Event of Default and/or the acceleration of repayment of the Loan under Clause 20.

It is understood that the indemnities provided in this Clause 22.1 shall not apply to any claim cost or expense which is a tax levied by a taxing authority on the indemnified party (which taxes are subject to indemnity solely as provided in Clause 23 below) but shall apply to any other costs associated with any tax which is not a Non-indemnified Tax.

22.2

Breakage Costs . Without limiting its generality, Clause 22.1 covers any quantifiable and customary actual claim, expense, liability or loss incurred by a Lender in liquidating or employing deposits from third parties acquired or arranged to fund or maintain all or any part of its Contribution and/or any overdue amount (or an aggregate amount which includes its Contribution or any overdue amount) for which reasonable evidence of calculations has been provided to the Borrower.


22.3	Miscellaneous Indemnities . The Borrower shall fully indemnify each Creditor Party severally on their respective demands in respect of all claims, expenses, liabilities and losses which may be made or brought against or incurred by a Creditor Party, in any country, as a result of or in connection with:


(i)	any action taken, or omitted or neglected to be taken, under or in connection with any Finance Document by the Agent, the Security Trustee or any other Creditor Party or by any receiver appointed under a Finance Document; or


(j)	any other Pertinent Matter,

other than claims, expenses, liabilities and losses which are shown to have been caused by the dishonesty or willful misconduct or gross negligence of the officers or employees of the Creditor Party concerned.

Without prejudice to its generality, this Clause 22.3 covers any claims, expenses, liabilities and losses which arise, or are asserted, under or in connection with any law relating to safety at sea, the ISM Code, the ISPS Code or any Environmental Law.


22.4	Currency Indemnity . If any sum due from the Borrower or any other Security Party to a Creditor Party under a Finance Document or under any order or judgment relating to a Finance Document has to be converted from the currency in which the Finance Document provided for the sum to be paid (the “ Contractual Currency ”) into another currency (the “ Payment Currency ”) for the purpose of:


(l)	making or lodging any claim or proof against the Borrower or any other Security Party, whether in its liquidation, any arrangement involving it or otherwise; or


(m)	obtaining an order or judgment from any court or other tribunal; or


(n)	enforcing any such order or judgment,

the Borrower shall indemnify the Creditor Party concerned against the loss arising when the amount of the payment actually received by that Creditor Party is converted at the available rate of exchange into the Contractual Currency.

In this Clause 22.4, the “ available rate of exchange ” means the rate at which the Creditor Party concerned is able at the opening of business (London time) on the Business Day after it receives the sum concerned to purchase the Contractual Currency with the Payment Currency.

This Clause 22.4 creates a separate liability of the Borrower which is distinct from its other liabilities under the Finance Documents and which shall not be merged in any judgment or order relating to those other liabilities.

22.5

Certification of Amounts . A notice which is signed by an officer of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 22 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.


22.6	Sums Deemed Due to a Lender . For the purposes of this Clause 22, a sum payable by the Borrower to the Agent or the Security Trustee for distribution to a Lender shall be treated as a sum due to that Lender.


22.7	Survival of Indemnities . All indemnities provided by the Borrower under this Clause 22 shall survive the termination of this Agreement.


23.	NO SET-OFF OR TAX DEDUCTION; TAX INDEMNITY; FATCA


23.1	No Deductions . All amounts due from a Security Party under a Finance Document shall be paid:


(p)	without any form of set-off, cross-claim or condition; and


(q)	free and clear of any tax deduction except a tax deduction which such Security Party is required by law to make.


23.2	Grossing-Up for Taxes . If a Security Party is required by law to make a tax deduction from any payment:


(k)	such Security Party shall notify the Agent as soon as it becomes aware of the requirement;


(l)	such Security Party shall pay the tax deducted to the appropriate taxation authority promptly, and in any event before any fine or penalty arises; and

(m)

except if the deduction is for collection or payment of a Non-indemnified Tax of a Creditor Party, the amount due in respect of the payment shall be increased by the amount necessary to ensure that each 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.


23.3	Evidence of Payment of Taxes . Within one (1) month after making any tax deduction, the relevant Security Party shall deliver to the Agent documentary

evidence satisfactory to the Agent that the tax had been paid to the appropriate taxation authority.

23.4

Indemnity for Taxes . The Borrower hereby indemnifies and agree to hold each Creditor Party harmless from and against all taxes other than Non-indemnified Taxes levied on such Creditor Party (including, without limitation, taxes imposed on any amounts payable under this Clause 23.4) paid or payable by such person, whether or not such taxes or other taxes were correctly or legally asserted. Such indemnification shall be paid within 10 days from the date on which such Creditor Party makes written demand therefore specifying in reasonable detail the nature and amount of such taxes or other taxes.


23.5	Exclusion from Indemnity and Gross-Up for Taxes . The Borrower shall not be required to indemnify any Creditor Party for a tax pursuant to Clause 23.4, or to pay any additional amounts to any Creditor Party pursuant to Clause 23.2, to the extent that the tax is collected by withholding on payments (a “ Withholding ”) and is levied by a Pertinent Jurisdiction of the payer and:

(e)

the person claiming such indemnity or additional amounts was not an original party to this agreement and under applicable law (after taking into account relevant treaties and assuming that such person has provided all forms it may legally and truthfully provided) on the date such person became a party to this Agreement a Withholding would have been required on such payment provided that this exclusion shall not apply to the extent such Withholding does not exceed the Withholding that would have been applicable if such payment had been made to the person from whom such person acquired its rights under the Agreement and this exclusion shall not apply to the extent that such Withholding exceeds the amount of Withholding that would have been required under the law in effect on the date such person became a party to this Agreement; or

(f)

the person claiming such indemnity or additional amounts is a Lender who has changed its Lending Office and under applicable law (after taking into account relevant treaties and assuming that such Lender has provided all forms it may legally and truthfully provide) on the date such Lender changed its Lending Office Withholding would have been required on such payment provided that this exclusion shall not apply to the extent such Withholding does not exceed the Withholding that would have been applicable to such payment if such Lender had not changed its Lending Office and this exclusion shall not apply to the extent that the Withholding exceeds the amount of Withholding that would have been required under the law in effect immediately after such Lender changed its Lending Office; or


(g)	in the case of a Lender, to the extent that Withholding would not have been required on such payment if such Lender has complied with its obligations to deliver certain tax form pursuant to Section 23.6 below.


23.6	Delivery of Tax Forms .

(i)

Upon the reasonable request of the Borrower, each Lender or transferee that is organized under the laws of a jurisdiction outside the United States (a “ Non-U.S. Lender ”) shall deliver to the Agent and the Borrower two properly completed and duly executed copies of either U.S. Internal Revenue Service Form W-8BEN-E, W-8BEN, W-8ECI or W-8IMY or, upon request of the Borrower or the Agent, any subsequent versions thereof or successors thereto, in each case claiming such reduced rate (which may be zero) of U.S. Federal withholding tax with respect to payments of interest hereunder as such Non-U.S. Lender may properly claim.

(j)

In addition, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code, such Non-U.S. Lender shall, when so requested by the Borrower provide to the Agent and the Borrower to in addition to the W8-BEN or W-8BEN-E required under Section 23.6(a) a certificate representing that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Code), and such Non-U.S. Lender agrees that it shall promptly notify the Agent in the event any representation in such certificate is no longer accurate.


(k)	Each Non-U.S. Lender shall deliver such forms within 20 days after receipt of a written request therefor from the Agent or Borrower.


(l)	Notwithstanding any other provision of this Clause 23.6, a Non-U.S. Lender shall not be required to deliver any form pursuant to this Clause 23.6 that such Non-U.S. Lender is not legally entitled to deliver.


23.7	FATCA Information


(d)	Subject to paragraph (c) below, each FATCA Relevant Party confirms to each other FATCA Relevant Party whether it is or is not a FATCA Exempt Party on the date hereof and thereafter within ten (10) Business Days of a reasonable request by another FATCA Relevant Party:


(i)	confirm to the other party whether it is a FATCA Exempt Party or is not a FATCA Exempt Party; and

(ii)

supply to the requesting party (with a copy to all other FATCA Relevant Parties) such other form or forms ( including IRS Form W-8 or Form W-9 or any successor or substitute form, as applicable) and any other documentation and other information relating to its status under FATCA (including its applicable “passthru percentage” or other information required under FATCA or other official guidance including intergovernmental agreements) as the requesting party reasonably requests for the purpose of determining whether any payment to such party may be subject to any FATCA Deduction.


(e)	If a FATCA Relevant Party confirms to any other FATCA Relevant Party that it is a FATCA Exempt Party or provides an IRS Form W-8 or W-9 to show that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that party shall so notify all other FATCA Relevant Parties reasonably promptly.

(f)

Nothing in this Clause 23.7 shall obligate any FATCA Relevant Party to do anything which would or, in its reasonable opinion, might constitute a breach of any law or regulation, any policy of that party, any fiduciary duty or any duty of confidentiality, or to disclose any confidential information (including, without limitation, its tax returns and calculations); provided, that nothing in this paragraph shall excuse any FATCA Relevant Party from providing a true, complete and correct IRS Form W-8 or W-9 (or any successor or substitute form where applicable). Any information provided on such IRS Form W-8 or W-9 (or any successor or substitute forms) shall not be treated as confidential information of such party for purposes of this paragraph.


(g)	If a FATCA Relevant Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with the provision of this Agreement or the provided information is insufficient under FATCA then:


(v)	such party shall be treated as if it were a FATCA Non-Exempt Party; and


(vi)	if that party failed to confirm its applicable passthru percentage then such party shall be treated for the purposes of the Finance Documents (and payments made thereunder) as if its applicable passthru percentage is 100%,

until (in each case) such time as the party in question provides sufficient confirmation, forms, documentation or other information to establish the relevant facts.


23.8	FATCA Withholding .


(d)	A FATCA Relevant Party making a payment to any FATCA Non-Exempt Party shall make such FATCA Deduction as it determines is required by law and shall render payment to the IRS within the time allowed and in the amount required by FATCA.


(e)	If a FATCA deduction is required to be made by any FATCA Relevant Party to a FATCA Non-Exempt Party, the amount of the payment due from such FATCA Relevant Party shall be reduced by the amount of the FATCA Deduction reasonably determined to be required by such FATCA Relevant Party.


(f)	Each FATCA Relevant Party shall promptly upon becoming aware that a FATCA Deduction is required with respect to any payment owed to it (or that there is any change in the rate or basis of a FATCA Deduction) notify each other FATCA Relevant Party accordingly.

(g)

Within thirty days of making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the party making such FATCA Deduction shall deliver to the Agent for delivery to the party on account of whom the FATCA Deduction was made evidence reasonably satisfactory to that party that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the IRS.


(h)	A FATCA Relevant Party who becomes aware that it must make a FATCA Deduction in respect of a payment to another FATCA Relevant Party (or that there is any change in the rate or basis of such FATCA Deduction) shall notify that party and the Agent.


(i)	The Agent shall promptly upon becoming aware that it must make a FATCA Deduction in respect of a payment to a Lender which relates to a payment by the Borrower (or that there is any change in the rate or the basis of such a FATCA Deduction) notify the Borrower and the relevant Lender.


(j)	If a FATCA Deduction is made as a result of any Creditor Party failing to be a FATCA Exempt Party, such party shall indemnify each other Creditor Party against any loss, cost or expense to it resulting from such FATCA Deduction.


23.9	FATCA Mitigation. Notwithstanding any other provision of this Agreement, if a FATCA Deduction is or will be required to be made by any party under Clause 23.8 in respect of a payment to any FATCA Non-Exempt Lender, the FATCA Non-Exempt Lender may either:


(a)	transfer its entire interest in the Loan to a U.S. branch or affiliate, or


(b)	nominate one or more Transferee Lenders who upon becoming a Lender would be a FATCA Exempt Party, by notice in writing to the Agent and the Borrower specifying the terms of the proposed transfer, and cause such Transferee Lender(s) to purchase all of the FATCA Non-Exempt Lender’s interest in the Loan.


23.10	Additional Borrowers and/or Guarantors . No additional borrowers and/or guarantors shall be added as parties to this Agreement without the consent of all Lenders.

23.11

Tax Credits . A Creditor Party which receives for its own account a repayment or credit in respect of tax on account of which the Borrower has made an increased payment under Clause 23.2 shall pay to the Borrower a sum equal to the proportion of the repayment or credit which that Creditor Party allocates to the amount due from the Borrower in respect of which the Borrower made the increased payment, provided that:


(a)	the Creditor Party shall not be obliged to allocate to this transaction any part of a tax repayment or credit which is referable to a class or number of transactions;


(b)	nothing in this Clause 23.9 shall oblige a Creditor Party to arrange its tax affairs in any particular manner, to claim any type of relief, credit, allowance or deduction instead of, or in priority to, another or to make any such claim within any particular time;


(c)	nothing in this Clause 23.9 shall oblige a Creditor Party to make a payment which would leave it in a worse position than it would have been in if the Borrower had not been required to make a tax deduction from a payment; and


(d)	any allocation or determination made by a Creditor Party under or in connection with this Clause 23.9 shall be conclusive and binding on the Borrower and the other Creditor Parties.


24.	ILLEGALITY, ETC


24.1	Illegality . This Clause 24 applies if a Lender (the “ Notifying Lender ”) notifies the Agent that it has become, or will with effect from a specified date, become:


(n)	unlawful or prohibited as a result of the introduction of a new law, an amendment to an existing law or a change in the manner in which an existing law is or will be interpreted or applied; or


(o)	contrary to, or inconsistent with, any regulation,

for the Notifying Lender to maintain or give effect to any of its obligations under this Agreement in the manner contemplated by this Agreement.


24.2	Notification of Illegality . The Agent shall promptly notify the Borrower, the other Security Parties, the Security Trustee and the other Lenders of the notice under Clause 24.1 which the Agent receives from the Notifying Lender.

24.3

Prepayment; Termination of Commitment . On the Agent notifying the Borrower under Clause 24.2, the Notifying Lender’s Commitment shall terminate; and thereupon or, if later, on the date specified in the Notifying Lender’s notice under Clause 24.1 as the date on which the notified event would become effective the Borrower shall prepay the Notifying Lender’s Contribution with accrued interest, but without penalty, premium or breakage cost.

24.4

Mitigation . If circumstances arise which would result in a notification under Clause 24.1 then, without in any way limiting the rights of the Notifying Lender under Clause 24.3, the Notifying Lender shall use reasonable commercial efforts to transfer its obligations, liabilities and rights under this Agreement and the Finance Documents to another office or financial institution not affected by the circumstances but the Notifying Lender shall not be under any obligation to take any such action if, in its opinion, to do would or might:


(h)	have an adverse effect on its business, operations or financial condition; or


(i)	involve it in any activity which is unlawful or prohibited or any activity that is contrary to, or inconsistent with, any regulation; or


(j)	involve it in any expense (unless indemnified to its satisfaction) or tax disadvantage.


25.	INCREASED COSTS


25.1	Increased Costs . This Clause 25 applies if a Lender (the “ Notifying Lender ”) notifies the Agent that the Notifying Lender considers that as a result of:


(o)	the introduction or alteration after the date of this Agreement of a law or an alteration after the date of this Agreement in the manner in which a law is interpreted or applied (disregarding any effect which relates to the application to payments under this Agreement of a Non-indemnified tax);


(p)	complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Notifying Lender allocates capital resources to its obligations under this Agreement) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Agreement, the

Notifying Lender (or a parent company of it) has incurred or will incur an “ increased cost ”; or


(q)	the implementation or application of or compliance with Basel III or any other law or regulation which implements Basel III (whether such implementation, application or compliance is by a government, regulator, Creditor Party or any of its affiliates).

Notwithstanding anything to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and all requests, rules, guidelines and directives promulgated thereunder, are deemed to have been introduced or adopted after the date of this Agreement, regardless of the date enacted or adopted.


25.2	Meaning of “ Increased Costs ” . In this Clause 25, “ increased costs ” means, in relation to a Notifying Lender:

(o)

an actual additional or increased cost incurred as a result of, or in connection with, the Notifying Lender having entered into, or being a party to, this Agreement or having taken an assignment of rights under this Agreement, of funding or maintaining its Commitment or Contribution or performing its obligations under this Agreement, or of having outstanding all or any part of its Contribution or other unpaid sums;


(p)	a reduction in the amount of any payment to the Notifying Lender under this Agreement or in the effective return which such a payment represents to the Notifying Lender or on its capital;


(q)	an actual additional or increased cost of funding all or maintaining all or any of the advances comprised in a class of advances formed by or including the Notifying Lender’s Contribution or (as the case may require) the proportion of that cost attributable to the Contribution; or


(r)	a liability to make a payment, or a return foregone, which is calculated by reference to any amounts received or receivable by the Notifying Lender under this Agreement;

(s)

but not an item attributable to a change in the rate of tax on the overall net income of the Notifying Lender (or a parent company of it) or an item covered by the indemnity for tax in Clause 22.1 or by Clause 23 or an item arising directly out of the implementation or application of or compliance with Basel III (whether such implementation, application or compliance is by a government, regulator, Creditor Party or any of its affiliates). For the purposes of this Clause 25.2 the Notifying Lender may in good faith allocate or spread costs and/or losses among its assets and liabilities (or

any class of its assets and liabilities) on such basis as it considers appropriate.

In each case, reasonable evidence of such Increased Cost shall be provided to the Borrower.


25.3	Notification to Borrower of Claim for Increased Costs . The Agent shall promptly notify the Borrower and the other Security Parties of the notice which the Agent received from the Notifying Lender under Clause 25.1.


25.4	Payment of Increased Costs . The Borrower shall pay to the Agent, on the Agent’s demand, for the account of the Notifying Lender the amounts which the Agent from time to time notifies the Borrower that the Notifying Lender has specified to be necessary to compensate the Notifying Lender for the increased cost.


25.5	Notice of Prepayment . If the Borrower is not willing to continue to compensate the Notifying Lender for the increased cost under Clause 25.4, the Borrower may give the Agent not less than 14 days’ notice of its intention to prepay the Notifying Lender’s Contribution at the end of an Interest Period.


25.6	Prepayment; Termination of Commitment . A notice under Clause 25.5 shall be irrevocable; the Agent shall promptly notify the Notifying Lender of the Borrower’s notice of intended prepayment; and:


(k)	on the date on which the Agent serves that notice, the Commitment of the Notifying Lender shall be cancelled; and


(l)	on the date specified in its notice of intended prepayment, the Borrower shall prepay (without premium or penalty) the Notifying Lender’s Contribution, together with accrued interest thereon at the applicable rate plus the Margin.


25.7	Application of Prepayment . Clause 8.8 shall apply in relation to the prepayment.


26.	SET-OFF


26.1	Application of Credit Balances . Upon the occurrence and during the continuance of an Event of Default, each Creditor Party may without prior notice:


(t)	apply any balance (whether or not then due) which at any time stands to the credit of any account in the name of the Borrower at any office in any country of that Creditor Party in or towards satisfaction of any sum then due from the Borrower to that Creditor Party under any of the Finance Documents; and


(u)	for that purpose:


(i)	break, or alter the maturity of, all or any part of a deposit of the Borrower;


(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 Creditor Party concerned considers appropriate.


26.2	Existing Rights Unaffected . No Creditor Party shall be obliged to exercise any of its rights under Clause 26.1; 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 Creditor Party is entitled (whether under the general law or any document).


26.3	Sums Deemed Due to a Lender . For the purposes of this Clause 26, a sum payable by the Borrower to the Agent or the Security Trustee for distribution to, or for the account of, a Lender shall be treated as a sum due to that Lender; and each Lender’s proportion of a sum so payable for distribution to, or for the account of, the Lenders shall be treated as a sum due to such Lender.


26.4	No Security Interest . This Clause 26 gives the Creditor Parties a contractual right of set-off only, and does not create any Security Interest over any credit balance of the Borrower.


27.	TRANSFERS AND CHANGES IN LENDING OFFICES


27.1	Transfer by Borrower or Guarantor . Neither the Borrower nor the Guarantor may, without the consent of the Agent, given on the instructions of all Lenders, transfer any of its rights, liabilities or obligations under any Finance Document.


27.2	Transfer by a Lender . Subject to Clause 27.4, a Lender (the “ Transferor Lender ”) may at any time, after consultation with the Borrower, cause:


(m)	its rights in respect of all or part of its Contribution in an amount of not less than $5,000,000; or


(n)	its obligations in respect of all or part of its Commitment in an amount of not less than $5,000,000; or


(o)	a combination of (a) and (b),

to be (in the case of its rights) transferred to, or (in the case of its obligations) assumed by, another bank or financial institution (subject, if the transfer or the assumption is to be made

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before the Drawdown Date, to the consent of the Borrower which shall not be unreasonably withheld or delayed and which shall be deemed to have been given fifteen Business Days after being sought unless expressly refused within that period and, for the avoidance of doubt no consent of the Borrower shall be required for any transfer occurring on or after the first Drawdown Date) (each, a “ Transferee Lender ”) which (i) is regularly engaged in or established for the purpose of making, purchasing or investing in asset finance loans or other related products and (ii) is not an Affiliate of the Borrower, by delivering to the Agent a completed certificate in the form set out in Schedule 5 with any modifications approved or required by the Agent (a “ Transfer Certificate ”) executed by the Transferor Lender and the Transferee Lender, provided, however, that the minimum transfer amounts set forth in Clause 27.2 shall not apply when a Transferor Lender transfers all of its right and obligations in respect of its Commitments and Contributions to a Transferee Lender.

Notwithstanding the foregoing, any rights and obligations of the Transferor Lender in its capacity as Agent or Security Trustee shall be determined in accordance with Clause 31.


27.3	Transfer Certificate, Delivery and Notification . As soon as reasonably practicable after a Transfer Certificate is delivered to the Agent, it shall (unless it has reason to believe that the Transfer Certificate may be defective):


(h)	sign the Transfer Certificate on behalf of itself, the Borrower, the other Security Parties, the Security Trustee and each of the other Lenders;


(i)	on behalf of the Transferee Lender, send to the Borrower and each other Security Party letters or faxes notifying them of the Transfer Certificate and attaching a copy of it;


(j)	send to the Transferee Lender copies of the letters or faxes sent under paragraph (b),

but the Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Transferor Lender and the Transferee Lender once it is satisfied it has complied with all necessary “ know your customer ” or other similar checks under all applicable laws and regulations to the transfer to that Transferee Lender.


27.4	Effective Date of Transfer Certificate . A Transfer Certificate becomes effective on the date, if any, specified in the Transfer Certificate as its effective date, provided that it is signed by the Agent under Clause 27.3 on or before that date.


27.5	No Transfer Without Transfer Certificate . Except as provided in Clause 27.6, no assignment or transfer of any right or obligation of a Lender under any Finance Document is binding on, or effective in relation to, the Borrower, any other Security Party, the Agent or the Security Trustee unless it is effected, evidenced or perfected by a Transfer Certificate.

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27.6

Lender Re-Organization; Waiver of Transfer Certificate . If a Lender enters into any merger, de-merger or other reorganization as a result of which all its rights or obligations vest in a successor, the Agent may, if it sees fit, by notice to the successor and the Borrower and the Security Trustee waive the need for the execution and delivery of a Transfer Certificate and, upon service of the Agent’s notice, the successor shall become a Lender with the same Commitment and Contribution as were held by the predecessor Lender.


27.7	Effect of Transfer Certificate . The effect of a Transfer Certificate is as follows:

(e)

to the extent specified in the Transfer Certificate, all rights and interests (present, future or contingent) which the Transferor Lender has under or by virtue of the Finance Documents are assigned to the Transferee Lender absolutely, free of any defects in the Transferor Lender’s title and of any rights or equities which the Borrower or any other Security Party had against the Transferor Lender;


(f)	the Transferor Lender’s Commitment is discharged to the extent specified in the Transfer Certificate;


(g)	the Transferee Lender becomes a Lender with the Contribution previously held by the Transferor Lender and a Commitment of an amount specified in the Transfer Certificate;

(h)

the Transferee Lender becomes bound by all the provisions of the Finance Documents which are applicable to the Lenders generally, including those about pro-rata sharing and the exclusion of liability on the part of, and the indemnification of, the Agent and the Security Trustee and, to the extent that the Transferee Lender becomes bound by those provisions (other than those relating to exclusion of liability), the Transferor Lender ceases to be bound by them;


(i)	any part of the Loan which the Transferee Lender advances after the Transfer Certificate’s effective date ranks in point of priority and security in the same way as it would have ranked had it been advanced by the transferor, assuming that any defects in the transferor’s title and any rights or equities of the Borrower or any other Security Party against the Transferor Lender had not existed;


(j)	the Transferee Lender becomes entitled to all the rights under the Finance Documents which are applicable to the Lenders generally, including but not limited to those relating to the Required Lenders and Clause 21, and to the extent that the Transferee Lender becomes entitled to such rights, the Transferor Lender ceases to be entitled to them; and

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(k)

in respect of any breach of a warranty, undertaking, condition or other provision of a Finance Document or any misrepresentation made in or in connection with a Finance Document, the Transferee Lender shall be entitled to recover damages by reference to the loss incurred by it as a result of the breach or misrepresentation, irrespective of whether the original Lender would have incurred a loss of that kind or amount.

The rights and equities of the Borrower or any other Security Party referred to above include, but are not limited to, any right of set off and any other kind of cross-claim.

27.8

Maintenance of Register of Lenders . During the Security Period the Agent shall maintain a register in which it shall record the name, Commitment, Contribution and administrative details (including the Lending Office) from time to time of each Lender holding a Transfer Certificate and the effective date (in accordance with Clause 27.4) of the Transfer Certificate; and the Agent shall make the register available for inspection by any Lender, the Security Trustee and the Borrower during normal banking hours, subject to receiving at least three (3) Business Days’ prior notice.

27.9

Reliance on Register of Lenders . The entries on that register shall, in the absence of manifest error, be conclusive in determining the identities of the Lenders and the amounts of their Commitments and Contributions and the effective dates of Transfer Certificates and may be relied upon by the Agent and the other parties to the Finance Documents for all purposes relating to the Finance Documents.


27.10	Authorization of Agent to Sign Transfer Certificates . The Borrower, the Security Trustee and each Lender irrevocably authorizes the Agent to sign Transfer Certificates on its behalf.


27.11	Registration Fee . In respect of any Transfer Certificate, the Agent shall be entitled to recover a registration fee of $5,000 from the Transferor Lender or (at the Agent’s option) the Transferee Lender.


27.12	Sub-Participation; Subrogation Assignment . A Lender may sub-participate all or any part of its rights and/or obligations under or in connection with the Finance Documents with notice to the Agent and the Security Trustee.


27.13	Disclosure of Information . A Lender may disclose to a potential Transferee Lender or sub-participant any information which the Lender has received in relation to the Borrower, any other Security Party or their affairs under or in connection with any Finance Document, unless the information is clearly of a confidential nature.

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27.14	Change of Lending Office. A Lender may change its Lending Office by giving notice to the Agent and the change shall become effective on the later of:


(a)	the date on which the Agent receives the notice; and


(b)	the date, if any, specified in the notice as the date on which the change will come into effect.


27.15	Notification. On receiving such a notice, the Agent shall notify the Borrower and the Security Trustee; and, until the Agent receives such a notice, it shall be entitled to assume that a Lender is acting through the Lending Office of which the Agent last had notice.

27.16

Security Over Lenders’ Rights . In addition to the other rights provided to Lenders under this Clause 27, each Lender may without consulting with or obtaining consent from the Borrower or any other Security Party, at any time charge, assign or otherwise create a Security Interest in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation:


(a)	any charge, assignment or other Security Interest to secure obligations to a federal reserve or central bank; and


(b)	in the case of any Lender which is a fund, any charge, assignment or other Security Interest granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities;

except that no such charge, assignment or Security Interest shall:


(iii)	release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Security Interest for the Lender as a party to any of the Finance Documents; or


(iv)	require any payments to be made by the Borrower or any other Security Party or grant to any person any more extensive rights than those required to be made or granted to the relevant Lender under the Finance Documents.


27.17	Replacement of Reference Bank . If any Reference Bank ceases to be a Lender or is unable on a continuing basis to supply quotations for the purposes of Clause 5 then, unless the Borrower, the Agent and the Required Lenders otherwise agree, the Agent, acting on the instructions of the Required Lenders, and after consulting the Borrower, shall appoint another bank (whether or not a Lender) to be a

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replacement Reference Bank; and, when that appointment comes into effect, the first‑mentioned Reference Bank’s appointment shall cease to be effective.


28.	VARIATIONS AND WAIVERS

28.1

Variations, Waivers, Etc. by Required Lenders . Subject to Clause 28.2, a document shall be effective to vary, waive, suspend or limit any provision of a Finance Document, or any Creditor Party’s rights or remedies under such a provision or the general law, only if the document is signed, or specifically agreed to by fax, by the Borrower, by the Agent on behalf of the Required Lenders, by the Agent and the Security Trustee in their own rights, and, if the document relates to a Finance Document to which a Security Party is party, by that Security Party.


28.2	Variations, Waivers, Etc. Requiring Agreement of All Lenders . As regards the following, Clause 28.1 applies as if the words “ by the Agent on behalf of the Required Lenders ” were replaced by the words “ by the Agent on behalf of every Lender ”:


(k)	a reduction in the Margin;


(l)	a postponement to the date for, or a reduction in the amount of, any payment of principal, interest, fees or other sum payable under this Agreement or the Note;


(m)	an extension of the Availability Period;


(n)	an increase in any Lender’s Commitment;


(o)	a change to the definition of “Required Lenders”;


(p)	a change to Clauses 3, 11.1(o), 11.1 (s), 11.1(x), 11.2(b), 11.2(e), 11.2(o), 11.2(q), 14.2(a), 14.2(c), 14.3, 14.5, 14.6, 15.2 or this Clause 28;


(q)	any release of, or material variation to, a Security Interest, guarantee, indemnity or subordination arrangement set out in a Finance Document;


(r)	any other change or matter which this Agreement or another Finance Document expressly provides that each Lender’s consent is required;


(s)	the substitution of any Security Party; and


(t)	any amendment or waiver if the Agent or a Lender which is a FATCA Non-Exempt Party reasonably believes that it may constitute a “material modification” within the meaning of FATCA that may result (directly or indirectly) in any party to any Finance Document being required to make a FATCA Deduction.

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28.3	Variations, Waivers, Etc. Relating to the Servicing Banks . An amendment or waiver that relates to the rights or obligations of the Agent or the Security Trustee under Clause 31 may not be effected without the consent of the Agent or the Security Trustee.

28.4

Exclusion of Other or Implied Variations . Except for a document which satisfies the requirements of Clauses 28.1, 28.2 or 28.3, no document, and no act, course of conduct, failure or neglect to act, delay or acquiescence on the part of the Creditor Parties or any of them (or any person acting on behalf of any of them) shall result in the Creditor Parties or any of them (or any person acting on behalf of any of them) being taken to have varied, waived, suspended or limited, or being precluded (permanently or temporarily) from enforcing, relying on or exercising:


(c)	a provision of this Agreement or another Finance Document; or


(d)	an Event of Default; or


(e)	a breach by the Borrower or another Security Party of an obligation under a Finance Document or the general law; or


(f)	any right or remedy conferred by any Finance Document or by the general law,

and there shall not be implied into any Finance Document any term or condition requiring any such provision to be enforced, or such right or remedy to be exercised, within a certain or reasonable time.


29.	NOTICES

29.1

General . Unless otherwise specifically provided, any notice under or in connection with any Finance Document shall be given by letter, email or fax and references in the Finance Documents to written notices, notices in writing and notices signed by particular persons shall be construed accordingly, provided, however, that if notice is provided by email, such notice shall also be given by confirming letter or fax to constitute effective notice hereunder unless receipt of such email notice is confirmed by return email and, provided, further, that notwithstanding anything in this Agreement to the contrary, all notices must be in writing.


29.2	Addresses for Communications . A notice by letter or fax shall be sent:

(a) to the Borrower


or a Guarantor:	9, Boulevard Charles III Monaco 98000 Attention: General Counsel

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Facsimile:+377 97 77 8346
Email: legal@scorpiogroup.net


with a copy to:	150 E. 58th Street New York, New York 10155 Attention: Chief Financial Officer Facsimile: +212-542-1618 Email: blee@scorpiogroup.net


(b) to a Lender:	At the address below its name in Schedule 1 or (as the case may require) in the relevant Transfer Certificate.


(c) to the Agent:	Crédit Agricole Corporate And Investment Bank Middle Office Shipping Attention: Olivier CARVALHO AZEVEDO 9 quai du President Paul Doumer 92920 Paris La Defense Cedex France Facsimile: +33 141 891 934 Email: Olivier.carvalhoazevedo@ca-cib.com


with a copy to:	Crédit Agricole Corporate And Investment Bank Ship Finance Department Broadwalk House, 5 Appold Street London EC2A 2DA United Kingdom


to the Security Trustee:	Crédit Agricole Corporate And Investment Bank Middle Office Shipping Attention: Olivier CARVALHO AZEVEDO 9 quai du President Paul Doumer 92920 Paris La Defense Cedex France Facsimile: +33 141 891 934 Email: Olivier.carvalhoazevedo@ca-cib.com


with a copy to:	Crédit Agricole Corporate And Investment Bank Ship Finance Department Broadwalk House, 5 Appold Street

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London EC2A 2DA
United Kingdom

or to such other address as the relevant party may notify the Agent or, if the relevant party is the Agent or the Security Trustee, the Borrower, the Lenders and the Security Parties.


29.3	Effective Date of Notices . Subject to Clauses 29.4 and 29.5:


(g)	a notice which is delivered personally or posted shall be deemed to be served, and shall take effect, at the time when it is delivered;


(h)	a notice which is sent by fax shall be deemed to be served, and shall take effect, two (2) hours after its transmission is completed; and.


(i)	a notice which is sent by electronic mail shall be deemed to be served and shall take effect at the time that (i) the confirming letter or fax is deemed to be served as provided in (a) or (b) above; or (ii) if receipt is confirmed by return email, the time of such return email.


29.4	Service Outside Business Hours . However, if under Clause 29.3 a notice would be deemed to be served:


(d)	on a day which is not a business day in the place of receipt; or


(e)	on such a business day, but after 5:00 p.m. local time,

the notice shall (subject to Clause 29.5) be deemed to be served, and shall take effect, at 9:00 a.m. on the next day which is such a business day, save that a notice which is given by a Creditor Party following the occurrence of an Event of Default shall be deemed to be served and shall take effect on the same day.


29.5	Illegible Notices . Clauses 29.3 and 29.4 do not apply if the recipient of a notice notifies the sender within one (1) hour after the time at which the notice would otherwise be deemed to be served that the notice has been received in a form which is illegible in a material respect.


29.6	Valid Notices . A notice (other than a notice sent solely by electronic mail without a confirming letter, fax or return email) under or in connection with a Finance Document shall not be invalid by reason that its contents or the manner of serving it do not comply with the requirements of this Agreement or, where appropriate, any other Finance Document under which it is served if:


(e)	the failure to serve it in accordance with the requirements of this Agreement or other Finance Document, as the case may be, has not caused any party to suffer any significant loss or prejudice; or

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(f)	in the case of incorrect and/or incomplete contents, it should have been reasonably clear to the party on which the notice was served what the correct or missing particulars should have been.


29.7	English Language . Any notice under or in connection with a Finance Document shall be in English.


29.8	Meaning of “N otice ” . In this Clause 29, “ notice ” includes any demand, consent, authorization, approval, instruction, waiver or other communication.


30.	SUPPLEMENTAL


30.1	Rights Cumulative, Non-Exclusive . The rights and remedies which the Finance Documents give to each Creditor Party are:


(m)	cumulative;


(n)	may be exercised as often as appears expedient; and


(o)	shall not, unless a Finance Document explicitly and specifically states so, be taken to exclude or limit any right or remedy conferred by any law.


30.2	Severability of Provisions . If any provision of a Finance Document is or subsequently becomes void, unenforceable or illegal, that shall not affect the validity, enforceability or legality of the other provisions of that Finance Document or of the provisions of any other Finance Document.


30.3	Counterparts . A Finance Document may be executed in any number of counterparts.


30.4	Binding Effect . This Agreement shall become effective on the Effective Date and thereafter shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.


31.	THE SERVICING BANKS AND PARALLEL DEBT


31.1	Appointment and Granting .


(j)	The Agent . Each of the Lenders appoints and authorizes (with a right of revocation) the Agent to act as its agent hereunder and under any of the other Finance Documents with such powers as are specifically delegated to the Agent by the terms of this Agreement and of any of the other Finance Documents, together with such other powers as are reasonably incidental thereto.


(k)	The Security Trustee .

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(iii)

Authorization of Security Trustee . Each of the other Creditor Parties appoints and authorizes (with a right of revocation) the Security Trustee to act as security trustee hereunder and under the other Finance Documents (other than the Notes) with such powers as are specifically delegated to the Security Trustee by the terms of this Agreement and such other Finance Documents, together with such other powers as are reasonably incidental thereto.

(iv)

Granting Clause . To secure the payment of all sums of money from time to time owing to the Creditor Parties under the Finance Documents plus accrued interest thereon and the performance of the covenants of the Borrower and any other Security Party herein and therein contained, and in consideration of the premises and of the covenants herein contained and of the extensions of credit by the Lenders, the Security Trustee does hereby declare that it will hold as such trustee in trust for the benefit of the other Creditor Parties, from and after the execution and delivery thereof, all of its right, title and interest as mortgagee in, to and under the Mortgages and its right, title and interest as assignee and secured party under the other Finance Documents (the right, title and interest of the Security Trustee in and to the property, rights and privileges described above, from and after the execution and delivery thereof, and all property hereafter specifically subjected to the Security Interest of the indenture created hereby and by the Finance Documents by any amendment hereto or thereto are herein collectively called the “ Estate ”); TO HAVE AND TO HOLD the Estate unto the Security Trustee and its successors and assigns forever, BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of the other Creditor Parties and their respective successors and assigns without any priority of any one over any other, UPON THE CONDITION that, unless and until an Event of Default under this Agreement shall have occurred and be continuing, the Guarantor shall be permitted, to the exclusion of the Security Trustee, to possess and use the Collateral Vessel. IT IS HEREBY COVENANTED, DECLARED AND AGREED that all property subject or to become subject hereto is to be held, subject to the further covenants, conditions, uses and trusts hereinafter set forth, and each Security Party, for itself and its respective successors and assigns, hereby covenants and agrees to and with the Security Trustee and its successors in said trust, for the equal and proportionate benefit and security of the other Creditor Parties as hereinafter set forth.


(v)	Acceptance of Trusts . The Security Trustee hereby accepts the trusts imposed upon it as Security Trustee by this Agreement, and

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the Security Trustee covenants and agrees to perform the same as herein expressed and agrees to receive and disburse all monies constituting part of the Estate in accordance with the terms hereof.


31.2	Scope of Duties . Neither the Agent nor the Security Trustee (which terms as used in this sentence and in Clause 31.5 hereof shall include reference to their respective affiliates and their own respective and their respective affiliates’ officers, directors, employees, agents and attorneys-in-fact):


(f)	shall have any duties or responsibilities except those expressly set forth in this Agreement and in any of the Finance Documents, and shall not by reason of this Agreement or any of the Finance Documents be (except, with respect to the Security Trustee, as specifically stated to the contrary in this Agreement) a trustee for a Lender;

(g)

shall be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or in any of the Finance Documents, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any of the other Finance Documents, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any of the other Finance Documents or any other document referred to or provided for herein or therein or for any failure by a Security Party or any other person to perform any of its obligations hereunder or thereunder or for the location, condition or value of any property covered by any Security Interest under any of the Finance Documents or for the creation, perfection or priority of any such Security Interest;


(h)	shall be required to initiate or conduct any litigation or collection proceedings hereunder or under any of the Finance Documents unless expressly instructed to do so in writing by the Required Lenders; or

(i)

shall be responsible for any action taken or omitted to be taken by it hereunder or under any of the Finance Documents or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct. Each of the Security Trustee and the Agent may employ agents and attorneys-in-fact and neither the Security Trustee nor the Agent shall be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. Each of the Security Trustee and the Agent may deem and treat the payee of a Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Agent together with the written consent of the Borrower to such assignment or transfer, provided, however, that if an Event of Default has occurred and is

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continuing, no consent of the Borrower shall be required for such assignment or transfer.

31.3

Reliance . Each of the Security Trustee and the Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telefacsimile, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper person or persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Security Trustee or the Agent, as the case may be. As to any matters not expressly provided for by this Agreement or any of the other Finance Documents, each of the Security Trustee and the Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders.

31.4

Knowledge . Neither the Security Trustee nor the Agent shall be deemed to have knowledge or notice of the occurrence of an event or circumstances which, with the giving of notice and/or lapse of time would constitute an Event of Default or Event of Default (other than, in the case of the Agent, the non-payment of principal of or interest on the Loan or actual knowledge thereof) unless each of the Security Trustee and the Agent has received notice from a Lender or the Borrower specifying such event or circumstances which, with the giving of notice and/or lapse of time would constitute an Event of Default or Event of Default and stating that such notice is a “ Notice of Default ”. If the Agent receives such a notice of the occurrence of such event or circumstances which, with the giving of notice and/or lapse of time would constitute an Event of Default or Event of Default, the Agent shall give prompt notice thereof to the Security Trustee and the Lenders (and shall give each Lender prompt notice of each such non-payment). Subject to Clause 31.8 hereof, the Security Trustee and the Agent shall take such action with respect to such event or circumstances which, with the giving of notice and/or lapse of time would constitute an Event of Default or Event of Default or other event as shall be directed by the Required Lenders, except that, unless and until the Security Trustee and the Agent shall have received such directions, each of the Security Trustee and the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such event or circumstances which, with the giving of notice and/or lapse of time would constitute an Event of Default or Event of Default or other event as it shall deem advisable in the best interest of the Lenders.


31.5	Security Trustee and Agent as Lenders . Each of the Security Trustee and the Agent (and any successor acting as Security Trustee or Agent, as the case may be) in its individual capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Security Trustee or the Agent, as the case may be, and the

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term “ Lender ” or “Lenders” shall, unless the context otherwise indicates, include each of the Security Trustee and the Agent in their respective individual capacities. Each of the Security Trustee and the Agent (and any successor acting as Security Trustee and Agent, as the case may be) and their respective affiliates may (without having to account therefor to a Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower and any of its subsidiaries or affiliates as if it were not acting as the Security Trustee or the Agent, as the case may be, and each of the Security Trustee and the Agent and their respective affiliates may accept fees and other consideration from the Borrower for services in connection with this Agreement or otherwise without having to account for the same to the Lenders.

31.6

Indemnification of Security Trustee and Agent . The Lenders severally agree, ratably in accordance with the aggregate principal amount of each Lender’s Contribution in the Loan, to indemnify each of the Agent and the Security Trustee (to the extent not reimbursed under other provisions of this Agreement, but without limiting the obligations of the Borrower under said other provisions) for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Security Trustee or the Agent in any way relating to or arising out of this Agreement or any of the other Finance Documents or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby (including, without limitation, the costs and expenses which the Borrower are to pay hereunder, but excluding, unless an Event of Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of their respective agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, except that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified.

31.7

Reliance on Security Trustee or Agent . Each Lender agrees that it has, independently and without reliance on the Security Trustee, the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Security Trustee, the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the Finance Documents. None of the Security Trustee or the Agent shall be required to keep itself informed as to the performance or observance by the Borrower of this Agreement or any of the Finance Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Borrower. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Security

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Trustee or the Agent hereunder, neither the Security Trustee nor the Agent shall have any duty or responsibility to provide a Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower or any of its parents, subsidiaries or affiliates which may come into the possession of the Security Trustee, the Agent or any of their respective affiliates.

31.8

Actions by Security Trustee and Agent . Except for action expressly required of the Security Trustee or the Agent hereunder and under the other Finance Documents, each of the Security Trustee and the Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from the Lenders of their indemnification obligations under Clause 31.6 against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.

31.9

Resignation and Removal . Subject to the appointment and acceptance of a successor Security Trustee or Agent (as the case may be) as provided below, each of the Security Trustee and the Agent may resign at any time by giving notice thereof to the Lenders and the Borrower, and the Security Trustee or the Agent may be removed at any time with or without cause by the Required Lenders by giving notice thereof to the Agent, the Security Trustee, the Lenders and the Borrower. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Security Trustee or Agent, as the case may be which shall be either one of the Lenders or any other third party acceptable to the Required Lenders and the Borrower (the Borrower’s consent not to be unreasonably withheld or delayed). If no successor Security Trustee or Agent, as the case may be, shall have been so appointed by the Lenders or, if appointed, shall not have accepted such appointment within 30 days after the retiring Security Trustee’s or Agent’s, as the case may be, giving of notice of resignation or the Required Lenders’ removal of the retiring Security Trustee or Agent, as the case may be, then the retiring Security Trustee or Agent, as the case may be, may, on behalf of the Lenders, appoint a successor Security Trustee or Agent. Upon the acceptance of any appointment as Security Trustee or Agent hereunder by a successor Security Trustee or Agent, such successor Security Trustee or Agent, as the case may be, shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Security Trustee or Agent, as the case may be, and the retiring Security Trustee or Agent shall be discharged from its duties and obligations hereunder. After any retiring Security Trustee or Agent’s resignation or removal hereunder as Security Trustee or Agent, as the case may be, the provisions of this Clause 31 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Security Trustee or the Agent, as the case may be.


31.10	Release of Collateral . Without the prior written consent of all Lenders neither the Security Trustee nor the Agent will consent to any modification, supplement

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or waiver under any of the Finance Documents nor without the prior written consent of all of the Lenders release any Collateral or otherwise terminate any Security Interest under the Finance Documents, except that no such consent is required, and each of the Security Trustee and the Agent is authorized, to release any Security Interest covering property if the Secured Liabilities have been paid and performed in full or which is the subject of a disposition of property permitted hereunder or to which the Lenders have consented.


31.11	Parallel Debt .

(a)

The Borrower hereby irrevocably and unconditionally undertakes, as far as necessary in advance, to pay to the Security Trustee, as creditor in its own right and not as representative of any of the other Creditor Parties, an amount equal to the aggregate of all its Principal Obligations to all the Creditor Parties from time to time due in accordance with the terms and conditions of such Principal Obligations (such payment undertaking and the obligations and liabilities which are the result thereof, its “ Parallel Debt ”).

(b)

Each of the parties hereto hereby acknowledges that (i) the Parallel Debt of the Borrower constitutes undertakings, obligations and liabilities of the Borrower to the Security Trustee which are separate and independent from, and without prejudice to, the Principal Obligations which the Borrower has to any other Creditor Party and (ii) that the Parallel Debt represents the Security Trustee’s own claim to receive payment of such Parallel Debt by the Borrower, provided that the total amount which may become due under the Parallel Debt of the Borrower under this Clause 31.11 shall never exceed the total amount which may become due under all the Principal Obligations of the Borrower to all the Creditor Parties.


(i)	The total amount due by the Borrower as the Parallel Debt under Clause 31.11(a) shall be decreased to the extent that the Borrower shall have paid any amounts to the Creditor Parties or any of them to reduce the Borrower’s outstanding Principal Obligations or any Creditor Party otherwise receive any amount of such Principal Obligations (other than by virtue of Clause 31.11(b)(ii); and


(ii)	To the extent that the Borrower shall have paid any amounts to the Security Trustee under the Parallel Debt or the Security Trustee shall have otherwise received monies in payment of such Parallel Debt, the total amount due under the Principal Obligations shall be decreased by the same amount.


(c)	In the event the Security Trustee should resign or be removed by the Required Lenders, the Security Trustee shall assign the Parallel Debt owed to it to its successor security trustee together with all of its other rights and

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obligations under this Clause 31.11 and shall take all such further actions as the Agent in its sole discretion may deem necessary or desirable in order to assign and transfer to the successor security trustee the Parallel Debt and the other rights and obligations under this Clause 31.11.


31.12	Instructions to Agent/Security Trustee . Unless a Finance Document expressly provides that the Agent and/or the Security Trustee shall only act or refrain from acting on the instructions of all Lenders, the Agent and/or the Security Trustee shall be entitled to act on the instructions of the Required Lenders.


32.	LAW AND JURISDICTION


32.1	Governing Law . THIS AGREEMENT AND THE OTHER FINANCE DOCUMENTS (EXCEPT AS OTHERWISE PROVIDED IN A FINANCE DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAW PRINCIPLES.


32.2	Consent to Jurisdiction .

(l)

Each of the Security Parties hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York County, and any appellate court thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Finance Documents to which such Security Party is a party or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State Court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.


(m)	Nothing in this Clause 32.2 shall affect the right of a Creditor Party to bring any action or proceeding against a Security Party or its property in the courts of any other jurisdictions where such action or proceeding may be heard.

(n)

Each of the Security Parties hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State or Federal court and the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court

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and any immunity from jurisdiction of any court or from any legal process with respect to itself or its property.

(o)

Each of the Security Parties hereby agrees to appoint Seward & Kissel LLP, with offices currently located at One Battery Park Plaza, New York, New York 10004, Attention: Michael Timpone, as its designated agent for service of process for any action or proceeding arising out of or relating to this Agreement or any other Finance Document. Each of the Security Parties also irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to its address specified in Clause 29.2. Each of the Security Parties also agrees that service of process may be made on it by any other method of service provided for under the applicable laws in effect in the State of New York.


32.3	Creditor Party Rights Unaffected. Nothing in this Clause 32 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.


32.4	Meaning of “ Proceedings ” . In this Clause 32, “ proceedings ” means proceedings of any kind, including an application for a provisional or protective measure.

32.5

Waiver of Sovereign Immunity . To the extent that a Security Party may be entitled, in any jurisdiction in which judicial proceedings may at any time be commenced with respect to any of the Finance Documents, to claim for itself or its revenues, assets or properties any immunity from suit, the jurisdiction of any court, attachment prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment or any other legal process, and to the extent that in any such jurisdiction there may be attributed such immunity (whether or not claimed), each such Security Party irrevocably agrees not to claim and hereby irrevocably waives such immunity to the fullest extent permitted by the laws of such jurisdiction and hereby agrees that the foregoing waiver shall be enforced to the fullest extent permitted under the Foreign Sovereign Immunities Act of 1976 of the United States of America, as amended, and is intended to be irrevocable for the purpose of such act.


32.6	Waiver of Damages . Each of the Borrower and the Guarantor waives, to the maximum extent not prohibited by law, any right it may have to claim or recover any special, indirect, exemplary, punitive or consequential damages in any action or proceeding arising out of or related to this Agreement or any of the other Finance Documents to which such Security Party is a party.


33.	WAIVER OF JURY TRIAL

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33.1	WAIVER . EACH OF THE SECURITY PARTIES AND THE CREDITOR PARTIES MUTUALLY AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.


34.	PATRIOT ACT NOTICE

34.1

PATRIOT Act Notice . Each of the Agent and the Lenders hereby notifies the Borrower that pursuant to the requirements of the PATRIOT Act and the policies and practices of the Agent and each Lender, the Agent and each of the Lenders is required to obtain, verify and record certain information and documentation that identifies each Security Party, which information includes the name and address of each Security Party and such other information that will allow the Agent and each of the Lenders to identify each Security Party in accordance with the PATRIOT Act.

[SIGNATURE PAGES FOLLOW ON NEXT PAGES]

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EXECUTION PAGE

WHEREFORE, the parties hereto have caused this Credit Agreement to be executed as of the date first above written.



SCORPIO BULKERS INC., as Borrower By:__ /s/ Hugh Baker_ ______________________ Name: Hugh Baker Title: Chief Financial Officer	CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as Lender, Administrative Agent, Mandated Lead Arranger, Security Trustee and Account Bank By:___ _/s/ Geoffrey D. Ferrer__ ______ Name: Geoffrey D. Ferrer Title: Attorney-in-Fact
SBI CRONOS SHIPPING COMPANY LIMITED, as Guarantor By:__ _/s/ Hugh Baker ____________________ Name: Hugh Baker Title: Secretary

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Schedule 1

THE LENDERS AND THEIR COMMITMENTS



Name	Lending Office and Contact Details	Commitment ($)

Crédit Agricole Corporate And Investment Bank	Lending Office 9 quai du President Paul Doumer 92920 Paris La Defense Cedex France	$12,500,000
	Address for Notices Middle Office Shipping Attention: Olivier CARVALHO AZEVEDO 9 quai du President Paul Doumer 92920 Paris La Defense Cedex France Facsimile: +33 141 891 934

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Schedule 2

GUARANTOR AND COLLATERAL VESSEL



Collateral Vessel	Collateral Vessel Owner/Guarantor	Type	DWT	IMO No.
SBI CRONOS	SBI Cronos Shipping Company Limited	Ultramax Bulk Carrier	61,000	9714719

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Schedule 3

IRREVOCABLE

DRAWDOWN NOTICE

Dated: ____________, 20__

Crédit Agricole Corporate and Investment Bank,
as Agent
9 quai du President Paul Doumer
92920 Paris La Defense Cedex
France

Ladies and Gentlemen:

The undersigned, Scorpio Bulkers Inc. (the “ Borrower ”), (i) refers to the senior secured term credit agreement, dated as of December 21, 2015 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”; the terms defined therein being used herein as therein defined unless otherwise defined herein), among the Borrower, as borrower, SBI Cronos Shipping Company Limited, as guarantor, the banks and financial institutions listed in Schedule 1 thereto as lenders, Crédit Agricole Corporate and Investment Bank, as mandated lead arranger, and Crédit Agricole Corporate and Investment Bank, as administrative agent, security trustee and account bank, and (ii) hereby gives you notice, irrevocably, pursuant to Clause 4.1 of the Credit Agreement that the undersigned hereby requests an Advance under the Credit Agreement, and in connection therewith sets forth below the information relating to such Advance (the “ Proposed Advance ”):


(iii)	The Business Day of the Proposed Advance is .


(iv)	The initial Interest Period(s) for the Proposed Advance is __________ months.


(v)	The Guarantor is a party to the Credit Agreement;


(vi)	Remittance Instructions: __________________________________.

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Advance:

(A) The representations and warranties of each of the Security Parties contained in each of the Finance Documents in effect or intended to be in effect immediately following the Proposed Advance are correct in all material respects on and as of the date of the Proposed Advance, before and after giving effect to the Proposed

122

Advance and to the application of the proceeds therefrom, as though made on and as of such date, other than any such representations or warranties that, by their terms, refer to a specific date other than the date of the Proposed Advance.

(B) No event has occurred and is continuing, or would result from such Proposed Advance or from the application of the proceeds therefrom, that is an event or circumstances which, with the giving of notice and/or lapse of time would constitute an Event of Default or is an Event of Default.

Delivery of an executed counterpart of this Notice of Drawdown by facsimile shall be effective as delivery of an original executed counterpart of this Notice of Drawdown. This Notice of Drawdown cannot be revoked or amended or modified in any way without the prior written consent of the Required Lenders.

[Signature Page Follows]

Very truly yours,

Scorpio Bulkers Inc.

By___________________________
Name:
Title:

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Schedule 4

DOCUMENTS REQUIRED AS CONDITIONS PRECEDENT

(referred to in Clause 9)

Part A

1. Constitutional Documents

copies, certified by an officer of each Security Party as true, complete and up to date copies of all documents which contain or establish or relate to the constitution of that Security Party;

2. Corporate Authorizations

copies of resolutions of the directors of each Security Party and stockholders of each Security Party (other than the Borrower) approving such of the Finance Documents to which such Security Party is, or is to be, party and authorizing the signature, delivery and performance of such Security Party’s obligations thereunder, certified (in a certificate dated no earlier than five (5) Business Days prior to the Effective Date) by an officer of such Security Party as:


(a)	being true and correct;


(b)	being duly passed at meetings of the directors of such Security Party and of (if required by applicable laws of the jurisdiction of incorporation) the stockholders of such Security Party duly convened and held or duly adopted by written consent;


(c)	not having been amended, modified or revoked; and


(d)	being in full force and effect,

together with originals or certified copies of any powers of attorney issued by any Security Party pursuant to such resolutions;

3. Specimen Signatures

copies of the signatures of the persons who have been authorized on behalf of each Security Party to sign and have or will sign such of the Finance Documents to which such Security Party is, or is to be, party and to give notices and communications, including notices of drawing, under or in connection with the Finance Documents, certified (in a

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certificate dated no earlier than five (5) Business Days prior to the Effective Date) by an officer of such Security Party as being the true signatures of such persons;

4. Certificate of Incumbency

a list of directors and officers of each Security Party specifying the names and positions of such persons, certified (in a certificate dated no earlier than five (5) Business Days prior to the Effective Date) by an officer of such Security Party to be true, complete and up to date;

5. Borrower’s Consents and Approvals

a certificate (dated no earlier than five (5) Business Days prior to the Effective Date) from an officer of the Borrower that no other consents, authorizations, licenses or approvals are necessary for the Borrower to authorize or are required by the Borrower in connection with the borrowing by that Borrower of the Loan pursuant to this Agreement or the execution, delivery and performance of the Borrower of the Finance Documents to which it is or will be a party;

6. Other Consents and Approvals

a certificate (dated no earlier than five (5) Business Days prior to the Effective Date) from an officer of each Security Party (other than the Borrower) that no other consents, authorizations, licenses or approvals are necessary for such Security Party to guarantee and/or grant security for the borrowing by the Borrower of the Total Commitments pursuant to this Agreement and execute, deliver and perform the Finance Documents insofar as such Security Party is a party thereto;

7. “KYC”

such documentation and other evidence as is reasonably requested by the Agent in order for each Creditor Party to carry out and be satisfied with the results of all necessary “know your customer” or other checks which it is required to carry out in relation to the transactions contemplated by this Agreement and the other Finance Documents and to the identity of any parties to the Finance Documents (other than the Creditor Parties) and their directors and officers;

8. Finance Documents


(a)	the Note, the Earnings Account Pledge, the Shares Pledge and the Charter Assignment (if any), each duly executed by the parties thereto; and


(b)	all notices of assignment and other documents, certificates and instruments required pursuant to the Finance Documents named in subpart (a).

9. Accounts

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evidence that the Earnings Account has been opened and duly completed mandate forms in respect thereof have been delivered to the Agent;

10. Fees and Commissions

evidence that any fees and commissions due under Clause 21 have been paid in full;

11. Borrower’s Process Agent

a letter from the Borrower’s agent for receipt of service of proceedings referred to in Clause 32.2 accepting its appointment under the said Clause and under each of the other Finance Documents in which it is or is to be appointed as the Borrower’s agent and referred to in this Part A;

12. Security Parties’ Process Agent

a letter from each Security Party’s (other than the Borrower) agent for receipt of service of proceedings referred to in each of the Finance Documents to which such Security Party is a party and referred to in this Part A accepting its appointment under each such Finance Document;

13. Security Parties’ Counsel’s Opinion

an opinion of Seward & Kissel LLP, special counsel to the Security Parties, in form and substance satisfactory to the Agent;

14. Agent’s Counsel’s Opinion

An opinion of Cozen O’Connor, special counsel for the Agent, in form and substance satisfactory to the Agent;

15. Certificates of Goodstanding

A Certificate of Goodstanding for each of the Security Parties issued by the Republic of the Marshall Islands dated not more than five (5) Business Days prior to the Effective Date; and

16. Further Conditions

any such further conditions, documents or opinions as may be reasonably required by the Agent.

Part B

1. Drawdown Notice

The Drawdown Notice, duly executed;

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2.	If the Drawdown Date does not take place within one Business Day of the Effective Date, updated corporate authorizations/certificates of incumbency

(a)

For the Borrower and the Guarantor, a list of directors and officers of each Security Party specifying the names and positions of such persons and copies of the signatures of the persons who have been authorized on behalf of each Security Party to sign and who have or will sign such of the Finance Documents to which such Security Party is, or is to be, party and referred to in this Part B in respect of the Advance, and to give notices and communications, including notices of drawing, under or in connection with the Finance Documents, certified by an officer of such Security Party to be, in the case of the list of directors, true, complete and up to date and, in the case of the specimen signatures, true signatures of such persons or a certificate by an officer of such Security Party that the list provided in respect of that Security Party pursuant to paragraph 4 of Part A of this schedule and that the specimen signatures provided in respect of the Security Party pursuant to paragraph 3 of Part A of this schedule remain true, complete and up to date;

3. Collateral Vessel conditions

evidence that the Collateral Vessel:


(a)	Registration and Encumbrances

is registered in the name of the Guarantor through the relevant Registry under an Approved Flag and that the Collateral Vessel and its Earnings, Insurances and Requisition Compensation are free of Security Interests other than Permitted Security Interests; and


(b)	Classification

a statement of class from the relevant Classification Society that the Collateral Vessel is in class, without recommendations affecting class and ready to sail; and


(c)	Insurance

is insured in accordance with the provisions of the relevant Finance Documents and all requirements of the Finance Documents in respect of such Insurances have been complied with (including without limitation, confirmation from the protection and indemnity association or other insurer with which the Collateral Vessel is entered for insurance or insured against protection and indemnity risks (including oil pollution risks) that any necessary declarations required by the association or insurer for the

127

removal of any oil pollution exclusion have been made and that any such exclusion does not apply to the Collateral Vessel); and

4. Fees and commissions

payment of any fees and commissions due from the Borrower to any of the Creditor Parties pursuant to the terms of Clause 21 or any other provision of the Finance Documents;

5. Finance Documents and Manager’s Undertakings

the Mortgage, the Earnings Assignment, the Insurance Assignment, and the Manager’s Undertakings in respect of the Collateral Vessel, each duly executed and delivered along with duly executed notices of assignment in the forms prescribed by the Finance Documents; as applicable;

6. Mortgage registration

evidence that the Mortgage in respect of the Collateral Vessel has been registered against the Collateral Vessel through the relevant Registry under an Approved Flag;

7. Insurance opinion

an opinion from insurance consultants to the Agent in form and substance satisfactory to the Agent and made at the cost and expense of the Borrower, on the insurances effected or to be effected in respect of the Collateral Vessel;

8. Management Agreement

a copy, certified as a true and complete copy by an officer of the Guarantor, of the Approved Management Agreements for the Collateral Vessel;

9. DOC and application for SMC

a certified copy of the DOC and either (i) a certified copy of the interim SMC for the Collateral Vessel or (ii) evidence satisfactory to the Agent that the Operator has applied for an SMC for the Collateral Vessel;

10. ISPS Code compliance


(a)	evidence satisfactory to the Agent that the Collateral Vessel is subject to a ship security plan which complies with the ISPS Code; and


(b)	a copy dated no earlier than five (5) Business Days prior to the Drawdown Date of the interim ISSC for such Collateral Vessel;

11. UCC-1 Financing Statement

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UCC-1 financing statement for each Security Party as shall be reasonably required by the Agent shall have been submitted for filing with such jurisdictions as the Agent may reasonably require.

12. Security Parties’ counsel’s opinion

an opinion of Seward & Kissel LLP, special counsel to the Security Parties, in form and substance satisfactory to the Agent;

13. Agent’s Counsel’s opinion

an opinion of Cozen O’Connor, special counsel to the Agent, in form and substance satisfactory to the Agent;

14. Financial Reports

all financial reports and Compliance Certificates required to be provided to the Agent by the Borrower and each Guarantor, in accordance with Clause 11.1(g) hereof shall have been provided and shall be in all respects acceptable to the Agent; provided, however, that if the Drawdown Notice shall be issued by the Borrower prior to the issuance of the first Compliance Certificate to be issued in accordance with Section 11.1(g), the Borrower shall provide a Compliance Certificate together with such Drawdown Notice;


15.	Two appraisals from Approved Brokers establishing the Fair Market Value of the Collateral Vessel;

16. Further conditions

any such other conditions, documents or evidence as may be reasonably required by the Agent.

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Schedule 5

TRANSFER CERTIFICATE

The Transferor and the Transferee accept exclusive responsibility for ensuring that this Certificate and the transaction to which it relates comply with all legal and regulatory requirements applicable to them respectively.

To: [Name of Agent] for itself and for and on behalf of the Borrower, the Guarantor, the Security Trustee and each Lender, as defined in the Credit Agreement referred to below.

[Date]

This Certificate relates to a Credit Agreement dated as of December 21, 2015 (the “ Credit Agreement ”) made among Scorpio Bulkers Inc. (the “ Borrower ”), a corporation incorporated and existing under the laws of the Republic of the Marshall Islands, as borrower; SBI Cronos Shipping Company Limited, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands, as guarantor (the “ Guarantor ”); The Banks and Financial Institutions listed in Schedule 1 to the Credit Agreement, as lenders (the “ Lenders ”, which expression includes their respective successors, transferees and assigns); Crédit Agricole Corporate and Investment Bank, as mandated lead arranger and Crédit Agricole Corporate and Investment Bank, as administrative agent, security trustee and account bank, for a credit facility of up to $12,500,000.


2.	In this Certificate, terms defined in the Credit Agreement shall, unless the contrary intention appears, have the same meanings when used in this Certificate and:

“ Relevant Parties ” means the Agent, the Borrower, the Guarantor, the Security Trustee and each Lender;

“ Transferor ” means [full name] of [lending office];

“ Transferee ” means [full name] of [lending office].


3.	The effective date of this Certificate is ____, provided that this Certificate shall not come into effect unless it is signed by the Agent on or before that date.


4.	The Transferor assigns to the Transferee absolutely all rights and interests (present, future or contingent) which the Transferor has as Lender under or by virtue of the Credit Agreement and every other Finance Document in relation to ____% of its Contribution, which percentage represents $____.

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5.	[By virtue of this Certificate and Clause 27 of the Credit Agreement, the Transferor is discharged [entirely from its Commitment which amounts to $____] [from ____ % of its Commitment, which percentage represents $_____ and the Transferee acquires a Commitment of $___.]


6.	The Transferee undertakes with the Transferor and each of the Relevant Parties that the Transferee will observe and perform all the obligations under the Finance Documents which Clause 27 of the Credit Agreement provides will become binding on it upon this Certificate taking effect.


7.	The Agent, at the request of the Transferee (which request is hereby made) accepts, for the Agent itself and for and on behalf of every other Relevant Party, this Certificate as a Transfer Certificate taking effect in accordance with Clause 27 of the Credit Agreement.


8.	The Transferor:


(a)	warrants to the Transferee and each Relevant Party that:


(iv)	the Transferor has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which are required in connection with this transaction; and


(v)	this Certificate is valid and binding as regards the Transferor;


(b)	warrants to the Transferee that the Transferor is absolutely entitled, free of encumbrances, to all the rights and interests covered by the assignment in paragraph 4; and


(c)	undertakes with the Transferee that the Transferor will, at its own expense, execute any documents which the Transferee reasonably requests for perfecting in any relevant jurisdiction the Transferee’s title under this Certificate or for a similar purpose.


9.	The Transferee:


(a)	confirms that it has received a copy of the Credit Agreement and each of the other Finance Documents;


(b)	agrees that it will have no rights of recourse on any ground against the Transferor, the Agent, the Security Trustee or any Lender in the event that:


(vii)	any of the Finance Documents prove to be invalid or ineffective;


(viii)	the Borrower or the Guarantor fails to observe or perform their obligations, or to discharge their respective liabilities, under any of the Finance Documents; and

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(ix)	it proves impossible to realize any asset covered by a Security Interest created by a Finance Document, or the proceeds of such assets are insufficient to discharge the liabilities of the Borrower or the Guarantor under any of the Finance Documents;


(c)	agrees that it will have no rights of recourse on any ground against the Agent, the Security Trustee or any Lender in the event that this Certificate proves to be invalid or ineffective;


(d)	warrants to the Transferor and each Relevant Party that:


(i)	it has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which it needs to take or obtain in connection with this transaction; and


(ii)	that this Certificate is valid and binding as regards the Transferee; and


(e)	confirms the accuracy of the administrative details set out below regarding the Transferee.

10.

The Transferor and the Transferee each undertake with the Agent and the Security Trustee severally, on demand, fully to indemnify the Agent and/or the Security Trustee in respect of any claim, proceeding, liability or expense (including all legal expenses) which they or either of them may incur in connection with this Certificate or any matter arising out of it, except such as are shown to have been mainly and directly caused by the gross negligence or willful misconduct of the Agent’s or the Security Trustee’s own officers or employees.

11.

The Transferee shall repay to the Transferor on demand so much of any sum paid by the Transferor under paragraph 10 as exceeds one-half of the amount demanded by the Agent or the Security Trustee in respect of a claim, proceeding, liability or expense which was not reasonably foreseeable at the date of this Certificate; but nothing in this paragraph shall affect the liability of each of the Transferor and the Transferee to the Agent or the Security Trustee for the full amount demanded by it.

[Name of Transferor]                    [Name of Transferee]

By: _______________________            By: _______________________
Name:                             Name:
Title:                             Title:
Date:                             Date:

AGENT

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Signed for itself and for and on behalf of itself

as Agent and for every other Relevant Party

CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK

By: _______________________
Name:
Title:
Date:

133

Schedule 6

LIST OF APPROVED BROKERS

Affinity

Arrow Sale and Purchase Ltd.

Braemar ACM

Clarkson Plc

Compass Maritime

Fearnleys

Galbraith’s Ltd.

Maersk Broker

Simpson, Spence & Young

134

Schedule 7

Payment Dates and Amounts

ADVANCE PAYMENT DATES AND AMOUNT



QUARTERLY PAYMENT DATE	Amount
3-31-2016	$208,333.33
6-30-2016	$208,333.33
9-30-2016	$208,333.33
12-31-2016	$208,333.33
3-31-2017	$208,333.33
6-30-2017	$208,333.33
9-30-2017	$208,333.33
12-31-2017	$208,333.33
3-31-2018	$208,333.33
6-30-2018	$208,333.33
9-30-2018	$208,333.33
12-31__-2018	$208,333.33
3-31-2019	$208,333.33
6-30-2019	$208,333.33
9-30-2019	$208,333.33
12-31-2019	$208,333.33
3-31-2020	$208,333.33
6-30-2020	$208,333.33
9-30-2020	$208,333.33
12-31-2020	$208,333.33
Maturity Date Balloon Payment	$8,333,333.40

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Schedule 8

Mandatory Cost Formula


1.	The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Financial Conduct Authority and/or the Prudential Regulation Authority (or, in any case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the “ Additional Cost Rate ”) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders’ Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the Advance) and will be expressed as a percentage rate per annum.

The Additional Cost Rate for any Lender lending from a lending office in a Participating Member State will be the percentage notified by that Lender to the Agent. This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender’s participation in all Advances made from that lending office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that lending office.


4.	The Additional Cost Rate for any Lender lending from a lending office in the United Kingdom will be calculated by the Agent as follows:

percent per annum

where:


E	is designed to compensate Lenders for amounts payable under all the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Lenders to the Agent pursuant to paragraph 6 below and expressed in pounds per £1,000,000.

5. For the purposes of this Schedule:


(a)	“ Eligible Liabilities ” and “ Special Deposits ” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;


(b)	“ Fees Rules ” means the rules on periodic fees contained in the Financial Conduct Authority Fees Manual or the Prudential Regulation Authority

136

Fees Manual (as the case may be) or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;


(c)	“ Fee Tariffs ” means the fee tariffs specified in the relevant Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the relevant Fees Rules but taking into account any applicable discount rate);


(d)	“ Participating Member State ” means any member state of the European Union that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Union relating to European Monetary Union; and


(e)	“ Tariff Base ” has the meaning given to it in, and will be calculated in accordance with, the relevant Fees Rules.

If requested by the Agent, each Lender shall, as soon as practicable after publication by the Financial Conduct Authority or the Prudential Regulation Authority (as the case may be), supply to the Agent, the aggregate of rates of charge payable by that Lender to each the Financial Conduct Authority and the Prudential Regulation Authority pursuant to the relevant Fees Rules in respect of the relevant financial year of the Financial Conduct Authority or the Prudential Regulation Authority (as the case may be) (calculated for this purpose by that Lender as being the average of the Fee Tariffs applicable to that Lender for that financial year) and expressed in pounds per £1,000,000 of each Tariff Base of that Lender.


7.	Each Lender shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information in writing on or prior to the date on which it becomes a Lender:


(a)	the jurisdiction of its lending office; and


(b)	any other information that the Agent may reasonably require for such purpose.

Each Lender shall promptly notify the Agent in writing of any change to the information provided by it pursuant to this paragraph.

The rates of charge of each Lender for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraph 6 above and on the assumption that, unless a Lender notifies the Agent to the contrary, each Lender’s obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a lending office in the same jurisdiction as its lending office.

137


9.	The Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender pursuant to paragraphs 3, 6 and 7 above is true and correct in all respects.


10.	The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender pursuant to paragraphs 3, 6 and 7 above.


11.	Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all parties.

12.

The Agent may from time to time, after consultation with the Borrower and the Lenders, determine and notify to all parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Financial Conduct Authority, the Prudential Regulation Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all parties.

138

Appendix A

FORM OF CHARTER ASSIGNMENT

139

Appendix B

FORM OF COMPLIANCE CERTIFICATE

140

Appendix C

FORM OF EARNINGS ACCOUNT PLEDGE

141

Appendix D

FORM OF EARNINGS ASSIGNMENT

142

Appendix E

FORM OF FIRST PREFERRED SHIP MORTGAGE

143

Appendix F

FORM OF MANAGER’S UNDERTAKING

144

Appendix G

FORM OF NOTE

145

Appendix H

FORM OF SHARES PLEDGE

146

Appendix I

FORM OF INSURANCE ASSIGNMENT

147

LEGAL\25075540\4 05112.0001.000/379251.000

148

Exhibit 4.28

Execution Version

$27,250,000 Secured Loan Agreement

Dated 22 December 2015

(1) SBI Achilles Shipping Company Limited

SBI Hermes Shipping Company Limited

(as Borrowers)

(2) Scorpio Bulkers Inc.
(as Guarantor)

(3) The Financial Institutions
listed in Schedule 1
(as Original Lenders)

(4) ABN AMRO Bank N.V.

(as Arranger)

(5) ABN AMRO Bank N.V.
(as Agent)

(6) ABN AMRO Bank N.V.

(as Swap Provider)

(7) ABN AMRO Bank N.V.
(as Security Agent)

LONLIVE\22651328.7

1313\01-53-03754

Contents

Page

Section 1 Interpretation 2

1 Definitions and Interpretation 2

Section 2 The Loan 24

2 The Loan 24

3 Purpose 24

4 Conditions of Utilisation 24

Section 3 Utilisation 27

5 Advance 27

Section 4 Repayment, Prepayment and Cancellation 29

6 Repayment 29

7 Illegality, Prepayment and Cancellation 29

Section 5 Costs of Utilisation 33

8 Interest 33

9 Interest Periods 33

10 Changes to the Calculation of Interest 34

11 Fees 35

Section 6 Additional Payment Obligations 36

12 Tax Gross Up and Indemnities 36

13 Increased Costs 40

14 Other Indemnities 42

15 Mitigation by the Lenders 44

16 Costs and Expenses 45

Section 7 Security and Application of Moneys 47

17 Security Documents and Application of Moneys 47

18 Guarantee and Indemnity 51

Section 8 Representations, Undertakings and Events of Default 55

19 Representations 55

20 Information Undertakings 60

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21 Financial Covenants 63

22 General Undertakings 65

23 Events of Default 73

Section 9 Changes to Parties 79

24 Changes to the Lenders 79

25 Changes to the Security Parties 84

Section 10 The Finance Parties 85

26 Role of the Agent, the Security Agent and the Arranger 85

27 Conduct of Business by the Finance Parties 98

28 Sharing among the Finance Parties 98

Section 11 Administration 100

29 Payment Mechanics 100

30 Set-Off 104

31 Notices 104

32 Calculations and Certificates 106

33 Partial Invalidity 107

34 Remedies and Waivers 107

35 Amendments and Waivers 107

36 Confidentiality 110

37 Disclosure of Lender Details by Agent 114

38 Counterparts 115

39 Joint and Several Liability 115

Section 12 Governing Law and Enforcement 117

40 Governing Law 117

41 Enforcement 117

42 Patriot Act Notice 118

Schedule 1 The Original Lenders 119

Schedule 2 Part I Conditions Precedent: Initial Conditions Precedent 120

Part II Conditions Precedent: Conditions Precedent to Release 124

Part III Conditions Subsequent 126

Schedule 3 Drawdown Request 127

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Schedule 4 Form of Transfer Certificate 128

Schedule 5 Form of Assignment Agreement 131

Schedule 6 Form of Compliance Certificate 134

LONLIVE\22651328.7

Loan Agreement

Dated 22 December 2015

Between:


(1)	SBI Achilles Shipping Company Limited (" Borrower A ") and SBI Hermes Shipping Company Limited (" Borrower B " and together with Borrower A, the " Borrowers " and each a " Borrower "), each a company incorporated under the laws of the Republic of the Marshall Islands, with registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960; and


(2)	Scorpio Bulkers Inc. , a company incorporated under the laws of the Republic of the Marshall Islands, with registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960 (the " Guarantor "); and


(3)	The Financial Institutions listed in Schedule 1 ( The Original Lenders ), each acting through its Facility Office (together the " Original Lenders " and each an " Original Lender "); and


(4)	ABN AMRO Bank N.V. , acting as mandated lead arranger through its office at Coolsingel 93, 3012 AE Rotterdam, The Netherlands (in that capacity, the " Arranger "); and


(5)	ABN AMRO Bank N.V. , acting as agent through its office at Daalsesingel 71, 3511 SW Utrecht, The Netherlands (in that capacity, the " Agent "); and


(6)	ABN AMRO Bank N.V. , acting as swap provider through its office at Coolsingel 93, 3012 AE Rotterdam, The Netherlands (in that capacity, the " Swap Provider "); and


(7)	ABN AMRO Bank N.V. , acting as security agent through its office at Daalsesingel 71, 3511 SW Utrecht, The Netherlands (in that capacity, the " Security Agent ").

Preliminary


(A)	Each Borrower has agreed to purchase the relevant Vessel from the relevant Seller on the terms of the relevant Shipsales Contract and intends to register that Vessel on delivery under an Approved Flag.


(B)	Each of the Original Lenders has agreed to advance to the Borrowers on a joint and several basis its Commitment aggregating, with all the other Commitments, up to $27,250,000 to assist the Borrowers to finance part of the purchase price of the Vessels.

It is agreed as follows:

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Section 1	Interpretation

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1	Definitions and Interpretation


1.1	Definitions In this Agreement:

" Accounts " means the bank accounts opened in the name of each Borrower with the Account Bank and each designated an "Account" and " Account " means either one of them.

" Account Security Deeds " means the account security deeds referred to in Clause 17.1.4 ( Security Documents ) and " Account Security Deed " means either one of them.

" Administration " has the meaning given to it in paragraph 1.1.3 of the ISM Code.

" Approved Closing Procedure " means, in respect of each Vessel, a procedure whereby a Tranche may be combined with funds of the relevant Borrower to pay all sums payable by the relevant Borrower to the Builder pursuant to the relevant Shipsales Contract by being remitted at least two banking days (days excluding Saturday, Sunday, and public holidays in Tokyo, London, New York, Monaco and The Netherlands) prior to the relevant Delivery Date as required pursuant to the relevant Shipsales Contract, on the request of the relevant Borrower to a suspense account held with the relevant Seller's bank on the basis of instructions set out in an MT199 SWIFT message providing that such amount is to be held to the order of the Agent and not to be released to the relevant Seller until a named representative of the Agent either signs a release instruction in favour of the relevant Seller or countersigns the protocol of delivery and acceptance for the relevant Vessel as between the relevant Borrower and the relevant Seller, such MT199 SWIFT message to include such other terms as the Agent may require including, without limitation, a return of proceeds provision if the Delivery Date of the relevant Vessel has not occurred within 10 Business Days of the date of the MT199 SWIFT message.

" Approved Flag " means the flag of the Marshall Islands or Liberia or such other flag as the Agent may, with the consent of the Majority Lenders, approve from time to time in writing as the flag on which a Vessel shall be registered.

" Approved Pooling Arrangement " means, in relation to a Vessel, the Scorpio Ultramax Pool and any other pooling arrangement:


(a)	proposed by a Borrower;


(a)	run by any Affiliate of the Commercial Manager; and


(b)	approved in writing by the Agent prior to that Vessel's entry into such pooling arrangement.

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" Approved Sub-manager " means Zenith Ship Management, C.P. Offen, Optimum Ship Services Ltd and any Affiliates or Subsidiary of the Technical Manager and the Commercial Manager.

" Assignments " means all the forms of assignment referred to in Clause 17.1.2 ( Security Documents ).

" Assignment Agreement " means an agreement substantially in the form set out in Schedule 6 ( Form of Assignment Agreement ) or any other form agreed between the relevant assignor and assignee.

" Authorisation " means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

" Availability Period " means, in respect of each Tranche, the period from and including the date of this Agreement to and including the earlier of:

(a) the date that is three months after the Delivery Date of that Vessel; and

(b) 30 April 2016.

" Break Costs " means the amount (if any) by which:


(a)	the interest (excluding the Margin) which a Lender should have received for the period from the date of receipt of all or any part of its participation in 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)	the amount which that 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 Imabari Shipbuilding Co. Ltd., a corporation organised and existing under the laws of Japan whose principal office is at 1-chome, Koura-cho, Imabari City Ehime Prefecture, Japan.

" Business Day " means a day (other than a Saturday or Sunday) on which banks are open for general business in London, New York and Amsterdam.

" Change of Control " means:


(a)	in respect of the Borrowers, the occurrence of any act, event or circumstance that without prior written consent of the Lenders results in the Guarantor owning directly or indirectly less than 100% of the issued and outstanding equity in a Borrower; and


(b)	in respect of the Guarantor:


(i)	a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than any holders of the Guarantor's equity as of the date of this

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Agreement, becomes the ultimate "beneficial owner" (as defined in Rule 13(d)-3 under the Exchange Act and including by reason of any change in the ultimate "beneficial ownership" of the equity of the Guarantor) of more than 35% of the total voting rights of the Guarantor (calculated on a fully diluted basis); or

(ii)

individuals who at the beginning of any period of two consecutive calendar years constituted the board of directors or equivalent governing body of the Guarantor (together with any new directors (or equivalent) whose election by such board of directors or equivalent governing body or whose nomination for election was approved by a vote of at least two-thirds of the members of such board of directors or equivalent governing body then still in office who either were members of such board of directors or equivalent governing body at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least 50% of the members of such Board of Directors or equivalent governing body then in office.

" Charged Property " means all of the assets of the Security Parties which from time to time are, or are expressed to be, the subject of the Security Documents.

" Charter " means any charter or contract of employment in respect of a Vessel that, inclusive of options, is capable of exceeding 12 months in duration, but excluding:


^(a)	any charter pursuant to an Approved Pooling Arrangement; and


^(b)	any other charter or contract of employment in respect of a Vessel that a Borrower enters into with a company within the Group.

" Code " means the US Internal Revenue Code of 1986.

" Commitment " means:


(a)	in relation to an Original Lender, the amount set opposite its name under the heading "Commitment" in Schedule 1 ( The Original Lenders ) and the amount of any other Commitment transferred to it under this Agreement; and


(b)	in relation to any other Lender, the amount of any Commitment transferred to it under this Agreement,

to the extent not cancelled, reduced or transferred by it under this Agreement.

" Commitment Fee " means the commitment fee to be paid by the Borrowers to the Agent under Clause 11.1 ( Commitment Fee ).

" Compliance Certificate " means a certificate substantially in the form set out in Schedule 7 ( Form of Compliance Certificate ) .


(a)	any Security Party or any of its advisers; or

LONLIVE\22651328.7 Page 5


(b)	another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any Security Party or any of its advisers,


(i)	is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of Clause 36 ( Confidentiality ); or


(ii)	is identified in writing at the time of delivery as non-confidential by any Security Party or any of its advisers; or

(iii)

" Confidentiality Undertaking " means a confidentiality undertaking substantially in a recommended form of the Loan Market Association at the relevant time.

" Confirmation " means a Confirmation exchanged or deemed to be exchanged between the Swap Provider and the Borrowers as contemplated by the Master Agreement.

" Contract Price " means:


(a)	in respect of Vessel A, $31,420,000; and


(b)	in respect of Vessel B, $30,923,200.

" Credit Support Provider " means any person (other than a Borrower) described as such in the Master Agreement.

" CTA " means the Corporation Tax Act 2009.

" Delegate " means any delegate, agent, attorney or co-trustee appointed by the Security Agent.

" Delivery Date " means the date of actual delivery of a Vessel to a Borrower by the relevant Seller under the relevant Shipsales Contract.

" 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

LONLIVE\22651328.7 Page 6


(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.

" Drawdown Date " means the date on which the relevant Tranche is advanced under Clause 5 ( Advance ).

" Drawdown Request " means a notice substantially in the form set out in Schedule 3 ( Drawdown Request ).

" 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 Incident " means:


(a)	any release, emission, spill or discharge into a Vessel or into or upon the air, sea, land or soils (including the seabed) or surface water of Environmentally Sensitive Material within or from a Vessel; or

(b)


(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 a Vessel and in connection with which a Vessel is actually or potentially liable to be

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arrested and/or where any Security Party and/or any operator or manager of a 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.

" ERISA " means the Employee Retirement Income Security Act of 1974, as amended, and any successor thereto.

" Event of Default " means any event or circumstance specified as such in Clause 23 ( Events of Default ).

" 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 (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 Application Date " means:


(a)	in relation to a "withholdable payment" described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014;


(b)	in relation to a "withholdable payment" described in section 1473(1)(A)(ii) of the Code (which relates to "gross proceeds" from the disposition of property of a type that can produce interest from sources within the US), 1 January 2017; or


(c)	in relation to a "passthru payment" described in section 1471(d)(7) of the Code not falling within (a) or (b), 1 January 2017,

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or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement.

" 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.

" Fee Letter " means any letter or letters dated on or about the date of this Agreement between the Arranger, the Borrowers and the Guarantor (or the Agent, the Borrowers and the Guarantor or the Security Agent, the Borrowers and the Guarantor) setting out any of the fees referred to in Clause 11 ( Fees ).

" Finance Parties " means the Arranger, the Agent, the Security Agent, the Swap Provider and the Lenders and " Finance Party " means any one of them.

" Financial Indebtedness " means, with respect to any person (the " Debtor ") at any date of determination (without duplication):


(a)	all obligations of the Debtor for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the Debtor;


(b)	all obligations of the Debtor evidenced by bonds, debentures, notes or other similar instruments;


(c)	all obligations of the Debtor in respect of any acceptance credit, guarantee or letter of credit facility or equivalent made available to the Debtor (including reimbursement obligations with respect thereto);


(d)	all obligations of the Debtor to pay the deferred purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery thereto or the completion of such services, except trade payables;


(e)	all Capitalized Lease Obligations of the Debtor as lessee;

(f)


(g)	all such Financial Indebtedness as described in sub-paragraphs (a) to (e) of persons other than the Debtor under any guarantee, indemnity to similar obligation entered into by the Debtor to the extent such Financial Indebtedness is guaranteed, indemnified, etc. by the Debtor.

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" Group " means the Guarantor and its Subsidiaries.

" Guarantee " means the guarantee and indemnity of the Guarantor contained in Clause 18 ( Guarantee and Indemnity ) and referred to in Clause 17.1.3 ( Security Documents ).

" 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 a Vessel issued under Annex VI.

" Impaired Agent " means the Agent at any time when:


(a)	it has failed to make (or has notified a Party that it will not make) a payment required to be made by it under the Finance Documents by the due date for payment;


(b)	the Agent otherwise rescinds or repudiates a Finance Document; or


(c)	an Insolvency Event has occurred and is continuing with respect to the Agent;

unless, in the case of (a):


(i)	its failure to pay is caused by:

(A) administrative or technical error; or

(B) a Disruption Event; and

payment is made within three Business Days of its due date; or


(ii)	the Agent is disputing in good faith whether it is contractually obliged to make the payment in question.

" Insolvency Event " in relation to an entity means that the entity:


(a)	is dissolved (other than pursuant to a consolidation, amalgamation or merger);


(b)	becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due;


(c)	makes a general assignment, arrangement or composition with or for the benefit of its creditors;

(d)


(e)	has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a

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petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition is instituted or presented by a person or entity not described in (d) and:


(i)	results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation; or


(ii)	is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof;


(f)	has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);


(g)	seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets (other than, for so long as it is required by law or regulation not to be publicly disclosed, any such appointment which is to be made, or is made, by a person or entity described in (d));


(h)	has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter;


(i)	causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in (a) to (h); or

takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts.

" Intercompany Loan Agreement " means any loan agreement entered into during the Facility Period between an entity within the same group as the Borrowers as lender and a Borrower as borrower.

" Intercompany Loan Assignment " means any assignment of an Intercompany Loan Agreement entered into pursuant to Clause 22.17 ( No borrowings ) and referred to in Clause 17.1.7 ( Security Documents ) and to be in a form acceptable to the Agent.

" Intercompany Loans " means any loan or loans to be made available to a Borrower pursuant to an Intercompany Loan Agreement.

" Intercompany Subordination and Assignment Agreement " means any subordination and assignment agreement in respect of any Intercompany Loans entered into pursuant to Clause 22.17 ( No borrowings ) and referred to in Clause 17.1.8 ( Security Documents ) and to be in a form acceptable to the Agent.

" Interest Payment Date " means each date for the payment of interest in accordance with Clause 8.2 ( Payment of interest ).

" Interpolated Screen Rate " means, in relation to LIBOR, the rate which results from interpolating on a linear basis between:

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(a)	the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the relevant Interest Period; and


(b)	the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the relevant Interest Period,

each as of 11.00 a.m. on the Quotation Day for dollars.

" ISM Code " means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention.

" ISM Company " means, at any given time, the company responsible for a Vessel's compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.

" ISPS Code " means the International Ship and Port Facility Security Code.

" ISSC " means a valid international ship security certificate for a 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 the Agent under Clause 4.1 ( Initial conditions precedent ) or Clause 4.3 ( Conditions subsequent ).

" 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


(a)	any other matters which are set out as qualifications or reservations as to matters of law of general application in the Legal Opinions.

" Lender " means:


(a)	any Original Lender; and


(b)	any bank, financial institution or other entity which has become a Party as a Lender in accordance with Clause 24 ( Changes to the Lenders ),

which in each case has not ceased to be a Lender in accordance with the terms of this Agreement.

" LIBOR " means, in relation to any Tranche:


(a)	the applicable Screen Rate; or


(b)	(if no Screen Rate is available for the relevant Interest Period) the Interpolated Screen Rate; or

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(c)	(if (i) no Screen Rate is available for the currency of that Tranche or (ii) no Screen Rate is available for the relevant Interest Period for that Tranche and it is not possible to calculate the Interpolated Screen Rate) the Reference Bank Rate,

" Management Agreement " means the master agreement dated 27 September 2013 entered into between Scorpio Bulkers Inc., the Technical Manager and the Commercial Manager:


(a)	as acceded to in respect of the commercial management of the Vessels pursuant to confirmation letters each dated 17 September 2014 between the relevant Borrower, Scorpio Bulkers Inc. and the Commercial Manager; and


(b)	as acceded to in respect of the technical management of the Vessels pursuant to confirmation letters each dated 18 July 2014 between the relevant Borrower, Scorpio Bulkers Inc. and the Technical Manager.

" Managers " means:


(a)	in relation to the commercial management of the Vessels, the Commercial Manager; and


(b)	in relation to the technical management of the Vessels, the Technical Manager,

or any Approved Sub-manager, and such other commercial and/or technical managers of a Vessel nominated by the Borrowers as the Agent (acting on the instructions of the Majority Lenders) may approve.

" Managers' Undertakings " means the written undertakings of the Managers whereby, throughout the Facility Period unless otherwise agreed by the Agent:


(a)	they will remain the commercial or technical managers of the Vessels (as the case may be);


(b)	they will not, without the prior written consent of the Agent, subcontract or delegate the commercial or technical management of the Vessels (as the case may be) to any third party other than an Approved Sub-manager provided that the Borrowers shall procure from such Approved Sub-manager a Manager's Undertaking;


(c)	if reasonably required by the Agent, the interests of the Managers in the Insurances will be assigned to the Security Agent with first priority; and


(d)	(following the occurrence of an Event of Default) all claims of the Managers against the Borrowers shall be subordinated to the claims of the Finance Parties under the Finance Documents.

" Mandatory Cost " means in relation to a Lender and in respect of any Interest Period, the cost to a Lender of compliance with the reserve requirements of the European Central Bank or any other central bank or financial supervisory authority (any such costs, for the purposes of this Agreement, to be represented by the percentage rate notified by a Lender to the Agent prior to the last day of the relevant Interest Period).

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" Margin " means 2.95% per annum.

" Master Agreement Proceeds Assignments " means the deeds of assignment referred to in Clause 17.1.6 ( Security Documents ).

" Material Adverse Effect " means in the reasonable opinion of the Majority Lenders a material adverse effect on:


(a)	the business, property or financial condition of a Borrower or the Guarantor; or


(b)	the ability of any Security Party to perform its obligations under any Finance Document; or


(c)	the validity or enforceability of, or the effectiveness or ranking of any Encumbrance granted or purporting to be granted pursuant to any of, the Finance Documents or the rights or remedies of any Finance Party under any of the Finance Documents; or


(d)	the rights or remedies of any Finance Party under any of the Finance Documents.

" Maximum Loan Amount " means the amount up to the lesser of (i) $27,250,000 and (ii) the aggregate of the Maximum Tranche A Amount and the Maximum Tranche B Amount.

" Maximum Tranche Amount " means the Maximum Tranche A Amount and the Maximum Tranche B Amount.

" Maximum Tranche A Amount " means the amount up to 50% of the FMV of Vessel A evidenced by the valuation received by the Agent under Clause 4.1 ( Initial conditions precedent ).

" Maximum Tranche B Amount " means the amount up to 50% of the FMV of Vessel B evidenced by the valuation received by the Agent under Clause 4.1 ( Initial conditions precedent ).

" Mortgages " means the first preferred mortgages referred to in Clause 17.1.1 ( Security Documents ) and " Mortgage " means any one of them.

" New Lender " has the meaning given to that term in Clause 24.1 ( Assignments and transfers by the Lenders ).

" Non-Consenting Lender " has the meaning given to that term in Clause 35.3.4 ( Replacement of Lender ).

" Original Financial Statements " means the audited consolidated financial statements of the Guarantor for the financial year ended 31 December 2014.

" Original Jurisdiction " means, in relation to a Security Party, the jurisdiction under whose laws that Security Party is incorporated as at the date of this Agreement.

" Party " means a party to this Agreement.

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" Permitted Disposal " means any sale, lease, licence, transfer or other disposal which is on arm's length terms:


(a)	of assets in exchange for other assets comparable or superior as to type, value and quality;


(b)	of obsolete or redundant vehicles, plant and equipment for cash; and


(c)	arising as a result of any Permitted Encumbrance.

" Permitted Encumbrance " means:


(a)	any Encumbrance which has the prior written approval of the Agent;


(b)	any Encumbrance created pursuant to a Finance Document;


(c)	any Encumbrance arising by operation of law and in the ordinary course of trading and not as a result of any default or omission by a Security Party;


(d)	any Quasi-Security arising as a result of a disposal which is a Permitted Disposal;


(e)	any liens for current crews' wages and salvage and liens incurred in the ordinary course of trading a Vessel up to an aggregate amount at any time not exceeding $1,000,000 in respect of any Vessel; or


(f)	any Encumbrance or set off rights arising from the general banking terms and conditions ( algemene bankvoorwaarden ).

" 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.

" Quasi-Security " has the meaning given to that term in Clause 22.9 ( Negative pledge ).

" Receiver " means a receiver or receiver and manager or administrative receiver of the whole or any part of the Charged Property.

" Reference Banks " means, in relation to LIBOR and Mandatory Cost, ABN AMRO Bank N.V. and ING Bank N.V., or such other banks as may be appointed by the Borrowers with the prior written approval of the Agent.

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" Relevant Documents " means the Finance Documents, the Shipsales Contracts, the Management Agreements, the Manager's Undertakings and any Intercompany Loan Agreement.

" Relevant Interbank Market " means the London interbank market.

" Relevant Jurisdiction " means, in relation to a Security Party:


(a)	its Original Jurisdiction;


(b)	any jurisdiction where any asset subject to or intended to be subject to a Security Document to be executed by it is situated; and


(c)	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 a Tranche to be repaid by the Borrowers under Clause 6 ( Repayment ).

" Representative " means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.

" Scorpio Ultramax Pool " means, in relation to a Vessel, a pooling arrangement whereby the pool is managed by the Commercial Manager.

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" Secured Parties " means each Finance Party from time to time party to this Agreement and any Receiver or Delegate.

" Sellers " means:


(d)	in respect of Vessel A, Laurel World Maritime S.A., a corporation organised and existing under the laws of Panama having its principal office at Paseo del Mar and Pacific Avenues, Costa del Este, MMG Tower 23 ^rd Floor, Panama City, Republic of Panama (" Seller A "); and


(e)	in respect of Vessel B, Lavender Maritime S.A. a corporation organised and existing under the laws of Panama having its principal office at 53rd Street Urbanizacion Obarrio, Torre Swiss Bank, 16th Floor, Swiss Tower, Panama, Republic Of Panama (" Seller B "),

and each a " Seller ".

" Share Pledges " means the charges of the issued share capital of the Borrowers referred to in Clause 17.1.5 ( Security Documents ).

" Shipsales Contracts " means:


(a)	in relation to Vessel A, the shipsales contract for construction and sale dated 30 June 2014 (as amended, supplemented or modified from time to time) on the terms and subject to the conditions of which Seller A will sell Vessel A to Borrower A for the relevant Contract Price; and


(b)	in relation to Vessel B, the shipsales contract for construction and sale dated 27 September 2013 (as amended, supplemented or modified from time to time) on the terms and subject to the conditions of which Seller B will sell Vessel B to Borrower B for the relevant Contract Price,

and each one a " Shipsales Contract ".

" SMC " means a valid safety management certificate issued for a Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.

" Subsidiary " means a subsidiary undertaking within the meaning of section 1162 of the Companies Act 2006.

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" Technical Manager " means Scorpio Ship Management S.A.M., a company incorporated under the laws of Monaco with its registered office at Le Millenium, 9, Boulevard Charles III, MC-98000 Monaco.

" Termination Date " means, in respect of each Tranche, the date falling five years after the Drawdown Date of the relevant Tranche.

" Total Commitments " means the aggregate of the Commitments.

" Total Loss " means:


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


(b)	the requisition for title or compulsory acquisition of a Vessel by any government or other competent authority (other than by way of requisition for hire); or


(c)	the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture of a Vessel (not falling within (b)), unless that Vessel is released and returned to the possession of the relevant Borrower within 30 days after the capture, seizure, arrest, detention, hijacking, theft, condemnation as prize, confiscation or forfeiture in question.

" Tranches " means Tranche A and Tranche B and " Tranche " means any one of them.

" Transaction " means a transaction entered into between the Swap Provider and the Borrowers governed by the Master Agreement.

" Transfer Certificate " means a certificate substantially in the form set out in Schedule 5 ( Form of Transfer Certificate ) or any other form agreed between the Agent and the Borrowers.

" Transfer Date " means, in relation to an assignment or a transfer, the later of:


(a)	the proposed Transfer Date specified in the relevant Assignment Agreement or Transfer Certificate; and


(b)	the date on which the Agent executes the relevant Assignment Agreement or Transfer Certificate.

" Treasury Transactions " means any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price.

" Trust Property " means:


(a)	all benefits derived by the Security Agent from Clause 17 ( Security and Application of Moneys ); and


(b)	all benefits arising under (including, without limitation, all proceeds of the enforcement of) each of the Security Documents,

with the exception of any benefits arising solely for the benefit of the Security Agent.

" Unpaid Sum " means any sum due and payable but unpaid by any Security Party under the Finance Documents.

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" US " means the United States of America.

" US GAAP " means generally accepted accounting principles in the United States of America as in effect from time to time.

" US Tax Obligor " means:


(a)	a Security Party which is resident for tax purposes in the US; or


(b)	a Security Party some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.

" 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 (a), or imposed elsewhere.

" Vessels " means the following vessels each currently under construction by the Builder with the Builders' hull numbers set out below and on delivery to the relevant Seller to be sold by that Seller to the relevant Borrower set out below and intended to be registered under an Approved Flag:



Designation	Type of Vessel	Hull Number / Name	Borrower
" Vessel A "	61,000 dwt ultramax vessel	S-A098 / "SBI Achilles"	Borrower A
" Vessel B "	61,000 dwt ultramax vessel	S-A090 / "SBI Hermes"	Borrower B

and " Vessel " means any one of them.


1.2	Construction Unless a contrary indication appears, any reference in this Agreement to:


1.2.1	any " Lender ", any " Borrower ", the " Guarantor ", the " Arranger ", the " Agent ", the " Swap Provider ", any " Secured Party ", the " Security Agent ", any " Finance Party " or any " Party " shall be construed so as to include its successors in title, permitted assignees and permitted transferees;


1.2.2	" assets " includes present and future properties, revenues and rights of every description;


1.2.3	a " 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;


1.2.4	a " group of Lenders " includes all the Lenders;


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);

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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.


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 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 any Finance Party and the Borrowers or their representatives before the date of this Agreement.


Section 2	The Loan


2	The Loan


2.1	Amount Subject to the terms of this Agreement, the Lenders agree to make available to the Borrowers on a joint and several basis a term loan comprising all of the Tranches and not exceeding in aggregate the Maximum Loan Amount.


2.2	Finance Parties' rights and obligations


2.2.1	The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.


2.2.2	The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from a Security Party shall be a separate and independent debt.


2.2.3	A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.


3	Purpose


3.1	Purpose The Borrowers shall apply the Loan for the purposes referred to in Preliminary (A).


3.2	Monitoring No Finance Party is bound to monitor or verify the application of any amount borrowed under this Agreement.


4	Conditions of Utilisation


4.1	Initial conditions precedent

4.1.1

In respect of a Tranche, the Lenders will only be obliged to comply with Clause 5.3 ( Lenders' participation ) in relation to the advance of that Tranche in accordance with the Approved Closing Procedure if, on or before the relevant Drawdown Date, the Agent has received all of the documents and other evidence listed in Part I of Schedule 2 ( Conditions Precedent ) in form and substance satisfactory to the Agent, save that references in Section 2 of that Part I to “the Vessel” or to any person or document relating to a Vessel shall be deemed to relate solely to the Vessel specified in the relevant Drawdown Request or to any person or document relating to that Vessel respectively; and

4.1.2

the Agent shall only release a Tranche in accordance with the Approved Closing Procedure if the Agent has received all of the documents and other evidence listed in Part II of Schedule 2 ( Conditions Precedent ) in form and substance satisfactory to the Agent, save that references in Part II to “the Vessel” or to any person or document relating to a Vessel shall be deemed to relate solely to the Vessel specified in the relevant Drawdown Request or to any person or document relating to that Vessel respectively,

and in each case the Agent shall notify the Borrowers and the Lenders promptly upon being so satisfied.


4.1.3	Other than to the extent that the Majority Lenders notify the Agent in writing to the contrary before the Agent gives the notification described in Clause 4.1.2, the Lenders authorise (but do not require) the Agent to give that notification. The Agent shall not be liable for any damages, costs or losses whatsoever as a result of giving any such notification.


4.2	Further conditions precedent


4.2.1	The Lenders will only be obliged to advance and release a Tranche in accordance with the Approved Closing Procedure if on the date of the relevant Drawdown Request, on the proposed Drawdown Date and on the proposed date of the release of the relevant Tranche the following are complied with:


(i)	no Default has occurred and is continuing or would result from the advance of that Tranche; and


(ii)	the representations made by each Borrower and the Guarantor under Clause 19 ( Representations ) are true.


4.2.2	The Lenders will only be obliged to advance a Tranche if that Tranche is not in excess of the relevant Maximum Tranche Amount.


4.2.3	The Lenders will only be obliged to advance a Tranche if that Tranche will not increase the Loan to a sum in excess of the Maximum Loan Amount.

4.3

4.4

No waiver If the Lenders in their sole discretion agree to advance all or any part of a Tranche to the Borrowers before all of the documents and evidence required by Clause 4.1 ( Initial conditions precedent ) have been delivered to or to the order of the Agent, the Borrowers undertake to deliver all outstanding documents and evidence to or to the order of the Agent and under such conditions as may be specified by the Agent at such date specified by the Agent (acting on the instructions of all the Lenders).


4.5	Form and content All documents and evidence delivered to the Agent under this Clause shall:


4.5.1	be in form and substance acceptable to the Agent; and


4.5.2	if required by the Agent, be certified, notarised, legalised or attested in a manner acceptable to the Agent.


Section 3	Utilisation


5	Advance

5.1

Delivery of a Drawdown Request The Borrowers may request a Tranche to be advanced, in a single advance, by delivery to the Agent of a duly completed Drawdown Request not more than ten and not fewer than four Business Days before the proposed Drawdown Date. Any Drawdown Request which becomes effective, in accordance with Clause 31.3, after 10.00 a.m. (Amsterdam time) in the place of receipt shall be deemed only to become effective on the following day.

The Borrowers must request that the Tranche is advanced either (i) to the relevant Seller's bank in accordance with the Approved Closing Procedure or (ii) to the relevant Borrower in the event that the Borrowers provide evidence together with the relevant Drawdown Notice that relevant Borrower is the registered owner of the relevant Vessel.

In the event that a Tranche which has been advanced to the relevant Seller's bank in accordance with the Approved Closing Procedure is subsequently returned to the Agent, such moneys shall be held by the Agent in a non-interest bearing suspense account in the name of the Agent until such time as the Borrowers notify the Agent that, either:


(a)	the Tranche shall be re-advanced to the relevant Seller's bank in accordance with the Approved Closing Procedure provided that (i) the Borrowers continue to be in compliance with their obligations pursuant to Clause 4.1.1 ( Initial conditions precedent ) and Clause 4.3 ( Further conditions precedent ) (ii) and the date of such re-advance falls within the Availability Period; or


(b)	the moneys shall be applied as a voluntary prepayment of the Loan by the Borrowers in accordance with Clause 7.3 ( Voluntary prepayment of Loan ).


5.2	Completion of a Drawdown Request A Drawdown 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 each Borrower;


5.2.2	the proposed Drawdown 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	Lenders' participation


5.3.1	Subject to Clauses 2 ( The Loan ), 3 ( Purpose ) and 4 ( Conditions of Utilisation ), each Lender shall make its participation in any Tranche available by the relevant Drawdown Date through its Facility Office.


5.3.2	The amount of each Lender's participation in any Tranche will be equal to the proportion borne by its Commitment to the Total Commitments.


5.4	Cancellation of Commitment The Total Commitments shall be cancelled on the earlier of (i) the Drawdown Date of the 2 ^nd Tranche to be advanced (ii) the end of the Availability Period of the last Tranche to be advanced, to the extent that it is unutilised at that time.


Section 4	Repayment, Prepayment and Cancellation


6	Repayment

6.1

Repayment of each Tranche The Borrowers agree to repay the Loan to the Agent for the account of the Lenders by 20 consecutive quarterly instalments, each in the sum of $426,000 together with a balloon payment of $18,730,000 falling due on the Termination Date in respect of the relevant Tranche, which shall reduce the amount outstanding in respect of that Tranche to nil, the first instalment falling due on the date which is three months after the relevant Drawdown Date, with subsequent instalments falling due at consecutive intervals of three calendar months thereafter, and the final instalment together with the relevant balloon payment falling due on the Termination Date in respect of the relevant Tranche.


6.2	Termination Date On the Termination Date in relation to either Tranche, such Tranche shall be repaid in full. On the Termination Date of the final Tranche (without prejudice to any other provision of this Agreement) the Loan and any amounts owing to any Finance Party under any of the Finance Documents shall be repaid in full.


6.3	Reduction of Repayment Instalments If the aggregate amount advanced to the Borrowers is less $27,250,000, the amount of each Repayment Instalment and the balloon payment shall be reduced pro rata to the amount actually advanced.


6.4	Reborrowing The Borrowers 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 a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in the Loan or it becomes unlawful for any Affiliate of a Lender for that Lender to do so:


7.1.3	that Lender shall promptly notify the Agent upon becoming aware of that event;


7.1.4	upon the Agent notifying the Borrowers, the Commitment of that Lender will be immediately cancelled; and


7.1.5	the Borrowers shall repay that Lender's participation in each Tranche on the last day of its current Interest Period or, if earlier, the date specified by that Lender in the notice delivered to the Agent and notified by the Agent to the Borrowers (being no earlier than the last day of any applicable grace period permitted by law).


7.2	Voluntary cancellation The Borrowers may, if they give the Agent not less than 5 Business Days' (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being an amount which is an integral multiple of $1,000,000) of the undrawn amount of a Tranche. Any cancellation under this Clause 7.2 shall reduce the Commitments of the Lenders rateably.


7.3	Voluntary prepayment of Loan The Borrowers may prepay the whole or any part of the Loan (but, if in part, being an amount which is an integral multiple of $1,000,000) subject as follows:


7.3.1	they give the Agent not less than 5 Business Days' (or such shorter period as the Majority Lenders may agree) prior notice;

7.3.2

they pay to the Agent for the account of the Lenders, in addition to the amount prepaid, a fee of an amount equal to one per cent of the amount prepaid, which fee shall be paid on the date of the prepayment in the event that such a prepayment occurs on or prior to the second anniversary of the earlier to occur of (i) the Drawdown Date of the 2 ^nd Tranche to be advanced or (ii) the last date of the Availability Period; and


7.3.3	any prepayment under this Clause 7.3 shall be applied in prepayment of the remaining Repayment Instalments in respect of the Loan in inverse order of maturity.


7.4	Right of cancellation and prepayment in relation to a single Lender


7.4.1	If:


(a)	any sum payable to any Lender by the Borrowers is required to be increased under Clause 12.2.2 ( Tax gross-up ); or


(b)	any Lender claims indemnification from the Borrowers under Clause 12.3 ( Tax indemnity ) or Clause 13.1 ( Increased costs ),


7.4.2	On receipt of a notice referred to in Clause 7.4.1 in relation to a Lender, the Commitment(s) of that Lender shall immediately be reduced to zero.


7.4.3	On the last day of the Interest Period in respect of each Tranche which ends after the Borrowers have given notice under Clause 7.4.1 in relation to a Lender (or, if earlier, the date specified by the Borrowers in that notice), the Borrowers shall repay that Lender's participation in that Tranche together with all interest and other amounts accrued under the Finance Documents.

^7.5


7.5.1	such Default becomes an Event of Default in which case the such Surplus shall be applied in prepayment of the remaining Repayment Instalments pro rata against each Tranche in inverse order of maturity; or


^7.5.2	such Default ceases to be continuing in which case such Surplus shall be released to the Borrowers.


^7.6	Cancellation on default under a Shipsales Contract In the event that:


^7.6.1	any of the events or circumstances specified in Clauses 23.1.6 ( Insolvency ), 23.1.7 ( Insolvency proceedings ) and 23.1.8 ( Creditors' process ) occurs in relation to a Seller or the Builder; or


^7.6.2	a Shipsales Contract is terminated, cancelled or otherwise ceases to remain in full force and effect at any time prior to its contractual expiry date,

the Agent may give the Borrowers notice of the cancellation of the Commitments of the Lenders in respect of the applicable Tranche.


7.7	Mandatory prepayment on Change of Control If a Change of Control occurs:


7.7.1	the relevant Borrower and/or the Guarantor (as the case may be) shall promptly notify the Agent upon having knowledge of that event;


7.7.2	no Lender shall be obliged to fund or continue to fund the relevant Tranche; and


^7.7.3	the Agent, acting on the instructions of the Majority Lenders, may, by not less than 10 Business Days' notice to the Borrowers:

^(a)

in the case of a Change of Control in respect of a Borrower or Borrowers, cancel the Commitments in respect of the Tranche or Tranches relating to the Vessel or Vessels owned by the relevant Borrower or Borrowers and declare all amounts outstanding under that Tranche or Tranches together with all other sums outstanding pursuant to the Finance Documents in respect of the relevant Tranche or Tranches due and payable within 60 days from the relevant Change of Control,; and


^(b)	in the case of a Change of Control in respect of the Guarantor, cancel the Commitments in respect of the Loan and declare the Loan, together with all sums outstanding pursuant to the Finance Documents, due and payable within 60 days from the relevant Change of Control.


7.8	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.

In the event of a prepayment under this Agreement the Borrowers shall, if applicable, terminate such Transactions as to ensure compliance with the provisions of Clause 22.26 ( Permitted Transactions ).

The Borrowers 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 Total Commitments cancelled under this Agreement may be subsequently reinstated.

If the Agent receives a notice under this Clause 7 it shall promptly forward a copy of that notice to the Borrowers or the affected Lender, as appropriate.


Section 5	Costs of Utilisation


8	Interest


8.1	Calculation of interest The rate of interest on each Tranche for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:


8.1.3	Margin;


8.1.4	LIBOR; and


8.1.5	Mandatory Cost, if any


8.2	Payment of interest Interest shall accrue day to day, shall be calculated on the basis of a 360 day year, and the Borrowers shall pay accrued interest on each Tranche on the last day of each Interest Period (and, if the Interest Period is longer than three months, on the dates falling at three monthly intervals after the first day of the Interest Period).

8.3


8.4	Notification of rates of interest The Agent shall promptly notify the Borrowers of the determination of a rate of interest under this Agreement.


9	Interest Periods


9.1	Duration of Interest Periods Each Interest Period shall start on the Drawdown Date of the relevant Tranche or (if that Tranche has already been advanced) on the last day of the preceding Interest Period of that Tranche and end on the next Repayment Date in respect of that Tranche.

9.2


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 each Lender's share of the relevant Tranche for that Interest Period shall be the percentage rate per annum which is the sum of:


10.2.3	the Margin;

10.2.4


10.2.5	the Mandatory Cost, if any, applicable to that Lender's participation in the relevant Tranche.

In this Agreement " Market Disruption Event " means:


(c)	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 Agent to determine LIBOR for dollars and the relevant Interest Period; or


(d)	before close of business in London on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in the relevant Tranche exceed 66 ² / ₃ % of that Tranche) that the cost to it of funding its participation in that Tranche from whatever source it may reasonably select would be in excess of LIBOR.


10.3	Alternative basis of interest or funding


10.3.3	If a Market Disruption Event occurs and the Agent or the Borrowers so require, the Agent and the Borrowers shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest.


10.3.4	Any alternative basis agreed pursuant to Clause 10.3.1 shall, with the prior consent of all the Lenders and the Borrowers, be binding on all Parties.


10.4	Break Costs The Borrowers shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Tranche or Unpaid Sum being paid by the Borrowers on a day other than the last day of an Interest Period for that Tranche or Unpaid Sum.

Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.


11	Fees

11.1

Commitment Fee The Borrowers shall pay to the Agent (for the account of the Lenders in proportion to their Commitments) a fee computed at the rate of 1.18% per annum of the undrawn portion of the Total Commitments during the period commencing on the date of this Agreement to and including the earlier to occur of (i) the Drawdown Date in respect of the 2 ^nd Tranche to be advanced and (ii) the end of the Availability Period.

The accrued commitment fee is payable on:


11.1.6	the last day of each successive period of six months which ends during the period commencing on the date of this Agreement to and including the earlier to occur of (i) the Drawdown Date in respect of the 2 ^nd Tranche to be advanced and (ii) the end of the Availability Period; and


11.1.7	on the earlier of (i) each Drawdown Date and (ii) the end of the Availability Period.


11.2	Upfront fee The Borrowers shall pay to the Arranger an upfront fee in the amount and at the times agreed in a Fee Letter.


11.3	Agency Fee In the event that there is more than one Lender at any time during the Facility Period, the Borrowers shall pay to the Agent an annual agency fee in the amounts and at the times to be agreed in a Fee Letter.


Section 6	Additional Payment Obligations


12	Tax Gross Up and Indemnities


12.1	Definitions 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 a Security Party to a Finance Party under Clause 12.2 ( Tax gross-up ) or a payment by a Borrower under Clause 12.3 ( Tax indemnity ).

Unless a contrary indication appears, in this Clause 12 a reference to "determines" or "determined" means a determination made in the absolute discretion of the person making the determination.


12.2	Tax gross-up Each Borrower shall (and shall procure that each other Security Party shall) make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law, subject as follows:

12.2.4


12.2.5	if a Tax Deduction is required by law to be made by a Borrower or any other Security Party, the amount of the payment due from that Borrower or that other Security Party 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;


12.2.6	if a Borrower or any other Security Party is required to make a Tax Deduction, that Borrower shall (and shall procure that such other Security Party 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; and

12.2.7


12.3	Tax indemnity


12.3.1	Each Borrower shall (within three Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.


12.3.2	Clause 12.3.1 shall not apply:


(e)	with respect to any Tax assessed on a Finance Party:


(i)	under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or


(ii)	under the law of the jurisdiction in which that Finance Party'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 that Finance Party; or


(f)	to the extent a loss, liability or cost:


(i)	is compensated for by an increased payment under Clause 12.2 ( Tax gross-up ); or


(ii)	relates to a FATCA Deduction required to be made by a Party.


12.3.3	A Protected Party making, or intending to make a claim under Clause 12.3.1 shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the Borrowers.


12.3.4	A Protected Party shall, on receiving a payment from a Borrower under this Clause 12.3, notify the Agent.


12.4	Tax Credit If a Borrower or any other Security Party makes a Tax Payment and the relevant Finance Party 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	that Finance Party has obtained and utilised that Tax Credit,


12.5	Stamp taxes The Borrowers shall pay and, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability that Finance Party 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

12.6.2

(a)

(b)

12.6.3


12.6.4	Any reference in this Clause 12.6 to any Party shall, at any time when such Party is treated as a member of a group for VAT purposes, include (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).


12.6.5	In relation to any supply made by a Finance Party to any Party under a Finance Document, if reasonably requested by such Finance Party, that Party must promptly provide such Finance Party with details of that Party's VAT registration and such other information as is reasonably requested in connection with such Finance Party'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 Business Days of a reasonable request by another Party:


(c)	confirm to that other Party whether it is:


(iii)	a FATCA Exempt Party; or


(iv)	not a FATCA Exempt Party;


(d)	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


(e)	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.


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 any Finance Party to do anything, and Clause 12.7.1(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


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 and, in addition, shall notify the Borrowers and the Agent and the Agent shall notify the other Finance Parties.


13	Increased Costs

13.1

In this Agreement:

(a) " Increased Costs " means:


(iii)	a reduction in the rate of return from the Loan or on a Finance Party's (or its Affiliate's) overall capital;


(iv)	an additional or increased cost; or


(v)	a reduction of any amount due and payable under any Finance Document,

(b)


13.1.8	" CRR " means 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), as amended, supplemented or restated; and


13.1.9	" CRD IV " means 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, as amended, supplemented or restated.


13.2	Increased cost claims


13.2.5	A Finance Party intending to make a claim pursuant to Clause 13.1 ( Increased costs ) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrowers.


13.2.6	Each Finance Party shall, as soon as practicable after a demand by the Agent, 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:


13.3.3	attributable to a Tax Deduction required by law to be made by a Borrower;


13.3.4	attributable to a FATCA Deduction required to be made by a Party;


13.3.5	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);


13.3.6	compensated for by the payment of the Mandatory Cost;


13.3.7	attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation; or

13.3.8

In this Clause 13.3, a reference to a " Tax Deduction " has the same meaning given to the term in Clause 12.1 ( Definitions ).


14	Other Indemnities


14.1	Currency indemnity If any sum due from a Borrower or the Guarantor 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:


14.1.7	making or filing a claim or proof against that Borrower or the Guarantor (as the case may be), or


14.1.8	obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,


14.2	Other indemnities


14.2.9	The Borrowers shall, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability incurred by that Finance Party as a result of:


(a)	the occurrence of any Event of Default;


(b)	a failure by a Borrower to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 28 ( Sharing among the Finance Parties );


(c)	funding, or making arrangements to fund, a Tranche following delivery by the Borrowers of a Drawdown Request but that Tranche 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 a Finance Party alone); or


(d)	a Tranche (or part of a Tranche) not being prepaid in accordance with a notice of prepayment given by the Borrowers.

14.2.10


14.2.11	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 applicable Sanctions; or


(b)	in connection with any Environmental Claim.


14.3	Indemnity to the Agent The Borrowers shall promptly indemnify the Agent against:


14.3.1	any cost, loss or liability incurred by the Agent (acting reasonably) as a result of:


(a)	investigating any event which it reasonably believes is a Default; or


(b)	acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; or


(c)	instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under this Agreement; and

14.3.2

any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by the Agent (otherwise than by reason of the Agent's gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 29.12 ( Disruption to Payment Systems etc .) notwithstanding the Agent's negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) in acting as Agent under the Finance Documents.


14.4	Indemnity to the Security Agent The Borrowers and the Guarantor shall promptly indemnify the Security Agent and every Receiver and Delegate against any cost, loss or liability incurred by any of them as a result of:


14.4.6	any failure by the Borrowers to comply with their obligations under Clause 16 ( Costs and Expenses );


14.4.7	acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised;


14.4.8	the taking, holding, protection or enforcement of the Security Documents;


14.4.9	the exercise of any of the rights, powers, discretions, authorities and remedies vested in the Security Agent and each Receiver and Delegate by the Finance Documents or by law;


14.4.10	any default by any Security Party in the performance of any of the obligations expressed to be assumed by it in the Finance Documents; or


14.4.11	acting as Security Agent, 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 Security Agent's, Receiver's or Delegate's gross negligence or wilful misconduct).


14.5	Indemnity survival The indemnities contained in this Agreement shall survive repayment of the Loan.


15	Mitigation by the Lenders

15.1


15.2	Limitation of liability The Borrowers shall promptly indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 15.1 ( Mitigation ). A Finance Party 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 Borrowers shall promptly on demand pay the Agent, the Security Agent and the Arranger the amount of all costs and expenses (including legal fees) reasonably incurred by any of them (and, in the case of the Security Agent, by any Receiver or Delegate) in connection with:


16.1.3	the negotiation, preparation, printing, execution, syndication and perfection of this Agreement and any other documents referred to in this Agreement;


16.1.4	the negotiation, preparation, printing, execution and perfection of any other Finance Documents executed after the date of this Agreement;


16.1.5	any other document which may at any time be required by a Finance Party to give effect to any Finance Document or which a Finance Party is entitled to call for or obtain under any Finance Document (including, without limitation, any valuation of a Vessel); and


16.1.6	any discharge, release or reassignment of any of the Security Documents.

16.2

Amendment costs If (a) a Security Party requests an amendment, waiver or consent or (b) an amendment is required under Clause 29.11 ( Change of currency ), the Borrowers shall, within three Business Days of demand, reimburse each of the Agent and the Security Agent for the amount of all duly documented costs and expenses (including legal fees) reasonably incurred by the Agent and the Security Agent (and, in the case of the Security Agent, by any Receiver or Delegate) in responding to, evaluating, negotiating or complying with that request or requirement.

16.3

Enforcement and preservation costs The Borrowers shall, within three Business Days of demand, pay to each Finance Party and each other Secured Party the amount of all costs and expenses (including legal fees) incurred by that Finance 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 Security Agent as a consequence of taking or holding the Security Documents or enforcing those rights including (without limitation) any losses, costs and expenses which that Finance Party or other Secured Party may from time to time sustain, incur or become liable for by reason of that Finance Party or other Secured Party being mortgagee of a Vessel and/or a lender to a Borrower, or by reason of that Finance Party or 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 a Vessel.

16.4

Other costs The Borrowers shall, within three Business Days of demand, pay to each Finance Party and each other Secured Party the amount of all sums which that Finance Party or other Secured Party may pay or become actually or contingently liable for on account of a Borrower in connection with a Vessel (whether alone or jointly or jointly and severally with any other person) including (without limitation) all sums which that Finance Party or other Secured Party may pay or guarantees which it may give in respect of the Insurances, any expenses incurred by that Finance Party or other Secured Party in connection with the maintenance or repair of a Vessel or in discharging any lien, bond or other claim relating in any way to a Vessel, and any sums which that Finance Party or other Secured Party may pay or guarantees which it may give to procure the release of a Vessel from arrest or detention.


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 Borrowers shall execute and deliver to the Security Agent or cause to be executed and delivered to the Security Agent the following documents in such forms and containing such terms and conditions as the Security Agent shall require:


17.1.12	first preferred mortgages over the Vessels;


17.1.13	first priority deeds of assignment of the Insurances, Earnings, any Charter and Requisition Compensation of the Vessels; and the first priority assignments of Insurances from the Managers contained in the Managers' Undertakings;


17.1.14	the guarantee and indemnity from the Guarantor;


17.1.15	account security deeds in respect of all amounts from time to time standing to the credit of the Accounts;


17.1.16	first priority charges of all the issued shares of the Borrowers;


17.1.17	a first priority deed of assignment over the Master Agreement Proceeds;


17.1.18	first priority deeds of assignment of any Intercompany Loan Agreement; and


17.1.19	subordination agreements by which the rights of any lender under any Intercompany Loan are fully subordinated to the rights of the Finance Parties under the Finance Documents.


17.2	Accounts The Borrowers shall maintain the Accounts with the Account Bank for the duration of the Facility Period free of Encumbrances (other than Permitted Encumbrances) and rights of set off other than those created by or under the Finance Documents and rights of set-off in favour of the Account Bank as account holder.


17.3	Earnings The Borrowers shall procure that all Earnings, proceeds from any Insurances, any liquidated damages, any Requisition Compensation and the relevant advanced Tranche are credited to the Account of the relevant Borrower.


17.4	Application of Accounts The Borrowers shall procure that there is transferred from the relevant Account to the Agent for the account of the Lenders:


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 Borrowers irrevocably authorise the Security Agent to instruct the Account Bank to make those transfers.


17.5	Borrowers' obligations not affected If for any reason the amount standing to the credit of the relevant Account is insufficient to pay any Repayment Instalment or to make any payment of interest when due, the Borrowers' obligation to pay that Repayment Instalment or to make that payment of interest shall not be affected.


17.6	Application of Earnings During the Facility Period the Earnings are to be applied as follows:


17.6.1	firstly, towards payment of Operating Expenses;


17.6.2	secondly, towards payment of all other sums other than principal and interest owing to the Finance Parties under the Finance Documents;


17.6.3	thirdly, towards payment of debt service under this Agreement; and


17.6.4	fourthly, towards payment of debt service under the Master Agreement,

and subject to no Event of Default being continuing, the balance of the funds in the Accounts will be freely available to the Borrowers.


17.7	Relocation of Accounts On and at any time an Event of Default is continuing, the Security Agent may without the consent of the Borrowers instruct the Account Bank to relocate the Accounts to any other branch of the Account Bank, without prejudice to the continued application of this Clause 17 and the rights of the Finance Parties under the Finance Documents.


17.8	Access to information The Borrowers agree that the Security Agent (and its nominees) may from time to time during the Facility Period review the records held by the Account Bank (whether in written or electronic form) in relation to the Accounts, and irrevocably waive any right of confidentiality which may exist in relation to those records.

^17.9

Statements Without prejudice to the rights of the Security Agent under Clause 17.8 ( Access to information ), the Borrowers shall procure that the Account Bank provides to the Security Agent, no less frequently than each calendar month during the Facility Period, written statements of account showing all entries made to the credit and debit of each of the Accounts during the immediately preceding calendar month.

17.10

Application after acceleration From and after the giving of notice to the Borrowers by the Agent under Clause 23.2 ( Acceleration ), the Borrowers shall procure that all sums from time to time standing to the credit of either of the Accounts are immediately transferred to the Security Agent or any Receiver or Delegate for application in accordance with Clause 17.11 ( Application of moneys by Security Agent ) and the Borrowers irrevocably authorise the Security Agent to instruct the Account Bank to make those transfers.


17.11	Application of moneys by Security Agent The Borrowers and the Finance Parties irrevocably authorise the Security Agent or any Receiver or Delegate to apply all moneys which it receives and is entitled to receive:


17.11.1	pursuant to a sale or other disposition of a Vessel or any right, title or interest in a Vessel; or


17.11.2	by way of payment of any sum in respect of the Master Agreement Proceeds, any Intercompany Loan Agreement, the Insurances, Earnings, any Charter or any Requisition Compensation; or


17.11.3	by way of transfer of any sum from either of the Accounts; or


17.11.4	otherwise under or in connection with any Security Document,

in or towards satisfaction of the Indebtedness in the following order:


17.11.5	first, any unpaid fees, costs, expenses and default interest due to the Agent and the Security Agent (and, in the case of the Security Agent, to any Receiver or Delegate) under all or any of the Finance Documents, such application to be apportioned between the Agent and the Security Agent pro rata to the aggregate amount of such items due to each of them;


17.11.6	second, any unpaid fees, costs, expenses (including any sums paid by the Lenders under Clause 26.11 ( Indemnity )) of the Lenders due under this Agreement, such application to be apportioned between the Lenders pro rata to the aggregate amount of such items due to each of them;


17.11.7	third, any accrued but unpaid default interest due to the Lenders under this Agreement, such application to be apportioned between the Lenders pro rata to the aggregate amount of such default interest due to each of them;


17.11.8	fourth, any other accrued but unpaid interest due to the Lenders under this Agreement, such application to be apportioned between the Lenders pro rata to the aggregate amount of such interest due to each of them;


17.11.9	fifth, any principal of the Loan due and payable but unpaid under this Agreement, such application to be apportioned between the Lenders pro rata to the aggregate amount of such principal due to each of them; and


17.11.10	sixth, any other sum due and payable to any Finance Party but unpaid under all or any of the Finance Documents, such application to be apportioned between the Finance Parties pro rata to the aggregate amount of any such sum due to each of them,

17.12

Retention on account Moneys to be applied by the Security Agent or any Receiver or Delegate under Clause 17.11 ( Application of moneys by Security Agent ) shall be applied as soon as practicable after the relevant moneys are received by it, or otherwise become available to it, save that (without prejudice to any other provisions contained in any of the Security Documents) the Security Agent or any Receiver or Delegate may retain any such moneys by crediting them to a suspense account for so long and in such manner as the Security Agent or such Receiver or Delegate may from time to time determine with a view to preserving the rights of the Finance Parties or any of them to prove for the whole of the Indebtedness (or any relevant part) against the Borrowers or any of them or any other person liable.

17.13

Additional security If at any time the aggregate of the FMV of the Vessels and the value of any additional security (such value to be the face amount of the deposit (in the case of cash), determined conclusively by appropriate advisers appointed by the Agent (in the case of other charged assets), and determined by the Agent in its discretion (in all other cases)) for the time being provided to the Security Agent under this Clause 17.13 is less than 145% of the amount of the Loan then outstanding (the " VTL Coverage "), the Borrowers shall, within 30 days of the Agent's request, at the Borrowers' option:


17.13.1	pay to the Security Agent or to its nominee a cash deposit in the amount of the shortfall to be secured in favour of the Security Agent as additional security for the payment of the Indebtedness; or


17.13.2	give to the Security Agent other additional security in amount and form acceptable to the Security Agent in its discretion; or


17.13.3	prepay the Loan in the amount of the shortfall.

Clauses 6.4 ( Reborrowing ), 7.3.3 ( Voluntary prepayment of Loan ) and 7.8 ( Restrictions ) shall apply, mutatis mutandis , to any prepayment made under this Clause 17.13 and the value of any additional security provided shall be determined by the Agent in its discretion.

If the Borrowers have provided additional security in accordance with the Agent's request under this Clause 17.13, the Borrowers may no less than six months after the Borrowers have provided additional security in accordance with the Agent's request under this Clause 17.13 request that the Agent test compliance with the VTL Coverage. The Borrowers shall bear the cost of valuations obtained by the Agent pursuant to this paragraph to determine the FMV of a Vessel and the value of any additional security provided in accordance with the Agent's request under this Clause 17.13. If the Agent shall determine when testing compliance with the VTL Coverage pursuant to this paragraph that all or any part of that additional security may be released without resulting in a shortfall in the VTL Coverage, provided that no Event of Default is continuing then the Security Agent shall effect a release of all or any part of that additional security in accordance with the Agent's instructions, but this shall be without prejudice to the Agent's right to make a further request under this Clause 17.13 should the value of the remaining security subsequently merit it.

The Agent may obtain valuations to determine the FMV of a Vessel for the purpose of testing compliance of this Clause 17.13 at any time. The Agent shall bear the cost of valuations obtained by the Agent to determine the FMV of a Vessel for the purpose of testing compliance of this Clause 17.13 provided that if an Event of Default is continuing the Borrowers shall bear the cost of valuations obtained by the Agent to determine the FMV of a Vessel for the purpose of testing compliance of this Clause 17.13.

17.14

Contingent Amount The Borrowers and the Swap Provider have agreed to enter into the Master Agreement for the hedging of the Borrowers' exposure to interest rate fluctuations. The Borrowers and the Swap Provider have agreed that the Mortgages shall secure any obligations payable by the Borrowers to the Swap Provider at any time pursuant to the Master Agreement in a maximum aggregate amount of up to $10,900,000. The Borrowers and the Swap Provider have further agreed that each of the other Security Documents shall not have any limitation as to the amount payable by the Borrowers to the Swap Provider at any time pursuant to the Master Agreement which is secured by such other Security Documents.


18	Guarantee and Indemnity


18.1	Guarantee and indemnity The Guarantor irrevocably and unconditionally jointly and severally:


18.1.5	guarantees to each Finance Party punctual performance by each other Security Party of all that Security Party's obligations under the Finance Documents;


18.1.6	undertakes with each Finance Party that whenever another Security Party 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 was the principal obligor; and

18.1.7


18.2	Continuing Guarantee This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Security Party under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.

18.3


18.4	Waiver of defences The obligations of the Guarantor under this Clause 18 will not be affected by an act, omission, matter or thing which, but for this Clause 18.4, would reduce, release or prejudice any of its obligations under this Clause 18 (without limitation and whether or not known to it or any Finance Party) including:


18.4.1	any time, waiver or consent granted to, or composition with, any Security Party or other person;


18.4.2	the release of any other Security Party or any other person under the terms of any composition or arrangement with any creditor of any Security Party;


18.4.3	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 Security Party 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;


18.4.4	any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of a Security Party or any other person;


18.4.5	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;


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


18.4.7	any insolvency or similar proceedings.

18.5


18.6	Immediate recourse The Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from the Guarantor under this Clause 18. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.


18.7	Appropriations Until all amounts which may be or become payable by the Security Parties under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:


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


18.7.2	hold in an interest-bearing suspense account any moneys received from the Guarantor or on account of the Guarantor's liability under this Clause 18.

18.8


18.8.1	to be indemnified by a Security Party;


18.8.2	to claim any contribution from any other guarantor of any Security Party's obligations under the Finance Documents;


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


18.8.4	to bring legal or other proceedings for an order requiring any Security Party to make any payment, or perform any obligation, in respect of which the Guarantor has given a guarantee, undertaking or indemnity under Clause 18.1 ( Guarantee and indemnity );


18.8.5	to exercise any right of set-off against any Security Party; and/or


18.8.6	to claim or prove as a creditor of any Security Party in competition with any Finance Party.


^18.9	Additional security This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Finance Party.

18.10


18.10.11	demand or accept payment in whole or in part of any moneys owing to it by the Borrowers or any of them or any other Security Party;


18.10.12	take any steps to enforce its rights to recover any moneys owing to it by the Borrowers or any of them or any other Security Party and more particularly (but without limitation) take or issue any judicial or other legal proceedings against the Borrowers or any of them or other Security Party or any of their respective property or assets; or


18.10.13	prove in the liquidation or other dissolution of the Borrowers or any of them or other Security Party in competition with a Finance Party.


Section 8	Representations, Undertakings and Events of Default


19	Representations


19.1	Representations Each Borrower and the Guarantor make the representations and warranties set out in this Clause 19 to each Finance Party.


19.1.3	Status Each of the Security Parties:


(a)	is a corporation 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.


19.1.4	Binding obligations Subject to the Legal Reservations:


(a)	the obligations expressed to be assumed by each of the Security Parties 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 19.1.2(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.


19.1.5	Non-conflict with other obligations The entry into and performance by each of the Security Parties of, and the transactions contemplated by, the Relevant Documents do not conflict with:


(e)	any law or regulation applicable to such Security Party;


(f)	the constitutional documents of such Security Party; or


(g)	any agreement or instrument binding upon such Security Party or any of such Security Party's assets or constitute a default or termination event (however described) under any such agreement or instrument.


19.1.6	Power and authority


(a)	Each of the Security Parties 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 Security Party 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.


19.1.7	Validity and admissibility in evidence All Authorisations required or desirable:


(c)	to enable each of the Security Parties 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 each Finance Party to enforce and exercise all its rights under the Relevant Documents; and


(d)	to make the Relevant Documents to which any Security Party is a party admissible in evidence in its Relevant Jurisdictions,

have been obtained or effected and are in full force and effect.


19.1.8	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 Security Party.


(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 Security Party.


19.1.9	Insolvency No corporate action, legal proceeding or other procedure or step described in Clause 23.1.7 ( Insolvency proceedings ) or creditors' process described in Clause 23.1.8 ( Creditors' process ) has been taken or threatened in relation to a Security Party; and none of the circumstances described in Clause 23.1.6 ( Insolvency ) applies to a Security Party.

19.1.10


19.1.11	Deduction of Tax None of the Security Parties 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.


19.1.12	No default


(a)	No Event of Default and, on the date of this Agreement and each Drawdown Date, no Default has occurred and is continuing or is reasonably likely to result from the advance of any Tranche or the entry into, the performance of, or any transaction contemplated by, any of the Relevant Documents.

(b)


19.1.13	No misleading information Save as disclosed in writing to the Agent and the Arranger prior to the date of this Agreement:

(a)


(b)	all other written information provided by any of the Security Parties (including its advisers) to a Finance Party was true, complete and accurate in all material respects as at the date it was provided and is not misleading in any respect.


19.1.14	Financial statements


(a)	The Original Financial Statements were prepared in accordance with US GAAP consistently applied.


(b)	The audited Original Financial Statements give a true and fair view of the Guarantor's financial condition and results of operations during the relevant financial year.


(c)	There has been no material adverse change in the Guarantor's assets, business or financial condition since the date of the Original Financial Statements.


(d)	The Guarantor's most recent financial statements delivered pursuant to Clause 20.1 ( Financial statements ):


(i)	have been prepared in accordance with US 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.


(e)	Since the date of the most recent financial statements delivered pursuant to Clause 20.1 ( Financial statements ) there has been no material adverse change in the business, assets or financial condition of the Guarantor.


19.1.15	No proceedings pending or threatened No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which are reasonably likely to have a Material Adverse Effect have been started or threatened against any of the Security Parties.


19.1.16	No breach of laws None of the Security Parties has breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.


19.1.17	Environmental laws


(a)	Each of the Security Parties is in compliance with Clause 22.3 ( Environmental compliance ) and 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 is threatened against any of the Security Parties where that claim has or is reasonably likely, if determined against that Security Party, to have a Material Adverse Effect.


19.1.18	Taxation


(a)	None of the Security Parties 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 Security Parties with respect to Taxes.


(c)	Each of the Security Parties is resident for Tax purposes only in its Original Jurisdiction.


19.1.19	Anti-corruption law Each of the Security Parties and each Affiliate of any of them has conducted its businesses in compliance with applicable anti-corruption laws and has instituted and maintained policies and procedures designed to promote and achieve compliance with such laws.


19.1.20	No Encumbrance or Financial Indebtedness


(a)	No Encumbrance (other than any Permitted Encumbrance) exists over all or any of the present or future assets of the Borrowers.


(b)	The Borrowers do not have any Financial Indebtedness outstanding other than as permitted by this Agreement.


19.1.21	Pari passu ranking The payment obligations of each of the Security Parties 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.


19.1.22	No adverse consequences


(a)	It is not necessary under the laws of the Relevant Jurisdictions of any of the Security Parties:


(i)	in order to enable any Finance Party to enforce its rights under any Finance Document; or


(ii)	by reason of the execution of any Finance Document or the performance by it of its obligations under any Finance Document,

that any Finance Party should be licensed, qualified or otherwise entitled to carry on business in any of the Relevant Jurisdictions of any of the Security Parties.


(b)	No Finance Party is or will be deemed to be resident, domiciled or carrying on business in any of the Relevant Jurisdictions of any of the Security Parties by reason only of the execution, performance and/or enforcement of any Finance Document.


19.1.23	Disclosure of material facts No Borrower nor the Guarantor is aware of any material facts or circumstances which have not been disclosed to the Agent and which might, if disclosed, have adversely affected the decision of a person considering whether or not to make loan facilities of the nature contemplated by this Agreement available to the Borrowers.

19.1.24


^19.1.25	No Immunity No Security Party or any of its assets is immune to any legal action or proceeding

19.1.26


19.1.27	Sanctions As regards Sanctions:


(a)	none of the Security Parties or any Affiliate of any of them is a Prohibited Person or is owned or controlled by, or acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person and none of such persons owns or controls a Prohibited Person;


(b)	no proceeds of the Loan shall be made available, directly or indirectly, to or for the benefit of a Prohibited Person or otherwise shall be, directly or indirectly, applied in a manner or for a purpose prohibited by Sanctions; and


(c)	each of the Security Parties and each Affiliate of any of them is in compliance with all Sanctions.

19.1.28


19.2	Repetition Each Repeating Representation is deemed to be repeated by each Borrower and the Guarantor by reference to the facts and circumstances then existing on the date of each Drawdown Request, on each Drawdown Date, on the first day of each Interest Period.


20	Information Undertakings

The undertakings in this Clause 20 remain in force for the duration of the Facility Period.


20.1	Financial statements The Guarantor shall supply to the Agent in sufficient copies for all of the Lenders:


20.1.3	as soon as the same become available, but in any event within 120 days after the end of each of its financial years, its audited consolidated financial statements for that financial year; and


20.1.4	as soon as the same become available, but in any event within 90 days after the end of each half year during each of its financial years, its unaudited consolidated semi-annual management accounts for that half year.


20.2	Compliance Certificate

20.2.8


20.2.9	Each Borrower shall supply to the Agent on 31 December and 30 June of each year during the Facility Period a Compliance Certificate stating only that no Event of Default is continuing.

20.2.10

Each Borrower shall supply to the Agent, with each set of its annual financial statements delivered pursuant to Clause 20.1.1 ( Financial statements ) , valuations issued no more than 30 days prior to such date by two Approved Shipbrokers evidencing the FMV of the relevant Vessel which the Agent shall use in order to determine compliance with Clause 17.13 ( Additional Security ), such valuations being at the cost of the Borrowers .


^20.2.11	Each Compliance Certificate shall be signed by the chief financial officer of the Guarantor and, in the case of each Compliance Certificate issued together with its annual financial statements, by the Borrowers' auditors.


20.3	Requirements as to financial statements

Each set of financial statements delivered by the Guarantor under Clause 20.1 ( Financial statements ):


20.3.5	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; and


20.3.6	shall be prepared using US 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 Agent that there has been a change in US GAAP, the accounting practices or reference periods and its auditors deliver to the Agent:


(a)	a description of any change necessary for those financial statements to reflect the US 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 Agent, to enable the Agent to determine whether Clause 21 ( 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.


20.4	Information: miscellaneous Each Borrower and the Guarantor shall supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests):


20.4.1	at the same time as they are dispatched, copies of all documents dispatched by that Borrower to its shareholders generally (or any class of them) or dispatched by that Borrower or any other Security Party to its creditors generally (or any class of them);


20.4.2	promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any Security Party, and which are reasonably likely to have a Material Adverse Effect;


20.4.3	promptly, such information as the Security Agent may reasonably require about the Charged Property and compliance of the Security Parties with the terms of any Security Documents including without limitation cash flow analyses and details of the operating costs of any Vessel;

20.4.4


20.4.5	promptly on request, such further information as any Finance Party through the Agent may reasonably request.


20.5	Notification of default


20.5.3	Each Borrower and the Guarantor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.


20.5.4	Promptly upon a request by the Agent, each Borrower shall supply to the Agent a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).


20.6	"Know your customer" checks


20.6.7	If:


(c)	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;


(d)	any change in the status of a Security Party after the date of this Agreement; or


(e)	a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,

obliges the Agent or any Lender (or, in the case of Clause 20.6.1(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, each Borrower shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or, in the case of the event described in Clause 20.6.1(c), on behalf of any prospective new Lender) in order for the Agent, such Lender or, in the case of the event described in Clause 20.6.1(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 the Finance Documents including without limitation obtaining, verifying and recording certain information and documentation that will allow the Agent and any Lender to identify each Security Party in accordance with the requirements to the Patriot Act.

20.6.8


21	Financial Covenants

21.1

Minimum Liquidity Cash and Cash Equivalents shall at all times be the greater of (i) $850,000 per vessel owned by the Group (the " Group Vessel Minimum Liquidity ") and (ii) $50,000,000) (the “ Minimum Liquidity ”). For the purpose of this test, Cash and Cash Equivalents can include unutilised and freely available parts of revolving credit facilities with a maturity date in excess of 12 months after the date of the annual financial statements delivered pursuant to Clause 20.1.1 ( Financial statements ) or the set of management accounts delivered pursuant to Clause 20.1.2 ( Financial statements ) (as the case may be) provided that 66 ² / ₃ % of the Minimum Liquidity shall at all times consist of Cash.

In the event that:


(a)	the Group Vessel Minimum Liquidity is greater than $50,000,000; and


(b)	the aggregate of the Cash and Cash Equivalent is less than the Group Vessel Minimum Liquidity,

the Borrowers shall prepay the Loan in an amount which is equal to:


(i)	the Group Vessel Minimum Liquidity, less


(ii)	Cash and Cash Equivalents.

Any such prepayment shall (i) be made within 30 days of the date of the applicable Compliance Certificate and (ii) shall be applied in prepayment of the remaining Repayment Instalments pro rata against each Tranche in inverse order of maturity.

21.2


21.3	Maximum Leverage A ratio of Net Debt to Consolidated Total Capitalisation of not more than 0.60 to 1.00.

The following definitions shall apply to this Clause 21:

“ Cash ” means any credit balance on any deposit, savings, current or other account, and any cash in hand held with banks or other financial institutions of the Group which is:


21.3.6	not subject to any Encumbrance (other than pursuant to any Security Document);


21.3.7	denominated and payable in a freely transferable and freely convertible currency; and


21.3.8	capable of being remitted to the Group.

“ Cash Equivalents ” means:


(a)	unencumbered securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof);


(b)	time deposits, certificates of deposit or deposits (in each case, unencumbered) in the interbank market of any commercial bank of recognized standing organized under the laws of the United States of America, any state thereof or any foreign jurisdiction having capital and surplus in excess of $500,000,000; and


(c)	such other securities or instruments as the Majority Lenders shall agree in writing,


(a)	all Financial Indebtedness; and


(a)	all obligations to pay a specific purchase price for goods or services whether or not delivered or accepted (including take-or-pay and similar obligations which in accordance with US GAAP would be shown on the liability side of a balance sheet),

provided that balance sheet accruals for future dry docking expenses shall not be classified as Consolidated Funded Debt.

“ Consolidated Tangible Net Worth ” means, on a consolidated basis, the total shareholders’ equity (including retained earnings) of the Guarantor, minus goodwill.

“ Consolidated Total Capitalization ” means Consolidated Tangible Net Worth plus Consolidated Funded Debt.

“ Net Debt ” means Financial Indebtedness less Cash and Cash Equivalents.


22	General Undertakings

The undertakings in this Clause 22 remain in force for the duration of the Facility Period.


22.1	Authorisations Each Borrower and the Guarantor shall promptly:


22.1.7	obtain, comply with and do all that is necessary to maintain in full force and effect; and


22.1.8	supply certified copies to the Agent of,

any Authorisation required under any law or regulation of a Relevant Jurisdiction to:


(a)	enable any Security Party 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 Security Party to carry on its business where failure to do so has or is reasonably likely to have a Material Adverse Effect.


22.2	Compliance with laws


22.3	Environmental compliance

Each Borrower and the Guarantor shall:


22.3.5	comply with all Environmental Laws;


22.3.6	obtain, maintain and ensure compliance with all requisite Environmental Approvals; and


22.3.7	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.


22.4	Environmental Claims

Each Borrower and the Guarantor shall promptly upon becoming aware of the same, inform the Agent in writing of:


22.4.9	any Environmental Claim against any of the Security Parties which is current, pending or threatened; and


22.4.10	any facts or circumstances which are reasonably likely to result in any Environmental Claim being commenced or threatened against any of the Security Parties,

where the claim, if determined against that Security Party, has or is reasonably likely to have a Material Adverse Effect.


22.5	Anti-corruption law


22.5.1	Each Borrower and the Guarantor shall not (and shall procure that no other Security Party will) directly or indirectly use the proceeds of the Loan for any purpose which would breach the Bribery Act 2010, the United States Foreign Corrupt Practices Act of 1977 or other similar legislation in other jurisdictions.


22.5.2	Each Borrower and the Guarantor shall (and shall procure that each other Security Party 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.


22.6	Taxation


22.6.14	Each Borrower and the Guarantor shall (and shall procure that each other Security Party 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 Agent under Clause 20.1 ( 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.


22.6.15	No Borrower nor the Guarantor may (and no other Security Party may) change its residence for Tax purposes.


22.7	Evidence of good standing Each Borrower will from time to time if requested by the Agent provide the Agent with evidence in form and substance satisfactory to the Agent that the Security Parties and all corporate shareholders of any of the Security Parties remain in good standing.


22.8	Pari passu ranking Each Borrower and the Guarantor shall ensure that at all times any unsecured and unsubordinated claims of a Finance Party 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.


22.9	Negative pledge

In this Clause 22.9 " Quasi-Security " means an arrangement or transaction described in Clause 22.9.2.

Except as permitted under Clause 22.9.3:


22.9.1	no Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) create nor permit to subsist any Encumbrance over any of its assets; and


22.9.2	no Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will):


(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 a Security Party;


(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.


22.9.3	Clauses 22.9.1 and 22.9.2 do not apply to any Encumbrance or (as the case may be) Quasi-Security, which is a Permitted Encumbrance.


22.10	Disposals


22.10.1	Except as permitted under Clause 22.10.2, no Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) without the prior written consent of the Agent 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.


22.10.2	Clause 22.10.1 does not apply to any sale, lease, transfer or other disposal which is a Permitted Disposal.


22.11	Arm's length basis


22.11.1	Except as permitted under Clause 22.11.2, no Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) enter into any transaction with any person except on arm's length terms and for full market value.


22.11.2	Fees, costs and expenses payable under the Relevant Documents in the amounts set out in the Relevant Documents delivered to the Agent under Clause 4.1 ( Initial conditions precedent) or agreed by the Agent shall not be a breach of this Clause 22.11.


22.12	Merger No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction.


22.13	Change of business No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) make any substantial change to the general nature of its business from that carried on at the date of this Agreement.


22.14	No other business No Borrower shall engage in any business other than the ownership, operation, chartering and management of the relevant Vessel.


22.15	No acquisitions No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) 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.


22.16	No Joint Ventures No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will):


22.16.1	enter into, invest in or acquire (or agree to acquire) any shares, stocks, securities or other interest in any Joint Venture; or


22.16.2	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).


22.17	No borrowings No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) incur or allow to remain outstanding any Financial Indebtedness except for:


22.17.1	the Loan


22.17.2	any Intercompany Loans made available pursuant to an Intercompany Loan Agreement provided that :


(a)	the rights of any lender under such Intercompany Loan are (i) fully subordinated to the rights of the Finance Parties under the Finance Documents and (ii) assigned to the Security Agent pursuant to an Intercompany Subordination and Assignment Agreement; and


(b)	the rights of a Borrower under such Intercompany Loan Agreement are assigned to the Security Agent pursuant to an Intercompany Loan Assignment,


22.17.3	under the Master Agreement; or


22.17.4	any Financial Indebtedness arising in the ordinary course of business in connection with the chartering, operation or repair of a Vessel.


22.18	No substantial liabilities Except in the ordinary course of business, no Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) incur any liability to any third party which is in the Agent's opinion of a substantial nature.


22.19	No loans or credit No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) 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 relevant Vessel.


22.20	No guarantees or indemnities No Borrower shall (and shall procure that no other Security Party (other than the Guarantor) will) incur or allow to remain outstanding any guarantee in respect of any obligation of any person.


22.21	No dividends or payments pursuant to Intercompany Loans In the event that an Event of Default is continuing or an Event of Default would result from undertaking any of the below no Borrower shall:


(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;


(c)	redeem, repurchase, defease, retire or repay any of its share capital or resolve to do so;


(d)	issue any new shares in its share capital or resolve to do so; or


(e)	make any payment or repayment pursuant to any Intercompany Loan or Intercompany Loan Agreement.


22.22	Inspection of records Each Borrower and the Guarantor will permit the inspection of its financial records and accounts from time to time by the Agent or its nominee.

22.23

No change in Relevant Documents No Borrower nor the Guarantor shall (and shall procure that no other Security Party will) amend, vary, novate, supplement, supersede, waive or terminate any term of, any of the Relevant Documents which are not Finance Documents but excluding the Shipsales Contracts (save that no reduction to a Contract Price shall be permitted) and the Management Agreement, or any other document delivered to the Agent pursuant to Clause 4.1 ( Initial conditions precedent ) or Clause 4.2 ( Further conditions precedent ) or Clause 4.3 ( Conditions subsequent ).


22.24	Further assurance


22.24.1	Each Borrower and the Guarantor shall (and shall procure that each other Security Party shall) promptly do all such acts or execute all such documents (including assignments, transfers, mortgages, charges, notices and instructions) as the Security Agent may reasonably specify (and in such form as the Security Agent may reasonably require in favour of the Security Agent or its nominee(s)):

(a)


(b)	to confer on the Security Agent or confer on the Finance Parties an Encumbrance over any property and assets of that Borrower (or that other Security Party 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.

22.24.2


^22.25	No dealings with Master Agreement No Borrower shall assign, novate or encumber or in any other way transfer any of its rights or obligations under the Master Agreement, nor enter into any interest rate exchange or hedging agreement with anyone other than the Swap Provider.


^22.26	Permitted Transactions No Borrower shall maintain outstanding Transactions the aggregate notional amount of which shall exceed the amount of the relevant Tranche from time to time.


^22.27	No change of ownership of the Borrowers The Guarantor will not permit any change in the beneficial ownership or control of the Borrowers or any of them from that advised to the Agent by the Borrowers at the date of this Agreement and will procure that each Borrower will remain a wholly owned subsidiary of the Guarantor.

^22.28


22.29	Sanctions


22.29.1	Each Borrower and the Guarantor:


(a)	undertakes that it, each Security Party, any other member of the Group, or any Affiliate of any of them, or any director, officer, agent, employee or person acting on behalf of any of the foregoing, is not a Restricted Person and does not act directly or indirectly on behalf of a Restricted Person;


(b)	shall, and shall procure that each Security Party, each other member of the Group, and each Affiliate of any of them, shall, not use any revenue or benefit derived from any activity or dealing with a Restricted Person in discharging any obligation due or owing to the Finance Parties;


(c)	shall procure that no proceeds from any activity or dealing with a Restricted Person are credited to any bank account held with any Finance Party in its name, in the name of any Security Party, in the name of any other member of the Group, or any Affiliate of any of them;


(d)	undertakes that it, each Security Party, each other member of the Group, and each Affiliate of any of them, has taken reasonable measures to ensure compliance with Sanctions;


(e)	shall, and shall procure that each Security Party and each other member of the Group shall, to the extent permitted by law promptly upon becoming aware of them supply to the Agent details of any claim, action, suit, proceedings or investigation against it with respect to Sanctions by any Sanctions Authority; and


(f)	shall not accept, obtain or receive any goods or services from any Restricted Person, except (without limiting Clause 22.2 ( Compliance with laws )), to the extent relating to any warranties and/or guarantees given and/or liabilities incurred in respect of an activity or dealing with a Restricted Person by a Security Party in accordance with this Agreement.


22.29.2	Each Party acknowledges and agrees that the Borrowers and the Guarantor do not undertake the requirements under Clause 22.29.1 in favour of any Lender incorporated or having its registered office in the Federal Republic of Germany and no such Lender shall have any right thereunder and shall be deemed not to be a party to the provisions of this Clause 22.29.


22.30	Assignment of Claims The Guarantor shall not assign any claims that it may have against another Security Party, against a Vessel or in respect of a Relevant Document.


22.31	Use of proceeds

22.31.1


22.31.2	Each Party acknowledges and agrees that the Borrowers and the Guarantor do not undertake the requirements under Clause 22.31.1 in favour of any Lender incorporated or having its registered office in the Federal Republic of Germany and no such Lender shall have any right thereunder and shall be deemed not to be a party to the provisions of this Clause 22.31.

22.33


23	Events of Default


23.1	Events of Default Each of the events or circumstances set out in this Clause 23.1 is an Event of Default.


23.1.9	Non-payment A Security Party 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:


(e)	its failure to pay is caused by:


(iii)	administrative or technical error; or


(iv)	a Disruption Event; and


(f)	payment is made within two Business Days of its due date.


23.1.10	Other specific obligations


(a)	Any requirement of Clause 21 ( Financial Covenants ) is not satisfied.


(b)	A Security Party does not comply with any obligation in a Finance Document relating to the Insurances or with Clause 17.13 ( Additional security ).


23.1.11	Other obligations


(a)	A Security Party does not comply with any provision of a Finance Document (other than those referred to in Clause 23.1.1 ( Non-payment ) and Clause 23.1.2 ( Other specific obligations ).


(b)	No Event of Default under this Clause 23.1.3 will occur if the failure to comply is capable of remedy and is remedied within ten Business Days of the earlier of (i) the Agent giving notice to the Borrowers and (ii) the Borrowers becoming aware of the failure to comply.


23.1.12	Misrepresentation Any representation or statement made or deemed to be repeated by a Security Party in any Finance Document or any other document delivered by or on behalf of a Security Party under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made.


23.1.13	Cross default Any Financial Indebtedness of the Borrowers or the Guarantor:


(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.


23.1.14	Insolvency

(a)


(b)	The value of the assets of a Security Party is less than its liabilities (taking into account contingent and prospective liabilities).


(c)	A moratorium is declared in respect of any indebtedness of a Security Party. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.


23.1.15	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 reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of a Borrower or the Guarantor;


(b)	a composition, compromise, assignment or arrangement with any creditor of a Borrower or the Guarantor;


(c)	the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager, or trustee or other similar officer in respect of a Borrower or the Guarantor or any of its assets; or


(d)	enforcement of any Encumbrance over any assets of a me Borrower or the Guarantor,

or any analogous procedure or step is taken in any jurisdiction.

This Clause 23.1.7 shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within five days of commencement.


23.1.16	Creditors' process Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of a Security Party.


23.1.17	Unlawfulness and invalidity


(c)	It is or becomes unlawful for a Security Party to perform any of its obligations under the Finance Documents or any Encumbrance created or expressed to be created or evidenced by the Security Documents ceases to be effective.


(d)	Any obligation or obligations of any Security Party under any Finance Documents 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 Lenders under the Finance Documents.


(e)	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 a Finance Party) to be ineffective.


23.1.18	Cessation of business A Borrower or the Guarantor ceases, or threatens to cease, to carry on all or a substantial part of its business.


23.1.19	Change in ownership or control of a Borrower Without the prior written consent of the Agent (acting on the instructions of all of the Lenders), a Borrower ceases to be ultimately owned and controlled by the Guarantor or ceases to be a wholly owned subsidiary of the Guarantor.


23.1.20	Expropriation The authority or ability of a Borrower or the 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 a Borrower or the Guarantor or any of its assets.


23.1.21	Repudiation and rescission of agreements


(a)	A Security Party 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 23.1.13(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 Majority Lenders, likely to have a material adverse effect on the interests of the Lenders 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 Majority Lenders.


23.1.22	Conditions subsequent Any of the conditions referred to in Clause 4.3 ( Conditions subsequent ) is not satisfied within the time reasonably required by the Agent.

23.1.23


23.1.24	Reduction of capital A Borrower reduces its authorised or issued or subscribed capital.

23.1.25


(a)	that 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 Agent 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 Security Agent within 6 months of the occurrence of the casualty giving rise to the Total Loss in question or such longer period as the Agent may in its discretion agree.


23.1.26	Challenge to registration The registration of a Vessel or a Mortgage is contested or becomes void or voidable or liable to cancellation or termination, or the validity or priority of a Mortgage is contested.

This Clause 23.1.18 shall not apply to any challenge or contest which is frivolous or vexatious and is discharged, stayed or dismissed within five days of commencement.


23.1.27	War The country of registration of a Vessel becomes involved in war (whether or not declared) or civil war or is occupied by any other power and the Agent in its discretion considers that, as a result, the security conferred by any of the Security Documents is materially prejudiced.

^23.1.28

This Clause 23.1.20 shall not apply to any Transactions that are terminated pursuant to Clause 7.8 ( Restrictions ).


^23.1.29	Notice of determination The Guarantor gives notice to the Security Agent to determine any obligations under the Guarantee.


23.1.30	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 a Security Party or its assets which have or are reasonably likely to have a Material Adverse Effect.


23.1.31	Material adverse change Any event or circumstance occurs which the Majority Lenders reasonably believe has or is reasonably likely to have a Material Adverse Effect.


23.1.32	Sanctions


(a)	Any of the Security Parties 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 Security Parties or any Affiliate of any of them is not in compliance with all Sanctions.


23.2	Acceleration On and at any time after the occurrence of an Event of Default which is continuing the Agent may, and shall if so directed by the Majority Lenders:


23.2.8	by notice to the Borrowers cancel the Total Commitments, at which time they shall immediately be cancelled;


23.2.9	by notice to the Borrowers 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;


23.2.10	by notice to the Borrowers declare that the Loan is payable on demand, at which time it shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders; and/or


23.2.11	exercise or direct the Security Agent to exercise any or all of its rights, remedies, powers or discretions under the Finance Documents.


Section 9	Changes to Parties


24	Changes to the Lenders


24.1	Assignments and transfers by the Lenders Subject to this Clause 24, a Lender (the " Existing Lender ") may:


24.1.12	assign any of its rights; or


24.1.13	transfer by novation any of its rights and obligations,


24.2	Conditions of assignment or transfer


24.2.11	An Existing Lender must obtain the prior written consent of the Borrowers prior to making an assignment or transfer in accordance with Clause 24.1 ( Assignments and transfers by the Lenders ) unless the assignment or transfer is:

(d) to another Lender or an Affiliate of a Lender; or

(e) made at a time when an Event of Default is continuing.


24.2.12	The consent of the Borrowers to an assignment or transfer must not be unreasonably withheld or delayed. The Borrowers will be deemed to have given their consent five Business Days after the Lender has requested it unless consent is expressly refused by the Borrowers within that time.


24.2.13	An assignment will only be effective on:


(e)	receipt by the Agent of written confirmation from the New Lender (in form and substance satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties as it would have been under if it was an Original Lender; and


(f)	performance by the Agent of all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to such assignment to a New Lender, the completion of which the Agent shall promptly notify to the Existing Lender and the New Lender.


24.2.14	A transfer will only be effective if the procedure set out in Clause 24.5 ( Procedure for transfer ) is complied with.


24.2.15	If:


(f)	a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and


(g)	as a result of circumstances existing at the date the assignment, transfer or change occurs, a Borrower would be obliged to make a payment to the New Lender or 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 Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred. This Clause 24.2.5 shall not apply in respect of an assignment or transfer made in the ordinary course of the primary syndication of the Loan.

24.2.16


24.3	Assignment or transfer fee Unless the Agent otherwise agrees and excluding an assignment or transfer (i) to an Affiliate of a Lender, (ii) to a Related Fund or (iii) made in connection with primary syndication of the Loan, the New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Agent (for its own account) a fee of $3,000.


24.4	Limitation of responsibility of Existing Lenders


24.4.16	Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:


(f)	the legality, validity, effectiveness, adequacy or enforceability of the Relevant Documents or any other documents;


(g)	the financial condition of any Security Party;


(h)	the performance and observance by any Security Party of its obligations under the Relevant Documents or any other documents; or


(i)	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.


24.4.17	Each New Lender confirms to the Existing Lender and the other Finance Parties that it:


(d)	has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Security Party 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 Existing Lender in connection with any of the Relevant Documents; and


(e)	will continue to make its own independent appraisal of the creditworthiness of each Security Party and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.


24.4.18	Nothing in any Finance Document obliges an Existing 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 24; or


(b)	support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Security Party of its obligations under the Relevant Documents or otherwise.


24.5	Procedure for transfer

24.5.1

Subject to the conditions set out in Clause 24.2 ( Conditions of assignment or transfer ) a transfer is effected in accordance with Clause 24.5.3 when the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to Clause 24.2.3(b), as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.


24.5.2	The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.


24.5.3	Subject to Clause 24.9 ( Pro rata interest settlement ), on the Transfer Date:

(d)


(e)	each Borrower and the Guarantor and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Borrower and the Guarantor and the New Lender have assumed and/or acquired the same in place of that Borrower and the Guarantor and the Existing Lender;

(f)

the Agent, the Security Agent, the Arranger, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Agent, the Security Agent, the Arranger and the Existing Lender shall each be released from further obligations to each other under this Agreement; and


(g)	the New Lender shall become a Party as a "Lender".


24.6	Procedure for assignment

24.6.4


24.6.5	The Agent shall only be obliged to execute an Assignment Agreement delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary "know your customer" or similar checks under all applicable laws and regulations in relation to the assignment to such New Lender.


24.6.6	Subject to Clause 24.9 ( Pro rata interest settlement ), on the Transfer Date:


(a)	the Existing Lender will assign absolutely to the New Lender its rights under the Finance Documents and in respect of any Encumbrance created or expressed to be created or evidenced by the Security Documents and expressed to be the subject of the assignment in the Assignment Agreement;


(b)	the Existing Lender will be released from the obligations (the " Relevant Obligations ") expressed to be the subject of the release in the Assignment Agreement (and any corresponding obligations by which it is bound in respect of any Encumbrance created or expressed to be created or evidenced by the Security Documents); and


(c)	the New Lender shall become a Party as a "Lender" and will be bound by obligations equivalent to the Relevant Obligations.

24.6.7


24.7	Copy of Transfer Certificate or Assignment Agreement to Borrowers The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate or an Assignment Agreement, send to the Borrowers a copy of that Transfer Certificate or Assignment Agreement.

24.8


24.8.3	any charge, assignment or other Encumbrance to secure obligations to a federal reserve or central bank; and


24.8.4	in the case of any Lender which is a fund, any charge, assignment or other Encumbrance granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities,

except that no such charge, assignment or Encumbrance shall:


(d)	release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Encumbrance for the Lender as a party to any of the Finance Documents; or


(e)	require any payments to be made by a Security Party 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 relevant Lender under the Finance Documents.


24.9	Pro rata interest settlement

24.9.3

(f)


(g)	the rights assigned or transferred by the Existing Lender will not include the right to the Accrued Amounts, so that, for the avoidance of doubt:


(iii)	when the Accrued Amounts become payable, those Accrued Amounts will be payable to the Existing Lender; and


(iv)	the amount payable to the New Lender on that date will be the amount which would, but for the application of this Clause 24.9, have been payable to it on that date, but after deduction of the Accrued Amounts.


24.9.4	In this Clause 24.9 references to "Interest Period" shall be construed to include a reference to any other period for accrual of fees.


25	Changes to the Security Parties


25.1	No assignment or transfer by Security Parties No Security Party may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.


Section 10	The Finance Parties


26	Role of the Agent, the Security Agent and the Arranger


26.1	Appointment of the Agent and the Security Agent


26.1.3	Each of the Arranger and the Lenders appoints the Agent to act as its agent under and in connection with the Finance Documents and each of the Arranger, the Lenders and the Agent appoints the Security Agent to act as its security agent for the purpose of the Security Documents.

26.1.4

Each of the Arranger and the Lenders authorises the Agent and each of the Arranger, the Lenders and the Agent authorises the Security Agent to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Agent or the Security Agent (as the case may be) under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.


^26.1.5	The Swap Provider appoints the Security Agent to act as its security agent for the purpose of the Security Documents and authorises the Security Agent to exercise the rights, powers, authorities and discretions specifically given to the Security Agent under or in connection with the Security Documents together with any other incidental rights, powers, authorities and discretions.


^26.1.6	Except in Clause 26.15 ( Replacement of the Agent ) and Clause 26.22 ( Period without role for Agent ) or where the context otherwise requires, references in this Clause 26 to the " Agent " shall mean the Agent, the Security Agent individually and collectively and references in this Clause 26 to the " Finance Documents " or to any " Finance Document " shall not include the Master Agreement.


26.2	Instructions


26.2.19	The Agent shall:


(d)	unless a contrary indication appears in a Finance Document, exercise or refrain from exercising any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by:


(i)	all Lenders if the relevant Finance Document stipulates the matter is an all Lender decision; and


(ii)	in all other cases, the Majority Lenders; and


(e)	not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with Clause 26.2.1(a).

26.2.20

The Agent shall be entitled to request instructions, or clarification of any instruction, from the Majority Lenders (or, if the relevant Finance Document stipulates the matter is a decision for any other Lender or group of Lenders, from that Lender or group of Lenders) as to whether, and in what manner, it should exercise or refrain from exercising any right, power, authority or discretion and the Agent may refrain from acting unless and until it receives any such instructions or clarification that it has requested.


26.2.21	Save in the case of decisions stipulated to be a matter for any other Lender or group of Lenders under the relevant Finance Document and unless a contrary indication appears in a Finance Document, any instructions given to the Agent by the Majority Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties.

26.2.22

The Agent may refrain from acting in accordance with any instructions of any Lender or group of Lenders until it has received any indemnification and/or security that it may in its discretion require (which may be greater in extent than that contained in the Finance Documents and which may include payment in advance) for any cost, loss or liability which it may incur in complying with those instructions.


26.2.23	In the absence of instructions, the Agent may act (or refrain from acting) as it considers to be in the best interest of the Lenders.


26.2.24	The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender's consent) in any legal or arbitration proceedings relating to any Finance Document. This Clause 26.2.6 shall not apply to any legal or arbitration proceeding relating to the perfection, preservation or protection of rights under the Finance Documents or the enforcement of the Finance Documents.


26.3	Duties of the Agent


26.3.4	The Agent's duties under the Finance Documents are solely mechanical and administrative in nature.


26.3.5	Subject to Clause 26.3.3, the Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Agent for that Party by any other Party.


26.3.6	Without prejudice to Clause 24.7 ( Copy of Transfer Certificate or Assignment Agreement to Borrowers ), Clause 26.3.1 shall not apply to any Transfer Certificate or any Assignment Agreement.


26.3.7	Except where a Finance Document specifically provides otherwise, the Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.


26.3.8	If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the Finance Parties.


26.3.9	If the Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent, the Arranger or the Security Agent) under this Agreement it shall promptly notify the other Finance Parties.


26.3.10	The Agent shall have only those duties, obligations and responsibilities expressly specified in the Finance Documents to which it is expressed to be a party (and no others shall be implied).


26.4	Role of the Arranger Except as specifically provided in the Finance Documents, the Arranger has no obligations of any kind to any other Party under or in connection with any Finance Document.


26.5	No fiduciary duties


26.5.4	Subject to Clause 26.12 ( Trust ) which relates to the Security Agent only, nothing in any Finance Document constitutes the Agent or the Arranger as a trustee or fiduciary of any other person.


26.5.5	Neither the Agent nor the Arranger shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.


26.6	Business with Security Parties The Agent and the Arranger may accept deposits from, lend money to and generally engage in any kind of banking or other business with any Borrower and any other Security Party or its Affiliate.


26.7	Rights and discretions of the Agent


26.7.5	The Agent may:


(d)	rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised;


(e)	assume that:


(v)	any instructions received by it from the Majority Lenders, any Lenders or any group of Lenders are duly given in accordance with the terms of the Finance Documents; and


(vi)	unless it has received notice of revocation, that those instructions have not been revoked; and


(vii)	rely on a certificate from any person:


(A)	as to any matter of fact or circumstance which might reasonably be expected to be within the knowledge of that person; or


(B)	to the effect that such person approves of any particular dealing, transaction, step, action or thing,

as sufficient evidence that that is the case and, in the case of (A), may assume the truth and accuracy of that certificate.


26.7.6	The Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders or security agent for the Finance Parties (as the case may be)) that:


(g)	no Default has occurred (unless it has actual knowledge of a Default arising under Clause 23.1 ( Events of Default ));


(h)	any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised; and


(i)	any notice or request made by the Borrowers (other than a Drawdown Request) is made on behalf of and with the consent and knowledge of all the Security Parties.


26.7.7	The Agent may engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts.


26.7.8	Without prejudice to the generality of Clause 26.7.3 or Clause 26.7.5, the Agent may at any time engage and pay for the services of any lawyers to act as independent counsel to the Agent (and so separate from any lawyers instructed by the Lenders) if the Agent in its reasonable opinion deems this to be desirable.


26.7.9	The Agent may rely on the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (whether obtained by the Agent or by any other Party) and shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of its so relying.


26.7.10	The Agent may act in relation to the Finance Documents through its officers, employees and agents and the Agent shall not:


(a)	be liable for any error of judgment made by any such person; or


(b)	be bound to supervise, or be in any way responsible for any loss incurred by reason of misconduct, omission or default on the part, of any such person,

unless such error or such loss was directly caused by the Agent's gross negligence or wilful misconduct.


26.7.11	Unless a Finance Document expressly provides otherwise the Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.


26.7.12	Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor the Arranger is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.


26.7.13	The Agent is not obliged to disclose to any Finance Party any details of the rate notified to the Agent by any Lender or the identity of any such Lender for the purpose of Clause 10.2.2 ( Market Disruption ).

26.7.14


26.8	Responsibility for documentation Neither the Agent nor the Arranger is responsible or liable for:


26.8.1	the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Agent, the Arranger, a Security Party or any other person given in or in connection with any Relevant Document or the transactions contemplated in the Finance Documents; or


26.8.2	the legality, validity, effectiveness, adequacy or enforceability of any Relevant Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Relevant Document; or


26.8.3	any determination as to whether any information provided or to be provided to any Finance Party is non-public information the use of which may be regulated or prohibited by applicable law or regulation relating to insider dealing or otherwise.


26.9	No duty to monitor The Agent shall not be bound to enquire:


26.9.1	whether or not any Default has occurred;


26.9.2	as to the performance, default or any breach by any Party of its obligations under any Finance Document; or


26.9.3	whether any other event specified in any Finance Document has occurred.


26.10	Exclusion of liability


26.10.1	Without limiting Clause 26.10.2 (and without prejudice to any other provision of any Finance Document excluding or limiting the liability of the Agent) the Agent shall not be liable (including, without limitation, for negligence or any other category of liability whatsoever) for:


(f)	any damages, costs or losses to any person, any diminution in value, or any liability whatsoever arising as a result of taking or not taking any action under or in connection with any Finance Document or any Encumbrance created or expressed to be created or evidenced by the Security Documents, unless directly caused by its gross negligence or wilful misconduct;

(g)


(h)	any shortfall which arises on the enforcement or realisation of the Trust Property; or


(i)	without prejudice to the generality of Clauses 26.10.1(a), 26.10.1(b) and 26.10.1(c), any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of:


(i)	any act, event or circumstance not reasonably within its control; or


(ii)	the general risks of investment in, or the holding of assets in, any jurisdiction,

26.10.2


26.10.3	The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose.


26.10.4	Nothing in this Agreement shall oblige the Agent or the Arranger to carry out:


(a)	any "know your customer" or other checks in relation to any person;


(b)	any check on the extent to which any transaction contemplated by this Agreement might be unlawful for any Lender,

on behalf of any Lender and each Lender confirms to the Agent and the Arranger that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or the Arranger.

26.10.5


26.11	Lenders' indemnity to the Agent

26.11.1

Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent and every Receiver and Delegate, within three Business Days of demand, against any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by any of them (otherwise than by reason of the relevant Agent's, Receiver's or Delegate's gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 29.12 ( Disruption to payment systems etc. ) notwithstanding the Agent's negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) in acting as Agent, Receiver or Delegate under, or exercising any authority conferred under, the Finance Documents (unless the relevant Agent, Receiver or Delegate has been reimbursed by a Security Party pursuant to a Finance Document).


26.11.2	Subject to Clause 26.11.3, the Borrowers shall immediately on demand reimburse any Lender for any payment that Lender makes to the Agent pursuant to Clause 26.11.1


26.11.3	Clause 26.11.2 shall not apply to the extent that the indemnity payment in respect of which the Lender claims reimbursement relates to a liability of the Agent to a Security Party.

26.12

26.12.3


26.12.4	the other Finance Parties acknowledge that the Security Agent shall be under no obligation to insure any property nor to require any other person to insure any property and shall not be responsible for any loss which may be suffered by any person as a result of the lack or insufficiency of any insurance;


26.12.5	the Finance Parties agree that the perpetuity period applicable to the trusts declared by this Agreement shall be the period of 125 years from the date of this Agreement;

26.12.6

26.12.7

26.12.8

The provisions of Part I of the Trustee Act 2000 shall not apply to the Security Agent or the Trust Property.


26.13	Parallel Debt

26.13.5


26.13.6	The Security Agent shall have its own independent right to demand payment of the amounts payable by the Borrowers or any of them and the Guarantor (including, without limitation, through any suit, execution, enforcement of security, recovery of guarantees and applications for and voting in any kind of insolvency proceeding) under this Clause 26.

26.13.7


26.14	Resignation of the Agent


26.14.1	The Agent may resign and appoint one of its Affiliates acting through an office as successor by giving notice to the other Finance Parties and the Borrowers.


26.14.2	Alternatively the Agent may resign by giving 30 days' notice to the other Finance Parties and the Borrowers, in which case the Majority Lenders (after consultation with the Borrowers) may appoint a successor Agent.


26.14.3	If the Majority Lenders have not appointed a successor Agent in accordance with Clause 26.14.2 within 20 days after notice of resignation was given, the retiring Agent (after consultation with the Borrowers) may appoint a successor Agent.

26.14.4

26.14.5


26.14.6	The Agent's resignation notice shall only take effect upon the appointment of a successor and (in the case of the Security Agent) the transfer of all the Trust Property to that successor.

26.14.7


26.14.8	The Agent shall resign in accordance with Clause 26.14.2 (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to Clause 26.14.3) if on or after the date which is three months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either:


(a)	the Agent fails to respond to a request under Clause 12.7 ( FATCA information ) and a Lender reasonably believes that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;


(b)	the information supplied by the Agent pursuant to Clause 12.7 ( FATCA information ) indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or


(c)	the Agent notifies the Borrowers and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;


26.15	Replacement of the Agent


26.15.1	After consultation with the Borrowers, the Majority Lenders may, by giving 30 days' notice to the Agent (or, at any time the Agent is an Impaired Agent, by giving any shorter notice determined by the Majority lenders) replace the Agent by appointing a successor Agent.


26.15.2	The retiring Agent shall (at its own cost if it is an Impaired Agent and otherwise at the expense of the Lenders) make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its function as Agent under the Finance Documents.

26.15.3


26.15.4	Any successor Agent and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.


26.16	Confidentiality


26.16.1	In acting as agent for the Finance Parties, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.


26.16.2	If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it.


26.16.3	Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor the Arranger is obliged to disclose to any other person (i) any Confidential Information or (ii) any other information if the disclosure would or might in its reasonable opinion constitute a breach of any laws or a breach of a fiduciary duty.


26.17	Relationship with the Lenders


26.17.2	Subject to Clause 24.9 ( Pro rata interest settlement ), the Agent may treat the person shown in its records as Lender at the opening of business (in the place of the Agent's principal office as notified to the Finance Parties from time to time) as the Lender acting through its Facility Office:


(f)	entitled to or liable for any payment due under any Finance Document on that day; and


(g)	entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day,

unless it has received not less than five Business Days' prior notice from that Lender to the contrary in accordance with the terms of this Agreement.


^26.17.3	Each Lender shall supply the Agent with any information required by the Agent in order to calculate the Mandatory Cost.

26.17.4

Any Lender may by notice to the Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or dispatched to that Lender under the Finance Documents. Such notice shall contain the address, fax number and (where communication by electronic mail or other electronic means is permitted under Clause 31.6 ( Electronic communication )) electronic mail address and/or any other information required to enable the sending and receipt of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, fax number, electronic mail address, department and officer by that Lender for the purposes of Clause 31.2 ( Addresses ) and Clause 31.6.1(b) ( Electronic communication ) and the Agent shall be entitled to treat such person as the person entitled to receive all such notices, communications, information and documents as though that person were that Lender.

26.18

Credit appraisal by the Lenders Without affecting the responsibility of any Security Party for information supplied by it or on its behalf in connection with any Relevant Document, each Lender confirms to the Agent and the Arranger that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Relevant Document including but not limited to:


26.18.1	the financial condition, status and nature of each Security Party;


26.18.2	the legality, validity, effectiveness, adequacy or enforceability of any Relevant Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Relevant Document;


26.18.3	whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Relevant Document, the transactions contemplated by the Relevant Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of under or in connection with any Relevant Document; and


26.18.4	the right or title of any person in or to, or the value or sufficiency of any part of the Charged Property, the priority of any Encumbrance created or expressed to be created or evidenced by the Security Documents or the existence of any Encumbrance affecting the Charged Property.


26.19	Reference Banks If a Reference Bank ceases to be a Lender, the Agent shall (in consultation with the Borrowers) appoint another bank to be a Reference Bank to replace that Reference Bank.

26.20

26.21


26.22	Period without role for Agent


26.22.1	In this Clause 26.22, a " Non-Agent Period " means the period in which the Agent has no role pursuant to Clause 26.22.2.


26.22.2	The Agent shall not have a role under this Agreement, other than entering into the Finance Documents in its capacity as Agent, and the other provisions of this Clause 26 shall not apply to the extent that they relate to the Agent if and for as long as each of the following conditions are met:


(a)	the only Lender is the Original Lender; and


26.22.3	no Default is continuing nor has the Original Lender (acting reasonably) determined that a Default has occurred and is continuing and the Original Lender has notified the Borrowers in writing that it has instructed the Agent to commence acting in its role as the Agent.


26.22.4	During a Non-Agent Period:


(g)	subject to Clause 26.22.3(c), all references to "the Agent" (other than in this Clause 26.22) and all references to "an Agent", or "a Party" in any Finance Document shall, where it relates to the Agent, be construed as references to "the Original Lenders" or "the Original Lender";


(h)	all payments which are expressed to be made to, received by or made available to or by the Agent (as applicable), must be made to, received by or made available to or by the Original Lender; and


(i)	the reference to "the Agent" in:


(i)	Clause 26.8 ( Responsibility for documentation ) to and including Clause 26.11 ( Lenders' indemnity to the Agent );


(ii)	Clause 14.2 ( Other indemnities ); and


(iii)	Clause 16 ( Costs and Expenses ),

must at all times be construed as reference to each of the Agent and the Original Lender in its former and/or existing role of the Agent pursuant to Clause 26.22.3(a).


27	Conduct of Business by the Finance Parties

No provision of this Agreement will:


27.1	interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;


27.2	oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or


27.3	oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.


28	Sharing among the Finance Parties


28.1	Payments to Finance Parties If a Finance Party (a " Recovering Finance Party ") receives or recovers any amount from a Security Party other than in accordance with Clause 29 ( Payment Mechanics ) (a " Recovered Amount ") and applies that amount to a payment due under the Finance Documents then:


28.1.11	the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery, to the Agent;


28.1.12	the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with Clause 29 ( Payment Mechanics ), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and


28.1.13	the Recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the " Sharing Payment ") equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 29.6 ( Partial payments ).


28.2	Redistribution of payments The Agent shall treat the Sharing Payment as if it had been paid by the relevant Security Party and distribute it between the Finance Parties (other than the Recovering Finance Party) (the " Sharing Finance Parties ") in accordance with Clause 29.6 ( Partial payments ) towards the obligations of that Security Party to the Sharing Finance Parties.


28.3	Recovering Finance Party's rights On a distribution by the Agent under Clause 28.2 ( Redistribution of payments ) of a payment received by a Recovering Finance Party from a Security Party, as between the relevant Security Party and the Recovering Finance Party, an amount of the Recovered Amount equal to the Sharing Payment will be treated as not having been paid by that Security Party.


28.4	Reversal of redistribution If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:

28.4.5


28.4.6	as between the relevant Security Party and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will be treated as not having been paid by that Security Party.


28.5	Exceptions


28.5.15	This Clause 28 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and enforceable claim against the relevant Security Party.


28.5.16	A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:


(d)	it notified that other Finance Party of the legal or arbitration proceedings; and


(e)	that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.


Section 11	Administration


29	Payment Mechanics

29.1

Payment shall be made to such account in the principal financial centre of the country of that currency with such bank as the Agent specifies.

29.2

Distributions by the Agent Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 29.3 ( Distributions to a Security Party ) and Clause 29.4 ( Clawback and pre-funding ) be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Agent by not less than five Business Days' notice with a bank specified by that Party in the principal financial centre of the country of that currency.

29.3

Distributions to a Security Party The Agent may (with the consent of a Security Party or in accordance with Clause 30 ( Set-Off )) apply any amount received by it for that Security Party in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Security Party under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.


29.4	Clawback and pre-funding


29.4.17	Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.

29.4.18

Unless Clause 29.4.3 applies, if the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Agent shall on demand refund the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds.


29.4.19	If the Agent is willing to make available amounts for the account of a Borrower before receiving funds from the Lenders then if and to the extent that the Agent does so but it proves to be the case that it does not then receive funds from a Lender in respect of a sum which it paid to a Borrower:


(j)	the Borrower to whom that sum was made available shall on demand refund it to the Agent; and


(k)	the Lender by whom those funds should have been made available or, if that Lender fails to do so, the Borrower to whom that sum was made available, shall on demand pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent against any funding cost incurred by it as a result of paying out that sum before receiving those funds from that Lender.


29.5	Impaired Agent


29.5.4	If, at any time, the Agent becomes an Impaired Agent, a Security Party or a Lender which is required to make a payment under the Finance Documents to the Agent in accordance with Clause 29.1 ( Payments to the Agent ) may instead either:


(f)	pay that amount direct to the required recipient(s); or

(g)

In each case such payments must be made on the due date for payment under the Finance Documents.


29.5.5	All interest accrued on the amount standing to the credit of the trust account shall be for the benefit of the Recipient Party or the Recipient Parties pro rata to their respective entitlements.


29.5.6	A Party which has made a payment in accordance with this Clause 29.5 shall be discharged of the relevant payment obligation under the Finance Documents and shall not take any credit risk with respect to the amounts standing to the credit of the trust account.

29.5.7

Promptly upon the appointment of a successor Agent in accordance with Clause 26.15 ( Replacement of the Agent ), each Paying Party shall (other than to the extent that that Party has given an instruction pursuant to Clause 29.5.5) give all requisite instructions to the bank with whom the trust account is held to transfer the amount (together with any accrued interest) to the successor Agent for distribution to the relevant Recipient Party or Recipient Parties in accordance with Clause 29.2 ( Distributions by the Agent ).


29.5.8	A Paying Party shall, promptly upon request by a Recipient Party and to the extent:


(d)	that it has not given an instruction pursuant to Clause 29.5.4; and


(e)	that it has been provided with the necessary information by that Recipient Party,

give all requisite instructions to the bank with whom the trust account is held to transfer the relevant amount (together with any accrued interest) to that Recipient Party.


29.6	Partial payments


29.6.4	If the Agent receives a payment that is insufficient to discharge all the amounts then due and payable by a Security Party under the Finance Documents (other than the Master Agreement), the Agent shall apply that payment towards the obligations of that Security Party under the Finance Documents (other than the Master Agreement) in the following order:


(j)	first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent or the Security Agent under the Finance Documents;


(k)	secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;


(l)	thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and


(m)	fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents,


29.6.5	The Agent shall, if so directed by the Majority Lenders, vary the order set out in Clauses 29.6.1(b) to 29.6.1(d).


29.6.6	Clauses 29.6.1 and 29.6.2 will override any appropriation made by a Security Party.


29.7	No set-off by Security Parties All payments to be made by a Security Party under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.


29.8	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.


29.9	Currency of account


^29.9.9	Subject to Clauses 29.9.2 to 29.9.5, dollars is the currency of account and payment for any sum due from a Security Party under any Finance Document.


29.9.10	A repayment or payment of all or part of a Tranche or an Unpaid Sum shall be made in the currency in which that Tranche or Unpaid Sum is denominated on its due date.


29.9.11	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.


29.9.12	Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.


^29.9.13	Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.

29.10

Control account The Agent shall open and maintain on its books a control account in the names of the Borrowers showing the advance of the Loan and the computation and payment of interest and all other sums due under this Agreement. The Borrowers' obligations to repay the Loan and to pay interest and all other sums due under this Agreement shall be evidenced by the entries from time to time made in the control account opened and maintained under this Clause 29.10 and those entries will, in the absence of manifest error, be conclusive and binding.


29.11	Change of currency


29.11.9	Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:


(f)	any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (after consultation with the Borrowers); and


(g)	any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent (acting reasonably).


29.11.10	If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Borrowers) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.


29.12	Disruption to payment systems etc. If either the Agent determines in its discretion that a Disruption Event has occurred or the Agent is notified by the Borrowers that a Disruption Event has occurred:


29.12.5	the Agent may, and shall if requested to do so by the Borrower, consult with the Borrowers with a view to agreeing with the Borrowers such changes to the operation or administration of the Loan as the Agent may deem necessary in the circumstances;


29.12.6	the Agent shall not be obliged to consult with the Borrowers in relation to any changes mentioned in Clause 29.12.1 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;


29.12.7	the Agent may consult with the Finance Parties in relation to any changes mentioned in Clause 29.12.1 but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances;


29.12.8	any such changes agreed upon by the Agent and the Borrowers 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 notwithstanding the provisions of Clause 35 ( Amendments and Waivers );


29.12.9	the Agent 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 Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 29.12; and


29.12.10	the Agent shall notify the Finance Parties of all changes agreed pursuant to Clause 29.12.4.


30	Set-Off

30.1


^30.2	Master Agreement rights The rights conferred on the Swap Provider by this Clause 30 shall be in addition to, and without prejudice to or limitation of, the rights of netting and set off conferred on the Swap Provider by the Master Agreement.


31	Notices


31.1	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, letter or electronic mail.


31.2	Addresses The address, fax number and electronic mail address (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:


31.2.20	in the case of each Borrower, that identified with its name below;


^31.2.21	in the case of the Guarantor, that identified with its name below;


31.2.22	in the case of each Lender, that notified in writing to the Agent on or prior to the date on which it becomes a Party;


^31.2.23	in the case of the Swap Provider, that identified with its name below;


^31.2.24	in the case of the Arranger, that identified with its name below; and


31.2.25	in the case of the Agent or the Security Agent, that identified with its name below,


31.3	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:


31.3.9	if by way of fax, when received in legible form;


31.3.10	if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or


31.3.11	if by way of electronic mail, then in accordance with Clause 31.6.2 and Clause 31.6.3,

and, if a particular department or officer is specified as part of its address details provided under Clause 31.2 ( Addresses ), if addressed to that department or officer.

All notices from or to a Security Party (save in respect of the Master Agreement) shall be sent through the Agent.

Subject to Clause 5.1 ( Delivery of a Drawdown Request ), any communication or document which becomes effective, in accordance with this Clause 31.3, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.


31.4	Notification of address and fax number Promptly upon changing its address, fax number or electronic mail address, the Agent shall notify the other Parties.

31.5


31.6	Electronic communication


31.6.4	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 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:


(h)	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


(i)	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.


31.6.5	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 Agent or the Security Agent only if it is addressed in such a manner as the Agent or the Security Agent shall specify for this purpose.


31.6.6	Any electronic communication which becomes effective, in accordance with Clause 31.6.2, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following day.


31.7	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:


31.7.14	in English; or


31.7.15	if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.


32	Calculations and Certificates


32.1	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 Agent pursuant to Clause 29.10 ( Control account ) are prima facie evidence of the matters to which they relate.


32.2	Certificates and determinations Any certification or determination by the Agent 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.


32.3	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.


33	Partial Invalidity


34	Remedies and Waivers


35	Amendments and Waivers


35.1	Required consents


35.1.6	Subject to Clause 35.2 ( Exceptions ) any term of the Finance Documents (other than the Master Agreement) may be amended or waived only with the consent of the Majority Lenders and the Borrowers and any such amendment or waiver will be binding on all Parties.


35.1.7	The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 35.


35.1.8	Without prejudice to the generality of Clauses 26.7.3, 26.7.4 and 26.7.5 ( Rights and discretions of the Agent ), the Agent may engage, pay for and rely on the services of lawyers in determining the consent level required for and effecting any amendment, waiver or consent under this Agreement.


35.2	Exceptions


35.2.7	An amendment, waiver or (in the case of a Security Document) a consent of, or in relation to, any term of any Finance Document that has the effect of changing or which relates to:


(j)	the definition of " Majority Lenders " in Clause 1.1 ( Definitions );


(k)	an extension to the date of payment of any amount under the Finance Documents;


(l)	a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;


(m)	a change in currency of payment of any amount under the Finance Documents;


(n)	an increase in any Commitment, an extension of the Availability Period or any requirement that a cancellation of Commitments reduces the Commitments of the Lenders rateably;


(o)	any provision which expressly requires the consent of all the Lenders;


(p)	Clause 2.2 ( Finance Parties' rights and obligations ), Clause 19.1.25 ( Sanctions ), Clause 22.29 ( Sanctions ), Clause 23.1.24 ( Sanctions ), Clause 24 ( Changes to the Lenders ), this Clause 35, Clause 40 ( Governing Law ) or Clause 41.1 ( Jurisdiction of English courts );


(q)	(other than as expressly permitted by the provisions of any Finance Document) the nature or scope of:


(iv)	any Guarantee;


(v)	the Charged Property; or


(vi)	the manner in which the proceeds of enforcement of the Security Documents are distributed; or

(r)

shall not be made, or given, without the prior consent of all the Lenders.


35.2.8	An amendment or waiver which relates to the rights or obligations of the Agent, the Security Agent or the Arranger (each in their capacity as such) may not be effected without the consent of the Agent, the Security Agent or, as the case may be, the Arranger.


35.3	Replacement of Lender


35.3.16	If:


(a)	any Lender becomes a Non-Consenting Lender (as defined in Clause 35.3.4); or


(b)	a Borrower or any other Security Party becomes obliged to repay any amount in accordance with Clause 7.1 ( Illegality ) or to pay additional amounts pursuant to Clause 12.2 ( Tax gross-up ), Clause 12.3 ( Tax Indemnity ) or Clause 13.1 ( Increased costs ) to any Lender,


35.3.17	The replacement of a Lender pursuant to this Clause 35.3 shall be subject to the following conditions:


(a)	the Borrowers shall have no right to replace the Agent or Security Agent;


(b)	neither the Agent nor the Lender shall have any obligation to the Borrowers to find a Replacement Lender;


(c)	in the event of a replacement of a Non-Consenting Lender such replacement must take place no later than 15 Business Days after the date on which that Lender is deemed a Non-Consenting Lender;


(d)	in no event shall the Lender replaced under this Clause 35.3 be required to pay or surrender to such Replacement Lender any of the fees received by such Lender pursuant to the Finance Documents; and


(e)	the Lender shall only be obliged to transfer its rights and obligations pursuant to Clause 35.3.1 once it is satisfied that it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to that transfer.


35.3.18	A Lender shall perform the checks described in Clause 35.3.2(e) as soon as reasonably practicable following delivery of a notice referred to in Clause 35.3.1 and shall notify the Agent and the Borrowers when it is satisfied that it has complied with those checks.


35.3.19	In the event that:


(a)	the Borrowers or the Agent (at the request of the Borrowers) have requested the Lenders to give a consent in relation to, or to agree to a waiver or amendment of, any provisions of the Finance Documents;


(b)	the consent, waiver or amendment in question requires the approval of all the Lenders; and


(c)	Lenders whose Commitments aggregate more than 66 ² / ₃ % of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66 ² / ₃ % of the Total Commitments prior to that reduction) have consented or agreed to such waiver or amendment,

then any Lender who does not and continues not to consent or agree to such waiver or amendment shall be deemed a " Non-Consenting Lender ".


36	Confidentiality

36.1

Confidential Information Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 36.2 ( Disclosure of Confidential Information ) and Clause 36.3 ( Disclosure to numbering service providers ), 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.


36.2	Disclosure of Confidential Information Any Finance Party may disclose:

36.2.20

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 that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this Clause 36.2.1 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;


36.2.21	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 or which succeeds (or which may potentially succeed) it as Agent or Security Agent and, in each case, 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 Security Parties and to any of that person's Affiliates, Related Funds, Representatives and professional advisers;


(c)	appointed by any Finance Party or by a person to whom Clause 36.2.2(a) or 36.2.2(b) applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf (including, without limitation, any person appointed under Clause 26.17.2 ( Relationship with the Lenders ));


(d)	who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in Clause 36.2.2(a) or 36.2.2(b);


(e)	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;


(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)	to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 24.8 ( Security over Lenders' rights );


(h)	who is either an insurance company, a reinsurance company, an insurance broker or a reinsurance broker that in either case is providing or may potentially provide insurance cover either (i) in respect of the assets that are the subject of the Finance Document or (ii) pursuant to and in accordance with the terms of the Finance Documents;


(i)	who is a Party; or


(j)	with the consent of the Borrowers;

in each case, such Confidential Information as that Finance Party shall consider appropriate if:


(i)	in relation to Clauses 36.2.2(a), 36.2.2(b) and 36.2.2(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 36.2.2(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 36.2.2(e), 36.2.2(f) and 36.2.2(g), 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 that Finance Party, it is not practicable so to do in the circumstances;

36.2.22

to any person appointed by that Finance Party or by a person to whom Clause 36.2.2(a) or 36.2.2(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 36.2.3 if the service provider to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking; and

^36.2.23


36.3	Disclosure to numbering service providers


36.3.8	Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Loan and/or one or more Security Parties the following information:


(f)	names of Security Parties;


(g)	country of domicile of Security Parties;


(h)	place of incorporation of Security Parties;


(i)	date of this Agreement;


(j)	Clause 40 ( Governing law );


(k)	the names of the Agent and the Arranger;


(l)	date of each amendment and restatement of this Agreement;


(m)	amount of Total Commitments;


(n)	currencies of the Loan;


(o)	type of Loan;


(p)	ranking of the Loan;


(q)	Termination Date;


(r)	changes to any of the information previously supplied pursuant to (a) to (l); and


(s)	such other information agreed between such Finance Party and that Security Party,

to enable such numbering service provider to provide its usual syndicated loan numbering identification services.


36.3.9	The Parties acknowledge and agree that each identification number assigned to this Agreement, the Loan and/or one or more Security Parties 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.


36.3.10	Each Borrower represents that none of the information set out in Clauses 36.3.1(a) to 36.3.1(n) is, nor will at any time be, unpublished price-sensitive information.


36.3.11	The Agent shall notify the Borrowers and the other Finance Parties of:


(b)	the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Loan and/or one or more Security Parties; and


(c)	the number or, as the case may be, numbers assigned to this Agreement, the Loan and/or one or more Security Parties by such numbering service provider.


36.4	Entire agreement This Clause 36 constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.

36.5


36.6	Notification of disclosure Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Borrowers:


36.6.4	of the circumstances of any disclosure of Confidential Information made pursuant to Clause 36.2.2(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


36.6.5	upon becoming aware that Confidential Information has been disclosed in breach of this Clause 36.


36.7	Continuing obligations The obligations in this Clause 36 are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of 12 months from the earlier of:


36.7.5	the date on which all amounts payable by the Security Parties 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


36.7.6	the date on which such Finance Party otherwise ceases to be a Finance Party.


37	Disclosure of Lender Details by Agent

37.1


37.2	Supply of Lender details at Borrowers' direction


37.2.12	The Agent shall, at the request of the Borrowers, disclose the identity of the Lenders and the details of the Lenders' Commitments to any:


(a)	other Party or any other person if that disclosure is made to facilitate, in each case, a refinancing of the Financial Indebtedness arising under the Finance Documents or a material waiver or amendment of any term of any Finance Document; and


(b)	Security Party.


37.2.13	Subject to Clause 37.2.3, the Borrowers shall procure that the recipient of information disclosed pursuant to Clause 37.2.1 shall keep such information confidential and shall not disclose it to anyone and shall ensure that all such information is protected with security measures and a degree of care that would apply to the recipient's own confidential information.

37.2.14


37.3	Supply of Lender details to other Lenders


37.3.11	If a Lender (a " Disclosing Lender ") indicates to the Agent that the Agent may do so, the Agent shall disclose that Lender's name and Commitment to any other Lender that is, or becomes, a Disclosing Lender.


37.3.12	The Agent shall, if so directed by the Requisite Lenders, request each Lender to indicate to it whether it is a Disclosing Lender.


37.4	Lender enquiry If any Lender believes that any entity is, or may be, a Lender and:


37.4.11	that entity ceases to have an Investment Grade Rating; or


37.4.12	an Insolvency Event occurs in relation to that entity,

the Agent shall, at the request of that Lender, indicate to that Lender the extent to which that entity has a Commitment.


37.5	Lender details definitions In this Clause 37:


38	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.


39	Joint and Several Liability


39.1	Nature of liability The representations, warranties, covenants, obligations and undertakings of the Borrowers contained in this Agreement shall be joint and several so that each Borrower shall be jointly and severally liable with all the Borrowers for all of the same and such liability shall not in any way be discharged, impaired or otherwise affected by:


39.1.13	any forbearance (whether as to payment or otherwise) or any time or other indulgence granted to any other Borrower or any other Security Party under or in connection with any Finance Document;


39.1.14	any amendment, variation, novation or replacement of any other Finance Document;


39.1.15	any failure of any Finance Document to be legal valid binding and enforceable in relation to any other Borrower or any other Security Party for any reason;


39.1.16	the winding-up or dissolution of any other Borrower or any other Security Party;


39.1.17	the release (whether in whole or in part) of, or the entering into of any compromise or composition with, any other Borrower or any other Security Party; or


39.1.18	any other act, omission, thing or circumstance which would or might, but for this provision, operate to discharge, impair or otherwise affect such liability.

39.2


39.2.13	exercise any rights of subrogation in relation to any rights, security or moneys held or received or receivable by a Finance Party or any other person; or


39.2.14	exercise any right of contribution from any other Borrower or any other Security Party under any Finance Document; or


39.2.15	exercise any right of set-off or counterclaim against any other Borrower or any other Security Party; or


39.2.16	receive, claim or have the benefit of any payment, distribution, security or indemnity from any other Borrower or any other Security Party; or


39.2.17	unless so directed by the Agent (when the relevant Borrower will prove in accordance with such directions), claim as a creditor of any other Borrower or any other Security Party in competition with any Finance Party


Section 12	Governing Law and Enforcement


40	Governing Law

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.


41	Enforcement

41.1

This Clause 41.1 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, any Finance Party may take concurrent proceedings in any number of jurisdictions.

41.2


41.3	Service of process


41.3.5	Without prejudice to any other mode of service allowed under any relevant law, each Borrower and the Guarantor:

(h)

irrevocably appoints Scorpio UK Limited at its business office from time to time currently of 10 Lower Grosvenor Place, London SW1W 0EN, England to act as its agent to receive and accept on their behalf any process or other document in relation to any proceedings before the English courts in connection with any Finance Document provided that any communication is expressly marked on the outside as being for the attention of General Counsel; and


(i)	agrees that failure by a process agent to notify that Borrower or the Guarantor (as the case may be) of the process will not invalidate the proceedings concerned.

41.3.6


42	Patriot Act Notice

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

Schedule 1
The Original Lenders



Name of Original Lender	Commitment
ABN AMRO Bank N.V.	$27,250,000

Schedule 2
Part I
Conditions Precedent: Initial Conditions Precedent


1	Security Parties

(a)


(b)	Certificates of good standing A certificate of good standing in respect of each Borrower and the Guarantor (if such a certificate can be obtained).


(c)	Board resolutions A copy of a resolution of the board of directors of the each Borrower and the Guarantor:


(i)	approving the terms of, and the transactions contemplated by, the Relevant Documents (other than the Management Agreements) to which it is a party and resolving that it execute those Relevant Documents (other than the Management Agreements); and


(ii)	authorising a specified person or persons to execute those Relevant Documents (other than the Management Agreements) and all documents and notices to be signed and/or dispatched under those documents on its behalf.


(d)	Specimen signatures A specimen of the signature of each person authorised by the resolutions referred to in (c).


(e)	Officer's certificates An original certificate of a duly authorised officer of each Borrower and the Guarantor:


(i)	certifying that each copy document relating to it specified in this Part I of Schedule 2 is correct, complete and in full force and effect;


(ii)	setting out the names of the directors, officers and shareholders of each Borrower and the Guarantor (as the case may be) 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 Security Party to be exceeded.


(f)	Powers of attorney The original notarially attested and legalised power of attorney of each of the Borrowers and the Guarantor under which the Relevant Documents (other than the Management Agreements) to which it is or is to become a party are to be executed or transactions undertaken by each Borrower and the Guarantor.


2	Security and related documents


(a)	Vessel documents Photocopies, certified as true, accurate and complete by a director, the secretary or the legal advisers of the Borrower, of:

(i) the relevant Shipsales Contract;


(iv)	any Charter in respect of the Vessel; and


(v)	the Management Agreement together with a confirmation from the parties thereto that the Vessel has been delivered into the Management Agreement,

in each case together with all addenda, amendments or supplements.

(b)


(c)	Valuation Two valuations dated not more than 30 days prior to the Drawdown Date evidencing the FMV of the Vessel, certifying that the amount of the Tranche requested to be advanced pursuant to the Drawdown Request is no greater than 50% of the FMV of the Vessel, such valuations to be obtained by the Agent at the expense of the Borrower.

(d)


^(e)	Mandates Such duly signed forms of mandate, and/or other evidence of the opening of the Accounts, as the Security Agent may require.


(f)	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.


^(g)	Account Bank's confirmation The written confirmation of the Account Bank that the Accounts have been opened with the Account Bank and to its actual knowledge are free from Encumbrances other than as created by or pursuant to the Security Documents and rights of set off in favour of the Account Bank as account holder.


(h)	Intercompany Loan Agreement A photocopy, certified as true, accurate and complete by a director, the secretary or the legal advisers of the Borrower, of any Intercompany Loan Agreement.


3	Legal opinions

The following legal opinions, each addressed to the Agent, the Security Agent, the Swap Provider and the Lenders and capable of being relied upon by any persons who become Lenders pursuant to the primary syndication of the Loan or confirmation satisfactory to the Agent that such opinions will be given:


(a)	a legal opinion of Stephenson Harwood LLP, legal advisers to the Agent as to English law substantially in the form distributed to the Lenders prior to signing this Agreement;


(b)	a legal opinion of the following legal advisers to the Agent:


(i)	Seward and Kissel LLP as to Marshall Islands law and, if applicable, Liberian law; and


(ii)	Clifford Chance LLP as to Netherlands law.


4	Other documents and evidence


(a)	Drawdown Request A duly completed Drawdown Request.


(b)	Process agent Evidence that any process agent referred to in Clause 41.2 ( 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 Agent considers to be necessary or desirable (if it has notified the Borrowers accordingly) in connection with the entry into and performance of the transactions contemplated by any 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 The Fee Letter and evidence that the fees, costs and expenses then due from the Borrowers under Clause 11 ( Fees ) and Clause 16 ( Costs and Expenses ) have been paid or will be paid by the relevant Drawdown Date.


(f)	"Know your customer" documents Such documentation and other evidence as is reasonably requested by the Agent in order for the Lenders to comply with all necessary "know your customer" or similar identification procedures in relation to the transactions contemplated in the Finance Documents.


(g)	Capital injected Evidence satisfactory to the Agent that all sums payable by the Borrower pursuant to the relevant Shipsales Contract that are not financed pursuant to the Tranche have been or will be paid in accordance with the relevant Shipsales Contract.

Part II
Conditions Precedent: Conditions Precedent to Release


1	Security and related documents


(a)	Vessel documents Photocopies, certified as true, accurate and complete by a director, the secretary or the legal advisers of the Borrower, of:


(i)	the bill of sale transferring title in the Vessel from the Builder to the Seller free of all encumbrances, maritime liens or other debts;


(ii)	the builder's certificate and/or bill of sale transferring title in the Vessel from the relevant Seller to the Borrower under the relevant Shipsales Contract free of all encumbrances, maritime liens or other debts;


(iii)	the protocol of delivery and acceptance evidencing the unconditional physical delivery of the Vessel by the Builder to the relevant Seller;


(iv)	the protocol of delivery and acceptance evidencing the unconditional physical delivery of the Vessel by the Seller to the relevant Borrower pursuant to the relevant Shipsales Contract;


(v)	the commercial invoice issued by the Seller in respect of the contract price of the relevant Vessel pursuant to the relevant Shipsales Contract;


(vi)	such other documents that are to be delivered by the relevant to the relevant Borrower pursuant to the terms and conditions of the relevant Shipsales Contract;


(vii)	the Vessel's current Safety Construction, Safety Equipment, Safety Radio and Load Line Certificates;


(viii)	evidence of the Vessel's current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990;


(ix)	the Vessel's current SMC;


(x)	the ISM Company's current DOC;


(xi)	the Vessel's current ISSC;


(xii)	the Vessel's current IAPPC; and


(xiii)	the Vessel's current Tonnage Certificate,

in each case together with all addenda, amendments or supplements.


(b)	Security Documents The Mortgage in respect of the Vessel and the Assignment in respect of the Vessel together with all other documents required by either of them, including, without limitation, all notices of assignment and evidence that those notices will be duly acknowledged by the recipients.


(c)	Evidence of Borrower's title Evidence that on the Delivery Date the Vessel will be at least provisionally registered under the laws and flag of the Republic of an Approved Flag in the ownership of the Borrower and the Mortgage will be capable of being registered against the Vessel with first priority.


(d)	Confirmation of class An interim Class Certificate, for hull and machinery confirming that the Vessel is classed with the highest class applicable to vessels of her type with Lloyds Register or such other classification society as may be acceptable to the Agent.


^(e)	Managers' Undertakings The Managers' Undertakings in respect of the Vessel.


(f)	Capital injected Evidence satisfactory to the Agent that all sums payable by the Borrower pursuant to the relevant Shipsales Contract that are not financed pursuant to the Tranche have been paid in accordance with the relevant Shipsales Contract.

Part III
Conditions Subsequent


1	Evidence of Borrower's title Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of an Approved Flag 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 Finance Parties.


3	Acknowledgements of notices Acknowledgements of all notices of assignment and/or charge given pursuant to any Security Documents received by the Agent pursuant to Part I and Part II of this Schedule 2.


4	Legal opinions Such of the legal opinions specified in Part I of this Schedule 2 as have not already been provided to the Agent.


5	Master's receipt The master's receipt for the Mortgage.

Schedule 3
Drawdown Request


From:	SBI Achilles Shipping Company Limited

SBI Hermes Shipping Company Limited


To:	ABN AMRO Bank N.V. (as Agent)

Dated:

Dear Sirs

SBI Achilles Shipping Company Limited and SBI Hermes Shipping Company Limited – $27,250,000 Loan Agreement dated [ ] 2015 (the "Agreement")


1	We refer to the Agreement. This is a Drawdown Request. Terms defined in the Agreement have the same meaning in this Drawdown Request unless given a different meaning in this Drawdown Request.


2	We wish to borrow the Tranche in respect of the Vessel specified below on the following terms:


Proposed Drawdown Date:	[ ] (or, if that is not a Business Day, the next Business Day)

Amount: $[ ]


Interest Period:	[ ]

Tranche: [ ]

Vessel: [ ]


3	We confirm that each condition specified in Clause 4.2 ( Further conditions precedent ) is satisfied on the date of this Drawdown Request.


4	The proceeds of the Tranche should be paid [in accordance with the provisions of the Shipsales Contract in respect of the above Vessel towards payment of the purchase price of the above Vessel] to the following account of [ABN AMRO Bank N.V.]/[the Seller in accordance with the Approved Closing Procedure]:

[A ccount details ]


5	This Drawdown Request is irrevocable.

Yours faithfully

…………………………………

authorised signatory for

SBI Achilles Shipping Company Limited

SBI Hermes Shipping Company Limited

Schedule 4
Form of Transfer Certificate

To: ABN AMRO Bank N.V. as Agent and ABN AMRO Bank N.V. as Security Agent


From:	[ The Existing Lender ] (the " Existing Lender ") and [ The New Lender ] (the " New Lender ")

Dated:

SBI Achilles Shipping Company Limited and SBI Hermes Shipping Company Limited – $27,250,000 Loan Agreement dated [ ] 2015 (the "Loan Agreement")


1	We refer to the Loan Agreement. This agreement (the " Agreement ") shall take effect as a Transfer Certificate for the purposes of the Loan Agreement. Terms defined in the Loan Agreement have the same meaning in this Agreement unless given a different meaning in this Agreement.


2	We refer to Clause 24.5 ( Procedure for transfer ) of the Loan Agreement:

(a)


(b)	The proposed Transfer Date is [ ].


(c)	The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 31.2 ( Addresses ) are set out in the Schedule.


3	The New Lender expressly acknowledges the limitations on the Existing Lender's obligations set out in Clause 24.4.1(c) ( Limitation of responsibility of Existing Lenders ).


4	This Agreement 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 this Agreement.


5	This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.


6	This Agreement has been entered into on the date stated at the beginning of this Agreement.

Note:

The Schedule

Commitment/rights and obligations to be transferred

[ insert relevant details ]

[ Facility Office address, fax number and attention details for notices and account details for payments, ]

[Existing Lender] [New Lender]

By: By:

This Agreement is accepted as a Transfer Certificate for the purposes of the Loan Agreement by the Agent and the Transfer Date is confirmed as [ ].

ABN AMRO Bank N.V. as Agent

By:

ABN AMRO Bank N.V. as Security Agent

By:

Schedule 5
Form of Assignment Agreement


To:	ABN AMRO Bank N.V. as Agent, ABN AMRO Bank N.V. as Security Agent and SBI Achilles Shipping Company Limited and SBI Hermes Shipping Company Limited as Borrowers, for and on behalf of each Security Party


From:	[the Existing Lender ] (the " Existing Lender ") and [the New Lender ] (the " New Lender ")

Dated:

SBI Achilles Shipping Company Limited and SBI Hermes Shipping Company Limited - $27,250,000 Loan Agreement dated [ ] 2015 (the "Loan Agreement")


1	We refer to the Loan Agreement. This is an Assignment Agreement. This agreement (the " Agreement ") shall take effect as an Assignment Agreement for the purpose of the Loan Agreement. Terms defined in the Loan Agreement have the same meaning in this Agreement unless given a different meaning in this Agreement.


2	We refer to Clause 24.6 ( Procedure for assignment ) of the Loan Agreement:

(a)


(b)	The Existing Lender is released from all the obligations of the Existing Lender which correspond to that portion of the Existing Lender's Commitment(s) and participations in the Loan under the Loan Agreement specified in the Schedule.


(c)	The New Lender becomes a Party as a Lender and is bound by obligations equivalent to those from which the Existing Lender is released under paragraph (b).


3	The proposed Transfer Date is [ ].


4	On the Transfer Date the New Lender becomes Party to the relevant Finance Documents as a Lender.


5	The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 31.2 ( Addresses ) are set out in the Schedule.


6	The New Lender expressly acknowledges the limitations on the Existing Lender's obligations set out in Clause 24.4.3 ( Limitation of responsibility of Existing Lenders ).


7	This Agreement acts as notice to the Agent (on behalf of each Finance Party) and, upon delivery in accordance with Clause 24.7 ( Copy of Transfer Certificate or Assignment Agreement to Borrowers ), to the Borrowers (on behalf of each Security Party) of the assignment referred to in this Agreement.


8	This Agreement 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 this Agreement.


9	This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.


10	This Agreement has been entered into on the date stated at the beginning of this Agreement.

Note:

The Schedule

Commitment/rights and obligations to be transferred by assignment, release and accession

[ insert relevant details ]

[ Facility office address, fax number and attention details for notices and account details for payments ]

[Existing Lender] [New Lender]

By: By:

This Agreement is accepted as an Assignment Agreement for the purposes of the Loan Agreement by the Agent and the Transfer Date is confirmed as [ ].

ABN AMRO Bank N.V. as Agent

By:

ABN AMRO Bank N.V. as Security Agent

By:

LONLIVE\22651328.7 Page 20

Schedule 6
Form of Compliance Certificate

To: ABN AMRO Bank N.V. (as Agent)

From: Scorpio Bulkers Inc.

Dated:

Dear Sirs

SBI Achilles Shipping Company Limited and SBI Hermes Shipping Company Limited – $27,250,000 Loan Agreement dated [ ] 2015 (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 we maintain:


(a)	Cash of $[ ];


(b)	Cash Equivalents of $[ ];


(c)	Minimum Liquidity of $[ ], of which [ ]% consists of Cash;


(d)	Consolidated Tangible Net Worth of $[ ]; and


(e)	a ratio of Net Debt to Consolidated Total Capitalisation of [ ]:1.0.


3	[We confirm that no Default is continuing.] ^*



Signed:	………………………………………………
	Chief Financial Officer
	of
	Scorpio Bulkers Inc.

LONLIVE\22651328.7 Page 21

Signatures

The Borrowers

SBI Achilles Shipping Company )

Limited )

)

By: /s/ Hugh Baker )

)

Address: )

c/o Scorpio Bulkers Inc. )

9, Boulevard Charles III )

MC 98000 Monaco )

Fax no.: +377 97 77 8346 )

Department/Officer: General Counsel )

SBI Hermes Shipping Company )

Limited )

)

By: /s/ Hugh Baker )

)

Address: )

c/o Scorpio Bulkers Inc. )

9, Boulevard Charles III )

MC 98000 Monaco )

Fax no.: +377 97 77 8346 )

Department/Officer: General Counsel )

The Guarantor

Scorpio Bulkers Inc. )

)

By: /s/ Hugh Baker )

)

Address: )

9, Boulevard Charles III )

MC 98000 Monaco )

Fax no.: +377 97 77 8346 )

Department/Officer: General Counsel )

LONLIVE\22651328.7 Page 22

The Arranger

ABN AMRO Bank N.V. )

)

By: /s/ Roderick McGeachy )

)

Address: )

Coolsingel 93 )

3012 AE Rotterdam )

The Netherlands )

Fax no.: +31 10 401 5323 )

Department/Officer: )

ECT / Transportation Mid-Office )

Email: )

magda.braam-heijnen@nl.abnamro.com, )

alper.sanliunal@nl.abnamro.com, )

martijn.m.van.den.berg@nl.abnamro.com )

and )

tom.van.vonderen@nl.abnamro.com )

The Agent

ABN AMRO Bank N.V. )

)

By: /s/ Roderick McGeachy )

)


Address:	)


Daalsesingel 71	)


3511 SW Utrecht	)

The Netherlands )

Fax no.: +31 20 628 69 85 )

Department/Officer: )

Agency Syndicated Loans (PAC EA8550) )

Email: )

agency.shipping@nl.abnamro.com )

LONLIVE\22651328.7 Page 23

The Security Agent

ABN AMRO Bank N.V. )

)

By: /s/ Roderick McGeachy )

)

Address: )


Daalsesingel 71	)


3511 SW Utrecht	)

The Netherlands )

Fax no.: +31 20 628 69 85 )

Department/Officer: )

Agency Syndicated Loans (PAC EA8550) )

Email: )

agency.shipping@nl.abnamro.com )

The Original Lenders

ABN AMRO Bank N.V. )

)

By: /s/ Roderick McGeachy )

The Swap Provider

ABN AMRO Bank N.V. )

)

By: /s/ Roderick McGeachy )

)

Address: )

Coolsingel 93 )

3012 AE Rotterdam )

The Netherlands )

Fax no.: +31 10 401 5323 )

Department/Officer: )

ECT / Transportation Mid-Office )

Email: )

magda.braam-heijnen@nl.abnamro.com, )

alper.sanliunal@nl.abnamro.com, )

martijn.m.van.den.berg@nl.abnamro.com )

LONLIVE\22651328.7 Page 24

and )

tom.van.vonderen@nl.abnamro.com )

LONLIVE\22651328.7 Page 25

Exhibit 8.1

Scorpio Bulkers Inc.

Subsidiaries



Subsidiary	Jurisdiction of Incorporation
SBI Achilles Shipping Company Limited	Republic of the Marshall Islands
SBI Alhambra Shipping Company Limited	Republic of the Marshall Islands
SBI Antares Shipping Company Limited	Republic of the Marshall Islands
SBI Apollo Shipping Company Limited	Republic of the Marshall Islands
SBI Aroma Shipping Company Limited	Republic of the Marshall Islands
SBI Athena Shipping Company Limited	Republic of the Marshall Islands
SBI Avanti Shipping Company Limited	Republic of the Marshall Islands
SBI Behike Shipping Company Limited	Republic of the Marshall Islands
SBI Belicoso Shipping Company Limited	Republic of the Marshall Islands
SBI Bolero Shipping Company Limited	Republic of the Marshall Islands
SBI Bravo Shipping Company Limited	Republic of the Marshall Islands
SBI Cakewalk Shipping Company Limited	Republic of the Marshall Islands
SBI Camacho Shipping Company Limited	Republic of the Marshall Islands
SBI Capoeira Shipping Company Limited	Republic of the Marshall Islands
SBI Carioca Shipping Company Limited	Republic of the Marshall Islands
SBI Charleston Shipping Company Limited	Republic of the Marshall Islands
SBI Chartering and Trading Ltd	Republic of the Marshall Islands
SBI Churchill Shipping Company Limited	Republic of the Marshall Islands
SBI Cohiba Shipping Company Limited	Republic of the Marshall Islands
SBI Conga Shipping Company Limited	Republic of the Marshall Islands
SBI Corona Shipping Company Limited	Republic of the Marshall Islands
SBI Cronos Shipping Company Limited	Republic of the Marshall Islands
SBI Diadema Shipping Company Limited	Republic of the Marshall Islands
SBI Echo Shipping Company Limited	Republic of the Marshall Islands
SBI Electra Shipping Company Limited	Republic of the Marshall Islands
SBI Estupendo Shipping Company Limited	Republic of the Marshall Islands
SBI Flamenco Shipping Company Limited	Republic of the Marshall Islands
SBI Habano Shipping Company Limited	Republic of the Marshall Islands
SBI Hera Shipping Company Limited	Republic of the Marshall Islands
SBI Hercules Shipping Company Limited	Republic of the Marshall Islands
SBI Hermes Shipping Company Limited	Republic of the Marshall Islands
SBI Hydra Shipping Company Limited	Republic of the Marshall Islands
SBI Hyperion Shipping Company Limited	Republic of the Marshall Islands
SBI Jive Shipping Company Limited	Republic of the Marshall Islands
SBI Kratos Shipping Company Limited	Republic of the Marshall Islands
SBI Lambada Shipping Company Limited	Republic of the Marshall Islands
SBI Leo Shipping Company Limited	Republic of the Marshall Islands
SBI Lyra Shipping Company Limited	Republic of the Marshall Islands
SBI Macarena Shipping Company Limited	Republic of the Marshall Islands
SBI Maduro Shipping Company Limited	Republic of the Marshall Islands
SBI Magnum Shipping Company Limited	Republic of the Marshall Islands



Subsidiary	Jurisdiction of Incorporation
SBI Maia Shipping Company Limited	Republic of the Marshall Islands
SBI Mazurka Shipping Company Limited	Republic of the Marshall Islands
SBI Merengue Shipping Company Limited	Republic of the Marshall Islands
SBI Montecristo Shipping Company Limited	Republic of the Marshall Islands
SBI Monterrey Shipping Company Limited	Republic of the Marshall Islands
SBI Montesino Shipping Company Limited	Republic of the Marshall Islands
SBI Orion Shipping Company Limited	Republic of the Marshall Islands
SBI Panatela Shipping Company Limited	Republic of the Marshall Islands
SBI Parapara Shipping Company Limited	Republic of the Marshall Islands
SBI Pegasus Shipping Company Limited	Republic of the Marshall Islands
SBI Perfecto Shipping Company Limited	Republic of the Marshall Islands
SBI Perseus Shipping Company Limited	Republic of the Marshall Islands
SBI Phoebe Shipping Company Limited	Republic of the Marshall Islands
SBI Phoenix Shipping Company Limited	Republic of the Marshall Islands
SBI Poseidon Shipping Company Limited	Republic of the Marshall Islands
SBI Presidente Shipping Company Limited	Republic of the Marshall Islands
SBI Puro Shipping Company Limited	Republic of the Marshall Islands
SBI Reggae Shipping Company Limited	Republic of the Marshall Islands
SBI Robusto Shipping Company Limited	Republic of the Marshall Islands
SBI Rock Shipping Company Limited	Republic of the Marshall Islands
SBI Rumba Shipping Company Limited	Republic of the Marshall Islands
SBI Salsa Shipping Company Limited	Republic of the Marshall Islands
SBI Samba Shipping Company Limited	Republic of the Marshall Islands
SBI Samson Shipping Company Limited	Republic of the Marshall Islands
SBI Sousta Shipping Company Limited	Republic of the Marshall Islands
SBI Subaru Shipping Company Limited	Republic of the Marshall Islands
SBI Swing Shipping Company Limited	Republic of the Marshall Islands
SBI Tango Shipping Company Limited	Cayman Islands
SBI Tethys Shipping Company Limited	Republic of the Marshall Islands
SBI Thalia Shipping Company Limited	Republic of the Marshall Islands
SBI Twist Shipping Company Limited	Republic of the Marshall Islands
SBI Ursa Shipping Company Limited	Republic of the Marshall Islands
SBI Valrico Shipping Company Limited	Republic of the Marshall Islands
SBI Zeus Shipping Company Limited	Republic of the Marshall Islands
SBI Zumba Shipping Company Limited	Republic of the Marshall Islands
Scorpio SALT LLC	Delaware
Bedford Shipping Limited	Malta
Belgrave Shipping Limited	Malta
Caithness Shipping Limited	Malta
Cavendish Shipping Limited	Malta
Fitzroy Shipping Limited	Malta
Grosvenor Shipping Limited	Malta
Skegness Shipping Limited	Malta
Sloane Shipping Limited	Malta
St. James's Shipping Limited	Malta

Exhibit 12.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

I, Emanuele A. Lauro, certify that:

1. I have reviewed this annual report on Form 20-F of Scorpio Bulkers Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; 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 functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.



Date:	February 29, 2016

	/s/ Emanuele A. Lauro
Name:	Emanuele A. Lauro
Title:	Chief Executive Officer (Principal Executive Officer)

Exhibit 12.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

I, Hugh Baker, certify that:

1. I have reviewed this annual report on Form 20-F of Scorpio Bulkers Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.



Date:	February 29, 2016

	/s/ Hugh Baker
Name:	Hugh Baker
Title:	Chief Financial Officer (Principal Financial Officer)

Exhibit 13.1

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with this Annual Report of Scorpio Bulkers Inc. (the “Company”) on Form 20-F for the year ended December 31, 2015 as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Emanuele A. Lauro, 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:	February 29, 2016

	/s/ Emanuele A. Lauro
Name:	Emanuele A. Lauro
Title:	Chief Executive Officer (Principal Executive Officer)

Exhibit 13.2

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with this Annual Report of Scorpio Bulkers Inc. (the “Company”) on Form 20-F for the year ended December 31, 2015 as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Hugh Baker, 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:	February 29, 2016

	/s/ Hugh Baker
Name:	Hugh Baker
Title:	Chief Financial Officer (Principal Financial Officer)

Exhibit 15.1

Exhibit 15.2