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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
OR
 
 
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the fiscal year ended December 31, 2019
 
 
OR
 
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the transition period from _________________ to _________________
 
 
OR
 
 
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
Date of event requiring this shell company report:
Commission file number: 001-38904
FLEX LNG Ltd.
(Exact name of Registrant as specified in its charter)
 
 
(Translation of Registrant's name into English)
 
 
Bermuda
(Jurisdiction of incorporation or organization)
 
 
Par-La-Ville Place
14 Par-La-Ville Road
Hamilton
HM08
Bermuda
(Address of principal executive offices)
With copies to:
James Ayers, Company Secretary
Par-La-Ville Place
14 Par-La-Ville Road
Hamilton
HM08



Bermuda
Telephone:
+1
441
295 69 35
Facsimile:
+1
441
295 3494
 
 
 
 
(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
Trading symbol(s)
Name of each exchange on which registered
Ordinary Shares, par value $0.10 per share
FLNG
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, 2019, there were 54,110,584 ordinary shares, par value $0.10 per share, outstanding.
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 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, a non-accelerated filer or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
☐
 
Accelerated filer
☐
 
 
 
 
 
 
 
 
 
Non-accelerated filer
 ☒
 
Emerging growth company
☒
 
 
(Do not check if a smaller reporting company)
 
 
 
 
 
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.     ☒
† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 ☒
U.S. GAAP
☐
International Financial Reporting Standards as issued by the international Accounting Standards Board
☐
Other
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17
☐
 
Item 18
☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
 
No
 ☒

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

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

Yes
☐
 
No
☐




TABLE OF CONTENTS

 
 
Page
PART I
 
6
 
 
 
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
6
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
6
ITEM 3.
KEY INFORMATION
6
ITEM 4.
INFORMATION ON THE COMPANY
32
ITEM 4A.
UNRESOLVED STAFF COMMENTS
51
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
51
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
64
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
67
ITEM 8.
FINANCIAL INFORMATION
68
ITEM 9.
THE OFFER AND LISTING
69
ITEM 10.
ADDITIONAL INFORMATION
70
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
77
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
78
 
 
 
PART II
 
78
 
 
 
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
78
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
78
ITEM 15.
CONTROLS AND PROCEDURES
78
ITEM 16.
RESERVED
79
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT.
79
ITEM 16B.
CODE OF ETHICS
79
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
79
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
80
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
80
ITEM 16F.
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
80
ITEM 16G.
CORPORATE GOVERNANCE
80
ITEM 16H.
MINE SAFETY DISCLOSURE
81
 
 
 
PART III
 
82
 
 
 
ITEM 17.
FINANCIAL STATEMENTS
82
ITEM 18.
FINANCIAL STATEMENTS
82
ITEM 19.
EXHIBITS
83




CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this annual report pertaining to our operations, cash flows and financial position, including, in particular, the likelihood of our success in developing and expanding our business, include forward-looking statements. The Private Securities Litigation Reform Act of 1995, or the PSLRA, provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
We are taking advantage of the safe harbor provisions of the PSLRA and are including this cautionary statement in connection therewith. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. This annual report 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. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "seeks," "targets," "potential," "continue," "contemplate," "possible," "likely," "might," "will," "would," "could," "projects," "forecasts," "may," "should" and similar expressions are forward-looking statements.
All statements in this annual report that are not statements of either historical or current facts are forward-looking statements. Forward-looking statements include, but are not limited to, such matters as:
•
general LNG shipping market conditions, including charter rates and vessel values;
•
our future operating or financial results;
•
global and regional economic and political conditions;
•
fluctuations in interest rates;
•
stability of Europe and the Euro;
•
our pending vessel acquisitions through our newbuilding program, our business strategy and expected and unexpected capital spending and operating expenses, including dry-docking, insurance costs and bunker costs;
•
our expectations of the availability of vessels to purchase, the time it may take to construct new vessels and risks associated with vessel construction and vessels' useful lives;
•
LNG market trends, including charter rates and factors affecting supply and demand;
•
our financial condition and liquidity, including our ability to repay or refinance our indebtedness and obtain financing in the future to fund capital expenditures, acquisitions and other general corporate activities;
•
our ability to enter into time charters or other employment arrangements for our newbuilding vessels and our existing vessels after our current charters expire and our ability to earn income in the spot market (which includes vessel employment under single voyage spot charters and time charters with an initial term of less than six months);
•
estimated future maintenance and replacement capital expenditures;
•
the expected cost of, and our ability to comply with, governmental regulations, maritime self-regulatory organization standards, as well as standard regulations imposed by our charterers applicable to our business;
•
availability of and ability to maintain skilled labor, vessel crews and management;
•
our anticipated incremental general and administrative expenses as a publicly traded company;
•
customers' increasing emphasis on environmental and safety concerns;



•
potential disruption of shipping routes due to accidents, political events, public health threats, international hostilities and instability, piracy or acts by terrorists; and
•
our ability to maintain relationships with major LNG producers and traders.
Many of these statements are based on our assumptions about factors that are beyond our ability to control or predict and are subject to risks and uncertainties that are described more fully in "Item 3. Key Information—D. Risk Factors." Any of these factors or a combination of these factors could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. Factors that might cause future results to differ include, but are not limited to, the following:
•
changes in governmental rules and regulations or actions taken by regulatory authorities including the implementation of new environmental regulations;
•
the impact of the discontinuance of the London Interbank Offered Rate, or LIBOR, after 2021 on interest rates of our debt that reference LIBOR;
•
changes in economic and competitive conditions affecting our business, including market fluctuations in charter rates and charterers' abilities to perform under existing time charters;
•
the length and severity of the recent Coronavirus COVID-19 (“COVID-19”) outbreak, including its impacts across our business on demand, operations in China and the Far East and knock-on impacts to our global operations;
•
potential liability from future litigation and potential costs due to environmental damage and vessel collisions;
•
the impact of adverse weather and natural disasters;
•
the impact of public health threats and outbreaks of other highly communicable diseases;
•
the length and number of off-hire periods; and
•
other factors discussed in "Item 3. Key Information—D. Risk Factors" in this annual report.
You should not place undue reliance on forward-looking statements contained in this annual report because they are statements about events that are not certain to occur as described or at all. All forward-looking statements in this annual report are qualified in their entirety by the cautionary statements contained in this annual report. These forward-looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.
Except to the extent required by applicable law or regulation, we undertake no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all of these factors.  Further, we cannot assess the effect of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.
PART I
ITEM 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, the terms "FLEX LNG," "we," "us," "our," the "Company" and the "Group" refer to FLEX LNG Ltd. and its consolidated subsidiaries.



We use the term "LNG" to refer to liquefied natural gas, and we use the term "cbm" to refer to cubic meters in describing the carrying capacity of the vessels in our fleet. Unless otherwise indicated, all references to "U.S. dollars," "USD," "dollars," "US$" and "$" in this annual report are to the lawful currency of the United States of America, references to "Norwegian Kroner," and "NOK" are to the lawful currency of Norway and references to "Great British Pounds," and "GBP" are to the lawful currency of the United Kingdom.
The consolidated financial statements included in this annual report have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America, or U.S. GAAP.
References in this annual report to ordinary shares are adjusted to reflect a one-for-ten reverse stock split, which became effective as of March 7, 2019.

A.    Selected Financial Data

The following selected historical financial information should be read in conjunction with our audited consolidated financial statements and related notes, which are included herein, together with "Item 5. Operating and Financial Review and Prospects". Our historical results are not necessarily indicative of our future results.
The following table presents, in each case for the periods and as of the dates indicated, the selected historical financial and operating data of FLEX LNG, which have been derived from audited consolidated financial statements as of and for the years ended December 31, 2019, 2018 and 2017. Our audited consolidated financial statements as of and for the years ended December 31, 2019, 2018 and 2017 have been prepared in accordance with U.S. GAAP.
STATEMENT OF INCOME
 
Year ended December 31,
(In thousands of $, except per share data)
 
2019

 
2018

 
2017

Vessel operating revenues
 
119,967

 
77,209

 
27,329

Voyage expenses
 
(6,284
)
 
(5,177
)
 
(6,658
)
Vessel operating expenses
 
(22,423
)
 
(20,984
)
 
(29,874
)
Administrative expenses
 
(7,506
)
 
(4,639
)
 
(3,409
)
Depreciation
 
(28,747
)
 
(17,412
)
 
(2
)
Operating income/(loss)
 
55,007

 
28,997

 
(12,614
)
Interest income
 
1,073

 
607

 
123

Interest expense
 
(33,875
)
 
(17,781
)
 
(234
)
Write-off of debt issuance costs
 
(3,388
)
 
—

 
—

Gain/(loss) on derivatives
 
(1,555
)
 
—

 
—

Other financial items
 
(113
)
 
(54
)
 
2,334

Income/(loss) before tax
 
17,149

 
11,769

 
(10,391
)
Income tax expense/(benefit)
 
(182
)
 
10

 
(17
)
Net income/(loss)
 
16,967

 
11,779

 
(10,408
)
 
 
 
 
 
 
 
Earnings/(loss) per share, basic and diluted
 
$
0.31

 
$
0.29

 
$
(0.34
)
Dividends per share declared
 
$
0.10

 
$
—

 
$
—

 
 
 
 
 
 
 
CASH FLOW DATA
 
Year ended December 31,
(In thousands of $)
 
2019

 
2018

 
2017

Net cash provided by (used in) operating activities
 
51,526

 
35,714

 
(17,752
)
Net cash (used in) provided by investing activities
 
(291,542
)
 
(584,433
)
 
(77,714
)
Net cash provided by (used in) financing activities
 
313,998

 
593,855

 
103,988


7


BALANCE SHEET DATA
As of December 31,
(In thousands of $, except ordinary share data)
 
2019

 
2018

 
2017

Total current assets
 
143,890

 
60,425

 
17,570

Total assets
 
1,641,282

 
1,294,386

 
684,510

Total long term debt
 
744,283

 
431,602

 
160,000

Total current liabilities
 
57,732

 
35,460

 
4,409

Total liabilities
 
802,017

 
467,062

 
164,409

Number of shares outstanding
 
54,110,584

 
54,099,929

 
36,797,238

Total equity
 
839,265

 
827,324

 
520,101


B.    Capitalization and Indebtedness

Not applicable.

C.    Reasons for the offer and use of Proceeds

Not applicable.
D.    Risk Factors
The following summarizes the risks that may materially affect our business, financial condition or results of operations. The occurrence of any of the events described in this section could significantly and negatively affect our business, financial condition, operating results or the trading price of our securities.
Risks Related to Our Industry
Charter hire rates for LNG vessels are volatile and may decrease in the future, which may adversely affect our earnings, revenue and profitability and our ability to comply with our loan covenants.
Substantially all of our revenues are derived from a single market, the LNG carrier segment, and therefore our financial results depend on chartering activities and developments in this segment. The LNG shipping industry is cyclical with attendant volatility in charter hire rates and profitability. The LNG charter market, from which we derive and plan to continue to derive our revenues, has only recently begun to recover after experiencing a prolonged period of historically low rates. The degree of charter hire rate volatility among different types of LNG vessels has varied widely, and time charter and spot market rates for LNG vessels have in the recent past declined below operating costs of vessels.
Fluctuations in charter rates result from changes in the supply and demand for vessel capacity and changes in the supply and demand for the major commodities carried on water internationally. Because the factors affecting the supply and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in charter rates are also unpredictable. A significant decrease in charter rates would also affect asset values and adversely affect our profitability, cash flows and our ability to pay dividends, if any.
Furthermore, a significant decrease in charter rates would cause asset values to decline and we may have to record an impairment charge in our consolidated financial statements which could adversely affect our financial results.
Factors that may influence demand for vessel capacity include:
•
supply of and demand for LNG;
•
the price of LNG;
•
changes in the exploration or production of LNG;
•
the location of regional and global exploration, production and manufacturing facilities;
•
the location of consuming regions for LNG;

8


•
the globalization of production and manufacturing;
•
global and regional economic and political conditions, including armed conflicts and terrorist activities, embargoes and strikes;
•
disruptions and developments in international trade;
•
changes in seaborne and other transportation patterns, including the distance LNG is transported by sea;
•
environmental and other regulatory developments;
•
currency exchange rates;
•
the weather; and
•
impact of public health threats and outbreaks of other highly communicable diseases
Demand for our LNG vessels is dependent upon economic growth in the world's economies, seasonal and regional changes in demand, changes in the capacity of the global LNG fleet and the sources and supply of LNG transported by sea. The capacity of the global LNG vessels fleet seems likely to increase and economic growth may not resume in areas that have experienced a recession or continue in other areas. As such, adverse economic, political, social or other developments could have a material adverse effect on our business and operating results.
Factors that may influence the supply of vessel capacity include:
•
number of newbuilding orders and deliveries;
•
the number of shipyards and ability of shipyards to deliver vessels;
•
port and canal congestion;
•
scrapping of older vessels;
•
speed of vessel operation;
•
vessel casualties; and
•
number of vessels that are out of service or laid up.
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 costs, insurance coverage costs, the efficiency and age profile of the existing LNG 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.
Global economic conditions may negatively impact the LNG shipping industry.
As the shipping industry is highly dependent on the availability of credit to finance and expand operations, it can be negatively affected by decline in available credit facilities. Any weakening in global economic conditions may have a number of adverse consequences for LNG and other shipping sectors, including, among other things:
•
low charter rates, particularly for vessels employed in the spot market (which includes vessel employment under single voyage spot charters and time charters with an initial term of less than six months);
•
decreases in the market value of LNG vessels and limited second-hand market for the sale of vessels;
•
limited financing for vessels;

9


•
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, financial condition and ability to pay dividends.
We are dependent on spot charters and any decrease in spot charter rates in the future may adversely affect our earnings.
We operate several of our vessels in the spot market, exposing us to fluctuations in spot market charter rates. The number of vessels that we employ in the spot market will vary from time to time and we may also employ any additional vessels that we acquire or take delivery of in the spot market. In addition, we operate several vessels under market linked contracts, whereby the charter hire received is linked to the spot market charter rates. As a result, our financial performance may be significantly affected by conditions in the LNG spot market and only our vessels that operate under fixed-rate time charters (if any) may, during the period such vessels operate under such time charters, provide a fixed source of revenue to us.
Historically, the LNG market has been volatile as a result of the many conditions and factors that can affect the price, supply of and demand for LNG capacity. Weak global economic trends may further reduce demand for transportation of LNG cargoes over longer distances, which may materially affect our revenues, profitability and cash flows. The spot charter market may fluctuate significantly based upon supply of and demand of vessels and cargoes. The successful operation of our vessels in the competitive spot charter market depends upon, 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 volatile, and, in the past, there have been periods when spot rates have declined below the operating cost of vessels. If future spot charter rates decline, then we may be unable to operate our vessels trading in the spot market profitably, or meet our obligations, including payments on indebtedness. 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.
Risks involved with operating ocean-going vessels could affect our business and reputation, which could have a material adverse effect on our results of operations and financial condition.
The operation of an ocean-going vessel carries inherent risks. These risks include the possibility of:
•
a marine disaster,
•
terrorism,
•
environmental accidents,
•
cargo and property losses and damage, and
•
business interruptions caused by mechanical failure, human error, war, terrorism, piracy, political action in various countries, labor strikes, or adverse weather conditions.
Any of these circumstances or events could increase our costs or lower our revenues. The involvement of our vessels in an environmental disaster may harm our reputation as a safe and reliable LNG operator.
World events, political instability, terrorist attacks, international hostilities and global public health threats could affect our operations and financial results.
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. Moreover, we operate in a sector of the economy that is likely to be adversely impacted by the effects of political conflicts, including the current political instability in the Middle East and the South China Sea region and other geographic countries and areas, geopolitical events such as Brexit, terrorist or other attacks, and war (or threatened war) or international hostilities, such as those between the United States and North Korea. Terrorist attacks such as those in Paris on November 13, 2015, Manchester on May 22, 2017, as well as the frequent incidents of terrorism in the Middle East, and the continuing response of the United States and others to these attacks, as well as the threat of future terrorist attacks around the world, continues to cause uncertainty in the world's financial markets and may affect our business, operating results and financial condition. Continuing conflicts and recent developments in the Middle

10


East, including increased tensions between the U.S. and Iran, as well as the presence of U.S. or other armed forces in Iraq, Syria, Afghanistan and various other regions, may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets. As a result of the above, insurers have increased premiums and reduced or restricted coverage for losses caused by terrorist acts generally. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. Any of these occurrences could have a material adverse impact on our operating results, revenues and costs. Additionally, Brexit, or similar events in other jurisdictions, could impact global markets, including foreign exchange and securities markets; any resulting changes in currency exchange rates, tariffs, treaties and other regulatory matters could in turn adversely impact our business and operations.
In January 2020, in response to certain perceived terrorist activity, the United States launched an airstrike in Baghdad that killed a high-ranking Iranian general, increasing hostilities between the U.S. and Iran. This attack or further escalations between the U.S. and Iran that may follow, could result in retaliation from Iran that could potentially affect the shipping industry, through increased attacks on vessels in the Strait of Hormuz (which already experienced an increased number of attacks on and seizures of vessels in 2019), or by potentially closing off or limiting access to the Strait of Hormuz. Any restriction on access to the Strait of Hormuz, or increased attacks on vessels in the area, could negatively impact our earnings, cash flow and results of operations.
In the past, political instability has also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea and the Gulf of Aden off the coast of Somalia.
In addition, public health threats, such as COVID-19, influenza and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate, including China, could adversely impact our operations and the timing of completion of outstanding or future newbuilding projects as well as the operations of our customers.
Any of these occurrences could have a material adverse impact on our future performance, results of operations, cash flows and financial position.
Outbreaks of epidemic and pandemic of diseases and governmental responses thereto could adversely affect our business.
Our operations and the industry in which we operate are subject to risks related to outbreaks of infectious diseases.  For example, public health threats, such as the COVID-19 outbreak (as described more fully below), influenza and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate, including China, could adversely affect economic conditions and the demand for LNG and LNG shipping regionally as well as globally, impact our operations, the timing of completion of any outstanding or future newbuilding projects, as well as the operations of our customers.
The recent outbreak of COVID-19, a virus causing potentially deadly respiratory tract infections first identified in China and subsequently spreading around the world, has negatively affected economic conditions, the supply chain, the labor market, the demand for LNG and LNG shipping regionally as well as globally and may otherwise impact our operations and the operations of our customers and suppliers. As of March 2020, the outbreak of COVID-19 has been declared a pandemic by the World Health Organization (“WHO”). Governments in affected countries are imposing travel bans, quarantines and other emergency public health measures. As of March 15, 2020, the United States has temporarily restricted travel by foreign nationals into the country from a number of areas, including China and Europe. In addition, on March 18, 2020, the U.S. and Canada agreed to restrict all nonessential travel across the border. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses. These restrictions, and future prevention and mitigation measures, are likely to have an adverse impact on global economic conditions, which could materially and adversely affect our future operations. Uncertainties regarding the economic impact of the COVID-19 outbreak are likely to result in sustained market turmoil, which could also negatively impact our business, financial condition and cash flows. These measures, though temporary in nature, may continue and increase as countries attempt to contain the outbreak. As a result of these measures, our vessels may not be able to call on ports, or may be restricted from disembarking from ports, located in regions affected by COVID-19. The extent of the COVID-19 outbreak’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. Although, to our knowledge, there has not yet been any significant delays or disruption of our operations due to COVID-19 to date, the ultimate severity of the outbreak and its effect on the industry in which we operate is uncertain at this time and therefore we cannot predict the continuous impact it may have on our future operations and finances, which could be material and adverse.

11


In addition, public health threats in any area, including areas where we do not operate, could disrupt international transportation. Our crews generally work on a rotation basis, with a substantial portion relying on international air transport for rotation. Any such disruptions could impact the cost of rotating our crews, and possibly impact our ability to maintain a full crew on all vessels at a given time. Any of these public health threats and related consequences could adversely affect our financial results.
The current state of the global financial markets and current economic conditions may adversely impact our results of operation, financial condition, cash flows and ability to obtain financing or refinance our existing and future credit facilities on acceptable terms, which may negatively impact our business.
Global financial markets and economic conditions have been, and continue to be, volatile. Beginning in February 2020, due in part to fears associated with the spread of COVID-19 (as more fully described above), global financial markets and starting in late February, financial markets in the U.S., experienced even greater relative volatility and a steep and abrupt downturn, which volatility and downturn may continue as COVID-19 continues to spread. Credit markets and the debt and equity capital markets have been distressed and the uncertainty surrounding the future of the global credit markets has resulted in reduced access to credit worldwide, particularly for the shipping industry. These issues, along with significant write-offs in the financial services sector, the re-pricing of credit risk and the current weak economic conditions, have made, and will likely continue to make, it difficult to obtain additional financing. The current state of global financial markets and current economic conditions might adversely impact our ability to issue additional equity at prices that will not be dilutive to our existing shareholders or preclude us from issuing equity at all. Economic conditions may also adversely affect the market price of our ordinary shares.
Also, as a result of concerns about the stability of financial markets generally, and the solvency of counterparties specifically, the availability and cost of obtaining money from the public and private equity and debt markets has become more difficult. Many lenders have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at all or on terms similar to current debt, and reduced, and in some cases ceased, to provide funding to borrowers and other market participants, including equity and debt investors, and some have been unwilling to invest on attractive terms or even at all. Due to these factors, we cannot be certain that financing will be available if needed and to the extent required, or that we will be able to refinance our existing and future credit facilities, on acceptable terms or at all. If financing or refinancing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they come due, including taking delivery of our Newbuilding Vessels (as defined in "Item 4. Information on the Company - A. History and Development of the Company"), or we may be unable to enhance our existing business, complete additional vessel acquisitions or otherwise take advantage of business opportunities as they arise.
The price of our ordinary shares may be volatile.
The price of our ordinary shares may be volatile and may fluctuate due to factors including:
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our payment of dividends to our shareholders;
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actual or anticipated fluctuations in quarterly and annual results;
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fluctuations in the seaborne transportation industry, including fluctuations in the LNG carrier market;
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mergers and strategic alliances in the shipping industry;
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changes in governmental regulations or maritime self-regulatory organization standards;
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shortfalls in our operating results from levels forecasted by securities analysts;
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announcements concerning us or our competitors;
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the failure of securities analysts to publish research about us, or analysts making changes in their financial estimates;
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general economic conditions;
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terrorist acts;
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business interruptions caused by the recent outbreak of COVID-19;

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future sales of our shares or other securities;
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investors’ perception of us and the LNG shipping industry;
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the general state of the securities market; and
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other developments affecting us, our industry or our competitors.
Securities markets worldwide are experiencing significant price and volume fluctuations, especially due to factors relating to the recent outbreak of COVID-19. The market price for our ordinary shares is volatile. The trading price of our ordinary shares as of December 31, 2019 was $10.90 per share and as of April 15, 2020, was $4.86 per share. This market and share price volatility relating to the effects of COVID-19, as well as general economic, market or political conditions, has and could further reduce the market price of our ordinary shares in spite of our operating performance and could also increase our cost of capital, which could prevent us from accessing debt and equity capital on terms acceptable to us or at all.
The instability of the Euro or the inability of countries to refinance their debts could have a material adverse effect on our revenue, profitability and financial position.
As a result of the credit crisis in Europe, in particular in Greece, Italy, Ireland, Portugal and Spain, the European Commission created the European Financial Stability Facility, or the EFSF, and the European Financial Stability Mechanism, or the EFSM, to provide funding to Eurozone countries in financial difficulties that seek such support. In March 2011, the European Council agreed on the need for Eurozone countries to establish a permanent stability mechanism, the European Stability Mechanism, or the ESM, which was activated by mutual agreement, to assume the role of the EFSF and the EFSM in providing external financial assistance to Eurozone countries entered into force in May 2013. Despite these measures, concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations and the overall stability of the Euro. An extended period of adverse development in the outlook for European countries could still reduce the overall demand for oil and gas and for our services. These potential developments, or market perceptions concerning these and related issues, could affect our financial position, results of operations and cash flow.
The U.K.’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.
In June 2016, a majority of voters in the U.K. elected to withdraw from the European Union, or the EU, in a national referendum (informally known as “Brexit”), a process that the government of the U.K. formally initiated in March 2017. Since then, the U.K. and the EU have been negotiating the terms of a withdrawal agreement, which was approved in October 2019 and ratified in January 2020. The U.K. formally exited the EU on January 31, 2020, although a transition period remains in place until December 2020, during which the U.K. will be subject to the rules and regulations of the EU while continuing to negotiate the parties’ relationship going forward, including trade deals. There is currently no agreement in place regarding the aftermath of the withdrawal, creating significant uncertainty about the future relationship between the U.K. and the EU, including with respect to the laws and regulations that will apply as the U.K. determines which EU-derived laws to replace or replicate following the withdrawal. Brexit has also given rise to calls for the governments of other EU member states to consider withdrawal. These developments and uncertainties, or the perception that any of them may occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business and on our consolidated financial position, results of operations and our ability to pay distributions. Additionally, Brexit or similar events in other jurisdictions, could impact global markets, including foreign exchange and securities markets; any resulting changes in currency exchange rates, tariffs, treaties and other regulatory matters could in turn adversely impact our business and operations.
Brexit contributes to considerable uncertainty concerning the current and future economic environment. Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets.

We face risks attendant to changes in economic and regulatory conditions around the world.
We face risks attendant to changes in economic environments, changes in interest rates, instability in the banking and securities markets and trade regulation around the world, among other factors. Major market disruptions and adverse changes in

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market conditions and regulatory climate in China, the United States, the European Union and worldwide may adversely affect our business or impair our ability to borrow amounts under credit facilities or any future financial arrangements.
Additionally, a further economic slowdown in the Asia-Pacific region, especially in China, could negatively affect global economic markets and the market for LNG shipping. Chinese LNG imports have accounted for the majority of global LNG transportation growth annually over the last years, with recent demand growth driven by stronger LNG imports to China. Before the global economic financial crisis that began in 2008, China had one of the world's fastest growing economies in terms of gross domestic product, or GDP, which had a significant impact on shipping demand. Although the growth rate of China's GDP for the year ended December 31, 2019, was 6.1%, down from a growth rate of 6.6% for the year ended December 31, 2018, it still remains well below pre-2008 levels. China and other countries in the Asia Pacific region will likely continue to experience slowed or even negative economic growth in the future including as a result of the COVID-19 or other public health threats. Our financial condition and results of operations, as well as our future prospects, would likely be hindered by a continuing or worsening economic downturn in any of these countries or geographic regions.
Over the past several years, the credit markets in the United States and Europe have remained contracted, deleveraged and less liquid, and the U.S. federal and state governments and European authorities have implemented governmental action and/or new regulation of the financial markets and may implement additional regulations in the future. Global financial markets have been, and continue to be, disrupted and volatile. Beginning in February 2020, due in part to fears associated with the spread of COVID-19, global financial markets and starting in late February, financial markets in the U.S., experienced even greater relative volatility and a steep and abrupt downturn, which volatility and downturn may continue as COVID-19 continues to spread. Potential adverse developments in the outlook for the United States or European countries, or market perceptions concerning these and related issues, could reduce the overall demand for LNG cargoes and for our service, which could negatively affect our financial position, results of operations and cash flow. The recent COVID-19 outbreak has negatively impacted, and may continue to negatively impact, global economic activity, demand for energy, including LNG and LNG shipping, and funds flows and sentiment in the global financial markets. Continued economic disruption caused by the continued failure to control the spread of the virus could significantly impact our ability to obtain additional debt financing.
Further, governments may turn and have turned to trade barriers to protect their domestic industries against foreign imports, thereby depressing shipping demand. In particular, leaders in the United States and China have implemented certain increasingly protective trade measures. The results of the 2016 presidential election and the potential results of the upcoming 2020 presidential election in the United States have created significant uncertainty about the future relationship between the United States, China and other exporting countries, including with respect to trade policies, treaties, government regulations and tariffs. For example, in March 2018, President Trump announced tariffs on imported steel and aluminum into the United States that could have a negative impact on international trade generally and in January 2019, the United States announced expanded sanctions against Venezuela, which may have an effect on its oil output and in turn affect global oil supply. There have also been continuing trade tensions, including significant tariff increases, between the United States and China. However, on January 15, 2020, the U.S. and China signed a Phase One trade deal pursuant to which, among other things, the U.S. will modify its Section 301 tariff actions to relax trade tensions between the two countries. Protectionist developments, or the perception that they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade. Moreover, increasing trade protectionism may cause an increase in (a) the cost of goods exported from regions globally, (b) the length of time required to transport goods and (c) the risks associated with exporting goods. Such increases may significantly affect the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs, which could have an adverse impact on our charterers’ business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us. This could have a material adverse effect on our business, results of operations, financial condition and our ability to pay any cash distributions to our stockholders.
Trade actions initiated by the U.S. imposing tariffs on imports have been met with retaliatory tariffs by other countries, adding a level of tension and uncertainty to the global economic environment. In November 2018, the U.S., Mexico and Canada executed the U.S.-Mexico-Canada Agreement, or the USMCA, the successor agreement to the North American Free Trade Agreement, or NAFTA. The agreement includes the imposition of tariffs on vehicles that do not meet regional raw material (steel and aluminum), part and labor content requirements. The agreement was ratified by the U.S. in January 2020.
While global economic conditions have generally improved, renewed adverse and developing economic and governmental factors, together with the concurrent volatility in charter rates and vessel values, may have a material adverse effect on our results of operations, financial condition and cash flows and could cause the price of our ordinary shares to decline. An extended period of deterioration in the outlook for the world economy could reduce the overall demand for our services and could also adversely affect our ability to obtain financing on acceptable terms or at all.

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Changes in the economic and political environment in China and policies adopted by the government to regulate its economy may have a material adverse effect on our business, financial condition and results of operations.
The Chinese economy differs from the economies of western countries in such respects as structure, government involvement, level of development, growth rate, capital reinvestment, allocation of resources, bank regulation, currency and monetary policy, rate of inflation and balance of payments position. Prior to 1978, the Chinese economy was a "planned economy." Since 1978, increasing emphasis has been placed on the utilization of market forces in the development of the Chinese economy. Annual and five-year state plans are adopted by the Chinese government in connection with the development of the economy. Although state-owned enterprises still account for a substantial portion of the Chinese industrial output, in general, the Chinese government is reducing the level of direct control that it exercises over the economy through State Plans and other measures. There is an increasing level of freedom and autonomy in areas such as allocation of resources, production, pricing and management and a gradual shift in emphasis to a "market economy" and enterprise reform. Limited price reforms were undertaken with the result that prices for certain commodities are principally determined by market forces. In addition, economic reforms may include reforms to the banking and credit sector and may produce a shift away from the export-driven growth model that has characterized the Chinese economy over the past few decades. Many of the reforms are unprecedented or experimental and may be subject to revision, change or abolition based upon the outcome of such experiments. The level of imports to and exports from China could be adversely affected by the failure to continue market reforms or changes to existing pro-export economic policies. The level of imports to and exports from China may also be adversely affected by changes in political, economic and social conditions (including a slowing of economic growth) or other relevant policies of the Chinese government, such as changes in laws, regulations or export and import restrictions, internal political instability, changes in currency policies, changes in trade policies and territorial or trade disputes. A decrease in the level of imports to China could adversely affect our business, operating results and financial condition.
While we do not currently, we may conduct a substantial amount of business in China. The legal system in China has inherent uncertainties that could have a material adverse effect on our business, financial condition and results of operations.
The Chinese legal system is based on written statutes and their legal interpretation by the Standing Committee of the National People's Congress. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, the Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, because these laws and regulations are relatively new, there is a general lack of internal guidelines or authoritative interpretive guidance and because of the limited number of published cases and their non-binding nature, interpretation and enforcement of these laws and regulations involve uncertainties. Changes in laws and regulations, including with regards to tax matters, and their implementation by local authorities could affect our vessels that could be chartered to Chinese customers or that call to Chinese ports and could have a material adverse effect on our business, results of operations and financial condition.
Acts of piracy on ocean-going vessels could adversely affect our business.
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Indian Ocean and in the Gulf of Aden off the coast of Somalia. Sea piracy incidents continue to occur, increasingly on the West Coast of Africa. In the past, political conflicts have also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping. The perception that our vessels are potential piracy or terrorist targets could have a material adverse impact on our business, financial condition and results of operations.
Further, if these piracy attacks occur in regions in which our vessels are deployed that insurers characterize as "war risk" zones or by the Joint War Committee as "war and strikes" listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain, if available at all. In addition, crew costs, including costs that may be incurred to the extent we employ on-board security guards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, 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, results of operations, cash flows, financial condition and may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.
If our vessels call on ports located in countries or territories that are subject to sanctions or embargoes imposed by the U.S. or other governments, it could lead to monetary fines or penalties and adversely affect our reputation and the market for our ordinary shares.

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While none of our vessels have called on ports in violation of sanctions and embargo laws in 2019 and we intend to maintain compliance with all applicable sanctions and embargo laws, and we endeavor to take precautions reasonably designed to mitigate such activities, including relevant provisions in charter agreements forbidding the use of our vessels in trade that would violate economic sanctions, it is possible that our vessels may call on ports located in countries or territories subject to sanctions and embargos on charterers’ instructions and without our consent, and there can be no assurance that we will maintain such compliance, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. If such activities result in a sanctions violation, we could be subject to monetary fines, penalties, or other sanctions, and our reputation and the market for our ordinary shares could adversely affected.
The sanctions and embargo laws and regulations of the United States and other applicable jurisdictions vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time.  Current or future counterparties of ours may be affiliated with persons or entities that are or may be in the future the subject of sanctions imposed by the U.S. administration, the EU, and/or other international bodies. If we determine that such sanctions require us to terminate existing or future contracts to which we or our subsidiaries are party or if we are found to be in violation of such applicable sanctions, our results of operations may be adversely affected or we may suffer reputational harm. Currently, we do not believe that any of our existing counterparties are affiliated with persons or entities that are subject to such sanctions.
Although we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain such compliance, there can be no assurance that we or our charterers will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in fines, penalties or other sanctions that could severely impact our ability to access U.S. and other 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 ordinary shares may adversely affect the price at which our ordinary shares trade. Moreover, our charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation. In addition, our reputation and the market for our securities may be adversely affected if we engage in certain other activities, such as entering into charters with individuals or entities in countries or territories subject to sanctions and embargo laws that are not controlled by the governments of those countries or territories, or engaging in operations associated with those countries or territories pursuant to contracts with third parties that are unrelated to those countries or territories or entities controlled by their governments. Investor perception of the value of our ordinary shares may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries or territories.
Compliance with safety and other vessel requirements imposed by classification societies may be costly and could reduce our net cash flows and net income.
The hull and machinery of every commercial vessel must be certified as being "in class" 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.
A vessel must undergo annual surveys, intermediate surveys, dry-dockings and special surveys. In lieu of a special survey, a vessel's machinery may be placed on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. We expect our vessels to be on special survey cycles for hull inspection and continuous survey cycles for machinery inspection.
Every vessel is also required to be dry-docked every five years for inspection of the underwater parts of the vessel. If any vessel does not maintain its class and/or fails any annual survey, intermediate survey, dry-docking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in violation of certain covenants in our loan agreements. Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on our financial condition and results of operations.
Compliance with the above requirements may result in significant expense. 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, which could have a material adverse effect on our business, results of operations, cash flows and financial condition.
The LNG shipping industry is subject to substantial environmental and other regulations, which may significantly limit our operations or increase our expenses.

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Our operations are materially affected by extensive and changing international, national, state and local environmental laws, regulations, treaties, conventions and standards which are in force in international waters, or in the jurisdictional waters of the countries in which our ships operate and in the countries in which our ships are registered. These requirements include those relating to equipping and operating ships, providing security and minimizing or addressing impacts on the environment from ship operations. We may incur substantial costs in complying with these requirements, including costs for ship modifications and changes in operating procedures. We also could incur substantial costs, including clean-up costs, civil and criminal penalties and sanctions, the suspension or termination of operations and third-party claims as a result of violations of, or liabilities under, such laws and regulations.
In addition, these requirements can affect the resale value or useful lives of our ships, require a reduction in cargo capacity, necessitate ship modifications or operational changes or restrictions or lead to decreased availability of insurance coverage for environmental matters. They could further result in the denial of access to certain jurisdictional waters or ports or detention in certain ports. We are required to obtain governmental approvals and permits to operate our ships. Delays in obtaining such governmental approvals may increase our expenses, and the terms and conditions of such approvals could materially and adversely affect our operations.
Additional laws and regulations may be adopted that could limit our ability to do business or increase our operating costs, which could materially and adversely affect our business. For example, new or amended legislation relating to ship recycling, sewage systems, emission control (including emissions of greenhouse gases and other pollutants) as well as ballast water treatment and ballast water handling may be adopted. The United States has recently enacted ballast water management system legislation and regulations that require more stringent controls of air and water emissions from ocean-going ships. Such legislation or regulations may require additional capital expenditures or operating expenses (such as increased costs for low-sulfur fuel) in order for us to maintain our ships' compliance with international and/or national regulations. We also may become subject to additional laws and regulations if we enter new markets or trades.
We also believe that the heightened environmental, quality and security concerns of insurance underwriters, regulators and charterers will generally lead to additional regulatory requirements, including enhanced risk assessment and security requirements, as well as greater inspection and safety requirements on all LNG carriers in the marine transportation market. These requirements are likely to add incremental costs to our operations, and the failure to comply with these requirements may affect the ability of our ships to obtain and, possibly, recover from, insurance policies or to obtain the required certificates for entry into the different ports where we operate.
Some environmental laws and regulations, such as the U.S. Oil Pollution Act of 1990, or "OPA", provide for potentially unlimited joint, several and strict liability for owners, operators and demise or bareboat charterers for oil pollution and related damages. OPA applies to discharges of any oil from a ship in U.S. waters, including discharges of fuel and lubricants from an LNG carrier, even if the ships do not carry oil as cargo. In addition, many states in the United States bordering a navigable waterway have enacted legislation providing for potentially unlimited strict liability without regard to fault for the discharge of pollutants within their waters. We also are subject to other laws and conventions outside the United States that provide for an owner or operator of LNG carriers to bear strict liability for pollution, such as the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended by different Protocols in 1976, 1984, and 1992, and amended in 2000, or the CLC.
Some of these laws and conventions, including OPA and the CLC, may include limitations on liability. However, the limitations may not be applicable in certain circumstances, such as where a spill is caused by a ship owner's or operator's intentional or reckless conduct. These limitations are also subject to periodic updates and may otherwise be amended in the future.
Compliance with OPA and other environmental laws and regulations also may result in ship owners and operators incurring increased costs for additional maintenance and inspection requirements, the development of contingency arrangements for potential spills, obtaining mandated insurance coverage and meeting financial responsibility requirements.
Climate change and greenhouse gas restrictions may adversely impact our operations and markets.
Due to concern over the risk of climate change, a number of countries and the International Maritime Organization, or the IMO, have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures may include, among others, adoption of cap and trade regimes, carbon taxes, increased efficiency standards and incentives or mandates for renewable energy. More specifically, on October 27, 2016, the International Maritime Organization’s Marine Environment Protection Committee announced its decision concerning the implementation of regulations mandating a reduction in sulfur emissions from 3.5% currently to 0.5% as of the beginning of January 1, 2020. Since January 1, 2020, ships must either remove sulfur from emissions or buy fuel with low sulfur content, which may lead to increased costs and supplementary investments for ship owners. The interpretation of "fuel oil used on board" includes use in main engine, auxiliary engines and

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boilers. Shipowners may comply with this regulation by (i) using 0.5% sulfur fuels on board, which are available around the world but at a higher cost; (ii) installing scrubbers for cleaning of the exhaust gas; or (iii) by retrofitting vessels to be powered by liquefied natural gas, which may not be a viable option due to the lack of supply network and high costs involved in this process. Costs of compliance with these regulatory changes may be significant and may have a material adverse effect on our future performance, results of operations, cash flows and financial position.
In addition, although the emissions of greenhouse gases from international shipping currently are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which required adopting countries to implement national programs to reduce emissions of certain gases, or the Paris Agreement (discussed further below), a new treaty may be adopted in the future that includes restrictions on shipping emissions. Compliance with changes in laws, regulations and obligations relating to climate change could increase our costs related to operating and maintaining our vessels and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions or administer and manage a greenhouse gas emissions program. Revenue generation and strategic growth opportunities may also be adversely affected.
Adverse effects upon the oil and gas industry relating to climate change, including growing public concern about the environmental impact of climate change, may also adversely affect demand for our services. For example, increased regulation of greenhouse gases or other concerns relating to climate change may reduce the demand for oil and gas in the future or create greater incentives for use of alternative energy sources. In addition, the physical effects of climate change, including changes in weather patterns, extreme weather events, rising sea levels, scarcity of water resources, may negatively impact our operations. Any long-term material adverse effect on the oil and gas industry could have a significant financial and operational adverse impact on our business that we cannot predict with certainty at this time.
If we fail to comply with international safety regulations, we may be subject to increased liability, which 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 shipowners, ship managers and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. If we fail to comply with the ISM Code, we may be subject to increased liability, or may invalidate existing insurance or decrease available insurance coverage for our affected vessels, and such failure may result in a denial of access to, or detention in, certain ports.
Regulations relating to ballast water discharge may adversely affect our revenues and profitability.
The IMO has imposed updated guidelines for ballast water management systems specifying the maximum amount of viable organisms allowed to be discharged from a vessel's ballast water.  Depending on the date of the International Oil Pollution Prevention, or IOPP renewal survey, existing vessels constructed before September 8, 2017 must comply with the updated D-2 standard on or after September 8, 2019.  For most vessels, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms.  Ships constructed on or after September 8, 2017 are to comply with the D-2 standards upon delivery. All our vessels comply with the updated guideline.
Furthermore, United States regulations are currently changing.  Although the 2013 Vessel General Permit, or VGP, program and U.S. National Invasive Species Act, or NISA, are currently in effect to regulate ballast discharge, exchange and installation, the Vessel Incidental Discharge Act, or VIDA, which was signed into law on December 4, 2018, requires that the, U.S. Environmental Protection Agency, or EPA develop national standards of performance for approximately 30 discharges, similar to those found in the VGP within two years. By approximately 2022, the U.S. Coast Guard, or USCG, must develop corresponding implementation, compliance and enforcement regulations regarding ballast water.  The new regulations could require the installation of new equipment, which may cause us to incur substantial costs.
Maritime claimants could arrest one or more of our vessels, which could interrupt our cash flow.
Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against 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 result in a significant loss of earnings for the related off-hire period. In addition, in jurisdictions where the "sister ship" theory of liability applies, such as South Africa, a claimant may arrest 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. In countries with "sister ship" liability laws, claims might be asserted against us or any of our vessels for liabilities of other vessels that we own.

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The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.
Our vessels may call in ports where smugglers attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face governmental or other regulatory claims or restrictions which could have an adverse effect on our business, financial condition, results of operations and cash flows.
Governments could requisition our vessels during a period of war or emergency resulting in a loss of earnings.
A government of a vessel's registry could requisition for title or seize one or more of our vessels. Requisition for title occurs when a government takes control of a vessel and becomes the owner. A government could also requisition one or more of our vessels for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of one or more of our vessels could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor advocacy groups, certain institutional investors, investment funds, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG and similar matters may hinder access to capital, as investors and lenders may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices. Companies which do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.
We may face increasing pressures from investors, lenders and other market participants, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result, we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders remain invested in us and make further investments in us, especially given the highly focused and specific trade of LNG transportation in which we are engaged. If we do not meet these standards, our business and/or our ability to access capital could be harmed.
Additionally, certain investors and lenders may exclude LNG shipping companies, such as us, from their investing portfolios altogether due to environmental, social and governance factors.  These limitations in both the debt and equity capital markets may affect our ability to grow as our plans for growth may include accessing the equity and debt capital markets.  If those markets are unavailable, or if we are unable to access alternative means of financing on acceptable terms, or at all, we may be unable to implement our business strategy, which would have a material adverse effect on our financial condition and results of operations and impair our ability to service our indebtedness. Further, it is likely that we will incur additional costs and require additional resources to monitor, report and comply with wide ranging ESG requirements.  The occurrence of any of the foregoing could have a material adverse effect on our business and financial condition.
Technological innovation and quality and efficiency requirements from our customers could reduce our charterhire income and the value of our vessels.
Our customers, in particular those in the oil industry, have a high and increasing focus on quality and compliance standards with their suppliers across the entire supply chain, including the shipping and transportation segment. Our continued compliance with these standards and quality requirements is vital for our operations. The charterhire 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 LNG 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 and the resale value of our vessels could significantly decrease. This could have an adverse effect on our results of operations, cash flows, financial condition and ability to pay dividends.

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Risks Related to Our Business
The fair market values of our vessels may decline, which could limit the amount of funds that we can borrow, cause us to breach certain financial covenants in our credit facilities or financing agreements, or result in an impairment charge, and cause us to incur a loss if we sell vessels following a decline in their market value.
The fair market values of LNG vessels, including our vessels, have generally experienced high volatility and may decline in the future. The fair market value of our vessels may continue to fluctuate depending on but not limited to the following factors:
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general economic and market conditions affecting the shipping industry;
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competition from other shipping companies;
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types and sizes of vessels;
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the availability of other modes of transportations;
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cost of newbuildings;
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shipyard capacity;
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governmental or other regulations;
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age of vessels;
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prevailing level of charter rates;
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the need to upgrade secondhand and previously owned vessels as a result of charterer requirements; and
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technological advances in vessel design or equipment or otherwise.
During the period a vessel is subject to a charter, we might not be permitted to sell it to take advantage of increases in vessel values without the charterer's consent. If we sell a vessel at a time when ship prices have fallen, the sale may be at less than the vessel's carrying amount in our financial statements, with the result that we could incur a loss and a reduction in earnings. The carrying values of our vessels are reviewed quarterly or whenever events or changes in circumstances indicate that the carrying amount of the vessel may no longer be recoverable. We assess recoverability of the carrying value by estimating the future net cash flows expected to result from the vessel, including eventual disposal. If the future net undiscounted cash flows and the estimated fair market value of the vessel are less than the carrying value, an impairment loss is recorded equal to the difference between the vessel's carrying value and fair value. Any impairment charges incurred as a result of declines in charter rates and other market deterioration could negatively affect our business, financial condition or operating results or the trading price of our ordinary shares.
In addition, if we determine at any time that a vessel's future useful life and earnings require us to impair its value in our financial statements, this would result in a charge against our earnings and a reduction of our shareholders' equity. If the fair market values of our vessels decline, we may not be in compliance with certain covenants contained in our financing agreements, which may result in an event of default. In such circumstances, we may not be able to refinance our debt or obtain additional financing acceptable to us or at all. Further, if we are not able to comply with the covenants in our financing agreements, and are unable to remedy the relevant breach, our lenders could accelerate our debt and foreclose on our fleet.
Conversely, if vessel values are elevated at a time when we wish to acquire additional vessels, the cost of acquisition may increase and this could adversely affect our business, results of operations, cash flow and financial condition.
We may require additional capital in the future, which may not be available on favorable terms, or at all.
Depending on many factors, including market developments, our future earnings, value of our assets and expenditures for any new projects, we may need additional funds. We cannot guarantee that we will be able to obtain additional financing at all or on terms acceptable to us. If adequate funds are not available, we may have to reduce expenditures for investments in new and existing projects, which could hinder our growth, prevent us from realizing potential revenues from prior investments and have a negative impact on our cash flows and results of operations.

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We are highly leveraged, which could significantly limit our ability to execute our business strategy and has increased the risk of default under our debt obligations.
As of December 31, 2019, we had approximately $778.8 million of net outstanding indebtedness under our financing agreements. We cannot assure you that we will be able to generate cash flow in amounts that is sufficient to satisfy these obligations. If we are not able to satisfy these obligations, we may have to undertake alternative financing plans or sell our assets. In addition, debt service payments under our financing agreements may limit funds otherwise available for working capital, capital expenditures, payment of cash distributions and other purposes. If we are unable to meet our debt obligations, or if we otherwise default under our financing agreements, our lenders could declare the debt, together with accrued interest and fees, to be immediately due and payable and foreclose on our fleet, which could result in the acceleration of other indebtedness that we may have at such time and the commencement of similar foreclosure proceedings by other lenders.
Our financing agreements impose operating and financial restrictions on us that limit our ability or the ability of our subsidiaries party thereto, as applicable, to:
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pay dividends and make capital expenditures;
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incur additional indebtedness, including the issuance of guarantees;
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create liens on our assets;
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change the flag, class or management of our vessels or terminate or materially amend the management agreement relating to each vessel;
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sell our vessels;
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merge or consolidate with, or transfer all or substantially all our assets to, another person; or
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enter into a new line of business.
In addition, our financing agreements, which are secured by liens on our vessels, contain various financial covenants. Among those covenants are requirements that relate to our financial position, operating performance and liquidity. For example, there are financial covenants that require us to maintain (i) an equity ratio fixing a minimum value of book equity, (ii) minimum levels of free cash, (iii) positive working capital, and (iv) a minimum value, or loan-to-value, covenant, which could require us to post collateral or prepay a portion of the outstanding borrowings should the value of the vessels securing borrowings decrease below a required level.
The market value of LNG vessels is likewise sensitive to, among other things, changes in the LNG market, with vessel values deteriorating in times when charter rates for LNG vessels are falling or anticipated to fall and improving when charter rates are rising or anticipated to rise. Such conditions may result in us not being in compliance with the covenants under our financing agreements. Events beyond our control, including changes in the economic and business conditions in the shipping markets in which we operate, interest rate developments, changes in the funding costs of our banks, changes in vessel earnings and asset valuations and outbreaks of epidemic and pandemic of diseases, such as the recent outbreak of COVID-19, may affect our ability to comply with these covenants. In such a situation, unless our lenders are willing to provide further waivers of covenant compliance or modifications to our covenants, or would be willing to refinance our indebtedness, we may have to sell vessels in our fleet and/or seek to raise additional capital in the equity markets in order to comply with the covenants under our financing agreements. Furthermore, if the value of our vessels deteriorates significantly, we may have to record an impairment adjustment in our financial statements, which would adversely affect our financial results and further hinder our ability to raise capital. The fair market values of our vessels may decline, which could limit the amount of funds that we can borrow, cause us to breach certain financial covenants in our financing agreements, or result in an impairment charge, and cause us to incur a loss if we sell vessels following a decline in their market value.
If we are not in compliance with our covenants and are not able to obtain covenant waivers or modifications, our lenders could 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 the covenants under our financing agreements, sell vessels in our fleet, or they could accelerate our indebtedness, any of which would impair our ability to continue to conduct our business. If our indebtedness is accelerated, we might not be able to refinance our debt or obtain additional financing and could lose our vessels if our lenders foreclose on their liens. In addition, if we find it necessary to sell our vessels at a time when vessel prices are low,

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we will recognize losses and a reduction in our earnings, which could affect our ability to raise additional capital necessary for us to comply with our loan agreements.
Furthermore, certain of our financing agreements contain a cross-default provision that may be triggered by a default under one of our other financing agreements. 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 financing agreements, the refusal of any one lender under our financing agreements to grant or extend a waiver could result in certain of our indebtedness being accelerated, even if our other lenders under our financing agreements have waived covenant defaults under the respective agreements. 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 financing agreements if our lenders foreclose their liens, which would adversely affect our ability to conduct our business.
Our operating fleet consists of six LNG vessels from which we derive all of our revenue and cash flow. Any limitation in the availability or operation of these vessels could have a material adverse effect on our business, results of operations and financial condition.
Our operating fleet consists of six LNG carriers, while seven vessels are currently under construction. Although some of our time charter agreements have fixed terms, they may be terminated early due to certain events, such as a charterer's failure to make charter payments to us because of financial inability, disagreements with us or otherwise. The ability of each of our counterparties to perform its obligations under a charter 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 LNG shipping industry, prevailing prices for natural gas and the overall financial condition of the counterparty. Should a counterparty fail to honor its obligations under an agreement with us, we may be unable to realize revenue under that charter and could sustain losses, which could have a material adverse effect on our business, financial condition, results of operations and ability to pay dividends to our shareholders.
If any of our vessels are unable to generate revenues as a result of off-hire time, early termination of the applicable time charter or otherwise, our business, and results of operations financial condition could be materially adversely affected.
We currently derive all our revenue and cash flow from a limited number of customers and the loss of any of these customers could cause us to suffer losses or otherwise adversely affect our business.
We have derived, and believe we will continue to derive, all of our revenues from a limited number of customers. For the year ended December 31, 2019, during which we derived our operating revenues from eleven customers, with our top three customers accounted for 32.8%, 21.8% and 14.7% of our consolidated revenues, equivalent to 69.3% of our consolidated revenues.  During this period, no other customer accounted for over 10% of our consolidated revenues.
We employ our Fleet in both the term and spot markets (which includes vessel employment under single voyage spot charters and time charters with an initial term of less than six months).  All of the charters for our Fleet have fixed terms but may be terminated early due to certain events, including but not limited to the customer’s failure to make charter payments to us because of financial inability, disagreements with us or otherwise. The ability of each of our counterparties to perform its respective obligations under a charter 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 LNG shipping industry, prevailing prices for natural gas, the overall financial condition of the counterparty and work stoppages or other labor disturbances, including as a result of the recent outbreak of COVID-19. Should a counterparty fail to honor its obligations under an agreement with us, we may be unable to realize revenue under that charter and may sustain losses, which may have a material adverse effect on our business, financial condition, cash flows, results of operations and ability to pay distributions to our shareholders (if any).
In addition, in general a customer may exercise its right to terminate its charter if, among other things:
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the vessel suffers a total loss or is damaged beyond repair;
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we default on our obligations under the charter, including prolonged periods of vessel off-hire;
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war or hostilities significantly disrupt the free trade of the vessel;
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the vessel is requisitioned by any governmental authority; or
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a prolonged force majeure event occurs, such as war or political unrest, which prevents the chartering of the vessel.

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In addition, the charter payments we receive may be reduced if the vessel does not perform according to certain contractual specifications. For example, charter hire may be reduced if the average vessel speed falls below the speed we have guaranteed or if the amount of fuel consumed to power the vessel exceeds the guaranteed amount.
Furthermore, in depressed market conditions, our customers 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, customers may seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those contracts. If our customers 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 may be at lower rates.
If any of our charters are terminated, we may be unable to re-deploy the related vessel on terms as favorable to us as our current charters, or at all. If we are unable to re-deploy a vessel for which the charter has been terminated, we will not receive any revenues from that vessel, and we may be required to pay ongoing expenses necessary to maintain the vessel in proper operating condition. Any of these factors may decrease our revenue and cash flows. Further, the loss of any of our customers, charters or vessels, or a decline in charter hire under any of our charters, could have a material adverse effect on our business, results of operations, financial condition and ability to pay distributions to our shareholders (if any).
We may be unable to successfully compete with other vessel operators for charters, which could adversely affect our results of operations and financial position.
The operation of LNG vessels and transportation of LNG cargoes is extremely competitive. Competition for the transportation of LNG cargoes by sea is intense and depends on price, location, size, age, condition and the acceptability of the vessel and its operators to the charterers. Through our operating subsidiaries, we compete with other vessel owners, and, to a lesser extent, owners of other size vessels. The LNG market is highly fragmented. Due in part to the highly fragmented market, competitors with greater resources could enter the LNG shipping industry and operate larger fleets through consolidations or acquisitions and may be able to offer lower charter rates than we are able to offer. Although we believe that no single competitor has a dominant position in the markets in which we compete, we are aware that certain competitors may be able to devote greater financial and other resources to their activities than we can, resulting in a significant competitive threat to us. As a result, we cannot assure you that we will be successful in finding continued timely employment of our existing vessels.
Our results of operations are subject to seasonal fluctuations, which may adversely affect our financial condition.
We operate our LNG vessels in markets that have historically exhibited seasonal variations in demand and, as a result, in charter hire rates. The LNG sector is typically stronger in the fall and winter months in anticipation of increased consumption of LNG in the northern hemisphere. In addition, unpredictable weather patterns in these months tend to disrupt vessel scheduling and supplies of certain commodities. This seasonality may result in quarter-to-quarter volatility in our revenues and operating results, which could affect our ability to pay dividends, if any, in the future.
A drop in spot charter rates may provide an incentive for some charterers to default on their charters.
When we enter into a time charter or bareboat charter, charter rates under that charter may be fixed for the term of the charter. If the spot charter rates or short-term time charter rates in the LNG shipping industry become significantly lower than the time charter equivalent rates that some of our charterers are obligated to pay us under our existing charters, the charterers may have incentive to default under that charter or attempt to renegotiate the charter. If our charterers fail to pay their obligations, we would have to attempt to re-charter our vessels at lower charter rates, which would affect our ability to comply with the covenants under our financing agreements and operate our vessels profitably. If we are not able to comply with the covenants under our financing agreements and our lenders choose to accelerate our indebtedness and foreclose their liens, we could be required to sell vessels in our fleet and our ability to continue to conduct our business would be impaired.
Our fixed rate time charters may limit our ability to benefit from any improvement in charter rates, and at the same time, our revenues may be adversely affected if we do not successfully employ our vessels on the expiration of our charters.
Fixed rate time charters generally provide more reliable revenues, they also limit the portion of our fleet available for spot market voyages during an upswing in the LNG industry cycle, when spot market voyages might be more profitable. By the same token, we cannot assure you that we will be able to successfully employ our vessels in the future or renew our existing charters at rates sufficient to allow us to operate our business profitably or meet our obligations. A decline in charter or spot rates or a failure to successfully charter our vessels could have a material adverse effect on our business, financial condition and results of operations.

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We are subject to certain risks with respect to our counterparties on contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our business.
We have entered, and may enter in the future, into various contracts, including charter parties with our customers, financing agreements with our lenders (including lease financing agreements), vessel management agreements, newbuilding contracts, vessel acquisition agreements and other agreements with other entities, which subject us to counterparty risks. The ability of each of the counterparties to perform its obligations under a contract with us or contracts entered into on our behalf 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 shipping sector, the overall financial condition of the counterparty, charter rates received for our vessels and the supply and demand for commodities. Should a counterparty fail to honor its obligations under any such contract, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Charterers are sensitive to the commodity markets and may be impacted by market forces affecting commodities. In addition, in depressed market conditions, charterers may have incentive to renegotiate their charters or default on their obligations under charters. Should a charterer in the future fail to honor its obligations under agreements with us, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure on the spot market or on charters may be at lower rates, depending on the then existing charter rate levels, compared to the rates currently being charged for our vessels. In addition, if the charterer of a vessel in our fleet that is used as collateral under one or more of our financing agreements defaults on its charter obligations to us, such default may constitute an event of default under the relevant financing agreement, which may allow the lenders to exercise remedies under the financing agreement. If our charterers fail to meet their obligations to us or attempt to renegotiate our charter agreements, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations, cash flows and compliance with covenants in our financing agreements.
Newbuilding projects are subject to risks that could cause delays, cost overruns or cancellation of the agreements with the shipyards or our agreements to acquire the newbuildings from related entities.
As of April 16, 2020, we have agreed to acquire from entities related to Geveran Trading Co. Ltd., or Geveran, our major shareholder, seven newbuilding LNG vessels that are currently under construction at Daewoo Shipbuilding and Marine Engineering Co. Ltd., or DSME, and Hyundai Samho Heavy Industries Co. Ltd., or HSHI, for an aggregate purchase price of $1,286 million, of which we have paid $349 million and the remaining $937 million is due on delivery. These Newbuilding Vessels (defined in "Item 4. Information on the Company – A. History and Development of the Company") have contracted delivery dates to us between the second quarter of 2020 and the second quarter of 2021. These Newbuilding Vessels are part of the 11 vessels that we have agreed to acquire from entities related to Geveran since 2017. We have secured financing for part of the remaining purchase price relating to five of the seven Newbuilding Vessels under the $629 million Term Loan Facility (defined in "Item 4. Information on the Company - A. History and Development of the Company - Share Issuances and Financing Transactions"), and are currently in the process of arranging financing to fund part of the balance of the purchase price for the remaining Newbuilding Vessels in our Fleet. We can provide no assurances that we will be able to secure such financing on terms acceptable to us or at all. If we default under the agreements to acquire newbuildings with the sellers we may be subject to legal claims for the unpaid amounts we are obligated to pay and we may not take delivery of the applicable Newbuilding Vessels. In addition, if the sellers default under their agreements with the shipyards, we may be unable to take delivery of some or all of the Newbuilding Vessels and we may lose all or part of the purchase price that we have already paid. 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, as a result of the recent outbreak of COVID-19 around the world, 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, a cancellation of any agreed charter contract and cancellation of any financing commitment for the relevant vessel.
In addition, in the event the shipyards or the sellers do not perform under the respective contracts and we are unable to enforce the corporate refund guarantees for any reason, we may lose all or part of our investment, which would have an adverse effect on our results of operations, financial condition and cash flows.
Our ability to obtain additional debt financing may be dependent on the performance of our then existing charterers and their creditworthiness.

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The actual or perceived credit quality of our charterers, and any defaults by them, may materially affect our ability to obtain the additional capital resources required to purchase additional vessels or may significantly increase our costs of obtaining such capital. Our inability to obtain additional financing at anticipated costs or at all may materially affect our results of operations and our ability to implement our business strategy.
Our financing arrangements have floating interest rates, which could negatively affect our financial performance as a result of interest rate fluctuations.
As certain of our current financing agreements have, and our future financing arrangements may have, floating interest rates, typically based on USD LIBOR, movements in interest rates could negatively affect our financial performance. Furthermore, historically interest in most financing agreements in our industry has been based on published LIBOR rates. Recently, however, there is uncertainty relating to the LIBOR calculation process which may result in the phasing out of LIBOR after 2021, and lenders have insisted on provisions that entitle the lenders, in their discretion, to replace published LIBOR as the base for the interest calculation with their cost-of-funds rate. If we are also required to agree to such a provision in future financing agreements, our lending costs could increase significantly, which would have an adverse effect on our profitability, earnings and cash flow.
In order to manage our exposure to interest rate fluctuations, we may from time to time use interest rate derivatives to effectively fix some of our floating rate debt obligations. No assurance can however be given that the use of these derivative instruments, if any, may effectively protect us from adverse interest rate movements. The use of interest rate derivatives may affect our results through mark to market valuation of these derivatives. Also, adverse movements in interest rate derivatives may require us to post cash as collateral, which may impact our free cash position.
Geveran may be able to exercise significant influence over us and may have conflicts of interest with our other shareholders.
As of April 16, 2020 , Geveran, a Cyprus-based company indirectly controlled by trusts established by Mr. John Fredriksen for the benefit of his immediate family, and certain of its related entities, may be deemed to beneficially own approximately 45.6% of our issued and outstanding shares. For so long as Geveran owns a significant percentage of our issued and outstanding shares, it may be able to exercise significant influence over us and will be able to strongly influence the outcome of shareholder votes on other matters, including the adoption or amendment of provisions in our Memorandum of Continuance or Bye-Laws and approval of possible mergers, amalgamations, control transactions and other significant corporate transactions. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, merger, amalgamations, consolidation, takeover or other business combination. This concentration of ownership could also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could in turn have an adverse effect on the market price of our ordinary shares. Geveran may not necessarily act in accordance with the best interests of other shareholders. The interests of Geveran may not coincide with the interests of other holders of our ordinary shares. To the extent that conflicts of interest may arise, Geveran may vote in a manner adverse to us or to you or other holders of our securities.
Certain of our directors, executive officers and major shareholders may have interests that are different from the interests of our other shareholders.
Certain of our directors, executive officers and major shareholders may have interests that are different from, or are in addition to, the interests of our other shareholders. In particular, Geveran, a Cyprus-based company indirectly controlled by trusts established by Mr. John Fredriksen for the benefit of his immediate family, and certain of its related entities, may be deemed to beneficially own approximately 45.6% of our issued and outstanding ordinary shares.
In addition, certain of our directors, including Mr. Lorentzon and Mr. Hermansen, also serve on the boards of one or more entities in which Geveran or entities related to Geveran are major shareholders, including but not limited to, Golden Ocean Group Limited (NASDAQ:GOGL), Frontline Ltd. (NYSE:FRO), and Avance Gas Holding Ltd. (OSE:AVANCE). There may be real or apparent conflicts of interest with respect to matters affecting Geveran or entities related to Geveran that in certain circumstances may be adverse to our interests.
To the extent that we do business with or compete with Geveran or entities related to Geveran for business opportunities, prospects or financial resources, or participate in ventures in which Geveran or entities related to Geveran may participate, these directors and officers may face actual or apparent conflicts of interest in connection with decisions that could have different implications for us. These decisions may relate to corporate opportunities, corporate strategies, potential acquisitions of businesses, newbuilding acquisitions, inter-company agreements, the issuance or disposition of securities, the election of new or additional directors and other matters. Such potential conflicts may delay or limit the opportunities available to us, and it is possible that

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conflicts may be resolved in a manner adverse to us or result in agreements that are less favorable to us than terms that would be obtained in arm's-length negotiations with unaffiliated third-parties.
We may not be able to manage or implement our growth successfully.
As of April 16, 2020 , we have entered into agreements to acquire seven newbuilding LNG carriers from entities related to Geveran, our major shareholder. Subject to the covenants in our financing agreements and other contractual restrictions, our current long term intention is to grow our fleet through selective acquisitions and newbuilding of LNG tonnage. Our business plan therefore depends upon our ability to identify and acquire suitable vessels to grow our fleet in the future and successfully employ our vessels.
Growing any business by acquisition and newbuildings presents numerous risks, including undisclosed liabilities and obligations, difficulty obtaining additional qualified personnel and managing relationships with customers and suppliers. In addition, competition from other companies, many of which may have significantly greater financial resources than us, may reduce our acquisition opportunities or cause us to pay higher prices. We cannot assure you that we will be successful in executing our plans to establish and grow our business or that we will not incur significant expenses and losses in connection with these plans. Our failure to effectively identify, purchase, develop and integrate any vessels could impede our ability to establish our operations or implement our growth successfully. Our acquisition growth strategy exposes us to risks that may harm our business, financial condition and operating results, including risks that we may:
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fail to realize anticipated benefits, such as cost savings or cash flow enhancements;
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incur or assume unanticipated liabilities, losses or costs associated with any vessels or businesses acquired, particularly if any vessel we acquire proves not to be in good condition;
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be unable to hire, train or retain qualified shore and seafaring personnel to manage and operate our growing business and fleet;
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decrease our liquidity by using a significant portion of available cash or borrowing capacity to finance acquisitions;
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significantly increase our interest expense or financial leverage if we incur debt to finance acquisitions; or
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incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges.
New vessels may experience initial operational difficulties and unexpected incremental start-up costs.
New vessels, during their initial period of operation, have the possibility of encountering structural, mechanical and electrical problems as well as unexpected incremental start-up costs. Typically, the purchaser of a newbuilding will receive the benefit of a warranty from the shipyard for newbuildings, but we cannot assure you that any warranty we obtain will be able to resolve any problem with the vessel without additional costs to us and off-hire periods for the vessel. Upon delivery of a newbuild vessel from a shipyard, we may incur operating expenses above the incremental start-up costs typically associated with such a delivery and such expenses may include, among others, additional crew training, consumables and spares.
Operational risks and damage to our vessels could adversely impact our performance.
Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather and other acts of God, business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human error, war, terrorism, piracy, labor strikes, boycotts, disease, quarantine and other circumstances or events. These hazards may result in death or injury to persons, loss of revenues or property, the payment of ransoms, environmental damage, higher insurance rates, damage to our customer relationships and market disruptions, delay or rerouting.
If our vessels suffer damage, they may need to be repaired at a dry-docking facility. The costs of dry-dock repairs are unpredictable and may be substantial. We may have to pay dry-docking costs that our insurance does not cover at all or in full. The loss of revenues while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, may adversely affect our business and financial condition. In addition, space at dry-docking facilities is sometimes limited and not all dry-docking facilities are conveniently located. We may be unable to find space at a suitable dry-docking facility or our vessels may be forced to travel to a dry-docking facility that is not conveniently located relative to our vessels' positions. The loss of

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earnings while these vessels are forced to wait for space or to travel to more distant dry-docking facilities may adversely affect our business and financial condition.
Further, the total loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator. If we are unable to adequately maintain or safeguard our vessels, we may be unable to prevent any such damage, costs or loss, which could negatively impact our business, financial condition, results of operations and cash flows.
We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.
The efficient operation of our business, including processing, transmitting and storing electronic and financial information, is dependent on computer hardware and software systems.  Information systems are vulnerable to security breaches by computer hackers and cyber terrorists.  We rely on industry accepted security measures and technology to securely maintain confidential and proprietary information maintained on our information systems.  However, these measures and technology may not adequately prevent security breaches.  In addition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could result in decreased performance and increased operating costs, causing our business and results of operations to suffer.  Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business and results of operations.
Increased inspection procedures, tighter import and export controls and new security regulations could increase costs and cause disruption of our business.
International shipping is subject to security and customs inspection and related procedures in countries of origin, destination and trans-shipment points. Under the U.S. Maritime Transportation Security Act of 2002, or MTSA, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States and at certain ports and facilities. These security procedures can result in delays in the loading, offloading or trans-shipment and the levying of customs duties, fines or other penalties against exporters or importers and, in some cases, carriers. Future changes to the existing security procedures may be implemented that could affect the LNG sector. These changes have the potential to impose additional financial and legal obligations on carriers and, in certain cases, to render the shipment of certain types of goods uneconomical or impractical. These additional costs could reduce the volume of goods shipped, resulting in a decreased demand for vessels and have a negative effect on our business, revenues and customer relations.
Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties and an adverse effect on our business.
We may 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 consistent and in compliance with the U.S. Foreign Corrupt Practices Act of 1977, or U.S Foreign Corrupt Practices Act, and other anti-bribery legislation. 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 U.S. Foreign Corrupt Practices Act. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and might adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.
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, shareholder litigation, 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.

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If we do not set aside funds and are unable to borrow or raise funds for vessel replacement at the end of a vessel's useful life, our revenue will decline, which would adversely affect our business, results of operations and financial condition.
If we do not set aside funds and are unable to borrow or raise funds for vessel replacement, we will be unable to replace the vessels in our fleet upon the expiration of their remaining useful lives. Our cash flows and income are dependent on the revenues earned by the chartering of our vessels. If we are unable to replace the vessels in our fleet upon the expiration of their useful lives, our business, results of operations and financial condition would be adversely affected. Any funds set aside for vessel replacement will not be available for cash distributions.
We may not have adequate insurance to compensate us if our vessels are damaged or lost.
In the event of a casualty to a vessel or other catastrophic event, we rely on our insurance to pay the insured value of the vessel or the damages incurred. We procure insurance for our fleet against those risks that we believe companies in the shipping industry commonly insure. These insurances include hull and machinery insurance, protection and indemnity insurance, which include environmental damage and pollution insurance coverage, and war risk insurance. We can give no assurance that we will be adequately insured against all risks and we cannot guarantee that any particular claim will be paid, even if we have previously recorded a receivable or revenue in respect of such claim. Our insurance policies may contain deductibles for which we will be responsible and limitations and exclusions, which may increase our costs or lower our revenues.
We cannot assure you that we will be able to obtain adequate insurance coverage for our vessels in the future or renew our existing policies on the same or commercially reasonable terms, or at all. For example, more stringent environmental regulations have in the past led to increased costs for, and in the future may result in the lack of availability of, protection and indemnity insurance against risks of environmental damage or pollution. Any uninsured or underinsured loss could harm our business, results of operations, cash flows and financial condition. In addition, our insurance may be voidable by the insurers as a result of certain of our actions, such as our vessels failing to maintain certification with applicable maritime self-regulatory organizations. Further, we cannot assure you that our insurance policies will cover all losses that we incur, or that disputes over insurance claims will not arise with our insurance carriers. Any claims covered by insurance would be subject to deductibles, and since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could be material. In addition, our insurance policies may be subject to limitations and exclusions, which may increase our costs or lower our revenues, thereby possibly having a material adverse effect on our business, results of operations, cash flows and financial condition.
We may be subject to calls because we obtain some of our insurance through protection and indemnity associations.
We may be subject to increased premium payments, or calls, if the value of our claim records, the claim records of our fleet managers, and/or the claim records of other members of the protection and indemnity associations through which we receive insurance coverage for tort liability (including pollution-related liability) significantly exceed projected claims. Our payment of these calls could result in significant expense to us, which could have a material adverse effect on our business, results of operations, cash flows and financial condition. In addition, our protection and indemnity associations may not have enough resources to cover claims made against them.
We are a holding company, and depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations.
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 funding and equity interests in our subsidiaries. Our ability to satisfy our financial obligations in the future depends on our subsidiaries and their ability to distribute funds to us. If we are unable to obtain funds from our subsidiaries, we may not be able to satisfy our financial obligations.
We are an "emerging growth company", and we cannot be certain that the reduced disclosure and other requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors.
We are an "emerging growth company", as defined in the Jumpstart Our Business Startups Act, or "JOBS Act", and we may take advantage of certain exemptions from various reporting and other requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.  Investors may find our ordinary shares and the price of our ordinary shares less attractive because we rely, or may rely, on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and the price of our ordinary shares may be more volatile.

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In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to "opt out" of such extended transition period, and as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
We could remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the date we first sell our common equity securities pursuant to an effective annual report under the Securities Act, although a variety of circumstances could cause us to lose that status earlier. For as long as we take advantage of the reduced reporting obligations, the information that we provide to shareholders may be different from information provided by other public companies.
As a foreign private issuer, we are permitted to, and we will, follow certain home country corporate governance practices in lieu of certain requirements applicable to U.S. issuers. This may afford less protection to holders of our equity shares.
As a foreign private issuer listed on the New York Stock Exchange, or NYSE, we are permitted to follow certain home country corporate governance practices in lieu of certain NYSE requirements. A foreign private issuer must disclose in its annual reports filed with the U.S. Securities and Exchange Commission, or the SEC, each NYSE requirement with which it does not comply followed by a description of its applicable home country practice. As a company incorporated in Bermuda and which is listed on the NYSE, we may follow our home country practice with respect to, among other things, the composition of our Board of Directors and executive sessions. Unlike the requirements of the NYSE, the corporate governance practice and requirements in Bermuda do not require us to have the majority of our Board of Directors be independent or to hold regular executive sessions where only independent directors shall be present. These and other Bermuda home country practices may afford less protection to holders of our equity shares than would be available to the shareholders of a U.S. corporation.
If we cease to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer.
As a foreign private issuer, we are exempt from a number of rules and regulations under the Securities Exchange Act of 1934, or the Exchange Act, applicable to U.S. domestic issuers, including the furnishing and content of proxy statements, compliance with the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act applicable to executive officers, directors and principal shareholders. We are required under the Exchange Act to file periodic reports and financial statements with the SEC as less frequently or as promptly as U.S. domestic issuers, and we are not required to disclose in our periodic reports all of the information that U.S. domestic issuers are required to disclose. If we do not qualify as a foreign private issuer, we will be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and we will incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer.
The international nature of our operations may make the outcome of any bankruptcy proceedings difficult to predict.
We are incorporated under the laws of Bermuda and 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.
Because we are a Bermuda exempted company, our shareholders may have less recourse against us or our directors than shareholders of a U.S. company have against the directors of that U.S. Company.
Because we are a Bermuda company, the rights of holders of our ordinary shares will be governed by Bermuda law and our memorandum of continuance and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders in other jurisdictions, including with respect to, among other things, rights related to interested directors, amalgamations, mergers and acquisitions, takeovers, the exculpation and indemnification of directors and shareholder lawsuits.
Among these differences is a Bermuda law provision that permits a company to exempt a director from liability for any negligence, default, or breach of a fiduciary duty except for liability resulting directly from that director's fraud or dishonesty. 

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Our bye-laws provide that no director or officer shall be liable to us or our shareholders unless the director's or officer's liability results from that person's fraud or dishonesty. Our bye-laws also require us to indemnify a director or officer against any losses incurred by that director or officer resulting from their negligence or breach of duty, except where such losses are the result of fraud or dishonesty.  Accordingly, we carry directors' and officers' insurance to protect against such a risk.
In addition, under Bermuda law, the directors of a Bermuda company owe their duties to that company and not to the shareholders. Bermuda law does not, generally, permit shareholders of a Bermuda company to bring an action for a wrongdoing against the company or its directors, but rather the company itself is generally the proper plaintiff in an action against the directors for a breach of their fiduciary duties. Moreover, class actions and derivative actions are generally not available to shareholders under Bermuda law. These provisions of Bermuda law and our bye-laws, as well as other provisions not discussed here, may differ from the law of jurisdictions with which shareholders may be more familiar and may substantially limit or prohibit a shareholder's ability to bring suit against our directors or in the name of the company. Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company's memorandum of association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company's shareholders than that which actually approved it. However, generally a derivative action will not be permitted where there is an alternative action available that would provide an adequate remedy. Any property or damages recovered by derivative action go to the company, not to the plaintiff shareholders. When the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interests of some part of the shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company's affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company or that the company be wound up.
It is also worth noting that under Bermuda law, our directors and officers are required to disclose to our Board of Directors any interests they have in any material contract entered into by our company or any of its subsidiaries. Our directors and officers are also required to disclose their material interests in any corporation or other entity which is party to a material contract with our company or any of its subsidiaries. A director who has disclosed his or her interests in accordance with Bermuda law may participate in any meeting of our Board of Directors, and may vote on the approval of a material contract, notwithstanding that he or she has an interest.
An active and liquid market for our ordinary shares may not be sustained.

Our ordinary shares commenced trading on the NYSE on June 17, 2019, prior to which there had been no established trading market for those shares in the United States. Our ordinary shares now trade on both the NYSE and the Oslo Stock Exchange, or the OSE. We cannot assure you that an active and liquid public market for our ordinary shares will continue. The market price of our ordinary shares has historically fluctuated over a wide range and may continue to fluctuate significantly in response to many factors, such as actual or anticipated fluctuations in our operating results, changes in financial estimates by securities analysts, economic and regulatory trends, general market conditions, rumors and other factors, many of which are beyond our control. Beginning in February 2020, due in part to fears associated with the spread of COVID-19, global financial markets, and starting in late February, financial markets in the U.S., experienced even greater relative volatility and a steep and abrupt downturn, which volatility and downturn may continue as COVID-19 continues to spread. If the volatility in the broad stock market worsens, it could have an adverse effect on the market price of our ordinary shares and impact a potential sale price if holders of our ordinary shares decide to sell their shares.

Future issuance of shares or other securities may dilute the holdings of shareholders and could materially affect the price of our ordinary shares.
It is possible that we may in the future decide to offer additional shares or other securities in order to secure financing for new projects, in connection with unanticipated liabilities or expenses or for any other purposes. Any such additional offering could reduce the proportionate ownership and voting interests of holders of our ordinary shares, as well as our earnings per share and our net asset value per share, and any offering by us could have a material adverse effect on the market price of our ordinary shares.
Because our offices and most of our assets are outside the United States, you may not be able to bring suit against us, or enforce a judgment obtained against us in the United States.

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Our executive offices, administrative activities and assets are located outside the United States. As a result, it may be more difficult for investors to effect service of process within the United States upon us, or to enforce both in the United States and outside the United States judgments against us in any action, including actions predicated upon the civil liability provisions of the federal securities laws of the United States.
As an exempted company incorporated under Bermuda law with subsidiaries in a Crown dependency and other offshore jurisdictions, our operations may be subject to economic substance requirements.
The Economic Substance Act 2018 and the Economic Substance Regulations 2018 of Bermuda (the "Economic Substance Act" and the "Economic Substance Regulations", respectively) became operative on December 31, 2018.  The Economic Substance Act applies to every registered entity in Bermuda that engages in a relevant activity and requires that every such entity shall maintain a substantial economic presence in Bermuda. A relevant activity for the purposes of the Economic Substance Act is banking business, insurance business, fund management business, financing business, leasing business, headquarters business, shipping business, distribution and service center business, intellectual property holding business and conducting business as a holding entity.
The Economic Substance Act provides that a registered entity that carries on a relevant activity complies with economic substance requirements if (a) it is directed and managed in Bermuda, (b) its core income-generating activities (as may be prescribed) are undertaken in Bermuda with respect to the relevant activity, (c) it maintains adequate physical presence in Bermuda, (d) it has adequate full time employees in Bermuda with suitable qualifications and (e) it incurs adequate operating expenditure in Bermuda in relation to the relevant activity.
A registered entity that carries on a relevant activity is obliged under the Economic Substance Act to file a declaration in the prescribed form (the "Declaration") with the Registrar of Companies (the "Registrar") on an annual basis.
Certain of our subsidiaries may be organized in other jurisdictions identified by the Code of Conduct Group for Business Taxation of the European Union based on global standards set by the Organization for Economic Co-operation and Development with the objective of preventing low-tax jurisdictions from attracting profits from certain activities. These jurisdictions may have also enacted economic substance laws and regulations which we may be obligated to comply with. If we fail to comply with our obligations under the Economic Substance Act or any similar law applicable to us in any other jurisdictions, we could be subject to financial penalties and spontaneous disclosure of information to foreign tax officials in related jurisdictions and may be struck from the register of companies in Bermuda or such other jurisdiction. Any of these actions could have a material adverse effect on our business, financial condition and results of operations.
Tax Risks
We may have to pay tax on United States source income, which would reduce our earnings.

Under the United States Internal Revenue Code of 1986 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, may be subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the applicable Treasury Regulations recently promulgated thereunder.

We believe that we and each of our subsidiaries qualified for the statutory exemption from U.S. federal income taxation for our taxable year ending December 31, 2019 and we intend to take this position for U.S. federal income tax return reporting purposes. However, there are factual circumstances beyond our control that could cause us to not obtain the benefit of this tax exemption for future taxable years and thereby become subject to U.S. federal income tax on our U.S. source income. For example, we would no longer qualify for exemption under Section 883 of the Code for a particular taxable year if certain non-qualified shareholders with a 5% or greater interest in our ordinary shares owned, in the aggregate, 50% or more of our outstanding ordinary shares for more than half the days during the taxable year. It is possible that we could be subject to this rule for our taxable year ending on or after December 31, 2020. Therefore, we can give no assurances on our tax-exempt status or that of any of our subsidiaries.

If we or our subsidiaries are not entitled to exemption under Section 883 of the Code for any taxable year, we or our subsidiaries could be subject for those years to an effective 4% U.S. federal income tax on the gross shipping income we or our subsidiaries derive during the year that are attributable to the transport of cargoes to or from the United States. The imposition of this tax would have a negative effect on our business and would result in decreased earnings available for distribution to our shareholders. Please see "Item 10. Additional Information—E. Taxation" for further information.

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

A foreign corporation will be treated as a "passive foreign investment company," or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income during the taxable year consists of certain types of "passive income" or (2) at least 50% of the average value of the corporation's assets during such taxable year produce or are held for the production of those types of "passive income." For purposes of these tests, "passive income" includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute "passive income." 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.

Based on our current and expected future method of operation, we do not believe that we will be a PFIC with respect to any taxable year. 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. We believe there is substantial legal authority supporting our position consisting of case law and United States Internal Revenue Service, or IRS, pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, we note that there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. Accordingly, no assurance can be given that the IRS or a court of law will accept our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of our operations.

If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S. shareholders will face adverse U.S. tax consequences and certain information reporting requirements. Under the PFIC rules, unless those shareholders make 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 at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our ordinary shares, as if the excess distribution or gain had been recognized ratably over the shareholder's holding period of our ordinary shares. Please see "Item 10. Additional Information―E. Taxation" below for a more comprehensive discussion of the U.S. federal income tax consequences if we were to be treated as a PFIC.

A change in tax laws in any country in which we operate could adversely affect us.

Tax laws and regulations are highly complex and subject to interpretation. Consequently, we and our subsidiaries are subject to changing laws, treaties and regulations in and between countries in which we operate. Our tax expense is based on our interpretation of the tax laws in effect at the time the expense was incurred. A change in tax laws, treaties or regulations, or in the interpretation thereof, could result in a materially higher tax expense or a higher effective tax rate on our earnings.
We may become subject to taxation in Bermuda which would negatively affect our results.

At the present time, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our shares. We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 31, 2035, be applicable to us or to any of our operations or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or is payable by us in respect of real property owned or leased by us in Bermuda. We cannot assure you that a future Minister would honor that assurance, which is not legally binding, or that after such date we would not be subject to any such tax. If we were to become subject to taxation in Bermuda, our results of operations could be adversely affected.

ITEM 4.    INFORMATION ON THE COMPANY
A.    History and Development of the Company

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FLEX LNG Ltd. is an exempted company incorporated under the laws of Bermuda. We are a growth-oriented owner and commercial operator of fuel efficient, fifth generation LNG carriers. As of April 16, 2020, we own and operate six M-type, Electronically Controlled, Gas Injection ("MEGI") LNG carriers, of which four have partial re-liquefaction systems installed, which we collectively refer to as our "Operating Vessels". In addition, we have agreed to acquire three newbuilding MEGI LNG carriers which are being constructed with full re-liquefaction systems and four Generation X Dual Fuel ("X-DF") LNG carriers, which are scheduled to be delivered to us during 2020 and 2021. We refer to these newbuildings as our "Newbuilding Vessels," which together with our Operating Vessels, are referred to as our "Fleet". Our business currently focuses on the expansion of our Fleet and execution of our chartering strategy to seek balanced employment for the vessels in our Fleet, including employment for our Newbuilding Vessels upon delivery to us, through actively marketing our vessels in both the term and spot market.
Our registered office is at Par-La-Ville Place, 14 Par-La-Ville Road, Hamilton, Bermuda. Our telephone number at that address is +1 441 295 69 35. Our website is www.flexlng.com. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC’s internet site is www.sec.gov. None of the information contained on these websites is incorporated into or forms a part of this annual report.
Company Background
FLEX LNG Ltd. was initially incorporated under the laws of the British Virgin Islands in September 2006. In 2009, we completed our initial public offering of our ordinary shares on the Oslo Axess under the symbol "FLNG." We conducted no material operations until 2013, at which time we entered into contracts for the construction of two newbuilding LNG carriers, the Flex Ranger and the Flex Rainbow, with Samsung Heavy Industries, or SHI, which were delivered to us in June 2018 and July 2018, respectively. Prior to 2017, we did not have any vessels on the water.
In June 2017, we re-domiciled into Bermuda. In order to strengthen our presence in the LNG carrier market and enhance our operational track record, we chartered-in four LNG carriers in 2017 and subsequently sub-chartered these vessels to several charterers in the LNG shipping market. We re-delivered two of these chartered-in vessels in September and October 2017, respectively, and the remaining two in March 2018.
In July 2017, as part of our strategy to position ourselves for growth, we transferred the listing of our ordinary shares from Oslo Axess to the OSE in order to increase our visibility to investors and to facilitate trading liquidity. We also strengthened our executive management team with the additions of Mr. Oystein Kalleklev as Chief Executive Officer of Flex LNG Management AS (our Principal Executive Officer) in August 2018 and Mr. Harald Gurvin as Chief Financial Officer of Flex LNG Management AS (our Principal Financial Officer) in January 2019. Flex LNG Management AS is a wholly-owned subsidiary of ours and is responsible for providing our management.
In June 2019, we effected a cross listing of our ordinary shares on the NYSE. No new shares were offered and sold in connection with the NYSE listing. Our ordinary shares commenced trading on the NYSE under the symbol “FLNG” on June 17, 2019. As a result of our listing on the NYSE, our ordinary shares may be traded on both the OSE and the NYSE. All of our issued and outstanding ordinary shares are identified by CUSIP G35947 202 and ISIN BMG 359472021.
In connection with our fleet expansion, we conducted a series of vessel acquisitions, share issuances and financing transactions, which are further discussed below under "Share Issuances and Financing Transactions" and "—B. Business Overview—Our Fleet."
Share Issuances and Financing Transactions
In 2014, Geveran increased its ownership in our ordinary shares to 43.3% and became obliged to conduct a mandatory offer for our ordinary shares, which resulted in Geveran owning 82% of our outstanding ordinary shares at that time. As of April 16, 2020 Geveran owns 45.6% of our outstanding ordinary shares.
In February 2017, we completed a Norwegian offering, or the First Norwegian Offering, of an aggregate of 7,243,478 ordinary shares at a subscription price of NOK 115.00 per share for gross proceeds of NOK 833 million (approximately $100 million, based on the prevailing exchange rate as of February 16, 2017). A portion of the proceeds of the First Norwegian Offering were used to repay certain of our indebtedness.
In March 2017, we issued 7,800,000 of our ordinary shares to Geveran as partial consideration for our acquisition of the Flex Endeavour and the Flex Enterprise, which we purchased from entities related to Geveran through the novation of the newbuilding contracts for the vessels.

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In March 2017, in connection with our acquisition of the shipbuilding contracts for the Flex Endeavour and the Flex Enterprise, we, through our wholly-owned subsidiary, Flex LNG Fleet Limited, entered into a $270 million revolving credit facility, or the $270 Million Revolving Credit Facility, with Sterna Finance Ltd., or Sterna, a company related to Geveran. In November 2019, the Company cancelled this facility. The facility was undrawn at the time of cancellation.
In May 2017, we completed a Norwegian Offering, or the Second Norwegian Offering, (which, together with the First Norwegian Offering, we refer to as the "2017 Norwegian Offerings"), of an aggregate of 8,947,916 ordinary shares at a subscription price of NOK 120.00 per share for gross proceeds of NOK 1.07 billion (approximately $125 million, based on the prevailing exchange rate as of May 15, 2017).
In June 2017, we completed a Norwegian Offering of 3,797 ordinary shares at a purchase price of NOK 115.00 per share for gross proceeds of approximately NOK 436,735 (approximately $51,633, based on the prevailing exchange rate as of June 6, 2017) to shareholders that were not allocated shares in the 2017 Norwegian Offerings or were residents in a jurisdiction that was not able to participate in the 2017 Norwegian Offerings.
In December 2017, we, through three of our vessel owning subsidiaries, entered into a $315 million secured term loan facility, or the $315 Million Term Loan Facility, with a syndicate of banks to partially finance the first three vessels in our Fleet, the Flex Endeavour, the Flex Enterprise and the Flex Ranger, which served as collateral under the facility. In July 2019 the outstanding principal under the tranche relating to the vessel Flex Ranger of $99.8 million was prepaid using the proceeds from the $100 Million Facility, which is detailed below. In July 2019, the outstanding principal under the tranches for Flex Endeavour and Flex Enterprise of $194.3 million in aggregate were prepaid using the proceeds from the Hyundai Glovis Sale and Charterback, which is detailed below.
In July 2018, we, through our wholly-owned subsidiary, Flex LNG Rainbow Ltd., which owned the Flex Rainbow, entered into a sale leaseback transaction, or the Flex Rainbow Sale and Leaseback, for the vessel with a Hong Kong-based lessor for a lease period of ten years. The gross sales price under the lease was $210.0 million, of which $52.5 million represented advance hire for the ten-year lease period. The bareboat rate payable under the lease has a fixed element, treated as principal repayment, and a variable element based on LIBOR plus a margin of 3.50% per annum on the outstanding under the lease. As of December 31, 2019, the net outstanding under the lease was $146.4 million.
In October 2018, we completed a Norwegian Offering, or the 2018 Norwegian Offering, of an aggregate of 17,293,894 ordinary shares at a purchase price of NOK 142.50 per share for gross proceeds of approximately NOK 2.5 billion (approximately $300 million, based on the prevailing exchange rate as of October 15, 2018). The net proceeds of the 2018 Norwegian Offering have been used to fund the advance payment portion of the purchase price of the Newbuilding Vessels Flex Freedom, Flex Artemis (formerly known as Flex Reliance), Flex Resolute, Flex Vigilant and Flex Volunteer and for working capital and general corporate purposes. Geveran purchased 5,764,631 shares in the 2018 Norwegian Offering at the subscription price of NOK 142.50 per share.
In April 2019, we, through two of our vessel owning subsidiaries, entered into a $250 million secured term loan facility, or the $250 Million Term Loan Facility, with a syndicate of banks to partially finance the two newbuildings, Flex Constellation and Flex Courageous. The first $125 million tranche under the facility was drawn upon the delivery of the Flex Constellation in June 2019, and the second $125 million tranche was drawn upon the delivery of the Flex Courageous in August 2019. The facility has a term of five years from delivery of the last vessel and bears interest at LIBOR plus a margin of 2.35% per annum. As of December 31, 2019, the net outstanding balance was $242.5 million.
In April 2019, we, through two of our vessel owning subsidiaries, entered into sale and time charter agreements for the vessels Flex Endeavour and Flex Enterprise, or the Hyundai Glovis Sale and Charterback. The transactions closed in July 2019, whereby we sold the vessels to Triple H No. 3 Ltd. and Triple H No. 4 Ltd., respectively, for a gross consideration of $210.0 million per vessel, with a net consideration of $150.0 million per vessel adjusted for a non-amortizing and non-interest bearing seller’s credit of $60.0 million per vessel.  Flex Endeavour and Flex Enterprise are chartered back from Hyundai Glovis Co. Ltd. (“Hyundai Glovis”) on a time-charter basis to us, through our subsidiaries, for a period of ten years. The agreements include fixed price purchase options, whereby we have options to acquire the vessels during the term of the time-charters. Upon closing of the transactions with Hyundai Glovis, a portion of the proceeds were used to prepay $194.3 million relating to these vessels under our $315 Million Term Loan Facility, resulting in net proceeds from the financing agreement with Hyundai Glovis to the Company of $102.7 million after fees and expenses. As of December 31, 2019, the net outstanding balance was $291.5 million.
In July 2019, we, through one of our vessel owning subsidiaries, entered into a $100 million secured term loan and revolving credit facility agreement, or the $100 Million Facility, with a syndicate of banks for the refinancing of the Flex Ranger, which was financed under the $315 Million Term Loan Facility. The $100 Million Facility is split between a $50 million term loan and a $50 million revolving facility. The facility was fully drawn in July 2019 and the proceeds were used to prepay the

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outstanding balance of $99.8 million relating to the Flex Ranger under the existing $315 Million Term Loan Facility. The facility has a term of five years and bears interest at LIBOR plus a margin of 2.25% per annum. As of December 31, 2019, the revolving facility was fully drawn and the total net outstanding balance under the $100 Million Facility was $98.5 million
Between June and September 2019, we entered into five interest rate swap transactions in order to reduce the risks associated with fluctuations in interest rates. The interest rate transactions had a total notional principal of $175 million, whereby the floating rate has been swapped to a fixed rate, with a concurrent maturity of June 2024. Please see “Note 14. Financial Instruments” to our Consolidated Financial Statements.
    In November 2019, we received firm commitments from a syndicate of eleven banks and the Export-Import Bank of Korea, or KEXIM, for the part financing of five of our Newbuilding Vessels that are scheduled to be delivered to us in 2020 in an amount up to $629 million, or the $629 Million Term Loan Facility. The facility agreement was signed in February 2020. The facility is divided into a commercial bank loan of $250 million, or the Commercial Loan, a KEXIM guaranteed loan of $189.1 million funded by commercial banks, or the KEXIM Guaranteed Loan, and a KEXIM direct loan of $189.9 million, or the KEXIM Direct Loan. The amount available for drawdown upon delivery of each Newbuilding Vessel is limited to the lower of (i) 65% of the fair market value of the relevant vessel and (ii) $125.8 million. The facility includes an accordion option of up to $10 million per vessel subject to acceptable long-term employment and credit approval by the lenders. The Commercial Loan bears interest at LIBOR plus a margin of 2.35% per annum and has a term of five years from delivery of the final vessel. The KEXIM Guaranteed Loan and the KEXIM Direct Loan bear interest at LIBOR plus a margin of 1.20% per annum and 2.25% per annum, respectively. The KEXIM Guaranteed Loan has a term of six years from the delivery of each vessel and the KEXIM Direct Loan has a term of 12 years from the delivery of each vessel, provided that these loans will mature at the same time as the Commercial Loan if the Commercial Loan has not been refinanced at terms acceptable to the lenders.
Between January and March 2020, we entered into seven interest rate swap transactions: four have a total notional principal of $225 million with concurrent effective dates of July 2020 and concurrent maturity of July 2025; and three have a total notional principal of $85 million with a concurrent effective date of September 2020 and concurrent maturity of September 2025.
For further information about our financing agreements, see "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Our Borrowing Activities."
Reverse Stock Split
On March 7, 2019, we effected a 1-for-10 reverse stock split of our then-outstanding ordinary shares. The reverse stock split reduced the number of our issued and outstanding ordinary shares from 541,043,903 shares to 54,103,993 shares and affected all issued and outstanding ordinary shares. The number of our authorized ordinary shares was consequently reduced from 100,000,000,000 to 10,000,000,000 and the par value increased from $0.01 per share to $0.10 per share. The terms of our ordinary shares were not affected by the reverse stock split.  No fractional shares were issued in connection with the reverse stock split. Shareholders of record who would have otherwise been entitled to receive a fractional share as a result of the reverse stock split received a cash payment in lieu thereof.  The reverse stock split was completed in order to comply with the initial listing requirements of the NYSE with which we were required to be in compliance in connection with our listing on the NYSE.
B.    Business Overview

Our Fleet
The following table sets forth additional information about our Fleet as of April 16, 2020:

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Vessel Name
 
Cargo Capacity (cbm)
 
Propulsion
 
Year Built(1)
 
Shipyard(2)
 
Charter
Expiration(3)
Operating Vessels
 
 
 
 
 
 
 
 
 
 
Flex Endeavour
 
173,400

 
MEGI
 
2018
 
DSME
 
Spot
Flex Enterprise
 
173,400

 
MEGI
 
2018
 
DSME
 
Q1 2021(4)
Flex Ranger
 
174,000

 
MEGI
 
2018
 
SHI
 
Q2 2021(5)
Flex Rainbow
 
174,000

 
MEGI
 
2018
 
SHI
 
Q3 2020(6)
Flex Constellation
 
173,400

 
MEGI
 
2019
 
DSME
 
Spot
Flex Courageous
 
173,400

 
MEGI
 
2019
 
DSME
 
Spot
Newbuilding Vessels
 
 
 
 
 
 
 
 
 
 
TBN Flex Aurora
 
174,000

 
X-DF
 
Q2 2020
 
HSHI
 
n/a
TBN Flex Amber
 
174,000

 
X-DF
 
Q3 2020
 
HSHI
 
n/a
TBN Flex Artemis(8)
 
173,400

 
MEGI
 
Q3 2020
 
DSME
 
Q3 2025(7)
TBN Flex Resolute
 
173,400

 
MEGI
 
Q3 2020
 
DSME
 
n/a
TBN Flex Freedom
 
173,400

 
MEGI
 
Q4 2020
 
DSME
 
n/a
TBN Flex Volunteer
 
174,000

 
X-DF
 
Q1 2021
 
HSHI
 
n/a
TBN Flex Vigilant
 
174,000

 
X-DF
 
Q2 2021
 
HSHI
 
n/a

_______________________

(1)The delivery dates for the Newbuilding Vessels are based on the contractual delivery dates under the purchase agreements and actual delivery dates may differ.
(2)As used in this annual report, "DSME" means Daewoo Ship building and Marine Engineering Co. Ltd., "SHI" means Samsung Heavy Industries, and "HSHI" means Hyundai Samho Heavy Industries Co. Ltd.
(3)The expiration of our charters is subject to re-delivery windows ranging from 15 to 90 days before or after the expiration date.
(4)    The charterer has the option to extend the charter for an additional three years, in 12-month periods.
(5)    The Flex Ranger is expected to commence employment under a new 12-month time charter with Endesa Energia S.A, a subsidiary of the Enel Group, in direct continuation of the current time charter with Enel Trade S.p.A., or Enel, a multinational power company that is also a subsidiary of the Enel Group, which is expected to expire in end of May 2020. Endesa Energia S.A will have the option to extend the charter for an additional 12 months.
(6)    The charterer has the option to extend the charter for an additional one and a half years, in 6-month periods.
(7)    The charterer has the option to extend the charter for an additional five years, in 12-month periods.
(8)    Formerly known as Flex Reliance.

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Fleet Development
In August 2013, we entered into shipbuilding contracts with SHI for the construction of the Flex Ranger and the Flex Rainbow, which were delivered to us in June 2018 and July 2018, respectively. We partially financed the purchase price of the Flex Ranger with borrowings under our $315 Million Term Loan Facility and the Flex Rainbow through the Flex Rainbow Sale and Leaseback.
In February 2017, we entered into agreements with Dionyssos Shipping Inc. and Bacchus Shipping Inc., entities related to Geveran, for the acquisition of the newbuilding contracts for two MEGI LNG carriers, Flex Endeavour and the Flex Enterprise, respectively, which were under construction at DSME. The acquisitions were by way of novation of the respective newbuilding contracts. The vessels were delivered to us in January 2018. As partial consideration for these vessels, we issued 7.8 million new ordinary shares to Geveran. The remaining portion of the purchase price was partly funded with borrowings under our $315 Million Term Loan Facility.
In May 2017, we entered into agreements with Constellation Inc. and Courageous Inc., entities related to Geveran, for the acquisition of two newbuilding MEGI LNG carriers, Flex Constellation and Flex Courageous, respectively, for a purchase price of $180.0 million per vessel. The Flex Constellation and Flex Courageous were delivered to us in June 2019 and August 2019, respectively. We made advance payments of $36.0 million per vessel to the sellers, representing 20% of the purchase price. The remaining portion of the purchase price was funded with borrowings under our $250 Million Term Loan Facility and cash on hand.
In May 2018, we entered into agreements with Sea Aurora Inc. and Sea America Inc., entities related to Geveran, for the acquisition of two newbuilding X-DF LNG carriers, Flex Aurora and Flex Amber, respectively, for a purchase price of $184.0 million per vessel.  The vessels are currently under construction at HSHI pursuant to shipbuilding contracts between HSHI and the sellers, who will continue to be responsible for the supervision of the vessels' construction. We have made advance payments of $36.8 million per vessel to the sellers, representing 20% of the purchase price, with the remaining balance of $147.2 million per vessel due upon the delivery to us. The contractual delivery dates for the vessels are in the second and the third quarter of 2020, respectively.
In October 2018, we entered into agreements with Sea Freedom Shipowning Inc., Sea Reliance Inc., Sea Resulute Inc., Vigilant Shipowning Inc., and Volunteer Shipowning Inc., entities related to Geveran, for the acquisition of five newbuilding LNG carriers, the Flex Freedom, Flex Artemis (formerly known as Flex Reliance), Flex Resolute, Flex Vigilant, and Flex Volunteer, respectively, for an aggregate purchase price of $918.0 million, or $180.0 million per vessel, with an additional cost of $6.0 million per vessel for full re-liquefaction systems on three of the vessels. The Flex Freedom, Flex Artemis and Flex Resolute are MEGI LNG carriers under construction at DSME, with contractual delivery dates for two vessels in the third quarter of 2020 and the remaining vessel in the fourth quarter of 2020. The Flex Volunteer and Flex Vigilant are X-DF LNG carriers with contractual delivery dates in the first and second quarters of 2021, respectively. The sellers will continue to be responsible for the supervision of the vessels' construction. We made advance payments of $55.8 million for each of the three MEGI newbuildings and $54.0 million for each of the two X-DF newbuildings in the fourth quarter of 2018, representing 30% of the purchase price. The remaining balance of $130.2 million for each of the three MEGI newbuildings and $126.0 million for each of the two X-DF newbuilding is due upon the delivery of the respective vessels to us. We refer to these vessels as the "October 2018 Newbuildings".

For information about our financing agreements which we have entered into in connection with the expansion of our Fleet, see "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources— Our Borrowing Activities."
Employment of Our Fleet and Our Customers
We actively market the vessels in our Fleet in both the term and spot-market (which includes vessel employment under single voyage spot charters and time charters with an initial term of less than six months) in order to secure optimal employment in the LNG shipping market. The below sets out employment arrangements for our vessels.
In April 2018, we entered into a time charter agreement with Enel Trade S.p.A., or Enel, a multinational power company, for the employment of the vessel Flex Ranger. The time charter has firm period of 12 months, and is expected to expire in end of May 2020.
In January 2019, we entered into a time charter agreement with Clearlake Shipping Pte. Ltd., or Clearlake, a subsidiary of the Gunvor Group, for the employment of the vessel Flex Rainbow. The current six month firm period under the agreement

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commenced February 2020, and the charterer also has options to extend the charter period up to an additional one and a half years, in six month periods.
In March 2019, we entered into a time charter agreement with an international energy major for the employment of the vessel Flex Enterprise. The time charter had an initial firm period of 12 months, commencing end of the first quarter of 2019. The charterer has options to extend the charter period up to an additional four years, in 12 month periods. The first 12-month extension option was declared by the charterer in January 2020, extending the firm period under the time charter to the end of the first quarter of 2021.
In November 2019, we entered into a long-term time charter with Clearlake for the employment of the Flex Artemis (formerly known as Flex Reliance). The time charter has a firm period of five years, and the charterer has options to extend the charter period for an additional five years, in 12 month periods. The charter will commence in connection with the delivery of the Flex Artemis from the shipyard, which is expected in the third quarter of 2020.
In December 2019, we entered into a time charter with Endesa Energia S.A. for the employment of the Flex Ranger. The new time charter has a firm period of 12 months and will commence in direct continuation of the existing time charter with Enel. The charterer has the option to extend the time charter by an additional 12 months.
We have derived, and believe that we will continue to derive, a significant portion of our revenues from a limited number of customers. Our customers include major oil and gas companies, energy trading companies, and various other entities that depend upon marine transportation. For a description of our customer concentration and dependency, please see "Item 3. Key Information-D. Risk Factors- We currently derive all our revenue and cash flow from a limited number of customers and the loss of any of these customers could cause us to suffer losses or otherwise adversely affect our business.". The loss of any significant customer or a substantial decline in the amount of services requested by a significant customer, or the inability of a significant customer to pay for our services, could have a material adverse effect on our business, financial condition and results of operations.

Management Structure
General Management Agreements

We have entered into a general management agreement with Flex LNG Bermuda Management Limited, our wholly owned subsidiary, for the provision of management services, which primarily include, among others, general administration, contract management, corporate governance assistance, accounting service and operational support. Flex LNG Bermuda Management Limited has, in turn, subcontracted these services from certain of our other subsidiaries, including Flex LNG Management AS and Flex LNG Management Limited. We reimburse Flex LNG Bermuda Management Limited for expenses incurred in connection with providing these services to us, plus a mark-up, which fee is subject to annual review and adjustment. Each of the Company and Flex LNG Bermuda Management Limited may terminate the general management agreement upon twelve months’ prior written notice to the other party. In addition, we may terminate the general management agreement with immediate effect upon a breach of the agreement by Flex LNG Bermuda Management Limited that continues for a period of 14 days after the date on which we deliver written notice to Flex LNG Bermuda Management Limited of the breach. For 2018, these services were provided by Flex LNG Management AS and Flex LNG Management Limited through general management agreements directly with FLEX LNG Ltd. The total compensation to Flex LNG Management AS for the year ended December 31, 2019 was $2.6 million (2018: $1.4 million). The total compensation to Flex LNG Management Limited for the year end December 31, 2019 was $0.4 million (2018: $2.3 million).

We have an administrative services agreement with Frontline Management (Bermuda) Limited, or Frontline Management, a related party, under which they provide us with certain administrative support services, for which we pay our allocation of the actual costs they incur on our behalf, plus a margin. Each of the Company and Frontline Management may terminate the administrative services agreement upon three months’ prior written notice to the other party. In the year ended December 31, 2019, we paid Frontline Management $0.5 million for these services (2018: $0.7 million).

Frontline Management also provided newbuilding supervision for the four newbuildings delivered in 2018. Since all of the vessels delivered during 2019 and the newbuildings to be delivered in 2020 and 2021, are on a Norwegian Sales Form basis there were no fees paid for these services for the year ended December 31, 2019 (2018: $1.5 million).

We also have a services agreement with Seatankers Management Co. Ltd., or Seatankers, a related party, under which they provide us with certain advisory and support services, for which we pay our allocation of the actual costs they incur on our behalf, plus a margin. We may terminate the services agreement upon not less than 20 business days’ written notice. In the year ended December 31, 2019, we paid Seatankers $0.5 million for such services (2018: $0.6 million).

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Technical Management and Support Services
We receive technical management supervision and other support services from Frontline Management for our Operating Vessels. These services include technical supervision, purchase of goods and services within the ordinary course of business, insurances and other services relating to our Operating Vessels. Frontline Management subcontracts these services to Frontline Management AS or other associated companies from time to time. Frontline Management provides quarterly invoices for services rendered and in addition it receives a monthly payment of $2,772 for each Operating Vessel. Each of the parties may terminate the contract on three months' notice. The fee is subject to annual review. In the year ended December 31, 2019, we paid Frontline Management $0.5 million for such services (2018: $0.1 million).
In October 2019, Flex LNG Fleet Management AS, a related party, received a document of compliance under the ISM Code (defined below), qualifying it for technical ship management services. The technical ship management for five of our six Operating Vessels was transferred to Flex LNG Fleet Management AS between November 2019 and March 2020, with the remaining vessel scheduled to be transferred during 2020. Flex LNG Fleet Management AS will also be responsible for the technical ship management of our seven Newbuilding Vessels. Under the agreements between Flex LNG Fleet Management AS and our vessel owning subsidiaries, Flex LNG Fleet Management AS is paid a fixed fee of $359,000 per vessel per annum for the provision of technical management services for each of our vessels in operation. The fee is subject to annual review. During the year ended December 31, 2019, we paid $0.2 million to Flex LNG Fleet Management AS for these services. For a description of our technical management and support services, please see “Item 7. Major Shareholders and Related Party Transactions-B. Related Party Transactions-Technical Management and Support Services.”
The Liquefied Natural Gas Industry
This section discusses the industry and markets in which we operate. Certain of the information in this section relating to market environment, market developments, growth rates, market trends, industry trends, competition and similar information are estimates based on data compiled by professional organizations, consultants and analysts; in addition to market data from other external and publicly available sources, and our knowledge of the markets. Any forecast information and other forward-looking statements in this market summary are not guarantees of future outcomes and these future outcomes could differ materially from current expectations. Numerous factors could cause or contribute to such differences, including those risks described in "Item 3. Key Information—D. Risk Factors."
Introduction
The Company's business is marine transportation of LNG, referred to as LNG shipping. The marine transportation is done by means of specialized ships, referred to as LNG carriers, which are vessels built to meet the specialized requirement of the LNG products.
LNG is used as a term to describe the super cool liquid form of natural gases, being a mix of hydrocarbon gasses (mainly methane, but also commonly including varying amounts of other higher alkanes and various other gases). The natural gas can primarily be extracted from oil fields or natural gas fields, but in recent years an increasing amount of gas is being extracted from more challenging and untraditional resource types such as sour gas, tight gas, shale gas, and coalbed methane.
An important source of energy, natural gas is non-toxic, clean-burning and relatively inexpensive. Although predominantly used for electricity generation, heating and cooking, natural gas is also utilized as a chemical feedstock in the industrial sector and, to a lesser extent, as fuel for vehicles. In producing regions with a high natural gas demand, pipelines are constructed when it is economically feasible to transport natural gas in from a wellsite to an end consumer. In end-user regions without access to pipelines, natural gas may be transported on tanker trucks or railway tankers (if by land) or by LNG carriers (if by sea).
LNG is a product that requires processing both at the supplying and at the receiving end of the transportation chain. This is because transportation is only economically feasible when the gas is in a liquid state. Liquefaction of natural gas reduces the volume to 1/600 of the gaseous state and therefore makes it economical for transportation by sea.
At the supply source of the transportation chain, liquefaction is done at specialized liquefaction plants, referred to as "liquefaction trains", where undesired heavy hydrocarbons and non-hydrocarbons are removed from the natural gas before cooling the natural gas to approximately -163 °C (-260 °F) to become liquid at close to atmospheric pressure. Similarly, at the receiving end of the transportation chain, the LNG is regasified to its gaseous state before being distributed to the end-user through pipelines.
LNG shipping is closely related to the liquefaction and regasification processes that take place at either end of the transportation chain. Liquefaction can be done onboard specialized ships (floating liquefaction plants), being a relatively new

39


trend in the LNG business. Regasification onboard Floating Storage Regasification Units ("FSRUs") have also become an important part of the LNG business.
LNG supply and demand
The volume of LNG shipping amounted to approximately 360 million tonnes in 2019. This volume has been subject to large changes, having increased from approximately 103 million tonnes in 2000. Among the factors that have contributed to this growth, are relatively low gas prices, large new discoveries and developments of natural gas resources, large developments of liquefaction plants to monetize these resources, as well as factors contributing to reducing the cost of importing LNG, such as FSRUs. During this period, there have been large changes both in the supplying (exporting) and consuming (importing) regions for LNG, giving rise to a more complex pattern of seaborne transportation.
Demand for natural gas and LNG is closely correlated with general energy demand, which in turn is closely related to economic growth and development. Factors impacting the demand for natural gas also include environmental awareness (particularly in comparison with coal) and relative price to other energy sources (particularly crude oil). The main rationale for securing access to natural gas has been economics – as natural gas is more cost effective than running power plants on fuel oil. In addition to the economic rationales for substituting other sources of energy with natural gas, the list of operational projects reveal other reasons for wanting access to LNG, including lack of sufficient electricity generation from hydro power plants (e.g. Brazil), large seasonal differences in demand (e.g. Dubai/Kuwait), security of supply and geopolitical considerations (e.g. Lithuania), falling domestic natural gas production (e.g. Egypt), and increased demand for energy, or LNG volumes already contracted on long-term deals (e.g. Indonesia). Also, factors such as the temporary shutdown of nuclear power plants in Japan following the Fukushima disaster in 2011 have impacted LNG demand.
The LNG carrier Fleet
LNG carriers have been built since 1964. In January 2020, the fleet was made up of approximately 506 LNG carriers (>125,000 cbm) with various cargo and propulsion systems. The orderbook for LNG carriers as of January 2020 for vessels larger than 125,000 cbm stands at approximately 116 vessels. Up to 2010, LNG carriers were generally constructed with steam turbines for propulsion. While these vessels still make up a large part of the fleet, they have a cost disadvantage to modern vessels due to higher fuel consumption. Starting around 2002, owners started building LNG carriers with dual fuel diesel engines or tri fuel diesel engines, making up the bulk of the current modern tonnage. Starting around 2012, engine makers started offering engines with slow speed two stroke engines referred to as MEGI (high pressure) or X-DF (low pressure), being specifically made for ships propelled by gas.
Rate developments
The majority of the LNG carrier fleet is contracted on long term contracts that link specific exporters to specific importers. This contract structure means that a large part of the LNG shipping business is of a more industrial nature than many other shipping businesses. However, there is also a part of the LNG carrier fleet that is constructed without contract coverage and which serves shorter-term contracts or spot trading.
The spot and short term contract market is influenced by supply and demand imbalances, and may be volatile. The market spiked in 2011/2012 following the Fukushima disaster in Japan, as all Japanese nuclear power plants were temporarily shut down. This caused the demand for natural gas to increase significantly in Asia and LNG prices increased as well. As a result there was a large price differential for LNG between Europe and Asia and the demand for LNG carriers increased with the flow of LNG from Atlantic to the Pacific. In late 2014 and 2015 the price for crude oil dropped significantly along with a slowdown in the global economy, resulting in the drop in LNG prices in Asia and the closing of the arbitrage between Atlantic and Pacific base prices. Since that period, the market has been characterized by an oversupply of LNG tonnage, mainly caused by delays in new LNG capacity coming on stream and the reduced intra basin trading. This overhang of tonnage has caused freight rates to be depressed. In the more recent period, the market has seen strong growth in LNG production, particularly in the US, leading to a more balanced market. However, due to the recent outbreak of COVID-19, since late February, the financial markets in the U.S. have been in steep decline. If U.S and world economic conditions continue to weaken, the demand for energy, including oil and gas may be negatively affected.
Environmental and Other Regulations in the Shipping Industry
Government regulation and laws significantly affect the ownership and operation of our fleet. We are subject to international conventions and treaties, national, state and local laws and regulations in force in the countries in which our vessels may operate or are registered relating to safety and health and environmental protection including the storage, handling, emission,

40


transportation and discharge of hazardous and non-hazardous materials, and the remediation of contamination and liability for damage to natural resources. Compliance with such laws, regulations and other requirements entails significant expense, including vessel modifications and implementation of certain operating procedures.
A variety of government and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (applicable national authorities such as the USCG, harbor master or equivalent), classification societies, flag state administrations (countries of registry) and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or result in the temporary suspension of the operation of one or more of our vessels.
Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations. However, because such laws and regulations frequently change and may impose increasingly stricter requirements, we cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious marine incident that causes significant adverse environmental impact could result in additional legislation or regulation that could negatively affect our profitability; new emission standards, titled IMO-2020, took effect on January 1, 2020.
International Maritime Regulation of LNG Vessels
The IMO, the United Nations agency for maritime safety and the prevention of pollution by vessels, has adopted the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, collectively referred to as MARPOL 73/78 and herein as "MARPOL," adopted the International Convention for the Safety of Life at Sea of 1974 ("SOLAS Convention"), and the International Convention on Load Lines of 1966 (the "LL Convention"). MARPOL establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged forms.  MARPOL is applicable to dry bulk, tanker and LNG carriers, among other vessels, and is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage or spilling; Annexes II and III relate to harmful substances carried in bulk in liquid or in packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI was separately adopted by the IMO in September of 1997.
Vessels that transport gas, including LNG carriers and FSRUs, are also subject to regulation under the International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk, or the IGC Code, published by the IMO. The IGC Code provides a standard for the safe carriage of LNG and certain other liquid gases by prescribing the design and construction standards of vessels involved in such carriage. The completely revised and updated IGC Code entered into force in 2016, and the amendments were developed following a comprehensive five-year review and are intended to take into account the latest advances in science and technology. Compliance with the IGC Code must be evidenced by a Certificate of Fitness for the Carriage of Liquefied Gases in Bulk. Non-compliance with the IGC Code or other applicable IMO regulations may subject a shipowner or a 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.  We believe that each of our vessels is in compliance with the IGC Code and each of the newbuilding contracts for our vessels requires that the vessel receive certification that it is in compliance with applicable regulations before it is delivered.

In June 2015 the IMO formally adopted the International Code of Safety for Ships using Gases or Low flashpoint Fuels, or the IGF Code, which is designed to minimize the risks involved with ships using low flashpoint fuels- including LNG. The IGF Code will be mandatory under SOLAS through the adopted amendments. The IGF Code and the amendments to SOLAS became effective January 1, 2017.

Our LNG vessels may also become subject to the 2010 HNS Convention, if it is entered into force.  The Convention creates a regime of liability and compensation for damage from hazardous and noxious substances, HNS, including liquefied gases.  The 2010 HNS Convention sets up a two-tier system of compensation composed of compulsory insurance taken out by shipowners and an HNS Fund which comes into play when the insurance is insufficient to satisfy a claim or does not cover the incident.  Under the 2010 HNS Convention, if damage is caused by bulk HNS, claims for compensation will first be sought from the shipowner up to a maximum of 100 million Special Drawing Rights, or SDR.  If the damage is caused by packaged HNS or by both bulk and packaged HNS, the maximum liability is 115 million SDR.  Once the limit is reached, compensation will be paid

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from the HNS Fund up to a maximum of 250 million SDR.  The 2010 HNS Convention has not been ratified by a sufficient number of countries to enter into force, and we cannot estimate the costs that may be needed to comply with any such requirements that may be adopted with any certainty at this time.
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 regulation may have on our operations.
Air Emissions
In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels. Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from all commercial vessel exhausts and prohibits "deliberate emissions" of ozone depleting substances (such as halons and chlorofluorocarbons), emissions of volatile compounds from cargo tanks, and the shipboard incineration of specific substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions, as explained below.  Emissions of "volatile organic compounds" from certain vessels, and the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls, or PCBs) are also prohibited.  We believe that all our vessels are currently compliant in all material respects with these regulations.
The Marine Environment Protection Committee, or MEPC, adopted amendments to Annex VI regarding emissions of sulfur oxide, nitrogen oxide, particulate matter and ozone depleting substances, which entered into force on July 1, 2010.  The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board ships. On October 27, 2016, at its 70th session, the MEPC agreed to implement a global 0.5% m/m sulfur oxide emissions limit (reduced from 3.50%) starting from January 1, 2020.  This limitation can be met by using low-sulfur compliant fuel oil, alternative fuels, or certain exhaust gas cleaning systems.  Once the cap becomes effective, ships will be required to obtain bunker delivery notes and International Air Pollution Prevention, or IAPP Certificates from their flag states that specify sulfur content.  Additionally, at MEPC 73, amendments to Annex VI to prohibit the carriage of bunkers above 0.5% sulfur on ships were adopted and will take effect March 1, 2020.  These regulations subject ocean-going vessels to stringent emissions controls, and may cause us to incur substantial costs.
Sulfur content standards are even stricter within certain Emission Control Areas, or ECAs. As of January 1, 2015, ships operating within an ECA were not permitted to use fuel with sulfur content in excess of 0.1% m/m. Amended Annex VI establishes procedures for designating new ECAs. Currently, the IMO has designated four ECAs, including specified portions of the Baltic Sea area, North Sea area, North American area and United States Caribbean area.  Ocean-going vessels in these areas will be subject to stringent emission controls and may cause us to incur additional costs. Other areas in China are subject to local regulations that impose stricter emission controls. If other ECAs are approved by the IMO, or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the EPA or the states where we operate, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of our operations.
Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for marine diesel engines, depending on their date of installation. At the MEPC meeting held from March to April 2014, amendments to Annex VI were adopted which address the date on which Tier III Nitrogen Oxide (NOx) standards in ECAs will go into effect.  Under the amendments, Tier III NOx standards apply to ships that operate in the North American and U.S. Caribbean Sea ECAs designed for the control of NOx produced by vessels with a marine diesel engine installed and constructed on or after January 1, 2016.  Tier III requirements could apply to areas that will be designated for Tier III NOx in the future. At MEPC 70 and MEPC 71, the MEPC approved the North Sea and Baltic Sea as ECAs for nitrogen oxide for ships built on or January 1, 2021. The EPA promulgated equivalent (and in some senses stricter) emissions standards in late 2010.  As a result of these designations or similar future designations, we may be required to incur additional operating or other costs.
As determined at the MEPC 70, the new Regulation 22A of MARPOL Annex VI became effective as of March 1, 2018 and requires ships above 5,000 gross tonnage to collect and report annual data on fuel oil consumption to an IMO database, with the first year of data collection commencing on January 1, 2019.  The IMO intends to use such data as the first step in its roadmap (through 2023) for developing its strategy to reduce greenhouse gas emissions from ships, as discussed further below.
As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for ships. All ships are now required to develop and implement Ship Energy Efficiency Management Plans, or SEEMPS, and new ships must be designed in compliance with minimum energy efficiency levels per capacity mile as defined by the Energy Efficiency Design Index, or EEDI.  Under these measures, by 2025, all new ships built will be 30% more energy efficient than those built in 2014.

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We may incur costs to comply with these revised standards. Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems and could adversely affect our business, results of operations, cash flows and financial condition.
Safety Management System Requirements
The SOLAS Convention was amended to address the safe manning of vessels and emergency training drills.  The Convention of Limitation of Liability for Maritime Claims, or LLMC, sets limitations of liability for a loss of life or personal injury claim or a property claim against ship owners. We believe that our vessels are in substantial compliance with SOLAS and LLMC standards.
Under Chapter IX of the SOLAS Convention, or the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (the "ISM Code"), our operations are also subject to environmental standards and requirements. The ISM Code requires the party with operational control of a vessel to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. We rely upon the safety management system that our managers have developed for compliance with the ISM Code. The failure of a vessel owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.
The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel's management with the ISM Code requirements for a safety management system. No vessel can obtain a safety management certificate unless its manager has been awarded a document of compliance, issued by each flag state, under the ISM Code. We have obtained applicable documents of compliance for our offices and safety management certificates for all of our vessels for which the certificates are required by the IMO. The document of compliance and safety management certificate are renewed as required.
Regulation II-1/3-10 of the SOLAS Convention governs ship construction and stipulates that ships over 150 meters in length must have adequate strength, integrity and stability to minimize risk of loss or pollution. Goal-based standards amendments in SOLAS regulation II-1/3-10 entered into force in 2012, with July 1, 2016 set for application to new oil tankers and bulk carriers.   The SOLAS Convention regulation II-1/3-10 on goal-based ship construction standards for bulk carriers and oil tankers, which entered into force on January 1, 2012, requires that all oil tankers and bulk carriers of 150 meters in length and above, for which the building contract is placed on or after July 1, 2016, satisfy applicable structural requirements conforming to the functional requirements of the International Goal-based Ship Construction Standards for Bulk Carriers and Oil Tankers (GBS Standards).
Amendments to the SOLAS Convention Chapter VII apply to vessels transporting dangerous goods and require those vessels be in compliance with the International Maritime Dangerous Goods Code, or IMDG Code. Effective January 1, 2018, the IMDG Code includes (1) updates to the provisions for radioactive material, reflecting the latest provisions from the International Atomic Energy Agency, (2) new marking, packing and classification requirements for dangerous goods, and (3) new mandatory training requirements. Amendments which took effect on January 1, 2020 also reflect the latest material from the UN Recommendations on the Transport of Dangerous Goods, including (1) new provisions regarding IMO type 9 tank, (2) new abbreviations for segregation groups, and (3) special provisions for carriage of lithium batteries and of vehicles powered by flammable liquid or gas.
The IMO has also adopted the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, or STCW.  As of February 2017, all seafarers are required to meet the STCW standards and be in possession of a valid STCW certificate.  Flag states that have ratified SOLAS and STCW generally employ the classification societies, which have incorporated SOLAS and STCW requirements into their class rules, to undertake surveys to confirm compliance.
The IMO's Maritime Safety Committee and MEPC, respectively, each adopted relevant parts of the International Code for Ships Operating in Polar Water (the “Polar Code”). The Polar Code, which entered into force on January 1, 2017, covers design, construction, equipment, operational, training, search and rescue as well as environmental protection matters relevant to ships operating in the waters surrounding the two poles. It also includes mandatory measures regarding safety and pollution prevention as well as recommendatory provisions. The Polar Code applies to new ships constructed after January 1, 2017, and after January 1, 2018, ships constructed before January 1, 2017 are required to meet the relevant requirements by the earlier of their first intermediate or renewal survey.
Furthermore, recent action by the IMO's Maritime Safety Committee and United States agencies indicates that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat

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cybersecurity threats. For example, cyber-risk management systems must be incorporated by ship-owners and managers by 2021. This might cause companies to create additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures.  The impact of such regulations is hard to predict at this time.
Pollution Control and Liability Requirements
The IMO has negotiated international conventions that impose liability for pollution in international waters and the territorial waters of the signatories to such conventions. For example, the IMO adopted an International Convention for the Control and Management of Ships' Ballast Water and Sediments, or BWM Convention, in 2004. The BWM Convention entered into force on September 8, 2017.  The BWM Convention requires ships to manage their ballast water to remove, render harmless, or avoid the uptake or discharge of new or invasive aquatic organisms and pathogens within ballast water and sediments.  The BWM Convention's implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits, and require all ships to carry a ballast water record book and an international ballast water management certificate.
On December 4, 2013, the IMO Assembly passed a resolution revising the application dates of BWM Convention so that the dates are triggered by the entry into force date and not the dates originally in the BWM Convention.  This, in effect, makes all vessels delivered before the entry into force date "existing vessels" and allows for the installation of ballast water management systems on such vessels at the first International Oil Pollution Prevention, or IOPP renewal survey following entry into force of the convention. The MEPC adopted updated guidelines for approval of ballast water management systems (G8) at MEPC 70. At MEPC 71, the schedule regarding the BWM Convention's implementation dates was also discussed and amendments were introduced to extend the date existing vessels are subject to certain ballast water standards. Those changes were adopted at MEPC 72. Ships over 400 gross tons generally must comply with a "D-1 standard," requiring the exchange of ballast water only in open seas and away from coastal waters.  The "D-2 standard" specifies the maximum amount of viable organisms allowed to be discharged, and compliance dates vary depending on the IOPP renewal dates. Depending on the date of the IOPP renewal survey, existing vessels must comply with the D-2 standard on or after September 8, 2019. For most ships, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms.  Ballast water management systems, which include systems that make use of chemical, biocides, organisms or biological mechanisms, or which alter the chemical or physical characteristics of the ballast water, must be approved in accordance with IMO Guidelines (Regulation D-3). As of October 13, 2019, MEPC 72’s amendments to the BWM Convention took effect, making the Code for Approval of Ballast Water Management Systems, which governs assessment of ballast water management systems, mandatory rather than permissive, and formalized an implementation schedule for the D-2 standard. Under these amendments, all ships must meet the D-2 standard by September 8, 2024. Costs of compliance with these regulations may be substantial.
Once mid-ocean ballast exchange ballast water treatment requirements become mandatory under the BWM Convention, the cost of compliance could increase for ocean carriers and may have a material effect on our operations. However, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and harmful species via such discharges. The U.S., for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternate measure, and to comply with certain reporting requirements.
The IMO adopted the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended by different Protocols in 1976, 1984, and 1992, and amended in 2000, or CLC. Under the CLC and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel's registered owner may be strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain exceptions.  The 1992 Protocol changed certain limits on liability expressed using the International Monetary Fund currency unit, the Special Drawing Rights. The limits on liability have since been amended so that the compensation limits on liability were raised.  The right to limit liability is forfeited under the CLC where the spill is caused by the shipowner's actual fault and under the 1992 Protocol where the spill is caused by the shipowner's intentional or reckless act or omission where the shipowner knew pollution damage would probably result.  The CLC requires ships over 2,000 tons covered by it to maintain insurance covering the liability of the owner in a sum equivalent to an owner's liability for a single incident. We have protection and indemnity insurance for environmental incidents. P&I Clubs in the International Group issue the required Bunkers Convention "Blue Cards" to enable signatory states to issue certificates. All of our vessels are in possession of a CLC State issued certificate attesting that the required insurance coverage is in force.
The IMO also adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or Bunker Convention to impose strict liability on ship owners (including the registered owner, bareboat charterer, manager or operator) for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance

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with the LLMC).  With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship's bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.
Ships are required to maintain a certificate attesting that they maintain adequate insurance to cover an incident. In jurisdictions, such as the United States where the CLC or the Bunker Convention has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or on a strict-liability basis.
Anti‑Fouling Requirements
In 2001, the IMO adopted the International Convention on the Control of Harmful Anti‑fouling Systems on Ships, or the "Anti‑fouling Convention." The Anti‑fouling Convention, which entered into force on September 17, 2008, prohibits the use of organotin compound coatings to prevent the attachment of mollusks and other sea life to the hulls of vessels. Vessels of over 400 gross tons engaged in international voyages will also be required to undergo an initial survey before the vessel is put into service or before an International Anti‑fouling System Certificate is issued for the first time; and subsequent surveys when the anti‑fouling systems are altered or replaced. We have obtained Anti‑fouling System Certificates for all of our vessels that are subject to the Anti‑fouling Convention.
Compliance Enforcement
Noncompliance with the ISM Code or other IMO regulations may subject the ship owner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The USCG and European Union authorities have indicated that vessels not in compliance with the ISM Code by applicable deadlines will be prohibited from trading in U.S. and European Union ports, respectively. As of the date of this annual report, each of our vessels is ISM Code certified. However, there can be no assurance that such certificates will be maintained in the future.  The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our operations.
United States Regulations
The U.S. Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation and Liability Act
The U.S. Oil Pollution Act of 1990, 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 or operate within the U.S., its territories and possessions or whose vessels operate in U.S. waters, which includes the U.S.'s territorial sea and its 200 nautical mile exclusive economic zone around the U.S.  The U.S. has also enacted the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of hazardous substances other than oil, except in limited circumstances, whether on land or at sea. OPA and CERCLA both define "owner and operator" in the case of a vessel as any person owning, operating or chartering by demise, the vessel.  Both OPA and CERCLA impact our operations.
Under OPA, vessel owners and operators are "responsible parties" and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels, including bunkers (fuel).  OPA defines these other damages broadly to include:
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injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;
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injury to, or economic losses resulting from, the destruction of real and personal property;
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loss of subsistence use of natural resources that are injured, destroyed or lost;
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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;
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lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and
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net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.

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OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs.  Effective November 12, 2019, the USCG adjusted the limits of OPA liability for a tank vessel, other than a single-hull tank vessel, over 3,000 gross tons liability to the greater of $2,300 per gross ton or $19,943,400 (subject to periodic adjustment for inflation).  These limits of liability do not apply if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual relationship), or a responsible party's gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident as required by law where the responsible party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act.
CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damages for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing the same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5.0 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations.  The limitation on liability also does not apply if the responsible person fails or refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA.
OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort law.  OPA and CERCLA both require owners and operators of vessels to establish and maintain with the USCG evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee. We comply and plan to comply going forward with the USCG's financial responsibility regulations by providing applicable certificates of financial responsibility.
The 2010 Deepwater Horizon oil spill in the Gulf of Mexico resulted in additional regulatory initiatives or statutes, including higher liability caps under OPA, new regulations regarding offshore oil and gas drilling and a pilot inspection program for offshore facilities. However, several of these initiatives and regulations have been or may be revised. For example, the U.S. Bureau of Safety and Environmental Enforcement’s, or BSEE revised Production Safety Systems Rule, or PSSR, effective December 27, 2018, modified and relaxed certain environmental and safety protections under the 2016 PSSR. Additionally, the BSEE amended the Well Control Rule, effective July 15, 2019, which rolled back certain reforms regarding the safety of drilling operations, and the U.S. President has proposed leasing new sections of U.S. waters to oil and gas companies for offshore drilling. The effects of these proposals and changes are currently unknown. Compliance with any new requirements of OPA and future legislation or regulations applicable to the operation of our vessels could impact the cost of our operations and adversely affect our business.
OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability established under OPA and some states have enacted legislation providing for unlimited liability for oil spills.  Many U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance.  These laws may be more stringent than U.S. federal law.  Moreover, some states have enacted legislation providing for unlimited liability for discharge of pollutants within their waters, although in some cases, states which have enacted this type of legislation have not yet issued implementing regulations defining vessel owners' responsibilities under these laws. The Company intends to comply with all applicable state regulations in the ports where the Company's vessels call.
We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage, it could have an adverse effect on our business and results of operation.
Other United States Environmental Initiatives
The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990), or CAA requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. The CAA also requires states to draft State Implementation Plans, or SIPs, designed to attain national

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health-based air quality standards in each state. Although state-specific, SIPs may include regulations concerning emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. Our vessels operating in such regulated port areas with restricted cargoes are equipped with vapor recovery systems that satisfy these existing requirements.
The U.S. Clean Water Act, or CWA prohibits the discharge of oil, hazardous substances and ballast water in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges.  The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA.  In 2015, the EPA expanded the definition of "waters of the United States", or WOTUS, thereby expanding federal authority under the CWA.  Following litigation on the revised WOTUS rule, in December 2018, the EPA and Department of the Army proposed a revised, limited definition of "waters of the United States."  The proposed rule was published in the Federal Register on February 14, 2019, and was subject to public comment. On October 22, 2019, the agencies published a final rule repealing the 2015 Rule defining “waters of the United States” and recodified the regulatory text that existed prior to the 2015 Rule. The final rule became effective on December 23, 2019. On January 23, 2020, the EPA published the “Navigable Waters Protection Rule,” which replaces the rule published on October 22, 2019, and redefines “waters of the United States.” The effect of this rule is currently unknown.
The EPA and the USCG have also enacted rules relating to ballast water discharge, compliance with which requires the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial costs, and/or otherwise restrict our vessels from entering U.S. Waters.  The EPA will regulate these ballast water discharges and other discharges incidental to the normal operation of certain vessels within United States waters pursuant to the Vessel Incidental Discharge Act, or VIDA, which was signed into law on December 4, 2018 and replaces the 2013 Vessel General Permit, or VGP program (which authorizes discharges incidental to operations of commercial vessels and contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in U.S. waters, stringent requirements for exhaust gas scrubbers, and requirements for the use of environmentally acceptable lubricants) and current Coast Guard ballast water management regulations adopted under the U.S. National Invasive Species Act, or NISA, such as mid-ocean ballast exchange programs and installation of approved USCG technology for all vessels equipped with ballast water tanks bound for U.S. ports or entering U.S. waters.  VIDA establishes a new framework for the regulation of vessel incidental discharges under the CWA, requires the EPA to develop performance standards for those discharges within two years of enactment, and requires the U.S. Coast Guard to develop implementation, compliance, and enforcement regulations within two years of EPA's promulgation of standards.  Under VIDA, all provisions of the 2013 VGP and USCG regulations regarding ballast water treatment remain in force and effect until the EPA and U.S. Coast Guard regulations are finalized.  Non-military, non-recreational vessels greater than 79 feet in length must continue to comply with the requirements of the VGP, including submission of a Notice of Intent, or NOI or retention of a PARI form and submission of annual reports. We have submitted NOIs for our vessels where required. Compliance with the EPA, U.S. Coast Guard and state regulations could require the installation of ballast water treatment equipment on our vessels or the implementation of other port facility disposal procedures at potentially substantial cost, or may otherwise restrict our vessels from entering U.S. waters.
European Union Regulations
In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties. The directive applies to all types of vessels, irrespective of their flag, but certain exceptions apply to warships or where human safety or that of the ship is in danger. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims.  Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April 2015 (amending EU Directive 2009/16/EC) governs the monitoring, reporting and verification of carbon dioxide emissions from maritime transport, and, subject to some exclusions, requires companies with ships over 5,000 gross tonnage to monitor and report carbon dioxide emissions annually, which may cause us to incur additional expenses.
The European Union has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk ships, as determined by type, age, and flag as well as the number of times the ship has been detained. The European Union also adopted and extended a ban on substandard ships and enacted a minimum ban period and a definitive ban for repeated offenses. The regulation also provided the European Union with greater authority and control over classification societies, by imposing more requirements on classification societies and providing for fines or penalty payments for organizations that failed to comply. Furthermore, the EU has implemented regulations requiring vessels to use reduced sulfur content fuel for their main and auxiliary engines. The EU Directive 2005/33/EC (amending Directive 1999/32/EC) introduced requirements parallel to those in Annex VI relating to the sulfur content of marine fuels. In addition, the EU imposed a 0.1% maximum sulfur requirement for fuel used by ships at berth in the Baltic, the North Sea and the English Channel (the so called “SOx-Emission Control Area”).

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As of January 2020, EU member states must also ensure that ships in all EU waters, except the SOx-Emission Control Area, use fuels with a 0.5% maximum sulfur content.
International Labor Organization
The International Labor Organization, or the ILO, is a specialized agency of the UN that has adopted the Maritime Labor Convention 2006 ("MLC 2006"). A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance is required to ensure compliance with the MLC 2006 for all ships that are 500 gross tonnage or over and are either engaged in international voyages or flying the flag of a Member and operating from a port, or between ports, in another country. We believe that all our vessels are in substantial compliance with and are certified to meet MLC 2006.
Greenhouse Gas Regulation
Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions with targets extended through 2020.  International negotiations are continuing with respect to a successor to the Kyoto Protocol, and restrictions on shipping emissions may be included in any new treaty. In December 2009, more than 27 nations, including the U.S. and China, signed the Copenhagen Accord, which includes a non-binding commitment to reduce greenhouse gas emissions.  The 2015 United Nations Climate Change Conference in Paris resulted in the Paris Agreement, which entered into force on November 4, 2016 and does not directly limit greenhouse gas emissions from ships.  The U.S. initially entered into the agreement but on June 1, 2017, the U.S. President announced that the United States intends to withdraw from the Paris Agreement, which provides for a four-year exit process, meaning that the earliest possible effective withdrawal date cannot be before November 4, 2020.  The timing and effect of such action has yet to be determined.
At MEPC 70 and MEPC 71, a draft outline of the structure of the initial strategy for developing a comprehensive IMO strategy on reduction of greenhouse gas emissions from ships was approved. In accordance with this roadmap, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships.  The initial strategy identifies "levels of ambition" to reducing greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through implementation of further phases of the EEDI for new ships; (2) reducing carbon dioxide emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008 emission levels; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared to 2008 while pursuing efforts towards phasing them out entirely.  The initial strategy notes that technological innovation, alternative fuels and/or energy sources for international shipping will be integral to achieve the overall ambition.  These regulations could cause us to incur additional substantial expenses.
The EU made a unilateral commitment to reduce overall greenhouse gas emissions from its member states from 20% of 1990 levels by 2020. The EU also committed to reduce its emissions by 20% under the Kyoto Protocol's second period from 2013 to 2020.  Starting in January 2018, large ships over 5,000 gross tonnage calling at EU ports are required to collect and publish data on carbon dioxide emissions and other information.
In the United States, the EPA issued a finding that greenhouse gases endanger the public health and safety, adopted regulations to limit greenhouse gas emissions from certain mobile sources, and proposed regulations to limit greenhouse gas emissions from large stationary sources. However, in March 2017, the U.S. President signed an executive order to review and possibly eliminate the EPA's plan to cut greenhouse gas emissions, and in August 2019, the Administration announced plans to weaken regulations for methane emissions.  The EPA or individual U.S. states could enact environmental regulations that would affect our operations.
Any passage of climate control legislation or other regulatory initiatives by the IMO, the EU, the U.S. or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol or Paris Agreement, that restricts emissions of greenhouse gases could require us to make significant financial expenditures which we cannot predict with certainty at this time. Even in the absence of climate control legislation, our business may be indirectly affected to the extent that climate change may result in sea level changes or certain weather events.
Vessel Security Regulations
Since the terrorist attacks of September 11, 2001 in the United States, there have been a variety of initiatives intended to enhance vessel security such as the U.S. Maritime Transportation Security Act of 2002, or the MTSA. To implement certain portions of the MTSA, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels

48


operating in waters subject to the jurisdiction of the United States and at certain ports and facilities, some of which are regulated by the EPA.
Similarly, Chapter XI-2 of the SOLAS Convention imposes detailed security obligations on vessels and port authorities and mandates compliance with the International Ship and Port Facilities Security Code ("the ISPS Code"). The ISPS Code is designed to enhance the security of ports and ships against terrorism. To trade internationally, a vessel must attain an International Ship Security Certificate, or ISSC from a recognized security organization approved by the vessel's flag state. Ships operating without a valid certificate may be detained, expelled from, or refused entry at port until they obtain an ISSC.  The various requirements, some of which are found in the SOLAS Convention, include, for example, on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship's identity, position, course, speed and navigational status; on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore; the development of vessel security plans; ship identification number to be permanently marked on a vessel's hull; a continuous synopsis record kept onboard showing a vessel's history including the name of the ship, the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship's identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and compliance with flag state security certification requirements.
The USCG regulations, intended to align with international maritime security standards, exempt non-U.S. vessels from MTSA vessel security measures, provided such vessels have on board a valid ISSC that attests to the vessel's compliance with the SOLAS Convention security requirements and the ISPS Code. Future security measures could have a significant financial impact on us.  We intend to comply with the various security measures addressed by MTSA, the SOLAS Convention and the ISPS Code.
The cost of vessel security measures has also been affected by the escalation in the frequency of acts of piracy against ships, notably off the coast of Somalia, including the Gulf of Aden and Arabian Sea area. Substantial loss of revenue and other costs may be incurred as a result of detention of a vessel or additional security measures, and the risk of uninsured losses could significantly affect our business. Costs are incurred in taking additional security measures in accordance with Best Management Practices to Deter Piracy, notably those contained in the BMP5 industry standard.
Inspection by Classification Societies
The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and SOLAS. Most insurance underwriters make it a condition for insurance coverage and lending that a vessel be certified "in class" by a classification society which is a member of the International Association of Classification Societies, the IACS.  The IACS has adopted harmonized Common Structural Rules, or the Rules, which apply to oil tankers and bulk carriers contracted for construction on or after July 1, 2015.  The Rules attempt to create a level of consistency between IACS Societies.  All of our Operating Vessels are certified as being "in class" by American Bureau of Shipping.
A vessel must undergo annual surveys, intermediate surveys, dry-dockings and special surveys. In lieu of a special survey, a vessel's machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Every vessel is also required to be dry-docked every five years for inspection of the underwater parts of the vessel.  If any vessel does not maintain its class and/or fails any annual survey, intermediate survey, dry-docking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in violation of certain covenants in our financing agreements. Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on our financial condition and results of operations.
Risk of Loss and Liability Insurance
General
The operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, piracy incidents, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon shipowners, operators and bareboat charterers of any vessel trading in the exclusive economic zone of the United States for certain oil pollution accidents in the United States, has made liability insurance more expensive for shipowners and operators trading in the United States market. We carry insurance coverage as customary in the shipping industry. However, not

49


all risks can be insured, specific claims may be rejected, and we might not be always able to obtain adequate insurance coverage at reasonable rates.
Marine and War Risks Insurance
We have in force marine hull and machinery and war risks insurance for all of our vessels. Our marine hull and machinery insurance covers risks of particular and general average and actual or constructive total loss from collision, fire, grounding, engine breakdown and other insured named perils up to an agreed amount per vessel. Our war risks insurance covers the risks of particular and general average and actual or constructive total loss from acts of war and civil war, terrorism, piracy, confiscation, seizure, capture, vandalism, sabotage, and other war-related named perils. We have also arranged coverage for increased value for each vessel. Under this increased value coverage, in the event of total loss of a vessel, we will be able to recover amounts in excess of those recoverable under the hull and machinery policy in order to compensate for additional costs associated with replacement of the loss of the vessel. Each vessel is covered up to at least its fair market value at the time of the insurance attachment and subject to a fixed deductible per each single accident or occurrence.
Protection and Indemnity Insurance
Protection and indemnity insurance is provided by mutual protection and indemnity associations, or P&I Associations, and covers our third-party liabilities in connection with our shipping activities. This includes third-party liability and other related expenses of injury or death of crew, passengers and other third parties, loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or "clubs."
Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident. The 13 P&I Associations that comprise the International Group insure approximately 90% of the world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. The International Group's website states that the Pool provides a mechanism for sharing all claims in excess of US$ 10 million up to, currently, approximately US$ 8.2 billion.  As a member of a P&I Association, which is a member of the International Group, we are subject to calls payable to the associations based on our claim records as well as the claim records of all other members of the individual associations and members of the shipping pool of P&I Associations comprising the International Group.
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 permits, licenses and certificates that are 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 the vessel. 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.
LNG Safety

LNG shipping is generally safe relative to other forms of commercial marine transportation. In the past forty years, there have been no significant accidents or cargo spillages involving an LNG carrier, even though over 40,000 LNG voyages have been made during that time.

LNG is non-toxic and non-explosive in its liquid state. It only becomes explosive or inflammable when it is heated, vaporized, and in a confined space within a narrow range of concentrations in the air (5% to 15%). The risks and hazards from an LNG spillage vary depending on the size of the spillage, the environmental conditions, and the site at which the spillage occurs.

Competition

We operate in markets that are highly competitive and based primarily on supply and demand. The process of obtaining new time charters generally involves intensive screening and competitive bidding, and often extends for several months. LNG carrier time charters are generally awarded based upon a variety of factors relating to the vessel operator, including but not limited to price, customer relationships, operating expertise, professional reputation and size, age and condition of the vessel. We believe that the LNG shipping industry is characterized by the significant time required to develop the operating expertise and professional reputation necessary to obtain and retain charterers.

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We expect substantial competition for providing marine transportation services for potential LNG projects from a number of experienced companies, including state-sponsored entities and major energy companies. Many of these competitors have significantly greater financial resources and larger and more versatile fleets than we do. We anticipate that an increasing number of marine transportation companies, including many with strong reputations and extensive resources and experience, will enter the LNG transportation market. This increased competition may cause greater price competition for time charters.

Seasonality

Historically, LNG trade, and therefore charter rates, increased in the winter months and eased in the summer months as demand for LNG in the Northern Hemisphere rose in colder weather and fell in warmer weather.  The LNG industry in general has become less dependent on the seasonal transport of LNG than a decade ago as new uses for LNG have developed, spreading consumption more evenly over the year.  There is a higher seasonal demand during the summer months due to energy requirements for air conditioning in some markets and a pronounced higher seasonal demand during the winter months for heating in other markets.

C.    Organizational Structure

FLEX LNG was initially incorporated under the laws of the British Virgin Islands in 2006 and re-domiciled, by way of continuation, into Bermuda in 2017. We operate principally through our wholly-owned subsidiaries, which are incorporated in Bermuda, the United Kingdom, Norway, the Isle of Man and the Marshall Islands. A list of our subsidiaries is filed herewith as Exhibit 8.1.
D.    Property, Plants and Equipment

We own no properties other than our vessels. For a description of our fleet, see "Item 4. Information on the Company—B. Business Overview—Our Fleet."
We lease office space in Oslo, Norway from Seatankers Management Norway AS, and in London and Glasgow from Frontline Corporate Services Ltd., both related parties.

ITEM 4A.    UNRESOLVED STAFF COMMENTS
None.
ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following presentation of management's discussion and analysis of results of operations and financial condition should be read in conjunction with our audited consolidated financial statements, and related notes, 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," "Item 4. Information on the Company—B. Business Overview," and "Cautionary Statement Regarding Forward-Looking Statements." This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth in "Item 3. Key Information—D. Risk Factors" and elsewhere in this annual report.
The audited consolidated financial statements as of and for the years ended December 31, 2019, 2018 and 2017 have been prepared in accordance with U.S. GAAP. The financial statements are presented in U.S. dollars.
The Company’s business could be materially and adversely affected by the risks, or the public perception of the risks related to the COVID-19 pandemic. The Company is unable to reasonably predict the estimated length or severity of the COVID-19 pandemic on future operating results. Please see "Item 3. Key Information-D. Risk Factors- Outbreaks of epidemic and pandemic of diseases and governmental responses thereto could adversely affect our business.” for further information.
A.    Operating Results
Important Financial and Operational Terms and Concepts

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We use a variety of financial and operational terms and concepts when analyzing our performance. These include the following:
Voyage Operating Revenues. Our time charter revenues are driven primarily by the number of vessels in our fleet, the amount of daily charter hire that our LNG carriers earn under time charters and the number of revenue earning days during which our vessels generate revenues. These factors are, in turn, affected by our decisions relating to vessel acquisitions, the amount of time that our LNG carriers spend dry-docked undergoing repairs, maintenance and upgrade work, the age, condition and specifications of our vessels and the levels of supply and demand in the LNG carrier charter market. Our revenues will also be affected if any of our charterers cancel a time charter or if we agree to renegotiate charter terms during the term of a charter resulting in aggregate revenue reduction. Our time charter arrangements have been contracted in varying rate environments and expire at different times. The Company employs all of its vessels on time charter contracts, which the Company has established to contain a lease since the vessel is a specified asset, the charterer has the right to direct the use of the vessel and there are no substantive substitution rights. All revenue from time charter contracts are recognized as operating leases under ASC 842 Leases, for which we have early adopted from January 1, 2017. We recognize revenues from time charters over the term of the charter as the applicable vessel operates under the charter. Under time charters, revenue is not recognized during days a vessel is off-hire. Revenue is recognized from delivery of the vessel to the charterer, until the end of the time charter period. Under time charters, we are responsible for providing the crewing and other services related to the vessel's operations, the cost of which is included in the daily hire rate, except when off-hire.
Refer to Note 2 in the Financial Statements for additional information related to ASC 606 and ASC 842.
Off-hire (Including Commercial Waiting Time). When a vessel is "off-hire"—or not available for service—the charterer generally is not required to pay the time charter hire rate and we are responsible for all costs. Prolonged off-hire may lead to vessel substitution or termination of a time charter. Our vessels may be out of service, that is, off-hire, for several reasons: scheduled dry-docking, special survey, vessel upgrade or maintenance or inspection, which we refer to as scheduled off-hire; days spent waiting or positioning for a charter, which we refer to as commercial waiting time; and unscheduled repairs, maintenance, operational efficiencies, equipment breakdown, accidents, crewing strikes, certain vessel detentions or similar problems, or our failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew, which we refer to as unscheduled off-hire. We have obtained loss of hire insurance to protect us against loss of income in the event one of our vessels cannot be employed due to damage caused by perils that are covered under the terms of our hull and machinery insurance. Under our loss of hire policies, our insurers generally will pay us the hire rate agreed in the policy in respect of each vessel for each day in excess of 14 days and with a maximum period of 180 days.
Voyage Expenses. Voyage expenses primarily include port and canal charges, bunker (fuel) expenses and agency fees which are paid for by the charterer under our time charter arrangements or by us during periods of off-hire except for commissions, which are always paid for by us. We may incur voyage related expenses when positioning or repositioning vessels before or after the period of a time charter, during periods of commercial waiting time or while off-hire during a period of dry-docking. Voyage expenses can be higher when vessels trade on shorter term charters or in the spot market due to fuel consumption during idling, cool down requirements, commercial waiting time in between charters and positioning and repositioning costs. From time to time, in accordance with industry practice, we pay commissions ranging up to 1.25% of the total daily charter rate under the charters to unaffiliated ship brokers, depending on the number of brokers involved with arranging the charter.
Vessel Operating Expenses. Vessel operating expenses include crew wages and related costs, performance claims, the cost of insurance, expenses for repairs and maintenance, the cost of spares and consumable stores, lubricant costs, statutory and classification expenses, forwarding and communications expenses and other miscellaneous expenses. Vessel operating expenses are paid by the ship-owner under time charters and are recognized as expenses when incurred. We expect that insurance costs, dry-docking and maintenance costs will increase as our vessels age. Factors beyond our control, some of which may affect the shipping industry in general—for instance, developments relating to market premiums for insurance, industry and regulatory requirements and changes in the market price of lubricants due to increases in oil prices—may also cause vessel operating expenses to increase.
Dry-docking. We must periodically dry-dock each of our vessels for inspection, repairs and maintenance and any modifications required to comply with industry certification or governmental requirements. In accordance with industry certification requirements, we have a mandatory obligation to dry-dock our vessels every 60 months. Special survey and dry-docking costs (consisting of direct costs, including shipyard costs, paints and class renewal expense, and peripheral costs, including spare parts, service engineer attendance) are capitalized and depreciated over the period until the next dry-dock. The number of dry-dockings undertaken in a given period and the nature of the work performed determine the level of dry-docking expenditures.

52


Depreciation. We depreciate the cost of our vessels on the basis of two components: a vessel component and a dry-docking component. We depreciate our LNG carriers on a straight-line basis over their remaining useful economic lives. Depreciation is based on the cost of the vessel less its estimated salvage value. We estimate the useful life of the LNG carriers in our Fleet to be 35 years from their initial delivery from the shipyard, consistent with LNG industry practice. Vessel residual value is estimated based on historical market trends and represents management's best estimate of the current selling price assuming the vessels are already of age and condition expected at the end of its useful life. The assumptions made reflect our experience, market conditions and the current practice in the LNG industry; however they required more discretion since there is a lack of historical references in scrap prices of similar types of vessels. The dry-docking component of the vessel’s cost is depreciated over five years (the period within which each vessel is required to be dry-docked). We capitalize the costs associated with the dry-docking and amortize these costs on a straight-line basis over the period to the next expected dry-docking. We have adopted the "built in overhaul" method for when a vessel is newly acquired, or constructed, whereby a proportion of the cost of the vessel is allocated to the components expected to be replaced at the next dry-docking based on the expected costs relating to the next dry-docking.
Interest expense. We incur interest expense on outstanding indebtedness under our existing debt agreements which we include in interest expense. Interest expense depends on our overall level of borrowings and may significantly increase when we take delivery of, acquire or refinance ships. Interest expense may also change with prevailing interest rates, although interest rate swaps or other derivative instruments may reduce the effect of these changes. We also incur financing and legal costs in connection with establishing debt agreements, which are deferred and amortized to interest and finance costs using the effective interest method. We will incur additional interest expense in the future on our outstanding borrowings and under future borrowings. For a description of our existing credit facilities, please see "Item 5. Operating and Financial Review and Prospects —B. Liquidity and Capital Resources—Our Borrowing Activities."
Vessel Useful Lives and Impairment. Vessels are reviewed for impairment quarterly or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, we first compare the undiscounted cash flows expected to be generated by that asset to its carrying value. If the carrying value of the long lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals as considered necessary. Since our inception, no impairment loss was recorded in any of our fleet vessels.
Critical Accounting Estimates and Judgments
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Such estimates and assumptions impact, among others, the following: the amount of uncollectible accounts and accounts receivable, the amount to be paid for certain liabilities, including contingent liabilities, the amount of costs to be capitalized in connection with the construction of our newbuildings and the expected economic life of our vessels. Actual results could differ from those estimates.
Revenue and expense recognition. Our shipping revenues are primarily generated from time charters. In a time charter voyage, the vessel is hired by the charterer for a specified period of time in exchange for consideration which is based on a daily hire rate. Generally, the charterer has the discretion over the ports visited, shipping routes and vessel speed. The contract/charter party generally provides typical warranties regarding the speed and performance of the vessel. The charter party generally has some owner protective restrictions such as that the vessel is sent only to safe ports by the charterer and carries only lawful or nonhazardous cargo. In a time charter contract, we are responsible for all the costs incurred for running the vessel such as crew costs, vessel insurance, repairs and maintenance and lubes. The charterer bears the voyage related costs such as bunker expenses, port charges, canal tools during the hire period. The performance obligations in a time charter contract are satisfied over the term of the contract beginning when the vessel is delivered to the charterer until it is redelivered back to us. The charterer generally pays the charter hire in advance of the upcoming contract period. The time charter contracts are considered operating leases because (i) the vessel is an identifiable asset (ii) we do not have substantive substitution rights and (iii) the charterer has the right to control the use of the vessel during the term of the contract and derives the economic benefits from such use. Time charter revenues are recorded over the term of the charter as a service is provided.
Vessel Impairment. The carrying values of our vessels may not represent their fair market value at any point in time since the market prices of second-hand vessels and the cost of newbuildings tend to fluctuate with changes in charter rates. Historically, both charter rates and vessel values tend to be cyclical. The carrying amounts of vessels that are held and used by us are reviewed for potential impairment quarterly or whenever events or changes in circumstances indicate that the carrying amount of a particular vessel or newbuilding may not be fully recoverable. Such indicators may include depressed charter rates and depressed second-hand vessel values. We assess recoverability of the carrying value of each asset on an individual basis by estimating the future undiscounted cash flows expected to result from the asset. If the future net undiscounted cash flows are less than the carrying

53


value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value. Fair value is estimated based on values achieved for the sale/purchase of similar vessels and appraised valuations.
Vessels and depreciation. Vessels are stated at cost less accumulated depreciation. We depreciate the cost of our vessels on the basis of two components: a vessel component and a dry-docking component. Vessel depreciation is calculated based on cost less estimated residual value, using the straight-line method, over the useful life of each vessel. The useful life of each vessel is deemed to be 35 years. The residual value is calculated by multiplying the lightweight tonnage of the vessel by the market price of scrap per tonne. The market price of scrap per tonne is calculated as the 10-year average, up to the date of delivery of the vessel, across the three main recycling markets (Far East, Indian sub-continent and Bangladesh). Residual values are reviewed annually. The dry-docking component of the vessel’s cost is depreciated over five years (the period within which each vessel is required to be dry-docked). We capitalize the costs associated with the dry-docking and amortize these costs on a straight-line basis over the period to the next expected dry-docking. We have adopted the "built in overhaul" method for when a vessel is newly acquired, or constructed, whereby a proportion of the cost of the vessel is allocated to the components expected to be replaced at the next dry-docking based on the expected costs relating to the next dry-docking.
Implications of Being an Emerging Growth Company
We had less than $1.07 billion in revenue during our last fiscal year, which means that we are an "emerging growth company" as defined in the JOBS Act. As an emerging growth company, we may take advantage of specified reduced public company reporting requirements that are otherwise applicable generally to public companies, including:
•
an exemption from the auditor attestation requirement of management's assessment of the effectiveness of our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and
•
an exemption from compliance with any new requirements adopted by the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and financial statements.
We may choose to take advantage of some or all of these reduced reporting requirements. We may take advantage of these provisions until the end of the fiscal year following the fifth anniversary of the date we first sell our common equity securities pursuant to an effective annual report under the Securities Act, or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if we have more than $1.07 billion in "total annual gross revenues" during our most recently completed fiscal year, if we become a "large accelerated filer" with a public float of more than $700 million, or as of any date on which we have issued more than $1 billion in non-convertible debt over the three-year period prior to such date.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to "opt out" of such extended transition period, and as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
For as long as we take advantage of the reduced reporting obligations, the information that we provide shareholders may not be compatible to information provided by other public companies. See "Item 3. Key Information—D. Risk Factors— We are an "emerging growth company" and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors."
Results of Operations
Year ended December 31, 2019 compared with the year ended December 31, 2018

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Vessel operating revenues
(in thousands of $)
 
2019

 
2018

 
Change

Vessel operating revenues
 
119,967

 
77,209

 
42,758

Vessel operating revenues increased by $42.8 million to $120.0 million for the year ended December 31, 2019 (2018: $77.2 million). The Company took delivery of two vessels in June and August 2019, and had a full year of operation for the four vessels delivered in 2018. For the year ended December 31, 2018 the Company also had two chartered-in vessels employed in the market, which were redelivered in the end of the first quarter of 2018.
Voyage expenses
(in thousands of $)
 
2019

 
2018

 
Change

Voyage expenses
 
(6,284
)
 
(5,177
)
 
(1,107
)
Voyage expenses, which include voyage specific expenses, broker commissions and bunkers consumption, for the year ended December 31, 2019 amounted to $6.3 million compared to $5.2 million for the year ended December 31, 2018. The increase in voyage expenses in 2019 of $1.1 million is primarily due to more vessels being in operation than in 2018.
Vessel operating expenses
(in thousands of $)
 
2019

 
2018

 
Change

Vessel operating expenses own vessels
 
(22,423
)
 
(14,884
)
 
(7,539
)
Vessel operating expenses chartered-in vessels
 
—

 
(6,100
)
 
6,100

Total vessel operating expenses
 
(22,423
)
 
(20,984
)
 
(1,439
)
Vessel operating expenses, including charter hire expense, claim expense and technical operating expenses (such as crewing, insurance, lubes and repairs & maintenance) for the year ended December 31, 2019 amounted to $22.4 million compared to $21.0 million for the year ended December 31, 2018. For the year ended December 31, 2018, vessel operating expenses included $6.1 million in relation to vessels chartered-in compared to $0.0 million for 2019. All chartered-in vessels were redelivered by the end of the first quarter of 2018.
Administrative expenses
(in thousands of $)
 
2019

 
2018

 
Change

Administrative Expenses
 
(7,506
)
 
(4,639
)
 
(2,867
)
Administrative expenses increased by $2.9 million to $7.5 million for the year ended December 31, 2019 (2018: $4.6 million). The increase is mainly due to one-off expenses related to the NYSE listing in June 2019, which includes, legal fees, listing fees and audit fees.
Depreciation
(in thousands of $)
 
2019

 
2018

 
Change

Depreciation
 
(28,747
)
 
(17,412
)
 
(11,335
)
Depreciation expense for the year ended December 31, 2019 was $28.7 million, compared to $17.4 million for the year ended December 31, 2018. The Company took delivery of its first four vessels during 2018 and took delivery of two further vessels in 2019.
Interest income

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(in thousands of $)
 
2019

 
2018

 
Change

Interest income
 
1,073

 
607

 
466

Interest income was $1.1 million for the year ended December 31, 2019 compared to $0.6 million for the year ended December 31, 2018. The increase in interest income is due to increased balances in interest bearing cash deposits.
Interest expense
(in thousands of $)
 
2019

 
2018

 
Change

Interest expense
 
(33,875
)
 
(17,781
)
 
(16,094
)
Interest expense was $33.9 million for the year ended December 31, 2019 compared to $17.8 million for the year ended December 31, 2018. The increase in interest expense is primarily due to the drawdown of two bank tranches of $125 million each under the $250 Million Term Loan Facility, in June and August 2019, and additional debt as a result of the refinancing of the Flex Endeavour and Flex Enterprise through the Hyundai Glovis Sale and Charterback transaction in July 2019.
Write-off of debt issuance costs
(in thousands of $)
 
2019

 
2018

 
Change

Write-off of debt issuance costs
 
(3,388
)
 
—

 
(3,388
)
In the year ended December 31, 2019, the Company wrote off $3.4 million relating to unamortized deferred debt issuance costs due to the prepayment of the $315 Million Term Loan Facility.
Gain/(loss) on derivatives
(in thousands of $)
 
2019

 
2018

 
Change

Gain/(loss) on derivatives
 
(1,555
)
 
—

 
(1,555
)
Gain/(loss) on derivatives was $1.6 million for the year ended December 31, 2019 compared to $0.0 million for the year ended December 31, 2018. In 2019, the Company entered into five interest rate swap transactions swapping floating interest rates to fixed interest rates to reduce the Company's exposure to fluctuations in interest rates, which resulted in an unrealized loss due to a reduction in interest rate levels during the period and thereby change in the estimated fair value of the derivatives.
Other financial items
(in thousands of $)
 
2019

 
2018

 
Change

Other financial items
 
(113
)
 
(54
)
 
(59
)
Other financial items were $0.1 million for the year ended December 31, 2019 compared to $0.1 million for the year ended December 31, 2018. The other financial items mainly consist of currency exchange differences.
Year ended December 31, 2018 compared with the year ended December 31, 2017
Vessel operating revenues
(in thousands of $)
 
2018

 
2017

 
Change

Vessel operating revenues
 
77,209

 
27,329

 
49,880

Vessel operating revenues increased by $49.9 million to $77.2 million for the year ended December 31, 2018 (2017: $27.3 million).  In 2018 the Company took delivery of four vessels, two in January, one in June and one in July. Two of the vessels were operating on short-term time charters in 2018, while the remaining two were operating in the spot market.

56



Voyage expenses
(in thousands of $)
 
2018

 
2017

 
Change

Voyage expenses
 
(5,177
)
 
(6,658
)
 
1,481

Voyage expenses, which include voyage specific expenses, broker commissions and bunkers consumption, for the year ended December 31, 2018 amounted to $5.2 million compared to $6.7 million for the year ended December 31, 2017. The decrease in voyage expenses of $1.5 million is primarily due to better utilization of owned and chartered in vessels during 2018.
Vessel operating expenses
(in thousands of $)
 
2018

 
2017

 
Change

Vessel operating expenses own vessels
 
(14,884
)
 
(74
)
 
(14,810
)
Vessel operating expenses chartered-in vessels
 
(6,100
)
 
(29,800
)
 
23,700

Total vessel operating expenses
 
(20,984
)
 
(29,874
)
 
8,890

Vessel operating expenses, including, charter hire expense, claim expense and technical operating expenses for the year ended December 31, 2018 amounted to $21.0 million compared to $29.9 million for the year ended December 31, 2017. For the year ended December 31, 2018, vessel operating costs include $6.1 million in relation to vessels chartered-in (2017: $29.8 million). All chartered-in vessels were redelivered by the end of the first quarter of 2018.
Administrative expenses
(in thousands of $)
 
2018

 
2017

 
Change

Administrative Expenses
 
(4,639
)
 
(3,409
)
 
(1,230
)
Administrative expenses increased by $1.2 million to $4.6 million for the year ended December 31, 2018 (2017: $3.4 million). 2018 was the first year FLEX LNG was fully operational, and during 2018 six new employees were recruited.
Depreciation
(in thousands of $)
 
2018

 
2017

 
Change

Depreciation
 
(17,412
)
 
(2
)
 
(17,410
)
Depreciation expense for the year ended December 31, 2018 was $17.4 million, compared to $0.0 million for the year ended December 31, 2017. The Company took delivery of its first four vessels during 2018.
Interest income
(in thousands of $)
 
2018

 
2017

 
Change

Interest income
 
607

 
123

 
484

Interest income was $0.6 million for the year ended December 31, 2018 compared to $0.1 million for the year ended December 31, 2017. The increase in interest income is due to increased balances in cash, restricted cash and cash equivalents.
Interest expense
(in thousands of $)
 
2018

 
2017

 
Change

Interest expense
 
(17,781
)
 
(234
)
 
(17,547
)

57


Interest expense was $17.8 million for the year ended December 31, 2018 compared to $0.2 million for the year ended December 31, 2017. The increased interest expense is due to the drawdown of three bank tranches of $105 million each under the $315 Million Term Loan Facility, two in January 2018 and one in June 2018, and the Flex Rainbow Sale and Leaseback in July 2018.
Other financial items
(in thousands of $)
 
2018

 
2017

 
Change

Other financial items
 
(54
)
 
2,334

 
(2,388
)
Other financial items were $0.1 million for the year ended December 31, 2018 compared to $2.3 million for the year ended December 31, 2017. The other financial items mainly consist of currency exchange differences. The $2.3 million in 2017 is a foreign exchange gain due to the settlement of a currency swap of $125 million.
B.    Liquidity and Capital Resources
Liquidity and Cash Needs
We operate in a capital-intensive industry and have financed the purchase of the vessels and newbuildings in our Fleet through a combination of cash generated from operations, equity capital and borrowings under our financing agreements. Payment of amounts outstanding under our debt agreements, and all other commitments that we have entered into are made from the cash available to us.
Cash
As of December 31, 2019, we reported cash, cash equivalents and restricted cash of $129.1 million, which represented an increase of $74.0 million, compared to $55.1 million as of December 31, 2018. The increase is primarily due to positive cash flows from operations, drawdown of the $250 Million Term Loan Facility and increased leverage on the vessels Flex Endeavour and Flex Enterprise following the execution of the Hyundai Glovis Sale and Charterback in July 2019. This was offset by installments payable upon delivery of the newbuildings delivered during the year the scheduled repayment of debt and the payment of dividends in December 2019.
Equity Offerings Impacting our Cash Flow
In February 2017, we completed the First Norwegian Offering of an aggregate of 7,243,478 ordinary shares at a subscription price of NOK 115.00 per share for gross proceeds of NOK 833 million (approximately $100 million, based on the prevailing exchange rate as of February 16, 2017). A portion of the proceeds of the First Norwegian Offering were used to repay certain of our indebtedness.
In March 2017, we issued 7,800,000 of our ordinary shares to Geveran as partial consideration for our acquisition of the Flex Endeavor and the Flex Enterprise, which we purchased from entities related to Geveran through the novation of the newbuilding contracts for the vessels.
In May 2017, we completed the Second Norwegian Offering of an aggregate of 8,947,916 ordinary shares at a subscription price of NOK 120.00 per share for gross proceeds of NOK 1.07 billion (approximately $125 million, based on the prevailing exchange rate as of May 15, 2017).
In June 2017, we completed a Norwegian Offering of 3,797 ordinary shares at a purchase price of NOK 115.00 per share for gross proceeds of approximately NOK 436,735 (approximately $51,633, based on the prevailing exchange rate as of June 6, 2017) to shareholders that were not allocated shares in the 2017 Norwegian Offerings or were residents in a jurisdiction that was not able to participate in the 2017 Norwegian Offerings.
In October 2018, we completed the 2018 Norwegian Offering of an aggregate of 17,293,894 ordinary shares at a purchase price of NOK 142.50 per share for gross proceeds of approximately NOK 2.5 billion (approximately $300 million, based on the prevailing exchange rate as of October 15, 2018).  The net proceeds of the 2018 Norwegian Offering were used to fund the advance payment portion of the purchase price of the October 2018 Newbuildings and for working capital and general corporate purposes. Geveran purchased 5,764,631 shares in the 2018 Norwegian Offering at the subscription price of NOK 142.50 per share.

58


Working Capital Needs
Working capital is equal to current assets less current liabilities, including the current portion of long-term debt.  As of December 31, 2019, we had positive working capital of $86.2 million, as compared to $25.0 million as of December 31, 2018, which is primarily the result of positive cash flows from operations.
Our primary liquidity requirements include payment of operating costs, funding working capital requirements, repayment of bank loans, payment of lease obligations, funding the cash part of our final payments on our newbuildings and maintaining cash reserves against fluctuations in operating cash flows and payment of cash distributions. Sources of short-term liquidity include cash balances, restricted cash balances and receipts from customers. We believe that our cash flows from operations, amounts available for borrowing under our financing agreements and our cash balance will be sufficient to meet our existing liquidity requirements for at least the next 12 months from the date of this annual report. As of April 16, 2020, we have agreed to acquire seven Newbuilding Vessels with contractual delivery dates between the second quarter of 2020 and the second quarter of 2021, for an aggregate purchase price of $1,286 million of which we have already paid $349 million upon entering into the respective agreements in 2018 and the remaining $937 million is due on delivery. We intend to finance the remaining balance with proceeds from the $629 Million Term Loan Facility, additional future financing agreements and our available liquidity.

Our Borrowing Activities
$270 Million Revolving Credit Facility
In March 2017, in connection with our acquisition of the shipbuilding contracts for the Flex Endeavour and the Flex Enterprise, we, through our wholly-owned subsidiary, Flex LNG Fleet Limited, entered into the $270 Million Revolving Credit Facility with Sterna, a company related to Geveran, with a term of three years from the delivery of the first of our Operating Vessels from DSME.
In November 2019, the Company cancelled the $270 million revolving credit facility. The facility was undrawn at the time of cancellation.
$315 Million Term Loan Facility
In December 2017, we, through three of our vessel owning subsidiaries, entered into the $315 Million Term Loan Facility with a syndicate of banks to partially finance the first three vessels in our Fleet, the Flex Endeavour, the Flex Enterprise, and the Flex Ranger, which served as collateral under the facility. In January 2018, the first two loan tranches of $105 million each were drawn in connection with the delivery of the Flex Endeavour and the Flex Enterprise. The third $105 million tranche was drawn in connection with the delivery of the Flex Ranger in June 2018. The facility bore interest at LIBOR plus a margin of 2.85% per annum and had a term of five years from the delivery of the third and final vessel. In July 2019, the outstanding principal under the tranche relating to the vessel Flex Ranger of $99.8 million was prepaid using the proceeds from the $100 Million Facility. In July 2019, the outstanding principal under the tranches for Flex Endeavour and Flex Enterprise of $194.3 million in aggregate were prepaid using the proceeds from the Hyundai Glovis Sale and Charterback.
Flex Rainbow Sale and Leaseback
In July 2018, we, through our wholly-owned subsidiary, Flex LNG Rainbow Ltd., which owned the Flex Rainbow, entered into a sale leaseback transaction for the vessel with a Hong Kong-based lessor for a lease period of ten years. The gross sales price under the lease was $210 million, of which $52.5 million represented advance hire for the ten-year lease period. The agreement includes fixed price purchase options, whereby we have options to re-purchase the vessel at or after the second anniversary of the agreement, and on each anniversary thereafter, until the end of the lease period. The bareboat rate payable under the lease has a fixed element, treated as principal repayment, and a variable element based on LIBOR plus a margin of 3.50% per annum calculated on the outstanding under the lease. The facility requires us to provide additional security, by way of a deposit, as necessary to maintain the fair market value of the vessel at not less than a specified percentage of the principal amount outstanding under the lease. As of December 31, 2019, the net outstanding balance under the lease was $146.4 million (2018: $154.0 million).
$250 Million Term Loan Facility
In April 2019, we, through two of our wholly-owned subsidiaries, entered into the $250 Million Term Loan Facility with a syndicate of banks for the part financing of the two newbuilding, Flex Constellation and Flex Courageous, which serve as

59


collateral for the facility. The first $125 million tranche under the facility was drawn upon the delivery of the Flex Constellation in June 2019 and the second $125 million tranche under the facility was drawn upon the delivery of the Flex Courageous in August 2019. The facility has a term of five years from delivery of the final vessel and bears interest at LIBOR plus a margin of 2.35% per annum. The facility contains financial covenants (as described below) and requires us to provide additional security or prepay an amount of the loan facility as necessary to maintain the fair market value of the vessels securing the loan facility at not less than specified percentages of the principal amount outstanding under the loan facility. As of December 31, 2019, the net outstanding balance under the facility was $242.5 million.
Hyundai Glovis Sale and Charterback
In April 2019, we, through two of our wholly owned subsidiaries, entered into sale and time charter agreements for the vessels Flex Endeavour and Flex Enterprise. The transactions were executed in July 2019, whereby the vessels were sold to Triple H No. 3 Ltd. and Triple H No. 4 Ltd., respectively, for a gross consideration of $210 million per vessel, with a net consideration of $150 million per vessel adjusted for a non-amortizing and non-interest bearing seller’s credit of $60 million per vessel. The vessels have been chartered back from Hyundai Glovis on a time-charter basis to us, through our subsidiaries, for a period of ten years. The agreements include fixed price purchase options, whereby we will have annual options to acquire the vessels during the term of the time-charters. The first option is exercisable on the third anniversary of closing of the transactions and the last option at expiry of the ten-year charter period. At the end of the ten-year charter period, Hyundai Glovis will have the right to sell the vessels back to us for a net consideration of $75 million per vessel, net of the $60 million seller’s credit per vessel. Upon closing of the transactions with Hyundai Glovis, a portion of the proceeds were used to prepay the outstanding aggregate amount of $194.3 million relating to these vessels under our $315 Million Term Loan Facility. As of December 31, 2019, the net outstanding under the lease was $291.5 million.
$100 Million Facility
In July 2019, we, through one of our vessel owning subsidiaries, entered into the $100 Million Facility with a syndicate of banks for the refinancing of the Flex Ranger, which was financed under the $315 Million Term Loan Facility. The $100 Million Facility is split between a $50 million term loan and a $50 million revolving facility. The facility was fully drawn in July 2019 and the proceeds were used to prepay the outstanding balance of $99.8 million relating to the Flex Ranger under the existing $315 Million Term Loan Facility. The facility has a term of five years and bears interest at LIBOR plus a margin of 2.25% per annum. The facility contains financial covenants (as described below) and requires us to provide additional security or prepay an amount of the loan facility as necessary to maintain the fair market value of the vessel securing the loan facility at not less than specified percentages of the principal amount outstanding under the loan facility. As of December 31, 2019, the revolving facility was fully drawn and the total net outstanding balance under the facility was $98.5 million.
$629 Million Term Loan Facility
In November 2019, we received firm commitments from a syndicate of eleven banks and KEXIM, for the financing of five of our Newbuilding Vessels that are scheduled to be delivered to us in 2020 in an amount up to $629 million. The facility agreement was signed in February 2020. The facility is divided into the $250 million Commercial Loan, the $189.1 million KEXIM Guaranteed Loan funded by commercial banks, and the $189.9 million KEXIM Direct Loan. The amount available for drawdown upon delivery of each vessel is limited to the lower of (i) 65% of the fair market value of the relevant vessel and (ii) $125.8 million. The facility includes an accordion option of up to $10 million per vessel subject to acceptable long-term employment and credit approval by the lenders. The Commercial Loan bears interest at LIBOR plus a margin of 2.35% per annum and has a term of five years from delivery of the final vessel. The KEXIM Guaranteed Loan and the KEXIM Direct Loan bears interest at LIBOR plus a margin of 1.20% per annum and 2.25% per annum, respectively. The KEXIM Guaranteed Loan has a term of six years from the delivery of each vessel and the KEXIM Direct Loan has a term of 12 years from the delivery of each vessel, provided however that these loans will mature at the same time as the Commercial Loan if the Commercial Loan has not been refinanced at terms acceptable to the lenders. The facility contains financial covenants (as described below) and requires us to provide additional security or prepay an amount of the loan facility as necessary to maintain the fair market value of the vessels securing the loan facility at not less than specified percentages of the principal amount outstanding under the loan facility.

The financing remains subject satisfaction of customary closing conditions, and is expected to be drawn upon delivery of the relevant vessels from the shipyards.

Loan Covenants
Certain of our financing agreements discussed above, have, among other things, the following financial covenants, as amended or waived, which are tested quarterly, the most stringent of which require us (on a consolidated basis) to maintain:

60


•
a book equity ratio of minimum 0.25 to 1.0;
•
a positive working capital; and
•
minimum liquidity, including undrawn credit lines with a remaining term of at least six months, being the higher of: (i) $25 million; and (ii) an amount equal to five per cent (5%) of our total interest bearing financial indebtedness net of any cash and cash equivalents.
Our financing agreements discussed above have, among other things, restrictive covenants which would restrict our ability to:
(i)
declare, make or pay any 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);
(ii)
pay any interest or repay any principal amount (or capitalized interest) on any debt to any of its shareholders;
(iii)
redeem, repurchase or repay any of its share capital or resolve to do so; or
(iv)
enter into any transaction or arrangement having a similar effect as described in (i) through (iii) above.
Our secured credit facilities may be secured by, among other things:
•
a first priority mortgage over the relevant collateralized vessels;
•
a first priority assignment of earnings, insurances and charters from the mortgaged vessels for the specific facility;
•
a pledge of earnings generated by the mortgaged vessels for the specific facility; and
•
a pledge of the equity interests of each vessel owning subsidiary under the specific facility.
A violation of any of the financial covenants contained in our financing agreements described above may constitute an event of default under the relevant financing agreement, which, unless cured within the grace period set forth under the financing agreement, if applicable, or waived or modified by our lenders, provides our lenders, by notice to the borrowers, with the right to, among other things, cancel the commitments immediately, declare that all or part of the loan, together with accrued interest, and all other amounts accrued or outstanding under the agreement, be immediately due and payable, enforce any or all security under the security documents, and/or exercise any or all of the rights, remedies, powers or discretions granted to the facility agent or finance parties under the finance documents or by any applicable law or regulation or otherwise as a consequence of such event of default.
Furthermore, certain of our financing agreements contain a cross-default provision that may be triggered by a default under one of our other financing agreements. 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 financing agreements, the refusal of any one lender under our financing agreements to grant or extend a waiver could result in certain of our indebtedness being accelerated, even if our other lenders under our financing agreements have waived covenant defaults under the respective agreements. 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 financing agreements 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 financing agreements 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 financing agreements. 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, 2019, we were in compliance with all of the financial covenants contained in our financing agreements.
Cash flow

61


The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated.
 
 
Year ended December 31,
(in thousands of $)
 
2019

 
2018

 
2017

Net cash provided by (used in) operating activities
 
51,526

 
35,714

 
(17,752
)
Net cash (used in) provided by investing activities
 
(291,542
)
 
(584,433
)
 
(77,714
)
Net cash provided by (used in) financing activities
 
313,998

 
593,855

 
103,988

Effect of exchange rate changes on cash
 
19

 
—

 
—

Net increase in cash, cash equivalents and restricted cash
 
74,001

 
45,136

 
8,522

Cash, cash equivalents and restricted cash at beginning of year
 
55,097

 
9,961

 
1,439

Cash, cash equivalents and restricted cash at end of year
 
129,098

 
55,097

 
9,961

Net cash provided by (used in) operating activities
Net cash provided by operating activities increased by $15.8 million to $51.5 million for the year ended December 31, 2019, compared to cash provided of $35.7 million in the same period in 2018. The increase in cash provided during the year ended December 31, 2019 was primarily due to the full year of operation of our first four vessels delivered during 2018 and the delivery of our fifth and sixth vessels in June and August 2019, respectively.
Net cash (used in) provided by investing activities
Net cash used in investing activities decreased by $292.9 million to $291.5 million in the year ended December 31, 2019, compared to cash used of $584.4 million in the same period in 2018. The decrease in cash used was due to delivery of four newbuildings during 2018 compared to two newbuilding deliveries in 2019.
Net cash provided by (used in) financing activities
Net cash provided by financing activities decreased by $279.9 million to $314.0 million in the year ended December 31, 2019, compared to net cash provided of $593.9 million in the same period in 2018. During the year ended December 31, 2019, cash provided by financing activities includes drawdown of $250 million under the $250 Million Term Loan Facility, drawdown of $100 million under the $100 Million Facility, under which the revolving credit facility was subsequently prepaid and the available amount re-drawn, and drawdown of $300 million on execution of the $300 million Hyundai Glovis Sale and Charterback. Cash used in financing activities include prepayment of $294.0 million outstanding under the $315 Million Term Loan Facility, $29.5 million in scheduled repayment of long term debt, $5.0 million in financing costs and $5.4 million in dividends paid.
Net cash provided by financing activities during year ended December 31, 2018 was primarily due to the proceeds received from the $315 Million Term Loan Facility and the Flex Rainbow Sale and Leaseback and proceeds from the 2018 Norwegian Offering, offset by scheduled repayment of long term debt and the repayment of the outstanding amounts under the $270 Million Revolving Credit Facility.
The table below sets forth a summary of our capital expenditures in 2019 and 2018.
 
 
Year ended December 31,
 
(unaudited in thousands of $)
 
2019

 
2018

Flex Ranger and Flex Rainbow
 
(500
)
 
216,627

Flex Endeavour and Flex Enterprise(1)
 
—

 
14,392

Flex Constellation and Flex Courageous
 
287,032

 
—

TBN Flex Aurora and TBN Flex Amber
 
—

 
73,600

TBN Flex Artemis(2), TBN Flex Resolute and TBN Flex Freedom
 
—

 
167,400

TBN Flex Volunteer and TBN Flex Vigilant
 
—

 
108,000

Capitalized costs(3)
 
—

 
3,928

Total
 
286,532

 
583,947


62


(1)
Following the acquisition of Flex Endeavour and Flex Enterprise, such vessels have been valued at cost based on the value of the 7,800,000 consideration shares we issued to Geveran as partial consideration for our acquisition of these two vessels and the $270 Million Revolving Credit Facility.
(2)
Formerly known as Flex Reliance.
(3)
Capitalized costs in 2018 include transaction costs related to the vessels acquired in 2018.
C.    Research and Development, Patents and Licenses, etc.
We have no material patents and do not use any licenses other than ordinary information technology licenses.
We have registered our primary domain at www.flexlng.com
D.    Trend Information
Please see "Item 4. Information on the Company—B. Business Overview—The Liquefied Natural Gas Industry."
E.    Off-Balance Sheet Arrangements
As of December 31, 2019, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital resources.
F.    Tabular Disclosure of Contractual Obligations
We have contractual obligations and commercial commitments for future payments including newbuilding installment payments. The table below summarizes scheduled payments under our contractual obligations as of December 31, 2019.
Contractual obligations as of December 31, 2019:
(In thousands of U.S. dollars)
 
Total

 
Less than 1 year

 
1-3
 years

 
3-5
years

 
More than 5 years

Newbuilding commitments
 
937,000

 
685,000

 
252,000

 
—

 
—

Long-term debt obligations (1)(2)
 
785,917

 
36,259

 
76,566

 
335,041

 
338,051

Interest on floating rate debt (3)
 
114,287

 
22,457

 
41,465

 
31,641

 
18,724

Interest on fixed rate debt
 
132,985

 
17,560

 
32,818

 
29,604

 
53,003

Total
 
1,970,189

 
761,276

 
402,849

 
396,286

 
409,778

(1)
The loan repayments comprise repayments under the Flex Rainbow Sale and Leaseback, the $100 Million Facility, the $250 Million Term Loan Facility and the Hyundai Glovis Sale and Charterback.
(2)
The Long-term debt obligation of $785.9 million is gross, before deduction of debt issuance costs of $7.1 million. Carrying value of long-term debt is $778.8 million.
(3)
Interest on floating rate debt was calculated using the three month USD LIBOR as of December 31, 2019 of 1.9% plus agreed margin and the respective outstanding borrowings as of that date.
G. Safe Harbor
Forward-looking information discussed in this Item 5 includes assumptions, expectations, projections, intentions and beliefs about future events. These statements are intended as "forward-looking statements." We caution that assumptions, expectations, projections, intentions and beliefs about future events may and often do vary from actual results and the differences can be material. Please see "Cautionary Statement Regarding Forward-Looking Statements" in this annual report.


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ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.    Directors and Senior Management
Set forth below are the names, ages and positions of our directors and senior executive officers.
The business address of each of our directors and senior management listed below is Par-La-Ville Place, 14 Par-La-Ville Road, Hamilton, Bermuda.
Name
 
Age
 
Position
David McManus
 
66
 
Director of the Company and Chairman of the Board of Directors
Marius Hermansen
 
41
 
Director of the Company
Ola Lorentzon
 
70
 
Director of the Company
Nikolai Grigoriev
 
46
 
Director of the Company and Chairperson of the Audit Committee
João Saraiva E Silva
 
42
 
Director of the Company
Oystein M. Kalleklev
 
40
 
Chief Executive Officer of Flex LNG Management AS and Principal Executive Officer of FLEX LNG Ltd.
Harald Gurvin
 
45
 
Chief Financial Officer of Flex LNG Management AS and Principal Financial Officer of FLEX LNG Ltd.
Biographical information concerning the directors and our senior executive officers listed above is set forth below.
David McManus has served as a director of the Company since August 2011. Mr. McManus is currently a non-executive director for a number of listed companies, including Hess Corporation, Genel Energy and Costain Group. Mr. McManus has 45 years of technical, commercial and general management experience across all aspects of the international oil and gas business, having held various executive roles at Pioneer Natural Resources, BG Group, ARCO, Ultramar, and Shell. As Chairman of Cape plc, Mr. McManus worked on several global LNG projects such as Sakhalin, Qatargas, and North West Shelf.
Marius Hermansen has served as a director of the Company since December 2015. Mr. Hermansen serves as Chief Operating Officer of the Seatankers Group, a related party. Mr. Hermansen started out his career as a trainee with AP Moller-Maersk and went on to work over 10 years at Fearnleys Shipbrokers. Mr. Hermansen currently serves as a Director and Chairman of Avance Gas Holding Ltd., a Director of Golden Ocean Group Limited and as Chairman of DESS Aquaculture Shipping AS, all which are related parties. Mr. Hermansen was educated at the Norwegian School of Economics (NHH) in Bergen, Norway.
Ola Lorentzon has served a director of the Company since June 2017. Mr. Lorentzon served as Principal Executive Officer of Golden Ocean Group Limited, or GOGL, from 2010 to 2015 and held the role as Chief Executive Officer of Frontline Management AS from 2000 to 2003. From 1986 to 2000, Mr. Lorentzon served as Chief Executive Officer of ICB Shipping. Mr. Lorentzon is also a Director and Chairman of Golden Ocean Group Limited and a Director of Frontline Ltd., both related parties, and Erik Thun AB.
Nikolai Grigoriev has served as a director of the Company since September 2017. From 2008 to 2016, Mr. Grigoriev served as Managing Director, Shipping at Gazprom Marketing & Trading (GMT) in London and Singapore. Prior to GMT, Mr. Grigoriev worked for BG Group and Merrill Lynch in Houston and London in senior LNG shipping, commercial and corporate finance roles. Nikolai holds a B.Sc. in Navigation from Admiral Makarov State Maritime Academy in St. Petersburg, Russia and an MBA from INSEAD in Fontainebleau, France.
João Saraiva e Silva has served as a director of the Company since September 2019. Mr. Saraiva e Silva is an investment professional with the Seatankers Group, a related party. Prior to joining Seatankers, Mr. Saraiva e Silva was responsible for energy investments at L1 Energy from 2013 to 2018, served as Managing Director of Carlyle’s International Energy Partners fund, and was responsible for energy and infrastructure investments at Och-Ziff Capital Management from 2008 to 2011. Prior to Och-Ziff, Mr. Saraiva e Silva spent approximately nine years in the investment banking division of Goldman Sachs advising on M&A and capital markets transactions across the broad energy sector. Mr. Saraiva e Silva has an Economics degree from the Nova School of Business.

Oystein M. Kalleklev joined the Group in October 2017, after serving as Chief Financial Officer of Knutsen NYK Offshore Tankers since 2013 and Chairman of the General Partner of the MLP KNOT Offshore Partners from 2015 to 2017.

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Previous roles include Chief Financial Officer of industrial investment company Umoe Group, Managing Director of Umoe Invest, Partner of investment bank Clarksons Platou and Business Consultant at Accenture. Mr. Kalleklev holds a MSc in Business and Administration from Norwegian School of Economics and a Bachelor in Business and Finance from Heriot-Watt University. Mr. Kalleklev was appointed Chief Executive Officer of Flex LNG Management AS and Principal Executive Officer of FLEX LNG Ltd. in August 2018 and also served as interim Chief Financial Officer until January 2019.
Harald Gurvin joined Flex LNG Management AS as Chief Financial Officer and Principal Financial Officer of FLEX LNG Ltd. in January 2019. He served as Chief Financial Officer of NYSE listed SFL Corporation Ltd. (formerly known as Ship Finance International Limited) (NYSE: SFL) from March 2012. From 2008 until 2012, Mr. Gurvin served as Senior Vice President at SFL Corporation. Prior to joining SFL Corporation in 2006, he spent seven years with the global shipping group of Fortis Bank in Oslo, focusing on shipping and offshore finance. Mr. Gurvin holds a Master of Science degree in Shipping, Trade and Finance from CASS Business School and a Master of Science degree in Marine Engineering and Naval Architecture from the Norwegian University of Science and Technology.
B.    Compensation
Our Board of Directors is responsible for establishing the executive officers' compensation and benefits. Under Bermuda law, compensation of the executive officers is not required to be determined by an independent committee. Our Board of Directors' process for determining our executive management's remuneration aims to link the performance related element of the remuneration (options and bonus) to value creation for shareholders.
The remuneration of the members of the Board of Directors is determined annually by at our General Meeting, on the basis of the Board of Directors' responsibility, expertise, time commitment and the complexity of our operations. Through our remuneration of directors, part of which has historically been in stock, we have encouraged directors to own our ordinary shares. Remuneration is not linked to our financial or operating performance.
During the year ended December 31, 2019, we paid aggregate cash compensation of approximately $0.9 million and an aggregate amount of approximately $0.2 million for pension, social security and retirement benefits to our directors and executive officers. In addition, we recognized stock and share option compensation of approximately $0.4 million in respect of remuneration to the Board of Directors and share options granted to management pursuant to our Share Option Scheme, as discussed below.
The following table sets out the aggregate compensation to our Directors:
Director
 
2019

 
2018

 
2017

David McManus
 
$
100,000

 
$
100,000

 
$
100,000

Marius Hermansen
 
$
40,000

 
$
40,000

 
$
40,000

Ola Lorentzon
 
$
40,000

 
$
40,000

 
$
20,000

Nikolai Grigoriev
 
$
40,000

 
$
40,000

 
$
11,000

João Saraiva E Silva
 
$
12,055

 
$
—

 
$
—

Georgina Sousa (former director)
 
$
—

 
$
9,484

 
$
5,000

Robin Bakken (former director)
 
$
—

 
$
—

 
$
14,000

Total
 
$
232,055

 
$
229,484

 
$
190,000

Share Option Scheme
On September 7, 2018, our Board of Directors approved our Share Option Scheme, which provides for share options to be granted to directors, officers and eligible employees of the Company and its subsidiaries. The Share Option Scheme was designed to align employees with shareholder value creation and to retain persons. Share options granted under our Share Option Scheme are fully paid ordinary shares of par value $0.10. No consideration shall be payable to the Company for the grant of an option. The option shall entitle the option holder to subscribe for shares at a price per share equal to the subscription price at the date the option is exercised. The share option scheme shall terminate on the earlier of the following dates: (a) the date (if any) determined by our Board of Directors to be the date of termination of the scheme; and (b) the tenth anniversary of the Adoption Date, meaning the date on which the scheme is approved by our Board of Directors.
On September 7, 2018, the Company granted 111,000 share options, with an initial exercise price of $14.30 per share, to an officer and employees in accordance with the terms of the Share Option Scheme. The grant date was determined as the date

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of resolution of the grant by the Board of Directors. The options vest equally based on three years of continuous service and have a five year contractual term.
On November 1, 2018, the Company granted 30,000 share options, with an initial exercise price of $17.60 per share, to an officer in accordance with the terms of the Share Option Scheme. The grant date was determined as the date of resolution of the grant by the Board of Directors. The options vest equally based on three years of continuous service and have a five year contractual term.
Details of options to acquire ordinary shares in the Company by our Directors and officers as of April 16, 2020, were as follows:
 
 
Number of options
 
 
 
 
Director or Officer
 
Total

 
Vested

 
Exercise price

 
Expiration Date
Øystein Kalleklev
 
60,000

 
20,000

 
$
14.10

 
September 2024
Harald Gurvin
 
30,000

 
10,000

 
$
17.40

 
November 2024
C.    Board Practices
Our Board of Directors maintains overall responsibility of the Company and its strategy and is entrusted with various tasks including appointment and supervision of our management team and establishment of strategic, accounting, organizational and financial policies. In accordance with our bye-laws the number of directors shall be such number not less than two as our shareholders by Resolution may from time to time determine and each director shall hold office until the next annual general meeting following his election or until his successor is elected. We currently have five directors.
We have established an Audit Committee which is responsible for overseeing the quality and integrity of our financial statements and its accounting, auditing and financial reporting practices, our compliance with legal and regulatory requirements and the independent auditor's qualifications, independence and performance. Our audit committee consists of one independent director, Mr. Nikolai Grigoriev, who our Board of Directors has determined qualifies as an "audit committee financial expert" for purposes of the SEC rules and regulations.
We have not established a nomination committee. Our Board of Directors is responsible for identifying and recommending potential candidates to become board members and recommending directors for appointment to board committees. Shareholders are permitted to identify and recommend potential candidates to become board members, but pursuant to our Bye-Laws, directors are elected by the shareholders in duly convened annual or special general meetings
We have not established a compensation committee. Our Board of Directors is responsible for establishing our executive officers' compensation and benefits. Under Bermuda law, compensation of the executive officers is not required to be determined by an independent committee.
As a foreign private issuer, we are exempt from certain corporate governance requirements of the NYSE that are applicable to U.S. listed companies because we follow our home country (Bermuda) practice, which is permitted under the NYSE's rules. For a listing and further discussion of how our corporate governance practices differ from those required of U.S. companies listed on the NYSE, please see "Item 16G. Corporate Governance".
D.    Employees
As of December 31, 2019, we employed eight people through our subsidiaries Flex LNG Management Limited and Flex LNG Management AS.
E.    Share Ownership
The table below shows, in relation to each of our directors and executive officers, the total number of ordinary shares beneficially owned as of April 16, 2020.

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Name
 
Ordinary
 Shares(1)
 
Percentage
of Ordinary
Shares
Outstanding
David McManus
 
92,519

 
*
Marius Hermansen
 
7,182

 
*
Ola Lorentzon
 
3,173

 
*
Nikolai Grigoriev
 
24,421

 
*
Oystein Kalleklev
 
40,000

 
*
Harald Gurvin
 
15,000

 
*
* Less than 1% of our outstanding shares.
(1)
Not including options to purchase ordinary shares.

ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.    Major Shareholders
The following table sets forth the beneficial ownership of our ordinary shares, par value $0.10 per share, as of April 16, 2020 by beneficial owners of 5% or more of the ordinary shares. All of our issued ordinary shares have equal voting rights and are equally entitled to dividends.
 
 
Ordinary Shares
Beneficially Owned
Name
 
Number
 
Percentage(1)
Geveran Trading Co. Ltd. (2)
 
24,678,811

 
45.6
%
(1)
Calculated based on 54,110,584 ordinary shares outstanding as of April 16, 2020.
(2)
Geveran is a Cyprus holding company, indirectly controlled by trusts established by Mr. John Fredriksen for the benefit of his immediate family. Mr. Fredriksen disclaims beneficial ownership of the 24,678,811 ordinary shares, except to the extent of his voting and dispositive interests in such ordinary shares and Mr. Fredriksen has no pecuniary interest in such shares.
In the past three years, there has been a significant change in Geveran's percentage ownership of the Company. Please see "Item 4. Information on the Company-A. History and Development of the Company-Share Issuances and Financing Transactions."
B.    Related Party Transactions
General Management Agreements
We have an administrative services agreement with Frontline Management under which it provides us with certain administrative support services, for which we pay our allocation of the actual costs they incur on our behalf, plus a margin. In the year ended December 31, 2019, we paid Frontline Management $0.5 million for these services (2018: $0.7 million).
We also have an agreement with Seatankers under which it provides us with certain advisory and support services, for which we pay our allocation of the actual costs they incur on our behalf, plus a margin. In the year ended December 31, 2019, we paid Seatankers $0.5 million for such services (2018: $0.6 million).
Financing Arrangements

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On March 7, 2017, we, though our wholly-owned subsidiary, Flex LNG Fleet Limited, entered into the $270 Million Revolving Credit Facility with Sterna, a company related to Geveran. In November 2019, the Company canceled this facility. For a description of the $270 Million revolving Credit Facility with Sterna, please see "Item. 5 Operating and Financial Review and Prospects— B. Liquidity and Capital Resources."
Vessel Acquisitions
Our agreements to acquire Flex Enterprise, Flex Endeavour, Flex Constellation, Flex Courageous, Flex Aurora, Flex Amber and the October 2018 Newbuildings were all with counterparties that are related to Geveran. The purchase price for these vessels was negotiated based on the parties' assessment of the construction cost for similar types of vessels at the time these agreements were entered into, and was supported by fairness opinions obtained from independent financial advisers. For a description of these transactions, please see "Item 4. Information on the Company-B. Business Overview-Fleet Development."
Newbuilding Supervision
We received newbuilding supervision services from Frontline Management for two of our vessels that were under construction at SHI, the Flex Ranger and the Flex Rainbow, and two of our vessels that were under construction at DSME, the Flex Enterprise and Flex Endeavour. In consideration for these services, we paid Frontline Management a monthly fee of $115,745 for each of our vessels under construction. These agreements terminated on the last day of the month in which the respective vessel was delivered to us. Since all of the vessels delivered during 2019 and the newbuildings to be delivered in 2020 and 2021, are on a Norwegian Sales Form basis there were no fees paid for these services for the year ended December 31, 2019 (2018: $1.5 million).
Technical Management and Support Services
We receive technical management supervision and other support services from Frontline Management for our Operating Vessels. These services include technical supervision, purchase of goods and services within the ordinary course of business, insurances and other services relating to our Operating Vessels. Frontline Management subcontracts these services to Frontline Management AS or other associated companies from time to time. Frontline Management provides quarterly invoices for services rendered and in addition it receives a monthly payment of $2,772 for each Operating Vessel. Each of the parties may terminate the contract on three months' notice. The fee is subject to annual review. In the year ended December 31, 2019, we paid Frontline Management $0.5 million for such services (2018: $0.1 million).
In October 2019, Flex LNG Fleet Management AS, a related party owned by Frontline Ltd., received a document of compliance under the ISM Code, qualifying it for technical ship management services. The technical ship management for five of our six Operating Vessels was transferred to Flex LNG Fleet Management AS between November 2019 and March 2020, with the remaining vessel scheduled to be transferred during 2020. Flex LNG Fleet Management AS will also be responsible for the technical ship management of our seven Newbuilding Vessels. Under the agreements between Flex LNG Fleet Management AS and our vessel owning subsidiaries, Flex LNG Fleet Management AS is paid a fixed fee of $359,000 per vessel per annum for the provision of technical management services for each of our vessels in operation. The fee is subject to annual review. During the year ended December 31, 2019, we paid $0.2 million to Flex LNG Fleet Management AS for these services.
C.    Interest of Experts and Counsel
Not applicable.
ITEM 8.    FINANCIAL INFORMATION
A.    Consolidated Statements and other Financial Information
Please see the section of this annual report on Form 20-F entitled "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

68


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
Holders of ordinary shares are entitled to receive dividend and distribution payments, pro rata based on the number of ordinary shares held, when, as and if declared by the Board, in its sole discretion. Any future dividends declared will be at the discretion of the Board and will depend upon our financial condition, earnings and other factors.
As a Bermuda exempted company, we are subject to Bermuda law relating to the payment of dividends. We may not pay any dividends if, at the time the dividend is declared or at the time the dividend is paid, there are reasonable grounds for believing that, after giving effect to that payment;
•
we will not be able to pay our liabilities as they fall due; or
•
the realizable value of our assets, is less than our liabilities.
In addition, since we are a holding company with no material assets, and conduct our operations through subsidiaries, our ability to pay any dividends to shareholders will depend on our subsidiaries' distributing to us their earnings and cash flow. Some of our loan agreements currently limit or prohibit our subsidiaries' ability to make distributions to us and our ability to make distributions to our shareholders.
We can give no assurance that dividends will be declared and paid in the future or the amount of such dividends if declared and paid.
B.    Significant Changes
Not applicable.
ITEM 9.    THE OFFER AND LISTING
A.    Offer and Listing Details.
Share History and Markets
Our ordinary shares currently trade on the OSE and the NYSE under the symbol "FLNG". See "Item 10. Additional Information-A. Share Capital."

B.    Plan of Distribution
Not applicable.
C.    Markets.
Our ordinary shares currently trade on the OSE and the NYSE, both under the symbol "FLNG". There is no assurance that an active and liquid trading market for our ordinary shares will be sustained in the United States or that we will continue to meet NYSE's continued listing requirements.

D.    Selling Shareholders
Not applicable.
E.    Dilution
Not applicable.
F.    Expenses of the Issue

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Not applicable.

ITEM 10.    ADDITIONAL INFORMATION
A.    Share Capital
This section summarizes our share capital and the material provisions of our Memorandum of Continuance and Bye-Laws, including the rights of the holders of our shares. The description is only a summary and does not describe everything contained in our Memorandum of Continuance and Bye-Laws, which are filed as an exhibit hereto.
Issued and Authorized Capitalization
On March 7, 2019, we effected a 1-for-10 reverse stock split of our then-outstanding ordinary shares. The reverse stock split reduced the number of our issued and outstanding ordinary shares from 541,043,903 shares to 54,103,993 shares and affected all issued and outstanding ordinary shares. The number of our authorized ordinary shares was consequently reduced from 100,000,000,000 to 10,000,000,000 and the par value increased from $0.01 per share to $0.10 per share. The terms of our ordinary shares were not affected by the reverse stock split.  No fractional shares were issued in connection with the reverse stock split. Shareholders of record who would have otherwise been entitled to receive a fractional share as a result of the reverse stock split received a cash payment in lieu thereof.
Our Share History
Please refer to "Item 4. Information on the Company."
Treasury Shares
As of April 16, 2020, we do not have any treasury shares.
B.    Memorandum of Continuance
The description of our Memorandum of Continuance and Bye-Laws is incorporated by reference to our registration statement on Form 20-F, as amended, which was filed with the SEC on May 28, 2019, or the 20-F Registration Statement. The Company’s Memorandum of Continuance and Bye-Laws were filed as Exhibit 1.1 and 1.2 to the 20-F Registration Statement and are hereby incorporated by reference into this annual report.

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 that are to be performed in whole or in part after the date of this annual report. Other than as set forth above, we have not entered into any material contracts outside the ordinary course of business other than those described in "Item 4. Information on the Company" and in "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Our Borrowing Activities" or elsewhere in this annual report, which are incorporated herein by reference.
D.    Exchange Controls
The Bermuda Monetary Authority, or the BMA, must give permission for all issuances and transfers of securities of a Bermuda exempted company like ours, unless the proposed transaction is exempted by the BMA's written general permissions. We have received general permission from the BMA to issue any unissued ordinary shares and for the free transferability of our ordinary shares as long as our ordinary shares are listed on an "appointed stock exchange". Our ordinary shares are listed on the OSE and the NYSE, each of which is an "appointed stock exchange". Our ordinary shares may therefore be freely transferred among persons who are residents and non-residents of Bermuda.
Although we are incorporated in Bermuda, we are classified as a non-resident of Bermuda for exchange control purposes by the BMA. Other than transferring Bermuda Dollars out of Bermuda, there are no restrictions on our ability to transfer funds into and out of Bermuda or to pay dividends to U.S. residents who are holders of ordinary shares or other non-residents of Bermuda who are holders of our ordinary shares in currency other than Bermuda Dollars.

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E.    Taxation
U.S. Federal Income Tax Considerations
The following discussion summarizes the material U.S. federal income tax consequences and certain non-U.S. tax consequences to U.S. Holders and Non-U.S. Holders, each as defined below, of the acquisition, ownership and disposition of our ordinary shares received pursuant to this annual report, and of certain U.S. federal income tax consequences to our Company. This summary does not purport to deal with all aspects of U.S. federal income taxation that may be relevant to an investor's decision to purchase our ordinary shares, or any tax consequences arising under the laws of any state, locality or foreign jurisdiction. This summary is not intended to be applicable to all categories of investors, such as dealers in securities, banks, thrifts or other financial institutions, insurance companies, regulated investment companies, tax-exempt organizations, U.S. expatriates, persons that hold the ordinary shares as part of a straddle, wash sale or conversion transaction, persons who own, directly or constructively, 10% or more of our outstanding stock, persons deemed to sell the ordinary shares under the constructive sale provisions of the U.S. Internal Revenue Code of 1986, as amended, or the Code, persons whose "functional currency" is other than the U.S. dollar, or persons required to recognize income for U.S. federal income tax purposes no later than when such income is reported on an "applicable financial statement", each of which may be subject to special rules. This discussion also does not describe all of the tax consequences that may be relevant to an investor, including the alternative minimum tax, the "base erosion and anti-avoidance" tax or the unearned income Medicare contribution tax. In addition, this discussion is limited to persons who hold ordinary shares as "capital assets" (generally, property held for investment) within the meaning of Code Section 1221.
If an entity treated as a partnership for U.S. federal income tax purposes holds the ordinary shares, the U.S. federal income tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. Partners of partnerships holding the ordinary shares are encouraged to consult their own tax advisors.
In the opinion of Seward & Kissel LLP, our U.S. counsel, the following are the material U.S. federal income tax consequences to us of our activities and to U.S. Holders and Non-U.S. Holders, each as defined below, of our ordinary shares.  Seward & Kissel LLP has assumed that the Company will be operated as described herein.  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, each of which as is in effect as of the date hereof and all of which are subject to change, possibly with retroactive effect.  Except as otherwise noted, this discussion is based on the assumption, as currently expected, that we will not maintain an office or other fixed place of business within the United States.  References in the following discussion to "we" and "us" are to FLEX LNG Ltd. and its subsidiaries on a consolidated basis.
U.S. Taxation of our Company
Shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States will be considered to be 50% derived from sources within the United States. Shipping income attributable to transportation that both begins and ends in the United States will be considered to be 100% derived from sources within the United States. We are not permitted by law to engage in transportation that gives rise to 100% U.S. source income.
Shipping income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from sources outside of the United States. Shipping income derived from sources outside of the United States will not be subject to U.S. federal income tax.
Unless exempt from U.S. federal income tax under section 883 of the Code, we will be subject to U.S. federal income tax, in the manner discussed below, to the extent our shipping income is derived from sources within the United States.
Application of Section 883 of the Code
Under section 883 of the Code and the Treasury Regulations promulgated thereunder, we, and each of our subsidiaries, will be exempt from U.S. federal income taxation on our respective U.S. source shipping income if, in addition to satisfying certain substantiation and reporting requirements, both of the following conditions are met:
•
we and each subsidiary are organized in a "qualified foreign country," defined as a country that grants an equivalent exemption from tax to corporations organized in the United States in respect of the shipping income for which exemption is being claimed under section 883 of the Code; this is also known as the "Country of Organization Requirement"; and
•
either

71


▪
more than 50% of the value of our stock is treated as owned, directly or indirectly, by individuals who are "residents" of qualified foreign countries; this is also known as the "Ownership Requirement"; or
▪
our stock is "primarily and regularly traded on an established securities market" in the United States or any qualified foreign country; this is also known as the "Publicly-Traded Requirement."
The U.S. Treasury Department has recognized (i) Bermuda, our country of incorporation and at least one of our subsidiaries, and (ii) the Republic of the Marshall Islands, the country of incorporation of certain of our vessel-owning subsidiaries that has earned shipping income from sources within the United States as qualified foreign countries.  Accordingly, we and each such subsidiary satisfy the Country of Organization Requirement.
Due to the public nature of our shareholdings, we do not believe that we will be able to substantiate that we satisfy the Ownership Requirement. However, as described below, we believe that we may be able to satisfy the Publicly-Traded Requirement.
The Treasury Regulations under section 883 of the Code provide that a foreign corporation will meet the Publicly-Traded Requirement if one or more classes of its stock representing, in the aggregate, more than 50% of the combined voting power and total value of the stock of the corporation is "primarily and regularly traded on an established securities market." Our ordinary shares represent more than 50% of the combined voting power and total value of our stock.
A class of stock will be considered to be "primarily traded" on an "established securities market" if the number of shares of each class of such stock that is traded during the taxable year on all "established securities markets" in that country exceeds the number of shares in each such class that are traded during that year on "established securities markets" in any other single country. Our stock is currently traded on the OSE and on the NYSE. Our ordinary shares are considered to be "primarily traded" on the OSE, an "established securities market" for purposes of Code section 883.
Under the Treasury Regulations, a class of stock will be considered to be "regularly traded" on an "established securities market" if one or more classes of stock of the corporation representing more than 50% of the total combined voting power of all classes of stock entitled to vote and of the total value of the stock of the corporation are listed on such market during the taxable year. Since our ordinary shares, which constitute more than 50% of the total combined voting power and total value of our stock, are listed on the OSE and the NYSE, we expect to satisfy the Listing Requirement.
The Treasury Regulations further require that with respect to each class of stock relied upon to meet the Listing Requirement: (i) 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; this is also known as the "Trading Frequency Test"; and (ii) the aggregate number of shares of such class of stock traded on such market is at least 10% of the average number of shares of such class of stock outstanding during such year, or as appropriately adjusted in the case of a short taxable year; this is also known as the "Trading Volume Test."
Our ordinary shares will satisfy the Trading Frequency Test and the Trading Volume Test.  Even if this were not the case, the Treasury Regulations provide that the Trading Frequency Test and the Trading Volume Test will be deemed satisfied by a class of stock if such class of stock is traded on an "established securities market" in the United States and such class of stock is regularly quoted by dealers making a market in such stock.
Notwithstanding the foregoing, the Treasury Regulations provide that our ordinary 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 outstanding ordinary shares, by vote and value, are owned, for more than half the days of the taxable year, by persons who each own, directly or indirectly, 5% or more of the vote and value of the outstanding ordinary shares; this is also known as the "5% Override Rule." The 5% Override Rule will not apply, however, if in respect of each category of shipping income for which exemption is being claimed, we can establish that individual residents of qualified foreign countries, or "Qualified Shareholders," own sufficient ordinary shares to preclude non-Qualified Shareholders from owning (excluding, for this purpose, any share of stock treated as also owned by a Qualified Shareholder through the application of constructive ownership rules) 50% or more of the total value of our ordinary shares for more than half the number of days during the taxable year; this is also known as the "5% Override Exception."
We believe we will satisfy the Publicly-Traded Test for the 2019 taxable year and will not be subject to the 5% Override Rule, and we intend to take that position on our 2019 U.S. federal income tax returns. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption and thereby become subject to U.S. federal income tax on our U.S. source income. For example, there is a risk that we could no longer qualify for Section 883 exemption for a particular taxable year if one or more 5% Shareholders were to own 50% or more of our outstanding ordinary shares on more than half the days of the taxable year. Under these circumstances, we would be subject to the 5% Override Rule and we would not

72


qualify for the Section 883 exemption unless we could establish that our shareholding during the taxable year was such that non-qualified 5% Shareholders did not own 50% or more of our ordinary shares on more than half the days of the taxable year. Under the Treasury Regulations, we would have to satisfy certain substantiation requirements regarding the identity of our shareholders. These requirements are onerous and there is no assurance that we would be able to satisfy them. We can give no assurances regarding our or any of our subsidiaries' qualification for the exemption under Section 883 of the Code.
Taxation in Absence of Exemption Under Section 883 of the Code
To the extent the benefits of section 883 of the Code are unavailable with respect to any item of U.S. source shipping income earned by us or by our subsidiaries, and our U.S. source shipping income is not considered effectively connected with the conduct of a U.S. trade or business, such U.S. source shipping income would be subject to a 4% U.S. federal income tax imposed by section 887 of the Code on a gross basis, without benefit of deductions. 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, to the extent not considered to be "effectively connected" with the conduct of a U.S. trade or business, would never exceed 2% of the gross amount of such shipping income.
Gain on Sale of Vessels
If we and our subsidiaries qualify for exemption from tax under section 883 of the Code in respect of our U.S. source shipping income, the gain on the sale of any vessel earning such U.S. source shipping income should likewise be exempt from U.S. federal income tax. Even if we and our subsidiaries are unable to qualify for exemption from tax under section 883 of the Code and we or any of our subsidiaries, as the seller of such vessel, are considered to be engaged in the conduct of a U.S. trade or business, gain on the sale of such vessel would not be subject to U.S. federal income tax provided the sale is considered to occur outside of the United States under U.S. federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. If the sale is considered to occur within the United States, any gain on such sale may be subject to U.S. federal income tax as "effectively connected" income at a rate of up to 44.7%. To the extent circumstances permit, we intend to structure sales of our vessels in such a manner, including effecting the sale and delivery of vessels outside of the United States, so as to not give rise to "effectively connected" income.'
U.S. Federal Income Tax Consequences to U.S. Holders of Our Ordinary Shares
A "U.S. Holder" is a beneficial owner of ordinary shares that is: (1) an individual citizen or resident alien of the United States, (2) a corporation or other entity that is taxable as a corporation, created or organized under the laws of the United States or any state or political subdivision thereof (including the District of Columbia), (3) an estate, the income of which is subject to U.S. federal income taxation regardless of its source, and (4) a trust, if (i) a U.S. court can exercise primary supervision over the administration of such trust and one or more U.S. persons has the authority to control all substantial decisions of the trust or (ii) the trust has in effect a valid election to be treated as a United States person for U.S. federal income tax purposes.
Taxation of Distributions on Ordinary Shares
Subject to the discussion below under "Passive Foreign Investment Company Status and Significant Tax Consequences," distributions, if any, paid on our ordinary shares generally will be includable in a U.S. Holder's income as dividend income to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will be treated first as a non-taxable return of capital to the extent of the U.S. Holder's tax basis in its ordinary shares on a dollar-for-dollar basis and thereafter as capital gain. Such distributions will generally not be eligible for the dividends-received deduction with respect to corporate U.S. Holders. A noncorporate U.S. Holder may qualify for taxation at preferential rates, provided that such U.S. Holder meets certain holding period and other requirements and we do not constitute a passive foreign investment company, as described below, for the taxable year of the distribution or the immediately preceding year. Dividends paid on our ordinary shares will be income from sources outside the United States and will generally constitute "passive category income" or, in the case of certain U.S. Holders, "general category income" for U.S. foreign tax credit limitation purposes.
Amounts taxable as dividends generally will be treated as passive income from sources outside the U.S. However, if (a) the Company is 50% or more owned, by vote or value, by U.S. persons and (b) at least 10% of the Company's earnings and profits are attributable to sources within the U.S., then for foreign tax credit purposes, a portion of its dividends would be treated as derived from sources within the U.S. With respect to any dividend paid for any taxable year, the U.S. source ratio of our dividends for foreign tax credit purposes would be equal to the portion of the Company's earnings and profits from sources within the U.S. for such taxable year divided by the total amount of Company's earnings and profits for such taxable year. The rules related to

73


U.S. foreign tax credits are complex and U.S. Holders should consult their tax advisors to determine whether and to what extent a credit would be available.
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 basis (or fair market value in certain circumstances) or dividends received within one-year period that, in the aggregate, equal or exceed 20% of a shareholder's adjusted tax basis (or fair market value upon the shareholder's election) in an ordinary share. If the Company pays an "extraordinary dividend" on its ordinary shares that is treated as "qualified dividend income" then any loss derived by a non-corporate U.S. Holder from the sale or exchange of such ordinary shares will be treated as long-term capital loss to the extent of such dividend.
Dividends paid in currency other than U.S. dollars will be generally included in the income of U.S. Holders at the U.S. dollar amount of the dividend (including any non-U.S. taxes withheld therefrom), based upon the exchange rate in effect on the date of the distribution. In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However an individual whose realized foreign exchange gain does not exceed U.S. $200 will not recognize that gain, to the extent that there are not expenses associated with the transaction that meet the requirement for deductibility as a trade or business expense (other than travel expenses in connection with a business trip or as an expense for the production of income).
Sale, Exchange or Other Disposition of Ordinary Shares
Subject to the discussion below under "Passive Foreign Investment Company Status and Significant Tax Consequences," upon the sale, exchange or other taxable disposition of ordinary shares, a U.S. Holder generally will recognize capital gain or capital loss equal to the difference between the amount realized on such sale or exchange and such holder's adjusted tax basis in such ordinary shares. U.S. Holders are encouraged to consult their tax advisors regarding the treatment of capital gains (which may be taxed at lower rates than ordinary income for U.S. Holders who are individuals, trusts or estates) and capital losses (the deductibility of which is subject to limitations). A U.S. Holder's gain or loss will generally be treated (subject to certain exceptions) as gain or loss from sources within the United States for U.S. foreign tax credit limitation purposes.
In the case of any proceeds paid in foreign currency to a U.S. Holder in connection with the sale, exchange or other taxable disposition of the ordinary shares that is not converted by the recipient into U.S. dollars on the settlement date (in the case of a cash method taxpayer or an accrual method taxpayer that elects to use the settlement date) or trade date (in the case of an accrual method taxpayer), a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the settlement date or trade date, respectively. Any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However, an individual whose realized foreign exchange gain does not exceed U.S. $200 will not recognize that gain, to the extent that there are not expenses associated with the transaction that meet the requirement for deductibility as a trade or business expense (other than travel expenses in connection with a business trip or as an expense for the production of income).
Passive Foreign Investment Company Status and Significant Tax Consequences
Notwithstanding the above rules regarding distributions with respect to and dispositions of the ordinary shares, special rules may apply to U.S. Holders (or, in some cases, U.S. persons who are treated as owning our ordinary shares under constructive ownership rules) if we are treated as a "passive foreign investment company," or a PFIC, for U.S. federal income tax purposes.  We will be a PFIC if either:
•
at least 75% of our gross income in a taxable year is "passive income"; or
•
at least 50% of our assets in a taxable year (based on an average of the quarterly values of the assets) are held for the production of, or produce, "passive income."
For purposes of determining whether we are a PFIC, we will be treated as earning and owning our proportionate share of the income and assets, respectively, of any of our subsidiary corporations in which we own 25% or more of the value of the subsidiary's stock. To date, our subsidiaries and we have derived most of our income from time and voyage charters, and we expect to continue to do so. This income should be treated as services income, which is not "passive income" for PFIC purposes. We believe there is substantial legal authority supporting our position consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes.

74


Based on our past, current and projected methods of operation we do not believe that we were, are or will be a PFIC for any taxable year. Our U.S. counsel, Seward & Kissel LLP, is of the view that the income our subsidiaries or we earn from certain of time and voyage charters should not constitute passive income for purposes of determining whether we are a PFIC. Moreover, we have not sought, and we do not expect to seek, a ruling from the IRS on this matter. As a result, the IRS or a court could disagree with our position. In addition, there can be no assurance that we will not become a PFIC if our operations change in the future.
If we become a PFIC (and regardless of whether we remain a PFIC), each U.S. Holder who owns or is treated as owning our ordinary shares during any period in which we are so classified, would generally be subject to U.S. federal income tax, at the then highest applicable income tax rates on ordinary income, plus interest, upon certain "excess distributions" and upon dispositions of such ordinary shares (including, under certain circumstances, a disposition pursuant to an otherwise tax free reorganization) as if the distribution or gain had been recognized ratably over the U.S. Holder's entire holding period of the ordinary shares. An "excess distribution" generally includes dividends or other distributions received from a PFIC in any taxable year of a U.S. Holder to the extent that the amount of those distributions exceeds 125% of the average annual distributions made by the PFIC during a specified base period. The tax at ordinary rates and interest resulting from an excess distribution would not be imposed on a U.S. Holder of our ordinary shares if the U.S. Holder makes a "mark-to-market" election or "qualified electing fund" election, as discussed below.
If we become a PFIC and, provided that, as is currently the case, our ordinary shares are treated as "marketable stock," a U.S. Holder may make a "mark-to-market" election with respect to our ordinary shares. Under this election, any excess of the fair market value of the ordinary shares at the close of any tax year over the U.S. Holder's adjusted tax basis in the ordinary shares is included in the U.S. Holder's income as ordinary income. In addition, the excess, if any, of the U.S. Holder's adjusted tax basis at the close of any taxable year over the fair market value of the ordinary shares is deductible in an amount equal to the lesser of the amount of such excess or the net "mark-to-market" gains that the U.S. Holder included in income in previous years. If a U.S. Holder makes a "mark-to-market" election after the beginning of its holding period of our ordinary shares, the U.S. Holder does not avoid the PFIC rules described above with respect to the inclusion of ordinary income, and the imposition of interest thereon, attributable to periods before the election.
In some circumstances, a shareholder in a PFIC may avoid the unfavorable consequences of the PFIC rules by making a "qualified electing fund" election. However, a U.S. Holder cannot make a "qualified electing fund" election with respect to us unless such U.S. Holder complies with certain reporting requirements. We do not intend to provide the information necessary to meet such reporting requirements.
In addition to the above consequences, if we were to be treated as a PFIC for any taxable year for which a U.S. Holder holds our ordinary shares, such U.S. Holder may be required to file IRS form 8621 with the IRS for that year with respect to such U.S. Holder's ordinary shares.
You should consult your tax advisors regarding the application of the PFIC rules to your investment in our ordinary shares and the elections discussed above.
U.S. Federal Income Tax Consequences to Non-U.S. Holders
For purposes of this discussion, a non-U.S. holder is a beneficial owner of our ordinary shares that is neither a U.S. holder nor a partnership (or any other entity taxed as a partnership for U.S. federal income tax purposes).
A non-U.S. holder will generally not be subject to U.S. federal income tax on dividends paid in respect of the ordinary shares or on gains recognized in connection with the sale or other disposition of the ordinary shares, provided, in each case, that such dividends or gains are not effectively connected with the non-U.S. holder's conduct of a U.S. trade or business. However, even if not engaged in a U.S. trader or business, individual non-U.S. holders may be subject to tax on gain resulting from the disposition of our ordinary shares if they are present in the U.S. for 183 days or more during the taxable year in which our ordinary shares are disposed and/or meet certain other requirements.
Information Reporting and Backup Withholding
Under certain circumstances, the Code requires "information reporting" annually to the IRS, and "backup withholding" with respect to certain payments made on or with respect to the ordinary shares. Certain U.S. Holders are exempt from backup withholding and information reporting, including corporations, tax-exempt organizations, qualified pension and profit sharing trusts, and individual retirement accounts in each case that provide a properly completed IRS Form W-9. Backup withholding will apply to a non-exempt U.S. Holder if such U.S. Holder (1) fails to furnish its taxpayer identification number, or TIN, which, for an individual would be his or her social security number, (2) furnishes an incorrect TIN, (3) is notified by the IRS that it has failed

75


to properly report payments of interest and dividends, or (4) under certain circumstances, fails to certify, under penalties of perjury, that it has furnished a correct TIN and has not been notified by the IRS that it is subject to backup withholding for failure to report interest and dividend payments. Non-U.S. Holders that do not provide a properly completed version of IRS Form W-8 (e.g., IRS Form W-8BEN-E, IRS Form W-8BEN, IRS Form W-8EXP, IRS Form W-8ECI, or IRS Form W-8IMY) will not be subject to this backup withholding.
Backup withholding is not an additional tax. Rather, the United States federal income tax liability of persons subject to backup withholding will be offset by the amount of tax withheld. If backup withholding results in an overpayment of United States federal income tax, a refund or credit may be obtained from the IRS, provided that certain required information is timely furnished.
Certain Non-U.S. Tax Considerations
Bermuda Taxation
Bermuda currently imposes no tax (including a tax in the nature of an income, estate, duty, inheritance, capital transfer or withholding tax) on profits, income, capital gains or appreciations derived by us, or dividends or other distributions paid by us to shareholders of our ordinary shares. Bermuda has undertaken not to impose any such Bermuda taxes on shareholders of our ordinary shares prior to the year 2035 except in so far as such tax applies to persons ordinarily resident in Bermuda.
The Minister of Finance in Bermuda has granted the Company a tax exempt status until March 31, 2035, under which no income taxes or other taxes (other than duty on goods imported into Bermuda and payroll tax in respect of any Bermuda-resident employees) are payable by the Company in Bermuda. If the Minister of Finance in Bermuda does not grant a new exemption or extend the current tax exemption, and if the Bermudian Parliament passes legislation imposing taxes on exempted companies, the Company may become subject to taxation in Bermuda after March 31, 2035.
Marshall Islands Taxation
Because we do not (and do not expect in the future that we will) conduct business or operations in the Republic of the Marshall Islands, we are not subject to income, capital gains, profits or other taxation under current Marshall Islands law.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL AND BERMUDA INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES.  YOU ARE ENCOURAGED TO CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF ACQUIRING, HOLDING, CONVERTING OR OTHERWISE DISPOSING OF SHARES OF OUR ORDINARY SHARES.
F.    Dividends and Paying Agents
Not applicable.
G.    Statement by Experts
Not applicable.
H.    Documents on Display
We are subject to the informational requirements of the Securities Exchange Act. In accordance with these requirements we file reports and other information with the SEC. These materials, including this annual report on Form 20-F and the accompanying exhibits may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling 1 (800) SEC-0330, and you may obtain copies at prescribed rates from the Public Reference Section of the SEC at its principal office in Washington, D.C. The SEC maintains a website (http://www.sec.gov.) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. In addition, our filings will be available on our website www.flexlng.com. This web address is provided as an inactive textual reference only. Information contained on our website does not constitute part of this annual report.
Shareholders may also request a copy of our filings at no cost by writing or telephoning us at the following address:
FLEX LNG Ltd.

76


Par-La-Ville Place, 14 Par-La-Ville Road, Hamilton, Bermuda
Tel: +1 441 295 69 35
I.    Subsidiary Information
Not applicable.

ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our activities expose it to a variety of financial risks including market risk (including currency risk and interest rate risk), credit risk and liquidity risk. Our overall risk management program considers the unpredictability of financial markets and seeks to minimize potential adverse effects on our financial performance, in a cost-effective manner.
Currency Risk
The majority of our transactions, assets and liabilities are denominated in U.S. dollars, our functional currency. However, we incur expenditures in currencies other than the functional currency, mainly overhead costs in GBP and NOK. A portion of our dividends, if any, may also be paid in NOK due to our listing on the OSE. Historically, we have not hedged these exposures. There is a risk that currency fluctuations in transactions incurred in currencies other than our functional currency will have a negative effect of the value of our cash flows.
Interest Rate Risk
We are exposed to interest rate fluctuations primarily due to our floating rate interest bearing long term debt. The international LNG transportation industry is a capital-intensive industry, which requires significant amounts of financing, typically provided in the form of secured long-term debt or lease financing. Certain of our current bank and lease financing agreements bear floating interest rates, based on LIBOR. Significant adverse fluctuations in floating interest rates could adversely affect our operating and financial performance and our ability to service our debt.
As of December 31, 2019, we had entered into five interest rate swap transactions to reduce the risks associated with fluctuations in interest rates, whereby the floating rate has been swapped to a fixed rate. The total notional principal of all five of our interest rate swaps was $175 million. The swaps were entered into between June and September 2019, with a concurrent maturity of June 2024. Please see “Note 14. Financial Instruments” to our Consolidated Financial Statements.
Between January and March 2020, we entered into seven interest rate swap transactions: four have a total notional principal of $225 million with concurrent effective dates of July 2020 and concurrent maturity of July 2025; and three have a total notional principal of $85 million with a concurrent effective date of September 2020 and concurrent maturity of September 2025.

Liquidity Risk
We monitor the risk of a shortage of funds using a cash modeling forecast. This model considers the maturity of payment profiles and projected cash flows required to fund the operations. Historically funds have been raised via equity issuance, lease finance and loan finance. Market conditions can have a significant impact on the ability to raise equity, lease finance and loan finance. While equity issuance may be dilutive to existing shareholders, lease and loan finance will contain covenants and other restrictions.
Our objective is to maintain a balance between continuity of funding and flexibility through the raising of funds from investors. Upon delivery of the respective vessels from the yards, we expect to finance remaining delivery payments that are due through available liquidity, debt financing and lease financing.
Credit Risk
We are exposed to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Currently the main exposure to credit risk relates to the advance payments made to the sellers in connection with the agreements to acquire the Newbuilding Vessels. Blue Sea Navigation Holding Inc., an entity related to Geveran, has provided corporate refund

77


guarantees for the advance payments made to the sellers of $349 million in aggregate for the Newbuilding Vessels Flex Aurora, Flex Amber, Flex Artemis (formerly known as Flex Reliance), Flex Resolute, Flex Freedom, Flex Volunteer and Flex Vigilant. Cash funds are currently held with DnB, Danske Bank and RBS.
Price Risk
We are also subject, indirectly, to price risk related to the spot/short term charter market for chartering LNG carriers. Charter rates may be uncertain and volatile and depend upon, among other things, the natural gas prices, the supply and demand for vessels, arbitrage opportunities, vessel obsolesce and the energy market, which we cannot predict with certainty. Currently, no financial instruments have been entered into to reduce this risk.
Operational Risk
The operation of a LNG carrier has certain unique operational risks. Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather, business interruptions caused by mechanical failures, grounding and fire, explosions and collisions, human error, war, terrorism, piracy, labor strikes, boycotts and other circumstances or events. These hazards may result in death or injury to persons, loss of revenues or property, higher insurance rates, damage to our customer relationships and market disruptions, delay or rerouting.
If our LNG carriers suffer damage, they may need to be repaired at a dry-docking facility. The costs of dry-dock repairs are unpredictable and may be substantial. We may have to pay dry-docking costs that our insurance does not cover at all or in full. The loss of revenues while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, may adversely affect our business and financial condition.
At a commercial level it also includes the ability to secure employment contracts on reasonable terms for the vessels under construction; and obtaining financing and working capital on reasonable terms.

ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A.    Debt Securities
Not applicable.
B.    Warrants and Rights.
Not applicable.
C.    Other Securities.
Not applicable.
D.    American Depositary Shares.
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

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A.    Disclosure Controls and Procedures.
Management assessed the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934, as of the end of the period covered by this annual report as of December 31, 2019. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures are effective as of the evaluation date.
B.    Management’s Annual Report on Internal Control Over Financial Reporting.
This annual report does not include a report of management's assessment regarding internal control over financial reporting due to a transition period established by rules of the SEC for newly public companies.
C.    Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of the Company's registered public accounting firm because as an emerging growth company, we are exempt from this requirement.
D.    Changes in Internal Control Over Financial Reporting.
There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report that have materially affected or are reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 16.    RESERVED

ITEM 16A.    AUDIT COMMITTEE FINANCIAL EXPERT.
Our Board has determined that Mr. Nikolai Grigoriev is an independent director and audit committee financial expert.

ITEM 16B.    CODE OF ETHICS
We have adopted a code of ethics, which we refer to as our Corporate Code of Business Ethics and Conduct, which applies to all entities controlled by the Company and its employees, directors, officers and agents. A copy of the Corporate Code of Business Ethics and Conduct is filed herewith as Exhibit 14.1. We have also posted a copy of our Corporate Code of Business Ethics and Conduct on our website at www.flexlng.com. We will provide any person, free of charge with a copy of our Corporate Code of Business Ethics and Conduct upon written request to our offices at: Par-La-Ville Place, 14 Par-La-Ville Road, Hamilton, Bermuda.

ITEM 16C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company's principal accountant for 2019 and 2018 was Ernst & Young AS. The following table sets forth for the two most recent fiscal years the fees paid or accrued for audit and services provided by Ernst & Young AS to the Company.
 
 
Year ended December 31,
(In thousands of $)
 
2019

 
2018

Audit Fees (a)
 
382

 
650

Audit-Related Fees (b)
 
40

 
—

Tax Fees (c)
 
12

 
8

All Other Fees (d)
 
—

 
—

Total
 
434

 
658


A.
Audit Fees

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Audit fees are the aggregate fees billed for professional services rendered for the audit of our annual financial statements and services normally provided by the principal accountant in connection with statutory and regulatory filings or engagements, included services related consents and assistance with and review of documents filed with the SEC.
B.
Audit-Related Fees
Audit-related fees consisted of assurance and related services rendered by the principal accountant related to the performance of the audit or review of our financial statements which have not been reported under Audit Fees above.
C.
Tax Fees
Tax fees represent fees for professional services rendered by the principal accountant for primarily tax compliance.
D.
All Other Fees
None.
The Company's Board has adopted pre-approval policies and procedures in compliance with paragraph (c) (7)(i) of Rule 2-01 of Regulation S-X that require the Board to approve the appointment of the independent auditor of the Company before such auditor is engaged and approve each of the audit and non-audit related services to be provided by such auditor under such engagement by the Company. All services provided by the principal auditor in 2019 and 2018 were approved by the Audit Committee pursuant to the pre-approval policy.

ITEM 16D.    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E.    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F.    CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G.    CORPORATE GOVERNANCE
Pursuant to an exception under the NYSE listing standards available to foreign private issuers, we are not required to comply with all of the corporate governance practices followed by U.S. companies under the NYSE listing standards (which are available at www.nyse.com) because in certain cases we follow our home country (Bermuda) practice.  Pursuant to Section 303A.11 of the NYSE Listed Company Manual, we are required to list the significant differences between our corporate governance practices that comply with and follow our home country practices and the NYSE standards applicable to listed U.S. companies. Set forth below is a list of those differences:

•
Independence of Directors. The NYSE requires that a U.S. listed company maintain a majority of independent directors. While our board of directors is currently comprised of directors a majority of whom are independent, we cannot assure you that in the future we will have a majority of independent directors.
•
Executive Sessions.  The NYSE requires that independent directors meet regularly in executive sessions at which only independent directors are present. We intend to hold executive sessions at which only independent directors are present at least twice a year.
•
Nominating/Corporate Governance Committee.  The NYSE requires that a listed U.S. company have a nominating/corporate governance committee of independent directors and a committee charter specifying the purpose, duties and evaluation procedures of the committee. As permitted under Bermuda law and our bye-laws, we do not currently have a nominating or corporate governance committee. To the extent we establish such committee in the future, it may not consist of independent directors, entirely or at all.

80


•
Compensation Committee. The NYSE requires U.S. listed companies to have a compensation committee composed entirely of independent directors and a committee charter addressing the purpose, responsibility, rights and performance evaluation of the committee. As permitted under Bermuda law, we do not currently have a compensation committee. To the extent we establish such committee in the future, it may not consist of independent directors, entirely or at all.
•
Audit Committee.  The NYSE requires, among other things, that a listed U.S. company have an audit committee with a minimum of three members, all of whom are independent. As permitted by Rule 10A-3 under the Securities Exchange Act of 1934, our audit committee consists of one independent member of our Board, Nikolai Grigoriev.
•
Shareholder Approval Requirements. The NYSE requires that a listed U.S. company obtain prior shareholder approval for certain issuances of authorized stock or the approval of, and material revisions to, equity compensation plans. As permitted under Bermuda law and our bye-laws, we do not seek shareholder approval prior to issuances of authorized stock or the approval of and material revisions to equity compensation plans.
•
Corporate Governance Guidelines.  The NYSE requires U.S. 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 of the Board. We are not required to adopt such guidelines under Bermuda law and we have not adopted such guidelines.

ITEM 16H.    MINE SAFETY DISCLOSURE
Not applicable.


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PART III
ITEM 17.    FINANCIAL STATEMENTS
Not applicable
ITEM 18.    FINANCIAL STATEMENTS
The financial statements beginning on page F-1 through F-27, together with the respective reports of the Independent Registered Public Accounting firm therefore, are filed as a part of this annual report.
 
 
Index to Consolidated Financial Statements of FLEX LNG Ltd.
F-1
 
 
Report of Independent Registered Public Accounting Firm
F-2
 
 
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
F-3
 
 
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 and 2017
F-4
 
 
Consolidated Balance Sheets as of December 31, 2019 and 2018
F-5
 
 
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
F-6
 
 
Consolidated Statements of Changes in Equity for the years ended December 31, 2019, 2018 and 2017
F-7
 
 
Notes to the Consolidated Financial Statements
F-8


82


ITEM 19.    EXHIBITS
1.1
 
 
1.2
 
 
2.1
 
 
2.2
 
 
4.1
 
 
4.2
 
 
4.3
 
 
4.4
 
 
4.5
 
 
4.6
 
 
4.7
 
 
4.8
 
 
4.9
 
 
4.10
 
 
4.11
 
 
4.12
 
 
4.13
 
 
4.14
 
 
4.15
 
 
8.1
 
 
12.1
 
 
12.2
 
 
13.1

83


* Previously filed
** Portions of this exhibit have been omitted.

84


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.
FLEX LNG Ltd.
(registrant)
By:
/s/ Oystein Kalleklev
 
Name: Oystein Kalleklev
 
Title: Chief Executive Officer of Flex LNG Management AS
(Principal Executive Officer of FLEX LNG Ltd.)
Date: April 17, 2020




FLEX LNG LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
Report of Independent Registered Public Accounting Firm
F-2
 
 
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
F-3
 
 
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 and 2017
F-4
 
 
Consolidated Balance Sheets as of December 31, 2019 and 2018
F-5
 
 
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
F-6
 
 
Consolidated Statements of Changes in Equity for the years ended December 31, 2019, 2018 and 2017
F-7
 
 
Notes to the Consolidated Financial Statements
F-8

F-1


Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of FLEX LNG Ltd.

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of FLEX LNG Ltd. (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young AS
 
We have served as the Company’s auditor since 2007.
 
Bergen, Norway
 
April 17, 2020


F-2


FLEX LNG Ltd.
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017

(in thousands of $, except per share data)
 
2019

 
2018

 
2017

 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
Vessel operating revenues
 
119,967

 
77,209

 
27,329

 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
Voyage expenses
 
(6,284
)
 
(5,177
)
 
(6,658
)
Vessel operating expenses
 
(22,423
)
 
(20,984
)
 
(29,874
)
Administrative expenses
 
(7,506
)
 
(4,639
)
 
(3,409
)
Depreciation
 
(28,747
)
 
(17,412
)
 
(2
)
Operating income/(loss)
 
55,007

 
28,997

 
(12,614
)
 
 
 
 
 
 
 
Other income/(expenses)
 
 
 
 
 
 
Interest income
 
1,073

 
607

 
123

Interest expense
 
(33,875
)
 
(17,781
)
 
(234
)
Write-off of debt issuance costs
 
(3,388
)
 
—

 
—

Gain/(loss) on derivatives
 
(1,555
)
 
—

 
—

Other financial items
 
(113
)
 
(54
)
 
2,334

Income/(loss) before tax
 
17,149

 
11,769

 
(10,391
)
Income tax (expense)/benefit
 
(182
)
 
10

 
(17
)
Net income/(loss)
 
16,967

 
11,779

 
(10,408
)
 
 
 
 
 
 
 
Earnings/(loss) per share:
 
 
 
 
 
 
- Basic and Diluted
 
0.31

 
0.29

 
(0.34
)
The accompanying notes are an integral part of these consolidated financial statements.

F-3


FLEX LNG Ltd.
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 and 2017

(in thousands of $)
 
2019

 
2018

 
2017

 
 
 
 
 
 
 
Net income/(loss) for the year
 
16,967

 
11,779

 
(10,408
)
Total other comprehensive income/(loss)
 
—

 
—

 
—

Total comprehensive income/(loss)
 
16,967

 
11,779

 
(10,408
)
The accompanying notes are an integral part of these consolidated financial statements.

F-4


FLEX LNG Ltd.
Consolidated Balance Sheets as of December 31, 2019 and 2018

(in thousands of $, except share data)
 
2019

 
2018

 
 
 
 
 
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash, cash equivalents and restricted cash
 
129,098

 
55,097

Inventory
 
2,686

 
915

Other current assets
 
11,791

 
2,693

Receivables due from related parties
 
315

 
1,720

Total current assets
 
143,890

 
60,425

Non-current assets
 
 
 
 
Derivative instruments
 
636

 
—

Vessel purchase prepayments
 
349,472

 
421,472

Vessels and equipment, net
 
1,147,274

 
812,478

Other fixed assets
 
10

 
11

Total non-current assets
 
1,497,392

 
1,233,961

Total Assets
 
1,641,282

 
1,294,386

 
 
 
 
 
EQUITY AND LIABILITIES
 
 
 
 
Current liabilities
 
 
 
 
Current portion of long-term debt
 
34,566

 
23,365

Derivative instruments
 
2,371

 
—

Payables due to related parties
 
96

 
206

Accounts payable
 
582

 
592

Other current liabilities
 
20,117

 
11,297

Total current liabilities
 
57,732

 
35,460

Non-current liabilities
 
 
 
 
Long-term debt
 
744,283

 
431,602

Other non-current liabilities
 
2

 
—

Total non-current liabilities
 
744,285

 
431,602

Total liabilities
 
802,017

 
467,062

Equity
 
 
 
 
Share capital (2019: 54,110,584 (2018: 54,099,929) shares issued and outstanding, par value $0.10 per share)
 
5,411

 
5,410

Additional paid in capital
 
1,190,049

 
1,189,665

Accumulated deficit
 
(356,195
)
 
(367,751
)
Total equity
 
839,265

 
827,324

Total Equity and Liabilities
 
1,641,282

 
1,294,386

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

F-5


FLEX LNG Ltd.
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
(in thousands of $)
 
2019

 
2018

 
2017

 
 
 
 
 
 
 
Operating activities
 
 
 
 
 
 
Net income/(loss)
 
16,967

 
11,779

 
(10,408
)
Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities:
 
 
 
 
 
 
Depreciation
 
28,747

 
17,412

 
2

Write-off of debt issuance costs
 
3,388

 
—

 
—

Amortization of debt issuance costs
 
1,149

 
141

 
—

Share-based payments
 
324

 
202

 
115

Foreign exchange loss/(gain)
 
(42
)
 
22

 
(2,334
)
Change in fair value of derivative instruments
 
1,749

 
—

 
—

Other
 
8

 
(659
)
 
(157
)
Changes in operating assets and liabilities, net:
 
 
 
 
 
 
Inventory
 
(1,771
)
 
126

 
(1,041
)
Trade accounts receivable, net
 
(5,425
)
 
—

 
—

Accrued income
 
(510
)
 
(2,024
)
 
—

Prepaid expenses
 
(2,270
)
 
2,414

 
(6,061
)
Other receivables
 
(893
)
 
335

 
(486
)
Receivables due from related parties
 
1,405

 
(1,720
)
 
—

Payables due to related parties
 
(110
)
 
(604
)
 
—

Accounts payable
 
(10
)
 
516

 
272

Accrued expenses
 
472

 
5,592

 
—

Deferred charter revenue
 
10,016

 
(44
)
 
2,346

Other current liabilities
 
(6
)
 
(42
)
 
—

Provisions
 
(1,662
)
 
2,268

 
—

Net cash provided by (used in) operating activities
 
51,526

 
35,714

 
(17,752
)
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
Purchase of other fixed assets
 
(10
)
 
(14
)
 
(4
)
Vessel purchase prepayments
 
—

 
(349,000
)
 
(72,000
)
Additions and installments on newbuildings
 
—

 
(232,455
)
 
(3,788
)
Purchase of vessels and equipment
 
(291,532
)
 
—

 
—

Capitalized interest
 
—

 
(2,964
)
 
(1,922
)
Net cash (used in) provided by investing activities
 
(291,542
)
 
(584,433
)
 
(77,714
)
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
Repayment of long-term debt
 
(29,456
)
 
(286,069
)
 
(117,000
)
Repayment of revolving credit facility
 
(50,000
)
 
—

 
—

Prepayment of long-term debt
 
(294,000
)
 
—

 
—

Proceeds from long-term debt
 
697,879

 
584,613

 
—

Financing costs
 
(5,014
)
 
—

 
—

Net proceeds from issuance of share capital
 
—

 
295,311

 
220,988

Cash dividends paid
 
(5,411
)
 
—

 
—

Net cash provided by (used in) financing activities
 
313,998

 
593,855

 
103,988

 
 
 
 
 
 
 
Effect of exchange rate changes on cash
 
19

 
—

 
—

Net increase in cash, cash equivalents and restricted cash
 
74,001

 
45,136

 
8,522

Cash, cash equivalents and restricted cash at the beginning of the period
 
55,097

 
9,961

 
1,439

Cash, cash equivalents and restricted cash at the end of the period
 
129,098

 
55,097

 
9,961

FLEX LNG Ltd.
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 (continued)
Supplemental Information
 
 
 
 
 
 
Interest paid
 
35,955

 
12,958

 
61

Income tax paid
 
58

 
—

 
5


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

F-6


FLEX LNG Ltd.
Consolidated Statements of Changes in Equity for the years ended December 31, 2019, 2018 and 2017

(in thousands of $, except number of shares)
 
2019

 
2018

 
2017

 
 
 
 
 
 
 
Number of shares outstanding
 
 
 
 
 
 
Balance at beginning of year
 
54,099,929

 
36,797,238

 
12,794,565

Shares issued
 
10,655

 
17,302,691

 
24,002,673

Balance at end of year
 
54,110,584

 
54,099,929

 
36,797,238

 
 
 
 
 
 
 
Share capital
 
 
 
 
 
 
Balance at beginning of year
 
5,410

 
3,680

 
1,280

Shares issued
 
1

 
1,730

 
2,400

Balance at end of year
 
5,411

 
5,410

 
3,680

 
 
 
 
 
 
 
Additional paid in capital
 
 
 
 
 
 
Balance at beginning of year
 
1,189,665

 
895,951

 
573,785

Shares issued
 
125

 
293,645

 
322,166

Stock option expense
 
259

 
69

 
—

Balance at end of year
 
1,190,049

 
1,189,665

 
895,951

 
 
 
 
 
 
 
Other comprehensive income
 
 
 
 
 
 
Balance at beginning of year
 
—

 
66

 
—

Other comprehensive income
 
—

 
(66
)
 
66

Balance at end of year
 
—

 
—

 
66

 
 
 
 
 
 
 
Accumulated deficit
 
 
 
 
 
 
Balance at beginning of year
 
(367,751
)
 
(379,530
)
 
(369,123
)
Net income/(loss)
 
16,967

 
11,779

 
(10,407
)
Dividends paid
 
(5,411
)
 
—

 
—

Balance at end of year
 
(356,195
)
 
(367,751
)
 
(379,530
)
Total equity
 
839,265

 
827,324

 
520,167



F-7


FLEX LNG Ltd.
Notes to Consolidated Financial Statements
(in thousands of $, unless otherwise stated)

1.
GENERAL
FLEX LNG Ltd. ("FLEX LNG" or the "Company") is a limited liability company, originally incorporated in the British Virgin Islands in September 2006 and re-domiciled to Bermuda in June 2017. The Company is currently listed on the Oslo and New York Stock Exchanges under the symbol "FLNG". The Company's activities are focused on seaborne transportation of liquefied natural gas ("LNG") through the ownership and operation of fuel efficient, fifth generation LNG carriers. As of December 31, 2019, the Company had six LNG carriers in operation, of which two were delivered by Daewoo Shipbuilding and Marine Engineering Co. Ltd. ("DSME") and two by Samsung Heavy Industries ("SHI") in 2018 and a further two were delivered by DSME in 2019. In addition, FLEX LNG has seven LNG carriers under construction, four at Hyundai Samho Heavy Industries Co. Ltd. ("HSHI") and three at DSME. The seven newbuildings are expected to be delivered between 2020 and 2021.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis for Preparation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries.
Going Concern
In the next twelve months from the signing of the financial statements, the Company has obligations of $811 million on vessels to be delivered, which is significant for our operations and exceeds our committed financing and expected cash flow from operations. We intend to fund these amounts with a combination of the $629 million Term Loan Facility, additional future financing agreements and our available liquidity. Based on ongoing discussions with different financing institutions, we believe we will be able to obtain the necessary funds and we have a track record of successfully financing our vessel purchases. Accordingly, the financial statements have been prepared on a going concern basis.
Reporting Currency and Presentation Currency
The Company's presentation and reporting currency is USD. The Company's primary economic environment is the international shipping market in which revenues are primarily settled in USD. The Company's most significant assets and liabilities are also paid for and settled in USD. Our expenses, however, are in the currency invoiced by each supplier.
Foreign currency transactions are translated into the functional currency at the exchange rate in effect at the date of the transaction. Monetary items are translated at the period end exchange rate, non-monetary items that are measured at historical cost are translated at the rate in effect on the original transaction date, and non-monetary items that are measured at fair value are translated at the exchange rate in effect at the time when the fair value was determined. Foreign exchange gains and losses resulting from the settlement of such cash transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.
Basis of Consolidation
The Company's consolidated financial statements comprise FLEX LNG Ltd. and its directly and indirectly wholly owned subsidiaries. The Company includes eight 100% directly owned subsidiaries and fourteen 100% indirectly owned subsidiaries as at December 31, 2019. Details on subsidiaries are provided in Note 4. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, FLEX LNG Ltd., using consistent accounting principles.
Intra-group transactions and balances, including internal profits and unrealized gains and losses, have been eliminated upon consolidation.

F-8


Factor affecting comparability
We have reclassified voyage expenses in comparable period for 2018 and 2017. Voyage expenses were included within vessel operating costs in the previous year. The split into vessel operating expenses and voyage expenses were made to provide the reader of the financial statements with more information.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact, the following: the amount to be paid for certain liabilities, fair value of derivative instruments, initial dry-dock cost and the expected useful lives of our vessels. Actual results could differ from those estimates.
Fair Value Measurements
The inputs to the fair value calculations are based on observable market data when available, but where this is not achievable; a degree of judgment is required in establishing fair values. Changes in these assumptions could impact the reported fair value, as detailed in Note 16.
Segment Reporting
Our chief operating decision maker ("CODM") measures performance based on our overall return to shareholders based on consolidated net income. Although separate vessel financial information is available, the CODM internally evaluates the performance of the Company as a whole and not on the basis of separate business units or different types of charters. As a result, the Company has determined that it operates as one reportable segment. Since the Company's vessels regularly move between countries in international waters over many trade routes, it is neither practical nor meaningful to assign revenues or earnings from the transportation of international LNG by geographic area.
For the year ended December 31, 2019, we derived our operating revenues from eleven customers, with our top three customers accounting for 32.8%, 21.8% and 14.7% of our consolidated revenues, equivalent to 69.3% of our consolidated revenues.  During this period, no other customer accounted for over 10% of our consolidated revenues.
Accounting for Revenue and Related Expenses
The Company employs all of its vessels on time charter contracts, which the Company has established to contain a lease since the vessel is a specified asset, the charterer has the right to direct the use of the vessel and there are no substantive substitution rights. Revenue from time charter contracts are recognized as operating leases under ASC 842 Leases. The Company receives a fixed charter hire per day of on-hire whereby revenue is recognized and recorded on an accrual basis over the term of the charter as service is provided, including option periods if reasonably certain to be exercised.
If the Company receives a lump sum re-positioning fee or fixed ballast bonus, which is probable at the commencement of the lease, this is recognized as part of the lease payments over the course of the time charter on a straight-line basis at the commencement of the lease.
If the Company receives a lump sum ballast bonus, which is not probable at the commencement of the lease then this is recognized as a variable lease payment from the date that the change in facts and circumstances occur. The variable lease payment is therefore recognized on a straight line basis from the date that the re-delivery port is declared and probability of occurrence is determined, to the date of arrival at the re-delivery port.
If there is an option under a charter party for the lessee to extend the charter, the Company will assess the likelihood of the charterer exercising the extension option at inception of the lease in order to determine the lease term. If the option period is not included in the initial lease term and the charterer declares such option, the Company will consider the declaration of an option as a lease modification. The Company will remeasure the total minimum lease payments from the date of declaration of the option, adjusted for any prepaid or accrued rent from the original contract, and recognize this on a straight line basis to the date of arrival at the re-delivery port.
Under a time charter agreement, the Company is responsible for both the operation and maintenance of the vessel which would be considered to be a non-lease performance obligation. The Company has chosen to elect the practical expedient of ASC 842 to

F-9


not separate the lease and non-lease components and instead combine these as a single performance obligation as the Company consider the lease component to be the predominant component of the contract, for which ASC 842 will be applied.
Costs incurred during the leasing period for the maintenance and operation of the vessels are expensed as incurred as the timing and pattern of transfer of the components are identical to the operating lease revenue earned from the charter hire.
Trade Accounts Receivables
Trade receivables are presented net of allowance for doubtful balances. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts.
Lease
The Company assesses whether a contract contains a lease at inception of the contract. The assessment involves the exercise of judgement about whether it depends on a specified asset, whether the Company obtains substantially all the economic benefits from the use of that asset, and whether the Company has the right to direct the use of the asset. The company does not separate lease components from non-lease components as lessee. The company recognizes a right-of-use asset and a lease liability at the lease commencement date. The standard provides practical expedients for an entity’s ongoing accounting. The Company has elected the short-term lease recognition exemption for leases that qualify, meaning that the Company does not recognize Right Of Use assets or lease liabilities for these leases where the Company is the lessee.

Interest expense
Interest expenses are expensed as incurred except for interest expenses that are capitalized for qualifying assets that require a period of time to get them ready for their intended use. Interest expenses are capitalized until the qualifying asset is ready for use. The Company does not capitalize amounts beyond the actual interest expense incurred in the period.
If the Company's financing plans associate a specific borrowing with a qualifying asset, the Company uses the rate on that borrowing as the capitalization rate to be applied to that portion of the average accumulated expenditures for the asset that does not exceed the amount of that borrowing. If average accumulated expenditures for the asset exceed the amounts of specific new borrowings associated with the asset, the capitalization rate to be applied to such excess shall be a weighted average of the rates applicable to other borrowings of the Company.
Income Taxes
Income taxes are provided for based upon the tax laws and rates in effect in the countries in which the Company's ocean-going LNG carriers' operations were conducted and income was earned. Deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Company's assets and liabilities using the applicable jurisdictional tax in effect at the year end. A valuation allowance for deferred tax assets is recorded when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized (Note 6). Recognition of uncertain tax positions is dependent upon whether it is more-likely-than-not that a tax position taken or expected to be taken in a tax return will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. If a tax position meets the more-likely-than-not recognition threshold, it is measured to determine the amount of benefit to recognize in the financial statements based on U.S. GAAP guidance. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.
Vessels
Vessels are carried at historical cost less accumulated depreciation and impairment adjustments, if any.
The depreciation on vessels is reviewed annually to ensure that the method and period used reflect the pattern in which the asset's future economic benefits are expected to be consumed.
The gross carrying amount of the vessel is the purchase price, including duties/taxes, borrowing costs and any other direct costs attributable to bringing it to the location and condition necessary for the vessels intended use. Capitalization of costs will cease once the vessel is in the location and condition necessary for it to be able to operate in the manner consistent with its intended design.

F-10


On delivery, the total acquisition costs of the vessel will be segregated to groups of components that have different expected useful lives. The different groups of components will be depreciated over their expected useful lives. Subsequent costs, such as repair and maintenance costs, are recognized in the income statement as incurred.
Each vessel is required to be dry-docked every 5 years. The Company capitalizes costs associated with the dry-docking in accordance with ASC Topic 360 Property, Plant and Equipment and amortizes these costs on a straight-line basis over the period to the next expected dry-docking. Amortization of dry-docking costs is included in depreciation in the Income Statement. The Company has adopted the "built in overhaul" method for when a vessel is newly acquired, or constructed, whereby a proportion of the cost of the vessel is allocated to the components expected to be replaced at the next dry-docking based on the expected costs relating to the next dry-docking. Dry-docking costs are included within operating activities on the statement of cash flows.
The cost of the vessel, less their estimated residual value, is depreciated on a straight-line basis over the asset's estimated useful economic life. The residual value for owned vessels is calculated by multiplying the lightweight tonnage of the vessel by the estimated scrap value per tonne. The cost of dry-dock is depreciated on a straight-line basis over the assets estimated useful life. The following useful lives have been used:
Vessels: 35 years
Dry-docking: five years

F-11


Impairment of Long-lived Assets
The carrying values of long-lived assets held and used by the Company and newbuildings are reviewed quarterly or whenever events or circumstances indicate that the carrying amount of an asset may no longer be recoverable. The Company assesses recoverability of the carrying value of each asset or newbuilding on an individual basis by estimating the future net undiscounted cash flows expected to result from the asset, including eventual disposal. In developing estimates of future undiscounted cash flows, the Company must make assumptions about future performance, with significant assumptions being related to charter rates, ship operating expenses, utilization, dry-docking requirements, residual values, the estimated remaining useful lives of the vessels. These assumptions are based on historical trends as well as future expectations. If the future net undiscounted cash flows are less than the carrying value of the asset, or the current carrying value plus future newbuilding commitments, an impairment loss is recorded equal to the difference between the asset's or newbuilding's carrying value and fair value. In addition, long-lived assets to be disposed of are reported at the lower of carrying amount and fair value less estimated costs to sell.
Newbuildings
The carrying value of vessels under construction ("newbuildings") represents the accumulated costs to the balance sheet date which the Company has paid by way of purchase instalments and other capital expenditures together with capitalized interest and associated finance costs. No charge for depreciation is made until a newbuilding is put into operation.
Vessel Purchase Prepayments
Vessel purchase prepayments relate to amounts advanced under vessel purchase agreements, where title of the vessel does not transfer to the Company until the date of delivery.
Inventories
Inventories comprise principally of fuel and lubricating oils and are stated at the lower of cost and net realizable value. Cost is determined on a first-in, first-out basis.
Cash and Cash Equivalents
Cash includes cash in hand and in the Company's bank accounts. Cash equivalents are short-term liquid investments with original maturities of three months or less.
Restricted Cash
Restricted cash consists of cash, which may only be used for certain purposes and is held under a contractual arrangement. The cash is restricted by law for the Norwegian tax authorities in relation to social security tax and personal income tax of employees in Flex LNG Management AS, and is settled every second month.
Debt Issuance Costs
Direct costs relating to obtaining a loan are deferred and amortized over the team of the loan using the effective interest rate method. Amortization of debt issuance costs is included under finance costs. The Company has recorded debt issuance costs as a direct reduction from the carrying amount of the related debt in the balance sheet and from the proceeds from long-term debt in the statement of cash flows.
Derivative Instruments
Our derivative instruments relate to interest-rate swaps, which are considered to be an economic hedge. However, these have not been designated as hedges for accounting purposes. These transactions involve the conversion of floating rates into fixed rates over the life of the transactions without an exchange of underlying principal. The fair value of the interest rate swap contracts are recognized as assets or liabilities. Changes in the fair value of these derivatives are recorded in gain/(loss) on derivatives in our consolidated statement of operations. Cash outflows and inflows resulting from economic derivative contracts are presented as cash flows from operations in the consolidated statement of cash flows.



F-12


Share-based Compensation
The Company accounts for share-based payments in accordance with ASC Topic 718 Compensation - Stock Compensation, under which the fair value of issued stock options is expensed over the period in which the options vest under the simplified method. Stock based compensation represents the cost of vested and non-vested shares and share options granted to employees and directors for their services, and are included in administrative expenses in the consolidated statements of operations. The fair value of share options grants is determined with reference to option pricing models, and depends on the terms of the granted options. The fair value is recognized (generally as compensation expense) over the requisite service period.
Earnings per share
Basic earnings per share ("EPS") are computed based on the income available to ordinary shareholders divided by the weighted average number of shares outstanding. Diluted EPS is computed by dividing the net income available to ordinary shareholders by the weighted average number of ordinary shares and dilutive ordinary share equivalents then outstanding. If in the period there is a loss, then any potential ordinary shares have been excluded from the calculation of diluted loss per share.

3.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which revises guidance for the accounting for credit losses on financial instruments within its scope. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The guidance will be effective January 1, 2020, with early adoption permitted. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. This recently issued accounting pronouncements are not expected to materially impact the Company.

In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the
Disclosure Requirements for Fair Value Measurement. This update removes, modifies and adds specific disclosure requirements in relation to fair value measurement with the aim of improving the effectiveness of disclosures to the financial statements. The amendments in this Update are effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is in the process of evaluating the impact of this standard update on its consolidated financial statements and related disclosures.

The Company has reviewed all other recent issued accounting pronouncements and has not identified other standard that would have a material impact on the Company's current accounting policies.


F-13


4.
SIGNIFICANT SUBSIDIARIES
As of December 31, 2019, the company had the following significant subsidiaries:
Company
 
Country of registration
 
Main operations
 
Ownership share
 
Voting share
Flex LNGC 1 Limited
 
Isle of Man
 
Shipping
 
100%
 
100%
Flex LNGC 2 Limited
 
Isle of Man
 
Shipping
 
100%
 
100%
Flex LNG Chartering Limited
 
United Kingdom
 
Chartering services
 
100%
 
100%
Flex LNG Management AS
 
Norway
 
Management services
 
100%
 
100%
Flex LNG Bermuda Management Limited
 
Bermuda
 
Management services
 
100%
 
100%
Flex LNG Management Limited
 
Isle of Man
 
Management services
 
100%
 
100%
Flex Petroleum Limited
 
British Virgin Islands
 
Shipping
 
100%
 
100%
Flex LNG Fleet Limited
 
Bermuda
 
Holding company
 
100%
 
100%
Flex LNG Endeavour Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Enterprise Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Ranger Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Rainbow Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Constellation Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Courageous Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Aurora Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Amber Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Resolute Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Reliance Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex Freedom Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex Vigilant Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex Volunteer Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Shipping (Bermuda) Limited
 
Bermuda
 
Shipping
 
100%
 
100%




F-14


5.
EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing the net income/(loss) for the year by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net income/(loss) by the weighted average number of shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. If in the period there is a loss then any potential ordinary shares have been excluded from the calculation of diluted loss per share.
The following reflects the net income/(loss) and share data used in the earnings per share calculation.
(in thousands of $, except share data)
 
2019

 
2018

 
2017

Net income/(loss) attributable to shareholders
 
16,967

 
11,779

 
(10,408
)
 
 
 
 
 
 
 
Weighted average number of ordinary shares
 
54,106,142

 
40,451,474

 
30,763,911

Share options
 
141,000

 
141,000

 
—

Weighted average number of shares, adjusted for dilution
 
54,247,142

 
40,592,474

 
30,763,911

 
 
 
 
 
 
 
Earnings/(loss) per share
 
 
 
 
 
 
- Basic and diluted
 
0.31

 
0.29

 
(0.34
)

In December 2019, the Company paid a cash dividend of $5.4 million, corresponding to $0.10 per share.

6.
INCOME TAX
The Group consists of one legal entity incorporated in the United Kingdom, one entity in British Virgin Islands, one entity in Norway, four entities in Bermuda, three entities in the Isle of Man, and thirteen in the Marshall Islands.  The profits attributable to the management service companies are taxable in the United Kingdom and Norway.
Bermuda
Under current Bermuda law, the Company is not required to pay taxes in Bermuda on either income or capital gains. The Company has received written assurance from the Minister of Finance in Bermuda that, in the event of any such taxes being imposed, the Company will be exempted from taxation until March 31, 2035.
United States
For the year ended December 31, 2019, the Company did not accrue U.S. income taxes because the Company was able to satisfy the requirements of the exemption from gross basis tax under Section 883 of the U.S. Internal Revenue Code. Under Section 863(c)(2)(A) of the Internal Revenue Code, 50% of all transportation revenue attributable to transportation which begins or ends in the United States shall be treated as from sources within the United States where no Section 883 exemption is available. Such revenue is subject to 4% tax. For the year ended December 31, 2019, 2018 and 2017, the Company accrued federal income tax of $0.0 million, $0.2 million and $0.0 million respectively and this has been recorded in vessel operating expenses.
Other Jurisdictions
Certain of the Company's subsidiaries in Norway and the United Kingdom are subject to income tax in their respective jurisdictions. The taxes paid by subsidiaries of the Company that are subject to income tax have been disclosed in the tables below.
The Company does not have any unrecognized tax benefits, material accrued interest or penalties relating to income taxes. The Norwegian income tax returns could be subject to examination by Norwegian tax authorities going back ten years or more. In the United Kingdom, the tax authorities can investigate as far back as 20 years if they suspect tax evasion. More commonly, the United Kingdom may investigate for (i) careless tax returns for up to six years and (ii) innocent errors for up to four years. The Internal

F-15


Revenue Service ("IRS") may audit tax returns filed within the last three years. If the IRS identifies a substantial error, the IRS may add additional years, which in most cases does not extend beyond six years.
None of FLEX LNG Ltd. or its subsidiaries is undergoing tax audits in any applicable tax jurisdictions. The table below shows the components of income tax year ended December 31, 2019, 2018 and 2017:
(in thousands of $)
 
2019

 
2018

 
2017

Current income tax (expense)/benefit
 
(118
)
 
5

 
(17
)
Adjustments in respect of current income tax of previous years
 
(64
)
 
5

 
—

Income tax (expense)/benefit reported in the income statement
 
(182
)
 
10

 
(17
)

A reconciliation between the tax expense and the product of the accounting profit multiplied by the Bermuda domestic tax rate for the year ended December 31, 2019, 2018 and 2017 is as follows:
(in thousands of $)
 
2019

 
2018

 
2017

Income/(loss) before tax
 
17,149

 
11,769

 
(10,391
)
Income tax at 0% (2018: 0% (2017: 0%))
 
—

 
—

 
—

Effect of higher overseas tax rates
 
(182
)
 
10

 
(17
)
Income tax at effective rate of -1.1% (2018: 0.1% (2017: 0.2%))
 
(182
)
 
10

 
(17
)


7.
VESSEL PURCHASE PREPAYMENTS
(in thousands of $)
 
2019

 
2018

At January 1
 
421,472

 
72,000

Additions
 
—

 
349,000

Capitalized interest
 
—

 
472

Transfer to vessels and equipment
 
(72,000
)
 
—

At December 31
 
349,472

 
421,472


In May 2018, the Company entered into agreements with entities related to Geveran Trading Co. Ltd., or Geveran, our major shareholder, for the acquisition of the two newbuilding Generation X Dual Fuel (“X-DF”) LNG carriers Flex Aurora and Flex Amber for a purchase price of $184.0 million per vessel. The vessels are currently under construction at HSHI pursuant to shipbuilding contracts between HSHI and the sellers, who will continue to be responsible for the supervision of the construction of the vessels. We made advance payments of $36.8 million per vessel in 2018, representing 20% of the purchase price, which were recorded as vessel purchase prepayments. The remaining balance of $147.2 million per vessel is due upon delivery to the Company. The contractual delivery dates for the vessels are in the second and third quarter of 2020, respectively.
In October 2018, the Company entered into agreements with entities related to Geveran for the acquisition of the five newbuilding LNG carriers, the Flex Freedom, Flex Artemis (formerly known as Flex Reliance), Flex Resolute, Flex Vigilant, and Flex Volunteer, for a purchase price of $180.0 million per vessel, with an additional cost of $6.0 million per vessel for full re-liquefaction systems on three of the vessels. The Flex Freedom, Flex Artemis and Flex Resolute are M-type, Electronically Controlled, Gas Injection (“MEGI”) carriers under construction at DSME, with contractual delivery dates for two vessels in the third quarter of 2020 and the remaining vessel in the fourth quarter of 2020. The Flex Volunteer and Flex Vigilant are X-DF LNG carriers with contractual delivery dates in the first and second quarters of 2021, respectively. The sellers will continue to be responsible for the supervision of the construction of the vessels. We made advance payments of $55.8 million for each of the three MEGI newbuildings and $54.0 million for each of the two X-DF newbuildings in 2018, representing 30% of the purchase price, which are recorded as vessel purchase prepayments. The remaining balance of $130.2 million for each of the three MEGI newbuildings and $126.0 million for each of the two X-DF newbuilding is due upon the delivery of the respective vessels to the Company.
In June 2019, $36.0 million was reclassified from Vessel purchase prepayments to Vessels and equipment, net upon the delivery of our fifth LNG carrier, Flex Constellation.

F-16


In August 2019, $36.0 million was reclassified from Vessel purchase prepayments to Vessels and equipment, net, upon delivery of our sixth LNG carrier, Flex Courageous.

8.    VESSELS AND EQUIPMENT, NET
The table below summarizes the vessels and equipment, net applicable to the Company:
(in thousands of $)
 
Vessels and equipment
 
Dry-docking
 
Total
Cost
 
 
 
 
 
 
At December 31, 2017
 
—

 
—

 
—

Additions
 
—

 
—

 
—

Newbuildings
 
819,884

 
10,000

 
829,884

Disposals
 
—

 
—

 
—

At December 31, 2018
 
819,884

 
10,000

 
829,884

Additions
 
—

 
—

 
—

Newbuildings
 
358,531

 
5,000

 
363,531

Disposals
 
—

 
—

 
—

At December 31, 2019
 
1,178,415

 
15,000

 
1,193,415

 
 
 
 
 
 
 
Accumulated depreciation
 
 
 
 
 
 
At December 31, 2017
 
—

 
—

 
—

Charge
 
15,931

 
1,475

 
17,406

Disposals
 
—

 
—

 
—

At December 31, 2018
 
15,931

 
1,475

 
17,406

Charge
 
26,280

 
2,455

 
28,735

Disposals
 
—

 
—

 
—

At December 31, 2019
 
42,211

 
3,930

 
46,141

 
 
 
 
 
 
 
Net book value
 
 
 
 
 
 
At December 31, 2017
 
—

 
—

 
—

At December 31, 2018
 
803,953

 
8,525

 
812,478

At December 31, 2019
 
1,136,204

 
11,070

 
1,147,274


In January 2018, the Company took delivery of two MEGI LNG carriers, Flex Endeavour and Flex Enterprise, from DSME at a cost of $197.2 million and $197.4 million, respectively. In June and July 2018, the Company took delivery of two MEGI LNG carriers, Flex Ranger and Flex Rainbow, from SHI at a cost of $217.5 million and $217.2 million, respectively.
In June and August 2019, the Company took delivery of two MEGI LNG carriers, Flex Constellation and Flex Courageous, from DSME at a cost of $182.0 million and $182.0 million, respectively.
The net book value of vessels that serve as collateral for the Company's long-term debt (Note 15) was $1,147.3 million as at December 31, 2019 (2018: $812.5 million). The net book value of the vessels Flex Rainbow, Flex Enterprise and Flex Endeavour further referred to in Note 15 is $580.1 million as at December 31, 2019


F-17


9.
OTHER CURRENT ASSETS
As of December 31, 2019 and 2018, the following table provides a reconciliation of the other current assets within the Consolidated Balance Sheets:
(in thousands of $)
 
2019

 
2018

Trade accounts receivable, net
 
5,425

 
—

Accrued income
 
2,534

 
2,024

Prepaid expenses
 
2,788

 
518

Other receivables
 
1,044

 
151

Total other current assets
 
11,791

 
2,693


Trade accounts receivables are presented net of allowances for doubtful accounts amounting to $0.0 million as of December 31, 2019 and 2018.

10.
OTHER CURRENT LIABILITIES
As of December 31, 2019 and 2018, the following table provides a reconciliation of the other current liabilities within the Consolidated Balance Sheets:
(in thousands of $)
 
2019

 
2018

Accrued expenses
 
6,927

 
6,441

Deferred charter revenue
 
12,575

 
2,559

Other current liabilities
 
9

 
15

Provisions
 
606

 
2,282

Total other current liabilities
 
20,117

 
11,297



11.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(in thousands of $)
 
2019

 
2018

Cash and cash equivalents
 
129,005

 
54,932

Restricted cash
 
93

 
165

Cash, cash equivalents and restricted cash
 
129,098

 
55,097


The Company has $0.1 million of restricted cash as at December 31, 2019 (2018: $0.2 million). This is restricted by law for the Norwegian tax authorities in relation to social security of employees.

12.
SHARE CAPITAL AND ADDITIONAL PAID IN CAPITAL
(in thousands of $, except share data)
 
Shares

 
Share Capital

 
Additional paid in capital

Ordinary shares - issued and fully paid:
 
 
 
 
 
 
At December 31, 2017
 
36,797,238

 
3,680

 
895,951

Shares issued
 
17,302,691

 
1,730

 
293,714

At December 31, 2018
 
54,099,929

 
5,410

 
1,189,665

Shares issued
 
10,655

 
1

 
384

At December 31, 2019
 
54,110,584

 
5,411

 
1,190,049


In January 2019, the Company issued 4,461 shares to the board of directors relating to their remuneration for the second half of 2018, of which part was paid in cash and part through the issuance of new shares.

F-18


On March 4, 2019, the Company declared a ten-for-one reverse stock split with an effective date of March 7, 2019, which resulted in a reduction of 397 shares due to share split fractions. The ordinary share par value was adjusted as a result of the reverse stock split to the value of $0.10 per share from $0.01 per share. In line with the guidance in ASC 260 Earnings Per Share, we have retroactively adjusted for this change in the prior year comparatives in the consolidated primary statements and applicable footnote disclosures.
In September 2019, the Company issued 6,591 new shares to the board of directors relating their remuneration for the first half of 2019, of which part was paid in cash and part through the issuance of new shares.

13.
SHARE BASED PAYMENTS
On September 7, 2018, the Company's Board of Directors approved a Share Option Scheme. The Share Option Scheme permits the Board of Directors, at its discretion, to grant options to acquire shares in the Company to employees and directors of the Company or its subsidiaries. The subscription price for all options granted under the scheme is reduced by the amount of all dividends declared by the Company in the period from the date of grant until the date the option is exercised, provided the subscription price is never reduced below the par value of the share. The vesting periods of options granted under the Share Option Scheme will be specific to each grant. There is no maximum number of shares authorized for awards of equity share options and authorized, un-issued or treasury shares of the Company may be used to satisfy exercised options.
On September 7, 2018, the Company granted 111,000 share options, with an initial exercise price of $14.30 per share, to an officer and employees in accordance with the terms of the Share Option Scheme. The grant date was determined as the date of resolution of the grant by the Board of Directors. The options vest equally based on three years of continuous service and have a five year contractual term.
On November 1, 2018, the Company granted 30,000 share options, with an initial exercise price of $17.60 per share, to an officer in accordance with the terms of the Share Option Scheme. The grant date was determined as the date of resolution of the grant by the Board of Directors. The options vest equally based on three years of continuous service and have a five year contractual term.
The fair value of the granted option awards is estimated on the date of grant using a Black-Scholes option valuation model with the following assumptions:
 
 
September 2018

 
November 2018

Risk free interest rate
 
2.82
%
 
2.32
%
Expected life (years)
 
5

 
5

Expected volatility
 
32.0
%
 
52.0
%
Expected dividend yield
 
—
%
 
—
%

The risk-free interest rate was estimated using the interest rate on five-year NOK treasury zero coupon issues. The volatility was estimated using historical volatility of share price data. The dividend yield has been estimated at 0% as the exercise price is reduced by all dividends declared by the Company from the date of grant to the exercise date. It was assumed that all of the options granted in September and November 2018 will vest and therefore no forfeitures were assumed. The effect of forfeitures is recognized as incurred.
The following table summarizes the unvested option activity for the year ended December 31, 2019 and 2018:

F-19


 
 
Number of non-vested options

 
Number of vested options

 
Weighted average exercise price per share ($)

 
Weighted average remaining contractual term (years)
 
Weighted average grant date fair value ($)

 
Aggregate intrinsic value

At December 31, 2017
 
—

 
—

 
—

 
0.0
 
—

 
—

Granted during the year
 
141,000

 
—

 
15.00

 
5.0
 
15.00

 
2,115,300

Converted during the year
 
—

 
—

 
—

 
0.0
 
—

 
—

Forfeited during the year
 
—

 
—

 
—

 
0.0
 
—

 
—

Expired during the year
 
—

 
—

 
—

 
0.0
 
—

 
—

At December 31, 2018
 
141,000

 
—

 
15.00

 
4.6
 
15.00

 
2,115,300

Granted during the year
 
—

 
—

 
—

 
0.0
 
—

 
—

Converted during the year
 
—

 
—

 
—

 
0.0
 
—

 
—

Forfeited during the year
 
—

 
—

 
—

 
0.0
 
—

 
—

Expired during the year
 
—

 
—

 
—

 
0.0
 
—

 
—

At December 31, 2019
 
94,000

 
47,000

 
14.90

 
3.6
 
15.00

 
2,115,300


As at December 31, 2019, there was $0.5 million (2018: $0.7 million) in unrecognized stock compensation expense related to non-vested options. Stock compensation expense of $0.2 million was recognized in 2019, recognized in administrative expenses (2018: $0.1 million). When a share option is exercised, the Board of Directors can use their right, according to the Bye-laws, to issue new shares or if the Company has its own shares these can also be used.

14. FINANCIAL INSTRUMENTS
Derivative instruments that economically hedge exposures are used for risk management purposes, but these instruments are not designated as hedges for accounting purposes.
Credit risk is the failure of the counterparty to perform under the terms of the derivative instrument. When the fair value of a derivative instrument is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative instrument is negative, the Company owes the counterparty, and, therefore, the Company is not exposed to the counterparty's credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with major banking and financial institutions. The derivative instruments entered into by the Company do not contain credit risk-related contingent features. The Company has not entered into master netting agreements with the counterparties to its derivative financial instrument contracts.
Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates, currency exchange rates or commodity prices. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
The Company assesses interest rate risk by monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating economical hedging opportunities.
In order to reduce the risk associated with fluctuations in interest rates, the Company has entered into five interest rate swap transactions during the year ended December 31, 2019, whereby LIBOR on a notional principal of $175 million (2018: $0.0 million), has been swapped to a fixed rate, with a concurrent maturity date of June 7, 2024.
Our interest rate swap contracts as at December 31, 2019 are summarized as follows:
(in thousands of $)
 
Notional principal

 
Inception date
 
Maturity date
 
Fixed Interest Rate

Receiving floating, pay fixed
 
25,000

 
June 2019
 
June 2024
 
2.00
%
Receiving floating, pay fixed
 
25,000

 
June 2019
 
June 2024
 
1.38
%
Receiving floating, pay fixed
 
50,000

 
June 2019
 
June 2024
 
2.15
%
Receiving floating, pay fixed
 
50,000

 
August 2019
 
June 2024
 
2.15
%
Receiving floating, pay fixed
 
25,000

 
September 2019
 
June 2024
 
1.40
%


F-20


At December 31, 2019, the Company held an asset of $0.6 million (2018: $0.0 million) and a liability of $2.4 million (2018: $0.0 million) in relation to these interest rate swaps. The Company recorded an unrealized loss on the interest rate swaps of $1.6 million (2018: $0.0 million) in the year.

15.
SHORT-TERM AND LONG-TERM DEBT
(in thousands of $)
 
2019

 
2018

U.S. dollar denominated floating rate debt
 
 
 
 
$315 Million Term Loan Facility
 
—

 
304,500

$250 Million Term Loan Facility
 
245,313

 
—

$50 million term loan under $100 Million Facility
 
49,342

 
—

Flex Rainbow Sale and Leaseback
 
147,657

 
155,530

Total U.S. dollar floating rate debt
 
442,312

 
460,030

 
 
 
 
 
U.S. dollar denominated fixed rate debt
 
 
 
 
Hyundai Glovis Sale and Charterback
 
294,263

 
—

Total U.S. dollar denominated fixed rate debt
 
294,263

 
—

 
 
 
 
 
U.S. dollar denominated revolving credit facilities
 
 
 
 
$270 Million Revolving Credit Facility
 
—

 
—

$50 million revolving tranche under $100 Million Facility
 
49,342

 
—

Total U.S. dollar denominated revolving credit facilities
 
49,342

 
—

 
 
 
 
 
Total debt
 
785,917

 
460,030

 
 
 
 
 
Less
 
 
 
 
Current portion of debt
 
36,259

 
23,625

Long-term portion of debt issuance costs
 
5,375

 
4,803

Long-term debt
 
744,283

 
431,602


$315 million Term Loan Facility
In December 2017, the Company, through three of its vessel owning subsidiaries, entered into a $315 million secured term loan facility (the "$315 Million Term Loan Facility") with a syndicate of banks to partially finance the first three vessels in our fleet, the Flex Endeavour, the Flex Enterprise, and the Flex Ranger, which served as collateral under the facility. In July 2019, the Company prepaid the total outstanding principal of $294.1 million under the facility. The outstanding principal under the tranche relating to the vessel Flex Ranger of $99.8 million was prepaid with the proceeds from the $100 Million Facility (detailed below). The outstanding principal on the tranches for Flex Endeavour and Flex Enterprise of $194.3 million in aggregate were prepaid using the proceeds from the Hyundai Glovis Sale and Charterback (detailed below). The prepayments were considered extinguishments, resulting in the write-off of remaining unamortized debt issuance costs of $3.4 million during the year.


F-21


Flex Rainbow Sale and Leaseback
In July 2018, the Company, through its wholly-owned subsidiary, Flex LNG Rainbow Ltd., which owned the Flex Rainbow, entered into a sale leaseback transaction (the "Flex Rainbow Sale and Leaseback"), for the vessel with a Hong Kong-based lessor for a lease period of 10 years. The gross sales price under the lease was $210 million, of which $52.5 million represented advance hire for the 10 years lease period. The agreement includes fixed price purchase options, whereby we have the option to re-purchase the vessel at or after the second anniversary of the agreement, and on each anniversary thereafter, until the end of the lease period. The bareboat rate payable under the lease has a fixed element, treated as principal repayment, and a variable element based on LIBOR plus a margin of 3.50% per annum calculated on the outstanding under the lease. The facility includes a covenant that requires us to provide additional security, by way of a deposit, as necessary to maintain the fair market value of the vessel at not less than a specified percentage of the principal amount outstanding under the lease. As of December 31, 2019, the net outstanding balance under the lease was $146.4 million (2018: $154.0 million).
$270 Million Revolving Credit Facility
In March 2017, in connection with the Company's acquisition of the shipbuilding contracts for the Flex Endeavour and the Flex Enterprise, the Company, through its wholly-owned subsidiary, Flex LNG Fleet Limited, entered into a $270 million revolving credit facility (the "$270 Million Revolving Credit Facility") with Sterna Finance Ltd., ("Sterna"), a company related to Geveran. In November 2019, the Company cancelled the $270 Million Revolving Credit Facility. The facility was undrawn at the time of cancellation.
$250 million Term Loan Facility
In April 2019, the Company, through two of its vessel owning subsidiaries, entered into a $250 million secured term loan facility (the "$250 Million Term Loan Facility") with a syndicate of banks for the part financing of the newbuildings Flex Constellation and Flex Courageous. The first $125 million tranche was drawn in June 2019 upon delivery of the Flex Constellation, and the remaining $125 million tranche was drawn in August 2019 upon delivery of the Flex Courageous. The facility has a term of five years from delivery of the last vessel, Flex Courageous, and bears interest at LIBOR plus a margin of 2.35% per annum. The facility contains a minimum value clause, and financial covenants that require the Company, on a consolidated basis, to maintain: a book equity ratio of minimum 0.25 to 1; a positive working capital; and minimum liquidity, including undrawn credit lines with a remaining term of at least six months, being the higher of $25 million and an amount equal to 5% of our total interest bearing debt net of any cash and cash equivalents. As of December 31, 2019, the net outstanding balance under the facility was $242.5 million (2018: $0.0 million).
$100 Million Facility
In July 2019, the Company, through one of its vessel owning subsidiaries, entered into a $100 million term loan and revolving credit facility (the "$100 Million Facility") with a syndicate of banks to refinance the vessel Flex Ranger. The new facility is divided into a $50 million term loan and a $50 million revolving credit facility. The full amount of $100 million was drawn on July 19, 2019, and the proceeds were used to prepay the outstanding balance of $99.8 million relating to the Flex Ranger under the existing $315 Million Term Loan Facility. The new facility has a term of five years and bears interest of LIBOR plus a margin of 2.25% per annum. The facility contains a minimum value clause, and financial covenants that require the Company, on a consolidated basis, to maintain: a book equity ratio of minimum 0.25 to 1; a positive working capital; and minimum liquidity, including undrawn credit lines with a remaining term of at least six months, being the higher of $25 million and an amount equal to 5% of our total interest bearing debt net of any cash and cash equivalents. In August 2019, the revolving tranche under the $100 Million Facility was prepaid in full, and in December 2019, the full amount of $49.3 million was drawn. As of December 31, 2019, the net outstanding balance under the facility was $98.5 million (2018: $0.0 million).
Hyundai Glovis Sale and Charterback
In April 2019, the Company, through two of its vessel owning subsidiaries, entered into sale and time charter agreements with Hyundai Glovis Co. Ltd. ("Hyundai Glovis") for the vessels Flex Endeavour and Flex Enterprise (the "Hyundai Glovis Sale and Charterback"). The transactions were executed at the end of July 2019, whereby the vessels were sold for a gross consideration of $210 million per vessel, with a net consideration of $150 million per vessel adjusted for a non-amortizing and non-interest bearing seller's credit of $60 million per vessel. The vessels have been chartered back on a time-charter basis to the vessel owning subsidiaries for a period of ten years. The agreements include fixed price purchase options, whereby the Company will have annual options to acquire the vessels during the term of the time-charters. The first option is exercisable on the third anniversary of closing of the transactions and the last option at expiry of the ten years charter periods. At the end of the ten years charter periods, Hyundai Glovis will have the right to sell the vessels back to the Company for a net consideration of $75 million per vessel, net of the $60

F-22


million seller's credit per vessel. As of December 31, 2019, the net outstanding balance under the lease was $291.5 million (2018: $0.0 million).
16.
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The principal financial assets of the Company at December 31, 2019 and 2018, consist primarily of cash and cash equivalents, restricted cash, other current assets, receivables due from related parties and derivative instruments receivable. The principal financial liabilities of the Company consist of payables due to related parties, accounts payable, other current liabilities, derivative instruments payable and secured long-term debt.
The fair value measurements requirement applies to all assets and liabilities that are being measured and reported on a fair value basis. The assets and liabilities carried at fair value should be classified and disclosed in one of the following three categories based on the inputs used to determine its fair value:
Level 1: Quoted market prices in active markets for identical assets or liabilities;
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data;
Level 3: Unobservable inputs that are not corroborated by market data.
The fair value of the Company's cash and cash equivalents and restricted cash approximates their carrying amounts reported in the accompanying consolidated balance sheets.
The carrying value of other current assets, receivables from related parties, payables due to related parties, accounts payable and other current liabilities approximate their fair value.

The fair value of long-term debt with floating interest rate and the fair value of long-term debt with fixed interest rate is estimated based on the average of the current rates offered to the Company for all debt facilities. The carrying value approximates the fair market value for the floating and fixed rate long-term debt. This has been categorized at Level 2 on the fair value measurement hierarchy.

The following table includes the estimated fair value and carrying value of those assets and liabilities.
 
 
 
 
2019

 
2019

 
2018

 
2018

(in thousands of $)
 
Fair value hierarchy level
 
Carrying value of asset (liability)

 
Fair value
asset (liability)

 
Carrying value of asset (liability)

 
Fair value asset
(liability)

Cash and cash equivalents
 
Level 1
 
129,098

 
129,098

 
55,097

 
55,097

 
 
 
 
 
 
 
 
 
 
 
Derivative instruments
 
Level 2
 
636

 
636

 
—

 
—

Derivative instruments
 
Level 2
 
(2,371
)
 
(2,371
)
 
—

 
—

Long-term debt*
 
Level 2
 
(778,849
)
 
(785,917
)
 
(454,967
)
 
(460,030
)
* Carrying value of Long-term debt is shown net deduction of debt issuance cost, while fair value of Long-term debt is shown gross.
There have been no transfers between different levels in the fair value hierarchy during the year.
Assets Measured at Fair Value on a Recurring Basis
The fair value (Level 2) of interest rate swap derivative agreements is the present value of the estimated future cash flows that we would receive or pay to terminate the agreements at the balance sheet date, taking into account, as applicable, fixed interest rates on interest rate swaps, current interest rates, forward rate curves and the credit worthiness of both us and the derivative counterparty.
Concentration of Risk

F-23


There is a concentration of credit risk with respect to cash and cash equivalents to the extent that substantially all of the amounts are carried with Danske Bank and DNB. There is a concentration of credit risk with respect to derivative receivables to the extent that the counterparts under the derivatives are Danske Bank, SEB and Nordea. However, we believe this risk is remote, as these financial institutions are established and reputable establishments with no prior history of default. We do not require collateral or other security to support financial instruments subject to credit risk.

17.
RELATED PARTY TRANSACTIONS
Related Party Balances
A summary of balances due from/(to) related parties at December 31, 2019 and 2018 is as follows:
(in thousands of $)
 
2019

 
2018

Seatankers Management Co. Ltd
 
(94
)
 
317

Seatankers Management Norway AS
 
—

 
352

Frontline Ltd
 
601

 
1,051

Frontline Management (Bermuda) Limited
 
(35
)
 
(62
)
Frontline Corporate Services Ltd
 
(12
)
 
—

Frontline Management AS
 
(16
)
 
(143
)
Flex LNG Fleet Management AS
 
(223
)
 
—

SFL Corporation Ltd
 
(2
)
 
—

Related party balance
 
219

 
1,514


Related Party Transactions
A summary of expenses incurred from related parties for the years ended December 31, 2019, 2018, and 2017 are as follows:
(in thousands of $)
 
2019

 
2018

 
2017

Seatankers Management Co. Ltd
 
548

 
616

 
300

Seatankers Management Norway AS
 
84

 
58

 
—

Frontline Management (Bermuda) Limited
 
711

 
1,864

 
—

Frontline Management AS
 
336

 
469

 
1,000

Flex LNG Fleet Management AS
 
223

 
—

 
—

Total related party transactions
 
1,902

 
3,007

 
1,300


In March 2017, we issued 7,800,000 of our ordinary shares to Geveran as partial consideration for our acquisition of the Flex Endeavor and the Flex Enterprise, which we purchased from entities related to Geveran through the novation of the newbuilding contracts for the vessels. In May 2017 the company entered into agreements with entities related to Geveran for the acquisition of Flex Constellation and Flex Courageous for the purchase price of $180.0 million per vessel. ​The company made advance payment of $36.0 million per vessel to the sellers in 2017.
In June 2019, the Company made a final payment of $145.1 million to a related party of Geveran upon the delivery of the fifth LNG carrier Flex Constellation. For more information see Note 7: Vessel Purchase Prepayments.
In August 2019, the Company made a final payment of $145.2 million to a related party of Geveran upon the delivery of the sixth LNG carrier Flex Courageous. For more information see Note 7: Vessel Purchase Prepayments.
In November 2019, the Company cancelled the $270 Million Revolving Credit Facility. For more information see Note 15: Short Term and Long Term Debt.
General Management Agreements

F-24


We have an administrative services agreement with Frontline Management (Bermuda) Limited and Frontline Management AS (together referred to as "Frontline Management") under which they provide us with certain administrative support services, for which we pay our allocation of the actual costs they incur on our behalf, plus a margin. In the year ended December 31, 2019, we paid Frontline Management $0.5 million for these services (2018: $0.7 million).
We also have an agreement with Seatankers Management Co. Ltd. ("Seatankers") under which it provides us with certain advisory and support services, for which we pay our allocation of the actual costs they incur on our behalf, plus a margin. In the year ended December 31, 2019, we paid Seatankers $0.5 million for such services (2018: $0.6 million).
Newbuilding Supervision
We received newbuilding supervision services from Frontline Management for two of our vessels that were under construction at SHI, the Flex Ranger and the Flex Rainbow, and two of our vessels that were under construction at DSME, the Flex Enterprise and Flex Endeavour. In consideration for these services, we paid Frontline Management a monthly fee of $115,745 for each of our vessels under construction. These agreements terminated on the last day of the month in which the respective vessel was delivered to us. Since all of the vessels delivered during 2019 and the newbuildings to be delivered in 2020 and 2021, are on a Norwegian Sales Form basis there were no fees paid for these services for the year ended December 31, 2019 (2018: $1.5 million).
Technical Management and Support Services
We receive technical management supervision and other support services from Frontline Management for our vessels in operation. These services include technical supervision, purchase of goods and services within the ordinary course of business, insurances and other services relating to our vessels in operation. Frontline Management subcontracts these services to Frontline Management AS or other associated companies from time to time. Frontline Management provides quarterly invoices for services rendered and in addition it receives a monthly payment of $2,772 for each of our vessels in operation. Each of the parties may terminate the contract on three months' notice. The fee is subject to annual review. In the year ended December 31, 2019, we paid Frontline Management $0.5 million for such services (2018: $0.1 million).
In October 2019, Flex LNG Fleet Management AS, a related party, received a document of compliance under the ISM Code, qualifying it for technical ship management services. The technical ship management for five of our six vessels in operation was transferred to Flex LNG Fleet Management AS between November 2019 and March 2020, with the remaining vessel scheduled to be transferred during 2020. Flex LNG Fleet Management AS will also be responsible for the technical ship management of our seven newbuildings. Under the agreements between Flex LNG Fleet Management AS and our vessel owning subsidiaries, Flex LNG Fleet Management AS is paid a fixed fee of $359,000 per vessel per annum for the provision of technical management services for each of our vessels in operation. The fee is subject to annual review. During the year ended December 31, 2019, we paid $0.2 million to Flex LNG Fleet Management AS for these services.

18.
COMMITMENTS AND CONTINGENT LIABILITIES
Capital commitments for the Company as at December 31, 2019 are detailed in the table below.
(in thousands of $)
 
Long-term debt obligations

 
Newbuildings

 
Total

2020
 
36,259

 
685,000

 
721,259

2021
 
37,901

 
252,000

 
289,901

2022
 
38,665

 
—

 
38,665

2023
 
39,478

 
—

 
39,478

2024
 
295,563

 
—

 
295,563

Thereafter
 
338,051

 
—

 
338,051

Total
 
785,917

 
937,000

 
1,722,917


As at December 31, 2019, the Company had seven vessels to be delivered on a Norwegian Sales Form basis, whereby the Company has paid a deposit to the relevant seller at the time of entering into the agreements, with the remaining purchase price being payable

F-25


upon delivery and transfer of title of the relevant vessel to us. The remaining capital expenditures on these newbuildings will include building supervision, but excludes future change requests, sundry buyers' supplies, fit out, studies and lube oils.

19.
MINIMUM COMMITTED REVENUE
Committed time charter revenues for the Company as at December 31, 2019 are detailed in the table below. Subsequent events, after the balance sheet date but before the financial statements were issued, could affect the value of the revenue realized due to market linked contracts and the effect of newly signed contracts, changes or options, which have been excluded. For market linked contracts only the floor rate per the contracts has been used for the purposes of calculating committed revenue whereas the actual revenue realized will only be determined at the time of invoicing. The amounts below represent committed revenue rather than the actual value in cash due in the next year. Hire relating to 2020 committed revenue is generally invoiced in advance and is included in the accounts as deferred charter revenue. As of December 31, 2019, $5.4 million was unpaid and is included in trade accounts receivables.
(in thousands of $)
 
 
2020
 
65,472

2021
 
29,312

2022
 
14,600

2023
 
14,600

2024
 
14,600

Thereafter
 
8,400

Total
 
146,984



20.
SUBSEQUENT EVENTS
$629 million Term Loan Facility
In November 2019, the Company received commitments from a syndicate of banks and the Export-Import Bank of Korea ("KEXIM") for a $629 million financing for the five newbuildings scheduled for delivery in 2020 (the "$629 Million Term Loan Facility"). The facility agreement was signed in February 2020. The facility is divided into a commercial bank loan of $250 million (the "Commercial Loan"), a KEXIM guaranteed loan, funded by commercial banks, of $189.1 million (the "KEXIM Guaranteed Loan") and a KEXIM direct loan of $189.9 million (the "KEXIM Direct Loan").
The amount available for drawdown upon delivery of each vessel is limited to the lower of (i) 65% of the fair market value of the relevant vessel and (ii) $125.8 million. The facility includes an accordion option of up to $10 million per vessel subject acceptable long-term employment. Further, the Company may request to replace any two of the vessels with the two vessels scheduled for delivery in 2021.
The combined repayment profile for the KEXIM Guaranteed Loan and the KEXIM Direct Loan is 12 years, while the Commercial Loan is structured as a non-amortizing loan, giving an overall repayment profile for the facility of 20 years. The Commercial Loan bears interest at LIBOR plus a margin of 2.35% per annum and has a term of five years from delivery of the final vessel. The KEXIM Guaranteed Loan bears interest at LIBOR plus a margin of 1.2% per annum and the KEXIM Direct Loan at LIBOR plus a margin of 2.25% per annum. The KEXIM Guaranteed Loan has a term of 6 years from delivery of each vessel and the KEXIM Direct Loan a term of 12 years from delivery of each vessel, provided however that these loans will mature at the same time as the Commercial Loan if the Commercial Loan has not been refinanced at terms acceptable to the lenders.
The facility includes a minimum value clause, and financial covenants that will require the Company, on a consolidated basis, to maintain: a book equity ratio of minimum 0.25 to 1; a positive working capital; and minimum liquidity, including undrawn credit lines with a remaining term of at least 6 months, being the higher of $25 million and an amount equal to 5% of total interest bearing debt, net of any cash and cash equivalents.

F-26


The facility remains subject to customary closing conditions and is expected to be drawn upon delivery of the vessels from the relevant shipyard.
Interest Rate Swap Transactions
Between January and March 2020, we entered into seven interest rate swap transactions: four have a total notional principal of $225 million with concurrent effective dates of July 2020 and concurrent maturity of July 2025; and three have a total notional principal of $85 million with a concurrent effective date of September 2020 and concurrent maturity of September 2025. The transactions all swapped a floating rate to a fixed rate with a combined weighted average interest rate of 1.32%.
Dividend
On February 25, 2020, the Company’s Board of Directors declared a cash dividend for the fourth quarter of 2019 of $0.10 per share. The dividend was paid on March 25, 2020, to shareholders on record as of March 10, 2020.

Time Charter Extensions

In January 2020, a 12-month extension option was exercised by the charterer under the time-charter agreement for Flex Enterprise, giving a firm period until the end of the first quarter 2021.

Appointment of Chief Commercial Officer and issuance of Share Options

On April 2, 2020, the Company issued 45,000 share options to Ben Martin in connection with his appointment as Chief Commercial Officer as from April 1, 2020. The share options will have a five-year term and will vest equally one third over a three-year vesting period. The options have an exercise price of: $5.10 for those vesting after one year; $7.60 for those vesting after two years; and $10.20 for those vesting after three years.

Coronavirus (COVID-19)

The Company’s business could be materially and adversely affected by the risks, or the public perception of the risks and travel restrictions related to the novel coronavirus (COVID-19) pandemic. The Company is unable to reasonable predict the estimated length or severity of the COVID-19 pandemic on future operating results.




F-27


Exhibit 2.2

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

As of December 31, 2019, Flex LNG Ltd. (the “Company”) only had ordinary shares registered under Section 12 of the Securities Exchange Act of 1934, as amended.

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

DESCRIPTION OF ORDINARY SHARES

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

Issued and Authorized Capitalization

On March 7, 2019, we effected a 1-for-10 reverse stock split of our then-outstanding ordinary shares. The reverse stock split reduced the number of our issued and outstanding ordinary shares from 541,043,903 shares to 54,103,993 shares and affected all issued and outstanding ordinary shares. The number of our authorized ordinary shares was consequently reduced from 100,000,000,000 to 10,000,000,000 and the par value increased from $0.01 per share to $0.10 per share. The terms of our ordinary shares were not affected by the reverse stock split. The respective number of ordinary shares issued and outstanding as of the last day of the fiscal year for the annual report on Form 20-F to which this description is attached or incorporated by reference as an exhibit is provided on the cover page of such annual report on Form 20-F.

Dividends

Holders of ordinary shares are entitled to receive dividend and distribution payments, pro rata based on the number of ordinary shares held, when, as and if declared by the Board, in its sole discretion. Any future dividends declared will be at the discretion of the Board and will depend upon our financial condition, earnings and other factors.

As a Bermuda exempted company, we are subject to Bermuda law relating to the payment of dividends. We may not pay any dividends if, at the time the dividend is declared or at the time the dividend is paid, there are reasonable grounds for believing that, after giving effect to that payment;

•we will not be able to pay our liabilities as they fall due; or
•the realizable value of our assets, is less than our liabilities.

In addition, since we are a holding company with no material assets, and conduct our operations through subsidiaries, our ability to pay any dividends to shareholders will depend on our subsidiaries' distributing to us their




earnings and cash flow. Some of our loan agreements currently limit or prohibit our subsidiaries' ability to make distributions to us and our ability to make distributions to our shareholders.

Redemption of Preference Shares

The Company may with the approval of the shareholders issue preference shares which are redeemable at the option of the Company or the holder, subject to the Bermuda Companies Act (the “Companies Act”) the Memorandum of Continuance and the Bye-laws.

Preemptive Rights

Bermuda law does not provide a shareholder with a preemptive right to subscribe for additional issues of a company's shares unless, and to the extent that, the right is expressly granted to the shareholder under the bye-laws of a company or under any contract between the shareholder and the company. Holders of our ordinary shares do not have any preemptive rights pursuant to the Bye-laws.

Voting Rights

The holders of our ordinary shares will be entitled to one vote per share on each matter requiring the approval of the holders of the ordinary shares. At any annual or special general meeting of shareholders where there is a quorum, a simple majority vote will generally decide any matter, unless a different vote is required by express provision of the Bye-laws or the Companies Act.

The Companies Act and our Bye-laws do not confer any conversion or sinking fund rights attached to our ordinary shares.

Liquidation

In the event of our liquidation, dissolution or winding up, the holders of ordinary shares are entitled to share in our assets, if any, remaining after the payment of all of our debts and liabilities, subject to any liquidation preference on any outstanding preference shares.

Listing

Our ordinary shares are listed on the New York Stock Exchange ("NYSE") and Oslo Stock Exchange ("OSE") under the symbol "FLNG."

Limitations on Ownership

Our ordinary shares may be freely transferred among persons who are residents and non-residents of Bermuda.

Modification of Rights

Subject to the Companies Act, all or any of the special rights for the time being attached to any class of shares for the time being issued may from time to time (whether or not the Company is being wound up) be altered or abrogated with the consent in writing of the holders of not less than seventy five percent of the issued shares of that class or with the sanction of a resolution passed at a separate general meeting of the holders of such shares voting in person or by proxy. To any such separate general meeting, all the provisions of our Bye-laws as to general meetings of the Company shall mutatis mutandis apply, but so that the necessary quorum shall be two or more persons holding or representing by proxy any of the shares of the relevant class, that every holder of shares of the relevant class shall be entitled on a poll to one vote for every such share held by him and that any holder of shares of the relevant class present in person or by proxy may demand a poll; provided, however, that if the Company or a class of Shareholders shall have only one Shareholder, one Shareholder present in person or by proxy shall constitute the necessary quorum.

Transfer Restrictions





The Board shall decline to register the transfer of any share, and shall direct the Registrar to decline (and the Registrar shall decline) to register the transfer of any interest in any share held through a Branch Register, to a person where the Board is of the opinion that such transfer might breach any law or requirement of any authority or any Listing Exchange until it has received such evidence as it may require to satisfy itself that no such breach would occur.

The Board may decline to register the transfer of any share, and may direct the Registrar to decline (and the Registrar shall decline if so requested) to register the transfer of any interest in any share held through a Branch Register, if the registration of such transfer would be likely, in the opinion of the Board, to result in fifty percent or more of the aggregate issued share capital of the Company or shares of the Company to which are attached fifty percent or more of the votes attached to all outstanding shares of the Company being held or owned directly or indirectly, (including, without limitation, through a Branch Register) by a person or persons resident for tax purposes in Norway, provided that this provision shall not apply to the registration of shares in the name of the Registrar as nominee of persons whose interests in such shares are reflected in a Branch Register, but shall apply, mutatis mutandis, to interests in shares of the Company held by persons through a Branch Register.
    
If fifty percent or more of the aggregate issued share capital of the Company or shares to which are attached fifty percent or more of the votes attached to all outstanding shares of the Company are found to be held or owned directly or indirectly (including, without limitation, through a Branch Register) by a person or persons resident for tax purposes in Norway, other than a Registrar in respect of those shares registered in its name in the Register as nominee of persons whose interests in such shares are reflected in a Branch Register, the Board shall make an announcement to such effect through the Oslo Stock Exchange, and the Board and the relevant Registrar shall thereafter be entitled and required to dispose of such number of shares of the Company or interests therein held or owned by such persons as will result in the percentage of the aggregate issued share capital of the Company held or owned as aforesaid being less than fifty percent, and, for these purposes, the Board and the relevant Registrar shall in such case dispose of shares or interests therein owned by persons resident for tax purposes in Norway on the basis that the shares or interests therein most recently acquired shall be the first to be disposed of (i.e. on the basis of last acquired first sold) save where there is a breach of the obligation to notify tax residency pursuant to the foregoing, in which event the shares or interests therein of the person in breach thereof shall be sold first. Shareholders shall not be entitled to raise any objection to the disposal of their shares, but the provisions of our Bye-laws relating to the protection of purchasers of shares sold under lien or upon forfeiture shall apply mutatis mutandis to any disposal of shares or interests therein made in accordance with Bye-law 41.

Alteration of Capital
    
The Company may from time to time by resolution: (a) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled; and (b) change the currency denomination of its share capital.

Where any difficulty arises in regard to any division, consolidation, or sub-division under Bye-law 5A, the Board may settle the same as it thinks expedient and, in particular, may arrange for the sale of the shares representing fractions and the distribution of the net proceeds of sale in due proportion amongst the shareholders who would have been entitled to the fractions, and for this purpose the Board may authorize some person to transfer the shares representing fractions to the purchaser thereof, who shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale.

Subject to the Companies Acts and to any confirmation or consent required by law or our Bye-laws, the Company may by Resolution from time to time convert any preference shares into redeemable preference shares.

Board of Directors

The Bye-laws provide that our board of directors shall consist of not less than two members and shall at all times comprise a majority of directors who are not residents in the United Kingdom. Our shareholders may change




the number of directors by a simple majority vote of shareholders at any annual or general meeting. Each director is elected at an annual general meeting of shareholders for a term commencing upon election and each director shall serve until re-elected or their successors are appointed on the date of the next scheduled annual general meeting. The Bye-laws do not permit cumulative voting for directors.

Subject to the Companies Act, the Bye-laws permit our directors to engage in any transaction or arrangement with us or in which we may otherwise be interested. Additionally, as long as our director declares the nature of his or her interest at the first opportunity at a meeting of our board of directors, he or she shall not by reason of his office be accountable to us for any benefit which he or she derives from any transaction to which the Bye-laws permit him or her to be interested.
    
Our directors are not required to retire because of their age and are not required to be holders of our ordinary shares.

Comparison of Bermuda Law to Delaware Law

The following table provides a comparison between some statutory provisions of the Delaware General Corporation Law and the Bermuda Companies Act relating to shareholders’ rights.




 
Delaware
 
 
Bermuda
 
Dividends
 
Under Delaware law, unless otherwise provided in a corporation's certificate of incorporation, directors may declare and pay dividends upon the shares of its capital stock either (i) out of its surplus or (ii) if the corporation does not have surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.
 
The excess, if any, at any given time, of the net assets of the corporation over the amount so determined to be capital is surplus. Net assets means the amount by which total assets exceed total liabilities.
 
Dividends may be paid in cash, in property, or in shares of the corporation's capital stock.
 
Under the Companies Act, a company may declare and pay a dividend, or make a distribution out of contributed surplus, provided there are reasonable grounds for believing that after any such payment (a) the company will be able to pay its liabilities as they become due and (b) the realizable value of its assets will be greater than its liabilities. (Companies Act § 54).
 
 
 
Directors
 
Number of board members shall be fixed by, or in a manner provided by, the bylaws, unless the certificate of incorporation fixes the number of directors, in which case a change in the number shall be made only by amendment of the certificate of incorporation. 
 
The maximum number of directors may be set by the shareholders at a general meeting or in accordance with the bye-laws. The maximum number of directors is usually fixed by the shareholders at the annual general meeting and may be fixed at a special general meeting. Only the shareholders may increase or decrease the number of directors’ seats last approved by the shareholders. If the maximum number of directors fixed by the shareholders has not been elected by the shareholders, the shareholders may authorize the board of directors to fill any vacancies. (Companies Act §91).
 

Dissenter’s Rights of Appraisal
 
Appraisal rights shall be available for the shares of any class or series of stock of a corporation in a merger or consolidation, subject to limited exceptions, such as a merger or consolidation of corporations listed on a national securities exchange in which listed stock is the offered consideration.
 
In the event of an amalgamation or merger of a Bermuda company with another company or corporation, a shareholder of the Bermuda company who did not vote in favor of the amalgamation or merger and is not satisfied that fair value has been offered for such shareholder’s shares may, within one month of notice of the shareholders meeting, apply to the Supreme Court of Bermuda to appraise the fair value of those shares. (Companies Act § 106(6)).
Shareholder Derivative Actions
 




Class actions and derivative actions generally are available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In any derivative suit instituted by a shareholder or a corporation, it shall be averred in the complaint that the plaintiff was a shareholder of the corporation at the time of the transaction of which he complains or that such shareholder's stock thereafter developed upon such shareholder by operation of law. 
 
Generally, class actions and derivative actions are not available to shareholders under Bermuda law. (See generally, Bermuda Companies Act).

Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is
alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the bye-laws.

Bermuda courts would further give consideration to acts that are alleged to constitute a fraud against the minority of shareholders, or, for instance, where an act requires the approval of a greater percentage of the company's shareholders than that which actually approved it.
 


Shareholder Meetings and Voting Rights
 
Shareholder meetings may be held at such times and places as designated in the certificate of incorporation or the bylaws, or if not so designated, as determined by the Board of Directors.
 
Special meetings of the shareholders may be called by the Board of Directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws, or if not so designated, as determined by the Board of Directors.
 
Written notice shall be given not less than 10 nor more than 60 days before the meeting. Whenever shareholders are required to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, and the means of remote communication, if any.
 
Shareholder meetings may be held within or without the State of Delaware.
 
Any action required to be taken by a meeting of shareholders may be taken without a meeting if a consent for such action is in writing and is signed by shareholders having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
 
Shareholder meetings may be called by the Board of Directors and must be called upon the request of shareholders holding not less than 10% of the paid-up capital of the company carrying the right to vote at a general meeting. (Companies Act §74(1)).

Special meetings may be convened by the Board of Directors whenever they see fit, and the meetings shall be called special general meetings. (Companies Act §71(1)).

May be held in or outside of Bermuda.

Notice:
–
Notice of all general meetings shall specify the place, the day and hour of the meeting. (Companies Act §71(3)).

–
Notice of special general meetings shall specify the place, the day, hour and general nature of the business to be considered at the meeting. (Companies Act §71(3)).

–
Notwithstanding any provision in the bye-laws of a company, at least five days’ notice shall be given of a company meeting. (Companies Act §75(1)).

The accidental omission to give notice to, or the non-reciept of a notice of a meeting by any person entitled to receive notice does not invalidate the proceedings. (Companies Act §71(4)).
 
 
Generally, any action which may be done by resolution of a company in a general meeting may be done by resolution in writing. (Companies Act §77A).




 
 
Shareholders may act by written resolution to elect directors, but may not act by written resolution to remove directors. (Companies Act §77A(6)(b)).

Except as otherwise provided in the bye-laws of a company or the Companies Act, any action or resolution requiring the approval of the shareholders may be passed by a simple majority of votes cast (Companies Act §77(2)).

A shareholder may authorize another person or persons to act for him by proxy. (Companies Act §77(1)).

The bye-laws may specify the number to constitute a quorum for a general meeting of the Company. In the case of a company having only one member, one member present in person or by proxy constitutes the necessary quorum. (Companies Act § 71(5)).

The bye-laws may provide for cumulative voting in the election of directors. (Companies Act §77).





MEMORANDUM OF AGREEMENT SALEFORM 2012 Norwegian Shipbrokers' Association's Memorandum of Agreement for sale and purchase of ships Dated: 25 April 2019 FLEX LNG ENDEAVOUR LIMITED, a company incorporated in the Marshall Islands, having its registered office at Trust Company Complex, Ajeltake Road, Ajelake Island, Majuro MH 96960, Marshall Islands-~,Qen~^—1~' `'~;-eF&), hereinafter called the "Sellers", have agreed to sell, and TRIPLE H NO. 3 LTD-, a company incorporated in Malta-N-eme of buyer--, having its registered office at 25/16 Vincenti Buildings, Strait Street, Valletta, Malta, VLT1432, hereinafter called the "Buyers", have agreed to buy: Name of vessel: Flex Endeavour IMO Number: 9762261 Classification Society: American Bureau of Shipping Class Notation: +A1 (E) Liquefied gas carrier, Ship type 2G, SH, SH-DLA, SHCM, SFA (40), CPS, + AMS, + ACCU#1, + APS, NBLES, DFD, ENVIRO, IHM, BWT, TCM, UWILD, RW. Year of Build: 2018 Builder/Yard: Daewoo (DSME), South Korea Flag: Marshall Islands Place of Registration: Majuro GT/NT: 113,049MT/36,562MT hereinafter called the "Vessel", on the following terms and conditions: Definitions "Sellers' Credit" means a non interest bearing non amortizing sellers' credit in an amount of USD 60,000,000, which is deemed to be drawn down by the Buyer on delivery and used as part payment of the Purchase Price and which will be deemed to be repaid either i) when the Vessel is delivered to the Sellers pursuant to any of the purchase options set out in clause 19 hereof, ii) in the event of a total loss of the Vessel, or iii) at expiry of the BBCP without any of the options in clause 19 hereof having been exercised. "Banking Days" are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1(Purchase Price) and in the place of closing stipulated in Clause 8 (Documentation) and Oslo, London, New York, Singapore, Malta and South Korea (add additional jurisdictions as appropriate). "BBCP" means the bareboat charter party dated 19 April 2019 and entered into between the Buyer and the Time Charter Owners. "Buyers' Nominated Flag State" means Malta (state flag state). "Call Option" means the call option over the Vessel granted by the Buyers to the Sellers pursuant to Clause 19 of this Agreement. "Class" means the class notation referred to above. "Classification Society" means the Society referred to above. Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
'Be~os+t"-~ -,",al;;tay-e the rnc-ani-FT Oivc~;-+,=r-Glaa-si 2 (Deposit). (slate name an-d location of-De~-e s+t -^~Øe F)-er;i#-{-e=i-t-b-lia-n-k, =Øfl-efs'—BaØw-h+~l; shall i'r c'Ø;,d--~'e a s c t-he De-p-esf-t-I-rr accordance w+th this ^ . "In writing" or "written" means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, email or telefax. "Parties" means the Sellers and the Buyers. "Purchase Price" means the price for the Vessel as stated in Clause 1(Purchase Price). "Restricted Party" means a person or entity that is (i) listed on, or owned or controlled by a person listed on, or acting on behalf of a person listed on, any Sanctions List; (ii) a national of, located in, incorporated under the laws of, or owned or (directly or indirectly) controlled by, or acting on behalf of, a person located in or organised under (A) Iraq, Iran or Venezuela or (B) the laws of a country or territory that is the target of country-wide or territory-wide Sanctions; or (iii) otherwise a target of Sanctions ("target of Sanctions" signifying a person with whom a US person or other national of Sanctions Authority would be prohibited or restricted by law from engaging in trade, business or other activities). "Sanctions" means the economic sanction laws, regulations, embargoes or restrictive measures administered, enacted or enforced by: (i) the United States government; (ii) the United Nations; (iii) the European Union; (iv) the United Kingdom; (v) the People's Republic of China or (vi) the respective governmental institutions and agencies of any of the foregoing, including, without limitation, the Office of Foreign Assets Control of the US Department of Treasury ("OFAC"), the United States Department of State and Her Majesty's Treasury ("HMT"); (together, the "Sanctions Authorities"). "Sanctions List" means the "Specially Designated Nationals and Blocked Persons" list maintained by the OFAC, the Consolidated List of Financial Sanctions Targets and the Investment Ban List maintained by HMT, or any similar list maintained by, or public announcement of Sanctions designation made by, any of the Sanctions Authorities. "Sellers' Account" means an account to be nominated by the Sellers at the Sellers' Bank. "Sellers' Bank" means ABN Ambro Bank N.V. "Time Charter Owners" means Hyundai Glovis Co., Ltd. a company incorporated in the Republic of Korea, having its registered office at 301, Teheran-ro, Gangnam-gu, Seoul, 06152, South Korea. "Time Charter" means the time charter party dated 25 April 2019 and entered into between the Sellers (as charterers) and the Time Charter Owners (as owners). "Sellers' Account" means (stote-detz+fs-caf-b-an-k Feet +r.t) - + t-he. ce "Sellers' Bank" means (state name of ba;,'tom -ranch-i , ) or, if left-blan - f< notified by-t-1,1-e. Sellers-te the Buyers r receipt—e~aaØf-the Purchase Price. 1. Purchase Price The Purchase Price is USD 210,000,000 (United States Dollars Two Hundred and Ten Million). (state eu--cam a" ne--t-beth in word a-nd-f+gores). 2. Deposit As sE.c,uri .y for the correct fulfilment of this Agreen-fc~, t-B-,.~crs-s-hal-1-1-effgc a-deposit c-•f- %-( -Per 10-94,-(-ten-per--reh-t'T-6f=th-e-P-uFcha,s-e-P-H-c:c (the "Deposit") in an intere-st bcarir-rg-aeee-u-nt fer the P ar t i es-vv-it-h~Efs+t H o l d e r=Af ith+r3-tk~~e-(13)---B-a-hk+n-f> C.`. ay-s-df te r t h e date that:_ 44-this Agreement-has beer,-s*hed-by the Parties-a-nØ~-I?-an-;-e-d--ian--6t+gir nuf-sr--by c na-a4-0+^ Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
h^'r k~nh-efb_ ~ the Dep-erJlt'i-tC7t l-e-r-'1`^~r~~TRFrned-i'~ The Deposit shall be released in accordance wit inint wetri T inst r„ f the Par-ties. Int-res 4l ed-ited-tØ—B;Tye M -fe arged-fe ' Deposit shall -gØ1~ Rar-tics. The Parties-s-h-all provide te-t-1~6sit {:te+,~„-r; ^' ; r #-a+r tFae account with-et -delay. 3. Payment On delivery of the Vessel, but not later than three (3) Banking Days after the date that Notice of Readiness has been given in accordance with Clause 5 (Time and place of delivery and notices):_ (i) the Deposit-shall be (ii) t-he--bafa-neØf tthe Purchase Price (less USD 60,000,000) and all other sums payable on delivery by the Buyers to the Sellers under this Agreement shall be maid-paid in full free of bank charges to the Sellers' Account. The remaining amount of USD 60,000,000 shall be paid by way of the Sellers' Credit, provided, however, the Sellers agree and acknowledge that any claim the Sellers may have against the Buyers in respect of the Sellers' Credit shall always be fully subordinated to the prior discharge in full of any and all outstanding indebtedness owed by the Buyers to the Mortgagee who has provided financing to the Buyers for its purchase of the VesselJull of bank chorgeJ _the-Sc-liers' Acct. 4. Inspec-ti-on {a}* —„e-T Buyrs hav nspected- a-n-d accepted-t essel's classification records. The Buyers have also inspected the Vessel at/in (state place) on au ', tan c~„~;~^~.(afeet nnl~i a the~,,,~~u-~,a, eFm-s -inrl nnnrli+innr~,c., J~,~,,,~~.~~ of +"ic /lnrnnvvYnn+ _ (b)* (i) The Buyers shall have the right to inspect the Vessel's clas.,ificatinn recorc r and declare ,•-"n'ther same arc accepted-o -i e - its +r~ -(-st-ate-date/ exit d);_ (ii) The-5e1Iers sh-a4;-ph c thre--Vess-cl a`ail dl{ fi r spect inn ^,rein (state place/range) wait-ha -S ate flate/period). The Buyers ~ ~ ~~ e ~nf~lnr•I•~lin~,-r-.~...-~ +l-.n inrnnn-0-in ►e~.~~.~~.^ernl de-l-ay-they-s-hei•-I-~en-sate-th-e-Seffe-Fs-fe,~trtL-TQsses thereby incurred._ Du ri n g t h e-ih-spe~,.~ r+ i,,,n ,~,",c,-/e Ie ek-and , aN-13~-dc.:a-~bfe-#er--ex e Buyers. T}, ln r". II 13-ee m-e nufrinht a i_ir subject only to the iery s and -n-d-ete-f eer.diiirvns of this Agreemen# provided that the Sellers receive written noticei of acceptance of the Vessel from the Buyersl within severity two r"^•rnr ~r n^.rl~ T41Tc_-YC.-TrSC.Z~TfI er. Should the Buyers fail to undertake the inspection as scheduled and/or notice of acceptance of the Vessel's classification records a-+å , 1-y t-e +"n [7 n r h-e naf+nr +"ir Arr + I..-.II , If any, shall Ø C_ Ty--iv--s- B rdi~.urc~.~nr:~-~~,TiZ:.~~~Jntm-b-~ and void. shall apply. 7 5. Time and place of delivery and notices (a) The Vessel shall be delivered and taken over safely afloat at the place she may be at the time of delivery-a--saf-e ~.Nf4 eee C~.I-.ln "f•. r,-r•l or areher-age-atfi-n- -(state place/twit-04n the Selte-Fsl-e-Wen. Notice of Readiness shall not be tendered before: 15 May 2019-{d-ate) Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
Cancelling Date (see Clauses 5(c); 6 (a)(i)r6{a-}(4 )- and 14): 15 September 2019 (b) The Sellers shall keep the Buyers well informed of the Vessel's itinerary and shall provide the Buyers with twenty (20), ten (10), five (5) and three (3) days' notice of the date the Sellers intend to tender Notice of Readiness and of the intended place of delivery. When the Vessel is at the place of delivery and physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery. (c) If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the Cancelling Date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and proposing a new Cancelling Date. Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 (Sellers' Default) within three (3) Banking Days of receipt of the notice or of accepting the new date as the new Cancelling Date. If the Buyers have not declared their option within three (3) Banking Days of receipt of the Sellers' notification or if the Buyers accept the new date, the date proposed in the Sellers' notification shall be deemed to be the new Cancelling Date and shall be substituted for the Cancelling Date stipulated in Clause 5(a). If this Agreement is maintained with the new Cancelling Date all other terms and conditions hereof including those contained in Clauses 5(b) and 5(d) shall remain unaltered and in full force and effect. (d) Cancellation, failure to cancel or acceptance of the new Cancelling Date shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 (Sellers' Default) for the Vessel not being ready by the original Cancelling Date. (e) Should the Vessel become an actual, constructive or compromised total loss before delivery the Deposit .e,i+h intnrn r+ earr,nnl if -i r,,. c ll bn rnlnarnrr 'rvz r,lnrli^+nl., to +hn rtrr ,..,h Fea te- zvterF~-c_n+her Ø~c.-aa :s P az: t -~-this Agreementg shall be null and void. 6. Divers In&peck' -h g (a)* (i) thn R u.,nrr rh-+II hairn tI^n r.ntior. at their ,-ert -inr•r ev'ie ,se to c.irrangn fnr -1n nrinrwatnr inrnnr•+jØ~~ dive-r-approved-b h- rn,; -eat-+ee ty--prior to thet-d-etivt. . -e -S eh option s-hall-be- d le n ne (0)daysp for to e V essel's •r,+ended to o•fØ r ess for deli„ery as notified by the Sellers want to \Clause 5(b) of this Agreement. The Sellers-s-hell at their cost-and e* r ^r r^ ,1 -ak the s-sel avail-able fer,-- - -eh-T;Ø~ien-,--T-h it ectin; shall be carried out withou= undue delay an-d-+n tai-- e-nee-e-f-a N-as:sificatian Society- v-yor arranged for by the Sellers and paid for -by-t l-e- Beyers. The Buyers' Il ri to h„--e;i , ~, crr~nixii—ttie + T,+eT:-el+ve+'s- ,ction as obscfy-cr(s) only-wh-eet -interfering w on Society surveyor. The extent of the inspection-and the- di rTs under which-it is performed shall be to th Kati-s aetio of the Cl-a • :y. If the conditions a- the place of delivery arc unsuitable for such inspection, the Set-le-Fs shall at their cost and expense bl - + i+ahln alt t' place ear to th ncdM r , pert ir. w hich event the r Date s", -e' h-e-o n 7e required for such positioning and the Jeq-went rc poi-t-ie-n-ing. The Sellers may not tender Notice of Readiness prior to completion of the underwater inspection. (ii) If the rudder, propeller, bottom or other underwater parts below the deepest load line are found-broken, damaged er defective so as to affect the Vessel's eras,, then (1) unless reps rr r. be cried ^, + afro + to the sat+ssf-action f I ss f' n S the Sellers r f +h, I cd at + n n inspection by the el- srifi, +•nn pa# below the deepestA- d thc extent =,f the-in eing in aceerda-n-ee-w-ith the `lassific tier cccicty's rules (2) such defects shall be made gocd y the Sellers at their cost and--e rase to the satisfaction of the €ins-sif~en Society -wit-hp-bit eehel t-en / r-e er-nme-nd-a t i o n * * a d-(-3; the-S-e-1 ,r~;-a m' -p nat*rwetc -r n s +; n n n r, t h,, r e<at on Society's attendance. Netwitkastan-«~44-Fit :c> the c.on~n----t-ri-s A:g,=e-e-rnr~~ e-C-1-a-s--Jrfication Society do not rcquirc the -afe re. me-n+t+er~d~efec~ t^~" ~~~ ifitØ~-r-e-t-hc nexT-cfas-s-dnydecking survey, the Sellers sh-aal-be---entitled te 4-0-iver the Vessel with +hnrn r•l^fnrtr -,R~i_j~,~ deduction from-the Purchase Price of the estimated-di-Feet-east ~f'r' ra-b-ot~ d materials) ofev r r y i n g o ut-t-he-r-ep-a-i-Es to t h e-s~t-is-fdc~ ~-^,`-;:t; -c~r .,'-a<rl+f i c u t i o n Seeit4Y, v.rk-e-reaftf-r the-B-ErY ers shall have no fur-t-hh-et=4gl=i-ts whatsoever in re-speet of the d`fcets-a{;dd-or- repairs. The estimated direct ca s'a: e-f-t-h-e--ne-pei-rs.r-s-he-la be the--av-er Ør 1: c s repair w ofif, -ek+t-a i n c d from t w o r e I-; ut-Aae Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
;n~^^ 1~~~ ~r• t sh-i-pyafels-,a-t-er--+~-the-v-i-c~-c4 of t h e port of-def-i ^ r, ^ r, A +_,, h n A h+-., • r.a ~,Ø rI T;,_~, of t h e P a rt+e-s.= wit-lii~~ (2) Banking D~\~ FsT;G, ~;e---d-ate-e# +hA imnr.ri i To-f--t-h-e~r -n_d_ition/reee,;;,`; ,-,-r~,åi~n, ~'~ unless the Paft-i-e-s fail to obtain such a q-u-ete--w-ith+n th e st-i-p-ufat-F^_ dTi~mT-ti-hen the-quote-du-1y obtainer-h-~e' cr +hn n+h 1-a~ II-~-~,~.--~,~..-~-e~ hn +hA cnln h for the estimate of the direct repair costs,~ y not tender Notice cf Readiness prior to rlvJ, e-;-;: +im-,+^ h-,,,ir,g hAAr nr+-,hlirhArl ^~ -i-s to be drydocked 7--fa-eili+inr ~Ipyl~~ Cnlliarr rh-sll '-a (rc nl +n ^ nr.rt enrl-~nrn cl li+-,hlA rir\,rinrl/'nrs ~-arili+inr -.rn -~\r-'. i I 1~IP,Y '~ -`J.'l .. _ ,~tTR'~-'G e~ T~G'Y'TfLT whether within or outside-the-d-~ range as per Clause-S{-a~.-4nccØrydockinØ has taken place the Sellers s~lrå~i~eirven~" +'cnc~—~vesas il uiZt pof=t- w4thlrt the-daliv~"`-~ f,-"--a~z~- P"`T- r--i-a-rS-e ~{-a-) which shall, fer the pur-pe-s-e-of-t4i3- ihn Ad~ r~el'\ In å:~en _, hnrmm~ _ .. rl-, ",-,n~.~,-c-c~r-rtcc.~n,Øå-cs:.-n,tren+' +hn f'-ar.P~nll•n fi +n ri-.-~I 1 1-\n nv+nr.rinrl. I-ee :he additional ti-Øc required for the drydocking and extra-ste-imir.rt hu+ lirrai~~ +r; ~iml Irr nf fiAl Ir+-nen (4-q,) days. k% T E,a SAII •h ~ ., _ . i§(iI-iii-~'r-y~ØL~~rl/ a-I~znt~~z~~~c..~~4..-t+ +i-.n nAr+ nfi~P~• nr~r finr inennr+iAn. ~~-c~-rc;_-c.,-ri~s h\e +h ('I crifiir^.+inn SA ^~'~r+ fi futer-~a~+c.~~h`~n~c~ fTr +h~~e~nnr+' IA-xvl Ii1-.e, x.in n -.rrnrrl-nrA t~e~~ct'ei~t~-+mt^~. ITs~~`~~n--Iha-e-IiTr~j wit~,~,~ ~` +h Crass;Øtien-Seciet:y's rules. If the rudder, propeller, bottom or other underwater parts below the r1v~P±F<~~~+~I,g v. e.-Z.. .rfexu-f~ linnITc-ciiz~ev-r~oØ - rn finllnr~l 1^IrnL^n, Pazm~r~nr~ n" <~Ir~~fnr_ ~.t Il t E_~ S O i;13 to i)ff C~ Ct theC U e S SE. al~r~~~-r_ rllrh P~Infinrts shall be made good i.ai-tii-CiSeii~~ars' cost-and-e*pensu~+ e-4-hi'--rråti.afaction~~i~ii~ic;r."it iic^,~j-v1^~ro-S-v~~-cii r n eon-44- Føii~{' C 07Tmmmreke t c ~!rk 1~ ~4eh -s-a re--ås!-Sv 4e-puy-rc^i---tfl"`~ e^~^ ~c i P! n~f n~- S e S i n I tifAnnnr+lnn~rrr-r~.~.. crr~r~~m~--prJ-s-t'~-i-¢~~~-eS'~ 5„1#'h nl + c i n and-'1 t~-k~iig-lie•I" o u t G` f dr~~!$C~Ytf 1'~i ncl{~ E.i-irn~t~~c.rr-y-ar~-v !YY\l~nP e,-I~c-c!~~C~'' .s-a~-nr^cr-tric -' ~ ~~I rriT ~~~~gA11ye-ei~Ø_e-Sellr-rS rl•Y- 11 - Ir~~n~r +'hP.cA rer+.r nPJ nses-i-f~i^ +'- ilshaft SyS~e+ m~~ rr.r.rlPamnP n Ar found defective or brok ~1ye+ s-s-hØEl~ay~+e-afø~e~ai-d cost~aii~~j=rs;d {c) If the Vessel is drydocked pursuant to Clause-6-(a)(ii) {i) The Classification-Se~ e-sufVey-ef-th-e-ta-i-lshaft system, the extent of the survey being to the saticfaction of the Clasr.~ca-t-i-e-n-s-u-r~eyef,l-f-su-e-kt-s-u-rv^°~-,Tet-Fequi"^„z-åØt-li-e El-aSsifica-ion Society, the Buyers s?i{1'1-1-hr'3vE.'-tht' option to rØ-u-tr-E-+,h-re~i,-k-haft-te-bc -yerl~-the rl-,rrifiir-,+ nn cP<rie+ th-ez.~ nt of t I c :~ u r•~dejf • L•~ii~~,-+"• •iiØc.~ U'ia c~G;-~,--~,~.- +l, i'H-te-C~Ø~ifF@at-i-Ø~i-~C3i.~e-ty'~;ule` ,~fvi~ixi!sll~:;'s-C1~n1~'~y~,i£i~c~r~sisten#- with• r y the_r1~~~r~en-t1r ~st~n.e-Gf-t-hØVes~,r~l`~~~,~.,~~Øy~~ . e~c rh-tll P~iArl -~rn iA,hA+hAr +hA \, rnPr l l r #-I1 deawii and sur~eyed-'b not la-~eeT +„~;3~~e compl~tcompletion-fio~ of the • • I 1;,~ the Classification Soet -T-hfl d-rawing and ref-~sfi +hA +-,ilrh-.f+ rh< ll 4 A -~-b4, r'F~~hA ;~ ~A I ,lPI -,n„ nrts-~ of the tailshaft syatem / I-tA rnv:rimm~A<I nr fir.r lrlrl rinfinr#iI,A cn -ac i'n "'S'1'R"Ar#- #'hA F(Arr~Al'r T.ZI.-å-T..lT7ZiL- "1 7L~.Tr•9L-7CTf7TC®TSTT-C.Z..~Tf'rL~Z_,:JLT_7 class, those pa~~---~.Thzall be renewed or made good -r+ +hrn S nrce r wr nr;cn + h c-a+ir r+inn f i'l ccif• -a+• nrin+ f • ei i+ ~~,,,Teee-rifriei'ir<wnrli+~•nn (r d-a-t+~ iiif The costs antd~.evnAncA . . AI ~+' 1ii-~t®-~hi?s.~+ -~cy, of the tail~-e~em rh~ll hn hnrnn. I-,.r +hA C!1 erc nIA ~ c+~ r'IR cifiir-a+•r SP.riA+e, r h + rtr i~f n-ar+r n~f +hPa r\rc+A Pl /. . . ~~t,-R..-ez_ . S ,Sui„~å,~`c~-~Zv~.~c~cå -r~"~-ed 0 u ,t.~~a-cc.,;-e-an~-ccm-~-c.~;,,;-c. d O r-fe-u-n4 11 / lYnYnP'~'1lCn PYY" hrnLnn fn 'lr +'n -lY'T'llri' i'hArc- -`(Ar~-~.~ S Cl 1(`., CI a~-~~ f~ is-r-`v°c~i=ti~l • n -~~aSE.'~I=FE—..~.--rrE.'rs3-s-lieii-~.~t,~y-th-e1""si--s-c.P-`.-s=cS~nll a n d expenses. (iii) The Buyer-sl -Pii#ati rirvht to be present-i-n the drydock, as observer(s) only-wit-1~ iiittirftt'ii-i ri g V'd i t -uind-e-r-wat-ef-parts c l c a n e d-a-nd-pai-nted-ert: their risk, east and expense without interfering ' without-affecting the Vessel's timely delivery. If, h-owever- t-ie-Buynrr~I~Øa;-k in rlr:,P,,,rl, ir r+ill in nrnY,ress a^v!~vffi rn,.11irArl +A rl^ +hn vc completed the work which the Se!' = a;~ ~U161V1 1a! ~V~!:in~ Zi,i,6^~nTCe~~~^ + ~~ve„~r,~.~-~„tPa rmm~ln+n # hø c.zr~z..-i-- C2i i\rnrc' ~ ' r i.m~s~c,.el/ r i~ C~~C e. !n theh -eventeefn that the-cØ~~-.3--hn ril l\rnre~ °av AfP tiork.~ r k i=ed-u-i," es-5-ue-~',zrdd I t Io n a l tim er the-Se-!fe-r-:rrncay-u-p,d-n~-e'tm-pl et i8ii-E}f-the'-Seii2ns' LSf L1r;k-cc^ -r~~dei-Nz=at+cC-~^-. "` -ef~$ff ri e~.`'i f~~r--i~efi~.~ery va~h+k-~~he~Gr-eJsel-+~sst-iii-iØ~d~-c!~aiid, r.ri,.,i+l c+-+nP:in, ( I 1 1Sr"~1, +hr Q1 1\r^rr rh-aII I A r.hi~~~..e~ ~~ take delivery in aaCOrdanr~~Yit~i hn+hnr_ T1T6"7-CTTi—C~~TTSI~ +hn \/P~ccAI is in nrc,a-inrl/ A Pa+. d e l cate~,h„e„-ev-ef-i-s-i-et-a-p ,,, p R i ca b l e. In th c---a-b-seT;;; _ ~-^ el eti o n s, a lte rn-at+ve-6 {-a-) shall apply. , if any, in t-h-e-surv-eyor's report--which ere accepted byde---G1-as-s-i4,=eatTeT,—Secicty w+thout-e-end-it-ien/rc:commendt~n an~net te-zh^ta;:cn into ace unt. Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012. z--

 
7. Spares, bunkers and other items The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore. All spare parts and spare equipment including spare tail-end shaft(s) and/or spare propeller(s)/propeller blade(s), if any, belonging to the Vessel at the time of i sps-ction delivery used or unused, whether on board or not shall become the Buyers' property, but spares on order are excluded. Forwarding charges, if any, shall be for the Buyers' account. The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/propeller blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers. Unused stores and provisions shall be included in the sale and be taken over by the Buyers without extra payment. Library r ; y us-e-i Sellers' vessel(s) c -ea-ptain's, affiEee & a-nd crcw's- pe-rsonal belongings-~n-g the slop chest arc cx€ ded from the-sale without cornpen,u+i^r well as the #el~~wi-ng ad-el i (include list) Items on board which-ae -e--hire or owned by-th+rd-p ties, listed-allows, arc excluded from the oel-e without compensation: (-~4e-I+s-}_ Items on board at the time of inspect+e-r, w;~,~~ ;,c o,—hi-Fe-e-r--ev~ ned by third-ra-rties, not lis ae ~b e-- f l rampa-aced or procured-by-The--Sellers prior to deliver-y and expense. The Gud m-ai7n;-i]_-b-ur krrn-ms-ar d u n u- -d-l-v' b-Fieatting-a d h y d r s in d greases -s t f?-dais and unopened drums (a}* the actual net price (excØ+ g-19 -g-e*e ^s eleRc-ems-key-invoices or vouchers; or_ (13)*_ the curr^n+ n+ r,-,rLn+ nv'en4^,,,.~, ,ain„~,,,.;giT,g~xpenses) 4,, a+ +hn r^r~.~-,+^ ^{ delivery of the Vessel or, iTui~aa✓ail~t~E~, ++r,n r n- rnch r. nLnring port, fer the quantities taken over- Payment u ndnr + hir Cla _ c^+-,--~„ +: ^ a-n~,-e;,i, Te . a„d~~ ~ d in t h e same c u, r~ re;;~s t h e Purchase Price. -"i ,sp ccivo " , Clause 7, sha-1-1-m-e-an-th„e-Rvu~`z^-r-r✓'-inspection ace-ord-i-ng40 Clause 4(a) or 4(-}_ (Inspection), if a-ppfi-c-rack. If the Vessel is ta! , the-el-ate-of this Agreement shall be-th--r-e-ktvant date,_ *(a) and (b) are alternate-, r -^ieTet ,", evnr is Ae-t ar.r<1-i-c4ble. In the absence o deletions alternate e (-` rh 8. Documentation Tfie-p-1-a-c-e--ef-el-es-ifit:-The place of closing: To be agreed. (a) In exchange for payment of the Purchase Price the Sellers shall provide the Buyers with the following delivery documents: (i) Legal Bill(s) of Sale in a form recordable in the Buyers' Nominated Flag State, transferring title of the Vessel and stating that the Vessel is free from all mortgages, encumbrances and maritime liens or any other debts whatsoever, duly notarially attested and legalised or apostilled, e-sif required by the Buyers' Nominated Flag State; (ii) Evidence that all necessary corporate, shareholder and other action has been taken by the Sellers to authorise the execution, delivery and performance of this Agreement; (iii) Copy of the Ppower of Attorney of the Sellers appointing one or more representatives to act on behalf of the Sellers in the performance of this Agreements duly notarially attested and apostilled, duly note+ vested-ari44egalizredtt or apos-t-ifl-ed(as-appr-ep-r+atc); (iv) Copy of the Certificate or Ownership and Encumbrance T scot of Reg s-t-ry issued by the competent authorities of the flag state on the date of delivery evidencing the Sellers' ownership of the Vessel and that the Vessel is free from registered encumbrances and mortgages (except for the existing mortgage over the Vessel Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
in favour of ABN Ambro Bank N.V. which will be discharged by use of the Purchase Price, such discharged to be confirmed by a letter of undertaking or similar from ABN Ambro Bank N.V.), to be faxed or e-mailed by such authority to the closing meeting with the original to be sent to the Buyers as soon as possible after delivery of the Vessel; (v) A copy of the Declaration of Class or (depending on the Classification Society) a Class Maintenance Certificate issued within three (3) Banking Days within three (3) Banking Days prior to delivery confirming that the Vessel is in Class free of condition/recommendation; _(vi) Certificate of Deletion of the Vessel from the Vessel's registry or other official evidence of deletion appropriate to the Vessel's registry at the time of delivery, or, in the event that the registry does not as a matter of practice issue such documentation immediately, a written undertaking by the Sellers to effect deletion from the Vessel's registry forthwith and provide a certificate or other official evidence of deletion to the Buyers promptly and latest within four (4) weeks after the Purchase Price has been paid and the Vessel has been delivered; {-vii) A copy of the Vessel's Continuous Synopsis Record certifying the date on-vt, to be registered with, e Ves el' re i ,ry ~ _the n+ +h ,+ the regisir„ does not ,s a matter of practic-e-ise ~Ttificate immed+ately, a 1fd 7 hie-Sellle-rrs-to provide the copy of this certificate prompt - en-i1--bung iss e-tegether with„-egi „ submission by#h-e iI-e e ^' Iy-executed Form 2 stating th it egi-stri (viii) A copy of the Commercial Invoice for the Vessel; f.-.r 4, Ø`+ t {4"~-,j-C~:.r~-rFIlz.'~-1-w$i-c-e`(ss+ Efn cC-~REi} i~z~''i`~'v~ui-iC-£?iiVØ (x) A copy of the Sellers' letter to their---3tellite communication provider cancelling the Ve,scl's ~~ communications-contr c --is-1.0 he t immediart:ely--vf-et ~ tt ~` of the Ve«e (i)0 Any additional documents as may reasonably be required by the competent authorities of the Buyers' Nominated Flag State for the purpose of registering the Vessel, provided the Buyers notify the Sellers of any such documents as soon as possible after the date of this Agreement; ,=r (x) Protocols of delivery and acceptance pursuant to the BBCP and the Time Charter, evidencing simultaneous delivery thereunder as per clause 21 below; and (xi) Quiet enjoyment letters as per clause 20 below. {xii) The Sellers' letter of , +h n;c best of their, r-ledge heVessel not black listed by any (b) At the time of delivery the Buyers shall provide the Sellers with: (i) Evidence that all necessary corporate, shareholder and other action has been taken by the Buyers to authorise the execution, delivery and performance of this Agreement; and (ii) A copy of the() -F/power of Attorney of the Buyers appointing one or more representatives to act on behalf of the Buyers in the performance of this Agreement, duly notarially attested and legalised or apostilled (as appropriate). (c) If any of the documents listed in Sub-clauses (a) and (b) above are not in the English language they shall be accompanied by an English translation by an authorised translator or certified by a lawyer qualified to practice in the country of the translated language. (d) The Parties shall to the extent possible exchange copies, drafts or samples of the documents listed in Sub- clause (a) and Sub-clause (b) above prior to delivery for review and comment by the other party-n-qt-I er than (state number ^f days), er if lef- blank, nine (9) days prior-to the Vessel's intended-date of readiness for deliver as noti# ed-key-tkre Selo- s purs (b)-of-4.his Agreement. (e) Concurrent with the exchange of documents in Sub-clause (a) and Sub-clause (b) above, the Sellers shall also hand to the Buyers the classification certificate(s) as well as all plans, drawings and manuals, (excluding Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
ISM/ISPS manuals), which are on board the Vessel. Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers have the right to take copies. (f) Other technical documentation which may be in the Sellers' possession shall promptly after delivery be forwarded to the Buyers at their expense, if they so request. Th c e'w'e—c5&, s th-e-Buyers have the right to take copies of same-.- (g) The Parties shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers. 9. Encumbrances The Sellers warrant that the Vessel, at the time of delivery, is free from all charters (other than the Time Charter), encumbrances, mortgages and maritime liens or any other debts whatsoever, and is not subject to Port State or other administrative detentions. The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery. 10. Taxes, fees and expenses Any taxes, fees and expenses in connection with the purchase and registration in the Buyers' Nominated Flag State shall be for the Buyers' account, whereas similar charges in rnnn ction it„ the clog;; of the Sellers' register shall be for-the-Se-Hers' account. 11. Condition on delivery The Vessel with everything belonging to her shall be at the Sellers' risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreement she shall be delivered and taken over "as is where is" she was at the time of deliveryinspecti^n . aintained without cnndi. ion/ * -ss, and with her classification certi;Tc ,d do al ce tificares -well as afl other certificates the Vessel had at t he +iph-e ^f inspecicn, ~saiid and unextended-w-it enelatØ"bt.eClassification ociety or the rcleva t atrthcrities e-ti—nceØ;+vcry. "Inspection" in this Clause 11, shaltcro wn the Buyers' inspectio ccording to :,la- _r-e-4-a) or 4(b) (Inspections), if 't-h-out-ii"-1s p C ct i a n, t i',-e-d - zvt c^ ~f-tri^ r;~-~~-,-g r^zcT^ m-e,=,;.- aet: date. any, in the surveyor's report which are accepted by the Classification-~ without condition Øn ar not to e taker__into account. 12. Name/4M~ Ip^r, deliver„ the B iyers undertake te change the name of the Vessel and altet funnel mark . 13. Buyers' default rccordanc- , ,i si -( eposit), tic-Sc-I4 s-hT~vt~h=e ri t is Agreement,--a-nd they compensation for their losses and for all expenses „euff d together with interest. Should the Purchase Price not be paid in accordance with Clause 3 (Payment), the Sellers have the right to cancel this Agreement, in vAieh-ize-- D';es;t-4tege w-ith interest e-at-ned, if any--sh-all be rely Sellers. If the Deposit does not comet to ~ Q—Sede="~ a1 ~nti, ~ed +r. el ins ~„r+~. ,rnpen5-atie-n for eir oss r for ll ^ s incur-rØr— th interest. 14. Sellers' default Should the Sellers f-a-il to g-i -Net-ie-e-ef--Puad+ness it, eee d-a-nce-v+"t r,r 1-a-use -(-0 or fail to be ready to validly complete a legal transfer by the Cancelling Date the Buyers shall have the option of cancelling this Agreement. Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not made physically ready again by the Cancelling Date and new Notice of Readiness given, the Buyers shall retain their option to cancel. to-t-h vent-th,eat-tb e lect to ca~°,-419;-s nr,+ +-I^n Depe ii. °-non+l-.ør n~i+-{s 'r. s-+ -ne ,-,II be eleased i"' c ~mti~,-e~-r~~d~v rr~.=ea~ti~-ewe..~-`vv-r~-r-`,i~i.~L-~i=C1.~-e~.-u e-&:-r-rc~a s•~~~~Ø-y~, i( -,n~ ~< I' ~tm~c_-r~.-rc~-._re~rZ~~~~.-~-r-r-}~~-rr~ r +n +-Ihnr~, 'rr,rr.nr-~i^.t^~._-~~-~a-c_ ^(v. Should the Sellers fail to give Notice of Readiness by the Cancelling Date or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement. 15. 8-u.rz~~'rr ,repfesenta#+aes After this Agreement has been signed-by- P-.r+ e-s-and the Deposit has been Indged;-+hR yr-s-kwe-t„ 4gh-t tc la€e +ae,i iii rentesne+- +i„nc nve bee-F -t ir sole risk and expense. Tbe-c ntet-i-ves-a-Fe-e; ,-~-a-rel-fert h ^ h c purpose of f arn+-i-a-ri-~.ra~: i o n a n c' inn -t ;t-ea-p-a-c+t-y-ef-e-b-.fe~r v; r< en , t4ey &hall not interfere in U„-y-nespLet-w+,i~~n -t;L operat+sn of the Vesrsea,-Th-e-o-uyer t-<;~Ø° R~ e-p-res-entativcs shall sign the Sellers' Pg.l Club's standard letter ef4ndnrrani~,nior to their embarkation. 16. Law and Arbitration (a)* This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Agreement shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re- enactment thereof save to the extent necessary to give effect to the provisions of this Clause. The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced. The reference shall be to three arbitrators. A party wishing to refer a dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within fourteen (14) calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both Parties as if the sole arbitrator had been appointed by agreement. In cases where neither the claim nor any counterclaim exceeds the sum of US$100,000 the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced. {b)* This Agreement shall be gover lad of or in Conner„-wi-t—~, Agreement shall be referred to three (3) persons at New York, one to be appointed chosen; + recision nr +h-,+ of +R r,f thm s1,-a-1-1-13e i'n-al -arrri grar the_~- r,u c} < ni nn-fnrr'nrv~~~y I of-c rp ent-j-u-risrikt-ion.T-he-proceed-ings shall be conducted ingeP er -an- ~ith the rules of the Society of s, In arbitratien shall be eenducted in ace-e+-da;ce-~~~th~~e~,,g;Ten: ch ~~~; ~' 7;i;~~tion Procedure of~ Vceei-e+„ rf M-ari+irnn ~rhi~~„`_r~ rs, Inc. Thir Anrnnrt nn+ eh ell Ean nn, nvnnel htA ~nri rnnci r inat 'v rrnrrl gr ri i $/ E. yt~~tl~) e laws of }-(-st.-~. NØ-►ad-~~~} ~i<n~ i+n 'ari<inn ral I+ n•f LVnnnr+L~l~~F~i+h +hi< ~-a~-R.~Inr~j f rn ~~~~} ~~ 7 or in A<sreement Shr.,~1iT. LT73:å tiiØ'ntFi' -{"s{-~{tC place), subject to the procedures applicable there. *1.6(a), 16(b) and 16{x:;--gane-a ete--w-h;-e-; cver--s-rr ot applicable. In t~l e Ø ~ser~e ef d eiet i~ri~; z~ l t~a~vc il amply. Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
17. Notices All notices to be provided under this Agreement shall be in writing. Contact details for recipients of notices are as follows: For the Buyers: Triple H No. 3 Ltd 25/16 Vincenti Buildings, Strait Street, Valletta, Malta, VLT1432 Copy to: HI Asset Management Co., Ltd. Attention: Mr Colin Park, MrJingu Kang E-mails: chpark@hi-am.com, jk.kang@hi-am.com For the Sellers: Flex LNG Management AS; Attention: Mr. Thorolf Aurstad; Bryggegata 3, 0250 Oslo, Norway; e-mail: finance@flexing.com 18. €ntirc Agreement The writ-te- tern ef- th_„ b ment comprise the entire agr I the-12,-uye~.T-a-1rd-thc Sellers in J-p r se of the Ves - -- :Ø e-n-i.-s--w-l+etk~er oral or writ en between the Parties in relation thereto. Each of the Parties acknowle4ges _emTn-t-i-ha n-et relied on and shall have no f-ig it or remedy in r _ -tement., r +e-s _ es r,„ r, V hethcr o e4e n-eg-l-i-gen-t-l-y)-e-t4e-r-th-a-n-as is expressly set out in this Agreement. Any terms implied into this Agreement by any applicable stat„te o.r law arc hereby excluded to the extent tha such exclusion can legally be made. Nothing in this Clause shall limit or excl for fraud. 19. Call and put options a) Sellers' call options The Sellers have the option to purchase the Vessel annually (plus up to 90 days in Sellers' option) starting from the end of year 3 of the Time Charter at the following prices: End Y3 USD 137,000,000 End Y4 USD 129,000,000 End Y5 USD 121,500,000 End Y6 USD 113,500,000 End Y7 USD 104,500,000 End Y8 USD 95,500,000 End Y9 USD 85,500,000 End Y10 USD 75,000,000 The Sellers must give a minimum of 60 (sixty) days' advance notice of their intention to buy the Vessel. The Vessel shall be delivered as soon as possible after expiry of the 60 (sixty) days' notice and the Buyers undertake to render the necessary assistance in order to achieve this. The Sellers' notice shall be irrevocable and Sellers shall indemnify and hold harmless the Buyers in case the Sellers fail to purchase the Vessel in accordance with the aforesaid notice. Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
b) Options in the event of Time Charter termination In the event that the Sellers terminate the Time Charter pursuant to clause 55 (Termination for default) subclause ii) or iii) thereof, the Sellers shall have the right to purchase the Vessel at the time of termination at the following prices: Amount in Year From mth To mth USD 1 1 12 145,000,000 2 13 24 138,500,000 3 25 36 132,500,000 4 37 48 125,500,000 5 49 60 118,500,000 6 61 72 111,000,000 7 73 84 102,500,000 8 85 96 94,000,000 9 97 108 84,500,000 10 109 120 75,000,000 In the event that the Time Charter is terminated due to Time Charter Owners' default pursuant to clause 55 (Termination for default) subclause i) thereof, then Sellers shall be entitled to request the Buyers to enter into a new or substituted bareboat charter (the "New BBCP") (in replacement of the BBCP) at the rate of 39,800 USD per day with effect from termination for the remaining charter period under the Time Charter, and to novate the contract with managers from Time Charter Owners to Sellers, but subject to the following conditions: (i) the performance of the Sellers under the New BBCP shall be guaranteed by FLEX LNG Ltd; (ii) there shall not be any time period or gap between the date on which the BBCP is terminated and the date on which the New BBCP is entered into so that the Sellers ensure that the charter hire is continuously paid to the Buyers without any interruption; and (iii) the Sellers shall be obligated to purchase the Vessel from the Buyers by no later than three (3) months following the date of the New BBCP on the following prices: Quarter Price in USD 0 152,000,000 1 150,557,705 2 149,094,893 3 147,611,272 4 146,106, 548 5 144,580,418 6 143,032,579 7 141,462,722 8 139,870,534 9 138,255,697 10 136,617,889 11 134,956,784 12 133,272,049 13 131,563,348 14 129,830,342 Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012. 62%

 
15 128,072,683 16 126,290,022 17 124,482,002 18 122,648,263 19 120,788,439 20 118,902,160 21 116,989,048 22 115,048,722 23 113,080,794 24 111,084,873 25 109,060,560 26 107,007,452 27 104,925,137 28 102,813,202 29 100,671,225 30 98,498,778 31 96,295,428 32 94,060,735 33 91,794,253 34 89,495,531 35 87,164,110 36 84,799,524 37 82,401,302 38 79,968,966 39 77,502,029 40 75,000,000 c) Buyers' put option The Buyers have the option to require Sellers to purchase the Vessel at the tenth anniversary of the Time Charter period (plus up to 90 days in Sellers option) at a price of 75MUSD. d) Provisions applicable in respect of all options In the event that any of the above options have been exercised, the following shall apply: The Sellers shall accept the Vessel on an AS IS, WHERE IS basis and the Buyers shall take such steps to obtain and furnish such documents and take such other actions as the Sellers may reasonably request in order to facilitate the sale and re-registration of the Vessel under such flag as the Sellers may designate. With respect to such sale, the Buyers warrant that the Vessel at such sale shall be free of any mortgages or encumbrances whatsoever and that the Buyers have not committed any act or omission which would impair title to the Vessel and Buyers hereby agree to indemnify and hold harmless Sellers in respect of any and all damages, costs and expenses whatsoever resulting from any breach of such warranty. Upon completion of such purchase of the Vessel as set out in this Clause 19, the Time Charter and all further rights and obligations of the parties thereunder (except for indemnities and other obligations that by their nature should survive the termination of the Time Charter) shall terminate forthwith. 20. Quiet Enjoyment Letters The Buyers shall provide a quiet enjoyment letter to the Sellers on delivery of the Vessel in form and substance satisfactory to the Sellers. Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
The Buyers shall in addition procure the issuance of a quiet enjoyment letter from the Mortgagee as financier of the Buyers in form and substance satisfactory to the Sellers. 21. Charter Structures The Buyers (as owners) and the Time Charter Owners (as charterers) have entered into the BBCP on 19 April 2019 whereunder the Vessel is chartered to the Time Charter Owners on delivery for such period and on such terms and conditions as more particularly described in the BBCP. The Time Charter Owners (as disponent owners) and the Sellers (as charterers) have entered into the Time Charter on 25 April 2019 whereunder the Vessel is chartered to the Sellers on delivery for such period and on such terms and conditions as more particularly described in the Time Charter. The Sellers', the Buyers' and the Time Charter Owner's obligations hereunder are subject to simultaneous delivery and acceptance under the MOA, the BBCP and the Time Charter. Upon the delivery of the Vessel under this Agreement, the Vessel shall simultaneously be delivered to the Time Charter Owners pursuant to the BBCP and to the Sellers (as charterers) pursuant to the Time Charter. If the Time Charter is cancelled or the delivery of the Vessel does not take place under the Time Charter for whatsoever reason, this Agreement shall be null and void and each of the Buyer and Seller shall renounce any and all claims they may have against each other. 22. Sellers' representation The Sellers represent and warrant as of the Delivery Date that: (a) they are the sole registered legal and beneficial owner of the Vessel; (b) they are not a Restricted Party; and (c) neither themselves nor any of their directors, officers or employees or any person acting on their behalf has received notice or are aware of any claim, action, suit, proceeding or investigation against any of them or the Vessel with respect to Sanctions by a Sanctions Authority. 23. This Agrement may be entered into in any number of counterparts, each of which shall be an original and which together shall constitute one and the same instrument. 24. As a condition precedent for the effectiveness of this Agreement, the subcharterers of the Vessel need to provide their consent in respect of change of flag and registered ownership. Sellers undertake to use reasonable efforts to obtain such consent, and will notify Buyers as soon as such consent has been obtained. In the event that such consent is rejected or not provided before the Cancelling Date, this Agreement shall be null and void and neither party shall incur any liability hereunder. As a condition precedent for the effectiveness of this Agreement, both this Agreement, the Time Charter and the novation agreement in respect of the technical management agreement must be duly executed by all parties thereto. For and on behalf of the Sellers For and on behalf of the Buyers . Name: (..2.(~2 ~ 5 1-e_1 h Name: PRk cgiw - HooA/ ^ Title: {(,\e - ~~, - ~~ 61, Title: AldirMy Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
MEMORANDUM OF AGREEMENT SALEFORM 2012 Norwegian Shipbrokers' Association's Memorandum of Agreement for sale and purchase of ships Dated: 25 April 2019 FLEX LNG ENTERPRISE LIMITED-, a company incorporated in the Marshall Islands, having its registered office at Trust Company Complex, Ajeltake Road, Ajelake Island, Majuro MH 96960, Marshall Islands{Name of sellers), hereinafter called the "Sellers", have agreed to sell, and TRIPLE H NO. 4 LTD-, a company incorporated in Malta( -åf buyers), having its registered office at 25/16 Vincenti Buildings, Strait Street, Valletta, Malta, VLT1432, hereinafter called the "Buyers", have agreed to buy: Name of vessel: FLEX Enterprise IMO Number: 9762273 Classification Society: American Bureau of Shipping Class Notation: +A1 (E) Liquefied gas carrier, Ship type 2G, SH, SH-DLA, SHCM, SFA (40), CPS, + AMS, + ACCU#1, + APS, NBLES, DFD, ENVIRO, IHM, BWT, TCM, UWILD, RW. Year of Build: 2018 Builder/Yard: Daewoo (DSME), South Korea Flag: Marshall Islands Place of Registration: Majuro GT/NT: 113,049 MT/36,562MT hereinafter called the "Vessel", on the following terms and conditions: Definitions "Sellers' Credit" means a non interest bearing non amortizing sellers' credit in an amount of USD 60,000,000, which is deemed to be drawn down by the Buyer on delivery and used as part payment of the Purchase Price and which will be deemed to be repaid either i) when the Vessel is delivered to the Sellers pursuant to any of the purchase options set out in clause 19 hereof, ii) in the event of a total loss of the Vessel, or iii) at expiry of the BBCP without any of the options in clause 19 hereof having been exercised. "Banking Days" are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1(Purchase Price) and in the place of closing stipulated in Clause 8 (Documentation) and Oslo, London, New York, Singapore, Malta and South Korea (add additional jurisdictions as appropriate). "BBCP" means the bareboat charter party dated 19 April 2019 and entered into between the Buyer and the Time Charter Owners. "Buyers' Nominated Flag State" means Malta (state flag state). "Call Option" means the call option over the Vessel granted by the Buyers to the Sellers pursuant to Clause 19 of this Agreement. "Class" means the class notation referred to above. "Classification Society" means the Society referred to above. Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
"Dcisit" sha1lh -'he-Fr e :n CIau{-e-2-(-O i ). yep os tt HAI cue r r;ac air (state name and-oeen of Deposit Holder) or, if left=blank, the Sellers' Bank, which-shall -and e;eas e De-pesit in accordance with t-h-ir--Agreement. "In writing" or "written" means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, email or telefax. "Parties" means the Sellers and the Buyers. "Purchase Price" means the price for the Vessel as stated in Clause 1(Purchase Price). "Restricted Party" means a person or entity that is (i) listed on, or owned or controlled by a person listed on, or acting on behalf of a person listed on, any Sanctions List; (ii) a national of, located in, incorporated under the laws of, or owned or (directly or indirectly) controlled by, or acting on behalf of, a person located in or organised under (A) Iraq, Iran or Venezuela or (B) the laws of a country or territory that is the target of country-wide or territory-wide Sanctions; or (iii) otherwise a target of Sanctions ("target of Sanctions" signifying a person with whom a US person or other national of Sanctions Authority would be prohibited or restricted by law from engaging in trade, business or other activities). "Sanctions" means the economic sanction laws, regulations, embargoes or restrictive measures administered, enacted or enforced by: (i) the United States government; (ii) the United Nations; (iii) the European Union; (iv) the United Kingdom; (v) the People's Republic of China or (vi) 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"L (together, the "Sanctions Authorities"). "Sanctions List" means the "Specially Designated Nationals and Blocked Persons" list maintained by the OFAC, the Consolidated List of Financial Sanctions Targets and the Investment Ban List maintained by HMT, or any similar list maintained by, or public announcement of Sanctions designation made by, any of the Sanctions Authorities. "Sellers' Account" means an account to be nominated by the Sellers at the Sellers' Bank. "Sellers' Bank" means ABN Ambra Bank N.V. "Time Charter Owners" means Hyundai Glovis Co., Ltd. a company incorporated in the Republic of Korea, having its registered office at 301, Teheran-ro, Gangnam-gu, Seoul, 06152, South Korea. "Time Charter" means the time charter party dated 25 April 2019 and entered into between the Sellers (as charterers) and the Time Charter Owners (as owners). "Sellens' Account" means (state details of bank account) at the Ner-s'-&e-n-k._ "Sellers' Ber4,,,-;, a-n., - (5.atc name of bank, branch and details) or, if-c lank, the-bUnk noti4ied~e.1-1-efs the Buyers for receipt cf the balance of the Purchase Price. 1. Purchase Price The Purchase Price is USD 210,000,000 (United States Dollars Two Hundred and Ten Million).i 'st e—e u -and-am-aunt both in words an~ 2. Degesit As security-T ~ r ect fulfilment of this Agreement the-E-uyet-s shall lodg-e a deposit of % ( -per e~ ) or, if left blank, 10% (-te=1=1--pe r cent), c f-t-ht- F t+rfh-a: -fzr+ct s-i-t"-)-i-i~-a;, T=rR rest-b-c a r i n;-a{: c ou-nt i e s t h=1,11-e-Depos+t~~wit. hi n-t-kt-r-e,^ ~' ank-'1-n-gza-y5zaf-te-i" t h-c-d-a-te that:_ (ij-t1-±is4,g+t-emcnt by-e-rti,a-i-I--eEteic;ax; and_ Copyright© 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
r hnnn n-ennnrl in~-t-e-the za-r~~-th ~3 T._ Th~osst shall-be rc ~,~ •^ d~; e~^ ~^ erd~;te with joint written instr-u-c-t~~ of the Partier. G^rnr~~;-n~~~u=g~; ~l'+ _r~P 'r. +~hn G r~~-A-r~y~-c1c~~,sTr~i=.~-, h ~ f or holding~ I d i r~ g and r~-~-~.nIn-er'nn +hn~^~. r1 n~ it shalla,I I be borne e q u a-I1-y-by-the f~La-Fti-e-~.s T;~cs-s-h-all provide-to the Deposit Holder all necessary documcnta+~n, ;;-te-e-pen and n-,-,;n+-,in the -a-c-count: w itheu-t d-ei-Uy: 3. Payment On delivery of the Vessel, but not later than three (3) Banking Days after the date that Notice of Readiness has been given in accordance with Clause 5 (Time and place of delivery and notices)_ -(+)-the--D e po s-i-t-s-h-a-If--b to the Softe s a~ f_ {i-i) the balance ref tthe Purchase Price (less USD 60,000,000) and all other sums payable on delivery by the Buyers to the Sellers under this Agreement shall be paid-paid in full free of bank charges to the Sellers' Account. The remaining amount of USD 60,000,000 shall be paid by way of the Sellers' Credit, provided, however, the Sellers agree and acknowledge that any claim the Sellers may have against the Buyers in respect of the Sellers' Credit shall always be fully subordinated to the prior discharge in full of any and all outstanding indebtedness owed by the Buyers to the Mortgagee who has provided financing to the Buyers for its purchase of the Vessel.f-uThfne ^®tea,;;- eharges to +he gel s' Account. 4. 1-nspecti-ete {-a-)* The Bu"ers have inspected and accepted-the -esse1's classification records. The Buyers have also inspected the Vessel—at/1—n— (state date) and have-aceepted th -V s^- ollowing this in,pection and f + r + t-h~--`.iarc.~~In 's outright--r sr -rc-uØ -end d bj~a Jc~~e +r-yr--rr IF'-rvz~-r + +h ~:.~+.b i~i'r.`~-im-~rl conditions Orzrrrsf +h' reg-rZZ~~~t,TR -rte {-b-)*_ (i) The Buyers. ~a1-1-hu ;--e rnh,~,, ns tie; record, ate-declare whether same are excepted -(st; - E-da-kel re-r-i-ed-)-._ r,.: Thn cell T-s"-all make the Vessel av~1a„abftØs~€~c~ion1 at/ir~ (state place ,~+h; -n- -{s-ta#-e d-a-te-lpe-ni-e4 -Ti-ti-e-%'aa` eF,e r e s h- I I u n. ed n~r så•kt i h~r re~~~3-ez^ tie r`t w 1 , ci-u-e €fef-a-y~.~*ey-they Øh ;'; een~pens-a~eflers for the lesses thereby incurred._ The Buyers shat;-i;,,r~ ~^ h,-e-V^~~^~a~l-ev~,t,he-~~t-epeninl; up and-w~}h^~,~,, t-cest to the Sellers._ ~n,.rri ~r e^+inr. thn l! {r.r 1. .lrrfirw~c+ilen by the' ~v u ~~ ~. ~~ ~~ YY::..)) theL I ~. I n ~rr~rR..'-v'i,S ~~~~nd L"'lTt~'1lTE_Ø~å,fT~JTh71`IUTI~—E—f`i7TØr`U`~~i The-sale-&h-a -beeem ght: and d +ded that the Sellers receive writt'n notice of acceptance of the Vessc! f~ e- within s ''-enty-t- -7-2 se-Ø4 {+i-, S-h-euld the Buyers fail to undertake the inspection as scheduled and/or notice of acceptance of the Vessel's classification records and/or of the-Vessel-Rot be received by the Sellers as aforesaid, the Deposit together with +nte rest -ea;,Te- ferny, h a lI b e--rek -i ed i atefyto +h B, , rc, w h eFe t^,-- =T,; ; and void. * a7-a 4-(b a-Fee-a er-r ?dues; delete whichever is not applicable In +Inn - h eee e ive 4(a) shall apply. 5. Time and place of delivery and notices (a) The Vessel shall be delivered and taken over safely afloat at the place she may be at the time of deliverya-s-a=-e and accessible bcrt -an^h, -Øt/in (state place/range)- he Seller.-option. Notice of Readiness shall not be tendered before: 15 May 2019-(d-date) Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
Cancelling Date (see Clauses 5(c)-r6-(a)(i), 6 (a)(iii) and 14): 15 September 2019 (b) The Sellers shall keep the Buyers well informed of the Vessel's itinerary and shall provide the Buyers with twenty (20), ten (10), five (5) and three (3) days' notice of the date the Sellers intend to tender Notice of Readiness and of the intended place of delivery. When the Vessel is at the place of delivery and physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery. (c) If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the Cancelling Date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and proposing a new Cancelling Date. Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 (Sellers' Default) within three (3) Banking Days of receipt of the notice or of accepting the new date as the new Cancelling Date. If the Buyers have not declared their option within three (3) Banking Days of receipt of the Sellers' notification or if the Buyers accept the new date, the date proposed in the Sellers' notification shall be deemed to be the new Cancelling Date and shall be substituted for the Cancelling Date stipulated in Clause 5(a). If this Agreement is maintained with the new Cancelling Date all other terms and conditions hereof including those contained in Clauses 5(b) and 5(d) shall remain unaltered and in full force and effect. (d) Cancellation, failure to cancel or acceptance of the new Cancelling Date shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 (Sellers' Default) for the Vessel not being ready by the original Cancelling Date. (e) Should the Vessel become an actual, constructive or compromised total loss before delivery the-- teg - +t, -st ear-Red,-i any7- hall be rideci ,,,-, .y-to-the--Btr i ~rni, afte -this Agreement shall be null and void. Divers i-en-/-D y eek-ing -( ) ;~T he---rye -&ha41 -,av-e-the o pt i o-n-at their c o Gs st and--e=gil„moo--a-r-rane +vE'r-yap ev d _ e ion Soe ` tlf the-V-ese--cI S, h option ,=h-a1-l--bc--d laced tes r i e-(9) "" is prior to the Vessel's intended date of readiness for delivery as notified by the Sellers p ers-u -t-t Clause S(b) of this Agrgeme-e1iT e-S IL~~;U;I at their cost and expense ma4Ke41.7e Vesccl aval b4 for such inspect s inspection shall be carriedØt ;^ + del Øyd in the presence of-a Classification Society-surveyor arranged for gay- t-hc nd-paid for by the Buyer=-rh-e gees ee r-ess~ i-v-e ( --have--z-Ii i g h+ +e h.,—` sc 'r+r-ai- he diver's ins ien--as--ebseir-ve (,) only without interfering with the work or decisions of the Classification Societ„ surveyor. The extent of the inspection and the conditions under which it is perform d +„ +h^ +icf etle 3--e-f the Class-i-f+eetion Society. If the conditions at the place of delivery are unsui:able for such inspections the Sell shall -,t their c^st and expense make the Vessel ati ailablc at a suitable alternative--p-laze--e r-ie#he cliver-y K^r ;; ;-eveai-i;-_ G ee11i Tp; I?at bLz ;;~dtiØ o onai time required for such-pos+4ioni nd the-&u seque The-Seile-s-rm ~-n-ot-tender-N 4- ad-i-ness-prior completion-of-he undervy .,petition. (ii}If the rudder, propeller, bottom-or-other underwater parts below the deepest load I n^ re4eued-1~7 d-a-En-a-ge-d or defective so as to affect the Vessel's class, then-(1) ess repay can be carQ„.-, ou f oct tot ,^ØTsfacti of- c- laT; åtion Society, the Sellers sha" nge fo-t e--Vessel to be drydocked a-t-theT, t ties- f inspection by therlassifiea i -4) S ri^ty ,,rØ-Ves e.l-s-i~erwater parts below the deepest load-l-i-r}c, he extee# f-the inspection bei _ lith the Classifica:ion Society's-rules (2) such defects shat ' by the Sellers at their cost and expense to the satisfaction of the-Gl-a&.ri;Øtie-n—Sri-eta' wi:hout conditiof r—eee C`r~åa iera* d- ?~~;e~i Ilcrs shat-I-pre.- -fer-t"-e-unceewnter inspection--iå-d-t r -gasification SocietyLs attendance. No +s dfeg-a-r-y4-h-1 --to-t-h µ++ r, iA this-Agrecrwent, if the Classifi-c-ation Society do not require-the aforementioned defects to be rectified before the-next clas-~-4--in-g-s-uwey, the Sellers shall be entitled to deliver the-Vessel s-th-these defects against-a deduction fron? the Purchase Price of the estimated direct cost f labi aed-n3at-e-r4tal-s-)- r-yie out the repairs s:o the Eratiefaet-+an-of the Cleest4iea4c -Seel t-y~ >f~e afte-re- the Buyers shcl! have ne-f-u-r -ie-r=r+gh-ts-whatsoever i-n respee of the defttess and/-er repair-s. The esti-raated d+r-est cos! be the aver s of quotes for the repair v,er4<—ebtainef -r-em two Fe—+4—p -able Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
c b t-a-i-ned-by each of the Parties wit-a+n two (2) Banking-D-ws-f-rem +hn rl-+` of t-kl-E-+-m-p-osi-t+ e condit-ienf recorn-phendda#-iØn;-u-nless the Parties agr-ee-etiae-fw-ise . Should e1t-hnf-e-f-t-h~-a r+i n~n e7bt a in-s-u-c-h-a-d-u.~-h in t-k-e-st2Fp-uazat-ed n t h e q u ctL--du-lya--ob-t: a i n e d~h å -P-ar-ty-s-;'-iL Il be the sole b a s i f fo r-t-h-e--e The Jin_l-ltnrr ~nv,?.. +nr,dnr Rln+ir.n n{ Dnadinnrc prior to ,~~~r, ~ ,~~~vingr+i,~n been cr+.~;~-~ If +he \tercel it to be dsyeleel/nrl ni ~rsuant to Clause 6(a)(ii) an ti no suitable dry_docl~ir~g~ facilities " available at i p Øel1~he Sellers shad take--t-he `~-Ves-solto -p øa hem abble drydocking facilities are available, whether within or outride _+ e eliv ryrange as per Clause 5(a). Once dry oc ing-has taken Noce eSe-lef-s shall deliver--h-e-Vessel at.a-port within the d laver- ge-as per Clause 5(a) which shall, for the purpose of this £-I-a~ ,m-e nhc new po+-4=ef-dnl elling Date shall be extended by the additional time required for the drydroe- ; tea maxim--Ø of fourteen (14) days. C Iln ~~I~n , +I n lfnrrnf~n' in r~ arl n, nr ~_~✓~.+inn l .r +4 n~~_~r ` ifir +inc, Cnr (~`,~f~e. ~~~~aa~r~~.f~ ry~f 4Y-€4 the-Vo~rJ_nl~~j-unF~nr r,-,r+r hnlnw +hn dønnnc~T iL_I.®i.d__llne, t~`-rl-e-extcØn f Cing in accordance ''-i-ea-t+on Society's rules. If +hn r,,ddnr~p,Tåpel;cr, bottom or other undnr.Fr-,+nr n.,r+r hnln,v the deepest load line arc found broken, damaged-or defect=i-ve-s-o-as ~£a-piade-g-8£ st and expense to-t-he Sa~~~r+inn+i nf +hn~T~~'~f1L-r~t;gn~®EFC~-¢, without cori d it,en7 ~~r^~m `" nn`Trd a tI o n** . In h e-SeifC~^-a r e-aiSio to-pay-for t-he-eas rd-ex-p e-n,c s in connection with putting the-Ve-ssel in -,nrl +-:kinn, h~~r-out-ef-d drydock dues and the r fe~-~~c Cnllnrr rl-.-sll -,I~Ø.,~~r~ fn i nrnV if n-,r+r n~ ~' ~c~s-~~7u r o u ~ 7 . ..',~~hn~~d-+r~~ , . . , " c ime t.ailshaft. r~~ c+r~ roken so as to affect the d, essel's class. In al„--~t~-e-r-c-a-~.~, +hn_ ncns rl~ ~~nrr . . rh-,II na~r~ afnrnc~-ci I d costsc t 5 a n d-c'.3!~ v',-r.r~-uv~i-rzf~~Cv.S, (c) If the Vessel is drydockcd pursuant to Clow-rn 6 raioiii of € rb .eve (i) The Classification Society may require survey of the tailshaft system, the extent of the survase, being to the satisfaction of the Classification surveyor. If such survey is not required by the Classification Society, the B, ",ens +has nn+inc +n r 'ras l- rrifin-.+inn Cnei t +h., e ern_ 'has~-r~.- +-,ilrh- ca~r.T~-u~-c-~tir f+ +n-be -drawn and surveyed-byene C -y--rTT~ rsf the-s-u ey being in accordance vyth the Classification,; eeety's rules. ,-t ey and co~vt-wit-h the current stage of the Vessel's survey c eln The Buyers rhall deelarn whether +hey reguire_te-~t to be rlra n -,pel s- r-yeyeel no+ l et r +han heP-the coØpletion of the inspection-19-y-the-Classification Society. The draie aner refi++lort of +has lshaft shall be arrang-ed-by-t-h-e-Sef-l-ers-Sf+ottlel-anyparts of the tailshaft system n en r:eln~ro-,rte nr fe nrl d-efn^f•orn. ras -,c +n C all bel Fen-e- reel er maste go d ~~~- ,~~. ~-~-c .~-~~ affect the Vessel's class, those parts ~u„Ø~~.~~~-~,-,-,-,-a-~-tea fI ~{ ~.y Sellers' ,s on e to the isfact o assiifica n Cn +~ eritho it. at the c r~EØ ~—åri-Ø~—ei ~~~sc~v- T.s~~ G rr~c EEi'e vv-rc-n-csu c-ef d it e,s/feeenÆr en-ec iei3 * . (ii) The costs and ex nsnr relating-to the— r.f +has +-,ilrhaf+ syrte-m rh-a11 has {-, nless the 1-as-:~49Seei-ety-requires such surve" +n b- e-,rri l—e -n if p arts of th m_ar neondemne d or found del-eetive or broken so ash a#,~ et hE Ts-class, in which case the Sellers - I-I p here s~s-aT cxp nses. (iii) The Buyers' representative(s)-s-hall havrom 4h- -r-g -e be present in the drydock, as observer(s) onl~thout fnteffc~ ;,--tnc s-of thl; tien Societyst fv-e- (iv) The Buy nrr rhall hao,n~+ ~inh+ +r, h ,,n +h,n i inelnreF/a+nr nar+r ef +h~r~~ ~~La~;;ed and painted at their risk, ~s-t-and~e, e„nnnrn e.rithout-iaterfering--v✓-i~~,-~.k~e-Sellers' or the ClassificationSee-i-ety-s-ufveyer='s-vFnrl, - nrl s eet-i-ngØn \fnrcers +•~nry, If, however, the Buyers' work in drydock is still in nrn~A-en the-Se',;:1=z-;,avti-eo,m ork which the Se-11-err -,rn rnn„irnrl +n ,aP., +hn -,rlditional docking time needed te~i~Tpi-^L~ r•e,rr _~+h,e -Bfiyerrl eF,e,rl, rhail be for,~„e-uye-r-~s-k-eas:t and expenrn~~n_~~r~ni r ' work Fed-Li-Wes c"n~-dh-cudItlonØi-t -e-Se'_-lteff-s-r-r~ay f the Sellers' mark tender Not-iee-of-Readinccs for-del-i-v~~c~r~~zesr~~-iSh,ilr still in dry~e-ek-and,hot-MC'`Ft.-1--i§tondifig-C-1-au-&n C(''~/ the [2uErorr rh-,Il~-be-obTT~ Is t-aak-e-del~--aLe-~1- r ~1-a~,e~m~7, ~~~ec.;;_cr eAr the Vessel is in drydock or not. Ø a n d 6 ( b)-afe-al-ti~f"-~ 's riot ia p-p-11-C rr-razm~siTs-e n c ('_-ef~ti{~t~ e~ n~,~~iåse r~~iazr✓c~ a;--i4' any, in t h e `.å-Fø'eyØ-r-1.s-Fe{"3 eft--'c~c,,,~f h i`'I; a re-aeee~ ~~ by t h e C l a s s if i c~t I ofl~ety wit-hFiu-t-``-Cihdition/recC3m~tit7n are not to~c-tza-;cc„ hn into a+_.count. Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
7. Spares, bunkers and other items The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore. All spare parts and spare equipment including spare tail-end shaft(s) and/or spare propeller(s)/propeller blade(s), if any, belonging to the Vessel at the time of i s-p-ection delivery used or unused, whether on board or not shall become the Buyers' property, but spares on order are excluded. Forwarding charges, if any, shall be for the Buyers' account. The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/propeller blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers. Unused stores and provisions shall be included in the sale and be taken over by the Buyers without extra payment. . ~ ii-':r^rei ^nr~ fnrrre nvr• u.~~velyC for use ir, the Sellers'~ ve-, ~ and^e capt ~~e.~rC~ and cr~;r,~Ørsorru-4 ~ ~f belonglr,gsTn-c;~din^Trr5-crc^~-1-op-e4'-ris+ 4- -,rn ^ti,,-Iu~~eTc~'Te-s-afe--w-iti Ø" C~rR'a'Cn-s-aØ • -IrT -u-s the fol-lowing additional items: (include list) Items on board white arØ;;Te-or owned by third pa-rties, -listed o{Icwe r„ excl d from the sale wit e t compensation (include list)_ +te~is oh ' }cr. ^r~i~ i~,ri ,.~1-,ir•-" ~=c on hire or .,, 's~ed above, sha-11-be fe-p-1-aced or procuT^^~-by-+~~^'~„e,~ pr;-er+to-defivcry at-their co~ expense. 7hØ- er~~~ ;-G;;-t--å-k-e-evcr femu'rn-i-h-;-b~~;-k-efs and u-hused lukricatii~,~~'Øat~a+c-e+ls a; d rtr^- scs ir. .+er-.g-e-tanks an-d unopened-6~s aØ-Lray-e1the-~ (a)* th^ actual net price (excluding bar-g+-n-g expenses) as evidenced-by invoice- er c~+ers; or_ /{ 1x- .J ofd- livery cif -kje Vessel or, if unavailable, at the n rest bunkering-pef~ for the quan itics takØevt~_ Payment under this Clau a place and in the same currency as the Purchase Price. "i-n-s-eetie-n" in this Clause 7, shall-mean- R~2 i~n -,ece-r-d1-h-g-te Clause 4(a) or-4(b)-- (Inspection), if t~, Øk'~"" . If the-yes-s-el-Fs-takt1n-ev-c r w i i o n, the-date-eif~i -Ag rtiti-m c;,z; ~;~ -a;;-b~~~fcva-n t d a t c,- *(a) and (b) arc alternatives, delete whig eh-ever -e applicabl~e-abs neØ ns la ternative (a) shall 8. Documentation Th e--ef-c-I-esing: The place of closing: To be agreed. (a) In exchange for payment of the Purchase Price the Sellers shall provide the Buyers with the following delivery documents: (i) Legal Bill(s) of Sale in a form recordable in the Buyers' Nominated Flag State, transferring title of the Vessel and stating that the Vessel is free from all mortgages, encumbrances and maritime liens or any other debts whatsoever, duly notarially attested and legalised or apostilled, e-sif required by the Buyers' Nominated Flag State; (ii) Evidence that all necessary corporate, shareholder and other action has been taken by the Sellers to authorise the execution, delivery and performance of this Agreement; (iii) Copy of the `power of Attorney of the Sellers appointing one or more representatives to act on behalf of the Sellers in the performance of this Agreement, duly notarially attested and apostilled d-Ø notarially t- e s- ed .,r d l, g-ul-iz ,~ or r ostilled (as -3-ppropriate); (iv) Copy of the Certificate or Ownership and Encumbrance Trar-e-e--ipte R—,i u-y-issued by the competent authorities of the flag state on the date of delivery evidencing the Sellers' ownership of the Vessel and that the Vessel is free from registered encumbrances and mortgages (except for the existing mortgage over the Vessel in favour of ABN Ambro Bank N.V. which will be discharged by use of the Purchase Price, such discharged to be Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
confirmed by a letter of undertaking or similar from ABN Ambra Bank N.V.), to be faxed or e-mailed by such authority to the closing meeting with the original to be sent to the Buyers as soon as possible after delivery of the Vessel; (v) A copy of the Declaration of Class or (depending on the Classification Society) a Class Maintenance Certificate issued within three (3) Banking Days within-Three (3) Banker Days prior to delivery confirming that the Vessel is in Class free of condition/recommendation; (vi) Certificate of Deletion of the Vessel from the Vessel's registry or other official evidence of deletion appropriate to the Vessel's registry at the time of delivery, or, in the event that the registry does not as a matter of practice issue such documentation immediately, a written undertaking by the Sellers to effect deletion from the Vessel's registry forthwith and provide a certificate or other official evidence of deletion to the Buyers promptly and latest within four (4) weeks after the Purchase Price has been paid and the Vessel has been delivered; A copy of the Vs&el!s_G~t±et, -SyØ p&is Record ee-rtifying the date on w-h+ch the Vessel ceased- to-be registered-w4th the Vessel's regi:.-rØr,i; the event that the ^i matter- r-ac#+ce issue such certificate immedia#ely,a ttenundertakin►g-from---the Sel e provide the copy of this certificate S of l-u-1 , promptly u pon it b n-g isssuedot gether with ev —e of subanis-sinn by hfl= JL el exeeuzed-F-e~ z stating the date-er+a -ich the Vessel-1~—s-ase to be registered-w-ith the V-essers registry; (vii+) A copy of the Commercial Invoice for the Vessel; (ix) Cor -rnercial-l- ivoice(s) for bunkers, lubricat-iflg and hy-d c oils aa-d greases; ( copy of the _ ~ liecs! . tettC' to their sate'ii anon pro,t4e eT—eafr Ili he _Vegis". e4Ls communications contract which is to be sent immediately after delivery of the Vessel; (xviii) Any additional documents as may reasonably be required by the competent authorities of the Buyers' Nominated Flag State for the purpose of registering the Vessel, provided the Buyers notify the Sellers of any such documents as soon as possible after the date of this Agreement; and (ix) Protocols of delivery and acceptance pursuant to the BBCP and the Time Charter, evidencing simultaneous delivery thereunder as per clause 21 below; and (x) Quiet enjoyment letters as per clause 20 below. Icttcy--ef fir tam- ion-~~e=b; t"~ ~t-ef-t;;tiir~' knowl-e-elgc7-t t black-11s~ nation or international orgunisation. (b) At the time of delivery the Buyers shall provide the Sellers with: (i) Evidence that all necessary corporate, shareholder and other action has been taken by the Buyers to authorise the execution, delivery and performance of this Agreement; and (ii) A copy of the 42power of Attorney of the Buyers appointing one or more representatives to act on behalf of the Buyers in the performance of this Agreement, duly notarially attested and legalised or apostilled (as appropriate). (c) If any of the documents listed in Sub-clauses (a) and (b) above are not in the English language they shall be accompanied by an English translation by an authorised translator or certified by a lawyer qualified to practice in the country of the translated language. (d) The Parties shall to the extent possible exchange copies, drafts or samples of the documents listed in Sub- clause (a) and Sub-clause (b) above prior to delivery for review and comment by the other party Ret-rater-# {-sta e-Ffu f .T);-e r if I e€t~I t . asr„~- -days ` ` ' ~I-divery as notified by the Sel~ru^snt to Claire 5(b) of this Agr-eeme;z. (e) Concurrent with the exchange of documents in Sub-clause (a) and Sub-clause (b) above, the Sellers shall also hand to the Buyers the classification certificate(s) as well as all plans, drawings and manuals, (excluding ISM/ISPS manuals), which are on board the Vessel. Other certificates which are on board the Vessel shall also Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers have the right to take copies. (f) Other technical documentation which may be in the Sellers' possession shall promptly after delivery be forwarded to the Buyers at their expense, if they so request. The Sellers may keep-the Vessc'n-feg ekG-i; t t: € -ye to-r-i-g e-take copies of se+f- (g) The Parties shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers. 9. Encumbrances The Sellers warrant that the Vessel, at the time of delivery, is free from all charters (other than the Time Charter), encumbrances, mortgages and maritime liens or any other debts whatsoever, and is not subject to Port State or other administrative detentions. The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery. 10. Taxes, fees and expenses Any taxes, fees and expenses in connection with the purchase and registration in the Buyers' Nominated Flag State shall be for the Buyers' account-wcr-ea,etr s +-ehis in-F n-hec- ion with the closing cue She-m' register shah--be er the Sellers' account. 11. Condition on delivery The Vessel with everything belonging to her shall be at the Sellers' risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreement she shall be delivered and taken over "as is where is" she was at the time of deliveryinspection fair ynor and tear excepted. However, -sfi-ala-lr>c deli-vertd-free-of -c.-ar-go-and-#-reF-of-sear owavreys- s-~fiaintair+ed-witheut certificat-esØ national certificates, as well as all other certificates the Vesse-I-1ad-t~i ` ir ~r.l,~t;-e-n-- valid and unextendcd without denditi.-.r. /rn,.,.w,r~,nn„ation* by the Cias;if+cation Society or the relevant authorities—at the time of delivery: "-l-n-fJpeeti-en" in this Cl eTa414-1-ei-Bovyer-sLi fdlfig--te--Ckru e 4(.a s), if applicable. It t-ØVesS without inspection, the date of this Agreement shall be the relevant date. . F4-etes and n-,nn r.r 4e if any, in the surveyor's report which -,rn aernpt d by tl ess;fi{za-tie-n Society, 12. c+t;gs n-4el iv c-r-y— ~-R~:uye e E uz~,f,e4e eh-ange the name of 13. Buyers' default In.-1nn rn 7 /rinr~ Ølr~~t ncit Øct;r -3nCe with-~ (`I^ ncit) the Sellers havn-~cr~i`n~. t r-itht t.~ ~--~n rnl,~s Øfic.Ø~n;t -a~ay ~h ~ ,-a;;-i1E~--t~ n t it I c~ t ~-el-al-ffi-c-eea`~~ f-e-nr~t i c} n for t h c.~~+r~s~es=- d-T -r-a-l-1-c*pe n s e incurred together witØterest. Should the Purchase Price not be paid in accordance with Clause 3 (Payment), the Sellers have the right to cancel this Agreement, which case th-e De sit together with-interest earned, it any;-sf-fl--bee-released to th- Sellers. If-t e-Depo t does met-cover-t ei s , he hers s„a14 be-entitled o claim further-eam-pe-Fts tion for their loss tpenses incurred to r with interest. 14. Sellers' default Should the Sellers fail--o-give-Net --el Readine-ss in accordance wit-h Clause{-b-)--ar-fail to be ready to validly complete a legal transfer by the Cancelling Date the Buyers shall have the option of cancelling this Agreement. If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
physically ready for delivery and is not made physically ready again by the Cancelling Date and new Notice of Readiness given, the Buyers shall retain their option to cancel. fn-th„e-e etha t e- ,~-gleirs ~~' -c-Gncei tl-4s U be rnleacerl to t! er Ag%P{?i"-fi{w4~-tiie si Should the Sellers fail to give Notice of Readiness by the Cancelling Date or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement. 15. Buyers" repfesentatives After this Agreement-lir~r~ -~eer~-b-y-thn ~ P- r+inr ^r,d the Depot hus--heer;-ledte^~~:110-Boy c--+s-#-a-v-i--t4~ place two (2) rcpresent-at+~,=~r.~-on board tl~~-~n ,'Ta-t-t"-ei-r-s-1le rirk - nd n*r,n sn Thnrn- rep-nnrnenr,t^at'crnrFes- en arnc~rr~avisr-crTe~;-~rTc.:~ enn he-errl f ~ thn n rrsF . ' å-tion uØ~c~-~r~~#rl 'n thn s^-sn-erite observers only, and they shall not ini:^r,-,-fe;e-;,n an-y--~vii.h the op-eFati~r°~.~~h-c-e4 Buyers-a-n-d the Buyer-s-rcpresentativcs stundarLd-l-etter of indemnity prior to their crri-la~n-: 16. Law and Arbitration (a)* This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Agreement shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re- enactment thereof save to the extent necessary to give effect to the provisions of this Clause. The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced. The reference shall be to three arbitrators. A party wishing to refer a dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within fourteen (14) calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the fourteen (14) days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the fourteen (14) days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both Parties as if the sole arbitrator had been appointed by agreement. In cases where neither the claim nor any counterclaim exceeds the sum of US$100,000 the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced. {b)* Th is ~tg rec..Ø-cØ s h g-be g a vo~.- ~~rd-~-n-s-t-r~-i~--ae ^~n,~r ~ia,n~-å°J;-t h Tit-le-9-of-44e U ni~yd~-t~~d<~~ 1~- the -a-b-st-aft-+ve-ltaw-(net-i~elu~~i+~-g~.h e choice of law~e~) (G oWL- of or in connection with t;-i-s-Agrnnrd,nr+- rf, ff he referred to thrnn r2 o renrrnrr ~nrf, nr,n to wn appointed 1her9 nea-}^hell —~.~I~~~c.~.~Tz-of tf-~,n r.-erti~sr hnrnte- a n d thee tI"ln~-ia-p—t~}~t~il-~-i~ iref i•.er E~~T,--merr-crcEnn• ~Fheir rin IS I-C~ E? ~-m-crc-~Znth-ei- of -aner tenro of th,-e shall be final, and for-t; -c-pa;Øsz ~11 s o#-e-mforci„-g-a„y-awafd, judgment may be ent . y any court of rgTG71T~7 Fnie-T8~;diction. r~ The proceedingr oridueLed f the Society of Maritime Arbitrators, Inc. Ø, e~~=:~F c-I-aimr-ner~-eo-u-nt-e-rclaim exceeds the sum of US$-1-61-Ci:700-0-the-ar,~;-t-rati-en-s-Kal-l-be ~et-ed-in accordun~ the Short-c-n-~.~ld-At ~-hti r~l-ati-on-p;®..o,~+re--e~f -t-h-L-So€1et:j,-a~~~nf rF Arhitr-,tnrr fn^ Thls ~ug`~i~r ement chaff ieoØn re-r-nnrl ie err -ene~ enTr=tt rueo ir: ^.^orrlar.r (sta e pIC GTPC-)-G-rd[-a-r{-lj-,~ + r €1-is -~t of or ir ~,~ ~ TTt.lZ.lii-~ A.. i 1iT~ ~( St'C;StC 1 nf'et 1 lhler-t to the nro^ler~l Irer ~Snnfl^'eiefP] thA;h * b) and 16(e-)-are alternatives; °^rhieheve-r is not a-~le, --1-1,1 the absence of deletions, alternative 17. Notices Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
All notices to be provided under this Agreement shall be in writing. Contact details for recipients of notices are as follows: For the Buyers: Triple H No. 4 Ltd 25/16Vincenti Buildings, Strait Street, Valletta, Malta, VLT1432 Copy to: HI Asset Management Co., Ltd. Attention: Mr Colin Park, Mr Jingu Kang E-mails: chpark@hi-am.com, ik.kang@hi-am.com For the Sellers: Flex LNG Management AS; Attention: Mr. Thorolf Aurstad; Bryggegata 3, 0250 Oslo, Norway; e-mail: finance@flexing.com 18. €n#+ -e-tom The w-r+t4^T;-t~-;ms ^{ +hir A^,~~„~~Ent comprise t-k+e--e -t-bet-ween Sellers in fel-a-t-i«+~-e-t-h-e-f,aa-e-an-d-purchase of :he Vcssc~-cl-s-~-r^r,e -," g.-^„i^„rr~cnts wJ1e_her oR3-1 or written bretwet--ri--the urtier in relat+e-n thereto. Each of t =tics acknow-Øges that in c-n-te„r-f-g„- 4h-its-Agreement it has not roll _d on and s#a-If gave-ne emedy-i respect of-any statemen-, r , ^_ ;a-he. ;-w-arranty (whether or- +read-e negligently) other than as is expressly set out in this Agreement. Any t +r ied into t g eemcnt by any applicable statute or law are hereby excluded such exclusion can-legal-1-0)-e~- 444-oj in i*hir €I- ur -a-11 itrJrz~i~nxdt 19. Call and put options a) Sellers' call options The Sellers have the option to purchase the Vessel annually (plus up to 90 days in Sellers' option) starting from the end of year 3 of the Time Charter at the following prices: End Y3 USD 137,000,000 End Y4 USD 129,000,000 End Y5 USD 121,500,000 End Y6 USD 113,500,000 End Y7 USD 104,500,000 End Y8 USD 95,500,000 End Y9 USD 85,500,000 End Y10 USD 75,000,000 The Sellers must give a minimum of 60 (sixty) days' advance notice of their intention to buy the Vessel. The Vessel shall be delivered as soon as possible after expiry of the 60 (sixty) days' notice and the Buyers undertake to render the necessary assistance in order to achieve this. The Sellers' notice shall be irrevocable and Sellers shall indemnify and hold harmless the Buyers in case the Sellers fail to purchase the Vessel in accordance with the aforesaid notice. Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
b) Options in the event of Time Charter termination In the event that the Sellers terminate the Time Charter pursuant to clause 55 (Termination for default) subclause ii) or iii) thereof, the Sellers shall have the right to purchase the Vessel at the time of termination at the following prices: Amount in Year From mth To mth USD 1 1 12 145,000,000 2 13 24 138,500,000 3 25 36 132,500,000 4 37 48 125,500,000 5 49 60 118,500,000 6 61 72 111,000,000 7 73 84 102,500,000 8 85 96 94,000,000 9 97 108 84,500,000 10 109 120 75,000,000 In the event that the Time Charter is terminated due to Time Charter Owners' default pursuant to clause 55 (Termination for default) subclause i) thereof, then Sellers shall be entitled to request the Buyers to enter into a new or substituted bareboat charter (the "New BBCP") (in replacement of the BBCP) at the rate of 39,800 USD per day with effect from termination for the remaining charter period under the Time Charter, and to novate the contract with managers from Time Charter Owners to Sellers, but subject to the following conditions: (i) the performance of the Sellers under the New BBCP shall be guaranteed by FLEX LNG Ltd; (ii) there shall not be any time period or gap between the date on which the BBCP is terminated and the date on which the New BBCP is entered into so that the Sellers ensure that the charter hire is continuously paid to the Buyers without any interruption; and (iii) the Sellers shall be obligated to purchase the Vessel from the Buyers by no later than three (3) months following the date of the New BBCP on the following prices: Quarter Price in USD 0 152,000,000 1 150557,705 2 149,094,893 3 147,611,272 4 146,106,548 5 144,580,418 6 143,032,579 7 141,462,722 8 139,870,534 9 138,255,697 10 136,617,889 11 134,956,784 12 133,272,049 Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012. 62u--

 
13 131,563,348 14 129,830,342 15 128,072,683 16 126,290,022 17 124,482,002 18 122,648,263 19 120,788,439 20 118,902,160 21 116,989,048 22 115,048,722 23 113,080,794 24 111,084,873 25 109,060,560 26 107,007,452 27 104,925,137 28 102,813,202 29 10.0,671,225 30 98,498,778 31 96,295,428 32 94,060,735 33 91,794,253 34 89,495,531 35 87,164,110 36 84,799,524 37 82,401,302 38 79,968,966 39 77,502,029 40 75,000, 000 c) Buyers' put option The Buyers have the option to require Sellers to purchase the Vessel at the tenth anniversary of the Time Charter period (plus up to 90 days in Sellers option) at a price of 75MUSD. d) Provisions applicable in respect of all options In the event that any of the above options have been exercised, the following shall apply: The Sellers shall accept the Vessel on an AS IS WHERE IS basis and the Buyers shall take such steps to obtain and furnish such documents and take such other actions as the Sellers may reasonably request in order to facilitate the sale and re-registration of the Vessel under such flag as the Sellers may designate. With respect to such sale, the Buyers warrant that the Vessel at such sale shall be free of any mortgages or encumbrances whatsoever and that the Buyers have not committed any act or omission which would impair title to the Vessel and Buyers hereby agree to indemnify and hold harmless Sellers in respect of any and all damages, costs and expenses whatsoever resulting from any breach of such warranty. Upon completion of such purchase of the Vessel as set out in this Clause 19, the Time Charter and all further rights and obligations of the parties thereunder (except for indemnities and other obligations that by their nature should survive the termination of the Time Charter) shall terminate forthwith. 20. Quiet Enjoyment Letters Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 
The Buyers shall provide a quiet enjoyment letter to the Sellers on delivery of the Vessel in form and substance satisfactory to the Sellers. The Buyers shall in addition procure the issuance of a quiet enjoyment letter from the Mortgagee as financier of the Buyers, in form and substance satisfactory to the Sellers. 21. Charter Structures The Buyers (as owners) and the Time Charter Owners (as charterers) have entered into the BBCP on 19 April 2019 whereunder the Vessel is chartered to the Time Charter Owners on delivery for such period and on such terms and conditions as more particularly described in the BBCP. The Time Charter Owners (as disponent owners) and the Sellers (as charterers) have entered into the Time Charter on 25 April 2019 whereunder the Vessel is chartered to the Sellers on delivery for such period and on such terms and conditions as more particularly described in the Time Charter. The Sellers', the Buyers' and the Time Charter Owner's obligations hereunder are subject to simultaneous delivery and acceptance under the MOA, the BBCP and the Time Charter. Upon the delivery of the Vessel under this Agreement, the Vessel shall simultaneously be delivered to the Time Charter Owners pursuant to the BBCP and to the Sellers (as charterers) pursuant to the Time Charter. If the Time Charter is cancelled or the delivery of the Vessel does not take place under the Time Charter for whatsoever reason, this Agreement shall be null and void and each of the Buyer and Seller shall renounce any and all claims they may have against each other. 22. Sellers' representation The Sellers represent and warrant as of the Delivery Date that: (a) they are the sole registered legal and beneficial owner of the Vessel; (b) they are not a Restricted Party; and (c) neither themselves nor any of their directors, officers or employees or any person acting on their behalf has received notice or are aware of any claim, action, suit, proceeding or investigation against any of them or the Vessel with respect to Sanctions by a Sanctions Authority. 23. This Agrement may be entered into in any number of counterparts, each of which shall be an original and which together shall constitute one and the same instrument. 24. As a condition precedent for the effectiveness of this Agreement, the subcharterers of the Vessel need to provide their consent in respect of change of flag and registered ownership. Sellers undertake to use reasonable efforts to obtain such consent, and will notify Buyers as soon as such consent has been obtained. In the event that such consent is rejected or not provided before the Cancelling Date, this Agreement shall be null and void and neither party shall incur any liability hereunder. As a condition precedent for the effectiveness of this Agreement, both this Agreement, the Time Charter and the novation agreement in respect of the technical management agreement must be duly executed by all parties thereto. or and on behalf of the Sellers For and on behalf of the Buyers Name: Name: fA Ca /4P4- HooN Title: Title: Copyright © 2012 Norwegian Shipbrokers' Association. All rights reserved. Published by BIMCO. No part of this BIMCO SmartCon document may be copied, reproduced or distributed in any form without the prior written permission of the Norwegian Shipbrokers' Association. Explanatory notes are available from BIMCO at www.bimco.org. Adopted by BIMCO in 1956, revised 1966, 1983, 1986/87, 1993 and 2012.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
EXECUTION VERSION FACILITIES AGREEMENT UP TO USD 100,000,000 TERM LOAN AND REVOLVING FACILITIES for FLEX LNG RANGER LIMITED as Borrower with FLEX LNG LTD. and FLEX LNG FLEET LIMITED as Guarantors arranged by ABN AMRO BANK N.V., OSLO BRANCH SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) as Bookrunners and Mandated Lead Arrangers with ABN AMRO BANK N.V. SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) as Hedge Providers and ABN AMRO BANK N.V. as Agent and Security Agent in respect of the Vessel "FLEX RANGER" Dated 15 July 2019 10127241/1

 
EXECUTION VERSION TABLE OF CONTENTS 1 DEFINITIONS AND INTERPRETATION .................................................................................................. 4 2 THE FACILITIES ............................................................................................................................. 21 3 PURPOSE ...................................................................................................................................... 22 4 CONDITIONS PRECEDENT ............................................................................................................... 22 5 DRAWDOWN .................................................................................................................................. 24 6 REPAYMENT ................................................................................................................................... 25 7 PREPAYMENT AND CANCELLATION ................................................................................................... 27 8 INTEREST ...................................................................................................................................... 31 9 INTEREST PERIODS ........................................................................................................................ 31 10 CHANGES TO THE CALCULATION OF INTEREST .................................................................................. 32 11 FEES ............................................................................................................................................. 33 12 TAX GROSS-UP AND INDEMNITIES ................................................................................................... 33 13 INCREASED COSTS ........................................................................................................................ 38 14 OTHER INDEMNITIES ...................................................................................................................... 40 15 MITIGATION BY THE LENDERS ......................................................................................................... 41 16 COSTS AND EXPENSES ................................................................................................................... 42 17 GUARANTEE AND INDEMNITY .......................................................................................................... 43 18 SECURITY ..................................................................................................................................... 47 19 REPRESENTATIONS AND WARRANTIES ............................................................................................. 49 20 INFORMATION UNDERTAKINGS ....................................................................................................... 53 21 FINANCIAL COVENANTS .................................................................................................................. 57 22 GENERAL UNDERTAKINGS ............................................................................................................... 58 23 VESSEL COVENANTS ...................................................................................................................... 63 24 EVENTS OF DEFAULT ...................................................................................................................... 67 25 CHANGES TO THE PARTIES ............................................................................................................. 71 26 ROLE OF THE AGENT, THE SECURITY AGENT AND THE ARRANGER ....................................................... 74 27 CONDUCT OF BUSINESS OF THE FINANCE PARTIES ........................................................................... 83 28 SHARING AMONG THE FINANCE PARTIES .......................................................................................... 83 29 PAYMENT MECHANICS .................................................................................................................... 85 30 SET-OFF ........................................................................................................................................ 87 31 NOTICES ....................................................................................................................................... 87 32 CALCULATIONS AND CERTIFICATES ................................................................................................. 88 33 PARTIAL INVALIDITY ...................................................................................................................... 89 34 REMEDIES AND WAIVERS ............................................................................................................... 89 35 AMENDMENTS AND WAIVERS .......................................................................................................... 89 10127241/1 2

 
EXECUTION VERSION 36 CONFIDENTIAL INFORMATION ......................................................................................................... 91 37 COUNTERPARTS ............................................................................................................................. 95 38 CONTRACTUAL RECOGNITION OF BAIL-IN ......................................................................................... 95 39 GOVERNING LAW AND ENFORCEMENT .............................................................................................. 96 SCHEDULES: SCHEDULE 1: THE ORIGINAL LENDERS AND COMMITMENTS SCHEDULE 2: CONDITIONS PRECEDENT SCHEDULE 3: FORM OF DRAWDOWN NOTICE SCHEDULE 4: FORM OF SELECTION NOTICE SCHEDULE 5: FORM OF COMPLIANCE CERTIFICATE SCHEDULE 6: FORM OF TRANSFER CERTIFICATE SCHEDULE 7: VESSEL SCHEDULE 8: REPAYMENT AND REDUCTION SCHEDULE 10127241/1 3

 
EXECUTION VERSION THIS FACILITIES AGREEMENT is dated 15 July 2019 and made between: (1) FLEX LNG RANGER LIMITED, a corporation incorporated in the Republic of Marshall Islands, having registration no. 90437, whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 as borrower (the "Borrower"); (2) FLEX LNG FLEET LIMITED, a company incorporated and existing under the laws of Bermuda, having company registration no. 52351, whose registered office is at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda (the "Intermediate Parent"); (3) FLEX LNG LTD., a company incorporated and existing under the laws of Bermuda, having company registration no. 52644, whose registered office is at Par-la-Ville Place, 14 Par-la- Ville Road, Hamilton, Bermuda (the "Ultimate Parent", and together with the Intermediate Parent, the "Guarantors" and each a "Guarantor") (4) THE FINANCIAL INSTITUTIONS listed in Schedule 1 (The Original Lenders and Commitments) as lenders (the "Original Lenders"); (5) ABN AMRO BANK N.V., OSLO BRANCH and SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) as bookrunners and mandated lead arrangers (the "Arrangers", and each an "Arranger"); (6) ABN AMRO BANK N.V., and SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) as hedge providers (each a "Hedge Provider", jointly the "Hedge Providers"); (7) ABN AMRO BANK N.V., as facility agent of the other Finance Parties (in such capacity, the "Agent"); and (8) ABN AMRO BANK N.V., as security agent of the other Finance Parties (in such capacity, the "Security Agent"). IT IS AGREED as follows: SECTION 1 INTERPRETATION 1 DEFINITIONS AND INTERPRETATION 1.1 Definitions In this Agreement, unless the context otherwise requires: "Account Bank" means DNB Bank ASA or the Agent, as relevant. "Account Pledge" means a first priority pledge granted or to be granted by the Borrower in favour of the Security Agent (on behalf of the Finance Parties) over the Earnings Accounts of the Borrower, to be in form and substance satisfactory to the Security Agent. "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. 10127241/1 4

 
EXECUTION VERSION "Agreement" means this facilities agreement, as it may be amended, supplemented and varied from time to time, including its Schedules and any Transfer Certificate. "Approved Broker" means each of Fearnleys, Clarksons Platou, Nordic Shipping, Affinity, Simpson Spence Young or such other independent and internationally reputable shipbroker(s) as may be approved in writing by the Agent. "Approved Manager" means: a) Bernhard Schulte Shipmanagement; b) any company within the Group or the Seatankers Group; or c) any other management company acceptable to the Majority Lenders from time to time as the technical and/or commercial manager of the Vessel, such consent not to be unreasonably withheld or delayed. "Approved Ship Registry" means each of the Marshall Islands, the Norwegian International Ship Registry (NIS), Liberia or such other international ship registry as may be approved in writing by all the Lenders. "Approved Classification Society" means each of DNV GL, Lloyds Register, American Bureau of Shipping (ABS), Bureau Veritas or such other IACS classification society as may be pre-approved in writing by all the Lenders, such approval not to be unreasonably withheld or delayed. "Assignment of Earnings and Charterparties" means a first priority assignment granted or to be granted by the Borrower in favour of the Security Agent (on behalf of the Finance Parties) of any of the Borrower's (i) rights, titles and interests to any Earnings, and (ii) in respect of any charterparty for the Vessel with a firm term (excluding options) exceeding twelve (12) months, its rights, titles and interests to same, to be in form and substance acceptable to the Security Agent. "Assignment of Hedging Claims" means a first priority assignment granted or to be granted by the Borrower in favour of the Security Agent (on behalf of the Finance Parties) of the Borrower's rights, titles and interests under any Hedging Agreements related to the Facilities, to be in form and substance acceptable to the Security Agent. "Assignment of Insurances" means a first priority assignment granted or to be granted by the Borrower in favour of the Security Agent (on behalf of the Finance Parties) of the Insurances relating to the Vessel, to be in form and substance acceptable to the Security Agent. "Assignment of Intercompany Loans" means a first priority assignment of any claims against the Borrower from any Guarantor, and any claims against any Guarantor from the Borrower, in favour of the Security Agent (on behalf of the Finance Parties) to be in form and substance acceptable to the Security Agent, and to include a statement of subordination, whereby the relevant creditor subordinates its claims against the relevant debtor to the claims of the Finance Parties under the Finance Documents. "Authorisations" means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration. "Availability Period" means 10127241/1 5

 
EXECUTION VERSION a) in respect of the Term Loan Facility: the period from and including the date of this Agreement to and including 30 August 2019, or such later date as may be agreed in writing by the Lenders; and b) in respect of the Revolving Facility: the period from and including the Drawdown Date under the Term Loan Facility up to, but not including, the Final Maturity Date. "Available Commitment" means, in relation to a Facility, a Lender's Commitment under the Facility minus: a) the amount of its participation in any outstanding Loans under that Facility; and b) in relation to any proposed drawdown only, the amount of its participation in any Loans that are due to be made under that Facility on or before the proposed Drawdown Date. "Bail-In Action" means the exercise of any Write-down and Conversion Powers. "Bail-In Legislation" means: a) in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time; and b) in relation to any other state, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation. "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 part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of a Loan or Unpaid Sum, had the principal amount or Unpaid Sum 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 London 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. "Business Day" means a day (other than a Saturday or Sunday) on which banks are open for general business in Oslo, Stockholm, London, Amsterdam and New York (or any other relevant place of payment under Clause 29 (Payment mechanics)). “Change in Ultimate Beneficial Owner” means in respect of an Obligor any event by which a private individual (i) acquires the legal and/or beneficial ownership (directly or indirectly) of 25 per cent. or more of the issued share capital of that Obligor or (ii) acquires the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to (directly or indirectly) cast, or control the casting of, 25 per cent. or more of the votes that might be cast at a general meeting of that Obligor or (iii) gains effective control over that Obligor (such private individual being referred to as the “Ultimate Beneficial Owner”). 10127241/1 6

 
EXECUTION VERSION "Change of Control" means the occurrence of any of the following events: a) any company controlled directly or indirectly by the John Fredriksen Family ceases to own directly minimum 25% of the shares and the voting rights of the Ultimate Parent; or b) without the prior written approval of the Majority Lenders, any individual person or more persons acting in concert (other than any company controlled directly or indirectly by the John Fredriksen Family) have the right or the ability to control, either directly or indirectly, the affairs or composition of the majority of the board of directors (or equivalent) of the Ultimate Parent or becomes owners of 1/3 or more of the voting shares of the Ultimate Parent; or c) the Ultimate Parent ceases to own directly 100% of the shares in the Intermediate Parent; or d) the Intermediate Parent ceases to own directly 100% of the shares in the Borrower, excluding in the event of a disposal of such shares in accordance with Clause 7.2 (Disposal or Total Loss), in which case that clause shall apply. "Code" means the US Internal Revenue Code of 1986 (as amended). "COFR" means the U.S. Certificate of Financial Responsibility program (as in effect from time to time), based on the U.S. Oil Pollution Act of 1980. "Commitment" means a) in relation to a Facility, the amount set out under the heading of such Facility in Schedule 1 (The Original Lenders and Commitments); b) in relation to an Original Lender, the amount set opposite its name under the heading "Commitment" in Schedule 1 (The Original Lenders and Commitments) and the amount of any other Commitment transferred to it under this Agreement; and c) 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. "Compliance Certificate" means a certificate substantially in the form as set out in Schedule 5 (Form of Compliance Certificates). "Confidential Information" means all information relating to the Obligors, the Group, the Finance Documents or the Facilities of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or 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 Facilities from either: a) the Obligors or any of their respective advisers; or b) another Finance Party, if the information was obtained by that Finance Party directly or indirectly from the Obligors or any of their advisers, 10127241/1 7

 
EXECUTION VERSION 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 36.1 (Confidential Information); or (ii) is identified in writing at the time of delivery as non-confidential by the Obligor or any of its advisers; or (iii) is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs a) or b) above 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 the Obligor 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. "Default" means an Event of Default or any event or circumstance specified in Clause 24 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default. "DOC" means, in relation to any technical Manager of the Vessel, a valid document of compliance issued to the technical Manager pursuant to paragraph 13.2 of the ISM Code. "Drawdown Date" means the Business Day on which the Borrower has requested drawdown of a Loan pursuant to this Agreement or, as the context requires, the date on which the drawdown is actually made. "Drawdown Notice" means a notice substantially in the form set out in Schedule 3 (Form of Drawdown Notice). "Earnings" means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Borrower and which arise out of the use of or operation of the Vessel, including (but not limited to): a) all freight, hire and passage moneys payable to the Borrower, including (without limitation) payments of any nature under a charterparty or any other agreement for the employment, use, possession, management and/or operation of the Vessel; b) any claim under any guarantees related to freight and hire payable to the Borrower as a consequence of the operation of the Vessel; c) compensation payable to the Borrower in the event of any requisition of the Vessel or for the use of the Vessel by any government authority or other competent authority; d) remuneration for salvage, towage and other services performed by the Vessel payable to the Borrower; e) demurrage and retention money receivable by the Borrower in relation to the Vessel; f) all moneys which are at any time payable under the Insurances in respect of loss of earnings; 10127241/1 8

 
EXECUTION VERSION g) any damages for breach (or payments for variation or termination) of any contract of employment of the Vessel payable to the Borrower; h) if and whenever the Vessel is employed on terms whereby any moneys falling within paragraphs a) to f) above (both inclusive) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Vessel; and i) any other money whatsoever due or to become due to the Borrower from third parties in relation to the Vessel, or otherwise. "Earnings Accounts" means the Borrower's bank accounts, into which all Earnings are to be paid, to be held with the Account Bank, and to be subject to the Account Pledge. "EEA Member Country" means any member state of the European Union, Iceland, Liechtenstein and Norway. "Environmental Approval" means any permit, licence, consent, approval and other Authorisations and the filing of any notification, report or assessment required under any Environmental Law for the operation of the Vessel. "Environmental Claim" means any claim, proceeding or investigation by any party in respect of any Environmental Law or Environmental Approval. "Environmental Law" means any law, regulation, convention or treaty applicable to an Obligor and which relates to the pollution or protection of the environment or to the carriage of material which is capable of polluting the environment. "EU Bail-In Legislation Schedule" means the document described as such and published by the Loan Market Association (or any successor person) from time to time. "Event of Default" means any event or circumstance specified as such in Clause 24 (Events of Default). "FA Act" means the Norwegian Financial Agreements Act 1999 No. 46 (No. finansavtaleloven). "Facilities" means the Term Loan Facility and the Revolving Facility and "Facility" means each of them. "FATCA" means: a) sections 1471 to 1474 of the Code or any associated regulations; b) any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph a) above; or c) any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs a) or b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction. "FATCA Application Date" means: 10127241/1 9

 
EXECUTION VERSION 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 "passthru payment" described in section 1471(d)(7) of the Code not falling within paragraph (a) above, the first date from which such payment may become subject to a deduction or withholding required by FATCA. "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: a) the Agent (on behalf of any other Finance Parties) and the Borrower; and b) the Agent (for itself) and the Borrower, in each case, setting out any of the fees referred to in Clause 11 (Fees). "Final Maturity Date" means the day falling five (5) years after the Drawdown Date under the Term Loan Facility. "Finance Documents" means a) this Agreement; b) any Fee Letter; c) the Security Documents; d) the Sterna Subordination Statement; e) any Trust Agreement; f) each Hedging Agreement, other than in respect of Clauses 35 (Amendments and Waivers), 37 (Counterparts) and (in relation to any communications between the Borrower and the Hedge Providers) Clause 31 (Notices); and g) any other document designated as such by the Agent and the Borrower. "Finance Party" means any or all of the Lenders, the Agent, the Security Agent, the Arrangers and the Hedge Providers. "Financial Indebtedness" means any indebtedness for or in respect of: a) moneys borrowed and debit balances at banks or other financial institutions; b) any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent; 10127241/1 10

 
EXECUTION VERSION c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; d) the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with US GAAP, be treated as a finance or capital lease; e) receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis); f) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that derivative transaction, that amount) shall be taken into account); g) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; h) any amount of any liability under a deferred purchase agreement if (i) one of the primary reasons behind entering into the agreement is to finance the acquisition or construction of the asset or service in question or (ii) the agreement is in respect of the supply of assets or services and payment is due more than 60 days after the date of supply; i) any amount raised under any other transaction (including any forward sale or purchase, sale and sale back or sale and leaseback agreement) having the commercial effect of a borrowing or otherwise classified as borrowings under US GAAP; and j) (without double-counting) the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs a) to i) above. "Green Passport" means a document listing all potential hazardous materials on board the Vessel as further described by the Vessel's classification society and/or the International Maritime Organization (IMO), hereunder an Inventory of Hazardous Materials as described thereby. "Group" means the Ultimate Parent and its Subsidiaries from time to time. "Guarantee" means the unconditional and irrevocable guarantee (In Norwegian: "Selvskyldnerkausjon") and indemnity provided by the each of the Guarantors pursuant to Clause 17 (Guarantee and indemnity). "Hedging Agreement" means any master agreement, confirmation, schedule or other agreement entered or to be entered into by the Borrower and any Hedge Provider to hedge liabilities relating to the Agreement. "Holding Company" means, in relation to a person, any other person in respect of which it is a Subsidiary. "Insurance Report" means a report with respect to the Insurances, with a form, scope and conclusion acceptable to the Lenders, and from a firm of marine insurance brokers acceptable to the Lenders. 10127241/1 11

 
EXECUTION VERSION "Insurances" means, in relation to the Vessel, all insurance policies and contracts of insurance (which expression includes all entries of the Vessel in a protection and indemnity or war risk association) which are from time to time during the Security Period in place or taken out or entered into by or for the benefit of the Borrower (whether in the sole name of the Borrower or in the joint names of the Obligors and any other person) in respect of the Vessel or otherwise in connection with the Vessel and all benefits thereunder (including claims of whatsoever nature and return of premiums). "Interest Payment Date" means the last Business Day of each Interest Period. "Interest Period" means, in relation to a Loan, each period determined in accordance with Clause 9 (Interest Periods), and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default interest). "Interpolated Screen Rate" means, in relation to LIBOR for any Loan, the rate (rounded to the same number of decimal places as the two relevant Screen Rates) which results from interpolating on a linear basis between: a) the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the Interest Period of that Loan; and b) the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of that Loan, each as of 12:00 hours on the Quotation Day for USD. "ISM Code" means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention. "ISPS Code" means the International Ship and Port Facility Security (ISPS) Code as adopted by the International Maritime Organization's (IMO) Diplomatic Conference of December 2002. "John Fredriksen Family" means Mr. John Fredriksen, his direct lineal descendants, the personal estate of any of them and/or any trust created for the benefit of any of the aforementioned persons or their estates. "Lender" means: a) any Original Lender; and b) any New Lender, which in each case has not ceased to be a Party in accordance with the terms of this Agreement. "LIBOR" means, in relation to any Loan: a) the applicable Screen Rate; or b) (if no Screen Rate is available for the Interest Period of that Loan) the Interpolated Screen Rate for that Loan; or c) if: 10127241/1 12

 
EXECUTION VERSION (i) no Screen Rate is available for USD; or (ii) no Screen Rate is available for the Interest Period of that Loan and it is not possible to calculate an Interpolated Screen Rate for that Loan, the Reference Bank Rate, as of 12:00 hours on the Quotation Day for USD and for a period equal in length to the Interest Period of that Loan, and, if any such rate is below zero, LIBOR will be deemed to be zero. "Loan" means a loan made or to be made under a Facility or the principal amount outstanding for the time being of that loan. "Majority Lenders" means: a) if there are no Loan outstanding, a Lender or Lenders whose Commitments aggregate 2 equal to or more than 66 /3% of the Total Commitments (or, if the Total Commitments 2 have been reduced to zero, aggregated equal to or more than 66 /3% of the Total Commitments immediately prior to the reduction); or b) at any other time, a Lender or Lenders whose participations in the Loans then outstanding 2 aggregate equal to or more than 66 /3% of the Loans then outstanding. "Management Agreement(s)" means any commercial and/or technical management agreement entered into between the Borrower and the Manager(s) regarding the Vessel, on terms and conditions acceptable to the Majority Lenders. "Manager" means any technical or commercial manager of the Vessel. "Manager's Undertaking" means a subordination statement by each Manager of the Vessel, in form and substance acceptable to the Agent, whereupon the Manager fully subordinates its claims under any Management Agreement(s) and otherwise in respect of the Vessel to the claims of the Finance Parties under the Finance Document. "Margin" means two point twenty five per cent (2.25%) per annum. "Marpol" means the International Convention for the Prevention of Pollution from Ships. "Market Value" means the fair market value of the Vessel in USD, being the average of valuations of the Vessel obtained from two (2) Approved Brokers by the Borrower. Such valuations to be made with or without physical inspection of the Vessel (as the Agent may require) on the basis of a sale for prompt delivery for cash at arm's length on normal commercial terms as between a willing buyer and seller, on an "as is, where is" basis, free of any existing charter or other contract of employment and/or pool arrangement. If the two valuations differ by more than ten per cent. (10.00%), then a third Approved Broker appointed by the Agent shall provide a valuation and the value of the Vessel shall be the average of the three valuations. The valuations shall be for the cost of the Borrower. "Material Adverse Effect" means a material adverse effect on: a) the financial position, business or operation of any Obligor or the Group (taken as a whole); 10127241/1 13

 
EXECUTION VERSION b) the ability of any of the Obligors' to perform any of its obligations under the Finance Documents; or c) the validity or enforceability of, or the effectiveness or ranking of any Security Interest granted or purported 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. "Maximum Loan Amount" means an amount equal to the lower of: a) 60% of the Market Value of the Vessel; and b) USD 100,000,000, "Mortgage" means the first priority or preferred, as applicable, cross collateralized ship mortgage and, if applicable, the declaration of pledge or deed of covenants collateral thereto, granted by the Borrower in favour of the Security Agent (on behalf of the Finance Parties) in form and substance acceptable to the Security Agent and registered against the Vessel with the applicable Approved Ship Registry. "New Lender" has the meaning set out in Clause 25 (Changes to the Parties). "Obligor" means the Borrower or the Guarantors, or any of them, as the case may be. "Original Financial Statements" means the financial statements for each Obligor (consolidated and audited in respect of the Ultimate Parent), for the financial year ended 31 December 2018. "Party" means a party to this Agreement. "Quotation Day" means, in relation to any period for which an interest rate is to be determined two (2) Business Days before the first day of that period. "Reduction Date" means the date falling three (3) months after the first Drawdown Date under this Agreement, and each date falling at the end of each consecutive three (3) month period thereafter. "Reduction Instalment" means the amount of each quarterly reduction of the Commitments on the Reductions Dates in accordance with Schedule 8 (Repayment and Reduction Schedule), based on a 19-year age adjusted reduction profile. "Reference Banks" means Skandinaviska Enskilda Banken AB (PUBL), ABN Amro Bank N.V. and/or such other banks as may be appointed by the Agent. "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 Bank could borrow funds in the applicable interbank market in the relevant currency and for the relevant period, were it to obtain interbank offers for deposits in that currency and for that period, and if a Reference Bank does not supply a quotation by 12:00 hours on the Quotation Day, the applicable rate shall be determined on the basis of the quotations of the remaining Reference Banks. "Relevant Jurisdiction" means in relation to any Party: a) its jurisdiction of incorporation; 10127241/1 14

 
EXECUTION VERSION b) any jurisdiction where any asset subject to or intended to be subject to Security Interest under a Security Document to be created by it is situated or registered, as applicable; c) any jurisdiction where it conducts its business; and d) the jurisdiction whose laws govern the perfection of any of the Security Documents entered into by it. "Repeating Representations" means each of the representations set out in Clause 19 (Representations and warranties), except for Clauses 19.3a) (Binding obligations), 19.4a) (No conflict with other obligations), 19.6 (Governing law and enforcement), 19.8 b (Taxes) and Clause 19.9 (No filing or stamp taxes). "Resolution Authority" means any body which has authority to exercise any Write-down and Conversion Powers. "Restricted Party" means a person or persons, legal or physical that: a) is listed on any Sanctions List; b) is domiciled, resident, located or having its main place of business in, or is incorporated under the laws of, a country or a territory that is or whose government is subject to Sanctions which attach legal effect to being domiciled, located, having its main place of business in, or incorporated under the laws such country; c) otherwise the target of Sanctions (whether designated by name or by reason of being included in a class of person); d) with which any Finance Party is prohibited from dealing with or otherwise engaging in a transaction with due to Sanctions; or e) is directly or indirectly owned by more than 50 percent or controlled, or acting on behalf, at the direction or for the benefit of a person(s) referred to in paragraph (a), (b) or (c) above. "Revolving Facility" means the senior secured revolving credit facility provided pursuant to the terms of this Agreement, as described in Clause 2.1 (The Facilities) "Rollover Loan" means one or more Loans under the Revolving Facility: (i) made or to be made: (A) on the same day that a maturing Loan is due to be repaid by the Borrower; and (B) in whole or in part for the purpose of refinancing the maturing Loan; and (ii) the aggregate amount of which is equal to or less than the amount of the maturing Loan. "Sanctions" means any economic or financial sanctions laws and/or regulations, trade embargoes, prohibitions, restrictive measures, decisions, executive orders, or notices from regulators implemented, adapted, imposed, administered, enacted, or enforced by any Sanctions Authority. "Sanctions Authority" means the United Nations Security Council, the European Union or any of its member states (including, without limitation, The Netherlands and the Kingdom of Sweden), the 10127241/1 15

 
EXECUTION VERSION United Kingdom, the Kingdom of Norway, any country to which any Obligor is bound, the United States of America (including but not limited to the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) and the U.S. Department of State), and any authority acting on behalf of any of them in connection with Sanctions. "Sanctions List" means any list of persons or entities subject to Sanctions published in connection with Sanctions by or on behalf of any Sanctions Authority from time to time. "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 USD for the relevant 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 service ceases to be available, the Agent may specify another page or service displaying the relevant rate after consultation with the Ultimate Parent. "Security Documents" means all or any security documents as may be entered into from time to time pursuant to Clause 18 (Security). "Security Interest" means any mortgage, charge (whether fixed or floating), encumbrance, pledge, lien, assignment by way of security, finance lease, sale and repurchase or sale and leaseback arrangement, sale of receivables on a recourse basis or other security interest or any other agreement or arrangement having the effect of conferring security. "Security Period" means the period commencing on the date of this Agreement and ending the date on which the Agent notifies the Borrower and the other Finance Parties that: a) all amounts which have become due for payment by the Borrower or any other 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 of the Finance Documents; c) the Obligors' have no future or contingent liability under any provision of this Agreement, the other Finance Documents; and d) the Agent and the Majority Lenders do not consider that there is a significant risk that any payment or transaction under a Finance Document would be set aside, or would have to be reversed or adjusted, in any present or possible future proceeding relating to a Finance Document or any asset covered (or previously covered) by a Security Interest created by a Finance Document. "Selection Notice" means a notice substantially in the form set forth in Schedule 4 (Form of Selection Notice) given in accordance with Clause 9.1 (Selection of Interest Periods). "Share Pledges" means first priority pledges in favour of the Security Agent (on behalf of the Finance Parties) to be created over all shares in the Borrower pursuant to one or several share pledge agreements in form and substance acceptable to the Security Agent, to be entered into between the Security Agent and the Intermediate Parent. 10127241/1 16

 
EXECUTION VERSION "Sterna RCF" means the revolving credit facility currently in the amount of USD 270,000,000 made available to the Intermediate Parent (as borrower) by Sterna Finance Ltd. (as lender) pursuant to a facility agreement dated 7 March 2017, as amended from time to time. "Sterna Subordination Statement" means a subordination statement in form and substance acceptable to all Lenders, to be entered into between Sterna Finance Ltd. (as lender under the Sterna RCF) and the Agent (on behalf of the Finance Parties), pursuant to which Sterna Finance Ltd. irrevocably fully subordinates its rights and claims against the Intermediate Parent to the rights and claims of the Finance Parties under the Finance Documents. "SMC" means a valid safety management certificate issued for the Vessel pursuant to paragraph 13.7 of the ISM Code. "SMS" means a safety management system for the Vessel developed and implemented in accordance with the ISM Code and including the functional requirements duties and obligations that follow from the ISM Code. "Subsidiary" means an entity from time to time of which a person: a) has direct or indirect control; b) or owns directly or indirectly more than fifty per cent. (50.00%) (votes and/or capital), and for the purpose of paragraph a) above, an entity shall be treated as being "controlled" by a person if that person is able to direct its affairs and/or control either directly or indirectly, the composition of its board of directors or equivalent body. "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). "Term Loan Facility" means the senior secured term loan facility provided pursuant to the terms of this Agreement as described in Clause 2.1 (The Facilities) "Total Commitments" means the aggregate of the Commitments in respect of both Facilities, being USD 100,000,000 at the date of this Agreement. "Total Loss" means, in relation to the Vessel: a) the actual, constructive, compromised, agreed, arranged or other total loss of the Vessel; b) any expropriation, confiscation, requisition or acquisition of the 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 purporting to be or to represent a governmental or official authority unless it is within 180 calendar days from the Total Loss Date redelivered to the full control of the Borrower; and c) any capture or seizure of the Vessel (including any hijacking or theft) unless it is within 180 calendar days from the Total Loss Date redelivered to the full control of the Borrower. "Total Loss Date" means: 10127241/1 17

 
EXECUTION VERSION a) in the case of an actual total loss of the Vessel, the date on which it occurred or, if that is unknown, the date when the Vessel was last heard of; b) in the case of a constructive, compromised, agreed or arranged total loss of the Vessel, the earlier of: (i) the date on which a notice of abandonment is given to the insurers; and (ii) the date of compromise, arrangement or agreement made by or on behalf of the Borrower with the Vessel's insurers in which the insurers agree to treat the Vessel as a total loss; or c) in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Agent that the event constituting the total loss occurred. "Transaction Documents" means any Management Agreement and the Sterna RCF. "Transfer Certificate" means a certificate substantially in the form as set out in Schedule 6 (Form of Transfer Certificate) or any other form agreed between the Agent and the Borrower. "Transfer Date" means, in relation to a transfer, the later of: a) the proposed Transfer Date specified in the relevant Transfer Certificate; and b) the date on which the Agent executes the relevant Transfer Certificate. "Trust Agreement" means: a) any vessel trust agreement entered into from time to time between the Agent and the Security Agent (as mortgagee) in respect of the Vessel and Mortgage, whereby the Security Agent agrees to hold the Vessel and/or the Mortgage on trust for the Finance Parties; and b) any trust deed entered into from time to time between the Finance Parties and the Security Agent in respect of any English law governed Security Documents. "Unpaid Sum" means any sum due and payable but unpaid by an Obligor under the Finance Documents. "US" means the United States of America. "US GAAP" means the generally accepted account principles in the US. "US Tax Obligor" means: a) an Obligor which is resident for tax purposes in the US; or b) an Obligor some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes. "USD" means United States Dollars, being the lawful currency of the United States of America. 10127241/1 18

 
EXECUTION VERSION "VAT" means value added tax and any other tax of similar nature. "Vessel" means the vessel set out in Schedule 7 (Vessel). "Write-down and Conversion Powers" means: a) in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule; and b) in relation to any other applicable Bail-In Legislation: (i) any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and (ii) any similar or analogous powers under that Bail-In Legislation. 1.2 Construction a) Unless a contrary indication appears, any reference in this Agreement to: (i) the "Agent", the "Security Agent", the "Arranger", any "Finance Party", any "Lender", any "Obligor", any "Hedge Provider" or any "Party" shall be construed so as to include its successors in title, permitted assigns and permitted transferees to, or of, its rights and/or obligations under the Finance Documents; (ii) a "Finance Document" or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, novated, supplemented, extended or restated; (iii) "control" means the power to appoint a majority of the board of directors or to direct the management and policies of an entity, whether through the ownership of voting capital, by contract or otherwise; (iv) "indebtedness" includes any obligation (whether incurred as principal or as surety) for the payment or repayment of borrowed money, whether present or future, actual or contingent; (v) a "person" shall include any individual, firm, partnership, joint venture, company, corporation, trust, fund, body, corporate, unincorporated body of persons, or any state or any agency of a state or association (whether or not having separate legal personality); (vi) a "regulation" includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, 10127241/1 19

 
EXECUTION VERSION intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organisation; (vii) a provision of law is a reference to that provision as it may be amended or re- enacted; and (viii) a time of the day is a reference to Oslo time unless specified otherwise. b) Section, Clause and Schedule headings are for ease of reference only. c) Words denoting the singular number shall include the plural and vice versa. d) Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement. e) Unless the contrary intention appears, a reference to a "month" or "months" is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that; (i) (subject to paragraph (iii) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day; (ii) if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and (iii) if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end. The above rules will only apply to the last month of any period. f) A Default and/or an Event of Default is "continuing" if it has not been remedied or waived. 1.3 Conflicting provisions In case of conflict between this Agreement and the terms of any of the Security Documents, the terms and conditions of this Agreement shall prevail. 1.4 The FA Act Each Obligor hereby agrees and accepts, to the extent permitted by law, that this Clause 1.3 (The FA Act) shall constitute a waiver of the provisions of the FA Act, and further agrees and accepts, to the extent permitted by law, that the provisions of the FA Act shall not apply to this Agreement or to the relationship between the Finance Parties and each Obligor. 10127241/1 20

 
EXECUTION VERSION SECTION 2 THE FACILITIES 2 THE FACILITIES 2.1 The Facilities Subject to the terms of this Agreement, the Lenders agree to make available to the Borrower the Facilities consisting of (i) the Term Loan Facility, a senior secured term loan facility, and (ii) the Revolving Facility, a senior secured revolving facility, in aggregate up to the Total Commitments allocated as set out in Schedule 1 (The Original Lenders and Commitments). 2.2 Finance Parties' rights and obligations a) 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. b) 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 an Obligor shall be a separate and independent debt in respect of which a Finance Party shall be entitled to enforce its rights in accordance with paragraph c) below. The rights of each Finance Party include any debt owing to that Finance Party under the Finance Documents and, for the avoidance of doubt, any part of a Loan or any other amount owed by an Obligor which relates to a Finance Party’s participation in the Facilities or its role under a Finance Document (including any such amount payable to the Agent on its behalf) is a debt owing to that Finance Party by that Obligor. c) A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents. 2.3 Obligors' agent a) Each Obligor (other than the Ultimate Parent) by its execution of this Agreement irrevocably appoints the Ultimate Parent to act on its behalf as its agent in relation to the Finance Documents and irrevocably by way of security authorises: (i) the Ultimate Parent on its behalf to supply all information concerning itself contemplated by this Agreement to the Finance Parties and to give all notices and instructions, to make such agreements, to execute such deeds (under hand), and to effect the relevant amendments, supplements and variations capable of being given, made or effected by the Ultimate Parent notwithstanding that they may affect the other Obligors, without further reference to or the consent of the other Obligors; and (ii) each Finance Party to give any notice, demand or other communication to the Obligors pursuant to the Finance Documents to the Ultimate Parent, and in each case the other Obligors shall be bound as though the Ultimate Parent itself had been given the notices and instructions or executed or made the agreements or deeds or effected the amendments, supplements or variations, or received the relevant notice, demand or other communication. 10127241/1 21

 
EXECUTION VERSION b) Every act, omission, agreement, undertaking, settlement, waiver, amendment, supplement, variation, notice or other communication given or made by the Ultimate Parent or given to the Ultimate Parent under any Finance Document on behalf of the other Obligors or in connection with any Finance Document (whether or not known to any of the other Obligors) shall be binding for all purposes on the other Obligors as if it had expressly made, given or concurred with it. In the event of any conflict between any notices or other communications of the Ultimate Parent and the other Obligors, those of the Ultimate Parent shall prevail. 3 PURPOSE 3.1 Purpose The Borrower shall apply all amounts borrowed by it under the Facilities towards (i) refinancing all existing indebtedness related to the Vessel and (ii) for the Borrower's general corporate purposes. 3.2 Monitoring Without prejudice to the obligations of the Borrower under this Clause 3, no Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement. 4 CONDITIONS PRECEDENT 4.1 Initial conditions precedent a) The signing and effectiveness of this Agreement is conditional upon the Agent having received all of the documents and other evidence listed in Part I of Schedule 2 (Conditions precedent - Signing) in form and substance satisfactory to the Agent no later than 15 August 2019, unless otherwise agreed by the Parties hereto. The Agent shall notify the Borrower and the Lenders promptly upon being so satisfied. b) The Borrower may not deliver a Drawdown Notice unless the Agent has received all of the documents and other evidence listed in Part II of Schedule 2 (Conditions precedent – Drawdown Notice) in form and substance satisfactory to the Agent. The Agent shall notify the Borrower and the Lenders promptly upon being so satisfied. c) 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 paragraph b) above, 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 The Lenders will only be obliged to comply with Clause 5.5 (Lenders' participation) if on the date of a Drawdown Notice and on the proposed Drawdown Date: a) in the case of a Rollover Loan, no Event of Default is continuing or would result from the proposed drawing and in the case of any other Loan, no Default is continuing or would result from the proposed drawing; and b) the Repeating Representations contained in Clause 19 (Representations and warranties) deemed to be repeated on those dates are true and correct in all material respects. 4.3 Maximum number of drawings a) The Term Loan Facility may be drawn in one (1) Loan only during the Availability Period. 10127241/1 22

 
EXECUTION VERSION b) The Borrower may not deliver a Drawdown Notice under the Revolving Facility if as a result of the proposed drawing more than five (5) Loans would be outstanding under the Revolving Facility. 4.4 Waiver of conditions precedent The conditions precedent specified in this Clause 4 are solely for the benefit of the Lenders and may be waived on their behalf in whole or in part and with or without conditions by the Agent (acting on the instructions of all the Lenders). 10127241/1 23

 
EXECUTION VERSION SECTION 3 DRAWDOWN 5 DRAWDOWN 5.1 Delivery of a Drawdown Notice The Borrower may utilise a Facility by delivering to the Agent a duly completed Drawdown Notice no later than 11:00 hours three (3) Business Days prior to the proposed Drawdown Date. 5.2 Completion of the Drawdown Notice Each Drawdown Notice is irrevocable and will not be regarded as having been duly completed unless: a) it identifies the Facility to which the proposed Loan relates; b) it identifies the purpose of the proposed Loan, being in accordance with Clause 3.1 (Purpose); c) the proposed Drawdown Date is a Business Day within the Availability Period of the relevant Facility; d) the currency specified is USD; e) the aggregate of any Loan(s) utilised and the amount of the proposed Loan, does not exceed the Total Commitments; f) the amount specified in the Drawdown Notice does not exceed the Available Commitments under the relevant Facility; g) the proposed Interest Period complies with Clause 9 (Interest Periods); h) in respect of the Revolving Facility, the amount of the proposed Loan is minimum USD 5,000,000 or integral multiples thereof; and i) in respect of the Term Loan Facility, the amount of the proposed Loan, when aggregated with the Commitments under the Revolving Facility, will not cause the Maximum Loan Amount to be exceeded, as determined by the Market Value of the Vessel established not more than four (4) weeks prior to the proposed Drawdown Date. 5.3 Automatic Rollover Loan a) In the event that the Agent has not received a Drawdown Notice within the time limit set in Clause 5.1 (Delivery of a Drawdown Notice) for a drawdown under the Revolving Facility made solely for the purpose of repayment of a Loan under the Revolving Facility in accordance with Clause 6.1 (Repayment – Revolving Facility) on its repayment date, it shall be regarded as if the Borrower has completed and submitted a Drawdown Notice for a Rollover Loan to the Agent within the time limit. b) In the event that the Borrower does not want the Rollover Loan to be made available automatically, it must notify the Agent in writing before 11:00 hours four (4) Business Days prior to the relevant repayment date. 10127241/1 24

 
EXECUTION VERSION c) The Rollover Loan will only be made available as long as all other requirements under this Agreement for the availability for a Loan under the Revolving Facility in the same amount as the Rollover Loan are fulfilled on the Drawdown Date. d) The Rollover Loan shall be applied to repay the relevant a Loan under the Revolving Facility on its repayment date in accordance with Clause 6.1 (Repayment – Revolving Facility). 5.4 Availability Any amount of the Commitments under a Facility which, at that time, has not been utilised shall automatically be cancelled at the close of business in Oslo on the expiry of the relevant Availability Period. 5.5 Lenders' participation a) Upon receipt of a Drawdown Notice, the Agent shall notify each Lender of the details of the requested drawing and the amount of each Lender's participation. b) If the conditions set out in this Agreement have been met, and subject to Clause 6.1 (Repayment – Revolving Facility) each Lender shall no later than 11:00 hours on a Drawdown Date make available to the Agent for the account of the Borrower an amount equal to its participation in the drawing to be advanced pursuant to a Drawdown Notice. The amount of each Lender's participation in each Loan will be equal to the proportion borne by its Commitments to the aggregate Commitments under such Facility immediately prior to making the Loan. SECTION 4 REPAYMENT, REDUCTION, PREPAYMENT AND CANCELLATION 6 REPAYMENT 6.1 Repayment – Revolving Facility a) The Borrower shall repay each Loan under the Revolving Facility on the last day of its Interest Period. b) Without prejudice to the Borrower's obligation under paragraph a) above, if: (i) one or more Loans are to be made available to the Borrower: (A) on the same day that a maturing Loan is due to be repaid by the Borrower; and (B) in whole or in part for the purpose of refinancing the maturing Loan; and (ii) the proportion borne by each Lender's participation in the maturing Loan to the amount of that maturing Loan is the same as the proportion borne by that Lender's participation in the new Loans to the aggregate amount of those new Loans, 10127241/1 25

 
EXECUTION VERSION the aggregate amount of the new Loans shall, unless the Borrower notifies the Agent to the contrary in the relevant Drawdown Notice, be treated as if applied in or towards repayment of the maturing Loan so that: (A) if the amount of the maturing Loan exceeds the aggregate amount of the new Loans: (1) the Borrower will only be required to make a payment under Clause 29.1 (Payments to the Agent) in an amount equal to that excess; and (2) each Lender's participation in the new Loans shall be treated as having been made available and applied by the Borrower in or towards repayment of that Lender's participation in the maturing Loan and that Lender will not be required to make a payment under Clause 29.1 (Payments to the Agent) in respect of its participation in the new Loans; and (B) if the amount of the maturing Loan is equal to or less than the aggregate amount of the new Loans: (1) the Borrower will not be required to make a payment under Clause 29.1 (Payments to the Agent); and (2) each Lender will be required to make a payment under Clause 29.1 (Payments to the Agent) in respect of its participation in the new Loans only to the extent that its participation in the new Loans exceeds that Lender's participation in the maturing Loan and the remainder of that Lender's participation in the new Loans shall be treated as having been made available and applied by the Borrower in or towards repayment of that Lender's participation in the maturing Loan. c) No amount shall be outstanding under the Revolving Facility after the Final Maturity Date. 6.2 Reduction – Revolving Facility a) The Borrower shall effect the Reduction Instalments on each Reduction Date. b) On each Reduction Date, the Commitments of each Lender shall be reduced by an amount equal to its proportionate pro rata share of the Reduction Instalment, and the Borrower shall, if relevant, procure the payment of each such Reduction Instalment, applied against each Loan, to bring the outstanding amounts in accordance with Schedule 8 (Repayment and Reduction Schedule). 6.3 Repayment – Term Loan Facility a) The Borrower shall repay the Loan under the Term Loan Facility in equal quarterly consecutive instalments, based on a 19-year age adjusted repayment profile, with the first instalment falling due three (3) months after the Drawdown Date of the Loan. b) On the Final Maturity Date the remaining principal amount outstanding under the Loan under the Term Loan Facility shall be repaid as a balloon repayment. 10127241/1 26

 
EXECUTION VERSION c) The Borrower may not re-borrow any part of the Loan under the Term Loan Facility which is repaid. 6.4 Final repayment Notwithstanding Clause 6.3 (Repayment) and 6.2 (Reduction), on the Final Maturity Date, the Borrower shall repay any Loans then outstanding under this Agreement in full, together with all other sums due and outstanding under the Finance Documents at such date (if any). 6.5 Repayment and reduction schedule An illustrative repayment and reduction schedule is set out in Schedule 8 (Repayment and Reduction Schedule), based on the assumption of full utilisation of the Total Commitments. The Agent shall provide an updated repayment schedule prior to the first Drawdown Date, reflecting the final amount of each Loan and its Drawdown Date, upon instruction of the Lenders. 7 PREPAYMENT AND CANCELLATION 7.1 Mandatory prepayment – Collateral Maintenance Test The aggregate Market Value of the Vessel shall at all times be minimum one hundred and thirty per cent. (130%) of the amount equal to the Loans outstanding under the Facilities (the "Collateral Maintenance Test"). If there is a breach of the Collateral Maintenance Test, the Borrower shall within fourteen (14) days of the occurrence of such breach either; (i) post additional collateral reasonably satisfactory to the Majority Lenders in favour of the Security Agent (it being understood that cash in USD placed in a pledged and blocked account shall be satisfactory to the Majority Lenders), pursuant to security documentation in form and substance reasonably satisfactory to the Agent, in an aggregate amount sufficient to cure such breach, or (ii) prepay the Loans under the Facilities by an amount necessary to cure such breach. As long as any breach of the Collateral Maintenance Test is continuing and not cured, the Available Commitments under the Revolving Facility shall be deemed reduced to zero for the purpose of any drawdown or proposed drawdown. 7.2 Mandatory prepayment – Total Loss or sale a) For the purpose of this Clause 7.2, the following definitions shall apply: "Disposal Date" means: (i) in case of a sale or other disposal of the Vessel, the date on which the sale or other disposal is completed by delivery of the Vessel to the buyer; (ii) in case of a sale or other disposal of all shares in the Borrower, the date of transfer of such shares from the Intermediate Parent to the buyer; or (iii) in the case of a Total Loss, on the earlier of (i) the date falling one hundred and twenty (120) days after the Total Loss Date and (ii) the receipt by the Agent (on behalf of the Lenders) of the proceeds of Insurance relating to such Total Loss (or in the event of a requisition for title of the Vessel, immediately after the occurrence of such requisition of title). 10127241/1 27

 
EXECUTION VERSION b) If the Vessel is sold or otherwise disposed of, or it becomes a Total Loss, or all shares in the Borrower is sold or otherwise disposed of, the Borrower shall be obliged to prepay the outstanding Loans under this Agreement in full, together with accrued interest, and settle all costs and fees, and all outstanding amounts under Hedging Agreements, related to such Loans, on the Disposal Date, and concurrently all Commitments shall be automatically cancelled. 7.3 Mandatory prepayment – Illegality If it becomes unlawful in any applicable jurisdiction or contrary to, or declared by any Sanctions Authority to be contrary to, Sanctions (including, without limitation, due to actions by any Obligor) for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in a Loan: a) that Lender shall promptly notify the Agent upon becoming aware of that event; b) upon the Agent notifying the Borrower, the Commitment of that Lender will be immediately cancelled; and c) the Borrower shall repay that Lender's participation in the Loans on the Interest Payment Date occurring after the Agent has notified the Borrower or, if earlier, the date specified by that Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law). 7.4 Mandatory prepayment – Change of Control Upon the occurrence of a Change of Control any Lender may cancel its Commitments, and declare that its participation in any Loan, together with accrued interest, costs and fees shall be due and payable. Such notice shall be given by the relevant Lender(s) to the Agent, and upon the Agent notifying the Borrower, such Commitments will be immediately cancelled and such outstanding part of any Loan and other amounts will become due and payable by the Borrower within 20 Business Days of such notice. The Borrower shall promptly notify the Agent upon becoming aware of a Change of Control. 7.5 Voluntary prepayment The Borrower may, if it gives the Agent not less than ten (10) Business Days' (or such shorter period as the Majority Lenders may agree) prior written notice, prepay the whole or any part of a Loan (but if in part, being an amount of minimum USD 5,000,000 or in integral multiples thereof). 7.6 Voluntary cancellation The Borrower may, if it gives the Agent not less than ten (10) Business Days' (or such shorter period as the Majority Lenders may agree) prior written notice, cancel the whole or any part of the Available Commitments (but if in part being a minimum amount of USD 5,000,000 or in integral multiples thereof) under the Revolving Facility. Any cancellation under this Clause 7.6 shall reduce the Commitments of the Lenders rateably, and shall be applied pro rata on all future reductions, including the balloon. 7.7 Right of repayment in relation to a single Lender a) If: (i) any sum payable to any Lender by the Borrower is required to be increased under paragraph c) of Clause 12.2 (Tax gross-up); or 10127241/1 28

 
EXECUTION VERSION (ii) any Lender claims indemnification from the Borrower under Clause 12.3 (Tax indemnity) or Clause 13.1 (Increased costs), the Borrower may, whilst the circumstance giving rise to the requirement for that increase or indemnification continues, give the Agent notice of cancellation of the Commitment of that Lender and its intention to procure the repayment of that Lender's participation in the Loans. b) On receipt of a notice of cancellation referred to in paragraph a) above, the Commitment of that Lender shall immediately be reduced to zero. c) On the last day of each Interest Period which ends after the Borrower have given notice of cancellation under paragraph a) above (or, if earlier, the date specified by the Borrower in that notice), the Borrower shall repay that Lender's participation in the Loans together with all interest and other amounts accrued under the Finance Documents. 7.8 Terms and conditions for prepayments and cancellation a) Any notice of prepayment or cancellation by the Borrower under this Clause 7 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date upon which the prepayment or cancellation is to be made. b) Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty. c) The Borrower may not re-borrow any part of the Term Loan Facility which is prepaid, and may not re-borrow any part of the Revolving Facility which is mandatorily prepaid. d) The Borrower shall not repay or prepay all or any part of the Loans or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement. e) No amount of the Commitments cancelled under this Agreement may subsequently be reinstated, unless otherwise agreed in writing with the Lenders. f) If the Agent receives a notice under this Clause 7 it shall promptly forward a copy of that notice to the Borrower or the Lenders, as appropriate. 7.9 Application of prepayments Unless otherwise provided for in this Clause 7, prepaid amounts shall be applied as follows: a) any mandatory prepayment under this Agreement shall, to the extent not prepaying the Loans in full, be applied in inverse order of maturity against the remaining instalments, including balloon payments, first pro rata between the Facilities, and secondly, after mandatory prepayments have been applied pro rata between the Facilities, the amount applied pro rata to each Facility shall be applied pro rata between the Loans under the respective Facilities, and shall, save as otherwise stated, reduce rateably each Lender's participation in the Loan(s) prepaid; and b) any voluntary prepayment under this Agreement shall be applied pro rata across the repayment schedule, including the balloon, for the relevant Loan(s) being prepaid, including any balloon, and shall, save as otherwise stated, reduce rateably each Lender's participation in the Loan(s) prepaid. 10127241/1 29

 
EXECUTION VERSION 10127241/1 30

 
EXECUTION VERSION SECTION 5 COSTS OF UTILISATION 8 INTEREST 8.1 Calculation of interest a) The rate of interest for a Loan for each Interest Period is the percentage rate per annum which is the aggregate of: (i) the Margin; and (ii) LIBOR. b) Effective interest pursuant to Section 46 of the FA Act has been calculated by the Agent as set out in a separate notice from the Agent to the Borrower. 8.2 Payment of interest The Borrower shall pay accrued interest on each Loan on the last day of each Interest Period (and if the Interest Period is longer than six (6) months, on the date falling at six-monthly intervals after the first day of the Interest Period). 8.3 Default interest a) If an Obligor fails to pay any amount payable by it under the Finance Documents on its due date, interest shall accrue on the overdue amount from the due date and up to the date of actual payment (both before and after judgment) at a rate determined by the Agent to be two percentage points (2.00%) per annum higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a 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 relevant Obligor on demand by the Agent. b) 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. c) If an Event of Default has occurred and is continuing, and notice thereof has been sent from the Agent to the Borrower, all outstanding amounts under the Facilities shall be deemed overdue and default interest will be calculated and is payable forthwith upon demand from the Agent. 9 INTEREST PERIODS 9.1 Selection of Interest Periods a) The Borrower may select an Interest Period for a Loan in a Drawdown Notice or (if the Loan has already been borrowed) in a Selection Notice. b) Each Selection Notice is irrevocable and must be received by the Agent not later than 12:00 hours three (3) Business Days before the Quotation Day for that Interest Period. c) If the Borrower fails to deliver a Selection Notice to the Agent in accordance with paragraph b) above, the relevant Interest Period will be three (3) months. 10127241/1 31

 
EXECUTION VERSION d) The Borrower may select an Interest Period of a Loan under the Revolving Facility of one (1), three (3) or six (6) months or such other period agreed between the Borrower and the Agent (on behalf of the Lenders), however maximum three (3) one (1) month periods per year. e) The Borrower may select an Interest Period of the Loan under the Term Loan Facility of three (3) months or such other period agreed between the Borrower and the Agent (on behalf of the Lenders). f) An Interest Period shall not extend beyond the Final Maturity Date, but shall be shortened so that it ends on the Final Maturity Date. 9.2 Non-Business Day 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 Market disruption a) If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Lender's share of that Loan for the Interest Period shall be the rate per annum which is the sum of: (i) the Margin; and (ii) the rate notified to the Agent by that Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in the Loan from whatever source it may reasonably select. b) In this Agreement, "Market Disruption Event" means: (i) at or about 12:00 hours on the Quotation Day for the relevant Interest Period, LIBOR is not available; or (ii) before close of business in the London interbank market on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in Loan exceed fifty per cent (50.00%) of the Loan) that the cost to it or them of obtaining matching deposits in the London interbank market would be in excess of LIBOR. 10.2 Alternative basis of interest or funding a) If a Market Disruption Event occurs and the Agent or the Borrower so requires, the Agent and the Borrower shall enter into negotiations (for a period of not more than thirty (30) days) with a view to agreeing a substitute basis for determining the rate of interest. b) Any alternative basis agreed pursuant to this Clause 10.2 shall, with the prior consent of all the Lenders and the Borrower, be binding on all Parties. 10127241/1 32

 
EXECUTION VERSION 10.3 Break Costs a) The Borrower shall, within three (3) Business Days of demand by a Finance Party, pay to that Finance Party its Break Cost attributable to all or any part of a Loan or Unpaid Sum being paid by the Borrower on a day other than the last day of an Interest Period for the Loan or Unpaid Sum. b) Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Cost for any Interest Period in which they accrue. 11 FEES 11.1 Commitment fee a) The Borrower shall pay to the Agent (for the account of each Lender) a fee in USD computed at a rate per annum equal to 40% of the Margin, calculated on each Lender's Available Commitment under the Facilities, from the date of this Agreement to the earlier of: (i) the expiry of all Availability Periods; or (ii) the date on which both Facilities have been cancelled in whole. b) The accrued commitment fee is payable quarterly in arrears on the last day of each fiscal quarter and on the last day of all Availability Periods or such other date upon which the Facilities are cancelled in whole or, in respect of any part cancellation, on the cancelled amount on the date the cancellation is effective. 11.2 Upfront fee The Borrower shall pay to Agent (for further distribution to the Arrangers) an upfront fee in the amount and at the times agreed in a Fee Letter. 11.3 Agency fee The Borrower shall pay to Agent (for its own account) an agency fee in the amount and at the times agreed in a Fee Letter. SECTION 6 ADDITIONAL PAYMENT OBLIGATIONS 12 TAX GROSS-UP AND INDEMNITIES 12.1 Definitions a) 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. "Qualifying Lender" means a Lender which is beneficially entitled to interest payable to it in respect of a Loan under a Finance Document and, in relation to the Borrower is: 10127241/1 33

 
EXECUTION VERSION (i) a Lender which is resident for tax purposes in the Borrower's Tax Jurisdiction and to whom interest may be paid by that Borrower without a Tax Deduction under the domestic laws of that Borrower's Tax Jurisdiction; or (ii) a Treaty Lender. "Tax Confirmation" means a confirmation by a Lender that it is beneficially entitled to interest payable to it in respect of an advance under a Finance Document specifying: (i) its Tax Jurisdiction; (ii) whether the Lender believes it is a Treaty Lender in relation to the Borrower; and (iii) such other relevant details as may be reasonably requested by the Borrower or the Agent "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 Jurisdiction" means, in relation to the Borrower, the jurisdiction in which it is resident for tax purposes from time to time. "Tax Payment" means either the increase in a payment made by an Obligor to a Finance Party under Clause 12.2 (Tax gross-up) or a payment under Clause 12.3 (Tax indemnity). "Treaty Lender" means, in relation to the Borrower, a Lender which is treated as resident in a jurisdiction that has a double taxation agreement (a "Treaty") with the Borrower's Tax Jurisdiction which gives such resident full exemption from tax imposed by the Borrower's Tax Jurisdiction on interest. b) 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 a) Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law. b) The Borrower shall promptly upon becoming aware that an Obligor 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 Borrower and that Obligor. c) If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor 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. 10127241/1 34

 
EXECUTION VERSION d) A payment shall not be increased under paragraph c) above by reason of a Tax Deduction if on the date on which the payment falls due: (i) the payment could have been made to the relevant Lender without a Tax Deduction if the Lender had been a Qualifying Lender in respect of that Obligor, but on that date that Lender is not or has ceased to be a Qualifying Lender in respect of that Obligor other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty or any published practice or published concession of any relevant authority; or (ii) the relevant Lender is a Treaty Lender and the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without the Tax Deduction had that Lender complied with its obligations under paragraph g) below. e) If an Obligor is required to make a Tax Deduction, that Obligor 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. f) Within thirty (30) days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party 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. g) A Treaty Lender and each Obligor which makes a payment to which that Treaty Lender is entitled shall co-operate in completing any procedural formalities necessary for that Obligor to obtain authorisation to make that payment without a Tax Deduction. h) A Lender shall promptly provide a Tax Confirmation to the Agent when it becomes a party to this Agreement and the Agent shall promptly send the Tax Confirmation it receives to the Borrower. The Agent may request a Lender to provide a Tax Confirmation in a specific format. A Lender shall promptly notify the Borrower and the Agent if there is any change in the position from that set out in the Tax Confirmation. 12.3 Tax indemnity a) The Borrower shall (within three (3) 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. b) Paragraph a) above shall not apply: (i) with respect to any Tax assessed on a Finance Party: (A) 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 10127241/1 35

 
EXECUTION VERSION (B) 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 (ii) to the extent a loss, liability or cost: (A) is compensated for by an increased payment under Clause 12.2 (Tax gross-up); or (B) would have been compensated for by an increased payment under Clause 12.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in paragraph d) of Clause 12.2 (Tax gross-up) applied; or (C) relates to a FATCA Deduction required to be made by a Party. c) A Protected Party making, or intending to make, a claim under paragraph a) above 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 Borrower. d) A Protected Party shall, on receiving a payment from an Obligor under this Clause 12.3, notify the Agent. 12.4 Tax Credit If an Obligor makes a Tax Payment and the relevant Finance Party determines that: a) a Tax Credit is attributable to an increased payment of which that Tax Payment forms part, to that Tax Payment or to a Tax Deduction in consequence of which that Tax Payment was required; and b) that Finance Party has obtained and utilised that Tax Credit, the Finance Party shall pay an amount to the Obligor 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 required to be made by the Obligor. 12.5 Stamp taxes a) The Borrower shall pay and, within three (3) 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. b) The relevant Finance Party shall, if it intends to make a claim pursuant to paragraph a) above, promptly notify the Borrower of the event giving rise to the claim and shall as soon as practicable, provide a certificate confirming the amount of the claim. 10127241/1 36

 
EXECUTION VERSION 12.6 VAT All amounts set out, or expressed to be payable under a Finance Document by any Party to a Finance Document shall be deemed to be exclusive of any VAT. If VAT is chargeable, the Borrower shall pay to the Agent for the account of such Finance Party (in addition to the amount required pursuant to the Finance Documents) an amount equal to such VAT. 12.7 FATCA Information a) Subject to paragraph c) below, each Party shall, within ten (10) Business Days of a reasonable request by another Party: (i) confirm to that other Party whether it is: (A) a FATCA Exempt Party; or (B) not a FATCA Exempt Party; (ii) supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party's compliance with FATCA; and (iii) supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party's compliance with any other law, regulation, or exchange of information regime. b) If a Party confirms to another Party pursuant to paragraph a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly. c) Paragraph a) above shall not oblige any Finance Party to do anything, and paragraph a)(iii) above shall not oblige any other Party to do anything, which would or might in its reasonable opinion constitute a breach of: (i) any law or regulation; (ii) any fiduciary duty; or (iii) any duty of confidentiality. d) If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with paragraph a)(i) or (ii) above (including, for the avoidance of doubt, where paragraph c) above applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information. 12.8 FATCA Deduction a) Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction. 10127241/1 37

 
EXECUTION VERSION b) Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment and, in addition, shall notify the Borrower and the Agent and the Agent shall notify the other Finance Parties. 13 INCREASED COSTS 13.1 Increased Costs a) Subject to Clause 13.3 (Exceptions) the Borrower shall, within three (3) Business Days of a demand by the Agent, pay 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 made after the date of this Agreement; (ii) compliance with any law or regulation made after the date of this Agreement; (iii) the implementation or application of, or compliance with, Basel III, CRD IV or CRR; or (iv) the implementation or application of, or compliance with, IFRS 9 or any other changes in relevant reporting standards, b) In this Agreement: "Basel III" means: (i) 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; (ii) 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 (iii) any further guidance or standards published by the Basel Committee on Banking Supervision relating to "Basel III". "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 Directive 2006/48/EC and 2006/49/EC. "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. 10127241/1 38

 
EXECUTION VERSION "IFRS 9" means the International Financial Reporting Standard (IFRS) by the International Accounting Standards Board (IASB) designated as "IFRS 9" and replacing IAS 39. "Increased Costs" means: (i) a reduction in the rate of return from the Facilities or on a Finance Party's (or its Affiliate's) overall capital; (ii) an additional or increased cost; or (iii) 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 its Commitment or funding or performing its obligations under any Finance Document. 13.2 Increased cost claims a) 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 Borrower. b) Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs, and the Agent shall promptly forward such certificate to the Borrower. 13.3 Exceptions a) Clause 13.1 (Increased Costs) does not apply to the extent any Increased Cost is: (i) attributable to a Tax Deduction required by law to be made by an Obligor; (ii) compensated for by Clause 12.2 (Tax Indemnity) (or would have been compensated for under Clause 12.2 (Tax Indemnity) but was not so compensated solely because any of the exclusions in paragraph b) of Clause 12.2 (Tax Indemnity) applied); (iii) attributable to a FATCA Deduction required to be made by a Party; (iv) 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 ("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); (v) attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation. b) In this Clause 13.3, a reference to "Tax Deduction" has the same meaning given to that term in Clause 12.1 (Definitions). 10127241/1 39

 
EXECUTION VERSION 14 OTHER INDEMNITIES 14.1 Currency indemnity a) If any sum due from an Obligor under the Finance Documents (a "Sum"), or any order, judgement or award given or made in relation to a Sum, has to be converted from the currency (the "First Currency") in which that Sum is payable into another currency (the "Second Currency") for the purpose of: (i) making or filing a claim or proof against that Obligor; (ii) obtaining or enforcing an order, judgement or award in relation to any litigation or arbitration proceedings, that Obligor shall as an independent obligation, within three (3) 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 person at the time of its receipt of that Sum. b) Each Obligor 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 Sanctions indemnity Each Obligor shall, on demand, indemnify each Finance Party against any cost, loss or liability incurred by it as a result of any claim, action, civil penalty or fine against, any settlement, and any other kind of loss or liability, and all reasonable costs and expenses (including reasonable counsel fees and disbursements) incurred by the Agent or any Lender as a result of conduct of any Obligor or any of their directors, officers, employees, that violates any Sanctions Laws. 14.3 Other indemnities The Borrower shall (or shall procure that an Obligor will) within three (3) Business Days of demand, indemnify each Finance Party against any costs, loss or liability incurred by that Finance Party as a result of: a) the occurrence of any Event of Default; b) a failure by an Obligor to pay any amount due under the Finance Documents on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 26 (Sharing among the Finance Parties); c) the funding, or making arrangements to fund, its participation in a Loan requested by the Borrower in a Drawdown Notice but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Lender alone); or d) a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given by the Borrower. 10127241/1 40

 
EXECUTION VERSION 14.4 Indemnity to the Agent The Borrower shall promptly indemnify the Agent against 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 possible Event of Default; b) acting or verifying any notice, request or instruction which it reasonably believes to be genuine, correct or appropriately authorised; c) instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under this Agreement; or d) 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) in acting as Agent under the Finance Documents. 14.5 Indemnity to the Security Agent a) The Borrower shall promptly indemnify the Security Agent against any cost, loss or liability incurred by it as a result of: (i) the taking, holding, protection or enforcement of the Security Documents or any other Finance Documents, (ii) acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; (iii) the exercise of any of the rights, powers, discretions and remedies vested in the Security Agent by the Finance Documents or by law; (iv) any default by an Obligor in the performance of any of the obligations expressed to be assumed by it in the Finance Documents; or (v) acting as Security Agent under the Finance Documents or which otherwise relates to any of the assets subject to the Security Documents (otherwise, in each case, than by reason of the Security Agent's gross negligence or wilful misconduct). b) The Security Agent may, in priority to any payment to the Finance Parties, indemnify itself out of the assets subject to the Security Documents, and pay and retain, all sums necessary to give effect to the indemnity in this Clause 14.5 and shall have a lien on the Security Documents and the proceeds of the enforcement of the Security Documents for all monies payable to it. 15 MITIGATION BY THE LENDERS 15.1 Mitigation a) Each Finance Party shall, in consultation with the Borrower, take all reasonable steps (for a period of fifteen (15) Business Days) to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of: (i) Clause 7.3 (Mandatory prepayment – Illegality); 10127241/1 41

 
EXECUTION VERSION (ii) Clause 12 (Tax gross-up and indemnities); and (iii) Clause 13 (Increased Costs), including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate. b) Paragraph a) does not in any way limit the obligations of any Obligor under the Finance Documents. 15.2 Limitation of liability a) The Borrower shall promptly indemnify each Finance Party for all costs and expenses reasonably and properly incurred by that Finance Party as a result of steps taken by it under Clause 15.1 (Mitigation). b) A Finance Party is not obliged to take any steps under this Clause 15.1 if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it. 16 COSTS AND EXPENSES 16.1 Transaction expenses The Borrower shall promptly on demand pay to the Agent (for distribution to the relevant Finance Party) the amount of all costs and expenses (including legal fees) reasonably and properly incurred by any of them in connection with the negotiation, preparation, printing, perfection, execution, registration and syndication of: a) this Agreement and any other documents referred to in this Agreement; and b) any other Finance Documents executed after the date of this Agreement. 16.2 Amendment and enforcement costs, etc The Borrower shall, within three (3) Business Days of demand, reimburse the Agent or another Finance Party for the amount of all costs and expenses (including internal and external legal fees) reasonably and properly incurred by it in connection with: a) the granting of any release, waiver or consent under the Finance Documents; b) any amendment or variation of any of the Finance Documents; and c) the preservation, protection, enforcement or maintenance of, or attempt to preserve or enforce, any of the rights of the Finance Parties under the Finance Documents. 10127241/1 42

 
EXECUTION VERSION SECTION 7 GUARANTEE AND SECURITY 17 GUARANTEE AND INDEMNITY 17.1 Guarantee and indemnity Each Guarantor hereby irrevocably and unconditionally guarantees, as primary obligors as and for its own debt and not merely as surety (No. selvskylderkausjon) to each Finance Party, on a joint and several basis with the other Guarantor: a) the due and punctual payment by the Borrower of any and all sums which are now or at any time hereafter will be payable by the Borrower under or in respect of the Finance Documents in accordance with the terms and provisions thereof (including, without limitation, principal, interest, default interest, legal fees and other fees, Break Costs, transaction and enforcement costs and any other costs, expenses, Taxes and Tax indemnities, currency indemnities and any other indemnities, claims for damages and any other costs and expenses in respect of any Event of Default or any other breach by the Borrower under the Finance Documents); b) the due and punctual performance by the Borrower of all of the Borrower's obligations under or in respect of the Finance Documents; and c) to indemnify each Finance Party immediately upon the Agent's first written demand against any loss, liability, costs and expenses suffered, incurred or paid by that Finance Party if any obligation of the Borrower is or becomes unenforceable, invalid or illegal (such amounts together referred to as the "Outstanding Indebtedness"). 17.2 Payment upon first demand If the Borrower shall fail to pay any sum under the Finance Documents as and when such sum shall become due and payable, each Guarantor shall immediately upon the Agent's first written demand pay to the Agent for the account of the relevant Finance Party an amount equal to such sum which the Borrower shall not have paid, such payment to be made in immediately available funds to the account of the Agent, as the Agent may designate, without set-off or counter-claim and free and clear of and without deduction for or on account of any present or future Taxes. 17.3 No limitation on number of demands Demands under this Clause 17 may be made by the Agent (on behalf of the Finance Parties) from time to time and there shall be no limitation in the number of demands which can be made hereunder. 17.4 Maximum guarantee liability The total liability of each Guarantor under this Clause 17 shall, in the aggregate, always be limited to USD 120,000,000, plus any unpaid amount of interest, fees, liability, costs and expenses under the Finance Documents. 17.5 Continuing guarantee This Guarantee shall be a continuing guarantee which shall be effective as of the date hereof and shall remain in full force and effect until payment in full has been received by the Agent (on behalf of the Finance Parties) of the Outstanding Indebtedness. 10127241/1 43

 
EXECUTION VERSION 17.6 No discharge The obligations of each Guarantor under this Clause 17 shall not be discharged, impaired or otherwise affected by reason of any of the following events or circumstances regardless of whether any such events or circumstances occur with or without such Guarantor's knowledge and consent: a) any total or partial invalidity, irregularity, illegality, unenforceability, imperfection or avoidance of or any defect in any security granted by, or the obligation of the Borrower, the Finance Parties or any other person under the Finance Documents or any other document or security; b) any time, waiver, consent or other indulgence granted to the Borrower or any other person or any composition or arrangement made by any Finance Party or any other person with the Borrower or any other person; c) any increase or reduction of the amount of a Loan, or variation of the terms and conditions for its repayment (including without limitation, the rate and/or method of calculation of interest payable on any Loan); d) any amendment, modification, replacement, supplement, variation, compromise, extension or renewal of any Finance Document or any right against any security over any assets of the Borrower or any other person; e) any refusal or neglect to take up or perfect or enforce or any release, indulgence or other relief granted under any Finance Document or any rights against or any security over any assets of the Borrower or any other person or any failure to realize the full value of any security; f) any transfer, assignment, assumption or novation of rights and obligations under the Finance Documents by the Borrower, a Lender or any other person; g) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of the Borrower, a Lender or any other person; h) any corporate reorganisation, reconstruction, amalgamation, dissolution, merger, acquisition or any other alteration in the corporate existence or structure of any of the Finance Parties, the Borrower or any other person; or i) any insolvency or similar proceedings concerning the Borrower, a Lender or any other person. 17.7 Waiver Each Guarantor specifically waives all rights under the provisions of the FA Act not being mandatory provisions, including the following provisions (the main contents of the relevant provisions being as indicated in the brackets): a) § 62 (1) (a) (to be notified of any security the giving of which was a precondition for the advance of a Loan, but which has not been validly granted or has lapsed); b) § 63 (1) - (2) (to be notified of any Event of Default under the Agreement and to be kept informed thereof); 10127241/1 44

 
EXECUTION VERSION c) § 63 (3) (to be notified of any extension granted to the Borrower in payment of principal and/or interest); d) § 63 (4) (to be notified of any of the Borrower's bankruptcy proceedings or debt reorganisation proceedings and/or any application for the latter); e) § 65 (3) (that the consent of the Guarantor is required for the Guarantor to be bound by amendments to the Finance Documents that may be detrimental to its interest); f) § 66 (1) - (2) (that the Guarantor shall be released from liabilities hereunder if security which was given, or the giving of which was a precondition for the advance of a Loan, is released by any of the Finance Parties without the consent of the Guarantor); g) § 66 (3) (that the Guarantor shall be released from its liabilities hereunder if, without its consent, security the giving of which was a precondition for the advance of a Loan, was not validly granted); h) § 67 (2) (about reduction of the Guarantor's liabilities hereunder); i) § 67 (4) (that the Guarantor's liabilities hereunder shall lapse after ten (10) years, as the Guarantor shall remain liable hereunder as long as any amount is outstanding under the Finance Documents); j) § 70 (as the Guarantor shall have no right of subrogation into the rights of the Finance Parties under the Finance Documents until and unless the Finance Parties shall have received all amounts due or to become due to them under the Finance Documents); k) § 71 (as the Finance Parties shall have no liability first to make demand upon or seek to enforce remedies against the Borrower or any other security provided in respect of the Borrower's liabilities under the Finance Documents before seeking to enforce the security created hereunder); l) § 72 (as all interest and default interest due under the Finance Documents shall be secured hereunder); m) § 73 (1) - (2) (as all costs and expenses related to a default under the Finance Documents shall be secured hereunder); and n) § 74 (1) - (2) (as the Guarantor shall make no claim against the Borrower for payment until and unless the Finance Parties first shall have received all amounts due or to become due to them under the Finance Documents). 17.8 Reinstatement If any payment by the Borrower, any other guarantor or any other provider of security under the Finance Documents must be repaid, or any discharge given by a Lender (whether in respect of the obligations of the Borrower, another guarantor or any security for those obligations or otherwise) is avoided or reduced, as a result of insolvency or any similar event: a) the liability of the Guarantors shall continue as if such payment, discharge, avoidance or reduction had not occurred; and 10127241/1 45

 
EXECUTION VERSION b) the Finance Parties shall be entitled to recover the value or amount of that security or payment from the Guarantors, as if such payment, discharge, avoidance or reduction had not occurred. 17.9 Undertaking Each Guarantor undertakes to the Agent that as long as this Guarantee is effective: a) following receipt of a notice from the Agent of the occurrence of any Event of Default, the Guarantor will not make a demand for any claim of moneys due to the Guarantor from the Borrower or any other guarantor, or exercise any other right or remedy to which the Borrower or any other guarantor are entitled to in respect of such moneys unless and until all moneys due and payable by the Borrower have been irrevocably paid in full; b) if the Borrower or any other guarantor becomes the subject of an insolvency proceeding or shall be wound up or liquidated, the Guarantor shall not (unless so instructed by the Agent and then only on condition that the Guarantor holds the benefit of any claim in such insolvency or liquidation to pay any amounts recovered thereunder to the Agent) make any claim in such insolvency, winding-up or liquidation until all the Outstanding Indebtedness owing or due has been irrevocably paid in full; c) if the Guarantor being in breach of paragraphs a) and b) above receives or recovers any money pursuant to such exercise, claim or proof as therein referred to, such moneys shall be held by the Guarantor for the Agent to apply the same as if they were money received or recovered by the Agent under this Guarantee; and d) it will not take or has not taken from the Borrower any security whatsoever for the obligations guaranteed hereunder. 17.10 Immediate recourse The Agent shall not be required to take any action against the Borrower, either Guarantor or any other person before claiming from either or both of the Guarantors (in its sole discretion) under this Clause 17. 17.11 No right of recourse and no security The Guarantors shall have no right of recourse against the Borrower, any other guarantor or any of their respective bankruptcy estate for any amount paid by the Guarantors under this Guarantee for so long as any part of the Outstanding Indebtedness remains outstanding, and the Guarantors shall not be entitled to obtain from the Borrower any security for any such right of recourse which the Guarantors may have after such time. Any such security which the Guarantors might obtain shall be regarded as supplementary security in favour of the Finance Parties. The Guarantors hereby renounce any and all such claims it has or may get against the Borrower or any other guarantor for as long as any part of the Outstanding Indebtedness remains outstanding. 17.12 No subrogation in Finance Parties' security The Guarantors shall have no right to subrogate, wholly or partly, in any security provided to the Finance Parties pursuant to the Finance Documents or in any other way until all of the Outstanding Indebtedness has been fully and finally paid. 17.13 Action Without affecting the obligations of either Guarantor hereunder, the Agent, the other Finance Parties may take such action as the Agent, the other Finance Parties, as the case may be, in their own 10127241/1 46

 
EXECUTION VERSION discretion may consider appropriate against the Borrower, the Guarantors or any other persons or parties or securities to recover monies due and payable in respect of the obligations under the Finance Documents. 17.14 Knowledge of the additional security Each Guarantor acknowledges and agrees that: a) it has received a copy of and has full knowledge of the security which is to be granted in respect of the amounts outstanding under the Finance Documents; b) 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 as security for the Borrower's obligations under the Finance Documents. 17.15 Assignment The Agent and the Finance Parties may assign or transfer the rights under this Guarantee to any person to whom the rights and obligations of such Finance Party under the Agreement are wholly or partly assigned or transferred to in accordance with Clause 25 (Changes to the Parties) of the Agreement. 17.16 Expenses The Guarantors shall pay to the Agent on demand on a full indemnity basis all charges, costs and expenses (including the legal fees) reasonably and properly incurred by the Finance Parties in connection with the preservation and enforcement of any of the rights of the Finance Parties under this Guarantee. 17.17 No implied waivers No delay or failure by the Agent or any other Finance Party to exercise any right or remedy under this Guarantee shall operate or be construed as a waiver of such rights or remedies unless otherwise expressly stated in writing by the Agent or such Finance Party. No partial exercise of any right or remedy shall prevent any further or other exercise of such right or remedy or any other right or remedy. No express waiver of any rights or remedies in respect of an Event of Default or any other event by the Agent, any other Finance Party shall operate or be construed as a waiver of any rights or remedies in respect of any similar or other Event of Default or events. 18 SECURITY 18.1 Security Documents The Borrower's obligations and liabilities under the Finance Documents, including (without limitation) the Borrower's obligation to repay the Loans together with all unpaid interest, default interest, commissions, charges, expenses and any other derived liability whatsoever of the Borrower towards the Lenders, the Agent or any other Finance Party in connection with this Agreement or another Finance Document, shall at any time until all amounts due to the Finance Parties under the Finance Documents have been paid and/or repaid in full, be cross collaterally secured by: (i) the Account Pledge; (ii) the Assignment of Earnings and Charterparties; (iii) the Assignment of Hedging Claims; 10127241/1 47

 
EXECUTION VERSION (iv) the Assignment of Insurances; (v) the Assignment of Intercompany Loans; (vi) the Guarantees; (vii) the Mortgage; and (viii) the Share Pledge. 18.2 Security for Hedging Agreements For the avoidance of doubt, the Security Interest created by the Security Documents shall also secure the Borrower's obligations under the Hedging Agreements on a pro rata basis, but subject to a subordinated distribution of proceeds in accordance with Clause 29.5 (Partial payments). The Borrower shall ensure that the Mortgage be amended to cover any and all Hedging Agreements entered into subsequent to the date of the Mortgage, on terms acceptable to the Security Agent and without undue delay from entry into of any such Hedging Agreement, in order to secure that any liability of the Borrower under any and all Hedging Agreements are secured under the Mortgage. 18.3 Perfection and further assistance Each Obligor undertakes to ensure that the above Security Documents be duly executed by the parties thereto in favour of the Security Agent (on behalf of the Finance Parties) on or about the date of this Agreement (or if not possible, as soon as practically possible), and legally valid and in full force and effect throughout the Security Period. Each Obligor further undertake to 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, maintenance or realisation of any Security Interest conferred or intended to be conferred on the Security Agent or the Finance Parties by or pursuant to the Finance Documents. 18.4 Share Pledge - waiver of recourse If the Security Agent enforces the Share Pledge, each Guarantor hereby irrevocably (i) waives any and all of its claims against the Borrower and releases the Borrower from any and all liabilities to each Guarantor, including but not limited to any liabilities of the Borrower under any intra-group or shareholder loans and any liability to each Guarantor and the Borrower under any recourse claims (the "Borrower Liabilities"), and (ii) authorises the Security Agent and grants power of attorney to the Security Agent to (without any consent, sanction, authority or further confirmation from any other party), to release any and all of the Borrower Liabilities, in order to allow for a sale of the shares in the Borrower to be completed without any claims of any Guarantor continuing to exist against the Borrower following such sale to the extent permitted by applicable mandatory laws. 10127241/1 48

 
EXECUTION VERSION SECTION 8 REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT 19 REPRESENTATIONS AND WARRANTIES Each Obligor makes the representations and warranties set out in this Clause 19 to each Finance Party on the date of this Agreement: 19.1 Status and ownership a) It is a company with limited liability or corporation, as applicable, duly incorporated and validly existing under the law of its jurisdiction of incorporation; b) It has the power to own its assets and carry on its business as it is being conducted; c) The Intermediate Parent owns directly one hundred per cent. (100.00%) of the shares and voting rights in the Borrower; and d) The Ultimate Parent owns directly one hundred per cent. (100.00%) of the shares and voting rights in the Intermediate Parent. 19.2 Insolvency No corporate action, legal proceeding or other procedure or step described in Clause 24.7 (Insolvency proceedings) or creditors' process described in Clause 24.8 (Creditors' process), has been taken or threatened in relation to an Obligor, and none of the circumstances described in Clause 24.6 (Insolvency) applies to an Obligor. 19.3 Binding obligations a) The Finance Documents and Transaction Documents to which it is a party constitute legal, valid, binding and enforceable obligations. b) Save as provided herein or therein and/or as have been or shall be completed prior to the Drawdown Date, no registration, filing, payment of tax or fees or other formalities are necessary or desired to render the Finance Documents enforceable against it, and in respect of the Vessel, for the Mortgage to constitute a valid and enforceable first priority mortgage over the Vessel. 19.4 No conflict with other obligations The entry into and performance by it of, and the transactions contemplated by, the Finance Documents and/or the Transaction Documents do not and will not conflict with: a) any law or regulation applicable to it any present law or regulation applicable to it (including Directive 1905/60/EC of the European Parliament and of the Council of the European Communities Union of 26 October 2005, implemented to combat money laundering); b) any of its constitutional documents; or c) any agreement or document to which it is a party or by which it or any of its assets are bound. 10127241/1 49

 
EXECUTION VERSION 19.5 Power and authority It has the power to enter into, perform and deliver, and has taken all necessary actions to authorise its entry into, performance and delivery of, the Finance Documents and Transaction Documents to which it is a party and the transactions contemplated by those Finance Documents and Transaction Documents. 19.6 Governing law and enforcement a) The choices of governing law of the relevant Finance Documents will be recognised and enforced in its jurisdiction of incorporation. b) Any judgment obtained in relation to a Finance Document in the jurisdiction of the governing law will be recognised and enforced in its Relevant Jurisdiction. 19.7 Authorisations and consents All Authorisations required by it (i) in connection with the entering into, performance, validity and enforceability of the Finance Documents and the transactions contemplated hereby and thereby, and (ii) to make the Finance Documents to which it is a party admissible in evidence in its Relevant Jurisdiction, have been obtained or effected and are in full force and effect. 19.8 Taxes a) It has complied with all taxation laws in all jurisdictions where it is subject to taxation and has paid all applicable Taxes and other amounts due to governments and other public bodies where failure to do so is reasonably likely to have a Material Adverse Effect. No claims are being asserted against it with respect to any Taxes or other payments due to public or governmental bodies, which are reasonably likely to have a Material Adverse Effect. b) It is not required to make any Tax Deductions (as defined in Clause 12.1 (Definitions)) for or on account of Tax from any payment it may make under any of the Finance Documents. 19.9 No filing or stamp taxes Under the laws of its Relevant Jurisdiction it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents, except the registration of the Mortgage with the Approved Ship Registry, which registrations, filings, taxes and fees shall be made and paid promptly by the Obligors after the date of the relevant Finance Document. 19.10 No Default a) No Event of Default is continuing or might reasonably be expected to result from the making of a Loan or the entry into and performance of or any transaction contemplated by any of the Finance Documents. b) No other event or circumstances is outstanding which constitutes a default or (with the expiry of a grace period, giving of notice or the making of any determination or any combination of the foregoing) might constitute a default under any other agreement or instrument which is binding on it or to which the its assets are subject which has or is reasonably likely to have a Material Adverse Effect. 10127241/1 50

 
EXECUTION VERSION 19.11 No misleading information a) Any factual information, documents, exhibits or reports relating to it and which have been furnished to the Finance Parties by or on behalf of it for the purposes of this Agreement are complete and correct in all material respects and do not contain any misstatement of fact or omit to state a fact making such information, exhibits or reports misleading in any material respect. b) Any financial projections contained in the information referred to in paragraph a) above have been prepared as at their date on the basis of recent historical information and on the basis of assumptions believed by the Obligor to be reasonable as at the date of preparation. 19.12 Original Financial Statements a) The Original Financial Statements give a true and fair view of its financial condition as at the end of the period to which they related, and have been prepared in accordance with US GAAP consistently applied. b) Since the date of the Original Financial Statements, there has been no material adverse change in its business or financial condition. 19.13 Pari passu ranking Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations preferred by mandatory law applying to companies generally. 19.14 No proceedings pending or threatened No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency, which if adversely determined, might reasonably be expected to have a Material Adverse Effect, have (to its knowledge and belief) been started or threatened against it. 19.15 No immunity The execution and delivery by it of each Finance Document to which it is a party constitute, and its exercise of its respective rights and performance of its obligations under each Finance Document will constitute, private and commercial acts performed for private and commercial purposes, and it will not (except for bankruptcy or any similar proceedings) be entitled to claim for itself or any or all of its assets immunity from suit, execution, attachment or other legal process in any other proceedings taken in Norway and/or elsewhere (as the case may be) in relation to any Finance Document. 19.16 No winding-up It has not taken any corporate action nor have any other steps been taken or legal proceedings been started or threatened against it for its reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise), winding-up, dissolution, judicial management or administration or for the appointment of a receiver, administrator, administrative receiver, judicial manager, trustee or similar officer of it or any or all of its assets. 19.17 Environmental compliance It has performed and observed in all material respects all Environmental Laws, Environmental Approvals and all other material covenants, conditions, restrictions or agreements directly or indirectly concerned with any contamination, pollution or waste or the release or discharge of any toxic or hazardous substance in connection with the Vessel. 10127241/1 51

 
EXECUTION VERSION 19.18 Environmental Claims No Environmental Claim has been commenced or (to the best of the Obligor's knowledge and belief) is threatened against it. 19.19 ISM Code and ISPS Code compliance All requirements of the ISM Code and the ISPS Code as they relate to any Obligor, the Managers and/or the Vessel have been complied with in all material respects. 19.20 The Vessel The Vessel is: a) in the absolute ownership of the Borrower, free and clear of all encumbrances (other than as permitted in accordance with Clause 22.5 (Negative Pledge – Collateral)) and the Borrower is and will remain the sole, legal and beneficial owner of the Vessel; b) registered in the name of the Borrower with an Approved Ship Registry under the laws and flag of such Approved Ship Registry; c) operationally seaworthy in every way and fit for service; and d) classed with an Approved Classification Society, free of all overdue requirements, recommendations and conditions. 19.21 Anti-corruption laws The Obligors have 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. 19.22 No money laundering a) It is acting for its own account in relation to the Facilities and in relation to the performance and the discharge of its obligations and liabilities under the Finance Documents and the transactions and other arrangements effected or contemplated by the Finance Documents to which it is a party, and the foregoing will not involve or lead to contravention of any law, official requirement or other regulatory measure or procedure implemented to combat money laundering (as defined in Article 1 of the Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2006 (as amended, supplemented and/or replaced from time to time). b) The Borrower will use the proceeds of the Facilities for its own benefit, under its full responsibility and exclusively for the purposes specified in this Agreement. 19.23 No breach of laws Except as notified by the Obligors to the Agent and accepted in writing by the Agent, each Obligor complies in all material respects with any law or regulation applicable to it. 19.24 Sanctions None of the Obligors nor any of their Subsidiaries and, to their knowledge, none of their respective directors, officers or employees: a) is in breach of any Sanctions; 10127241/1 52

 
EXECUTION VERSION b) is a Restricted Party nor acts directly or indirectly on behalf of a Restricted Party; or c) has received notice of or is aware of any claim, action, suit, proceeding, formal notice or investigation against it with respect to Sanctions. 19.25 Repetition The Repeating Representations set out in this Clause 19 shall be deemed to be repeated: a) on the date of each Drawdown Notice; b) on each Drawdown Date; c) on the first day of each Interest Period; and d) in each Compliance Certificate forwarded to the Agent pursuant to Clause 20.2 (Compliance certificate) (or, if no such Compliance Certificate is forwarded, on each day such certificate should have been forwarded to the Agent at the latest). 20 INFORMATION UNDERTAKINGS The undertakings set out in this Clause 20 shall remain in force from the date of this Agreement and throughout the Security Period. 20.1 Financial statements The Ultimate Parent shall supply to the Agent in sufficient copies for all of the Lenders: a) as soon as the same become available, but in any event within one hundred and twenty (120) days after the end of each of its fiscal years, its consolidated audited financial statements for that fiscal year together with the unaudited accounts of the Borrower; b) as soon as the same become available, but in any event within sixty (60) days after the end of each financial quarter, its unaudited consolidated financial statements for that financial quarter; and c) as soon as same become available, but in any event no later than 28 February for each year, its budget and cash flow projections. 20.2 Compliance Certificates The Ultimate Parent shall supply to the Agent, with each set of financial statements delivered pursuant to paragraphs a) and b) of Clause 20.1 (Financial statements), a Compliance Certificate in the form set out in Schedule 5 (Form of Compliance Certificate) signed by the CFO of the Ultimate Parent setting out (in reasonable detail) computations as to compliance with Clause 21 (Financial covenants) and the Collateral Maintenance Test pursuant to Clause 7.1 (Mandatory prepayment – Collateral Maintenance Test), as at the date at which those financial statements were drawn up. 20.3 Vessel's Market Value Valuations to determine the Market Value of the Vessel shall be obtained by the Borrower for the Borrower's cost prior to the end of each financial half-year and to be sent to the Agent together with each relevant Compliance Certificate, or, if an Event of Default has occurred, for the Borrower's cost at such further frequency as may be requested by the Agent (acting on behalf of the Majority Lenders). 10127241/1 53

 
EXECUTION VERSION 20.4 Requirements as to financial statements The Obligors shall procure that each set of financial statements delivered pursuant to Clause 20.1 (Financial statements) is prepared using US GAAP, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements for the Obligors 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 the Obligor's auditors deliver to the Agent: a) a description of any change necessary for those financial statements to reflect US GAAP, accounting practices and reference periods upon which that Obligor's Original Financial Statements were prepared; and b) sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Lenders 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 that Obligor's Original Financial Statements. Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared. 20.5 Fiscal Year There shall be no change to any Obligor's fiscal year without the prior written consent of the Agent (on behalf of the Majority Lenders). 20.6 Information – miscellaneous The Obligor shall notify the Agent and/or supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests): a) at the same time as they are dispatched, copies of all documents dispatched by an Obligor to its creditors generally; b) promptly upon becoming aware of them, the details of any litigation, claim, arbitration or administrative proceedings which are current, threatened or pending against an Obligor, and which might, if adversely determined, have a Material Adverse Effect; c) promptly, such further information regarding the business, operations, assets, operations (financial or otherwise) and technical data of the Obligors and the Vessel as the Agent may reasonably request, and which can be delivered without breach of any confidentiality undertakings or any applicable law or rules of a securities/regulatory exchange; d) promptly, such further information reasonably requested by the Agent (on behalf of the Finance Parties) in order for each Finance Party to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents; e) promptly upon becoming aware of any Change in Ultimate Beneficial Owner, the name of the Ultimate Beneficial Owner and such documentation and other evidence as is reasonably requested by the Agent or any Lender in order for the Agent or such Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar 10127241/1 54

 
EXECUTION VERSION checks under all applicable laws and regulations in relation to the Ultimate Beneficial Owner; and f) promptly, upon becoming aware of them, the details of any loss, seizure, capture or piracy against the Vessel. 20.7 Notification of default Each Obligor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence. 20.8 Notification of Environmental Claims Each Obligor shall inform the Agent in writing as soon as reasonably practicable upon becoming aware of the same: a) if any Environmental Claim has been commenced or (to the best of the Obligor's knowledge and belief) is threatened against an Obligor or the Vessel; and b) of any fact and circumstances which will or are reasonably likely to result in any Environmental Claim being commenced or threatened against an Obligor or the Vessel. 20.9 "Know your customer" checks a) 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 Ultimate Beneficial Owner after the date of this Agreement; (iii) any Applicable KYC Procedures; (iv) any change in the status of an Obligor (or of a Holding Company of an Obligor) or the composition of the shareholders of an Obligor (or of a Holding Company of an Obligor) after the date of this Agreement; (v) a proposed assignment or transfer by a Lender of any of its rights and/or obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer; or (vi) any anti-money laundering or anti-terrorism financing laws and regulations applicable to the Agent or any Lender, obliges the Agent or any Lender (or, in the case of paragraph (iii) above, any prospective new Lender) to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor 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 paragraph (iii) above, on behalf of any prospective new Lender) in order for the Agent, such Lender or, in the case of the event described in paragraph (iii) above, any prospective new Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents. 10127241/1 55

 
EXECUTION VERSION b) 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. For the purpose of this Clause 20.9: "Applicable KYC Procedures" means any applicable "know your customer" checks or similar identification procedures, or equivalent internal policies of a Lender or the Agent, or any equivalent procedures required by applicable law or regulations. 20.10 Use of websites a) The Ultimate Parent may satisfy its obligation under this Agreement to deliver any information in relation to those Finance Parties (the “Website Lenders”) who accept this method of communication by posting this information onto an electronic website designated by the Ultimate Parent and the Agent (the “Designated Website”) if: the Agent expressly agrees (after consultation with each of the Finance Parties) that it will accept communication of the information by this method; both the Ultimate Parent and the Agent are aware of the address of and any relevant password specifications for the Designated Website; and the information is in a format previously agreed between the Ultimate Parent and the Agent. If any Finance Party (a “Paper Form Lender”) does not agree to the delivery of information electronically then the Agent shall notify the Ultimate Parent accordingly and the Ultimate Parent shall supply the information to the Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event the Ultimate Parent shall supply the Agent with at least one copy in paper form of any information required to be provided by it. b) The Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Ultimate Parent and the Agent. c) The Ultimate Parent shall promptly upon becoming aware of its occurrence notify the Agent if: the Designated Website cannot be accessed due to technical failure; the password specifications for the Designated Website change; any new information which is required to be provided under this Agreement is posted onto the Designated Website; any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or 10127241/1 56

 
EXECUTION VERSION the Ultimate Parent becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software. If the Ultimate Parent notifies the Agent under paragraph c) i) or paragraph c) v) above, all information to be provided by the Ultimate Parent under this Agreement after the date of that notice shall be supplied in paper form unless and until the Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing. 21 FINANCIAL COVENANTS 21.1 Financial definitions Except otherwise explicitly provided for in this Agreement, an accounting term used in this Clause is to be construed in accordance with US GAAP. For the purposes of this Clause 21, the following definitions shall apply: "Cash and Cash Equivalents" means, at any date, the aggregate amount of freely available cash and cash equivalents of the Group, in each case reported in accordance with US GAAP, including without limitation: a) cash in hand or on freely available deposit with any bank or financial institution; b) certificates of deposits or marketable debt securities (included money market funds) with a maturity of twelve (12) months or less after the relevant date of calculation, issued by an Arranger or a financial institution which has a rating for its long term unsecured and non- credit enhanced debt obligations with A or higher by Standard & Poor’s Rating Services or Fitch Ratings Ltd or A2 or higher by Moody’s Investor Services Limited or a comparable rating from an internationally recognised credit rating agency; or c) any other instrument, security or investment approved in writing by the Agent, and in each case, to which any of the Obligors is beneficially entitled at that time and which can be promptly realised and applied against the Loans. "Equity Ratio" means the ratio of Total Equity to Total Assets. "Liquidity" means, at any given time, the aggregate of (i) Cash and Cash Equivalents and (i) any undrawn amount freely and unconditionally available for drawings under either the Sterna RCF and/or any other credit facilities with remaining tenor of at least six (6) months. "Total Assets" means the aggregate book value of total assets in accordance with US GAAP. "Total Equity" means the aggregate book value of the equity treated as equity in accordance with US GAAP. "Working Capital" means current assets less current liabilities (which shall exclude instalments of long term debt due in the twelve (12) months, capital lease payments and, in respect of the Borrower only, any intra group debt incurred in accordance with Clause 22.10 (b) (ii) (Financial Indebtedness restrictions). 10127241/1 57

 
EXECUTION VERSION 21.2 Financial testing The financial covenants set out in this Clause 21 (Financial Covenants) shall be calculated in accordance with US GAAP consistently applied, provided always, that lease obligations shall be classified in accordance with applicable account principles prior to 1 January 2019 (for the avoidance of doubt, disregarding any amendments to accounting principles as a result of IFRS 16 or equivalent). The financial covenants shall be tested quarterly, by reference to each of the financial statements delivered pursuant to paragraphs (a) and (b) of Clause 20.1 (Financial Statements) and/or each Compliance Certificate delivered pursuant to Clause 20.2 (Compliance Certificate). 21.3 Financial covenants The Ultimate Parent shall ensure that it maintains (on a consolidated basis) at all times: a) an Equity Ratio of minimum 0.25 to 1.00; b) a positive Working Capital; and c) Liquidity of minimum the higher of: (i) USD 25,000,000; or (ii) an amount equal to five per cent. (5%) of the Group’s total interest bearing Financial Indebtedness on a consolidated basis (excluding the Sterna RCF) net of any Cash and Cash Equivalents. 21.4 Change of accounting principles If the Agent believes that the definitions and/or the financial covenants set out in this Clause 21 (Financial covenants) need to be amended as a result of any change of accounting principles, determination or requirement, the Ultimate Parent and the Agent shall negotiate (Agent acting on the instructions of the Lenders) in good faith to amend the existing definitions and/or financial covenants so as to provide the Lenders with substantially the same protections as the definitions and/or financial covenants set out in this Clause 21 (but which are not materially more onerous for the Borrower or the Ultimate Parent). 22 GENERAL UNDERTAKINGS The undertakings set out in this Clause 22 shall remain in force from the date of this Agreement and throughout the Security Period. 22.1 Authorisations etc. The Obligors shall promptly: a) obtain, comply and do all that is necessary to maintain in full force and effect; and b) supply certified copies to the Agent (if so requested) of, any Authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance Document. 10127241/1 58

 
EXECUTION VERSION 22.2 Compliance with laws Each Obligor shall comply in all material respects with all laws to which it may be subject. 22.3 Pari passu ranking Each Obligor shall ensure that its obligations under the Finance Documents do and will rank at least pari passu with all its other present and future unsecured and unsubordinated obligations, except for those obligations which are preferred by mandatory law applying to companies generally in the jurisdictions of their incorporation or in the jurisdiction in the ports of calls. 22.4 Title – Collateral The Borrower will hold legal title to, and own the entire beneficial interest in, its Vessel, its Insurances, its Earnings and all of its other assets, free of all Security Interest, except for those created by the Financial Documents and as set out in Clause 22.5 (Negative pledge - Collateral). 22.5 Negative Pledge – Collateral Neither of the Obligors, nor any other member of the Group, shall create or permit to subsist any Security Interest over (i) any asset subject to, or intended to be subject to, Security Interest under the Security Documents, or (ii) any other asset of the Borrower, other than: a) the Security Interest created under the Security Documents; b) any Security Interests arising in the ordinary course of business by operation of law and securing obligations not more than forty-five (45) days overdue; and c) any Security Interests disclosed in writing to the Agent, and consented to in writing by the Agent (acting upon instructions from the Majority Lenders). 22.6 Ownership of the Borrower and the Intermediate Parent a) The Intermediate Parent shall at all times own directly one hundred per cent. (100.00%) of the shares and voting rights in the Borrower. b) The Ultimate Parent shall at all times own directly one hundred per cent. (100.00%) of the shares and voting rights in the Intermediate Parent. c) Neither of the Obligors shall create or permit to subsist any Security Interest over any existing or future shares issued by the Borrower or the Intermediate Parent, other than the Security Interest created under the Security Documents. 22.7 Preservation of assets Each Obligor shall maintain and preserve all of its assets that are necessary or desirable, in the opinion of the Agent, for the conduct of its business, as intended to be conducted at the date of this Agreement, in good working order and condition, ordinary wear and tear excepted. 22.8 Change of business The Obligors shall ensure that no change is made to the general nature of its business from that carried out at the date of this Agreement without the prior written consent of the Agent (on behalf of the Lenders). 10127241/1 59

 
EXECUTION VERSION 22.9 No mergers etc. No Obligor shall enter into any merger, amalgamation, de-merger, split-up, divest, consolidation with or into any other person or be the subject of any reconstruction, name change or change of type of organization without the prior consent of the Agent (on behalf of the Lenders). 22.10 Financial Indebtedness restrictions a) The Borrower shall not incur, create or permit to subsist any Financial Indebtedness. b) Paragraph (a) above does not apply to Financial Indebtedness: (i) incurred under the Finance Documents; (ii) incurred under any loans from any Guarantor, provided that any Guarantor’s claims under such loans are subject to an Assignment of Intercompany Loan and fully subordinated to the claims of the Finance Parties under the Finance Documents; or (iii) consented to in writing by the Lenders. 22.11 Financial support The Borrower shall not make or grant any loans, guarantees or any other form of financial support to any person, except for: a) financial support by way of trade credit in the ordinary course of operation of the Vessel; and b) intra-group loans to a Guarantor, provided always that the obligations of any other Guarantor be fully subordinated to any obligations under the Finance Documents, and the Borrower's claims under such loans are subject to an Assignment of Intercompany Loan. 22.12 Distributions from the Borrower Following the occurrence of an Event of Default which is continuing, the Borrower may not: (i) declare, make or pay any 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); (ii) pay any interest or repay any principal amount (or capitalised interest) on any debt to any of its shareholders; or (iii) redeem, repurchase or repay any of its share capital or resolve to do so, or enter into any transaction or arrangement having a similar effect as described in paragraphs (i) to (iii). 22.13 Distributions from the Ultimate Parent a) Subject to the limitations listed in paragraph (b) below, the Ultimate Parent may: (i) declare, make or pay any 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); (ii) pay any interest or repay any principal amount (or capitalised interest) on any debt to any of its shareholders; 10127241/1 60

 
EXECUTION VERSION (iii) redeem, repurchase or repay any of its share capital or resolve to do so; or (iv) enter into any transaction or arrangement having a similar effect as described in paragraphs (i) to (iii). b) The distributions described in paragraph (a) above can only be carried out and effectuated if: (i) no Event of Default is existing and is continuing on the time when the distribution is to be made or would result from the making, payment or declaration of the distribution; or (ii) as otherwise consented to in writing by the Agent (on behalf of the Majority Lenders). 22.14 Sterna RCF a) The Intermediate Parent shall procure that the Sterna RCF is subject to the Sterna Subordination Statement on terms satisfactory to the Agent. b) The Intermediate Parent may not make any payments to Sterna Finance Ltd. (or any party replacing Sterna Finance Ltd. as creditor) under the Sterna RCF or any other loans from Affiliates of the Ultimate Parent following the occurrence of an Event of Default or otherwise in breach of the subordination statement(s) in favour of the Finance Parties. 22.15 Investments The Borrower shall not make any investments or acquisitions, neither of vessels or companies (or shares in companies), other than: a) ordinary and scheduled maintenance of the Vessel; and b) any other maintenance of the Vessel required in order to be in compliance with the provisions under this Agreement, including, but not limited to, Clause 23.3 (Classification and repairs). 22.16 Environmental compliance The Obligors shall comply in all respects with all applicable Environmental Laws subject to the terms and conditions of any applicable Environmental Approval and obtain and maintain any applicable Environmental Approval. 22.17 Arm's length transactions No Obligor shall engage in, directly or indirectly, any transaction with any party (without limitation, the purchase, sale or exchange of assets or the rendering of any service), except pursuant to the reasonable requirement of the Obligor's business and upon fair and reasonable terms that are no less favorable to the Obligor, as the case may be, than those which might be obtained in an arm's length transaction at the time. 22.18 Listing The Ultimate Parent shall remain listed on the Oslo Stock Exchange, New York Stock Exchange or another recognised stock exchange acceptable to the Agent (on behalf of the Lenders). 10127241/1 61

 
EXECUTION VERSION 22.19 Hedging a) The Hedge Providers shall have a first right of refusal in relation to interest hedging relating to the Vessel or the Facilities on competitive terms. b) No Obligor shall carry out derivative transactions for speculative purposes. 22.20 Earnings Accounts The Borrower shall open and maintain all its Earnings Accounts with the Account Bank, ensure that all Earnings are paid to the Earnings Accounts, and that the Earnings Accounts remain subject to the Account Pledge(s). The Borrower may freely operate and make withdrawals from the Earnings Accounts until the occurrence of an Event of Default which is continuing. 22.21 Taxation The Obligors 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 such payment is being contested in good faith or can be lawfully withheld. 22.22 Sanctions a) Each Obligor, and the Obligors shall ensure that their directors, officers and employees, agents and representatives shall comply in all respects with Sanctions. b) No Obligor shall, and the Obligors shall ensure that none of their directors, officers or employees will, take any action or make any omission that results, or is reasonably likely to result, in it or any Finance Party becoming a Restricted Party. c) No Obligor shall use any revenue or benefit derived from any activity or dealing with a Restricted Party in discharging any obligation due or owing to the Finance Parties; d) Each Obligor shall procure that no proceeds from any activity or dealing with a Restricted Party are credited to any bank account held with any Finance Party in its name; e) Each Obligor 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 provide information on what steps are being taken with regards to answer or oppose such; f) No Obligor shall permit or authorise any other person to, directly or indirectly use the proceeds of a Loan, or lend, make payments of or contribute or otherwise make available all or any part of such proceeds (i) to or for the benefit of any Restricted Party or (ii) in any other manner that would result in a violation of Sanctions by any person (including any person participating in a Loan hereunder, whether as a Finance Party or otherwise) or any such person becoming a Restricted Party. 22.23 EU Bail-In In the event that any Finance Document will be governed by the laws of a non-EEA Member Country, then to the extent the Agent determines it is necessary such Finance Document shall either prior to its entry, or if already in force be amended to, contain the current form of EU bail-in provisions recommended by the Loan Market Association. 10127241/1 62

 
EXECUTION VERSION 23 VESSEL COVENANTS The undertakings set out in this Clause 23 shall remain in force from the date of this Agreement and throughout the Security Period. 23.1 Insurance a) The Borrower shall maintain or ensure that the Vessel is insured against such risks, including but not limited to, Hull and Machinery, Protection & Indemnity (including maximum cover for pollution liability with a club within the International Group of P&I Clubs), Hull Interest and/or Freight Interest and War Risk (including acts of terrorism, hijacking, confiscation and piracy) insurances, in such amounts, on such terms and with such brokers, clubs and/or insurers as the Agent from time to time shall approve (such approval not to be unreasonably withheld). b) The insurance value (to be on agreed value basis) for Hull and Machinery combined with Hull Interest and/or Freight Interest, and for War Risk, shall for the Vessel cover the higher of (i) the Market Value of the Vessel, and (ii) to one hundred and twenty per cent (120.00%) of the amount equal to (A) the Loan under the Term Loan Facility, plus (B) the Commitments under the Revolving Facility. c) The insured value for the Hull and Machinery insurance shall cover at least eighty per cent (80.00%) of the Market Value of the Vessel. The remaining cover may be taken out as Hull Interest and/or Freight Interest. d) Each Obligor shall procure that the Security Agent (on behalf of the Finance Parties) is noted as first priority mortgagee in the insurance contracts, together with the confirmation from the underwriters to the Agent thereof that the notice of assignment with regards to the Insurances and the loss payable clauses are noted in the insurance contracts and that standard letters of undertaking are executed by the insurers and/or brokers (as applicable). e) Not later than fourteen (14) days prior to the expiry date of the relevant Insurances the Borrower shall procure the delivery to the Agent of a certificate from the insurance broker(s) through whom the Insurances referred to in paragraph a) above have been renewed and taken out in respect of the Vessel with insurance values as required by paragraph b) above, that such Insurances are in full force and effect and that the Security Agent (on behalf of the Finance Parties) have been noted by the relevant insurers. f) The Agent may (at the request of a Lender), for the account of the Borrower, take out a Mortgagee's Interest Insurance ("MII") and/or a Mortgagee's Interest – Additional Perils Pollution Insurance ("MAPI") covering up to one hundred and twenty per cent (120.00%) of the Total Commitments. g) If any of the Insurances referred to in paragraph a) form part of a fleet cover, the Borrower shall procure that the insurers and/or brokers (as applicable) shall undertake to the Agent that they shall neither set-off against any claims in respect of the Vessel any premiums due in respect of other vessels under such fleet cover or any premiums due for other insurances, nor cancel this Insurance for reason of non-payment of premiums for other vessels under such fleet cover or of premiums for such other insurances, and shall undertake to issue a separate policy in respect of the Vessel if and when so requested by the Agent. 10127241/1 63

 
EXECUTION VERSION h) The Borrower shall procure that any person named as assured or co-assured in any insurance policy assigns such insurances to the Security Agent or provides other satisfactory undertakings as the Security Agent may require. Further, the Borrower shall procure that the Security Agent shall have the right to appoint an insured party. i) The Borrower shall procure that the Vessel always are employed in conformity with the terms of the instruments of Insurances (including any warranties expressed or implied therein) and comply with such requirements as to extra premium or otherwise as the insurers may prescribe. j) No Obligor will make any change to the Insurances described under paragraphs a) and b) above without the prior written consent of the Agent (on behalf of the Lenders). k) The Agent will obtain an Insurance Report from an independent insurance consultant for the account of the Borrower prior to any utilisation of the Facilities, and, if the Agent (acting on the instructions of the Majority Lenders) so requires, on an annual basis thereafter. l) The Borrower will supply to the Agent from time to time on request such information as the Agent may in its discretion require with regard to the Insurances and the brokers, underwriters, associations or clubs through or with which the Insurances are placed. m) Each Obligor shall promptly take any steps required, or provide any and all assistance requested by the Agent, to ensure prompt collection of any claims under the Insurances. 23.2 Loss Payable Claims related to the Insurances in respect of an actual or constructive or agreed or arranged or compromised Total Loss or requisition for title or other compulsory acquisition of the Vessel and claims payable in respect of a major casualty, that is to say any claim (or the aggregate of which) in excess of USD 3,000,000 shall be payable to the Security Agent. Subject thereto all other claims, unless and until the insurers have received notice from the Security Agent of an event of default which is continuing and unremedied under the Agreement in which event all claims shall be payable directly to the Security Agent up to the Finance Parties' mortgage interest, shall be released directly for the repair, salvage or other charges involved or to the Borrower as reimbursement if it has fully repaired the damage and paid all of the salvage or other charges or otherwise in respect of Borrower's actual costs in connection with repair, salvage and/or other charges. 23.3 Classification and repairs The Obligors shall keep the Vessel in a good, safe and efficient condition consistent with first class ownership and management practice and in particular: a) so as to maintain the highest classification required for the relevant trade with an Approved Classification Society, free of overdue recommendations and conditions; and b) so as to comply with the laws and regulations (statutory or otherwise) applicable to vessels registered under the flag state of the Vessel or to vessels trading to any jurisdiction to which the Vessel may trade from time to time. 23.4 Restrictions on chartering, appointment of managers etc. a) The Borrower shall not without the prior written consent of the Agent (on behalf of the Majority Lenders): 10127241/1 64

 
EXECUTION VERSION (i) let the Vessel on bareboat charter for any period other than to another member of the Group (subject to satisfactory Security Interest in favour of the Agent (on behalf of the Finance Parties) with respect to such member of the Group's earnings and charterparty in respect of the Vessel); (ii) charter in or hire any vessel or tonnage; (iii) appoint a Manager other than any Approved Manager; or (iv) change the class certification of the Vessel. b) The Borrower shall inform the Agent of any change of management of the Vessel to another Approved Manager, or change of classification society to another Approved Classification Society. 23.5 Notification of certain events The Borrower shall immediately notify the Agent of: a) any accident to the Vessel involving repairs where the costs will or is likely to exceed USD 3,000,000 (or the equivalent in any other currency); b) any requirement or recommendation made by any insurer or classification society or by any competent authority which is not, or cannot be, immediately complied with; c) any exercise or purported exercise of any lien on the Vessel, the Earnings or the Insurances; d) any occurrence as a result of which the Vessel has become or is, by the passing of time or otherwise, likely to become a Total Loss; and e) any claim for a material breach of the ISM Code or the ISPS Code being made against the Borrower, a Manager or otherwise in connection with the Vessel. 23.6 Operation of the Vessel a) The Borrower shall comply, or procure the compliance by any manager, in all material respects with the ISM Code, the ISPS Code, Marpol, all Environmental Laws and all other laws or regulations applicable to the Vessel, their ownership, operation and management or to the business of the Borrower and shall not employ the Vessel nor allow its employment: (i) in any manner contrary to law or regulation in any relevant jurisdiction including but not limited to the ISM Code; (ii) in U.S. waters contrary to COFR regulations, always ensuring as required that a Certificate of Financial Responsibility is maintained for such purpose; and (iii) in the event of hostilities in any part of the world (whether war is declared or not), in any zone which is declared a war zone by any government or by the war risk insurers of the Vessel unless the Borrower has (at its expense) effected any special, additional or modified insurance cover which shall be necessary or customary for first class shipowners trading vessels within the territorial waters of such country at such time and has provided evidence of such cover to the Agent. 10127241/1 65

 
EXECUTION VERSION b) Without limitation to the generality of this Clause 23.6, the Borrower shall comply or procure compliance, with, as applicable, all requirements of the International Convention for the Safety of Life at Sea (SOLAS) 1974 as adopted, amended or replaced from time to time including, but not limited to, the STCW 95, the ISM Code or the ISPS Code. 23.7 Inspections and class records a) The Borrower shall upon the request of the Agent permit, and shall procure that any managers and charterers permit, one person appointed by the Agent to inspect the Vessel, limited to one time per twelve (12) months, at the cost of the Borrower. If the request is made following an Event of Default which is continuing, there shall be no limitation on the number of inspections per year. Unless there is an Event of Default, any inspection shall not interfere with the normal operation and trading of the Vessel. b) The Borrower shall instruct the classification society to send to the Agent, following a written request from the Agent, copies of all class records held by the classification society in relation to the Vessel. 23.8 Surveys The Borrower shall submit to or cause the Vessel to be submitted to such periodic or other surveys as may be required for classification purposes and to ensure full compliance with regulations of the flag state of the Vessel and to supply or to cause to be supplied to the Agent copies of all survey reports and confirmations of class issued in respect thereof whenever such is required by the Agent, however limited to once a year. 23.9 Arrest The Borrower shall or shall procure that the charterers (if any) shall, promptly pay and discharge: a) all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against the Vessel, the Earnings or the Insurances; b) all tolls, taxes, dues, fines, penalties and other amounts charged in respect of the Vessel, the Earnings or the Insurances; and c) all other outgoings whatsoever in respect of the Vessel, the Earnings and the Insurances. 23.10 Total Loss In the event that the Vessel shall suffer a Total Loss, the Borrower shall, within a period of ninety (90) days after the Total Loss Date, obtain and present to the Agent, a written confirmation from the relevant insurers that the claim relating to the Total Loss has been accepted in full, and the insurance proceeds shall be applied in prepayment of the relevant Loan in accordance with Clause 7.1 (Mandatory prepayment – Total Loss or sale). 23.11 Dismantling a) The Borrower shall procure that the Vessel has obtained a Green Passport in respect of the Vessel, which shall be maintained and available throughout the lifespan of the Vessel. b) Each Obligor shall ensure that the Vessel or other vessels controlled by it or another member of the Group being scrapped, or sold to an intermediary with the intention of being scrapped, is recycled at a recycling yard which conducts its recycling business in a socially and environmentally responsible manner, in accordance with the provisions of The 10127241/1 66

 
EXECUTION VERSION Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009 or EU Ship Recycling Regulation of 20 November, 2013. 23.12 Flag, name and registry a) The Vessel shall at all times be registered with an Approved Ship Registry. b) The Borrower shall not, without the prior written consent of the Agent (on behalf of the Lenders), change the flag, name or registry of the Vessel. Subject to substitution of the Mortgage, and closing arrangements satisfactory to the Agent, the Lenders may not refuse the Borrower's request to change the registry of the Vessel from one Approved Ship Registry to another Approved Ship Registry, unless a Default has occurred. 24 EVENTS OF DEFAULT Each of the events or circumstances set out in this Clause 24 is an Event of Default (save for Clause 24.17 (Acceleration)). 24.1 Non-payment Any Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place and in the currency in which it is expressed to be payable unless: a) its failure to pay is caused by administrative or technical error affecting the transfer of funds despite timely payment instructions by the Obligor; and b) payment is made within three (3) Business Days of its due date. 24.2 Financial covenants, Sanctions, Insurances and Classification Any requirement in Clauses 21 (Financial covenants), 22.22 (Sanctions), 23.1 a) to d) (Insurance) or 23.3a) (Classification and repair) is not satisfied. 24.3 Other obligations a) An Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 24.1 (Non-payment) and Clause 24.2 (Financial covenants, Sanctions, Insurances and Classification)). b) No Event of Default under paragraph a) above will occur if the failure to comply is capable of remedy and is remedied within ten (10) Business Days of the earlier of (i) the Agent giving notice to the Borrower and (ii) any Obligor becoming aware of the failure to comply. 24.4 Misrepresentations Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered by or on behalf of an Obligor under or in connection with any of the Finance Documents is or proves to have been incorrect or misleading in any material respect when made or deemed to be made. 24.5 Cross default a) Any Financial Indebtedness of any Obligor is not paid when due nor within any originally applicable grace period. 10127241/1 67

 
EXECUTION VERSION b) Any Financial Indebtedness of any Obligor is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described). c) Any commitment for any Financial Indebtedness of any Obligor is cancelled or suspended by a creditor of any Obligor as a result of an event of default (however described). d) Any creditor of any Obligor becomes entitled to declare any Financial Indebtedness of any Obligor due and payable prior to its specified maturity as a result of an event of default (however described). e) No Event of Default will occur under this Clause 24.5 if the aggregate amount of the Financial Indebtedness or commitment for Financial Indebtedness falling within paragraph a) to d) above is less than USD 8,000,000 (or its equivalent in any other currency or currencies). 24.6 Insolvency a) An Obligor is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness. b) The value of the assets of an Obligor is less than its liabilities (taking into account contingent and prospective liabilities). 24.7 Insolvency proceedings Any corporate action, legal proceedings or other procedure or step is taken in relation to: a) the suspension of payments, a moratorium of any indebtedness, winding-up, cessation of business, dissolution, administration, judicial management or reorganisation (by way of voluntary arrangement, scheme or arrangement or otherwise) of an Obligor; b) a composition, compromise, assignment or arrangement with any creditor of an Obligor; c) the appointment of a liquidator, receiver, administrative receiver, administrator, judicial manager or other similar officer in respect of an Obligor; or d) enforcement of any Security Interest over any assets of an Obligor (excluding enforcement of any share pledge over shares owned by a Guarantor in special purpose vessel owning entities (excluding any Obligor) within the Group). 24.8 Creditor's process Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of an Obligor (excluding shares owned by a Guarantor in special purpose vessel owning entities (excluding any Obligor) within the Group) and is not discharged within thirty (30) days after the Obligor has become aware of it. 24.9 Arrest If an arrest or detention is taken or levied against the Vessel and is not discharged within twenty (20) days (or such longer period as approved in writing by the Lenders) after an Obligor becomes 10127241/1 68

 
EXECUTION VERSION aware of the same. 24.10 Cessation of business Any of the Obligors suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a substantial part of its business, or otherwise substantially changes the general nature of its business. 24.11 Unlawfulness It is or becomes impossible or unlawful for an Obligor to perform any of its obligations under the Finance Documents. 24.12 Repudiation Any Obligor repudiates a Finance Document or evidences an intention to repudiate a Finance Document. 24.13 Security Documents Any of the Security Documents for any reason whatsoever becomes invalid, ineffective, illegal or for any other reason ceases to continue in full force and effect. 24.14 Material adverse change Any event or series of events occur which, in the opinion of the Agent (on behalf of the Lenders), might have a Material Adverse Effect. 24.15 Permits Any licence, authorization, consent, permission or approval required in order to enforce, complete or perform any of the Finance Documents is revoked, terminated or modified having a Material Adverse Effect on an Obligor. 24.16 Litigation There is current, pending or threatened any claims, litigation, arbitration or administrative proceedings against an Obligor which might, if adversely determined, have a Material Adverse Effect on that Obligor. 24.17 Acceleration Upon the occurrence of an Event of Default, the Agent may, and shall if so directed by the Majority Lenders, by written notice to the Borrower: a) cancel the Total Commitments whereupon they shall immediately be cancelled; b) declare that all or part of the Loans together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents, be either immediately due and payable and/or payable upon demand, whereupon they shall become either immediately due and payable or payable on demand; and/or c) instruct the Security Agent to start enforcement in respect of the Security Interests established by the Security Documents; and/or d) take any other action, with or without notice to the Borrower, exercise any other right or pursue any other remedy conferred upon the Agent, the Security Agent or the Finance 10127241/1 69

 
EXECUTION VERSION Parties by any of the Finance Documents or by any applicable law or regulation or otherwise as a consequence of such Event of Default; and/or e) exercise or direct the Security Agent to exercise any or all of its rights, remedies, powers or discretions under the Finance Documents. 10127241/1 70

 
EXECUTION VERSION SECTION 9 CHANGES TO PARTIES 25 CHANGES TO THE PARTIES 25.1 No assignment by the Obligors The Obligors may not assign or transfer or have assumed any part of, or any interest in, its rights and/or obligations under the Finance Documents. 25.2 Assignments and transfers by the Lenders A Lender (the "Existing Lender") may at any time assign, transfer or have assumed its rights or obligations under the Finance Documents (a "Transfer") to another bank or financial institution (the "New Lender"). The consent of the Obligors will be required (such consent not to be unreasonably withheld or delayed), unless (i) an Event of Default has occurred and is continuing, or (ii) in case of Transfer to another Lender, or an Affiliate of the Existing Lender or another Lender. The Obligors will be deemed to have given its consent if no express refusal is received within five (5) Business Days. Unless the Agent otherwise agrees and excluding an assignment or transfer to an Affiliate of a Lender, 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 USD 3,500. 25.3 Limitations of responsibility of Existing Lenders a) Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to the New Lender for: (i) the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents; (ii) the financial condition of an Obligor; (iii) the performance and observance by the Obligors of its obligations under the Finance Documents or any other documents; or (iv) the accuracy of any statements (whether written or oral) made in or in connection with the Finance Documents or any other document. b) Each New Lender confirms to the Existing Lender and the other Finance Parties that it: (i) has made (and will continue to make) its own independent investigation and assessment of the financial condition and affairs of the Obligors 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 Finance Document; and (ii) will continue to make its own independent appraisal of the creditworthiness of the Obligors and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force. c) Nothing in any Finance Document obliges an Existing Lender to: 10127241/1 71

 
EXECUTION VERSION (i) accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause 25; or (ii) support any losses directly or indirectly incurred by the New Lender by reason of the non- performance by any Obligor of its obligations under the Finance Documents or otherwise. 25.4 Procedure for transfer Any Transfer shall be effected as follows: a) the Existing Lender must notify the Agent of its intention to Transfer all or part of its rights and obligations by delivering a duly completed Transfer Certificate to the Agent duly executed by the Existing Lender and the New Lender; b) subject to Clause 25.2 (Assignments and transfers by the Lenders), the Agent shall as soon as reasonable possible after receipt of a Transfer Certificate execute the Transfer Certificate and deliver a copy of the same to each of the Existing Lender and the New Lender; and c) subject to Clause 25.2 (Assignments and transfers by the Lenders), the Transfer shall become effective on the Transfer Date. 25.5 Effects of the Transfer On the Transfer Date: a) to the extent that in the Transfer Certificate the Existing Lender seeks to transfer its rights and obligations under the Finance Documents, each of the Obligors and the Existing Lender shall be released from further obligations to one another under the Finance Documents and their respective rights against one another under the Finance Documents shall be cancelled (the "Discharged Rights and Obligations"); b) each of the Obligors 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 Obligor and the New Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender; c) the Agent, the Arrangers, the New Lender and the 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 hereunder with the rights and/or obligations acquired or assumed by it as a result of the Transfer and to that extent the Agent, the Arrangers and the Existing Lender shall each be released from further obligations to each other under the Finance Documents; and d) the New Lender shall become a Party as a "Lender". 25.6 Further assurances The Borrower undertake to procure that in relation to any Transfer, the Borrower shall (at its own cost) at the request of the Agent execute such documents as may in the discretion of the Agent be necessary to ensure that the New Lender attains the benefit of the Finance Documents. 25.7 Disclosure of information Any Lender may disclose: 10127241/1 72

 
EXECUTION VERSION a) to any of its Affiliates and a potential assignee; b) to whom that Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, this Agreement or the Borrower; and c) to whom, to the extent that, information is required to be discloses by any applicable law, such information about the Borrower and the Finance Documents as that Lender shall consider appropriate. 25.8 Security over Lenders' rights In addition to the other rights provided to Lenders under this Clause 25, each Lender may without consulting with or obtaining consent from the Obligors, at any time charge, assign or otherwise create 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: (i) 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 (ii) require any payments to be made by an Obligor other than or in excess of, or grant to any person any more extensive rights than, those required to be made or granted to the relevant Lender under the Finance Documents. 10127241/1 73

 
EXECUTION VERSION 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 a) Each other Finance Party appoints the Agent to act as its facility agent under and in connection with the Finance Documents. b) Each other Finance Party appoints the Security Agent to act as its security agent under and in connection with the Finance Documents. c) Each other Finance Party authorises the Agent and the Security Agent to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Agent and the Security Agent, respectively, under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions. d) Each other Finance Party authorises the Agent and the Security Agent, as applicable, to execute and enforce each Finance Document to be executed and/or enforced by the Agent or the Security Agent, as the case may be, on its behalf in the manner contemplated by the Finance Documents. e) The Finance Parties shall not have any independent power to enforce, or have recourse to, any of the Security or to exercise any right, power, authority or discretion arising under the Security Documents except through the Agent. 26.2 Instructions a) The Agent and the Security Agent shall: (i) 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 or Security Agent, as the case may be, in accordance with any instructions given to it by: (A) all Lenders if the relevant Finance Document stipulates the matter is an all Lender decision; and (B) in all other cases, the Majority Lenders; and (ii) not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with paragraph (i) above. b) The Agent and the Security 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. The Agent and the Security Agent may refrain from acting unless and until it receives any such instructions or clarification that it has requested. 10127241/1 74

 
EXECUTION VERSION c) 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 or the Security Agent by the Majority Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties. d) The Agent and the Security 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. e) In the absence of instructions, the Agent and the Security Agent may act (or refrain from acting) as it considers to be in the best interest of the Lenders. f) The Agent and the Security 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. 26.3 Duties of the Agent and the Security Agent a) The Agent and the Security Agent's duties under the Finance Documents are solely mechanical and administrative in nature. b) Subject to paragraph c) below, 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. c) 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. d) 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 other Finance Parties. e) 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 or the Arranger) under this Agreement, it shall promptly notify the other Finance Parties. f) 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 Role of the Security Agent a) The Security Agent shall not be (except as expressly provided in any Finance Document) a trustee of any Finance Party under or in connection with any Finance Document. b) The Security Agent shall hold the benefit of the Security Documents for itself and as agent on behalf of the other Finance Parties and will apply all payments and other benefits 10127241/1 75

 
EXECUTION VERSION received by it under the Security Documents in accordance with the provisions of this Agreement. 26.6 No fiduciary duties a) Nothing in any Finance Document constitutes the Agent, the Security Agent (except as expressly provided in any Finance Document) or the Arranger as a trustee or fiduciary of any other person. b) None of the Agent, the Security 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. 26.7 Rights and discretions a) The Agent and the Security Agent may: (i) rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised; (ii) assume that: (A) 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 (B) 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 paragraph (A) above, may assume the truth and accuracy of that certificate. b) The Agent and the Security Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that: (i) no Default has occurred (unless it has actual knowledge of a Default arising under Clause 24.1 (Non-payment)); (ii) any right, power, authority or discretion vested in any Party or any group of Lenders has not been exercised; and (iii) any notice or request made by the Borrower (other than a Drawdown Notice or Selection Notice) is made on behalf of and with the consent and knowledge of all the Obligors. c) The Agent may engage and pay for the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts. 10127241/1 76

 
EXECUTION VERSION d) Without prejudice to the generality of paragraph c) above or paragraph e) below, 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 necessary. e) 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. f) The Agent and the Security Agent may act in relation to the Finance Documents through its officers, employees and agents. g) 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. h) 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. i) Notwithstanding any provision of any Finance Document to the contrary, the Agent and the Security 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, the Security Agent nor the Arranger is responsible or liable for: a) the adequacy, accuracy or completeness of any information (whether oral or written) supplied by the Agent, the Arranger, the Obligors or any other person in or in connection with any Finance Document or the transactions contemplated in the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; b) the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; or c) 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: a) whether or not any Default has occurred; 10127241/1 77

 
EXECUTION VERSION b) as to the performance, default or any breach by any Party of its obligations under any Finance Document; or c) whether any other event specified in any Finance Document has occurred 26.10 Exclusion of liability a) Without limiting paragraph b) below (and without prejudice to any other provision of any Finance Document excluding or limiting the liability of the Agent and the Security Agent), the Agent and the Security Agent will not be liable for: (i) 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, unless directly caused by its gross negligence or wilful misconduct; (ii) exercising, or not exercising, any right, power, authority or discretion given to it by, or in connection with, any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Finance Document, other than by reason of its gross negligence or wilful misconduct; or (iii) without prejudice to the generality of paragraphs (i) and (ii) above, any damages, costs or losses to any person, any diminution in value or any liability whatsoever (including, without limitation, for negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent or the Security Agent) arising as a result of: (A) any act, event or circumstance not reasonably within its control; or (B) 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. b) 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 Finance Document and any officer, employee or agent of the Agent may rely on this Clause. c) Neither the Agent nor the Security 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 it if it 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 it for that purpose. 10127241/1 78

 
EXECUTION VERSION d) Nothing in this Agreement shall oblige the Agent, the Security Agent or the Arranger to carry out: (i) any "know your customer" or other checks in relation to any person; or (ii) 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, the Security 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, the Security Agent or the Arranger. e) Without prejudice to any provision of any Finance Document excluding or limiting the Agent's liability, any liability of the Agent or the Security Agent arising under or in connection with any Finance Document shall be limited to the amount of actual loss which has been suffered (as determined by reference to the date of default of the Agent and the Security 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 and the Security 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 and Finance Parties' indemnity to the Security Agent a) 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, 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 the Agent (otherwise than by reason of the Agent's gross negligence or wilful misconduct, in acting as Agent under the Finance Documents (unless the Agent has been reimbursed by the Obligors pursuant to a Finance Document). b) Each other Finance Party shall (in proportion to its share of all amounts outstanding and/or available for drawing under the Finance Documents) indemnify the Security Agent, within three (3) Business Days of demand, against any cost, loss or liability incurred by the Security Agent (otherwise than by reason of the Security Agent's gross negligence or wilful misconduct) in acting as Security Agent under the Finance Documents (unless it has been reimbursed by the Obligors pursuant to a Finance Document). 26.12 Resignation of the Agent or the Security Agent a) The Agent or the Security Agent may resign and appoint one of its Affiliates as successor by giving notice to the Lenders and the Borrower. b) Alternatively, the Agent or the Security Agent may resign by giving thirty (30) days' notice to the Lenders and the Borrower, in which case the Majority Lenders (after consultation with the Borrower) may appoint a successor Agent, or as the case may be, a successor Security Agent. 10127241/1 79

 
EXECUTION VERSION c) If the Majority Lenders have not appointed a successor Agent or as the case may be, a successor Security Agent in accordance with paragraph b) above within twenty (20) days after notice of resignation was given, the retiring Agent or Security Agent (after consultation with the Borrower) may appoint a successor Agent or as the case may be, a successor Security Agent. d) The retiring Agent shall, or, as the case may be, the Security Agent make available to the successor Agent, or, as the case may be, the successor Security Agent such documents and records and provide such assistance as the successor Agent or, as the case may be, the successor Security Agent may reasonably request for the purposes of performing its functions under the Finance Documents. The Borrower 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. e) The Agent's, or, as the case may be, the Security Agent's, resignation notice shall only take effect upon the appointment of a successor. f) Upon the appointment of a successor, the retiring Agent or Security Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under paragraph e) above) but shall remain entitled to the benefit of Clause 14.4 (Indemnity to the Agent), Clause 14.5 (Indemnity to the Security 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. g) After consultation with the Borrower, the Majority Lenders may, by notice to the Agent, require it to resign in accordance with paragraph b) above. In this event, the Agent shall resign in accordance with paragraph b) above. h) The Agent shall resign in accordance with paragraph b) above (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to paragraph c) above) if on or after the date which is three (3) months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either: (i) the Agent fails to respond to a request under Clause 12.7 (FATCA Information) and the Borrower or 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; (ii) 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 (iii) the Agent notifies the Borrower 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) the Borrower or 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 the Borrower or that Lender, by notice to the Agent, requires it to resign. 10127241/1 80

 
EXECUTION VERSION 26.13 Confidentiality a) 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. b) 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. 26.14 Relationship with the Lenders a) 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: (i) entitled to or liable for any payment due under any Finance Document on that day; and (ii) 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 (5) Business Days' prior notice from that Lender to the contrary in accordance with the terms of this Agreement. b) 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 despatched to that Lender under the Finance Documents. Such notice shall contain the address and e-mail address and/or any other information required to enable the transmission 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, e- mail address (or such other information), department and officer by that Lender for the purposes of Clause 31.2 (Addresses) 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. 26.15 Credit appraisal by the Lenders Without affecting the responsibility of each Obligor for information supplied by it or on its behalf in connection with any Finance 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 Finance Document including but not limited to: a) the financial condition, status and nature of the Obligors; b) the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; c) 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 Finance Document, the transactions contemplated by the Finance Documents or any other agreement, 10127241/1 81

 
EXECUTION VERSION arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and d) the adequacy, accuracy or completeness of any information provided by the Agent, any Party or by any other person under or in connection with any Finance Document, the transactions contemplated by any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document. 26.16 Reference Banks If a Reference Bank ceases to be a Lender, the Agent shall (in consultation with the Borrower) appoint another Lender to replace that Reference Bank. 26.17 Role of Reference Banks a) No Reference Bank is under any obligation to provide a quotation or any other information to the Agent. b) No Reference Bank will be liable for any action taken by it under or in connection with any Finance Document, or for any quotation provided as Reference Bank, unless directly caused by its gross negligence or wilful misconduct. c) No Party (other than the relevant Reference Bank) may take any proceedings against any officer, employee or agent of any Reference Bank in respect of any claim it might have against that Reference Bank or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document, or to any quotation provided as a Reference Bank, and any officer, employee or agent of each Reference Bank may rely on this Clause 26.17. 26.18 Deduction from amounts payable by the Agent or the Security Agent If any Party owes an amount to the Agent or the Security Agent under the Finance Documents the Agent or the Security Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent or the Security Agent (as the case may be) 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. 26.19 No responsibility to perfect Security Interest Neither the Agent nor the Security Agent shall be liable for any failure to: a) require the deposit with it of any deed or document certifying, representing or constituting the title of any Obligor to any of the assets subject to or intended to be subject to the Security Interest under the Security Documents; b) obtain any licence, consent or other authority for the execution, delivery, legality, validity, enforceability or admissibility in evidence of any Finance Document or the Security Interest; c) register, file or record or otherwise protect any of the Security Interest under the Security Documents (or the priority of any of those Security Interest) under any law or regulation or to give notice to any person of the execution of any Finance Document or of the Security Interest under the Security Documents; 10127241/1 82

 
EXECUTION VERSION d) take, or to require any Obligor to take, any step to perfect its title to any of the assets subject to or intended to be subject to the Security Interest under the Security Documents or to render those Security Interest effective or to secure the creation of any ancillary Security under any law or regulation; or e) require any further assurance in relation to any Security Document. 27 CONDUCT OF BUSINESS OF THE FINANCE PARTIES No provision of this Agreement will: a) interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit; b) oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or to the extent, order or manner of any claim; or c) 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 Payment to Finance Parties If a Finance Party (a "Recovering Finance Party") receives or recovers any amount from an Obligor 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: a) the Recovering Finance Party shall promptly, within three (3) Business Days, notify details of the receipt or recovery to the Agent; b) 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 by or made by the Agent and distributed in accordance with Clause 29 (Payment mechanics), without taking account of Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and c) the Recovering Finance Party shall, within three (3) 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 29.5 (Partial payments). 28.2 Redistribution of payments The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) (the "Sharing Finance Parties") in accordance with Clause 29.5 (Partial payments) towards the obligations of that Obligor 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 an Obligor, as between the relevant Obligor and the 10127241/1 83

 
EXECUTION VERSION Recovering Finance Party, an amount of the Recovered Amount equal to the Sharing Payment will be treated as not having been paid by that Obligor. 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: a) 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 b) as between the relevant Obligor and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will treated as not having been paid by that Obligor. 28.5 Exceptions a) 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 Obligor. b) 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: (i) it notified that other Finance Party of the legal or arbitration proceedings; and (ii) that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as reasonably practicable having received notice and did not take separate legal or arbitration proceedings. 10127241/1 84

 
EXECUTION VERSION SECTION 11 ADMINISTRATION 29 PAYMENT MECHANICS 29.1 Payments to the Agent All payments by an Obligor or a Lender under the Finance Documents (other than in connection with the realisation or enforcement of any Security Documents) shall be made: a) to the Agent to its account with such office or bank as the Agent may from time to time designate in writing to the Obligor or a Lender for this purpose; and b) for value on the due date at such times and in such funds as the Agent may specify to the Party concerned as being customary at the time for settlement of transactions in the relevant currency in the place of payment. 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 the Obligors), 29.4 (Clawback) and 29.9 (Payments to the Security Agent), be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement, to such account as that Party may notify to the Agent by not less than five (5) Business Days' notice. 29.3 Distributions to an Obligor The Agent may (with the consent of the Obligor or in accordance with Clause 30 (Set-off)), apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of currency to be so applied. 29.4 Clawback and pre-funding a) 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. b) Unless paragraph c) below 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 amount 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. c) If the Agent has notified the Lenders that it is willing to make available amounts for the account of the 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 the Borrower: (i) the Agent shall notify the Borrower of that Lender's identity and the Borrower shall on demand refund it to the Agent; and 10127241/1 85

 
EXECUTION VERSION (ii) the Lender by whom those funds should have been made available or, if that Lender fails to do so, the Borrower 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 Partial payments a) If the Agent (or the Security Agent, as applicable) receives a payment or an amount is recovered by the Security Agent pursuant to the terms of any Security Document in connection with the realisation or enforcement of all or any part of the Security Interest) that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Agent shall apply that payment towards the obligations of that Obligor under the Finance Documents in the following order: (i) firstly, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent and the Security Agent under the Finance Documents; (ii) secondly, in or towards payment pro rata of any accrued interest (including default interest), fee or commissions due but unpaid under this Agreement; (iii) thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and (iv) fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents (excluding the Hedging Agreements); and (v) fifthly, in or towards payment pro rata of any other sum due but unpaid under the Hedging Agreements. b) The Agent shall, if so directed by the Lenders, vary the order set out in paragraphs (i) to (v) above. c) This Clause 29.5 will override any appropriation made by an Obligor. 29.6 No set-off by the Obligors All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim. 29.7 Business Days a) Any payment under the Finance Documents which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not). b) During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date. 29.8 Currency of account The Obligors shall pay: a) any amount payable under the Finance Documents, except as otherwise provided for herein, in USD; and 10127241/1 86

 
EXECUTION VERSION b) all payments of costs and Taxes in the currency in which the same were incurred. 29.9 Payments to the Security Agent Notwithstanding any other provision of any Finance Document, at any time after any Security Interest created by or pursuant to any Security Document becomes enforceable, the Security Agent may require: a) any Obligor to pay all sums due under any Finance Document; or b) the Agent to pay all sums received or recovered from an Obligor under any Finance Document, in each case as the Security Agent may direct for application in accordance with the terms of the relevant Security Document. 30 SET-OFF a) A Finance Party may, to the extent permitted by applicable law, set off any obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any obligations owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, 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. b) Each Obligor hereby agrees and accepts that this Clause 30 shall constitute a waiver of the provisions of Section 29 of the FA Act and further agrees and accepts, to the extent permitted by law, that Section 29 of the FA Act shall not apply to this Agreement. 31 NOTICES 31.1 Communication in writing a) 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 e-mail or letter. b) Any such notice or communication addressed as provided in Clause 31.2 (Addresses) will be deemed to be given or made as follows: (i) if by letter, when delivered at the address of the relevant Party; (ii) if by email, when received in legible form. c) However, a notice given in accordance with the above but received on a day which is not a Business Day or after 16:00 hours in the place of receipt will only be deemed to be given at 9:00 hours on the next Business Day in that place. d) Any communication or document to be made or delivered to the Agent will be effective only when actually received by the Agent and then only if it is expressly marked for the attention of the department or officer identified with the Agent's signature below (or any substitute department or officer as the Agent shall specify for this purpose). 10127241/1 87

 
EXECUTION VERSION 31.2 Addresses Any communication or document to be made under or in connection with the Finance Documents shall be made or delivered to the address and email address of each Party and marked for the attention of the department or persons set out below and, in case of any New Lender, to the address notified to the Agent: If to the Agent or ABN AMRO BANK N.V. the Security Agent: Office: Gustav Mahlerlaan 10 1082 PP Amsterdam The Netherlands/ PAC HQ9037 Address for correspondence: PO Box 283 1000 EA Amsterdam The Netherlands/ PAC HQ9037 Department:Agency Syndicated Loans ABN.AMRO.Agency.Team.1 @nl.abnamro.com If to any of the Obligors: FLEX LNG MANAGEMENT AS Bryggegata 3 0250 Oslo, Norway Att: Chief Financial Officer E-mail: finance@flexlng.com or any substitute address and/or email address and/or marked for such other attention as the Party may notify to the other Agent (or the Agent may notify the other Parties if a change is made by the Agent) by not less than five (5) Business Days' prior notice. 31.3 Communication with the Obligors All communication from or to an Obligor shall be sent through the Agent. 31.4 Language Communication to be given by one Party to another under the Finance Documents shall be given in the English language or, if not in English and if so required by the Agent, be accompanied by a certified English translation and, in this case, the English translation shall prevail unless the document is a statutory or other official document. 32 CALCULATIONS AND CERTIFICATES 32.1 Certificates and Determinations Any certification or determination by a Finance Party 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. 32.2 Day count convention All interest, commission or fee accruing under the Finance Documents 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. 10127241/1 88

 
EXECUTION VERSION 33 PARTIAL INVALIDITY If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provisions under any law of any other jurisdiction will in any way be affected or impaired. 34 REMEDIES AND WAIVERS No failure to exercise, nor any delay in exercising on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, of any such right or remedy any of the Finance Documents. No single or partial exercise of any other right or remedy shall prevent any further or other exercise of any other right or remedy. The rights and remedies provided in each Finance Document are cumulative and not exclusive of any rights or remedies provided by law. 35 AMENDMENTS AND WAIVERS 35.1 Required consents a) Subject to Clause 35.2 (All Lender matters) and 35.3 (Other exceptions), any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Obligors and any such amendment will be binding on all Parties. b) The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause. 35.2 All Lender matters An amendment to or waiver of 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 of the date of any payment of any amount under the Finance Documents; c) a reduction in Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable; d) an increase in or extension of any Commitment or an extension of the Availability Period or any requirement that a cancellation of Commitments reduces the Commitments of the Lenders rateably under the Facilities; e) a term of the Finance Documents which expressly requires the consent of all the Lenders; f) a proposed substitution or replacement of the Borrower or a Guarantor; g) the definitions of "Restricted Party", "Sanctions", "Sanctions Authority" or "Sanctions List", any Clause in which such term is used in this Agreement, or any other provision or other matters relating to Sanctions, including without limitation Clause 22.22 (Sanctions). h) the release of any guarantee and indemnity granted under Clause 17 (Guarantee and indemnity) or of any Security Interest granted under any of 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 to Security Interest where such sale or disposal is expressly permitted under this Agreement or any other Finance Document; or 10127241/1 89

 
EXECUTION VERSION i) Clauses 2.2 (Finance party's rights and obligations), 7.3 (Mandatory prepayment – Illegality) 18 (Security), 25 (Changes to the Parties), 28 (Sharing among the Finance Parties), 29.5 (Partial payments), this Clause 35.2, Clause 39.1 (Governing law) and 39.2 (Jurisdiction), shall not be made without the prior written consent of all the Lenders. 35.3 Other exceptions An amendment or waiver which relates to the rights or obligations of the Agent, Hedge Providers, the Security Agent or the Arranger (each in their capacity as such) may not be effected without the consent of the Agent, the Hedge Providers, the Security Agent or, as the case may be, the Arranger. 35.4 Replacement of Screen Rate a) Subject to Clause 35.3 (Other exceptions), any amendment or waiver which relates to: (i) providing for the use of a Replacement Benchmark; and (ii) (A) aligning any provision of any Finance Document to the use of that Replacement Benchmark; (B) enabling that Replacement Benchmark to be used for the calculation of interest under this Agreement (including, without limitation, any consequential changes required to enable that Replacement Benchmark to be used for the purposes of this Agreement); (C) implementing market conventions applicable to that Replacement Benchmark; (D) providing for appropriate fallback (and market disruption) provisions for that Replacement Benchmark; or (E) adjusting the pricing to reduce or eliminate, to the extent reasonably practicable, any transfer of economic value from one Party to another as a result of the application of that Replacement Benchmark (and if any adjustment or method for calculating any adjustment has been formally designated, nominated or recommended by the Relevant Nominating Body, the adjustment shall be determined on the basis of that designation, nomination or recommendation), may be made with the consent of the Agent (acting on the instructions of the Majority Lenders) and the Obligors. b) If any Lender fails to respond to a request for an amendment or waiver described in paragraph (a) above within 10 Business Days (or such longer time period in relation to any request which the Company and the Agent may agree) of that request being made: (i) its Commitment(s) shall not be included for the purpose of calculating the Total Commitments under the relevant Facility when ascertaining whether any relevant percentage of Total Commitments has been obtained to approve that request; and 10127241/1 90

 
EXECUTION VERSION (ii) its status as a Lender shall be disregarded for the purpose of ascertaining whether the agreement of any specified group of Lenders has been obtained to approve that request. c) For the purpose of this Clause 35.4 (Replacement of Screen Rate) "Relevant Nominating Body" means any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or the Financial Stability Board. "Replacement Benchmark" means a benchmark rate which is: a) formally designated, nominated or recommended as the replacement for a Screen Rate by: (i) the administrator of that Screen Rate (provided that the market or economic reality that such benchmark rate measures is the same as that measured by that Screen Rate); or (ii) any Relevant Nominating Body, and if replacements have, at the relevant time, been formally designated, nominated or recommended under both paragraphs, the "Replacement Benchmark" will be the replacement under paragraph (ii) above; b) in the opinion of the Majority Lenders and the Obligors, generally accepted in the international or any relevant domestic syndicated loan markets as the appropriate successor to a Screen Rate; or c) in the opinion of the Majority Lenders and the Obligors, an appropriate successor to a Screen Rate. 36 CONFIDENTIAL INFORMATION 36.1 Confidentiality 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 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: a) to any of its Affiliates and any of its or their officers, directors, employees, professional advisers, auditors, partners, insurance and reinsurance brokers, insurers and reinsurers 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 paragraph a) is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information; 10127241/1 91

 
EXECUTION VERSION b) to any person and only such Confidential Information as that Finance Party shall consider appropriate: (i) to (or through) whom it transfers (or may potentially 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 and, in each case, to any of that person's Affiliates and professional advisers; (ii) with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and the Borrower and to any of that person's Affiliates and professional advisers; (iii) appointed by any Finance Party or by a person to whom paragraph b)(i) or (ii) above applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf (including, without limitation, any person appointed under paragraph c) of Clause 26.14 (Relationship with the Lenders)); (iv) who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in paragraph b)(i) or b)(ii) above; (v) to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation; (vi) to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes; (vii) to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 25.8 (Security over Lenders' rights); (viii) who is a Party; or (ix) with the consent of the Borrower. 36.3 Disclosure to numbering service providers a) Notwithstanding any other term of any Finance Document or any other agreement between the Parties to the contrary (whether express or implied), 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 Facilities and/or one or more Obligors the following information: (i) names of Obligors; (ii) country of domicile of Obligors; 10127241/1 92

 
EXECUTION VERSION (iii) place of incorporation of Obligors; (iv) date of the Agreement; (v) governing law of the Agreement; (vi) names of the Agent and the Arrangers; (vii) date of each amendment and restatement of the Agreement; (viii) amounts of, and names of, the Facilities (and any tranches); (ix) amount of Total Commitments; (x) currencies of the Facilities; (xi) type of Facilities; (xii) ranking of Facilities; (xiii) Termination Date for Facilities; (xiv) changes to any of the information previously supplied pursuant to sub-clauses (i) to (xii) above; and (xv) such other information agreed between such Finance Party and the Ultimate Parent, to enable such numbering service provider to provide its usual syndicated loan numbering identification services. b) The Parties acknowledge and agree that each identification number assigned to the Agreement, the Facilities and/or one or more Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider. c) Each Obligor represents that none of the information set out in sub-paragraphs (i) to (xiv) of paragraph a) above is, nor will at any time be, unpublished price-sensitive information. d) The Agent shall notify the Ultimate Parent and the other Finance Parties of: (i) the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Facilities and/or one or more Obligors; and (ii) the number or, as the case may be, numbers assigned to the Agreement, the Facilities and/or one or more Obligors by such numbering service provider. 36.4 Disclosure to administration/settlement services providers Notwithstanding any other term of any Finance Document or any other agreement between the Parties to the contrary (whether express or implied), any Finance Party may disclose to any person appointed by: a) that Finance Party; 10127241/1 93

 
EXECUTION VERSION b) a person to (or through) whom that Finance Party 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 under the Agreement; and/or c) a person with (or through) whom that Finance Party enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made, or may be made, by reference to, one or more Finance Documents and/or one or more Obligors, 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 36.4 if the service provider to whom the Confidential Information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for use with Administration/ Settlement Services Providers or such other form of confidentiality undertaking agreed between the Ultimate Parent and the relevant Finance Party. 36.5 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. 36.6 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. 36.7 Notification of disclosure Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Borrower: a) of the circumstances of any disclosure of Confidential Information made pursuant to paragraph b)(v) of Clause 36.2 (Disclosure of Confidential Information), except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and b) upon becoming aware that Confidential Information has been disclosed in breach of this Clause 36. 36.8 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 twelve (12) months from the earlier of: a) the date on which all amounts payable by the Obligors under or in connection with this Agreement have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and 10127241/1 94

 
EXECUTION VERSION b) the date on which such Finance Party otherwise ceases to be a Finance Party. 37 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. 38 CONTRACTUAL RECOGNITION OF BAIL-IN Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding between the Parties, each Party acknowledges and accepts that any liability of any Party to any other Party under or in connection with the Finance Documents may be subject to Bail- In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of: a) any Bail-In Action in relation to any such liability, including (without limitation): (i) a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability; (ii) a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and (iii) a cancellation of any such liability; and b) a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability. 10127241/1 95

 
EXECUTION VERSION SECTION 11 GOVERNING LAW AND ENFORCEMENT 39 GOVERNING LAW AND ENFORCEMENT 39.1 Governing law This Agreement shall be governed by Norwegian law. 39.2 Jurisdiction a) For the benefit of each Finance Party, each Obligor agrees that the courts of Oslo, Norway, have jurisdiction to settle any disputes arising out of or in connection with the Finance Documents including a dispute regarding the existence, validity or termination of this Agreement, and the Obligors accordingly submits to the non-exclusive jurisdiction of the Oslo District Court (Oslo tingrett). b) Nothing in this Clause 39.2 shall limit the right of the Finance Parties to commence proceedings against an Obligor in any other court of competent jurisdiction. To the extent permitted by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions. 39.3 Service of process Without prejudice to any other mode of service, each Obligor: a) appoints Flex LNG Management AS (company no. 920 626 289), PO Box 1327 Vika, 0112 Oslo (mail address) and Bryggegate 3, 0250 Oslo, Norway (visiting adress) as its agent for the service of process and/or any other writ, notice, order or judgment in respect of this Agreement, any other Finance Document governed by Norwegian law and/or the matters arising here from; and b) agrees that failure by such process agent to notify an Obligor of the process will not invalidate the proceedings concerned. If any process agent appointed pursuant to this Clause 39.3 (Service of process) (or any successor thereto) shall cease to exist for any reason where process may be served, the Obligor will forthwith appoint another process agent with an office in Norway where process may be served and will forthwith notify the Agent thereof. * * * This Agreement has been entered into on the date stated at the beginning of this Agreement. 10127241/1 96

 
EXECUTION VERSION SCHEDULE 1 THE ORIGINAL LENDERS AND COMMITMENTS Name of Original Lender Commitment Term Loan Facility ABN AMRO BANK N.V., OSLO BRANCH Organisation no. 995 550 164 USD 25,000,000 SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) Registration no. 502032-9081 USD 25,000,000 Revolving Facility ABN AMRO BANK N.V., OSLO BRANCH Organisation no. 995 550 164 USD 25,000,000 SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) Registration no. 502032-9081 USD 25,000,000 Total Commitments USD 100,000,000 10127241/1 97

 
EXECUTION VERSION SCHEDULE 2 CONDITIONS PRECEDENT PART I CONDITIONS PRECEDENT TO SIGNING 1 Corporate authorisations a) A copy of each Obligor's constitutional documents; b) A copy of resolutions passed by each Obligor's board of directors evidencing: (i) the approval of the terms of, and the transactions contemplated by, the Finance Documents; and (ii) the authorisation of its appropriate officer or officers or other representatives to execute the Finance Documents and any other documents necessary for the transactions contemplated by the Finance Documents, on its behalf. c) To the extent required in the relevant jurisdictions, a copy of resolutions passed by the shareholders of each Obligor ratifying the resolutions of its board of directors; d) To the extent not covered by resolutions, any powers of attorney (notarised and legalised, if required) granted by an Obligor to execute any Finance Documents; e) A certificate of goodstanding (or equivalent) in respect of each Obligor; f) A specimen of the signature (which can be by way of copy of passport) of each person signing the Finance Documents on behalf of each Obligor g) A certificate of an authorised signatory of each Obligor certifying that each copy document relating to it specified in this Schedule 2 is correct, complete and in full force and effect and has not been amended or superseded as at a date no earlier than the date of this Agreement and confirming that borrowing or guaranteeing or securing, as appropriate, the Total Commitments would not cause any borrowing, guarantee, security or similar binding limit to be exceeded. h) Such other documentation and evidence required to complete the "know your customer" checks as described in Clause 20.9 ("Know your customer" checks). 2 Authorisations All approvals, authorisations and consents required by any government or other authorities for the Obligors to enter into and perform their obligations under this Agreement and/or any of the Finance Documents to which they are respective parties. 3 Finance Documents a) The Agreement; b) The Fee Letters; and 10127241/1 98

 
EXECUTION VERSION c) The letter in respect of effective interest pursuant to Clause 8.1b) (Effective Interest). 4 Vessel Documents a) A copy of the Management Agreements. 5 Miscellaneous a) Evidence that all fees referred to in Clause 11 (Fees) that are due have or will be paid on its due date; b) Copy of the Original Financial Statements; c) Evidence that all process agent appointments required by the Finance Documents listed in item 3 above have been duly accepted; d) A copy of the Sterna RCF; and e) Any other documentation authorization, opinion or assurance reasonably required by the Agent. 6 Legal opinions a) If required, such legal opinions relating to the Agreement, in such form (agreed draft or issued) as the Agent may require. PART II CONDITIONS PRECEDENT TO DRAWDOWN NOTICE 1 Finance Documents a) the Account Pledge, and deliverables thereunder; b) the Assignment of Earnings and Charterparties, and deliverables thereunder; c) if applicable, the Assignment of Hedging Claims, and deliverables thereunder; d) the Assignment of Insurances, and deliverables thereunder; e) the Assignment of Intercompany Loans, and deliverables thereunder; f) the Share Pledge, and deliverables thereunder; All of the above Security Documents duly executed and perfected. g) the Mortgage in respect of the Vessel (agreed form only); h) the Trust Agreement in respect of the Vessel; i) The Drawdown Notice at least three (3) Business Days prior to the Drawdown Date; j) Any Hedging Agreements; and 10127241/1 99

 
EXECUTION VERSION k) The Sterna Subordination Undertaking, and any other subordination statements required pursuant to the Agreement. 2 Vessel Documents In respect of the Vessel: a) evidence (by way of transcript of registry) that the Vessel is, or will be, registered in the name of the Borrower in an Approved Ship Registry, that the Mortgage has been or will latest on the Drawdown Date be executed and recorded with its intended first priority against the Vessel and that no other encumbrances, maritime liens, mortgages or debts whatsoever are registered against the Vessel; b) copies of insurance policies/cover notes documenting that insurance cover has been taken out in respect of the Vessel in accordance with Clause 23.1 (Insurance), and evidencing that the Security Agent's (on behalf of the Finance Parties) Security Interest in the insurance policies have been noted in accordance with the relevant notices as required under the Security Agreement; c) the Insurance Report, with no outstanding pre-delivery action points; d) the technical manager's current DOC; e) each Manager's Undertaking; f) a copy of each charterparty or other employment contract entered into in respect of the Vessel with a term exceeding twelve (12) months; g) class certificate related to the Vessel from the relevant classification society, confirming that the Vessel is classed with the highest class in accordance with Clause 23.3 (Classification and repairs), free of overdue recommendations and conditions; h) copy of the Vessel's SMC and ISPS Certificates; and i) evidence of the Market Value of the Vessel dating not more thirty (30) days prior to the proposed Drawdown Date. 3 Miscellaneous a) Evidence that all fees referred to in Clause 11 (Fees), and costs and expenses referred to in 16 (Costs and expenses) that are due have or will be paid on its due date; b) A Compliance Certificate confirming that the Obligors are in compliance with the financial covenants as set out in Clause 21 (Financial covenants), together with the latest consolidated financial statements of the Guarantor. c) Evidence that all process agent appointments required by the Finance Documents have been duly accepted; d) Documentation evidencing all shareholder loans to any Obligor, as well as any intra-group loans or receivables to which any Obligor is a party; 10127241/1 100

 
EXECUTION VERSION e) Any other documentation authorization, opinion or assurance reasonably required by the Agent. 4 Legal opinions a) A legal opinion regarding Norwegian law issued by Advokatfirmaet Thommessen AS; b) A legal opinion regarding Bermuda law issued by Appleby (Bermuda) Limited; c) A legal opinion regarding Marshall Islands law and New York law issued by Watson Farley & Williams LLP; d) A legal opinion regarding English law issued by Holman Fenwick Willan LLP; e) Any such other favourable legal opinions in form and substance satisfactory to the Agent from lawyers appointed by the Agent on matters concerning all relevant jurisdictions, including the jurisdiction of the Approved Ship Registry in which the Vessel is registered. 10127241/1 101

 
EXECUTION VERSION SCHEDULE 3 FORM OF DRAWDOWN NOTICE To: ABN AMRO BANK N.V , as Agent From: [Borrower] Date: [***] USD 100,000,000 TERM LOAN AND REVOLVING FACILITIES AGREEMENT DATED 15 JULY 2019 (THE "AGREEMENT") We refer to Clause 5.1 (Delivery of the Drawdown Notice) of the Agreement. Terms defined in the Agreement shall have the same meaning when used in this Drawdown Notice. a) You are hereby irrevocably notified that we wish to make the following drawdown on the following terms: Facility: [Term Loan Facility][Revolving Facility] Proposed Drawdown Date: [ ] Principal Amount: USD [ ] Interest Period: [ ] b) The purpose of the Loan is the part financing of the Vessel and/or for our general corporate purpose, and all proceeds shall applied accordingly. c) The proceeds of the Loan shall be credited to [**] [insert details of account]. d) We confirm that, as of the date hereof (i) each condition specified in Clause 4 (Conditions Precedent) of the Agreement is satisfied; (ii) each of the Repeating Representations set out in Clause 19 (Representations and warranties) of the Agreement is true and correct; and (iii) no event or circumstances has occurred and is continuing which constitute or may constitute an Event of Default. Yours sincerely for and on behalf of FLEX LNG RANGER LIMITED By: __________________________________ Name: Title: [authorised officer] 10127241/1 102

 
EXECUTION VERSION SCHEDULE 4 FORM OF SELECTION NOTICE To: ABN AMRO BANK N.V., as Agent From: FLEX LNG Ltd. Date: [***] USD 100,000,000 TERM LOAN AND REVOLVING FACILITIES AGREEMENT DATED 15 JULY 2019 (THE "AGREEMENT") We refer to the Agreement. Terms defined in the Agreement shall have the same meaning when used in this Selection Notice. a) We refer to the amount outstanding under the Loan with an Interest Period ending on [**]. b) We request that the next Interest Period for the Loan is [**]. This Selection Notice is irrevocable. Yours sincerely for and on behalf of FLEX LNG Ltd. By: ______________________________ Name: Title: 10127241/1 103

 
EXECUTION VERSION SCHEDULE 5 FORM OF COMPLIANCE CERTIFICATE To: ABN AMRO BANK N.V., as Agent From: FLEX LNG Ltd. Date: [***] [To be delivered no later than 120/60 days after each Reporting Date] USD 100,000,000 TERM LOAN AND REVOLVING FACILITIES AGREEMENT DATED 15 JULY 2019 (THE "AGREEMENT") We refer to the Agreement. Terms defined in the Agreement have their defined meanings when used in this Compliance Certificate. 1 We hereby represent and warrant that at the date of this Compliance Certificate, we are in compliance with Clause 21 (Financial covenants), that no Event of Default has occurred and that the Repeating Representations contained in Clause 19 (Representations and warranties) of the Agreement are true and correct at the date hereof as if made with respect to the facts and circumstances existing at this date. 2 Without limiting the generality of paragraph 1 above, we hereby further represent and warrant as follows: Equity Ratio For the purpose of Clause 21.3 a) (Equity Ratio) we confirm as follows: Total Assets USD [] Total Liabilities USD [] Equity (Total Assets less Total Liabilities) USD [] Equity Ratio [ ]:1.00 Requirement: Not lower than 0.25:1.00 Compliance: [Yes/No] Working Capital For the purpose of Clause 21.3 b) (Working Capital) we confirm as follows: Working Capital: USD [] Requirement: Working Capital > 0 Compliance: [Yes/No] Liquidity For the purpose of Clause 21.3 c) (Liquidity) we confirm as follows: Liquidity: USD [] of which Cash and Cash Equivalents is: USD [] Group’s total interest bearing Financial Indebtedness on a consolidated basis USD [] ("NIBD") (excluding the Sterna RCF), net of Cash and 5% of which is USD [] 10127241/1 104

 
EXECUTION VERSION Cash Equivalents. Liquidity > Higher of (i) USD 25,000,000 and (ii) 5% of NIBD Requirement: [Yes/No] Compliance: Collateral Maintenance Test For the purpose of Clause 7.1 (Collateral Maintenance Test) we confirm as follows: Market Values* Flex Ranger USD []/[Not delivered] (A) Aggregate Market Value: USD [] (B) Aggregate Loans: USD [] Ratio (A/B): [ ]% Requirement: (A/B) > 130% Compliance: [Yes/No] * Evidence of Market Values attached hereto 3 This Compliance Certificate shall be governed by and construed in accordance with Norwegian law. Yours sincerely for and on behalf of FLEX LNG Ltd. By: __________________________________ Name: Title: CFO 10127241/1 105

 
EXECUTION VERSION SCHEDULE 6 FORM OF TRANSFER CERTIFICATE To: ABN AMRO BANK N.V., as Agent From: [**] (the "Existing Lender" and [**] (the "New Lender") Date: [**] USD 100,000,000 TERM LOAN AND REVOLVING FACILITIES AGREEMENT DATED 15 JULY 2019 (THE "AGREEMENT") We refer to the Agreement. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate. With reference to Clause 25 (Changes to the Parties): a) The Existing Lender, in its capacity as Lender under the Agreement, confirms that it participates with [ ] per cent of the Total Commitments. b) The Existing Lender hereby transfers to the New Lender [ ] per cent of the Total Commitments as specified in the Schedule hereto, and of the equivalent rights and interest in all Finance Documents, and the New Lender hereby accepts such transfer from the Existing Lender in accordance with the terms set out herein and Clause 25 (Changes to the Parties) of the Agreement and assumes the same obligations to the other Finance Parties as it would have been under if it was an original Lender. c) The proposed Transfer Date is [ ], as from which date the Transfer of such portion of the Total Commitments shall take full legal effect. d) The New Lender confirms that it has received a copy of the Agreement, together with such other information as it has required in connection with this transaction. The New Lender expressly acknowledges and agrees to the limitations on the Existing Lender's responsibility set out in Clause 25.3 (Limitations of responsibility of Existing Lenders) of the Agreement. e) The New Lender hereby undertakes to the Existing Lender and the Borrower that it will perform in accordance with the terms and conditions of the Agreement all those obligations which will be assumed by it upon execution of this Transfer Certificate. f) The address, telefax number and attention details for notices, as well as the account details of the New Lender, are set out in the Schedule. g) This Transfer Certificate is governed by Norwegian law, with Oslo City Court (Oslo tingrett) as legal venue. 10127241/1 106

 
EXECUTION VERSION The Schedule Commitments/rights and obligations to be transferred I Existing Lender: [ ] II New Lender: [ ] III Total Commitments of Existing Lender: USD [ ] IV Aggregate amount transferred: USD [ ] V Total Commitments of New Lender USD [ ] VI Transfer Date: [ ] Administrative Details / Payment Instructions of New Lender Notices to New Lender: [ ] [ ] Att: [ ] Fax no: + [ ] [Insert relevant office address, telefax number and attention details for notices and payments to the New Lender] Account details of New Lender: [Insert relevant account details of the New Lender] Existing Lender: New Lender: [**] [**] By: __________________________________ By: ________________________________ Name: Name: Title: Title: This Transfer Certificate is accepted and agreed by the Agent (on behalf of the Majority Lenders) and the Transfer Date is confirmed as [ ]. Agent: ABN AMRO BANK N.V. By: __________________________________ Name: Title: 10127241/1 107

 
EXECUTION VERSION SCHEDULE 7 VESSEL Vessel name Owner IMO No. FLEX RANGER FLEX LNG RANGER LIMITED 9709025 10127241/1 108

 
EXECUTION VERSION SCHEDULE 8 REPAYMENT AND REDUCTION SCHEDULE (USD) 10127241/1 109

 
EXECUTION VERSION SIGNATORIES Borrower: FLEX LNG RANGER LIMITED By: Name: Kristian Wangsfjord Title: Attorney-in-fact Advokatfirmaet Wiersholm AS Guarantor and Intermediate Parent: Guarantor and Ultimate Parent: FLEX LNG FLEET LIMITED FLEX LNG LTD. By: B Name: Name: Kristian Wangsfjord Kristian Wangsfjord Title: Attorney-in-fact Title: Attorney-in--fact Advokatfirmaet Wiersholm AS n,,±.,:'katfirmaet Wkn-shoim AS Agent: Security Agent: ABN AMRO BANK N.V. ABN AMRO BANK N.V. By: By: Name: Name: Title: Title: Arranger: Lender: ABN AMRO BANK N.V., OSLO BRANCH ABN AMRO BANK N.V., OSLO BRANCH By: By: Name: Name: Title: Title: Arranger: Lender: SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) By: By: Name: Name: Title: Title: 10127241/1 110

 

 

 
Private & Confidential Dated 25 February 2020 FLEX LNG AMBER LIMITED FLEX LNG AURORA LIMITED FLEX FREEDOM LIMITED FLEX LNG RELIANCE LIMITED FLEX LNG RESOLUTE LIMITED as Borrowers arranged by ABN AMRO BANK N.V., OSLO BRANCH CITIBANK N.A., LONDON BRANCH COMMONWEALTH BANK OF AUSTRALIA CREDIT SUISSE AG DEUTSCHE BANK AG with ABN AMRO BANK N.V. , OSLO BRANCH NORDEA BANK ABP, FILIAL I NORGE as Bookrunners ABN AMRO BANK N.V. , OSLO BRANCH as ECA Co-ordinator NORDEA BANK ABP, FILIAL I NORGE as KEXIM Agent NORDEA BANK ABP, FILIAL I NORGE as Agent and NORDEA BANK ABP, FILIAL I NORGE as Security Agent guaranteed by FLEX LNG LTD and FLEX LNG FLEET LIMITED FACILITY AGREEMENT FOR UP TO $629,000,000 TERM LOAN FACILITY BD-#34696673-v11

 
Contents Clause Page 1 Definitions and Interpretation ............................................................................1 2 The Facility.................................................................................................... 21 3 Purpose ........................................................................................................ 25 4 Conditions Precedent ...................................................................................... 25 5 Drawdown..................................................................................................... 27 6 Repayment.................................................................................................... 29 7 Prepayment and Cancellation........................................................................... 30 8 Interest ........................................................................................................ 33 9 Interest Periods ............................................................................................. 33 10 Changes to the Calculation of Interest .............................................................. 34 11 Fees ............................................................................................................. 35 12 Tax Gross-up and Indemnities ......................................................................... 37 13 Increased Costs ............................................................................................. 41 14 Other Indemnities .......................................................................................... 42 15 Mitigation by the Lenders ................................................................................ 44 16 Costs and Expenses........................................................................................ 45 17 Guarantee and Indemnity................................................................................ 46 18 Security ........................................................................................................ 50 19 Representations and Warranties....................................................................... 52 20 Information Undertakings................................................................................ 56 21 Financial Covenants........................................................................................ 60 22 General Undertakings ..................................................................................... 61 23 Vessel Covenants ........................................................................................... 66 24 Events of Default ........................................................................................... 70 25 Changes to the Parties.................................................................................... 74 26 Role of the Agent, the Security Agent, the KEXIM Agent, the Arrangers, Bookrunners and ECA Co-ordinator............................................................................. 78 27 Conduct of Business of the Finance Parties ........................................................ 90 BD-#34696673-v11

 
28 Sharing among the Finance Parties................................................................... 90 29 Payment Mechanics ........................................................................................ 92 30 Set-Off ......................................................................................................... 94 31 Notices ......................................................................................................... 94 32 Calculations and Certificates ............................................................................ 95 33 Partial Invalidity............................................................................................. 95 34 Remedies and Waivers.................................................................................... 96 35 Amendments and Waivers ............................................................................... 96 36 Confidential Information.................................................................................. 99 37 Counterparts ............................................................................................... 102 38 Contractual Recognition of Bail-In .................................................................. 103 39 Governing Law and Enforcement .................................................................... 104 Schedule 1 THE ORIGINAL PARTIES AND COMMITMENTS ............................................ 105 Schedule 2 CONDITIONS PRECEDENT ....................................................................... 108 Schedule 3 FORM OF DRAWDOWN NOTICE................................................................ 113 Schedule 4 FORM OF SELECTION NOTICE ................................................................. 114 Schedule 5 FORM OF COMPLIANCE CERTIFICATE ....................................................... 115 Schedule 6 FORM OF TRANSFER CERTIFICATE ........................................................... 117 Schedule 7 VESSELS .............................................................................................. 119 Schedule 8 REPAYMENT SCHEDULE (USD)................................................................. 125 Schedule 9 FORM OF INCREASE CONFIRMATION........................................................ 127 BD-#34696673-v11

 
THIS FACILITY AGREEMENT is dated ___25 February 2020 and made between: (1) THE ENTITIES listed in Schedule 1 (The Original Parties and Commitments) as borrowers (the "Borrowers" and each a "Borrower"); (2) FLEX LNG FLEET LIMITED, a company incorporated and existing under the laws of Bermuda, having company registration no. 52351, whose registered office is at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda (the "Intermediate Parent"); (3) FLEX LNG LTD., a company incorporated and existing under the laws of Bermuda, having company registration no. 52644, whose registered office is at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda (the "Ultimate Parent", and together with the Intermediate Parent, the "Guarantors" and each a "Guarantor"); (4) THE FINANCIAL INSTITUTIONS listed in Schedule 1 as commercial facility lenders (the "Original Commercial Facility Lenders"); (5) THE FINANCIAL INSTITUTIONS listed in Schedule 1 as KEXIM facility lenders (the "Original KEXIM Facility Lenders"); (6) THE FINANCIAL INSTITUTIONS listed in Schedule 1 as KEXIM guaranteed facility lenders (the "Original KEXIM Guaranteed Facility Lenders"); (7) ABN AMRO BANK N.V., OSLO BRANCH, CITIBANK N.A., LONDON BRANCH, COMMONWEALTH BANK OF AUSTRALIA, CREDIT SUISSE AG, DEUTSCHE BANK AG as mandated lead arrangers (the "Arrangers"); (8) THE FINANCIAL INSTITUTIONS listed in Schedule 1 as hedging providers (each a "Hedge Provider", jointly the "Hedge Providers"); (9) ABN AMRO BANK N.V., OSLO BRANCH as ECA co-ordinator (the "ECA Co-ordinator"); (10) NORDEA BANK ABP, FILIAL I NORGE as KEXIM agent (the "KEXIM Agent"); (11) ABN AMRO BANK N.V., OSLO BRANCH and NORDEA BANK ABP, FILIAL I NORGE as bookrunners (the "Bookrunners"); (12) NORDEA BANK ABP, FILIAL I NORGE as facility agent of the other Finance Parties (in such capacity, the "Agent"); and (13) NORDEA BANK ABP, FILIAL I NORGE as security agent of the other Finance Parties (in such capacity, the "Security Agent"). IT IS AGREED as follows: Section 1 - Interpretation 1 Definitions and Interpretation 1.1 Definitions In this Agreement, unless the context otherwise requires: "Accordion Lender" has the meaning given to that term in Clause 2.5 (Accordion option). "Account Bank" means DNB Bank ASA or the Agent, as relevant. "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. BD-#34696673-v11 1

 
"Agreement" means this facility agreement, as it may be amended, supplemented and varied from time to time, including its Schedules and any Transfer Certificate. "Alternative Vessels" means each of the vessels (to be built by the relevant Yard under the relevant Shipbuilding Contract) described in Schedule 7 (Vessels) and "Alternative Vessel" means either of them. "Annex VI" means Annex VI of the Protocol of 1997 (as subsequently amended from time to time) to amend the International Convention for the Prevention of Pollution from Ships 1973 (Marpol), as modified by the Protocol of 1978 relating thereto. "Approved Broker" means each of Fearnleys, Clarksons Platou, Nordic Shipping, Affinity, Braemar ACM Valuations Ltd., Simpson Spence Young or such other independent and internationally reputable shipbroker(s) as may be approved in writing by the Agent. "Approved Manager" means: (a) Bernhard Schulte Shipmanagement; (b) Flex LNG Fleet Management AS; (c) any company within the Group, other than Flex LNG Fleet Management AS; or (d) any other management company acceptable to the Majority Lenders from time to time as the technical and/or commercial manager of a Vessel, such consent not to be unreasonably withheld or delayed. "Approved Ship Registry" means each of the Marshall Islands, the Norwegian International Ship Registry (NIS), Liberia or such other international ship registry as may be approved in writing by all the Lenders. "Approved Classification Society" means each of DNV GL, Lloyds Register, American Bureau of Shipping (ABS), Bureau Veritas or such other IACS classification society as may be pre-approved in writing by all the Lenders, such approval not to be unreasonably withheld or delayed. “Article 55 BRRD” means Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms. "Assignment of Hedging Claims" means a first priority assignment granted or to be granted by each Borrower in favour of the Security Agent (on behalf of the Finance Parties) of each Borrower's rights, titles and interests under any Hedging Agreements related to this Facility, to be in form and substance acceptable to the Security Agent. "Authorisations" means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration. "Availability Period" means in relation to each Loan (a) for Vessels with a Scheduled Delivery Date (as indicated in Schedule 7 (Vessels) during 2020), 31 December 2020 and (b) for Vessels with a Scheduled Delivery Date (as indicated in Schedule 7 (Vessels) during 2021), 30 June 2021 (or such later date as may be approved by the Lenders). "Available Commitment" means a Lender's Commitment minus the amount of its participation in any outstanding Loans. "Bail-In Action" means the exercise of any Write-down and Conversion Powers. "Bail-In Legislation" means: (a) in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 BRRD, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time; and BD-#34696673-v11 2

 
(b) in relation to any state other than such an EEA Member Country or (to the extent that the United Kingdom is not such an EEA Member Country) the United Kingdom, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation. "Break Costs" means the amount (if any) by which: (a) the interest (excluding the Margin) which a Lender should have received for the period from the date of receipt of all or part of its participation in a Loan or Unpaid Sum to the last day of the then current Interest Period in respect of a Loan or Unpaid Sum, had the principal amount or Unpaid Sum 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 London 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. "Business Day" means a day (other than a Saturday or Sunday) on which banks are open for general business in London, Amsterdam, Seoul, New York and Oslo (or any other relevant place of payment under Clause 29 (Payment mechanics)). "Change of Control" means the occurrence of any of the following events: (a) any company controlled directly or indirectly by the John Fredriksen Family ceases to own directly minimum (i) 25% of the shares and the voting rights of the Ultimate Parent prior to the Final Maturity Date relating to the Commercial Facility or (ii) 20% of the shares and the voting rights of the Ultimate Parent thereafter until the 8th anniversary of the Delivery Date of the final Vessel; or (b) without the prior written approval of the Lenders, any individual person or more persons acting in concert (other than any company controlled directly or indirectly by the John Fredriksen Family) have the right or the ability to control, either directly or indirectly, the affairs or composition of the majority of the board of directors (or equivalent) of the Ultimate Parent or becomes owners of 1/3 or more of the voting shares of the Ultimate Parent; or (c) the Ultimate Parent ceases to own directly 100% of the shares in the Intermediate Parent; or (d) the Intermediate Parent ceases to own directly 100% of the shares in each of the Borrowers, excluding in the event of a disposal of such shares in accordance with Clause 7.2 (Disposal or Total Loss), in which case that Clause shall apply. "Charged Property" means all of the assets of the Obligors which from time to time are, or are expressed or intended to be, the subject of the Security Documents. "Code" means the US Internal Revenue Code of 1986 (as amended). "COFR" means the U.S. Certificate of Financial Responsibility program (as in effect from time to time), based on the U.S. Oil Pollution Act of 1980. "Commercial Facility" means the term loan facility made available by the Commercial Facility Lenders under this Agreement as described in Clause 2 (The Facility) and which shall include any increase made pursuant to Clause 2.5 (Accordion option). "Commercial Facility Commitment" means: (a) in relation to an Original Commercial Facility Lender, the amount set opposite its name under the heading "Commercial Facility Commitment" in Schedule 1 (The Original Parties and Commitments) and the amount of any other Commercial Facility BD-#34696673-v11 3

 
Commitment (including by virtue of Clause 2.5 (Accordion option)) transferred to it under this Agreement; and (b) in relation to any other Commercial Facility Lender, the amount of any Commercial Facility Commitment (including by virtue of Clause 2.5 (Accordion option)) transferred to it under this Agreement, to the extent not cancelled, reduced or transferred by it under this Agreement. "Commercial Facility Lender" means: (a) the Original Commercial Facility Lenders; (b) any Accordion Lender; and (c) any bank or financial institution which has become a Party as a commercial facility lender in accordance with Clause 25 (Changes to the Parties), which in each case has not ceased to be a Party in accordance with the terms of this Agreement. "Commercial Facility Loan" means an advance of the Commercial Facility Commitments being the Relevant Percentage in relation to the Commercial Facility of a Loan or the principal amount outstanding for the time being of that advance. "Commercial Facility Majority Lenders" means subject to the proviso hereto: (a) if there are no Commercial Facility Loans outstanding, a Commercial Facility Lender or Commercial Facility Lenders whose Commercial Facility Commitments aggregate equal to or more than 66 2/3% of the Total Commercial Facility Commitments (or, if the Total Commercial Facility Commitments have been reduced to zero, aggregated equal to or more than 66 2/3% of the Commercial Facility Commitments immediately prior to the reduction); or (b) at any other time, a Commercial Facility Lender or Commercial Facility Lenders whose participations in the Commercial Facility Loans then outstanding aggregate equal to or more than 66 2/3% of the Commercial Facility Loans then outstanding. "Commitment" means, in relation to a Lender, its Commercial Facility Commitment, its KEXIM Facility Commitment and its KEXIM Guaranteed Facility Commitment. "Compliance Certificate" means a certificate substantially in the form as set out in Schedule 5 (Form of Compliance Certificates). "Confidential Information" means all information relating to the Obligors, the Group, the Finance Documents or the Facility of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or 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 Facility from either: (a) the Obligors or any of their respective advisers; or (b) another Finance Party, if the information was obtained by that Finance Party directly or indirectly from the Obligors or any of their 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 36.1 (Confidential Information); or BD-#34696673-v11 4

 
(ii) is identified in writing at the time of delivery as non-confidential by the Obligor or any of its advisers; or (iii) is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (a) or (b) above 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 the Obligor 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. "Default" means an Event of Default or any event or circumstance specified in Clause 24 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default. "Delivery Date" means the date on which a Vessel is actually delivered, by passing of risk and title, to the relevant Borrower under the relevant Intermediate MOA, expected to occur on or about the relevant Scheduled Delivery Date (as indicated in Schedule 7 (Vessels)). "DOC" means, in relation to any technical Manager of a Vessel, a valid document of compliance issued to the technical Manager pursuant to paragraph 13.2 of the ISM Code. "Drawdown Date" means the Business Day on which a Borrower has requested drawdown of a Loan pursuant to this Agreement or, as the context requires, the date on which the drawdown is actually made. "Drawdown Notice" means a notice substantially in the form set out in Schedule 3 (Form of Drawdown Notice). "Earnings" means all moneys whatsoever which are now, or later become, payable (actually or contingently) to a Borrower and which arise out of the use of or operation of a Vessel, including (but not limited to): (a) all freight, hire and passage moneys payable to a Borrower, including (without limitation) payments of any nature under a charterparty or any other agreement for the employment, use, possession, management and/or operation of a Vessel; (b) any claim under any guarantees related to freight and hire payable to a Borrower as a consequence of the operation of a Vessel; (c) compensation payable to a Borrower in the event of any requisition of a Vessel or for the use of a Vessel by any government authority or other competent authority; (d) remuneration for salvage, towage and other services performed by a Vessel payable to a Borrower; (e) demurrage and retention money receivable by a Borrower in relation to a Vessel; (f) all moneys which are at any time payable under the Insurances in respect of loss of earnings; (g) any damages for breach (or payments for variation or termination) of any contract of employment of a Vessel payable to a Borrower; (h) if and whenever a Vessel is employed on terms whereby any moneys falling within paragraphs (a) to (f) above (both inclusive) 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 such Vessel; and (i) any other money whatsoever due or to become due to a Borrower from third parties in relation to a Vessel, or otherwise. BD-#34696673-v11 5

 
"Earnings Accounts" means the Borrowers' bank accounts, into which all Earnings are to be paid, to be held with the Account Bank, and to be subject to the relevant Security Agreement. "ECA Commitments" means, the aggregate of the KEXIM Facility Commitments and the KEXIM Guaranteed Facility Commitments, being $379,000,000 as at the date of this Agreement. "EEA Member Country" means any member state of the European Union, Iceland, Liechtenstein and Norway. "Environmental Approval" means any permit, licence, consent, approval and other Authorisations and the filing of any notification, report or assessment required under any Environmental Law for the operation of a Vessel. "Environmental Claim" means any claim, proceeding or investigation by any party in respect of any Environmental Law or Environmental Approval. "Environmental Law" means any law, regulation, convention or treaty applicable to an Obligor and which relates to the pollution or protection of the environment or to the carriage of material which is capable of polluting the environment. "EU Bail-In Legislation Schedule" means the document described as such and published by the Loan Market Association (or any successor person) from time to time. "Event of Default" means any event or circumstance specified as such in Clause 24 (Events of Default). "Facilities" means the Commercial Facility, the KEXIM Facility and the KEXIM Guaranteed Facility and "Facility" means any of them. "FATCA" means: (a) sections 1471 to 1474 of the Code or any associated regulations; (b) any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or (c) any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction. "FATCA 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 "passthru payment" described in section 1471(d)(7) of the Code not falling within paragraph (a) above, the first date from which such payment may become subject to a deduction or withholding required by FATCA. "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: BD-#34696673-v11 6

 
(a) the Agent (on behalf of any other Finance Parties) and a Borrower; and (b) the Agent (for itself) and a Borrower, in each case, setting out any of the fees referred to in Clause 11 (Fees). "Final Maturity Date" means, subject to Clause 29.7 (Business Days): (a) in respect of each Commercial Facility Loan, the earliest of (i) the date falling 60 months after the Drawdown Date in respect of the final Loan or (ii) 30 November 2025, provided that if the Commercial Facility has been refinanced or restructured in a manner approved under Clause 7.9 (Commercial Facility) such Final Maturity Date shall be the final repayment date in respect of that Commercial Facility Loan following such refinancing or restructuring; or (b) in respect of a KEXIM Facility Loan, the earlier of (i) the date falling 144 months after the Drawdown Date in respect of the Loan of which it forms part or (ii) 30 November 2032; or (c) in respect of a KEXIM Guaranteed Facility Loan, the earlier of (i) the date falling 72 months after the Drawdown Date in respect of the Loan of which it forms part or (ii) 30 November 2026. "Finance Documents" means (a) this Agreement; (b) any Fee Letter; (c) the Security Documents; (d) each Hedging Agreement, other than in respect of Clause 35 (Amendments and Waivers), Clause 37 (Counterparts) and (in relation to any communications between the Borrowers and the Hedge Providers) Clause 31 (Notices); and (e) any other document designated as such by the Agent and the Borrowers. "Finance Party" means any or all of the Lenders, the Agent, the Security Agent, the Arrangers, the Hedge Providers, any Bookrunner, the ECA Co-ordinator or the KEXIM Agent. "Financial Indebtedness" means any indebtedness for or in respect of: (a) moneys borrowed and debit balances at banks or other financial institutions; (b) any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with US GAAP, be treated as a finance or capital lease; (e) receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis); (f) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that derivative transaction, that amount) shall be taken into account); BD-#34696673-v11 7

 
(g) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; (h) any amount of any liability under a deferred purchase agreement if (i) one of the primary reasons behind entering into the agreement is to finance the acquisition or construction of the asset or service in question or (ii) the agreement is in respect of the supply of assets or services and payment is due more than 60 days after the date of supply; (i) any amount raised under any other transaction (including any forward sale or purchase, sale and sale back or sale and leaseback agreement) having the commercial effect of a borrowing or otherwise classified as borrowings under US GAAP; and (j) (without double-counting) the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (i) above. "General Assignment" means a first priority assignment granted or to be granted by each Borrower in favour of the Security Agent (on behalf of the Finance Parties) of any of the Borrowers' rights, titles and interests to (i) any Earnings, (ii) Insurances and (iii) in respect of any charterparty for any Vessel with a firm term (excluding options) exceeding twelve (12) months, its rights, titles and interests to same, to be in form and substance acceptable to the Security Agent. "Green Passport" means a document listing all potential hazardous materials on board the relevant Vessel as further described by the relevant Vessel's classification society and/or the International Maritime Organization (IMO), hereunder an Inventory of Hazardous Materials as described thereby. "Group" means the Ultimate Parent and its Subsidiaries from time to time. "Group Member" means any Obligor and any other entity which is part of the Group. "Guarantee" means the unconditional and irrevocable guarantee and indemnity provided by the each of the Guarantors pursuant to Clause 17 (Guarantee and indemnity). "Hedging Agreement" means any master agreement, confirmation, schedule or other agreement entered or to be entered into by any Borrower and any Hedge Provider to hedge liabilities relating to the Agreement. "Holding Company" means, in relation to a person, any other person in respect of which it is a Subsidiary. "Increase Confirmation" means a confirmation certificate substantially in the form as set out in Schedule 9 (Form of Increase Confirmation) or any other form agreed between the Agent and the Borrowers. "Insurance Report" means a report with respect to the Insurances, with a form, scope and conclusion acceptable to the Lenders, and from a firm of marine insurance brokers acceptable to the Lenders. "Insurances" means, in relation to any Vessel, all insurance policies and contracts of insurance (which expression includes all entries of any Vessel in a protection and indemnity or war risk association) which are from time to time during the Security Period in place or taken out or entered into by or for the benefit of any Borrower (whether in the sole name of a Borrower or in the joint names of the Obligors and any other person) in respect of any Vessel or otherwise in connection with a Vessel and all benefits thereunder (including claims of whatsoever nature and return of premiums). "Interest Payment Date" means the last Business Day of each Interest Period. BD-#34696673-v11 8

 
"Interest Period" means, in relation to a Loan (or any Commercial Facility Loan forming part thereof), 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). "Intermediate Buyer" means Sea Reliance Inc. in respect of the Vessel "Flex Artemis", Sea Resulute Inc. in respect of the Vessel "Flex Resolute", Sea Freedom Shipowning Inc. in respect of the Vessel "Flex Freedom", Sea Aurora Inc. in respect of the Vessel "Flex Aurora", Sea America Inc. in respect of the Vessel "Flex Amber", which entities are parties as buyers to the Shipbuilding Contracts, and have entered into the Intermediate MOAs. "Intermediate MOA" means each memorandum of agreement for the sale of the respective Vessels from the Intermediate Buyers as sellers to the respective Borrower as buyer, securing a concurrent delivery under the Shipbuilding Contract and the Intermediate MOA, and including arrangements for the assignment of Yard's warranties in respect of the Vessel to the relevant Borrower, to be in form and substance satisfactory to the Agent. "Interpolated Screen Rate" means, in relation to LIBOR for any Loan, the rate (rounded to the same number of decimal places as the two relevant Screen Rates) which results from interpolating on a linear basis between: (a) the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the Interest Period of that Loan; and (b) the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of that Loan, each as of 12:00 hours on the Quotation Day for USD. "ISM Code" means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention. "ISPS Code" means the International Ship and Port Facility Security (ISPS) Code as adopted by the International Maritime Organization's (IMO) Diplomatic Conference of December 2002. "John Fredriksen Family" means Mr. John Fredriksen, his direct lineal descendants, the personal estate of any of them and/or any trust created for the benefit of any of the aforementioned persons or their estates. "KEXIM" means The Export-Import Bank of Korea. "KEXIM Facility" means the term loan facility made available by the KEXIM Facility Lenders under this Agreement as described in Clause 2 (The Facility). "KEXIM Facility Commitment" means: (a) in relation to an Original KEXIM Facility Lender, the amount set opposite its name under the heading "KEXIM Facility Commitment" in Schedule 1 (The Original Parties and Commitments) and the amount of any other KEXIM Facility Commitment transferred to it under this Agreement; and (b) in relation to any other KEXIM Facility Lender, the amount of any KEXIM Facility Commitment transferred to it under this Agreement, to the extent not cancelled, reduced or transferred by it under this Agreement. "KEXIM Facility Lenders" means: (a) the Original KEXIM Facility Lender; and BD-#34696673-v11 9

 
(b) any bank or financial institution which has become a Party as a KEXIM Facility Lender in accordance with Clause 25 (Changes to the Parties), which in each case has not ceased to be a Party in accordance with the terms of this Agreement. "KEXIM Facility Loan" means an advance of the KEXIM Facility Commitments being the Relevant Percentage in relation to the KEXIM Facility of a Loan or the principal amount outstanding for the time being of that advance. "KEXIM Guarantee" means the guarantee issued or (as the context may require) to be issued by KEXIM as guarantor in favour of the KEXIM Guaranteed Facility Lenders (or the Security Agent on their behalf). "KEXIM Guarantee Premium" means, in respect of a Vessel, the amount of premium in respect of the issuance of the relevant KEXIM Guarantee paid to KEXIM on the Drawdown Date for the relevant KEXIM Guaranteed Facility Loan for such Vessel. The KEXIM Guarantee Premium payable in respect of a KEXIM Guaranteed Facility Loan shall be an amount equal to 2.10% of the KEXIM Guaranteed Facility Loan requested to be utilised in the Drawdown Notice for such KEXIM Guaranteed Facility Loan. "KEXIM Guaranteed Facility" means the term loan facility made available by the KEXIM Guaranteed Facility Lenders under this Agreement as described in Clause 2 (The Facility). "KEXIM Guaranteed Facility Commitment" means: (a) in relation to an Original KEXIM Guaranteed Facility Lender, the amount set opposite its name under the heading "KEXIM Guaranteed Facility Commitment" in Schedule 1 (The Original Parties and Commitments) and the amount of any other KEXIM Guaranteed Facility Commitment transferred to it under this Agreement; and (b) in relation to any other KEXIM Guaranteed Facility Lender, the amount of any KEXIM Guaranteed Facility Commitment transferred to it under this Agreement, to the extent not cancelled, reduced or transferred by it under this Agreement. "KEXIM Guaranteed Facility Lenders" means: (a) the Original KEXIM Guaranteed Facility Lenders; and (b) any bank or financial institution which has become a Party as a KEXIM Guaranteed Facility Lender in accordance with Clause 25 (Changes to the Parties), which in each case has not ceased to be a Party in accordance with the terms of this Agreement. "KEXIM Guaranteed Facility Loan" means an advance of the KEXIM Guaranteed Facility Commitments being the Relevant Percentage in relation to the KEXIM Guaranteed Facility of a Loan or the principal amount outstanding for the time being of that advance. “KEXIM Mandatory Prepayment Event” means each of the following events or circumstances: (a) it is or becomes unlawful for KEXIM to perform any of its obligations under the KEXIM Guarantee or for a Finance Party to receive the benefit of the KEXIM Guarantee; (b) any obligation or obligations of KEXIM under the KEXIM Guarantee are not or cease to be legal, valid, binding or enforceable or the KEXIM Guarantee is not or ceases to be in full force and effect; or BD-#34696673-v11 10

 
(c) KEXIM avoids, rescinds, repudiates, suspends, cancels or terminates all or part of the KEXIM Guarantee or evidences an intention to or purports to avoid, rescind, repudiate, suspend, cancel or terminate all or part of the KEXIM Guarantee. “Legal Reservations” means: (a) the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors; (b) the time barring of claims under the Limitation Act 1980 and the Foreign Limitation Periods Act 1984, the possibility that an undertaking to assume liability for, or indemnify a person against, non-payment of 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 (d) 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 Commercial Facility Lender; (b) any KEXIM Facility Lender; and (c) any KEXIM Guaranteed Facility Lender, and "Lenders" mean all of them. "LIBOR" means, in relation to any Loan: (a) the applicable Screen Rate; or (b) (if no Screen Rate is available for the Interest Period of that Loan) the Interpolated Screen Rate for that Loan; or (c) if: (i) no Screen Rate is available for USD; or (ii) no Screen Rate is available for the Interest Period of that Loan and it is not possible to calculate an Interpolated Screen Rate for that Loan, the Reference Bank Rate, as of 12:00 hours on the Quotation Day for USD and for a period equal in length to the Interest Period of that Loan, and, if any such rate is below zero, LIBOR will be deemed to be zero. "Loan" means a means a loan made or to be made under the Facilities or the principal amount outstanding for the time being of that loan. "Majority Lenders" means subject to the proviso hereto: (a) if there are no Loans outstanding, a Lender or Lenders whose Commitments aggregate equal to or more than 66 2/3% of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated equal to or more than 66 2/3% of the Total Commitments immediately prior to the reduction); or BD-#34696673-v11 11

 
(b) at any other time, a Lender or Lenders whose participations in the Loans then outstanding aggregate equal to or more than 66 2/3% of the Loans then outstanding, provided always that the Majority Lenders shall always include a minimum of one Commercial Facility Lender. "Management Agreement(s)" means any commercial and/or technical management agreement entered into between any of the Borrowers and the Manager(s) regarding any of the Vessels, on terms and conditions acceptable to the Majority Lenders. "Manager" means any technical or commercial manager of a Vessel. "Manager's Undertaking" means a subordination statement by each Manager of a Vessel, in form and substance acceptable to the Agent, whereupon the Manager fully subordinates its claims under any Management Agreement(s) and otherwise in respect of the Vessel to the claims of the Finance Parties under the Finance Document. "Margin" means: (a) in relation to the Commercial Facility, 2.35 per cent per annum; (b) in relation to the KEXIM Facility, 2.25 per cent per annum; and (c) in relation to the KEXIM Guaranteed Facility, 1.20 per cent per annum. "Marpol" means the International Convention for the Prevention of Pollution from Ships. "Market Value" means the fair market value of each Vessel in USD, being the average of valuations of the Vessel obtained from two (2) Approved Brokers by the Borrowers. Such valuations to be made with or without physical inspection of the relevant Vessel (as the Agent may require) on the basis of a sale for prompt delivery for cash at arm's length on normal commercial terms as between a willing buyer and seller, on an "as is, where is" basis, free of any existing charter or other contract of employment and/or pool arrangement. If the two valuations differ by more than ten per cent. (10.00%) of the mean value of the two valuations, then a third Approved Broker appointed by the Agent shall provide a valuation and the value of the Vessel shall be the average of the three valuations. If the valuation is provided in a range, the mean value of the range shall be used. The valuations shall be for the cost of the Borrowers. "Material Adverse Effect" means a material adverse effect on: (a) the financial position, business or operation of any Obligor or the Group (taken as a whole); (b) the ability of any of the Obligors to perform any of its obligations under the Finance Documents; or (c) the validity or enforceability of, or the effectiveness or ranking of any Security Interest granted or purported 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. "Maximum Loan Amount" means, in relation to a Loan, an amount equal to the lower of: (a) 65% of the Market Value of the applicable Vessel; and (b) USD 125,800,000. "Mortgage(s)" means each of the first priority or preferred, as applicable, cross collateralized ship mortgages and, if applicable, the declaration of pledges or deeds of covenants collateral thereto, granted by each Borrower in favour of the Security Agent (on behalf of the Finance BD-#34696673-v11 12

 
Parties) in form and substance acceptable to the Security Agent and registered against each of the Vessels with the applicable Approved Ship Registry. "New Lender" has the meaning set out in Clause 25 (Changes to the Parties). "Obligor" means the Borrowers and the Guarantors, or any of them, as the case may be. "Original Financial Statements" means the financial statements for each Obligor (consolidated and audited in respect of the Ultimate Parent), for the financial year ended 31 December 2018. "Party" means a party to this Agreement. "Poseidon Principles" means the financial industry framework for assessing and disclosing the climate alignment of ship finance portfolios published on 18 June 2019 as the same may be amended or replaced to reflect changes in applicable law or regulation or the introduction of or changes to mandatory requirements of the International Maritime Organisation from time to time https://www.poseidonprinciples.org at the date of this Agreement. "Quotation Day" means, in relation to any period for which an interest rate is to be determined two (2) Business Days before the first day of that period. "Reference Banks" means those of the Commercial Facility Lenders which are able to act in such capacity and/or such other banks as may be appointed by the Agent. "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 Bank could borrow funds in the applicable interbank market in the relevant currency and for the relevant period, were it to obtain interbank offers for deposits in that currency and for that period, and if a Reference Bank does not supply a quotation by 12:00 hours on the Quotation Day, the applicable rate shall be determined on the basis of the quotations of the remaining Reference Banks. "Relevant Jurisdiction" means in relation to any Party: (a) its jurisdiction of incorporation; (b) any jurisdiction where any asset subject to or intended to be subject to Security Interest under a Security Document to be created by it is situated or registered, as applicable; (c) any jurisdiction where it conducts its business; and (d) the jurisdiction whose laws govern the perfection of any of the Security Documents entered into by it. "Relevant Percentage" means: (a) in relation to the Commercial Facility, 39.746 per cent; (b) in relation to the KEXIM Facility, 30.187 per cent; and (c) in relation to the KEXIM Guaranteed Facility, 30.067 per cent. "Repeating Representations" means each of the representations set out in Clause 19 (Representations and warranties), except for Clauses 19.3 (Binding obligations), 19.4 (No conflict with other obligations), 19.6 (Governing law and enforcement), 19.8 (Taxes) and 19.9 (No filing or stamp taxes). "Resolution Authority" means any body which has authority to exercise any Write-down and Conversion Powers. BD-#34696673-v11 13

 
"Restricted Party" means a person or persons, legal or physical that: (a) is listed on any Sanctions List; (b) is domiciled, resident, located or having its main place of business in, or is incorporated under the laws of, a country or a territory that is or whose government is subject to Sanctions which attach legal effect to being domiciled, located, having its main place of business in, or incorporated under the laws such country; (c) otherwise the target of Sanctions (whether designated by name or by reason of being included in a class of person); (d) with which any Finance Party is prohibited from dealing with or otherwise engaging in a transaction with due to Sanctions; or (e) is directly or indirectly owned by more than 50 per cent or controlled, or acting on behalf, at the direction or for the benefit of a person(s) referred to in paragraph (a), (b) or (c) above. "Sanctions" means any economic or financial sanctions laws and/or regulations, trade embargoes, prohibitions, restrictive measures, decisions, executive orders, or notices from regulators implemented, adapted, imposed, administered, enacted, or enforced by any Sanctions Authority. "Sanctions Authority" means: (a) the United Nations Security Council, the European Union, the United Kingdom, the Kingdom of Norway, any country to which any Obligor is bound, the United States of America (including but not limited to the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) and the U.S. Department of State), and any authority acting on behalf of any of them in connection with Sanctions; and (b) (for the purposes of Clause 7.3 (Mandatory prepayment – Illegality) only), the country of incorporation of a Lender for the time being. "Sanctions List" means any list of persons or entities subject to Sanctions published in connection with Sanctions by or on behalf of any Sanctions Authority from time to time. "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 USD for the relevant 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 service ceases to be available, the Agent may specify another page or service displaying the relevant rate after consultation with the Ultimate Parent. "Security Agreement" means: (a) in the case of the Borrowers, a first priority pledge granted or to be granted by each Borrower in favour of the Security Agent (on behalf of the Finance Parties) over the Earnings Accounts of the Borrowers and of the claims against any Borrower or any Guarantor from such Borrower in favour of the Security Agent (on behalf of the Finance Parties); (b) in the case of a Guarantor, the first priority charge of the claims against any Borrower from such Guarantor, in each case to be in form and substance acceptable to the Security Agent, and to include a statement of subordination, whereby the relevant creditor subordinates its claims against the relevant debtor to the claims of the Finance Parties under the Finance Documents. BD-#34696673-v11 14

 
"Security Documents" means all or any security documents as may be entered into from time to time pursuant to Clause 18 (Security). "Security Interest" means any mortgage, charge (whether fixed or floating), encumbrance, pledge, lien, assignment by way of security, finance lease, sale and repurchase or sale and leaseback arrangement, sale of receivables on a recourse basis or other security interest or any other agreement or arrangement having the effect of conferring security. "Security Period" means the period commencing on the date of this Agreement and ending the date on which the Agent notifies the Borrowers and the other Finance Parties that: (a) all amounts which have become due for payment by the Borrowers or any other 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 of the Finance Documents; (c) the Obligors have no future or contingent liability under any provision of this Agreement, the other Finance Documents; and (d) the Agent and the Majority Lenders do not consider that there is a significant risk that any payment or transaction under a Finance Document would be set aside, or would have to be reversed or adjusted, in any present or possible future proceeding relating to a Finance Document or any asset covered (or previously covered) by a Security Interest created by a Finance Document. "Selection Notice" means a notice substantially in the form set forth in Schedule 4 (Form of Selection Notice) given in accordance with Clause 9.1 (Selection of Interest Periods). "Share Pledges" means first priority pledges in favour of the Security Agent (on behalf of the Finance Parties) to be created over all shares in the Borrowers pursuant to one or several share pledge agreements in form and substance acceptable to the Security Agent, to be entered into between the Security Agent and the Intermediate Parent. "Shipbuilding Contracts" means any or all, as the case may be, of the shipbuilding contracts entered into between the applicable Intermediate Buyer and the relevant Yard regarding the construction of the Vessels. "Statement of Compliance" means a Statement of Compliance related to fuel oil consumption pursuant to regulations 6.6 and 6.7 of Annex VI. "SMC" means a valid safety management certificate issued for a Vessel pursuant to paragraph 13.7 of the ISM Code. "SMS" means a safety management system for a Vessel developed and implemented in accordance with the ISM Code and including the functional requirements duties and obligations that follow from the ISM Code. "Subsidiary" means an entity from time to time of which a person: (a) has direct or indirect control; (b) or owns directly or indirectly more than fifty per cent. (50.00%) (votes and/or capital), and for the purpose of paragraph a) above, an entity shall be treated as being "controlled" by a person if that person is able to direct its affairs and/or control either directly or indirectly, the composition of its board of directors or equivalent body. "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). BD-#34696673-v11 15

 
"Total Commercial Facility Commitments" means the aggregate of the Commercial Facility Commitments, being $250,000,000 as at the date of this Agreement. "Total Commitments" means the aggregate of the Total Commercial Facility Commitments, the Total KEXIM Facility Commitments and the Total KEXIM Guaranteed Facility Commitments, being $629,000,000 at the date of this Agreement. "Total KEXIM Facility Commitments" means the aggregate of the KEXIM Facility Commitments, being $189,879,000 approximately equal to 50.1% of the ECA Commitments as at the date of this Agreement. "Total KEXIM Guaranteed Facility Commitments" means the aggregate of the KEXIM Guaranteed Facility Commitments, being $189,121,000 approximately equal to 49.9% of the ECA Commitments as at the date of this Agreement. "Total Loss" means, in relation to a Vessel: (a) the actual, constructive, compromised, agreed, arranged or other total loss of the Vessel; (b) any expropriation, confiscation, requisition or acquisition of the 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 purporting to be or to represent a governmental or official authority unless it is within 180 calendar days from the Total Loss Date redelivered to the full control of the relevant Borrower; and (c) any capture or seizure of the Vessel (including any hijacking or theft) unless it is within 180 calendar days from the Total Loss Date redelivered to the full control of the relevant Borrower. "Total Loss Date" means: (a) in the case of an actual total loss of a Vessel, the date on which it occurred or, if that is unknown, the date when the Vessel was last heard of; (b) in the case of a constructive, compromised, agreed or arranged total loss of a Vessel, the earlier of: (i) the date on which a notice of abandonment is given to the insurers; and (ii) the date of compromise, arrangement or agreement made by or on behalf of the relevant Borrower with the Vessel's insurers in which the insurers agree to treat the relevant Vessel as a total loss; or (c) in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Agent that the event constituting the total loss occurred. "Transaction Documents" means any Management Agreement, any Shipbuilding Contract and the Intermediate MOAs. "Transfer Certificate" means a certificate substantially in the form as set out in Schedule 6 (Form of Transfer Certificate) or any other form agreed between the Agent and the Borrowers. "Transfer Date" means, in relation to a transfer, the later of: (a) the proposed Transfer Date specified in the relevant Transfer Certificate; and (b) the date on which the Agent executes the relevant Transfer Certificate. BD-#34696673-v11 16

 
"Trust Property" means, collectively: (a) all moneys duly received by the Security Agent under or in respect of the Finance Documents or the KEXIM Guarantee; (b) any portion of the balance on any Earnings Account held by or charged to the Security Agent at any time; (c) the Security Interests, guarantees, security, powers and rights given to the Security Agent under and pursuant to the Finance Documents or the KEXIM Guarantee including, without limitation, the covenants given to the Security Agent in respect of all obligations of any Obligor; (d) all assets paid or transferred to or vested in the Security Agent or its agent or received or recovered by the Security Agent or its agent in connection with any of the Finance Documents or the KEXIM Guarantee whether from any Obligor or any other person; and (e) all or any part of any rights, benefits, interests and other assets at any time representing or deriving from any of the above, including all income and other sums at any time received or receivable by the Security Agent or its agent in respect of the same (or any part thereof). “UK Bail-In Legislation” means (to the extent that the United Kingdom is not an EEA Member Country which has implemented, or implements, Article 55 BRRD) Part I of the United Kingdom Banking Act 2009 and any other law or regulation applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (otherwise than through liquidation, administration or other insolvency proceedings). "Unpaid Sum" means any sum due and payable but unpaid by an Obligor under the Finance Documents. "US" means the United States of America. "US GAAP" means the generally accepted account principles in the US. "US Tax Obligor" means: (a) an Obligor which is resident for tax purposes in the US; or (b) an Obligor some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes. "USD" means United States Dollars, being the lawful currency of the United States of America. "VAT" means value added tax and any other tax of similar nature. "Vessel" means each of the vessels set out in Schedule 7 (Vessel). "Write-down and Conversion Powers" means: (a) in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule; (b) in relation to any other applicable Bail-In Legislation: (i) any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, BD-#34696673-v11 17

 
reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and (ii) any similar or analogous powers under that Bail-In Legislation. (c) in relation to any UK Bail-In Legislation: (i) any powers under that UK Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability of any of the powers under that UK Bail-In Legislation that are related to or ancillary to any of those powers; and (ii) any similar or analogous powers under that UK Bail-In Legislation. "Yard" means: (a) in respect of the Vessels, "Flex Artemis", "Flex Resolute" and "Flex Freedom", Daewoo Shipbuilding and Marine Engineering Co., Ltd; and (b) in respect of the Vessels, "Flex Aurora" and "Flex Amber" and the Additional Vessels, Hyundai Samho Heavy Industries Co., Ltd.. 1.2 Construction (a) Unless a contrary indication appears, any reference in this Agreement to: (i) the "Agent", the "Security Agent", the "Arrangers", any "Finance Party", any "Lender", any "Obligor", any "Hedge Provider" or any "Party" shall be construed so as to include its successors in title, permitted assigns and permitted transferees to, or of, its rights and/or obligations under the Finance Documents; (ii) a "Finance Document" or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, novated, supplemented, extended or restated; (iii) "control" means the power to appoint a majority of the board of directors or to direct the management and policies of an entity, whether through the ownership of voting capital, by contract or otherwise; (iv) "indebtedness" includes any obligation (whether incurred as principal or as surety) for the payment or repayment of borrowed money, whether present or future, actual or contingent; (v) a "person" shall include any individual, firm, partnership, joint venture, company, corporation, trust, fund, body, corporate, unincorporated body of persons, or any state or any agency of a state or association (whether or not having separate legal personality); (vi) a "regulation" includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, BD-#34696673-v11 18

 
intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organisation; (vii) a “Yard Authorised Signatory" means any person: (A) authorised to execute any document to be delivered pursuant to or in connection with this Agreement on the Yard's behalf; and (B) in respect of whom the Agent has received evidence satisfactory to it of such authority and a specimen signature; (viii) a provision of law is a reference to that provision as it may be amended or re- enacted; and (ix) a time of the day is a reference to Central European Time unless specified otherwise. (b) Section, Clause and Schedule headings are for ease of reference only. (c) Words denoting the singular number shall include the plural and vice versa. (d) Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement. (e) The ejusdem generis rule of construction shall not apply to the Finance Documents and accordingly general words shall not be given a restrictive meaning by reason of their being preceded or followed by words indicating a particular class or examples of acts, matters or things. (f) Unless the contrary intention appears, a reference to a "month" or "months" is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that; (i) (subject to paragraph (iii) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day; (ii) if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and (iii) if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end. The above rules will only apply to the last month of any period. (g) A Default and/or an Event of Default is "continuing" if it has not been remedied or waived. 1.3 Conflicting provisions In case of conflict between this Agreement and the terms of any of the Security Documents, the terms and conditions of this Agreement shall prevail. 1.4 Third party rights (a) Unless expressly provided to the contrary in a Finance Document for the benefit of a Finance Party, a person who is not a party to a Finance Document has no right under BD-#34696673-v11 19

 
the Contracts (Rights of Third Parties) Act 1999 (the "Third Parties Act") to enforce or enjoy the benefit of any term of the relevant Finance Document. (b) Any Finance Document may be rescinded or varied by the parties to it without the consent of any person who is not a party to it (unless otherwise provided by this Agreement). (c) A person who is not a party to a Finance Document may only enforce its rights under that Finance Document through a Finance Party and if and to the extent and in such manner as the Finance Party may determine. 1.5 Finance Documents Where any other Finance Document provides that this Clause 1.5 shall apply to that Finance Document, any other provision of this Agreement which, by its terms, purports to apply to all or any of the Finance Documents and/or any Obligor shall apply to that Finance Document as if set out in it but with all necessary changes. BD-#34696673-v11 20

 
Section 2 - The Facility 2 The Facility 2.1 The Facility Subject to the terms of this Agreement, the Lenders agree to make available to the Borrowers senior secured term loan facilities up to the Total Commitments, which Facilities shall be available for drawdown in up to five (5) Loans, one for each respective Borrower and its respective Vessel, and each Loan shall comprise a Commercial Facility Loan, a KEXIM Facility Loan and a KEXIM Guaranteed Facility Loan which shall be in the Relevant Percentage of such Loan. 2.2 Finance Parties' rights and obligations (a) 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. (b) 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 an Obligor shall be a separate and independent debt in respect of which a Finance Party shall be entitled to enforce its rights in accordance with paragraph (c) below. The rights of each Finance Party include any debt owing to that Finance Party under the Finance Documents and, for the avoidance of doubt, any part of a Loan or any other amount owed by an Obligor which relates to a Finance Party's participation in the Facility or its role under a Finance Document (including any such amount payable to the Agent on its behalf) is a debt owing to that Finance Party by that Obligor. (c) A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents. 2.3 Obligors' agent (a) Each Obligor (other than the Ultimate Parent) by its execution of this Agreement irrevocably appoints the Ultimate Parent to act on its behalf as its agent in relation to the Finance Documents and irrevocably by way of security authorises: (i) the Ultimate Parent on its behalf to supply all information concerning itself contemplated by this Agreement to the Finance Parties and to give all notices and instructions, to make such agreements, to execute such deeds (under hand), and to effect the relevant amendments, supplements and variations capable of being given, made or effected by the Ultimate Parent notwithstanding that they may affect the other Obligors, without further reference to or the consent of the other Obligors; and (ii) each Finance Party to give any notice, demand or other communication to the Obligors pursuant to the Finance Documents to the Ultimate Parent, and in each case the other Obligors shall be bound as though the Ultimate Parent itself had been given the notices and instructions or executed or made the agreements or deeds or effected the amendments, supplements or variations, or received the relevant notice, demand or other communication. (b) Every act, omission, agreement, undertaking, settlement, waiver, amendment, supplement, variation, notice or other communication given or made by the Ultimate Parent or given to the Ultimate Parent under any Finance Document on behalf of the other Obligors or in connection with any Finance Document (whether or not known BD-#34696673-v11 21

 
to any of the other Obligors) shall be binding for all purposes on the other Obligors as if it had expressly made, given or concurred with it. In the event of any conflict between any notices or other communications of the Ultimate Parent and the other Obligors, those of the Ultimate Parent shall prevail. 2.4 Joint and several liability (a) Notwithstanding anything to the contrary herein contained, each Borrower shall be and remain jointly and severally liable with each other Borrower for (i) the payment of each and every sum from time to time due from the Borrowers, (ii) each and every obligation undertaken and (iii) each and every liability incurred on the part of the Borrowers under or pursuant to the Finance Documents. Failure by a Borrower to perform its obligations under this Agreement shall constitute a failure by all of the Borrowers. (b) If at any time a Borrower has paid to the Finance Parties or the Finance Parties have recovered from that Borrower a sum which was due from the Borrowers under or pursuant to the Finance Documents and such sum is higher than the amount that Borrower was obliged to contribute in its relation (if any) with any other Borrower, then that Borrower shall not have the benefit of any right of subrogation and shall not exercise any right of recourse or claim any set-off or counterclaim against any other Borrower or prove otherwise in competition with the Finance Parties (all such rights being hereby irrevocably waived by each Borrower) unless and until the outstanding indebtedness under the Finance Documents has been paid and discharged in full. (c) Each Borrower irrevocably and unconditionally jointly and severally with each other Borrower: (i) agrees that it is responsible for the performance of the obligations of each other Borrower under this Agreement; (ii) acknowledges and agrees that it is a principal and original debtor in respect of all amounts due from the Borrowers under this Agreement; and (iii) agrees with each Finance Party that, if any obligation of another Borrower under this Agreement is or becomes unenforceable, invalid or illegal for any reason it will, as an independent and primary obligation, indemnify that Finance Party immediately on demand against any and all losses it incurs as a result of another Borrower not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by that other Borrower under this Agreement. The amount payable under this indemnity shall be equal to the amount which that Finance Party would otherwise have been entitled to recover. (d) The obligations of each Borrower under the Finance Documents shall continue until all amounts which may be or become payable by the Borrowers under or in connection with the Finance Documents have been irrevocably and unconditionally paid or discharged in full, regardless of any intermediate payment or discharge in whole or in part. (e) If any discharge, release or arrangement (whether in respect of the obligations of a Borrower 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 Borrowers under this Agreement will continue or be reinstated as if the discharge, release or arrangement had not occurred. (f) The obligations of each Borrower under the Finance Documents shall not be affected by an act, omission, matter or thing which, but for this Clause (whether or not known to it or any Finance Party), would reduce, release or prejudice any of its obligations under the Finance Documents including: BD-#34696673-v11 22

 
(i) any time, waiver or consent granted to, or composition with, any Obligor or other person; (ii) the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any other Obligor; (iii) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security; (iv) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person; (v) 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; (vi) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or (vii) any insolvency or similar proceedings. (g) Each Borrower 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 that Borrower under any Finance Document. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary. (h) After cancellation of the Total Commitments in accordance with Clauses 7.3 (Mandatory prepayment – Illegality) or 7.6 (Voluntary cancellation) or the giving of notice under paragraph (a) of Clause 24.17 (Acceleration), then, until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably and unconditionally paid or discharged in full, each Finance Party (or any trustee or agent on its behalf) may: (i) 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 no Borrower will be entitled to the benefit of the same; and (ii) hold in an interest-bearing suspense account any money received from any Borrower or on account of any Borrower's liability under any Finance Document. (i) Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless the Agent otherwise directs (on such terms as it may require), no Borrower shall exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents: (i) to be indemnified by another Obligor; (ii) to claim any contribution from any other Obligor or any guarantor of any Obligor's obligations under the Finance Documents; (iii) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Finance Party; BD-#34696673-v11 23

 
(iv) to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which that Borrower is liable under this Agreement or any of the other Finance Documents; (v) to exercise any right of set-off against any other Obligor; and/or (vi) to claim or prove as a creditor of any other Obligor in competition with any Finance Party. (j) If a Borrower receives any benefit, payment or distribution in relation to such rights it will promptly pay an equal amount to the Agent for application in accordance with Clause 29 (Payment mechanics). This only applies until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full. 2.5 Accordion option (a) Provided that no Default has occurred and is continuing (or will occur as a result of the Accordion Increase (as defined below)) including, without limitation, compliance with Clause 21 (Financial Covenants) and provided further that a Vessel is subject to a charter with a third party, not being a Group Member, for a firm period of five years or more at a minimum time charter rate of $65,000 per day or otherwise on terms acceptable to the Lenders that participate in the Accordion Increase (each, an “Accordion Lender” and collectively the "Accordion Lenders"), the Commercial Facility Majority Lenders and KEXIM, the Borrowers may, subject to: (i) the Lenders obtaining further commitments satisfactory to the Borrowers, which commitments shall be allocated pro-rata as between the relevant Accordion Lenders; and (ii) the Commercial Facility Majority Lenders approving the Accordion Increase (as defined below); (iii) the Accordion Increase (as defined below) becoming effective and to be made available to the Borrowers not later than twelve (12) months after the Drawdown Date relating to the Loan for such Vessel; and (iv) the Borrowers agreeing to any and all amendments to the Finance Documents required by the Agent (acting on the instructions of the Commercial Facility Majority Lenders); increase the Total Commitments and the Total Commercial Facility Commitments (an "Accordion Increase") by an amount of whichever shall be the lesser of: (A) $10,000,000 in respect of such Vessel; and (B) such amount as when aggregated with the Commercial Facility Loan, the KEXIM Facility Loan and the KEXIM Guaranteed Facility Loan relating to such Vessel equals 70% of the Market Value of such Vessel as determined by the most recent valuations delivered to the Agent pursuant to clause 20.3 (Vessels’ Market Value) (the "Additional Commitments"). (b) Without prejudice to any amendments to the Finance Documents required under Clause 2.5(a), the Borrowers shall be required as a condition to making available any Additional Commitments relative to a Vessel to prepay such Additional Commitments if, for whatever reason, the relevant charter shall be terminated, cancelled or otherwise cease to be in full force and effect prior to its scheduled expiry. Any notice issued by the Agent confirming the amount of the required prepayment shall be conclusive and binding on all parties, in the absence of manifest error. BD-#34696673-v11 24

 
(c) The Additional Commitments may be used for the general working capital purposes of the Borrowers. (d) No Lender shall be obliged to provide any Additional Commitments. (e) The Additional Commitments shall be repaid in accordance with Clauses 6.1(b) and 6.1(c). (f) Subject to Clause 2.5(a), the Borrowers may increase the Total Commitments and the Commercial Facility Commitments for the relevant Vessel by delivering an Increase Confirmation to the Agent not later than five (5) Business Days prior to the proposed increase date (the "Increase Date"). An Increase Confirmation is irrevocable. (g) On the Increase Date: (i) the amount of the Additional Commitments of each Accordion Lender will be as set out in the relevant Increase Confirmation; (ii) each of the Obligors and each Lender of Additional Commitments shall assume obligations towards one another and/or acquire rights against one another as they would have acquired or assumed had each Lender of Additional Commitments been an Original Commercial Facility Lender with the rights and obligations acquired and assumed by it as a result of providing its Additional Commitments; and (iii) unless otherwise agreed by the Parties, the Additional Commitments shall, from the Increase Date, form part of the Commercial Facility Loan relating to the relevant Vessel. 3 Purpose 3.1 Purpose The Borrowers shall apply all amounts borrowed by it under the Facilities towards the part financing of the Vessels and, in the case of the KEXIM Guaranteed Facility, financing the cost of the KEXIM Guarantee Premium. 3.2 Monitoring Without prejudice to the obligations of the Borrowers under this Clause 3, no Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement. 4 Conditions Precedent 4.1 Initial conditions precedent (a) The signing and effectiveness of this Agreement is conditional upon the Agent having received all of the documents and other evidence listed in Part I of Schedule 2 (Conditions precedent - Signing) in form and substance satisfactory to the Agent. The Agent shall notify the Borrowers and the Lenders promptly upon being so satisfied. (b) The Borrowers may not deliver a Drawdown Notice unless the Agent has received all of the documents and other evidence listed in Part II of Schedule 2 (Conditions precedent – Drawdown Notice) in form and substance satisfactory to the Agent. The Agent shall notify the Borrowers and the Lenders promptly upon being so satisfied. BD-#34696673-v11 25

 
(c) The Borrowers shall procure that the Agent has received all of the documents and other evidence listed in Part III of Schedule 2 (Conditions precedent – Delivery Date) in form and substance satisfactory to the Agent latest on the relevant Delivery Date. (d) 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 paragraphs (a), (b) and (c) above, 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 notifications. 4.2 Further conditions precedent The Lenders will only be obliged to comply with Clause 5.4 (Lenders' participation) if on the date of a Drawdown Notice and on the proposed Drawdown Date: (a) no Default is continuing or would result from the proposed drawing; and (b) the Repeating Representations contained in Clause 19 (Representations and warranties) deemed to be repeated on those dates are true and correct in all material respects; (c) no KEXIM Mandatory Prepayment Event has occurred or would result from the proposed Loan; (d) the KEXIM Agent has not received a notice from KEXIM requesting that further advances be suspended or terminated under this Agreement (unless such notice has been withdrawn by KEXIM); and (e) the full amount of any outstanding KEXIM Guarantee Premium has been, or will on the relevant Drawdown Date be, paid. 4.3 Maximum number of drawings The Facility may be drawn in five (5) Loans only during the Availability Period, one in respect of each Borrower and its Vessel. 4.4 Waiver of conditions precedent The conditions precedent specified in this Clause 4 are solely for the benefit of the Lenders and may be waived on their behalf in whole or in part and with or without conditions by the Agent (acting on the instructions of all the Lenders). BD-#34696673-v11 26

 
Section 3 - Drawdown 5 Drawdown 5.1 Delivery of a Drawdown Notice The Borrowers may utilise the Facilities by delivering to the Agent a duly completed Drawdown Notice no later than 11:00 hours four (4) Business Days prior to the proposed Drawdown Date. 5.2 Completion of the Drawdown Notice Each Drawdown Notice is irrevocable and will not be regarded as having been duly completed unless: (a) it identifies the Borrower, and the Vessel to which the proposed Loan relates; (b) it identifies the purpose of the proposed Loan, being in accordance with Clause 3.1 (Purpose); (c) the proposed Drawdown Date is a Business Day within the Availability Period; (d) subject to Clause 5.5 (Closing mechanics), the proposed Drawdown Date is also the Delivery Date of the relevant Vessel; (e) the currency specified is USD; (f) the amount of the proposed Loan is an amount not exceeding the applicable Maximum Loan Amount, as determined by the Market Value of the relevant Vessel established not more than four (4) weeks prior to the proposed Drawdown Date; (g) the aggregate of any Loan drawn down and the amount of the proposed Loan, does not exceed the Commitment for the relevant Vessel identified in Schedule 7 (Vessels); (h) the proposed Loan comprises a Commercial Facility Loan, a KEXIM Facility Loan and KEXIM Guaranteed Facility Loan, each in the Relevant Percentage of such Loan; and (i) the proposed Interest Period complies with Clause 9 (Interest Periods). 5.3 Availability Any amount of the Total Commitments which, at that time, has not been utilised shall automatically be cancelled at the close of business in Oslo on the expiry of the Availability Period. 5.4 Lenders' participation (a) Upon receipt of a Drawdown Notice, the Agent shall notify each Lender of the details of the requested drawing and the amount of each Lender's participation not later than 11.00 hours on the day falling three (3) Business Days before a Drawdown Date. (b) If the conditions set out in this Agreement have been met, each Lender shall no later than 11:00 hours on a Drawdown Date make available to the Agent for the account of the relevant Borrower an amount equal to its participation in the drawing to be advanced pursuant to a Drawdown Notice. BD-#34696673-v11 27

 
5.5 Closing mechanics Subject to (i) an agreed closing procedure, (ii) conditions for release and return of funds, and (iii) relevant undertakings not to trigger release prior to the Agent's written consent, all to the satisfaction of the Agent (acting on the instruction of the Lenders, in their sole discretion) prior to issue of the Drawdown Notice, the Drawdown Date may be prior to the Delivery Date in order to facilitate pre-positioning of funds with the relevant Yard's bank and/or with the relevant Intermediate Buyer’s bank. 5.6 Notice to KEXIM as guarantor The Agent shall promptly after each Drawdown Notice notify the KEXIM Agent of the amount of the relevant Loan and of the relevant Drawdown Date and the KEXIM Agent shall then notify KEXIM as guarantor of the same. BD-#34696673-v11 28

 
Section 4 - Repayment, Prepayment and Cancellation 6 Repayment 6.1 Repayment (a) To the extent not previously reduced, the Borrowers shall repay each Loan as follows: (i) the Commercial Facility Loan (excluding any Additional Commitments) forming part of such Loan shall be repaid in one payment on the Final Maturity Date relating to the Commercial Facility; (ii) subject to clause 6.1(a)(v), the KEXIM Facility Loan forming part of such Loan shall, for the first six (6) years, be repaid in equal semi-annual consecutive instalments, based on a 3006 year linear repayment profile, and for the following six (6) years shall be repaid in twelve (12) equal semi-annual consecutive instalments to zero; (iii) subject to clause 6.1(a)(v), the KEXIM Guaranteed Facility Loan forming part of such Loan shall be repaid in twelve (12) equal semi-annual consecutive instalments to zero; (iv) subject to clause 6.1(a)(v), the combined repayment profile of the KEXIM Facility Loan and the KEXIM Guaranteed Facility Loan shall be a twelve (12)-year profile in equal semi-annual consecutive instalments to zero; and (v) the first instalment of the KEXIM Facility Loan and the KEXIM Guaranteed Facility Loan forming part of the first Loan to be made available shall be due and payable on the date falling six months after the first Drawdown Date and each subsequent instalment shall be due on each of the dates falling six monthly thereafter; the first pro-rated instalment for the KEXIM Facility Loan and the KEXIM Guaranteed Facility Loan forming part of any later Loan shall be due on the same date upon which the next instalment shall fall due in respect of the KEXIM Facility Loan and the KEXIM Guaranteed Facility Loan forming part of the first such Loan in order that the instalment dates for each Loan shall be consolidated. (b) To the extent not previously reduced, the Borrowers shall repay each Commercial Facility Loan relating to the Additional Commitments on a twenty (20)-year profile over a repayment period ending on the Final Maturity Date relating to the Commercial Facility in equal semi-annual consecutive instalments (other than the final such instalment which shall be the balance of such Commercial Facility Loan which would, but for this clause, have been repaid between the Final Maturity Date relating to the Commercial Facility and the expiry of such twenty (20)-year period). (c) An illustrative repayment schedule is set out in Schedule 8 (Repayment Schedule), based on the assumption of full utilisation of the Total Commitments. The Agent shall provide an updated repayment schedule prior to each Drawdown Date, reflecting the final amount of each Loan and its Drawdown Date. 6.2 No re-borrowing The Borrowers may not re-borrow any part of a Loan which is repaid. 6.3 Final repayment Notwithstanding Clause 6.1 (Repayment), on the Final Maturity Date, the Borrowers shall repay the relevant Loans then outstanding under this Agreement in full, together with all other sums due and outstanding under the Finance Documents at such date (if any). BD-#34696673-v11 29

 
7 Prepayment and Cancellation 7.1 Mandatory prepayment – Collateral Maintenance Test (a) The aggregate Market Value of the Vessels shall at all times be minimum one hundred and thirty per cent. (130%) of the Loans outstanding (the "Collateral Maintenance Test"). (b) If there is a breach of the Collateral Maintenance Test, the Borrowers shall within fourteen (14) days of the occurrence of such breach either: (i) post additional collateral reasonably satisfactory to the Majority Lenders in favour of the Security Agent (it being understood that cash in USD placed in a pledged and blocked account shall be satisfactory to the Majority Lenders), pursuant to security documentation in form and substance reasonably satisfactory to the Agent, in an aggregate amount sufficient to cure such breach; or (ii) prepay the Loans by an amount necessary to cure such breach. 7.2 Mandatory prepayment – Total Loss or sale (a) For the purpose of this Clause 7.2, the following definitions shall apply: "Disposal Date" means: (i) in case of a sale or other disposal of a Vessel, the date on which the sale or other disposal is completed by delivery of the Vessel to the buyer; (ii) in case of a sale or other disposal of all shares in a Borrower, the date of transfer of such shares from the Intermediate Parent to the buyer; or (iii) in the case of a Total Loss, on the earlier of (i) the date falling one hundred and eighty (180) days after the Total Loss Date and (ii) the receipt by the Agent (on behalf of the Lenders) of the proceeds of Insurance relating to such Total Loss (or in the event of a requisition for title of the Vessel, immediately after the occurrence of such requisition of title). (b) If a Vessel is sold or otherwise disposed of, or it becomes a Total Loss, or all shares in a Borrower are sold or otherwise disposed of, the respective Borrower shall be obliged to prepay the Loan related to such Vessel in full, together with accrued interest, and settle all costs and fees, and all outstanding amounts under Hedging Agreements, related to such Loan on the Disposal Date and any undrawn Commitment under the Facility available for the financing of such Vessel shall be cancelled on the Disposal Date. 7.3 Mandatory prepayment – Illegality If it becomes unlawful in any applicable jurisdiction (including by virtue of the introduction of, or any change in the interpretation or application of, any regulation) or contrary to, or declared by any Sanctions Authority to be contrary to, Sanctions (including, without limitation, due to actions by any Obligor) for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in a Loan: (a) that Lender is entitled, at is discretion, at any time to notify the Agent upon becoming aware of that event; (b) upon the Agent notifying the Borrowers, the Commitment of that Lender will be immediately cancelled; and (c) the Borrowers shall repay that Lender's participation in the Loan on the Interest Payment Date occurring after the Agent has notified the Borrowers or, if earlier, the BD-#34696673-v11 30

 
date specified by that Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law). 7.4 Mandatory prepayment – Change of Control Upon the occurrence of a Change of Control any Lender may cancel its Commitments, and declare that its participation in any Loan, together with accrued interest, costs and fees shall be due and payable. Such notice shall be given by the relevant Lender(s) to the Agent, and upon the Agent notifying the Borrowers, such Commitments will be immediately cancelled and such outstanding part of any Loan and other amounts will become due and payable by the Borrower(s) within 20 Business Days of such notice. The Borrowers shall promptly notify the Agent upon becoming aware of a Change of Control. 7.5 Voluntary prepayment The Borrowers may, if they give the Agent not less than ten (10) Business Days' (or such shorter period as the Majority Lenders may agree) prior written notice, prepay the whole or any part of a Loan (but if in part, being an amount of minimum USD 5,000,000 or in integral multiples thereof and which shall be applied against each of the Commercial Facility Loan, the KEXIM Facility Loan and KEXIM Guaranteed Facility Loan forming part of such Loan on a pro rata basis). A prepayment fee of 0.5% shall be paid by the Borrowers on any amount of a KEXIM Facility Loan which is prepaid, provided that the KEXIM Facility Lenders may, but shall not be obliged to, waive such prepayment fee if such prepayment occurs on the Interest Payment Date of such KEXIM Facility Loan(s). 7.6 Voluntary cancellation The Borrowers may, if they give the Agent not less than ten (10) Business Days' (or such shorter period as the Majority Lenders may agree) prior written notice, cancel the whole or any part of the Available Commitments (but if in part being a minimum amount of USD 5,000,000 or in integral multiples thereof and which shall be applied against each of the Commercial Facility Loan, the KEXIM Facility Loan and KEXIM Guaranteed Facility Loan forming part of such Loan on a pro rata basis). Any cancellation under this Clause 7.6 shall reduce the Commitments of the Lenders rateably. 7.7 Right of repayment in relation to a single Lender (a) If: (i) any sum payable to any Lender by the Borrowers is required to be increased under paragraph (c) of Clause 12.2 (Tax gross-up); or (ii) 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 of that Lender and its intention to procure the repayment of that Lender's participation in the Loans. (b) On receipt of a notice of cancellation referred to in paragraph (a) above, the Commitment of that Lender shall immediately be reduced to zero. (c) On the last day of each Interest Period which ends after the Borrowers have given notice of cancellation under paragraph (a) above (or, if earlier, the date specified by the Borrowers in that notice), the Borrowers shall repay that Lender's participation in the Loans together with all interest and other amounts accrued under the Finance Documents. BD-#34696673-v11 31

 
7.8 KEXIM Guarantee If, for any reason whatsoever, a KEXIM Mandatory Prepayment Event occurs, the Borrowers or the relevant Finance Party shall promptly notify the KEXIM Agent upon any Obligor or such Finance Party (as applicable) becoming aware of such KEXIM Mandatory Prepayment Event following which the Borrowers shall, if instructed by the KEXIM Agent (acting on the instructions of a KEXIM Guaranteed Facility Lender), prepay the portion of the KEXIM Guaranteed Facility Loans attributable to such KEXIM Guaranteed Facility Lender, together with any other amounts owing to such KEXIM Guaranteed Facility Lender relating to such KEXIM Guaranteed Facility Loans under this Agreement and the Finance Documents within 30 Business Days' of receipt of the KEXIM Agent's notice. 7.9 Commercial Facility If, by the date falling 30 days prior to the Final Maturity Date in respect of the Commercial Facility Loans, the Commercial Facility Loans (a) have not been extended or (b) have not been replaced by another loan facility on terms and with lenders satisfactory to the KEXIM Facility Lenders and the KEXIM Guaranteed Facility Lenders, the Borrowers shall, if instructed by the KEXIM Agent (acting on the instruction of a KEXIM Guaranteed Facility Lender or KEXIM), prepay the KEXIM Facility Loans and the KEXIM Guaranteed Facility Loans, together with any other amounts owing to the KEXIM Facility Lenders and the KEXIM Guaranteed Facility Lenders under this Agreement and the other Finance Documents on the Final Maturity Date in respect of the Commercial Facility Loans. 7.10 Terms and conditions for prepayments and cancellation (a) Any notice of prepayment or cancellation by the Borrowers under this Clause 7 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date upon which the prepayment or cancellation is to be made. (b) Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty. (c) The Borrowers may not re-borrow any part of the Facility which is prepaid. (d) The Borrowers shall not repay or prepay all or any part of the Loans or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement. (e) No amount of the Total Commitments cancelled under this Agreement may subsequently be reinstated. (f) If the Agent receives a notice under this Clause 7 it shall promptly forward a copy of that notice to the Borrowers or the Lenders, as appropriate. 7.11 Application of prepayments Unless otherwise provided for in this Clause 7, prepaid amounts shall be applied as follows: (a) any mandatory prepayment under this Agreement shall, to the extent not prepaying a single Loan in full, be applied in inverse order of maturity against the remaining instalments, including balloon payments, pro rata between the Loans under the Facility, and shall, save as otherwise stated, reduce rateably each Lender's participation in the Loan(s) prepaid; and (b) any voluntary prepayment under this Agreement shall be applied pro rata across the repayment schedule, including the balloon, for the relevant Loan(s) being prepaid, including any balloon, and shall, save as otherwise stated, reduce rateably each Lender's participation in the Loan(s) prepaid. BD-#34696673-v11 32

 
Section 5 - Costs of Utilisation 8 Interest 8.1 Calculation of interest The rate of interest for a Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable: (a) Margin; and (b) LIBOR. 8.2 Payment of interest The Borrowers shall pay accrued interest on each Loan (or on any Commercial Facility Loan, KEXIM Facility Loan or KEXIM Guaranteed Facility Loan comprising part of such Loan) on the last day of each Interest Period (and, if an Interest Period in respect of a Commercial Facility Loan is longer than six months, on the dates falling at six monthly intervals after the first day of that Interest Period). 8.3 Default interest (a) If an Obligor fails to pay any amount payable by it under the Finance Documents on its due date, interest shall accrue on the overdue amount from the due date and up to the date of actual payment (both before and after judgment) at a rate determined by the Agent to be two percentage points (2.00%) per annum higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a 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 relevant Obligor on demand by the Agent. (b) 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. (c) If an Event of Default has occurred and is continuing, and notice thereof has been sent from the Agent to the Borrowers under Clause 24.17(b) (Acceleration), all outstanding amounts under the Facility shall be deemed overdue and default interest will be calculated and is payable forthwith upon demand from the Agent. 9 Interest Periods 9.1 Selection of Interest Periods (a) The Borrowers may select an Interest Period for a Loan in a Drawdown Notice or (if one or more Loans have already been borrowed and in the case of the Commercial Facility Loans only) in a Selection Notice. (b) Each Selection Notice is irrevocable and must be received by the Agent not later than 12:00 hours three (3) Business Days before the Quotation Day for that Interest Period. (c) If, in the case of Commercial Facility Loans, the Borrowers fail to deliver a Selection Notice to the Agent in accordance with paragraph (b) above, the relevant Interest Period will be six (6) months. (d) Subject to Clause 9.1(e), the first Interest Period shall start on the first Drawdown Date. The first Interest Period for the second or any later Loan shall start on the BD-#34696673-v11 33

 
relevant Drawdown Date and end on the last day of the then current Interest Period for the balance of the Loan which has previously been drawn and each subsequent Interest Period shall start on the day following the last day of the previous Interest Period. (e) The Borrowers may, in respect of the Commercial Facility Loans only, select an Interest Period of one (1), three (3) or six (6) months or such other period agreed between the Borrowers and the Agent (on behalf of the Lenders) in the case of Commercial Facility Loans only, however the Borrower may only select a maximum of three (3) one (1) month periods per year. In respect of KEXIM Facility Loans and KEXIM Guaranteed Facility Loans, Interest Periods may only be six (6) months or any other period agreed between the Borrowers and the Agent (acting on the instruction of the Lenders, and in respect of KEXIM Guaranteed Facility Loans, also KEXIM as guarantor). For the avoidance of doubt at all times following the first Drawdown Date, Interest Periods for (i) all Commercial Facility Loans and (ii) all KEXIM Facility Loans and KEXIM Guaranteed Facility Loans, shall be consolidated. (f) An Interest Period shall not extend beyond the Final Maturity Date, but shall be shortened so that it ends on the Final Maturity Date relating to it. 9.2 Non-Business Day 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 Market disruption (a) If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Lender's share of that Loan for the Interest Period shall be the rate per annum which is the sum of: (i) the Margin; and (ii) the rate notified to the Agent by that Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in the Loan from whatever source it may reasonably select. (b) In this Agreement, "Market Disruption Event" means: (i) at or about 12:00 hours on the Quotation Day for the relevant Interest Period, LIBOR is not available; or (ii) before close of business in the London interbank market on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in the Loans exceed fifty per cent (50.00%) of the Loans) that the cost to it or them of obtaining matching deposits in the London interbank market would be in excess of LIBOR. 10.2 Alternative basis of interest or funding (a) If a Market Disruption Event occurs and the Agent or the Borrowers so requires, the Agent and the Borrowers shall enter into negotiations (for a period of not more than thirty (30) days) with a view to agreeing a substitute basis for determining the rate of interest. BD-#34696673-v11 34

 
(b) Any alternative basis agreed pursuant to this Clause 10.2 shall, with the prior consent of all the Lenders and the Borrowers, be binding on all Parties. 10.3 Break Costs (a) The Borrowers shall, within three (3) Business Days of demand by a Finance Party, pay to that Finance Party its Break Cost attributable to all or any part of a Loan or Unpaid Sum being paid by the Borrowers on a day other than the last day of an Interest Period for the Loan or Unpaid Sum. (b) Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Cost for any Interest Period in which they accrue. 11 Fees 11.1 Commitment fee (a) The Borrowers shall pay to the Agent (for the account of each Lender) a fee in USD computed at a rate per annum equal to 40% of the Margin, calculated on each Lender's Available Commitment, from the date of this Agreement to the earlier of: (i) the expiry of the Availability Period; or (ii) the date on which the Facilities have been fully drawn or cancelled in whole. (b) The accrued commitment fee is payable semi-annually in arrears on the last day of each fiscal half-year and on the last day of the Availability Period or such other date upon which the Facility is fully drawn or cancelled in whole or, in respect of any part cancellation, on the cancelled amount on the date the cancellation is effective. 11.2 Arrangement fee The Borrowers shall pay to Agent (for further distribution to the Arrangers) an arrangement fee in the amount and at the times agreed in a Fee Letter. 11.3 Agency fee The Borrowers shall pay to the Agent (for its own account) an agency fee in the amount and at the times agreed in a Fee Letter. 11.4 KEXIM Guarantee Premium (a) The Borrowers acknowledge that the KEXIM Guaranteed Facility Lenders shall procure the issuance of the KEXIM Guarantee either through the KEXIM Agent or directly with KEXIM as guarantor and shall benefit from it throughout the duration of the Security Period. The Borrowers agree to pay to the KEXIM Agent (for the account of KEXIM as guarantor) the KEXIM Guarantee Premium applicable to each KEXIM Guaranteed Facility Loan on or prior to the Drawdown Date in respect of such KEXIM Guaranteed Facility Loan. (b) The Borrowers agree that their obligation to make the payments set out in this Clause 11.4 to the KEXIM Agent in respect of the KEXIM Guarantee (or any part thereof) shall be an absolute obligation and shall not be affected by any matter whatsoever. The KEXIM Guarantee Premium (or any part thereof) shall not be refundable except in accordance with the terms of the KEXIM Guarantee and KEXIM as guarantor's internal regulations. (c) The Borrowers acknowledge that the amount of the KEXIM Guarantee Premium will be solely determined by KEXIM as guarantor and no Lender is in any way involved in the determination of the amount of any KEXIM Guarantee Premium and agrees that BD-#34696673-v11 35

 
the Borrowers shall have no claim or defence against any Lender in connection with the amount of the KEXIM Guarantee Premium. BD-#34696673-v11 36

 
Section 6 - Additional Payment Obligations 12 Tax Gross-up and Indemnities 12.1 Definitions (a) 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 or the KEXIM Guarantee and KEXIM as guarantor. "Qualifying Lender" means a Lender which is beneficially entitled to interest payable to it in respect of a Loan under a Finance Document and, in relation to a Borrower is: (i) a Lender which is resident for tax purposes in a Borrower's Tax Jurisdiction and to whom interest may be paid by that Borrower without a Tax Deduction under the domestic laws of that Borrower's Tax Jurisdiction; or (ii) a Treaty Lender. "Tax Confirmation" means a confirmation by a Lender that it is beneficially entitled to interest payable to it in respect of an advance under a Finance Document specifying: (i) its Tax Jurisdiction; (ii) whether the Lender believes it is a Treaty Lender in relation to a Borrower; and (iii) such other relevant details as may be reasonably requested by the Borrowers or the Agent "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 or the KEXIM Guarantee, other than a FATCA Deduction. "Tax Jurisdiction" means, in relation to a Borrower, the jurisdiction in which it is resident for tax purposes from time to time. "Tax Payment" means either the increase in a payment made by an Obligor to a Finance Party under Clause 12.2 (Tax gross-up) or a payment under Clause 12.3 (Tax indemnity). "Treaty Lender" means, in relation to a Borrower, a Lender which is treated as resident in a jurisdiction that has a double taxation agreement (a "Treaty") with the Borrowers' Tax Jurisdiction which gives such resident full exemption from tax imposed by the Borrowers' Tax Jurisdiction on interest. (b) 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 (a) Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law. BD-#34696673-v11 37

 
(b) The Borrowers shall promptly upon becoming aware that an Obligor 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 that Obligor. (c) If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required. (d) Subject to paragraph (iii) below, a payment shall not be increased under paragraph (c) above by reason of a Tax Deduction if on the date on which the payment falls due: (i) the payment could have been made to the relevant Lender without a Tax Deduction if the Lender had been a Qualifying Lender in respect of that Obligor, but on that date that Lender is not or has ceased to be a Qualifying Lender in respect of that Obligor other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty or any published practice or published concession of any relevant authority; or (ii) the relevant Lender is a Treaty Lender and the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without the Tax Deduction had that Lender complied with its obligations under paragraph (g) below, (iii) it is acknowledged that as at the date of this Agreement none of the Lenders are a Qualifying Lender and it is hereby agreed that if a Lender shall at any time become a Qualifying Lender, the Parties shall consult in good faith for a period of not less than 30 days regarding any amendments that should be made to this Clause to reflect the principle that, subject to any applicable obligations on such a Lender under Clauses 12.2(g) or 15.1(a), the Lenders are expected to be able to receive payments under the Finance Documents either without a Tax Deduction or with Clause 12.2(c) being applicable. (e) If an Obligor is required to make a Tax Deduction, that Obligor 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. (f) Within thirty (30) days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party 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. (g) A Treaty Lender and each Obligor which makes a payment to which that Treaty Lender is entitled shall co-operate in completing any procedural formalities necessary for that Obligor to obtain authorisation to make that payment without a Tax Deduction. (h) A Lender shall promptly provide a Tax Confirmation to the Agent when it becomes a party to this Agreement and the Agent shall promptly send the Tax Confirmation it receives to the Borrowers. The Agent may request a Lender to provide a Tax Confirmation in a specific format. A Lender shall promptly notify the Borrowers and the Agent if there is any change in the position from that set out in the Tax Confirmation. BD-#34696673-v11 38

 
12.3 Tax indemnity (a) The Borrowers shall (within three (3) 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 or the KEXIM Guarantee. (b) Paragraph a) above shall not apply: (i) with respect to any Tax assessed on a Finance Party: (A) 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 (B) 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 (ii) to the extent a loss, liability or cost: (A) is compensated for by an increased payment under Clause 12.2 (Tax gross- up); or (B) would have been compensated for by an increased payment under Clause 12.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 12.2 (Tax gross-up) applied; or (C) relates to a FATCA Deduction required to be made by a Party. (c) A Protected Party making, or intending to make, a claim under paragraph a) above 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. (d) A Protected Party shall, on receiving a payment from an Obligor under this Clause 12.3, notify the Agent. 12.4 Tax Credit If an Obligor makes a Tax Payment and the relevant Finance Party determines that: (a) a Tax Credit is attributable to an increased payment of which that Tax Payment forms part, to that Tax Payment or to a Tax Deduction in consequence of which that Tax Payment was required; and (b) that Finance Party has obtained and utilised that Tax Credit, the Finance Party shall pay an amount to the Obligor 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 required to be made by the Obligor. 12.5 Stamp taxes (a) The Borrowers shall pay and, within three (3) Business Days of demand, indemnify each Finance Party and/or KEXIM as guarantor against any cost, loss or liability that Finance Party and/or KEXIM as guarantor incurs in relation to all stamp duty, BD-#34696673-v11 39

 
registration and other similar Taxes payable in respect of any Finance Document or the KEXIM Guarantee. (b) The relevant Finance Party shall, if it intends to make a claim pursuant to paragraph (a) above, promptly notify the Borrowers of the event giving rise to the claim and shall as soon as practicable, provide a certificate confirming the amount of the claim. 12.6 VAT All amounts set out, or expressed to be payable under a Finance Document by any Party to a Finance Document shall be deemed to be exclusive of any VAT. If VAT is chargeable, the Borrowers shall pay to the Agent for the account of such Finance Party (in addition to the amount required pursuant to the Finance Documents) an amount equal to such VAT. 12.7 FATCA Information (a) Subject to paragraph (c) below, each Party shall, within ten (10) Business Days of a reasonable request by another Party: (i) confirm to that other Party whether it is: (A) a FATCA Exempt Party; or (B) not a FATCA Exempt Party; (ii) supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party's compliance with FATCA; and (iii) supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party's compliance with any other law, regulation, or exchange of information regime. (b) If a Party confirms to another Party pursuant to paragraph (a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly. (c) Paragraph a) above shall not oblige any Finance Party to do anything, and paragraph (a)(iii) above shall not oblige any other Party to do anything, which would or might in its reasonable opinion constitute a breach of: (i) any law or regulation; (ii) any fiduciary duty; or (iii) any duty of confidentiality. (d) If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with paragraph a)(i) or (ii) above (including, for the avoidance of doubt, where paragraph c) above applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information. 12.8 FATCA Deduction (a) Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall BD-#34696673-v11 40

 
be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction. (b) Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment 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 (a) Subject to Clause 13.3 (Exceptions) the Borrowers shall, within three (3) Business Days of a demand by the Agent, pay for the account of a Finance Party or KEXIM as guarantor the amount of any Increased Costs incurred by that Finance Party or KEXIM as guarantor 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 made after the date of this Agreement; (ii) compliance with any law or regulation made after the date of this Agreement; (iii) the implementation or application of, or compliance with, Basel III, CRD IV or CRR; or (iv) the implementation or application of, or compliance with, IFRS 9 or any other changes in relevant reporting standards, (b) In this Agreement: "Basel III" means: (i) 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; (ii) 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 (iii) any further guidance or standards published by the Basel Committee on Banking Supervision relating to "Basel III". "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 Directive 2006/48/EC and 2006/49/EC. "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. BD-#34696673-v11 41

 
"IFRS 9" means the International Financial Reporting Standard (IFRS) by the International Accounting Standards Board (IASB) designated as "IFRS 9" and replacing IAS 39. "Increased Costs" means: (i) a reduction in the rate of return from the Facility or on a Finance Party's (or its Affiliate's) overall capital; (ii) an additional or increased cost; or (iii) 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 its Commitment or funding or performing its obligations under any Finance Document. 13.2 Increased cost claims (a) 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. (b) Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs, and the Agent shall promptly forward such certificate to the Borrowers. 13.3 Exceptions (a) Clause 13.1 (Increased Costs) does not apply to the extent any Increased Cost is: (i) attributable to a Tax Deduction required by law to be made by an Obligor; (ii) compensated for by Clause 12.2 (Tax Indemnity) (or would have been compensated for under Clause 12.2 (Tax Indemnity) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 12.2 (Tax Indemnity) applied); (iii) attributable to a FATCA Deduction required to be made by a Party; (iv) 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 ("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); (v) attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation. (b) In this Clause 13.3, a reference to "Tax Deduction" has the same meaning given to that term in Clause 12.1 (Definitions). 14 Other Indemnities 14.1 Currency indemnity (a) If any sum due from an Obligor under the Finance Documents or the KEXIM Guarantee (a "Sum"), or any order, judgement or award given or made in relation to a Sum, has to be converted from the currency (the "First Currency") in which BD-#34696673-v11 42

 
that Sum is payable into another currency (the "Second Currency") for the purpose of: (i) making or filing a claim or proof against that Obligor; (ii) obtaining or enforcing an order, judgement or award in relation to any litigation or arbitration proceedings, that Obligor shall as an independent obligation, within three (3) Business Days of demand, indemnify each Finance Party and/or KEXIM as guarantor 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 person at the time of its receipt of that Sum. (b) Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents or the KEXIM Guarantee in a currency or currency unit other than that in which it is expressed to be payable. 14.2 Sanctions indemnity Each Obligor shall, on demand, indemnify each Finance Party and/or KEXIM as guarantor against any cost, loss or liability incurred by it as a result of any claim, action, civil penalty or fine against, any settlement, and any other kind of loss or liability, and all reasonable costs and expenses (including reasonable counsel fees and disbursements) incurred by the Agent or any Lender and/or KEXIM as guarantor as a result of conduct of any Obligor or any of their directors, officers, employees, that violates any Sanctions Laws. 14.3 Other indemnities The Borrowers shall (or shall procure that an Obligor will) within three (3) Business Days of demand, indemnify each Finance Party and/or KEXIM as guarantor against any costs, loss or liability incurred by that Finance Party and/or KEXIM as guarantor as a result of: (a) the occurrence of any Event of Default; (b) a failure by an Obligor to pay any amount due under the Finance Documents 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) the funding, or making arrangements to fund, its participation in a Loan requested by the Borrowers in a Drawdown Notice but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Lender alone); (d) (under or pursuant to the KEXIM Guarantee) any duly evidenced and properly incurred additional premiums, cost or expense as provided for under the KEXIM Guarantee which KEXIM as guarantor may charge, invoice or set-off against amounts owing to the KEXIM Agent or the KEXIM Guaranteed Facility Lenders or otherwise properly incurred by the KEXIM Agent, the Lenders and/or KEXIM as guarantor in connection with compliance with the KEXIM Guarantee; or (e) a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given by the Borrowers. 14.4 Indemnity to the Agent and the KEXIM Agent The Borrowers shall promptly indemnify the Agent and the KEXIM Agent against any cost, loss or liability incurred by the Agent or the KEXIM Agent (acting reasonably) as a result of: (a) investigating any event which it reasonably believes is a possible Event of Default; BD-#34696673-v11 43

 
(b) acting or verifying any notice, request or instruction which it reasonably believes to be genuine, correct or appropriately authorised; or (c) instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under this Agreement. 14.5 Indemnity to the Security Agent (a) The Borrowers shall promptly indemnify the Security Agent against any cost, loss or liability incurred by it as a result of: (i) the taking, holding, protection or enforcement of the Security Documents or any other Finance Documents, (ii) the exercise of any of the rights, powers, discretions and remedies vested in the Security Agent by the Finance Documents or by law; or (iii) any default by an Obligor in the performance of any of the obligations expressed to be assumed by it in the Finance Documents. (b) The Security Agent may, in priority to any payment to the Finance Parties, indemnify itself out of the Trust Property in respect of, and pay and retain, all sums necessary to give effect to the indemnity in this Clause 14.5 and shall have a lien on the Security Documents and the proceeds of the enforcement of the Security Documents for all monies payable to it. 15 Mitigation by the Lenders 15.1 Mitigation (a) Each Finance Party shall, in consultation with the Borrowers, take all reasonable steps (for a period of fifteen (15) Business Days) to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of: (i) Clause 7.3 (Mandatory prepayment – Illegality); (ii) Clause 12 (Tax gross-up and indemnities); and (iii) Clause 13 (Increased Costs), including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate. (b) Paragraph (a) does not in any way limit the obligations of any Obligor under the Finance Documents. 15.2 Limitation of liability (a) The Borrowers shall promptly indemnify each Finance Party for all costs and expenses reasonably and properly incurred by that Finance Party as a result of steps taken by it under Clause 15.1 (Mitigation). (b) A Finance Party is not obliged to take any steps under this Clause 15.1 if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it. BD-#34696673-v11 44

 
16 Costs and Expenses 16.1 Transaction expenses The Borrowers shall promptly on demand pay to the Agent (for distribution to the relevant Finance Party or KEXIM as guarantor) the amount of all costs and expenses (including legal fees) reasonably and properly incurred by any of them in connection with the negotiation, preparation, printing, perfection, execution, registration and syndication of: (a) this Agreement and any other documents referred to in this Agreement (including the KEXIM Guarantee); and (b) any other Finance Documents executed after the date of this Agreement. 16.2 Amendment and enforcement costs, etc The Borrowers shall, within three (3) Business Days of demand, reimburse the Agent or another Finance Party or KEXIM as guarantor for the amount of all costs and expenses (including internal and external legal fees) reasonably and properly incurred by it in connection with: (a) the granting of any release, waiver or consent under the Finance Documents; (b) any amendment or variation of any of the Finance Documents; and (c) the preservation, protection, enforcement or maintenance of, or attempt to preserve or enforce, any of the rights of the Finance Parties under the Finance Documents or the KEXIM Guarantee. BD-#34696673-v11 45

 
Section 7 - Guarantee and Security 17 Guarantee and Indemnity 17.1 Guarantee and indemnity Each Guarantor hereby irrevocably and unconditionally guarantees to the Security Agent (as trustee for the Finance Parties) and the other Finance Parties, as primary obligors as and for its own debt and not merely as surety to each Finance Party, on a joint and several basis with the other Guarantor: (a) the due and punctual payment by the Borrowers of any and all sums which are now or at any time hereafter will be payable by the Borrowers under or in respect of the Finance Documents in accordance with the terms and provisions thereof (including, without limitation, principal, interest, default interest, legal fees and other fees, Break Costs, transaction and enforcement costs and any other costs, expenses, Taxes and Tax indemnities, currency indemnities and any other indemnities, claims for damages and any other costs and expenses in respect of any Event of Default or any other breach by the Borrowers under the Finance Documents); (b) the due and punctual performance by the Borrowers of all of the Borrowers' obligations under or in respect of the Finance Documents; and (c) to indemnify each Finance Party immediately upon the Agent's first written demand against any loss, liability, costs and expenses suffered, incurred or paid by that Finance Party if any obligation of the Borrowers is or becomes unenforceable, invalid or illegal (such amounts together referred to as the "Outstanding Indebtedness"). 17.2 Payment upon first demand If any Borrower shall fail to pay any sum under the Finance Documents as and when such sum shall become due and payable, each Guarantor shall immediately upon the Agent's first written demand pay to the Agent for the account of the relevant Finance Party an amount equal to such sum which the Borrowers shall not have paid, such payment to be made in immediately available funds to the account of the Agent, as the Agent may designate, without set-off or counter-claim and free and clear of and without deduction for or on account of any present or future Taxes. 17.3 No limitation on number of demands Demands under this Clause 17 may be made by the Agent (on behalf of the Finance Parties) from time to time and there shall be no limitation in the number of demands which can be made hereunder. 17.4 Continuing guarantee This Guarantee shall be a continuing guarantee which shall be effective as of the date hereof and shall remain in full force and effect until payment in full has been irrevocably and unconditionally received by the Agent (on behalf of the Finance Parties) of the Outstanding Indebtedness. 17.5 Waiver of defences The obligations of each Guarantor under this Clause 17 will not be affected by an act, omission, matter or thing (whether or not known to it or any Finance Party) which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 17 including (without limitation): BD-#34696673-v11 46

 
(a) any time, waiver or consent granted to, or composition with, any Obligor or other person; (b) the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any other Obligor; (c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security; (d) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person; (e) any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document or any other document or security including without limitation any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security; (f) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or (g) any insolvency or similar proceedings. 17.6 Guarantor Intent Without prejudice to the generality of Clause 17.5 (Waiver of defences), each 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. 17.7 Reinstatement If any payment by any Borrower, any other guarantor or any other provider of security under the Finance Documents must be repaid, or any discharge given by a Lender (whether in respect of the obligations of any Borrower, another guarantor or any security for those obligations or otherwise) is avoided or reduced, as a result of insolvency or any similar event: (a) the liability of the Guarantors shall continue as if such payment, discharge, avoidance or reduction had not occurred; and (b) the Finance Parties shall be entitled to recover the value or amount of that security or payment from the Guarantors, as if such payment, discharge, avoidance or reduction had not occurred. 17.8 Undertaking Each Guarantor undertakes to the Agent that as long as this Guarantee is effective: (a) following receipt of a notice from the Agent of the occurrence of any Event of Default, the Guarantor will not make a demand for any claim of moneys due to the Guarantor from any Borrower or any other guarantor, or exercise any other right or remedy to which any Borrower or any other guarantor are entitled to in respect of such moneys unless and until all moneys due and payable by the Borrowers have been irrevocably paid in full; (b) if a Borrower or any other guarantor becomes the subject of an insolvency proceeding or shall be wound up or liquidated, the Guarantor shall not (unless so BD-#34696673-v11 47

 
instructed by the Agent and then only on condition that the Guarantor holds the benefit of any claim in such insolvency or liquidation to pay any amounts recovered thereunder to the Agent) make any claim in such insolvency, winding-up or liquidation until all the Outstanding Indebtedness owing or due has been irrevocably paid in full; (c) if the Guarantor being in breach of paragraphs (a) and (b) above receives or recovers any money pursuant to such exercise, claim or proof as therein referred to, such moneys shall be held by the Guarantor for the Agent to apply the same as if they were money received or recovered by the Agent under this Guarantee; and (d) it will not take or has not taken from any Borrower any security whatsoever for the obligations guaranteed hereunder. 17.9 Immediate recourse Each Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from such Guarantor under this Clause 17. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary. 17.10 Appropriations Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably and unconditionally paid in full, each Finance Party (or any trustee or agent on its behalf) may: (a) refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and (b) hold in an interest-bearing suspense account any moneys received from either Guarantor or on account of such Guarantor's liability under this Clause 17. 17.11 Deferral of Guarantor's rights (a) Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably and unconditionally paid in full and unless the Agent otherwise directs, no Guarantor will 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 17: (i) to be indemnified by another Obligor; (ii) to claim any contribution from any other guarantor of any Obligor's obligations under the Finance Documents; (iii) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Finance Party; (iv) to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which such Guarantor has given a guarantee, undertaking or indemnity under this Clause 17; (v) to exercise any right of set-off against any other Obligor; and/or BD-#34696673-v11 48

 
(vi) to claim or prove as a creditor of any other Obligor in competition with any Finance Party. (b) If either Guarantor receives any benefit, payment or distribution in relation to such rights it will promptly pay an equal amount to the Agent for application in accordance with Clause 29 (Payment mechanics). This only applies until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full. 17.12 No right of recourse and no security The Guarantors shall have no right of recourse against any Borrower, any other guarantor or any of their respective bankruptcy estate for any amount paid by the Guarantors under this Guarantee for so long as any part of the Outstanding Indebtedness remains outstanding, and the Guarantors shall not be entitled to obtain from any Borrower any security for any such right of recourse which the Guarantors may have after such time. Any such security which the Guarantors might obtain shall be regarded as supplementary security in favour of the Finance Parties. The Guarantors hereby renounce any and all such claims it has or may get against any Borrower or any other guarantor for as long as any part of the Outstanding Indebtedness remains outstanding. 17.13 No subrogation in Finance Parties' security The Guarantors shall have no right to subrogate, wholly or partly, in any security provided to the Finance Parties pursuant to the Finance Documents or in any other way until all of the Outstanding Indebtedness has been fully and finally paid. 17.14 Action Without affecting the obligations of either Guarantor hereunder, the Agent, the other Finance Parties may take such action as the Agent, the other Finance Parties, as the case may be, in their own discretion may consider appropriate against any Borrower, the Guarantors or any other persons or parties or securities to recover monies due and payable in respect of the obligations under the Finance Documents. 17.15 Knowledge of the additional security Each Guarantor acknowledges and agrees that: (a) it has received a copy of and has full knowledge of the security which is to be granted in respect of the amounts outstanding under the Finance Documents; (b) 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 as security for the Borrowers' obligations under the Finance Documents. 17.16 Assignment The Agent and the Finance Parties may assign or transfer the rights under this Guarantee to any person to whom the rights and obligations of such Finance Party under the Agreement are wholly or partly assigned or transferred to in accordance with Clause 25 (Changes to the Parties) of the Agreement. 17.17 Expenses The Guarantors shall pay to the Agent on demand on a full indemnity basis all charges, costs and expenses (including the legal fees) reasonably and properly incurred by the Finance Parties in connection with the preservation and enforcement of any of the rights of the Finance Parties under this Guarantee. BD-#34696673-v11 49

 
17.18 No implied waivers No delay or failure by the Agent or any other Finance Party to exercise any right or remedy under this Guarantee shall operate or be construed as a waiver of such rights or remedies unless otherwise expressly stated in writing by the Agent or such Finance Party. No partial exercise of any right or remedy shall prevent any further or other exercise of such right or remedy or any other right or remedy. No express waiver of any rights or remedies in respect of an Event of Default or any other event by the Agent, any other Finance Party shall operate or be construed as a waiver of any rights or remedies in respect of any similar or other Event of Default or events. 18 Security 18.1 Security Documents The Borrowers' obligations and liabilities under the Finance Documents, including (without limitation) the Borrowers' obligation to repay the Loans together with all unpaid interest, default interest, commissions, charges, expenses and any other derived liability whatsoever of any Borrower towards the Lenders, the Agent or any other Finance Party in connection with this Agreement or another Finance Document, shall at any time until all amounts due to the Finance Parties under the Finance Documents have been paid and/or repaid in full, be cross collaterally secured by: (a) the Security Agreements; (b) the General Assignments; (c) the Assignment of Hedging Claims; (d) the Guarantees; (e) the Mortgages; (f) the Share Pledges; and (g) the Manager’s Undertakings. 18.2 Security for Hedging Agreements (a) For the avoidance of doubt, the Security Interest created by the Security Documents shall also secure the Borrowers' obligations under the Hedging Agreements on a pro rata basis, but subject to a subordinated distribution of proceeds in accordance with Clause 29.5 (Partial payments). (b) Each Borrower shall ensure that the Mortgages be amended to cover any and all Hedging Agreements entered into subsequent to the date of any of the Mortgages, on terms acceptable to the Security Agent and without undue delay from entry into of any such Hedging Agreement, in order to secure – subject to a subordinated distribution of proceeds in accordance with Clause 29.5 (Partial payments) - that any liability of the Borrowers under any and all Hedging Agreements are secured under the Mortgages. 18.3 Perfection and further assistance Each Obligor undertakes to ensure that the above Security Documents be duly executed by the parties thereto in favour of the Security Agent (on behalf of the Finance Parties) on or about the date of this Agreement (or if not possible, as soon as practically possible), and legally valid and in full force and effect throughout the Security Period. Each Obligor further undertake to 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, BD-#34696673-v11 50

 
maintenance or realisation of any Security Interest conferred or intended to be conferred on the Security Agent or the Finance Parties by or pursuant to the Finance Documents. 18.4 Share Pledges - waiver of recourse If the Security Agent enforces any or all of the Share Pledges, each Guarantor and each Borrower hereby irrevocably (i) waives any and all of its claims against the relevant (other) Borrower and releases the relevant (other) Borrower from any and all liabilities to each Guarantor and each Borrower, including but not limited to any liabilities of the relevant (other) Borrower under any intra-group or shareholder loans and any liability to each Guarantor and the relevant (other) Borrower under any recourse claims (the "Borrower Liabilities"), and (ii) authorises the Security Agent and grants power of attorney to the Security Agent to (without any consent, sanction, authority or further confirmation from any other party), release any and all of the Borrower Liabilities, in order to allow for a sale of the shares in each of the Borrowers to be completed without any claims of any Guarantor and/or any of the (other) Borrowers continuing to exist against any of the Borrowers following such sale to the extent permitted by applicable mandatory laws. BD-#34696673-v11 51

 
Section 8 - Representations, Undertakings and Events Of Default 19 Representations and Warranties Each Obligor makes the representations and warranties set out in this Clause 19 to each Finance Party on the date of this Agreement: 19.1 Status and ownership (a) It is a company with limited liability or corporation, as applicable, duly incorporated and validly existing under the law of its jurisdiction of incorporation; (b) It has the power to own its assets and carry on its business as it is being conducted; (c) The Intermediate Parent owns directly one hundred per cent. (100.00%) of the shares and voting rights in the Borrowers; and (d) The Ultimate Parent owns directly one hundred per cent. (100.00%) of the shares and voting rights in the Intermediate Parent. 19.2 Insolvency No corporate action, legal proceeding or other procedure or step described in Clause 24.7 (Insolvency proceedings) or creditors' process described in Clause 24.8 (Creditors' process), has been taken or threatened in relation to an Obligor, and none of the circumstances described in Clause 24.6 (Insolvency) applies to an Obligor. 19.3 Binding obligations (a) The Finance Documents and Transaction Documents to which it is a party constitute legal, valid, binding and enforceable obligations. (b) Save as provided herein or therein and/or as have been or shall be completed prior to the Drawdown Date, no registration, filing, payment of tax or fees or other formalities are necessary or desired to render the Finance Documents enforceable against it, and in respect of the Vessels, for each Mortgage to constitute a valid and enforceable first priority mortgage over the respective Vessel and, subject to the Legal Reservations, for each of the other Security Documents to have the priority which it is expressed to have in the Security Documents. 19.4 No conflict with other obligations The entry into and performance by it of, and the transactions contemplated by, the Finance Documents and/or the Transaction Documents do not and will not conflict with: (a) any law or regulation applicable to it any present law or regulation applicable to it (including Directive 2005/60/EC of the European Parliament and of the Council of the European Communities Union of 26 October 2005, implemented to combat money laundering); (b) any of its constitutional documents; or (c) or constitute a default or termination event (however described) under any agreement or document to which it is a party or by which it or any of its assets are bound. 19.5 Power and authority It has the power to enter into, perform and deliver, and has taken all necessary actions to authorise its entry into, performance and delivery of, the Finance Documents and Transaction BD-#34696673-v11 52

 
Documents to which it is a party and the transactions contemplated by those Finance Documents and Transaction Documents. 19.6 Governing law and enforcement (a) The choices of governing law of the relevant Finance Documents will be recognised and enforced in its jurisdiction of incorporation. (b) Any judgment obtained in relation to a Finance Document in the jurisdiction of the governing law will be recognised and enforced in its Relevant Jurisdiction. 19.7 Authorisations and consents All Authorisations required by it (i) in connection with the entering into, performance, validity and enforceability of the Finance Documents and the transactions contemplated hereby and thereby, and (ii) to make the Finance Documents to which it is a party admissible in evidence in its Relevant Jurisdiction, have been obtained or effected and are in full force and effect. 19.8 Taxes (a) It has complied with all taxation laws in all jurisdictions where it is subject to taxation and has paid all applicable Taxes and other amounts due to governments and other public bodies where failure to do so is reasonably likely to have a Material Adverse Effect. No claims are being asserted against it with respect to any Taxes or other payments due to public or governmental bodies, which are reasonably likely to have a Material Adverse Effect. (b) It is not required to make any Tax Deductions (as defined in Clause 12.1 (Definitions)) for or on account of Tax from any payment it may make under any of the Finance Documents. 19.9 No filing or stamp taxes Under the laws of its Relevant Jurisdiction it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents, except the registration of the Mortgages with the Approved Ship Registry, which registrations, filings, taxes and fees shall be made and paid promptly by the Obligors after the date of the relevant Finance Document. 19.10 No Default (a) No Event of Default is continuing or might reasonably be expected to result from the making of a Loan or the entry into and performance of or any transaction contemplated by any of the Finance Documents. (b) No other event or circumstances is outstanding which constitutes a default or (with the expiry of a grace period, giving of notice or the making of any determination or any combination of the foregoing) might constitute a default under any other agreement or instrument which is binding on it or to which the its assets are subject which has or is reasonably likely to have a Material Adverse Effect. 19.11 No misleading information (a) Any factual information, documents, exhibits or reports relating to it and which have been furnished to the Finance Parties by or on behalf of it for the purposes of this Agreement are complete and correct in all material respects and do not contain any misstatement of fact or omit to state a fact making such information, exhibits or reports misleading in any material respect. BD-#34696673-v11 53

 
(b) Any financial projections contained in the information referred to in paragraph a) above have been prepared as at their date on the basis of recent historical information and on the basis of assumptions believed by the Obligor to be reasonable as at the date of preparation. 19.12 Original Financial Statements (a) The Original Financial Statements give a true and fair view of its financial condition as at the end of the period to which they related, and have been prepared in accordance with US GAAP consistently applied. (b) Since the date of the Original Financial Statements, there has been no material adverse change in its business or financial condition. 19.13 Pari passu ranking Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations preferred by mandatory law applying to companies generally. 19.14 No proceedings pending or threatened No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency, which if adversely determined, might reasonably be expected to have a Material Adverse Effect, have (to its knowledge and belief) been started or threatened against it and no judgments or orders have been issued which might reasonably be expected to have a Material Adverse Effect. 19.15 No immunity The execution and delivery by it of each Finance Document to which it is a party constitute, and its exercise of its respective rights and performance of its obligations under each Finance Document will constitute, private and commercial acts performed for private and commercial purposes, and it will not (except for bankruptcy or any similar proceedings) be entitled to claim for itself or any or all of its assets immunity from suit, execution, attachment or other legal process in any other proceedings taken in England, Norway and/or elsewhere (as the case may be) in relation to any Finance Document. 19.16 No winding-up It has not taken any corporate action nor have any other steps been taken or legal proceedings been started or threatened against it for its reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise), winding-up, dissolution, judicial management or administration or for the appointment of a receiver, administrator, administrative receiver, judicial manager, trustee or similar officer of it or any or all of its assets. 19.17 Environmental compliance It has performed and observed in all material respects all Environmental Laws, Environmental Approvals and all other material covenants, conditions, restrictions or agreements directly or indirectly concerned with any contamination, pollution or waste or the release or discharge of any toxic or hazardous substance in connection with the Vessels. 19.18 Environmental Claims No Environmental Claim has been commenced or (to the best of the Obligor's knowledge and belief) is threatened against it. BD-#34696673-v11 54

 
19.19 ISM Code and ISPS Code compliance All requirements of the ISM Code and the ISPS Code as they relate to any Obligor, the Managers and/or any Vessel have been complied with in all material respects. 19.20 The Vessels Each Vessel is or will from its respective Delivery Date be: (a) in the absolute ownership of the respective Borrower, free and clear of all encumbrances (other than as permitted in accordance with Clause 22.5 (Negative Pledge – Collateral)) and the relevant Borrower is and will remain the sole, legal and beneficial owner of the Vessel; (b) registered in the name of the relevant Borrower with an Approved Ship Registry under the laws and flag of such Approved Ship Registry; (c) operationally seaworthy in every way and fit for service; and (d) classed with an Approved Classification Society, free of all overdue requirements, recommendations and conditions. 19.21 Anti-corruption laws The Obligors have conducted its businesses in compliance with applicable anti-corruption laws and Sanctions and has instituted and maintained policies and procedures designed to promote and achieve compliance with such laws and Sanctions. 19.22 No money laundering (a) It is acting for its own account in relation to the Facility and in relation to the performance and the discharge of its obligations and liabilities under the Finance Documents and the transactions and other arrangements effected or contemplated by the Finance Documents to which it is a party, and the foregoing will not involve or lead to contravention of any law, official requirement or other regulatory measure or procedure implemented to combat money laundering (as defined in Article 1 of the Directive 2015/849/EC of the European Parliament and of the Council of the European Communities (as amended, supplemented and/or replaced from time to time). (b) The Borrowers will use the proceeds of the Facility for its own benefit, under its full responsibility and exclusively for the purposes specified in this Agreement. 19.23 No breach of laws Except as notified by the Obligors to the Agent and accepted in writing by the Agent, each Obligor complies in all material respects with any law or regulation applicable to it. 19.24 Sanctions None of the Obligors nor any of their Subsidiaries and, to the best of their knowledge (having made due and careful enquiry), none of their respective directors, officers or employees: (a) is in breach of any Sanctions; (b) is a Restricted Party nor acts directly or indirectly on behalf of a Restricted Party; or (c) has received notice of or is aware of any claim, action, suit, proceeding, formal notice or investigation against it with respect to Sanctions. BD-#34696673-v11 55

 
19.25 No Rebates No agreement or understanding has been entered into or agreed pursuant to an Intermediate MOA to allow or pay any rebate, premium, inducement, commission, discount or other benefit or payment (however described) to any Borrower or any other Group Member in connection with the purchase by a Borrower of a Vessel, other than as disclosed to the Agent in writing on or before the date of this Agreement. 19.26 Repetition The Repeating Representations set out in this Clause 19 shall be deemed to be repeated: (a) on the date of each Drawdown Notice; (b) on each Drawdown Date; (c) on the first day of each Interest Period; and (d) in each Compliance Certificate forwarded to the Agent pursuant to Clause 20.2 (Compliance certificate) (or, if no such Compliance Certificate is forwarded, on each day such certificate should have been forwarded to the Agent at the latest). 20 Information Undertakings The undertakings set out in this Clause 20 shall remain in force from the date of this Agreement and throughout the Security Period. 20.1 Financial statements The Ultimate Parent shall supply to the Agent in sufficient copies for all of the Lenders: (a) as soon as the same become available, but in any event within four (4) calendar months after the end of each of its fiscal years, its consolidated audited financial statements for that fiscal year together with the unaudited accounts of each Borrower; (b) as soon as the same become available, but in any event within two (2) calendar months after the end of each financial quarter, its unaudited consolidated financial statements for that financial quarter; and (c) as soon as same become available, but in any event no later than 28 February for each year, its budget and cash flow projections. 20.2 Compliance Certificates The Ultimate Parent shall supply to the Agent, with each set of financial statements delivered pursuant to paragraphs (a) and (b) of Clause 20.1 (Financial statements), a Compliance Certificate in the form set out in Schedule 5 (Form of Compliance Certificate) signed by the Principal Financial Officer of the Ultimate Parent setting out (in reasonable detail) computations as to compliance with Clause 21 (Financial covenants) and the Collateral Maintenance Test pursuant to Clause 7.1 (Mandatory prepayment – Collateral Maintenance Test), as at the date at which those financial statements were drawn up. 20.3 Vessels' Market Value Valuations to determine the Market Value of the Vessels shall be obtained by the Borrowers for the Borrowers' cost prior to the end of each financial half-year and to be sent to the Agent together with each relevant Compliance Certificate, or, if an Event of Default has occurred, for the Borrowers' cost at such further frequency as may be requested by the Agent (acting on behalf of the Majority Lenders). BD-#34696673-v11 56

 
20.4 Requirements as to financial statements The Obligors shall procure that each set of financial statements delivered pursuant to Clause 20.1 (Financial statements) is prepared using US GAAP, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements for the Obligors 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 the Obligor's auditors deliver to the Agent: (a) a description of any change necessary for those financial statements to reflect US GAAP, accounting practices and reference periods upon which that Obligor's Original Financial Statements were prepared; and (b) sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Lenders 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 that Obligor's Original Financial Statements. Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared. 20.5 Fiscal Year There shall be no change to any Obligor's fiscal year without the prior written consent of the Agent (on behalf of the Majority Lenders). 20.6 Information – miscellaneous The Obligor shall notify the Agent and/or supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests): (a) at the same time as they are dispatched, copies of all documents dispatched by an Obligor to its creditors generally; (b) promptly upon becoming aware of them, the details of any litigation, claim, arbitration or administrative proceedings which are current, threatened or pending against an Obligor, and which might, if adversely determined, have a Material Adverse Effect; (c) promptly, such further information regarding the business, operations, assets, operations (financial or otherwise) and technical data of any Group Member and the Vessels as the Agent may reasonably request, and which can be delivered without breach of any confidentiality undertakings or any applicable law or rules of a securities/regulatory exchange; (d) promptly, such further information reasonably requested by the Agent (on behalf of the Finance Parties) in order for each Finance Party to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents; and (e) promptly, upon becoming aware of them, the details of any loss, seizure, capture or piracy against any Vessel. 20.7 Notification of default Each Obligor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence. BD-#34696673-v11 57

 
20.8 Notification of Environmental Claims Each Obligor shall inform the Agent in writing as soon as reasonably practicable upon becoming aware of the same: (a) if any Environmental Claim has been commenced or (to the best of the Obligor's knowledge and belief) is threatened against an Obligor or a Vessel; and (b) of any fact and circumstances which will or are reasonably likely to result in any Environmental Claim being commenced or threatened against an Obligor or a Vessel. 20.9 "Know your customer" checks (a) 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 Applicable KYC Procedures; (iii) any change in the status of an Obligor (or of a Holding Company of an Obligor) or the composition of the shareholders of an Obligor (or of a Holding Company of an Obligor) after the date of this Agreement; (iv) a proposed assignment or transfer by a Lender of any of its rights and/or obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer; or (v) any anti-money laundering or anti-terrorism financing laws and regulations applicable to the Agent or any Lender, obliges the Agent or any Lender (or, in the case of paragraph (iii) above, any prospective new Lender) to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor 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 paragraph (iii) above, on behalf of any prospective new Lender) in order for the Agent, such Lender or, in the case of the event described in paragraph (iii) above, any prospective new Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents. (b) 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. For the purpose of this Clause 20.9: "Applicable KYC Procedures" means any applicable "know your customer" checks or similar identification procedures, or equivalent internal policies of a Lender or the Agent, or any equivalent procedures required by applicable law or regulations. BD-#34696673-v11 58

 
20.10 KEXIM as guarantor notification and information (a) The Borrowers shall promptly notify the Agent and the KEXIM Agent forthwith by email of the occurrence of any event involving a risk covered by the KEXIM Guarantee and shall: (i) pay upon demand any additional premium payable to KEXIM as guarantor in respect of the KEXIM Guarantee as a result of such event involving a political or commercial risk; and (ii) cooperate with the Agent or the KEXIM Agent on its reasonable request to take all steps necessary on the part of the Borrowers to ensure the KEXIM Guarantee remains in full force and effect throughout the Facility Period. (b) The Borrowers shall promptly provide the Agent and the KEXIM Agent with copies of all financial or other information required by the KEXIM Agent to satisfy any request for information by KEXIM as guarantor pursuant to the KEXIM Guarantee. 20.11 Use of websites (a) The Ultimate Parent may satisfy its obligation under this Agreement to deliver any information in relation to those Finance Parties (the "Website Lenders") who accept this method of communication by posting this information onto an electronic website designated by the Ultimate Parent and the Agent (the "Designated Website") if: (i) the Agent expressly agrees (after consultation with each of the Finance Parties) that it will accept communication of the information by this method; (ii) both the Ultimate Parent and the Agent are aware of the address of and any relevant password specifications for the Designated Website; and (iii) the information is in a format previously agreed between the Ultimate Parent and the Agent. If any Finance Party (a "Paper Form Lender") does not agree to the delivery of information electronically then the Agent shall notify the Ultimate Parent accordingly and the Ultimate Parent shall supply the information to the Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event the Ultimate Parent shall supply the Agent with at least one copy in paper form of any information required to be provided by it. (b) The Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Ultimate Parent and the Agent. (c) The Ultimate Parent shall promptly upon becoming aware of its occurrence notify the Agent if: (i) the Designated Website cannot be accessed due to technical failure; (ii) the password specifications for the Designated Website change; (iii) any new information which is required to be provided under this Agreement is posted onto the Designated Website; (iv) any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or BD-#34696673-v11 59

 
(v) the Ultimate Parent becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software. If the Ultimate Parent notifies the Agent under paragraph (c)(i) or paragraph (c)(v) above, all information to be provided by the Ultimate Parent under this Agreement after the date of that notice shall be supplied in paper form unless and until the Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing. 21 Financial Covenants 21.1 Financial definitions Except otherwise explicitly provided for in this Agreement, an accounting term used in this Clause is to be construed in accordance with US GAAP. For the purposes of this Clause 21, the following definitions shall apply: "Cash and Cash Equivalents" means, at any date, the aggregate amount of freely available cash and cash equivalents of the Group, in each case reported in accordance with US GAAP, including without limitation: (a) cash in hand or on freely available deposit with any bank or financial institution; (b) certificates of deposits or marketable debt securities (including, but not limited to, money market funds) with a maturity of twelve (12) months or less after the relevant date of calculation, issued by an Arranger or a financial institution which has a rating for its long term unsecured and non-credit enhanced debt obligations with A or higher by Standard & Poor's Rating Services or Fitch Ratings Ltd or A2 or higher by Moody's Investor Services Limited or a comparable rating from an internationally recognised credit rating agency; or (c) any other instrument, security or investment approved in writing by the Agent, and in each case, to which any of the Obligors is beneficially entitled at that time and which can be promptly realised and applied against the Loans. "Equity Ratio" means the ratio of Total Equity to Total Assets. "Liquidity" means, at any given time, the aggregate of (i) Cash and Cash Equivalents and (i) any undrawn amount freely and unconditionally available for drawings under any credit facilities with remaining tenor of at least six (6) months. "Total Assets" means the aggregate book value of total assets in accordance with US GAAP. "Total Equity" means the aggregate book value of the equity treated as equity in accordance with US GAAP. "Working Capital" means current assets less current liabilities (which shall exclude instalments of long term debt due in the twelve (12) months, capital lease payments and, in respect of any Borrower only, any intra group debt incurred in accordance with Clause 22.11(b)(ii) (Financial Indebtedness restrictions). 21.2 Financial testing (a) The financial covenants set out in this Clause 21 (Financial Covenants) shall be calculated in accordance with US GAAP consistently applied, provided always, that lease obligations shall be classified in accordance with applicable accounting principles prior to 1 January 2019 (for the avoidance of doubt, disregarding any amendments to accounting principles as a result of IFRS 16 or equivalent). BD-#34696673-v11 60

 
(b) The financial covenants shall be tested quarterly, by reference to each of the financial statements delivered pursuant to paragraphs (a) and (b) of Clause 20.1 (Financial Statements) and/or each Compliance Certificate delivered pursuant to Clause 20.2 (Compliance Certificate). 21.3 Financial covenants The Ultimate Parent shall ensure that it maintains (on a consolidated basis) at all times: (a) an Equity Ratio of minimum 0.25 to 1.00; (b) a positive Working Capital; and (c) Liquidity of minimum the higher of: (i) USD 25,000,000; or (ii) an amount equal to five per cent. (5%) of the Group's total interest bearing Financial Indebtedness on a consolidated basis net of any Cash and Cash Equivalents. 21.4 Change of accounting principles If the Agent believes that the definitions and/or the financial covenants set out in this Clause 21 (Financial covenants) need to be amended as a result of any change of accounting principles, determination or requirement, the Ultimate Parent and the Agent shall negotiate (Agent acting on the instructions of the Lenders) in good faith to amend the existing definitions and/or financial covenants so as to provide the Lenders with substantially the same protections as the definitions and/or financial covenants set out in this Clause 21 (but which are not materially more onerous for the Borrowers or the Ultimate Parent). 22 General Undertakings The undertakings set out in this Clause 22 shall remain in force from the date of this Agreement and throughout the Security Period. 22.1 Blocking Law Any provision of Clauses 19.24 (Sanctions) or 22.22 (Sanctions) shall, if specified in writing by a Finance Party to the Agent, not apply to or in favour of any Finance Party if and to the extent that it would result in a breach, by or in respect of that Finance Party, of any applicable Blocking Law. An affected Finance Party shall be obliged to notify the Agent whether such provisions shall not be deemed to apply promptly after a potential breach by or in respect of such Finance Party comes to the attention of such Finance Party. For the purposes of this Clause 22.1, Blocking Law means: (a) any provision of Council Regulation (EC) No 2271/1996 of 22 November 1996 (or any law or regulation implementing such Regulation in any member state of the European Union or the United Kingdom); or (b) any similar blocking or anti-boycott law applicable to that Finance Party. 22.2 Authorisations etc. The Obligors shall promptly: (a) obtain, comply and do all that is necessary to maintain in full force and effect; and (b) supply certified copies to the Agent (if so requested) of, BD-#34696673-v11 61

 
any Authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance Document. 22.3 Compliance with laws Each Obligor shall comply in all material respects with all laws (including Sanctions) to which it may be subject. 22.4 Pari passu ranking Each Obligor shall ensure that its obligations under the Finance Documents do and will rank at least pari passu with all its other present and future unsecured and unsubordinated obligations, except for those obligations which are preferred by mandatory law applying to companies generally in the jurisdictions of their incorporation or in the jurisdiction in the ports of calls. 22.5 Title – Collateral The respective Borrower will hold legal title to, and own the entire beneficial interest in, its Vessel, its Insurances, its Earnings and all of its other assets, free of all Security Interest, except for those created by the Finance Documents and as set out in Clause 22.6 (Negative pledge - Collateral). 22.6 Negative Pledge – Collateral None of the Obligors, nor any other Group Member, shall create or permit to subsist any Security Interest over (i) any asset subject to, or intended to be subject to, Security Interest under the Security Documents, or (ii) any other asset of the Borrowers, other than: (a) the Security Interest created under the Security Documents; (b) any Security Interest arising under the general terms and conditions of banks with whom any Group Member maintains a banking relationship in the ordinary course of business (including, without limitation, arising under article 24 and 25 of the general terms and conditions (algemene voorwaarden) of any member of the Dutch Bankers' association (Nederlandse Vereniging van Banken)); (c) any Security Interests arising in the ordinary course of business by operation of law and securing obligations not more than forty-five (45) days overdue; and (d) any Security Interests disclosed in writing to the Agent, and consented to in writing by the Agent (acting upon instructions from the Majority Lenders). 22.7 Ownership of the Borrowers and the Intermediate Parent (a) The Intermediate Parent shall at all times own directly one hundred per cent. (100.00%) of the shares and voting rights in the Borrowers. (b) The Ultimate Parent shall at all times own directly one hundred per cent. (100.00%) of the shares and voting rights in the Intermediate Parent. (c) None of the Obligors shall create or permit to subsist any Security Interest over any existing or future shares issued by any of the Borrowers or the Intermediate Parent, other than the Security Interest created under the Security Documents. 22.8 Preservation of assets Each Obligor shall maintain and preserve all of its assets that are necessary or desirable, in the opinion of the Agent, for the conduct of its business, as intended to be conducted at the BD-#34696673-v11 62

 
date of this Agreement, in good working order and condition, ordinary wear and tear excepted. 22.9 Change of business The Obligors shall ensure that no change is made to the general nature of its business from that carried out at the date of this Agreement without the prior written consent of the Agent (on behalf of the Lenders and KEXIM as guarantor). 22.10 No mergers etc. No Obligor shall enter into any merger, amalgamation, de-merger, split-up, divest, consolidation with or into any other person or be the subject of any reconstruction, name change or change of type of organization without the prior consent of the Agent (on behalf of the Lenders and KEXIM as guarantor). 22.11 Financial Indebtedness restrictions (a) The Borrowers shall not incur, create or permit to subsist any Financial Indebtedness. (b) Paragraph (a) above does not apply to Financial Indebtedness: (i) incurred under the Finance Documents; (ii) incurred under any loans from any Guarantor or any other Borrower, provided that any Guarantor's or the other Borrower's claims under such loans are subject to a Security Agreement and fully subordinated to the claims of the Finance Parties under the Finance Documents; or (iii) consented to in writing by the Lenders. 22.12 Financial support The Borrowers shall not make or grant any loans, guarantees or any other form of financial support to any person, except for: (a) financial support by way of trade credit in the ordinary course of operation of the Vessels; and (b) intra-group loans to another Borrower or a Guarantor, provided always that the obligations of any other Borrower or a Guarantor be fully subordinated to any obligations under the Finance Documents, and the relevant Borrower's claims under such loans are subject to a Security Agreement. 22.13 Distributions from the Borrowers Following the occurrence of an Event of Default which is continuing, no Borrower may: (a) declare, make or pay any 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) pay any interest or repay any principal amount (or capitalised interest) on any debt to any of its shareholders; or (c) redeem, repurchase or repay any of its share capital or resolve to do so, or enter into any transaction or arrangement having a similar effect as described in paragraphs (i) to (iii). BD-#34696673-v11 63

 
22.14 Distributions from the Ultimate Parent (a) Subject to the limitations listed in paragraph (b) below, the Ultimate Parent may: (i) declare, make or pay any 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); (ii) pay any interest or repay any principal amount (or capitalised interest) on any debt to any of its shareholders; (iii) redeem, repurchase or repay any of its share capital or resolve to do so; or (iv) enter into any transaction or arrangement having a similar effect as described in paragraphs (i) to (iii). (b) The distributions described in paragraph (a) above can only be carried out and effectuated if: (i) no Event of Default is existing and is continuing on the time when the distribution is to be made or would result from the making, payment or declaration of the distribution; or (ii) as otherwise consented to in writing by the Agent (on behalf of the Majority Lenders). 22.15 Investments No Borrower shall make any investments or acquisitions, neither of vessels or companies (or shares in companies), other than: (a) the acquisition of the Vessels; (b) ordinary and scheduled maintenance of the Vessels; and (c) any other maintenance of the Vessels required in order to be in compliance with the provisions under this Agreement, including, but not limited to, Clause 23.3 (Classification and repairs). 22.16 Environmental compliance The Obligors shall comply in all respects with all applicable Environmental Laws subject to the terms and conditions of any applicable Environmental Approval and obtain and maintain any applicable Environmental Approval. 22.17 Arm's length transactions No Obligor shall engage in, directly or indirectly, any transaction with any party (without limitation, the purchase, sale or exchange of assets or the rendering of any service), except pursuant to the reasonable requirement of the Obligor's business and upon fair and reasonable terms that are no less favorable to the Obligor, as the case may be, than those which might be obtained in an arm's length transaction at the time. 22.18 Listing The Ultimate Parent shall remain listed on the Oslo Stock Exchange and/or the New York Stock Exchange and/or another recognised stock exchange acceptable to the Agent (on behalf of the Lenders). BD-#34696673-v11 64

 
22.19 Hedging (a) The Hedge Providers shall have a first right of refusal in relation to interest hedging relating to any Vessel or the Facility on competitive terms. The Borrowers shall use reasonable endeavours to ensure that the ISDA Master Agreements and schedules entered into with the Hedge Providers shall be in substantially similar terms and shall provide copies to the Agent once they have been signed. (b) No Obligor shall carry out derivative transactions for speculative purposes. 22.20 Earnings Accounts The Borrowers shall open and maintain all its Earnings Accounts with the Account Bank, ensure that all Earnings are paid to the Earnings Accounts, and that the Earnings Accounts remain subject to the relevant Security Agreement. The Borrowers may freely operate and make withdrawals from the Earnings Accounts until the occurrence of an Event of Default which is continuing. 22.21 Taxation The Obligors 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 such payment is being contested in good faith or can be lawfully withheld. 22.22 Sanctions (a) Each Obligor, and the Obligors and its Subsidiaries shall ensure that their directors, officers and employees, agents and representatives shall comply in all respects with Sanctions. (b) No Obligor shall, and the Obligors and its Subsidiaries shall ensure that none of their directors, officers or employees will, take any action or make any omission that results, or is reasonably likely to result, in it or any Finance Party becoming a Restricted Party. (c) No Obligor shall use any revenue or benefit derived from any activity or dealing with a Restricted Party in discharging any obligation due or owing to the Finance Parties. (d) Each Obligor shall procure that no proceeds from any activity or dealing with a Restricted Party are credited to any bank account held with any Finance Party in its name. (e) Each Obligor 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 provide information on what steps are being taken with regards to answer or oppose such. (f) No Obligor shall permit or authorise any other person to, directly or indirectly use the proceeds of a Loan, or lend, make payments of or contribute or otherwise make available all or any part of such proceeds or permit services provided by any Finance Party to such Obligor under the Finance Documents to be used (i) to or for the benefit of any Restricted Party or (ii) in any other manner that would result in a violation of Sanctions by any person (including any person participating in a Loan hereunder, whether as a Finance Party or otherwise) or any such person becoming a Restricted Party. 22.23 EU Bail-In In the event that any Finance Document will be governed by the laws of a non-EEA Member Country, then to the extent the Facility Agent determines it is necessary such Finance BD-#34696673-v11 65

 
Document shall either prior to its entry, or if already in force be amended to, contain the current form of EU bail-in provisions recommended by the Loan Market Association. 22.24 KEXIM as guarantor requirements No Obligor shall act (or omit to act) in a manner that is inconsistent with any requirement of KEXIM as guarantor under or in connection with the KEXIM Guarantee and, in particular: (a) each Obligor shall do all that is necessary to ensure that all requirements of KEXIM as guarantor under or in connection with the KEXIM Guarantee are complied with; and (b) each Obligor will refrain from acting in any manner which could result in a breach of any requirements of KEXIM as guarantor under or in connection with the KEXIM Guarantee or affect its validity. 22.25 KEXIM Guarantee protection If at any time in the reasonable opinion of the KEXIM Agent, any provision of a Finance Document contradicts or conflicts with any provision of the KEXIM Guarantee, the KEXIM Agent shall notify the Borrowers and the Agent accordingly and the Borrowers will: (a) take all steps as the Agent, the KEXIM Agent and/or KEXIM as guarantor shall reasonably require to remove such contradiction or conflict; and (b) take all steps as the Agent, the KEXIM Agent and/or KEXIM as guarantor shall reasonably require to ensure that the KEXIM Guarantee remains in full force and effect. 23 Vessel Covenants The undertakings set out in this Clause 23 shall remain in force from the date of this Agreement and throughout the Security Period. 23.1 Insurance (a) Each Borrower shall maintain or ensure that the Vessels are insured against such risks, including but not limited to, Hull and Machinery, Protection & Indemnity (including maximum cover for pollution liability with a club within the International Group of P&I Clubs), Hull Interest and/or Freight Interest and War Risk (including acts of terrorism, hijacking, confiscation and piracy insurances), in such amounts, on such terms and with such brokers, clubs and/or insurers as the Agent from time to time shall approve (such approval not to be unreasonably withheld). (b) The insurance value (to be on agreed value basis) for Hull and Machinery combined with Hull Interest and/or Freight Interest, and for War Risk, shall for each Vessel cover the higher of (i) the Market Value of the Vessel, and (ii) one hundred and twenty per cent (120.00%) of the relevant Loan. (c) The insured value for the Hull and Machinery insurance shall cover at least eighty per cent (80.00%) of the Market Value of the Vessel. The remaining cover may be taken out as Hull Interest and/or Freight Interest. (d) Each Obligor shall procure that the Security Agent (on behalf of the Finance Parties) is noted as first priority mortgagee in the insurance contracts, together with the confirmation from the underwriters to the Agent thereof that the notice of assignment with regards to the Insurances and the loss payable clauses are noted in the insurance contracts and that standard letters of undertaking are executed by the insurers and/or brokers (as applicable). BD-#34696673-v11 66

 
(e) Not later than fourteen (14) days prior to the expiry date of the relevant Insurances the Borrowers shall procure the delivery to the Agent of a certificate from the insurance broker(s) through whom the Insurances referred to in paragraph (a) above have been renewed and taken out in respect of a Vessel with insurance values as required by paragraph (b) above, that such Insurances are in full force and effect and that the Security Agent (on behalf of the Finance Parties) have been noted by the relevant insurers. (f) The Agent shall, for the account of the Borrowers, take out a Mortgagee's Interest Insurance ("MII") and/or a Mortgagee's Interest – Additional Perils Pollution Insurance ("MAPI") with an insurance broker and on terms agreed by the Security Agent and the Agent, covering up to one hundred and twenty per cent (120.00%) of the Loans, but the Agent shall (if requested by the Borrowers) consult with the Borrowers for such period as the Agent shall agree prior to taking out such insurances. (g) If any of the Insurances referred to in paragraph (a) form part of a fleet cover, the Borrowers shall procure that the insurers and/or brokers (as applicable) shall undertake to the Agent that they shall neither set-off against any claims in respect of any Vessel any premiums due in respect of other vessels under such fleet cover or any premiums due for other insurances, nor cancel this Insurance for reason of non- payment of premiums for other vessels under such fleet cover or of premiums for such other insurances, and shall undertake to issue a separate policy in respect of the Vessels if and when so requested by the Agent. (h) The Borrower shall procure that any person named as assured or co-assured in any insurance policy assigns such insurances to the Security Agent or provides other satisfactory undertakings as the Security Agent may require. Further, the Borrowers shall procure that the Security Agent shall have the right to appoint an insured party. (i) The Borrowers shall procure that the Vessels always are employed in conformity with the terms of the instruments of Insurances (including any warranties expressed or implied therein) and comply with such requirements as to extra premium or otherwise as the insurers may prescribe. (j) No Obligor will make any change to the Insurances described under paragraphs (a) and (b) above without the prior written consent of the Agent (on behalf of the Lenders). (k) The Agent will obtain an Insurance Report from an independent insurance consultant for the account of the Borrowers prior to any utilisation of the Facility, and, if the Agent (acting on the instructions of the Majority Lenders) so requires, on an annual basis thereafter. (l) The Borrowers will supply to the Agent from time to time on request such information as the Agent may in its discretion require with regard to the Insurances and the brokers, underwriters, associations or clubs through or with which the Insurances are placed. (m) Each Obligor shall promptly take any steps required, or provide any and all assistance requested by the Agent, to ensure prompt collection of any claims under the Insurances. 23.2 Loss Payable Claims related to the Insurances in respect of an actual or constructive or agreed or arranged or compromised Total Loss or requisition for title or other compulsory acquisition of a Vessel and claims payable in respect of a major casualty, that is to say any claim (or the aggregate of which) in excess of USD 3,000,000 shall be payable to the Security Agent and the Security Agent’s approval to settle such a claim shall be required. Subject thereto all other claims, unless and until the insurers have received notice from the Security Agent of an event of BD-#34696673-v11 67

 
default which is continuing and unremedied under the Agreement in which event all claims shall be payable directly to the Security Agent up to the Finance Parties' mortgage interest, shall be released directly for the repair, salvage or other charges involved or to the relevant Borrower as reimbursement if it has fully repaired the damage and paid all of the salvage or other charges or otherwise in respect of Borrower's actual costs in connection with repair, salvage and/or other charges. 23.3 Classification and repairs The Obligors shall keep the Vessels in a good, safe and efficient condition consistent with first class ownership and management practice and in particular: (a) so as to maintain the highest classification required for the relevant trade with an Approved Classification Society, free of overdue recommendations and conditions; and (b) so as to comply with the laws and regulations (statutory or otherwise) applicable to vessels registered under the flag state of the Vessels or to vessels trading to any jurisdiction to which the Vessels may trade from time to time. 23.4 Restrictions on chartering, appointment of managers etc. (a) The Borrowers shall not without the prior written consent of the Agent (on behalf of the Majority Lenders): (i) let any Vessel on bareboat charter for any period other than to another Group Member (subject to satisfactory Security Interest in favour of the Agent (on behalf of the Finance Parties) with respect to such Group Member’s earnings and charterparty in respect of that Vessel); (ii) charter in or hire any vessel or tonnage; (iii) appoint a Manager other than any Approved Manager; or (iv) change the class certification of any Vessel. (b) The Borrowers shall inform the Agent of any change of management of a Vessel to another Approved Manager, or change of classification society to another Approved Classification Society. 23.5 Notification of certain events The Borrowers shall immediately notify the Agent of: (a) any accident to a Vessel involving repairs where the costs will or is likely to exceed USD 3,000,000 (or the equivalent in any other currency); (b) any requirement or recommendation made by any insurer or classification society or by any competent authority which is not, or cannot be, immediately complied with; (c) any exercise or purported exercise of any lien on any Vessel, the Earnings or the Insurances; (d) any occurrence as a result of which a Vessel has become or is, by the passing of time or otherwise, likely to become a Total Loss; and (e) any claim for a material breach of the ISM Code or the ISPS Code being made against a Borrower, a Manager or otherwise in connection with a Vessel. BD-#34696673-v11 68

 
23.6 Operation of the Vessels (a) The Borrowers shall comply, or procure the compliance by any manager, in all material respects with the ISM Code, the ISPS Code, Marpol, all Environmental Laws and all other laws or regulations applicable to the Vessels, their ownership, operation and management or to the business of the Borrowers and shall not employ any Vessel nor allow its employment: (i) in any manner contrary to law or regulation in any relevant jurisdiction including but not limited to the ISM Code; (ii) in U.S. waters contrary to COFR regulations, always ensuring as required that a Certificate of Financial Responsibility is maintained for such purpose; and (iii) in the event of hostilities in any part of the world (whether war is declared or not), in any zone which is declared a war zone by any government or by the war risk insurers of the relevant Vessel unless the Borrower has (at its expense) effected any special, additional or modified insurance cover which shall be necessary or customary for first class shipowners trading vessels within the territorial waters of such country at such time and has provided evidence of such cover to the Agent. (b) Without limitation to the generality of this Clause 23.6, the Borrowers shall comply or procure compliance, with, as applicable, all requirements of the International Convention for the Safety of Life at Sea (SOLAS) 1974 as adopted, amended or replaced from time to time including, but not limited to, the STCW 95, the ISM Code or the ISPS Code. (c) Each Vessel shall only be used as a civil merchant trading vessel. 23.7 Inspections and class records (a) The Borrowers shall upon the request of the Agent permit, and shall procure that any managers and charterers permit, one person appointed by the Agent to inspect the Vessels, limited to one time per twelve (12) months per Vessel, at the cost of the Borrowers. If the request is made following an Event of Default which is continuing, there shall be no limitation on the number of inspections per year. Unless there is an Event of Default, any inspection shall not interfere with the normal operation and trading of the Vessels. (b) The Borrowers shall instruct the classification society to send to the Agent, following a written request from the Agent, copies of all class records held by the classification society in relation to the Vessels. 23.8 Surveys The Borrowers shall submit to or cause the Vessels to be submitted to such periodic or other surveys as may be required for classification purposes and to ensure full compliance with regulations of the flag state of the Vessels and to supply or to cause to be supplied to the Agent copies of all survey reports and confirmations of class issued in respect thereof whenever such is required by the Agent, however limited to once a year. 23.9 Arrest The Borrowers shall or shall procure that the charterers (if any) shall, promptly pay and discharge: (a) all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against any Vessel, the Earnings or the Insurances; (b) all tolls, taxes, dues, fines, penalties and other amounts charged in respect of any Vessel, the Earnings or the Insurances; and BD-#34696673-v11 69

 
(c) all other outgoings whatsoever in respect of any Vessel, the Earnings and the Insurances. 23.10 Total Loss In the event that a Vessel shall suffer a Total Loss, the Borrowers shall, within a period of ninety (90) days after the Total Loss Date, obtain and present to the Agent, a written confirmation from the relevant insurers that the claim relating to the Total Loss has been accepted in full, and the insurance proceeds shall be applied in prepayment of the relevant Loan in accordance with Clause 7.1 (Mandatory prepayment – Total Loss or sale). 23.11 Dismantling (a) Each Borrower shall procure that within eight (8) weeks of the Delivery Date of each respective Vessel, it has obtained a Green Passport in respect of such Vessel, which shall be maintained and available throughout the lifespan of that Vessel. (b) Each Obligor shall ensure that any Vessel or other vessels controlled by it or another Group Member being scrapped, or sold to an intermediary with the intention of being scrapped, is recycled at a recycling yard which conducts its recycling business in a socially and environmentally responsible manner, in accordance with the provisions of The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009 or EU Ship Recycling Regulation of 20 November, 2013. 23.12 Flag, name and registry (a) The Vessels shall at all times be registered with an Approved Ship Registry. (b) The Borrowers shall not, without the prior written consent of the Agent (on behalf of the Lenders and KEXIM as guarantor), such consent not to be unreasonably withheld or delayed, change the flag, name or registry of a Vessel. Subject to substitution of the relevant Mortgage, and closing arrangements satisfactory to the Agent, neither the Lenders nor KEXIM as guarantor may refuse a Borrower's request to change the registry of a Vessel from one Approved Ship Registry to another Approved Ship Registry, unless a Default has occurred. 23.13 Dealings with Vessel Each Borrower shall, upon the request of the Agent and at the cost of such Borrower, on or before 31 July in each calendar year, supply or procure the supply to the Agent of all information necessary in order for any Lender to comply with its obligations under the Poseidon Principles in respect of the preceding year, being all ship fuel oil consumption data required to be collected and reported in accordance with Regulation 22A of Annex VI and any Statement of Compliance, in each case relating to each Vessel for the preceding calendar year provided always that no Lender shall publicly disclose such information with the identity of any Vessel without the prior written consent of such Borrower. For the avoidance of doubt, such information shall be "Confidential Information" for the purposes of Clause 36 (Confidential Information). Without prejudice to the foregoing, each Borrower acknowledges that, in accordance with the Poseidon Principles, such information will on an anonymous and unidentifiable basis form part of the information published regarding the relevant Lender's portfolio climate alignment. 24 Events of Default Each of the events or circumstances set out in this Clause 24 is an Event of Default (save for Clause 24.17 (Acceleration)). 24.1 Non-payment Any Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place and in the currency in which it is expressed to be payable unless: BD-#34696673-v11 70

 
(a) its failure to pay is caused by administrative or technical error affecting the transfer of funds despite timely payment instructions by the Obligor; and (b) payment is made within three (3) Business Days of its due date. 24.2 Financial covenants, Sanctions, Insurances and Classification Any requirement in Clauses 21 (Financial covenants), 22.22 (Sanctions), 23.1 (a) to (d) (Insurance) or 23.3(a) (Classification and repair) is not satisfied. 24.3 Other obligations (a) An Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 24.1 (Non-payment) and Clause 24.2 (Financial covenants, Sanctions, Insurances and Classification)). (b) No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within ten (10) Business Days of the earlier of (i) the Agent giving notice to the Borrowers and (ii) any Obligor becoming aware of the failure to comply. 24.4 Misrepresentations Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered by or on behalf of an Obligor under or in connection with any of the Finance Documents is or proves to have been incorrect or misleading in any material respect when made or deemed to be made. 24.5 Cross default (a) Any Financial Indebtedness of any Obligor is not paid when due nor within any originally applicable grace period. (b) Any Financial Indebtedness of any Obligor is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described). (c) Any commitment for any Financial Indebtedness of any Obligor is cancelled or suspended by a creditor of any Obligor as a result of an event of default (however described). (d) Any creditor of any Obligor becomes entitled to declare any Financial Indebtedness of any Obligor due and payable prior to its specified maturity as a result of an event of default (however described). (e) No Event of Default will occur under this Clause 24.5 if the aggregate amount of the Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (a) to (d) above is less than USD 8,000,000 (or its equivalent in any other currency or currencies). 24.6 Insolvency (a) An Obligor is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness. (b) The value of the assets of an Obligor is less than its liabilities (taking into account contingent and prospective liabilities). BD-#34696673-v11 71

 
24.7 Insolvency proceedings Any corporate action, legal proceedings or other procedure or step is taken in relation to: (a) the suspension of payments, a moratorium of any indebtedness, winding-up, cessation of business, dissolution, administration, judicial management or reorganisation (by way of voluntary arrangement, scheme or arrangement or otherwise) of an Obligor; (b) a composition, compromise, assignment or arrangement with any creditor of an Obligor; (c) the appointment of a liquidator, receiver, administrative receiver, administrator, judicial manager or other similar officer in respect of an Obligor; or (d) enforcement of any Security Interest over any assets of an Obligor (excluding enforcement of any share pledge over shares owned by a Guarantor in special purpose vessel owning entities (excluding any Obligor) within the Group). 24.8 Creditor's process Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of an Obligor (excluding shares owned by a Guarantor in special purpose vessel owning entities (excluding any Obligor) within the Group) and is not discharged within thirty (30) days after the Obligor has become aware of it. 24.9 Arrest If an arrest or detention is taken or levied against a Vessel and is not discharged within twenty (20) days (or such longer period as approved in writing by the Lenders) after an Obligor becomes aware of the same. 24.10 Cessation of business Any of the Obligors suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a substantial part of its business, or otherwise substantially changes the general nature of its business. 24.11 Unlawfulness It is or becomes impossible or unlawful for an Obligor to perform any of its obligations under the Finance Documents. 24.12 Repudiation Any Obligor repudiates a Finance Document or evidences an intention to repudiate a Finance Document. 24.13 Security Documents Any of the Security Documents for any reason whatsoever becomes invalid, ineffective, illegal or for any other reason ceases to continue in full force and effect. 24.14 Material adverse change Any event or series of events occur which, in the opinion of the Agent (acting on the instructions of the Lenders), might have a Material Adverse Effect. BD-#34696673-v11 72

 
24.15 Permits Any licence, authorization, consent, permission or approval required in order to enforce, complete or perform any of the Finance Documents is revoked, terminated or modified having a Material Adverse Effect on an Obligor. 24.16 Litigation There is current, pending or threatened any claims, litigation, arbitration or administrative proceedings against an Obligor which might, if adversely determined, have a Material Adverse Effect on that Obligor. 24.17 Acceleration Upon the occurrence of an Event of Default, the Agent may, and shall if so directed by the Majority Lenders: (a) by written notice to the Borrowers, cancel the Total Commitments whereupon they shall immediately be cancelled; (b) by written notice to the Borrowers, declare that all or part of the Loans together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents, be either immediately due and payable and/or payable upon demand, whereupon they shall become either immediately due and payable or payable on demand; and/or (c) having given written notice to the Borrowers, instruct the Security Agent to start enforcement in respect of the Security Interests established by the Security Documents; and/or (d) take any other action, with or without notice to the Borrowers, exercise any other right or pursue any other remedy conferred upon the Agent, the Security Agent or the Finance Parties by any of the Finance Documents or by any applicable law or regulation or otherwise as a consequence of such Event of Default; and/or (e) exercise or direct the Security Agent to exercise any or all of its rights, remedies, powers or discretions under the Finance Documents. BD-#34696673-v11 73

 
Section 9 - Changes to Parties 25 Changes to the Parties 25.1 No assignment by the Obligors (a) Subject to this Clause 25.1, the Obligors may not assign or transfer or have assumed any part of, or any interest in, its rights and/or obligations under the Finance Documents. (b) The Borrowers may, not later than thirty (30) days prior to any anticipated Drawdown Date, upon notice to the Agent, request that the Lenders and KEXIM as guarantor accept an Alternative Vessel in place of a Vessel. The Lenders and KEXIM as guarantor shall accept such Alternative Vessel provided that the Market Value of such Alternative Vessel (as evidenced by valuations dated not earlier than three (3) months prior to the date of the request to accept an Alternative Vessel) and its technical specifications are substantially similar (in the reasonable opinion of the Agent) to the relevant Vessel. (c) If the Lenders and KEXIM as guarantor accept the replacement of the Vessel, the relevant Alternative Vessel shall become the "Vessel" for the purposes of this Agreement. (d) If the Borrowers exercise their rights under this Clause 25.1 in respect of an Alternative Vessel, the amount of the Loan to be made available in respect of such Alternative Vessel shall be the amount of the Loan which would have been made available in respect of the Vessel which is being replaced but reduced with any scheduled repayment instalments in respect of the Commercial Facility Loan, KEXIM Facility Loan and KEXIM Guaranteed Facility Loan relating to such Vessel under Clause 6.1 (Repayment) which fall due prior to delivery of the Alternative Vessel. (e) The Borrowers may only exercise their rights under this Clause 25.1 in order to replace up to two (2) Vessels with Alternative Vessels provided that the Market Value of such Alternative Vessel (as evidenced by valuations dated not earlier than three (3) months prior to the date of the request to accept an Alternative Vessel) and its technical specifications are substantially similar (in the reasonable opinion of the Agent) to the relevant Vessel and the Agent is satisfied that the Collateral Maintenance Test, following such replacement, shall continue to be satisfied. (f) If it shall be necessary for one or more Borrowers to be replaced with other Subsidiaries of the Intermediate Parent as "Borrowers" under the Finance Documents, the Borrowers, such Subsidiaries of the Intermediate Parent and the other Obligors shall enter into such documentation as the Lenders, the Agent and KEXIM as guarantor shall require in order to effect such replacement of the relevant Borrowers. 25.2 Assignments and transfers by the Lenders A Lender (the "Existing Lender") may at any time assign, transfer or have assumed its rights or obligations under the Finance Documents (a "Transfer") to another bank or financial institution (the "New Lender"). The consent of KEXIM is required for an assignment or transfer by an Existing Lender which is a KEXIM Guaranteed Facility Lender. The consent of the Obligors will be required (such consent not to be unreasonably withheld or delayed), unless (i) an Event of Default has occurred and is continuing, or (ii) in case of Transfer to another Lender or KEXIM as guarantor, or an Affiliate of the Existing Lender or another Lender or KEXIM as guarantor. The Obligors will be deemed to have given its consent if no express refusal is received within five (5) Business Days. BD-#34696673-v11 74

 
Unless the Agent otherwise agrees and excluding an assignment or transfer to an Affiliate of a Lender or KEXIM as guarantor in accordance with Clause 25.8, 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 USD 5,000. 25.3 Limitations of responsibility of Existing Lenders (a) Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to the New Lender for: (i) the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents; (ii) the financial condition of an Obligor; (iii) the performance and observance by the Obligors of its obligations under the Finance Documents or any other documents; or (iv) the accuracy of any statements (whether written or oral) made in or in connection with the Finance Documents or any other document. (b) Each New Lender confirms to the Existing Lender and the other Finance Parties that it: (i) has made (and will continue to make) its own independent investigation and assessment of the financial condition and affairs of the Obligors 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 Finance Document; and (ii) will continue to make its own independent appraisal of the creditworthiness of the Obligors and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force. (c) Nothing in any Finance Document obliges an Existing Lender to: (i) accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause 25; or (ii) support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise. 25.4 Procedure for Transfer Any Transfer shall be effected as follows: (a) the Existing Lender must notify the Agent of its intention to Transfer all or part of its rights or rights and obligations by delivering a duly completed Transfer Certificate to the Agent duly executed by the Existing Lender and the New Lender; (b) subject to Clause 25.2 (Assignments and transfers by the Lenders), the Agent shall as soon as reasonable possible after receipt of a Transfer Certificate execute the Transfer Certificate and deliver a copy of the same to each of the Existing Lender and the New Lender; and (c) subject to Clause 25.2 (Assignments and transfers by the Lenders), the Transfer shall become effective on the Transfer Date. BD-#34696673-v11 75

 
25.5 Effects of the Transfer On the Transfer Date: (a) the Existing Lender will assign absolutely to the New Lender the rights under the Finance Documents expressed to be the subject of the assignment in the Transfer Certificate; (b) the Existing Lender will be released by each Obligor and the other Finance Parties from the obligations owed by it (the "Relevant Obligations") and expressed to be the subject of the release in the Transfer Certificate (but the obligations owed by the Obligors under the Finance Documents shall not be released); and (c) the New Lender shall become a Party to the Finance Documents as a "Lender" and as a "Commercial Facility Lender", a "KEXIM Facility Lender" and/or a "KEXIM Guaranteed Facility Lender" (as applicable) for the purposes of all the Finance Documents and will be bound by obligations equivalent to the Relevant Obligations. 25.6 Further assurances The Borrowers undertake to procure that in relation to any Transfer, the Borrowers shall (at its own cost) at the request of the Agent execute such documents as may in the discretion of the Agent be necessary to ensure that the New Lender attains the benefit of the Finance Documents. 25.7 Security over Lenders' rights In addition to the other rights provided to Lenders under this Clause 25, each Lender may without consulting with or obtaining consent from the Obligors, at any time charge, assign or otherwise create 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: (i) 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 (ii) require any payments to be made by an Obligor other than or in excess of, or grant to any person any more extensive rights than, those required to be made or granted to the relevant Lender under the Finance Documents. 25.8 Transfer to KEXIM as guarantor If a KEXIM Guaranteed Facility Lender receives a payment from KEXIM as guarantor under the KEXIM Guarantee in respect of its participation in a KEXIM Guaranteed Facility Loan, then, to the extent that it is required to do so by KEXIM as guarantor pursuant to the terms of the KEXIM Guarantee, that KEXIM Guaranteed Facility Lender shall, at the cost of the Borrowers, transfer to KEXIM as guarantor a part of its participation in such KEXIM Guaranteed Facility Loan equal to the amount paid to it by KEXIM as guarantor (but the transfer shall not limit the rights of that KEXIM Guaranteed Facility Lender to recover any remaining part of its participation in the KEXIM Guaranteed Facility Loan or of any other moneys owing to it), BD-#34696673-v11 76

 
provided however that if KEXIM as guarantor makes any payment to the KEXIM Guaranteed Facility Lenders under the KEXIM Guarantee: (a) the obligations of the Obligors and the Finance Parties (or any of them) under this Agreement and each of the Finance Documents shall not be discharged nor affected in any way; (b) KEXIM as guarantor shall be subrogated to the respective rights of the KEXIM Guaranteed Facility Lenders against the Obligors and the Finance Parties; (c) without double counting, KEXIM as guarantor shall be entitled to the extent of such payment to exercise the respective rights of the KEXIM Guaranteed Facility Lenders (whether present or future) against the Obligors and the Finance Parties (and against any of them) pursuant to this Agreement and the Finance Documents or any relevant laws and/or regulations unless and until such payment and the interest accrued thereon are fully reimbursed to KEXIM as guarantor; and (d) without double counting, with respect to the obligations of the Obligors owed to the Finance Parties under the Finance Documents (or any of them), such obligations shall additionally be owed to KEXIM as guarantor by way of subrogation of the rights of the Finance Parties. BD-#34696673-v11 77

 
Section 10 - The Finance Parties 26 Role of the Agent, the Security Agent, the KEXIM Agent, the Arrangers, Bookrunners and ECA Co-ordinator 26.1 Appointment of the Agent and the Security Agent (a) Each other Finance Party appoints the Agent to act as its facility agent under and in connection with the Finance Documents. (b) Each other Finance Party appoints the Security Agent to act as its security agent and (to the extent permitted under any applicable law) trustee under and in connection with the Finance Documents. (c) Each other Finance Party authorises the Agent and the Security Agent to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Agent and the Security Agent, respectively, under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions. (d) Each other Finance Party authorises the Agent and the Security Agent, as applicable, to execute and enforce each Finance Document to be executed and/or enforced by the Agent or the Security Agent, as the case may be, on its behalf in the manner contemplated by the Finance Documents. (e) The Finance Parties shall not have any independent power to enforce, or have recourse to, any of the Security or to exercise any right, power, authority or discretion arising under the Security Documents except through the Agent. (f) The Security Agent accepts its appointment under Clause 26.1(b) as trustee of the Trust Property with effect from the date of this Agreement and declares that it holds the Trust Property on trust for itself, the other Finance Parties (for so long as they are Finance Parties) on and subject to the terms set out in Clauses 26.1 to 26.22 and 29.5 (inclusive) and the Security Documents to which it is a party. 26.2 Instructions (a) The Agent and the Security Agent shall: (i) 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 or Security Agent, as the case may be, in accordance with any instructions given to it by: (A) all Lenders if the relevant Finance Document stipulates the matter is an all Lender decision; and (B) in all other cases, the Majority Lenders; and (ii) not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with paragraph (i) above. (b) The Agent and the Security 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. The Agent and the Security Agent may refrain from acting unless and until it receives any such instructions or clarification that it has requested. BD-#34696673-v11 78

 
(c) 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 or the Security Agent by the Majority Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties. (d) The Agent and the Security 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. (e) In the absence of instructions, the Agent and the Security Agent may act (or refrain from acting) as it considers to be in the best interest of the Lenders. (f) The Agent and the Security 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. 26.3 Duties of the Agent and the Security Agent (a) The Agent and the Security Agent's duties under the Finance Documents are solely mechanical and administrative in nature. (b) Subject to paragraph (c) below, 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. (c) 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. (d) 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 other Finance Parties. (e) 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 or the Arrangers) under this Agreement, it shall promptly notify the other Finance Parties. (f) 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, Bookrunners and the ECA Co-ordinator Except as specifically provided in the Finance Documents, the Arrangers, the Bookrunners and the ECA Co-ordinator have no obligations of any kind to any other Party under or in connection with any Finance Document or the transactions contemplated by the Finance Documents. 26.5 Role of the Security Agent (a) The Security Agent shall not be (except as expressly provided in any Finance Document) a trustee of any Finance Party under or in connection with any Finance Document. (b) The Security Agent shall hold the benefit of the Security Documents for itself and as agent on behalf of the other Finance Parties and will apply all payments and other benefits received by it under the Security Documents in accordance with the provisions of this Agreement. BD-#34696673-v11 79

 
26.6 No fiduciary duties (a) Nothing in any Finance Document constitutes the Agent, the KEXIM Agent, the Security Agent (except as expressly provided in any Finance Document) or the Arrangers, the Bookrunners or the ECA Co-ordinator as a trustee or fiduciary of any other person. (b) None of the Agent, the Security Agent, the Arrangers, the Bookrunners nor the ECA Co-ordinator 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. 26.7 Rights and discretions (a) The Agent and the Security Agent may: (i) rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised; (ii) assume that: (A) 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 (B) 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 paragraph (A) above, may assume the truth and accuracy of that certificate. (b) The Agent and the Security Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that: (i) no Default has occurred (unless it has actual knowledge of a Default arising under Clause 24.1 (Non-payment)); (ii) any right, power, authority or discretion vested in any Party or any group of Lenders has not been exercised; and (iii) any notice or request made by the Borrowers (other than a Drawdown Notice or Selection Notice) is made on behalf of and with the consent and knowledge of all the Obligors. (c) The Agent may engage and pay for the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts. (d) Without prejudice to the generality of paragraph (c) above or paragraph (e) below, 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 necessary. (e) 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 BD-#34696673-v11 80

 
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. (f) The Agent and the Security Agent may act in relation to the Finance Documents through its officers, employees and agents. (g) 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. (h) Notwithstanding any other provision of any Finance Document to the contrary, none of the Agent, the Security Agent nor the Arrangers is entitled 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. (i) Notwithstanding any provision of any Finance Document to the contrary, the Agent and the Security 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. (j) Except with KEXIM as guarantor's prior consent, neither the Agent nor the Security Agent shall 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, by the terms of this Agreement and/or the KEXIM Guarantee, would require KEXIM as guarantor's prior consent and any amendment or waiver which relates to any matter which, by the terms of any Finance Document and/or the KEXIM Guarantee, requires the prior consent of KEXIM as guarantor shall not be entered into or provided by the Agent or the Security Agent until KEXIM as guarantor has agreed to its terms. 26.8 Responsibility for documentation Neither the Agent, the Security Agent nor any Arranger is responsible or liable for: (a) the adequacy, accuracy or completeness of any information (whether oral or written) supplied by the Agent, the Arrangers, the Obligors or any other person in or in connection with any Finance Documents, the KEXIM Guarantee or the transactions contemplated in the Finance Documents, the KEXIM Guarantee or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document or the KEXIM Guarantee; (b) the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document or the KEXIM Guarantee; (c) 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; or (d) any loss to the Trust Property arising in consequence of the failure, depreciation or loss of any Charged Property or any investments made or retained in good faith or by reason of any other matter or thing. 26.9 No duty to monitor The Agent shall not be bound to enquire: (a) whether or not any Default has occurred; BD-#34696673-v11 81

 
(b) as to the performance, default or any breach by any Party of its obligations under any Finance Document; or (c) whether any other event specified in any Finance Document has occurred 26.10 Exclusion of liability (a) Without limiting paragraph (b) below (and without prejudice to any other provision of any Finance Document excluding or limiting the liability of the Agent and the Security Agent), the Agent and the Security Agent will not be liable for: (i) 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 the KEXIM Guarantee, unless directly caused by its gross negligence or wilful misconduct; (ii) exercising, or not exercising, any right, power, authority or discretion given to it by, or in connection with, any Finance Document or the KEXIM Guarantee or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Finance Document or the KEXIM Guarantee, other than by reason of its gross negligence or wilful misconduct; or (iii) without prejudice to the generality of paragraphs (i) and (ii) above, any damages, costs or losses to any person, any diminution in value or any liability whatsoever (including, without limitation, for negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent or the Security Agent) arising as a result of: (A) any act, event or circumstance not reasonably within its control; or (B) 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. (b) 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 Finance Document, the KEXIM Guarantee and any officer, employee or agent of the Agent may rely on this Clause. (c) Neither the Agent nor the Security Agent will 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 it if it 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 it for that purpose. (d) Nothing in this Agreement shall oblige the Agent, the Security Agent or the Arrangers to carry out: (i) any "know your customer" or other checks in relation to any person; or (ii) any check on the extent to which any transaction contemplated by this Agreement might be unlawful for any Lender, BD-#34696673-v11 82

 
on behalf of any Lender and each Lender confirms to the Agent, the Security 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, the Security Agent or the Arrangers. (e) Without prejudice to any provision of any Finance Document excluding or limiting the Agent's liability, any liability of the Agent or the Security Agent arising under or in connection with any Finance Document shall be limited to the amount of actual loss which has been suffered (as determined by reference to the date of default of the Agent and the Security 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 and the Security 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 and Finance Parties' indemnity to the Security Agent (a) 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, 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 the Agent (otherwise than by reason of the Agent's gross negligence or wilful misconduct, in acting as Agent under the Finance Documents (unless the Agent has been reimbursed by the Obligors pursuant to a Finance Document). (b) Each other Finance Party shall (in proportion to its share of all amounts outstanding and/or available for drawing under the Finance Documents) indemnify the Security Agent, within three (3) Business Days of demand, against any cost, loss or liability incurred by the Security Agent (otherwise than by reason of the Security Agent's gross negligence or wilful misconduct) in acting as Security Agent under the Finance Documents and, to the extent applicable, the KEXIM Guarantee (unless it has been reimbursed by the Obligors pursuant to a Finance Document). 26.12 Resignation of the Agent or the Security Agent (a) The Agent or the Security Agent may resign and appoint one of its Affiliates as successor by giving notice to the Lenders, the Borrowers and the KEXIM Agent. (b) Alternatively, the Agent or the Security Agent may resign by giving thirty (30) days' notice to the Lenders and the Borrowers, in which case the Majority Lenders (after consultation with the Borrowers) may appoint a successor Agent, or as the case may be, a successor Security Agent. (c) If the Majority Lenders have not appointed a successor Agent or as the case may be, a successor Security Agent in accordance with paragraph (b) above within twenty (20) days after notice of resignation was given, the retiring Agent or Security Agent (after consultation with the Borrowers) may appoint a successor Agent or as the case may be, a successor Security Agent. (d) The retiring Agent shall, or, as the case may be, the Security Agent make available to the successor Agent, or, as the case may be, the successor Security Agent such documents and records and provide such assistance as the successor Agent or, as the case may be, the successor Security Agent may reasonably request for the purposes of performing its functions 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. BD-#34696673-v11 83

 
(e) The Agent's, or, as the case may be, the Security Agent's, resignation notice shall only take effect upon the appointment of a successor. (f) Upon the appointment of a successor, the retiring Agent or Security Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under paragraph (d) above) but shall remain entitled to the benefit of Clause 14.4 (Indemnity to the Agent), Clause 14.5 (Indemnity to the Security 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. (g) After consultation with the Borrowers, the Majority Lenders may, by notice to the Agent, require it to resign in accordance with paragraph (b) above. In this event, the Agent shall resign in accordance with paragraph (b) above. (h) The Agent shall resign in accordance with paragraph (b) above (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to paragraph (c) above) if on or after the date which is three (3) months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either: (i) the Agent fails to respond to a request under Clause 12.7 (FATCA Information) and Borrower or 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; (ii) 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 (iii) 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 Borrower or 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 the Borrowers or that Lender, by notice to the Agent, requires it to resign. 26.13 Confidentiality (a) 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. (b) 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. 26.14 Relationship with the Lenders (a) 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: (i) entitled to or liable for any payment due under any Finance Document on that day; and BD-#34696673-v11 84

 
(ii) 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 (5) Business Days' prior notice from that Lender to the contrary in accordance with the terms of this Agreement. (b) 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 despatched to that Lender under the Finance Documents. Such notice shall contain the address, fax number and e-mail address and/or any other information required to enable the transmission 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, e-mail address (or such other information), department and officer by that Lender for the purposes of Clause 31.2 (Addresses) 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. 26.15 Credit appraisal by the Lenders Without affecting the responsibility of each Obligor for information supplied by it or on its behalf in connection with any Finance 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 Finance Document including but not limited to: (a) the financial condition, status and nature of the Obligors; (b) the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; (c) 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 Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and (d) the adequacy, accuracy or completeness of any information provided by the Agent, any Party or by any other person under or in connection with any Finance Document, the transactions contemplated by any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document. 26.16 Reference Banks If a Reference Bank ceases to be a Lender, the Agent shall (in consultation with the Borrowers) appoint another Lender to replace that Reference Bank. 26.17 Role of Reference Banks (a) No Reference Bank is under any obligation to provide a quotation or any other information to the Agent. (b) No Reference Bank will be liable for any action taken by it under or in connection with any Finance Document, or for any quotation provided as Reference Bank, unless directly caused by its gross negligence or wilful misconduct. (c) No Party (other than the relevant Reference Bank) may take any proceedings against any officer, employee or agent of any Reference Bank in respect of any claim it might have against that Reference Bank or in respect of any act or omission of any BD-#34696673-v11 85

 
kind by that officer, employee or agent in relation to any Finance Document, or to any quotation provided as a Reference Bank, and any officer, employee or agent of each Reference Bank may rely on this Clause 26.17. 26.18 Deduction from amounts payable by the Agent or the Security Agent If any Party owes an amount to the Agent or the Security Agent under the Finance Documents the Agent or the Security Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent or the Security Agent (as the case may be) 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. 26.19 No responsibility to perfect Security Interest Neither the Agent nor the Security Agent shall be liable for any failure to: (a) require the deposit with it of any deed or document certifying, representing or constituting the title of any Obligor to any of the assets subject to or intended to be subject to the Security Interest under the Security Documents; (b) obtain any licence, consent or other authority for the execution, delivery, legality, validity, enforceability or admissibility in evidence of any Finance Document or the Security Interest; (c) register, file or record or otherwise protect any of the Security Interest under the Security Documents (or the priority of any of those Security Interest) under any law or regulation or to give notice to any person of the execution of any Finance Document or of the Security Interest under the Security Documents; (d) take, or to require any Obligor to take, any step to perfect its title to any of the assets subject to or intended to be subject to the Security Interest under the Security Documents or to render those Security Interest effective or to secure the creation of any ancillary Security under any law or regulation; or (e) require any further assurance in relation to any Security Document. 26.20 Powers and duties of the Security Agent as trustee of the security In its capacity as trustee in relation to the Trust Property, the Security Agent: (a) shall, without prejudice to any of the powers, discretions and immunities conferred upon trustees by law (and to the extent not inconsistent with the provisions of this Agreement or any of the Security Documents), have all the same powers and discretions as a natural person acting as the beneficial owner of such property and/or as are conferred upon the Security Agent by this Agreement and/or any Security Document but so that the Security Agent may only exercise such powers and discretions to the extent that it is authorised to do so by the provisions of this Agreement; (b) shall (subject to Clause 29.5 (Partial Payments)) be entitled (in its own name or in the names of nominees) to invest moneys from time to time forming part of the Trust Property or otherwise held by it as a consequence of any enforcement of the security constituted by any Finance Document which, in the reasonable opinion of the Security Agent, it would not be practicable to distribute immediately, by placing the same on deposit in the name or under the control of the Security Agent as the Security Agent may think fit without being under any duty to diversify the same and the Security Agent shall not be responsible for any loss due to interest rate or exchange rate fluctuations except for any loss arising from the Security Agent's gross negligence or wilful misconduct; BD-#34696673-v11 86

 
(c) may, in the conduct of its obligations under and in respect of the Security Documents (otherwise than in relation to its right to make any declaration, determination or decision), instead of acting personally, employ and pay any agent (whether being a lawyer or any other person) to transact or concur in transacting any business and to do or concur in doing any acts required to be done by the Security Agent (including the receipt and payment of money) and on the basis that (i) any such agent engaged in any profession or business shall be entitled to be paid all usual professional and other charges for business transacted and acts done by him or any partner or employee of his or her in connection with such employment and (ii) the Security Agent shall not be bound to supervise, or be responsible for any loss incurred by reason of any act or omission of, any such agent if the Security Agent shall have exercised reasonable care in the selection of such agent; and (d) may place all deeds and other documents relating to the Trust Property which are from time to time deposited with it pursuant to the Security Documents in any safe deposit, safe or receptacle selected by the Security Agent exercising reasonable care or with any firm of solicitors or company whose business includes undertaking the safe custody of documents selected by the Security Agent exercising reasonable care and may make any such arrangements as it thinks fit for allowing Obligors access to, or its solicitors or auditors possession of, such documents when necessary or convenient and the Security Agent shall not be responsible for any loss incurred in connection with any such deposit, access or possession if it has exercised reasonable care in the selection of a safe deposit, safe, receptacle or firm of solicitors or company (save that it shall take reasonable steps to pursue any person who may be liable to it in connection with such loss). 26.21 Co-operation to achieve agreed priorities of application The other Finance Parties shall co-operate with each other and with the Security Agent and any receiver or administrator under the Security Documents in realising the property and assets subject to the Security Documents and in ensuring that the net proceeds realised under the Security Documents after deduction of the expenses of realisation are applied in accordance with Clause 29.5 (Partial payments). 26.22 Indemnity from Trust Property (a) In respect of all liabilities, costs or expenses for which the Obligors are liable under this Agreement, the Security Agent and each Affiliate of the Security Agent and each officer or employee of the Security Agent or its Affiliate (each a Relevant Person) shall be entitled to be indemnified out of the Trust Property in respect of all liabilities, damages, costs, claims, charges or expenses whatsoever properly incurred or suffered by such Relevant Person: (i) in the execution or exercise or bona fide purported execution or exercise of the trusts, rights, powers, authorities, discretions and duties created or conferred by or pursuant to the Finance Documents; (ii) as a result of any breach by an Obligor of any of its obligations under any Finance Document; (iii) in respect of any Environmental Claim made or asserted against an Obligor which would not have arisen if the Finance Documents had not been executed; and (iv) in respect of any matter or thing done or omitted in any way in accordance with the terms of the Finance Documents relating to the Trust Property or the provisions of any of the Finance Documents. (b) The rights conferred by this Clause 26.22 are without prejudice to any right to indemnity by law given to trustees generally and to any provision of the Finance Documents entitling the Security Agent or any other person to an indemnity in respect of, and/or reimbursement of, any liabilities, costs or expenses incurred or suffered by it in connection with any of the Finance Documents or the performance BD-#34696673-v11 87

 
of any duties under any of the Finance Documents. Nothing contained in this Clause 26.22 shall entitle the Security Agent or any other person to be indemnified in respect of any liabilities, damages, costs, claims, charges or expenses to the extent that the same arise from such person's own gross negligence or wilful misconduct. 26.23 Finance Parties to provide information The other Finance Parties shall provide the Security Agent with such written information as it may reasonably require for the purposes of carrying out its duties and obligations under the Security Documents and, in particular, with such necessary directions in writing so as to enable the Security Agent to make the calculations and applications contemplated by Clause 25.9 (Partial payments) above and to apply amounts received under, and the proceeds of realisation of, the Security Documents as contemplated by the Security Documents, Clause 25.9 (Partial payments). 26.24 Release to facilitate enforcement and realisation Each Finance Party acknowledges that pursuant to any enforcement action by the Security Agent (or a receiver) carried out on the instructions of the Agent it may be desirable for the purpose of such enforcement and/or maximising the realisation of the Charged Property being enforced against, that any rights or claims of or by the Security Agent (for the benefit of the Finance Parties) and/or any Finance Parties against any Obligor and/or any Security Interest over any assets of any Obligor (in each case) as contained in or created by any Finance Document, other than such rights or claims or security being enforced, be released in order to facilitate such enforcement action and/or realisation and, notwithstanding any other provision of the Finance Documents, each Finance Party hereby irrevocably authorises the Security Agent (acting on the instructions of the Agent) to grant any such releases to the extent necessary to fully effect such enforcement action and realisation including, without limitation, to the extent necessary for such purposes to execute release documents in the name of and on behalf of the Finance Parties. Where the relevant enforcement is by way of disposal of shares in an Obligor, the requisite release shall include releases of all claims (including under guarantees) of the Finance Parties and/or the Security Agent against such Obligor and of all Security Interests over the assets of such Obligor. 26.25 Undertaking to pay Each Obligor which is a Party undertakes with the Security Agent on behalf of the Finance Parties that it will, on demand by the Security Agent, pay to the Security Agent all money from time to time owing, and discharge all other obligations from time to time incurred, by it under or in connection with the Finance Documents. 26.26 Additional trustees The Security Agent shall have power by notice in writing to the other Finance Parties and the Borrowers to appoint any person approved by the Borrowers (such approval not to be unreasonably withheld or delayed) either to act as separate trustee or as co-trustee jointly with the Security Agent: (a) if the Security Agent reasonably considers such appointment to be in the best interests of the Finance Parties; (b) for the purpose of conforming with any legal requirement, restriction or condition in any jurisdiction in which any particular act is to be performed; or (c) for the purpose of obtaining a judgment in any jurisdiction or the enforcement in any jurisdiction against any person of a judgment already obtained, and any person so appointed shall (subject to the provisions of this Agreement) have such rights (including as to reasonable remuneration), powers, duties and obligations as shall be conferred or imposed by the instrument of appointment. The Security Agent shall have power to remove any person so appointed. At the request of the Security Agent, the other parties to this Agreement shall forthwith execute all such documents and do all such things as may be BD-#34696673-v11 88

 
required to perfect such appointment or removal and each such party irrevocably authorises the Security Agent in its name and on its behalf to do the same. Such a person shall accede to this Agreement as a Security Agent to the extent necessary to carry out their role on terms satisfactory to the Security Agent and (subject always to the provisions of this Agreement) have such trusts, powers, authorities, liabilities and discretions (not exceeding those conferred on the Security Agent by this Agreement and the other Finance Documents) and such duties and obligations as shall be conferred or imposed by the instrument of appointment (being no less onerous than would have applied to the Security Agent but for the appointment). The Security Agent shall not be bound to supervise, or be responsible for any loss incurred by reason of any act or omission of, any such person if the Security Agent shall have exercised reasonable care in the selection of such person. 26.27 Non-recognition of trust It is agreed by all the parties to this Agreement that: (a) in relation to any jurisdiction the courts of which would not recognise or give effect to the trusts expressed to be constituted by this Clause 26, the relationship of the Security Agent and the other Finance Parties shall be construed as one of principal and agent, but to the extent permissible under the laws of such jurisdiction, all the other provisions of this Agreement shall have full force and effect between the parties to this Agreement; and (b) the provisions of this Clause 26 insofar as they relate to the Security Agent in its capacity as trustee for the Finance Parties and the relationship between themselves and the Security Agent as their trustee may be amended by agreement between the other Finance Parties and the Security Agent. The Security Agent may amend all documents necessary to effect the alteration of the relationship between the Security Agent and the other Finance Parties and each such other party irrevocably authorises the Security Agent in its name and on its behalf to execute all documents necessary to effect such amendments. 26.28 Role of the KEXIM Agent (a) Each of the KEXIM Guaranteed Facility Lenders and the Agent appoints the KEXIM Agent to act as its agent for the purposes of dealing with KEXIM as guarantor in respect of the KEXIM Guarantee and the KEXIM Agent accepts the appointment on and subject to the terms of these paragraphs (a) to (g). (b) The KEXIM Agent's duties under the Finance Documents are solely mechanical and administrative in nature. (c) The KEXIM Agent shall promptly forward to the Agent the original or a copy of any document which is delivered to the KEXIM Agent for another Party and shall promptly forward to KEXIM as guarantor (in accordance with the provisions of the KEXIM Guarantee) the original or a copy of any document which is delivered to the KEXIM Agent by any other Party. (d) Except where a Finance Document specifically provides otherwise, the KEXIM Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party. (e) Clauses 26.7 (Rights and discretions), 26.8 (Responsibility for documentation), 26.1 (No duty to monitor), 26.10 (Exclusion of liability), 26.12 (Resignation of the Agent or the Security Agent), 26.13 (Confidentiality), 26.14 (Relationship with the Lenders), 26.15 (Credit appraisal by the Lenders) and 26.18 (Deduction from amounts payable by the Agent or the Security Agent) shall each extend so as to apply to the KEXIM Agent in its capacity as such and for that purpose each reference to the "Agent" in these Clauses shall extend to include in addition a reference to the "KEXIM Agent" in its capacity as such, provided, that any change, substitution or resignation of the KEXIM Agent shall be subject to any consent requirement pursuant to the KEXIM Guarantee. BD-#34696673-v11 89

 
(f) All communication between the Finance Parties and KEXIM shall be carried out exclusively through the KEXIM Agent. (g) Each Lender and the Hedge Providers shall deal with the KEXIM Agent exclusively through the Agent and shall not deal directly with the KEXIM Agent. 26.29 KEXIM Guarantee Each KEXIM Lender represents and warrants to the KEXIM Agent that, with effect from the date it receives the KEXIM Guarantee (a) it has reviewed any KEXIM Guarantee and is aware of the provisions thereof, (b) any representations and warranties made by the KEXIM Agent on behalf of each KEXIM Guaranteed Facility Lender under any KEXIM Guarantee are true and correct with respect to such KEXIM Guaranteed Facility Lender in all respects and (c) no information provided by such KEXIM Guaranteed Facility Lender in writing to the KEXIM Agent or to KEXIM as guarantor prior to the date hereof was incomplete, untrue or incorrect in any respect except to the extent that such KEXIM Guaranteed Facility 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. Each KEXIM Guaranteed Facility Lender represents and warrants to the KEXIM Agent that it has not taken (or failed to take), and agrees with the KEXIM Agent that it shall not take (or fail to take), any action that would result in the KEXIM Agent being in breach of any of its obligations in its capacity as KEXIM Agent under the KEXIM Guarantee or the Finance Documents, or result in any of KEXIM Guaranteed Facility Lenders being in breach of any of their respective obligations as guaranteed parties, under the KEXIM Guarantee, or which would otherwise prejudice the KEXIM Agent's ability to make a claim on behalf of the KEXIM Guaranteed Facility Lenders under the KEXIM Guarantee. 26.30 KEXIM Agent actions The KEXIM Agent agrees to take such actions under the KEXIM Guarantee (including with respect to any amendment, modification or supplement to the KEXIM Guarantee) as may be directed on the unanimous instructions of the KEXIM Guaranteed Facility Lenders from time to time, provided that, anything herein or in the KEXIM Guarantee to the contrary notwithstanding, the KEXIM 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. 27 Conduct of Business of the Finance Parties No provision of this Agreement will: (a) interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit; (b) oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or to the extent, order or manner of any claim; or (c) 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 Payment to Finance Parties If a Finance Party (a "Recovering Finance Party") receives or recovers any amount from an Obligor 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: (a) the Recovering Finance Party shall promptly, within three (3) Business Days, notify details of the receipt or recovery to the Agent; BD-#34696673-v11 90

 
(b) 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 by or made by the Agent and distributed in accordance with Clause 29 (Payment mechanics), without taking account of Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and (c) the Recovering Finance Party shall, within three (3) 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 29.5 (Partial payments). For the avoidance of doubt, any payment received by a KEXIM Guaranteed Facility Lender from KEXIM as guarantor or the KEXIM Agent or the Security Agent under the KEXIM Guarantee shall not constitute a Recovered Amount for the purposes of this Clause 28.1. 28.2 Redistribution of payments The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) (the "Sharing Finance Parties") in accordance with Clause 29.5 (Partial payments) towards the obligations of that Obligor 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 an Obligor, as between the relevant Obligor 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 Obligor. 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: (a) 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 (b) as between the relevant Obligor and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will treated as not having been paid by that Obligor. 28.5 Exceptions (a) 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 Obligor. (b) 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: (i) it notified that other Finance Party of the legal or arbitration proceedings; and (ii) that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as reasonably practicable having received notice and did not take separate legal or arbitration proceedings. BD-#34696673-v11 91

 
Section 11 - Administration 29 Payment Mechanics 29.1 Payments to the Agent All payments by an Obligor or a Lender under the Finance Documents (other than in connection with the realisation or enforcement of any Security Documents) shall be made: (a) to the Agent to its account with such office or bank as the Agent may from time to time designate in writing to the Obligor or a Lender for this purpose; and (b) for value on the due date at such times and in such funds as the Agent may specify to the Party concerned as being customary at the time for settlement of transactions in the relevant currency in the place of payment. 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 the Obligors), 29.4 (Clawback) and 29.9 (Payments to the Security Agent), be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement, to such account as that Party may notify to the Agent by not less than five (5) Business Days' notice. 29.3 Distributions to an Obligor The Agent may (with the consent of the Obligor or in accordance with Clause 30 (Set-off)), apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of currency to be so applied. 29.4 Clawback and pre-funding (a) 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. (b) Unless paragraph c) below 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 amount 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. (c) If the Agent has notified the Lenders that it is willing to make available amounts for the account of the Borrowers 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: (i) the Agent shall notify the Borrowers of that Lender's identity and the Borrowers shall on demand refund it to the Agent; and (ii) the Lender by whom those funds should have been made available or, if that Lender fails to do so, the Borrowers 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. BD-#34696673-v11 92

 
29.5 Partial payments (a) If the Agent (or the Security Agent, as applicable) receives a payment or an amount is recovered by the Security Agent pursuant to the terms of any Security Document in connection with the realisation or enforcement of all or any part of the Security Interest) that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Agent shall apply that payment towards the obligations of that Obligor under the Finance Documents in the following order: (i) firstly, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent and the Security Agent under the Finance Documents; (ii) secondly, in or towards payment pro rata of any accrued interest (including default interest), fee or commissions due but unpaid under this Agreement; (iii) thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and (iv) fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents (excluding the Hedging Agreements); and (v) fifthly, in or towards payment pro rata of any other sum due but unpaid under the Hedging Agreements. (b) The Agent shall, if so directed by the Lenders and the KEXIM Agent vary the order set out in paragraphs (i) to (v) above. (c) The Security Agent and each other beneficiary of the Security Documents shall make each application in accordance with paragraph (a) as soon as is practicable after the relevant moneys are received by, or otherwise become available to, it save that (without prejudice to any other provision contained in any of the Security Documents) the Security Agent (acting on the instructions of the Agent) any other beneficiary of the Security Documents or any receiver or administrator may credit any moneys received by it to a suspense account for so long and in such manner as the Security Agent, any other beneficiary of the Security Documents or such receiver or administrator 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 their respective claims against the Borrowers or any other person liable. (d) The Security Agent and/or any other beneficiary of the Security Documents shall obtain a good discharge in respect of the amounts expressed to be due to the other Finance Parties as referred to in this Clause 29.5 by paying such amounts to the Agent for distribution in accordance with Clause 29 (Payment mechanics). (e) This Clause 29.5 will override any appropriation made by an Obligor. 29.6 No set-off by the Obligors All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim. 29.7 Business Days (a) Any payment under the Finance Documents which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not). (b) During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date. BD-#34696673-v11 93

 
29.8 Currency of account The Obligors shall pay: (a) any amount payable under the Finance Documents, except as otherwise provided for herein, in USD; and (b) all payments of costs and Taxes in the currency in which the same were incurred. 29.9 Payments to the Security Agent Notwithstanding any other provision of any Finance Document, at any time after any Security Interest created by or pursuant to any Security Document becomes enforceable, the Security Agent may require: (a) any Obligor to pay all sums due under any Finance Document; or (b) the Agent to pay all sums received or recovered from an Obligor under any Finance Document, in each case as the Security Agent may direct for application in accordance with the terms of the relevant Security Document. 30 Set-Off A Finance Party may, to the extent permitted by applicable law, set off any obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any obligations owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, 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 Notices 31.1 Communication in writing (a) 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 e-mail or letter. (b) Any such notice or communication addressed as provided in Clause 31.2 (Addresses) will be deemed to be given or made as follows: (i) if by letter, when delivered at the address of the relevant Party; (ii) if by email, when received in legible form. (c) However, a notice given in accordance with the above but received on a day which is not a Business Day or after 16:00 hours in the place of receipt will only be deemed to be given at 9:00 hours on the next Business Day in that place. (d) Any communication or document to be made or delivered to the Agent will be effective only when actually received by the Agent and then only if it is expressly marked for the attention of the department or officer identified with the Agent's signature below (or any substitute department or officer as the Agent shall specify for this purpose). 31.2 Addresses Any communication or document to be made under or in connection with the Finance Documents shall be made or delivered to the address and email address of each Party and BD-#34696673-v11 94

 
marked for the attention of the department or persons set out below and, in case of any New Lender, to the address notified to the Agent: If to the Agent or the Security Agent: Nordea Bank Abp, filial i Norge Dept.: Global Maritime Loans Essendrops gate 7, 0367 Oslo, Norway For credit and documentation matters: Dept.: Global Maritime Loans Email: agency.soosid@nordea.com (recipient for information undertakings, amendment and waiver requests, conditions precedent and conditions subsequent etc.) For loan operation matters: Dept.: Structure Loan Services Email: sls.norway@nordea.com (recipient for utilisation requests, selection notices, payment notices etc.) If to any of the Obligors:FLEX LNG MANAGEMENT AS Bryggegata 3 0250 Oslo, Norway Att: Principal Financial Officer E-mail: finance@flexlng.com or any substitute address and/or email address and/or marked for such other attention as the Party may notify to the other Agent (or the Agent may notify the other Parties if a change is made by the Agent) by not less than five (5) Business Days' prior notice. 31.3 Communication with the Obligors All communication from or to an Obligor shall be sent through the Agent. 31.4 Language Communication to be given by one Party to another under the Finance Documents shall be given in the English language or, if not in English and if so required by the Agent, be accompanied by a certified English translation and, in this case, the English translation shall prevail unless the document is a statutory or other official document. 32 Calculations and Certificates 32.1 Certificates and Determinations Any certification or determination by a Finance Party 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. 32.2 Day count convention All interest, commission or fee accruing under the Finance Documents 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. 33 Partial Invalidity If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provisions under any law of any other jurisdiction will in any way be affected or impaired. BD-#34696673-v11 95

 
34 Remedies and Waivers No failure to exercise, nor any delay in exercising on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, of any such right or remedy any of the Finance Documents. No single or partial exercise of any other right or remedy shall prevent any further or other exercise of any other right or remedy. The rights and remedies provided in each Finance Document are cumulative and not exclusive of any rights or remedies provided by law. 35 Amendments and Waivers 35.1 Required consents (a) Subject to Clause 35.2 (All Lender matters) and 35.3 (Other exceptions), any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Obligors and any such amendment will be binding on all Parties. (b) The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause. 35.2 All Lender matters An amendment to or waiver of 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 of the date of any payment of any amount under the Finance Documents; (c) a reduction in Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable; (d) an increase in or extension of any Commitment other than any Accordion Increase pursuant to Clause 2.5 (Accordion Option) or an extension of the Availability Period or any requirement that a cancellation of Commitments reduces the Commitments of the Lenders rateably under the Facility; (e) a term of the Finance Documents which expressly requires the consent of all the Lenders; (f) a proposed substitution or replacement of a Borrower or a Guarantor; (g) the definitions of "Restricted Party", "Sanctions", "Sanctions Authority" or "Sanctions List", any Clause in which such term is used in this Agreement, or any other provision or other matters relating to Sanctions, including without limitation Clause 22.22 (Sanctions). (h) the release of any guarantee and indemnity granted under Clause 17 (Guarantee and indemnity) or of any Security Interest granted under any of 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 to Security Interest where such sale or disposal is expressly permitted under this Agreement or any other Finance Document; or (i) the definition of “Change of Control”, Clauses 2.2 (Finance party's rights and obligations), 7.3 (Mandatory prepayment – Illegality), 7.4 (Mandatory prepayment – Change of Control), 7.8 (Mandatory prepayment – KEXIM Guarantee), 7.9 (Mandatory Prepayment – Commercial Facility), 18 (Security), 25 (Changes to the Parties), 28 (Sharing among the Finance Parties), 29.5 (Partial payments), 29.8 BD-#34696673-v11 96

 
(Currency of account), this Clause 35.2, Clauses 39.1 (Governing law) and 39.2 (Jurisdiction of English courts), shall not be made without the prior written consent of all the Lenders. 35.3 Other exceptions (a) An amendment or waiver which relates to the rights or obligations of the Agent, the KEXIM Agent, the Hedge Providers, the Security Agent, the Arrangers, the Bookrunners or the ECA Co-ordinator (each in their capacity as such) may not be effected without the consent of the Agent, the KEXIM Agent, the Hedge Providers, the Security Agent, the Arrangers, the Bookrunners or, as the case may be, the ECA Co-ordinator. (b) Amendments to or waivers in respect of Clauses 7.8 (KEXIM Guarantee) or 7.9 (Commercial Facility) may only be agreed with the consent of each of the KEXIM Guaranteed Facility Lenders. (c) Amendment to the definition of "Majority Lenders" or Clauses 22.22 (Sanctions) or 25 (Changes to the Parties) may only be agreed with the consent of KEXIM as guarantor. 35.4 Replacement of Screen Rate (a) Subject to Clause 35.3 (Other exceptions), any amendment or waiver which relates to: (i) providing for the use of a Replacement Benchmark; and (ii) (A) aligning any provision of any Finance Document to the use of that Replacement Benchmark; (B) enabling that Replacement Benchmark to be used for the calculation of interest under this Agreement (including, without limitation, any consequential changes required to enable that Replacement Benchmark to be used for the purposes of this Agreement); (C) implementing market conventions applicable to that Replacement Benchmark; (D) providing for appropriate fallback (and market disruption) provisions for that Replacement Benchmark; or (E) adjusting the pricing to reduce or eliminate, to the extent reasonably practicable, any transfer of economic value from one Party to another as a result of the application of that Replacement Benchmark (and if any adjustment or method for calculating any adjustment has been formally designated, nominated or recommended by the Relevant Nominating Body, the adjustment shall be determined on the basis of that designation, nomination or recommendation), may be made with the consent of the Agent (acting on the instructions of the Majority Lenders) and the Obligors. (b) If any Lender fails to respond to a request for an amendment or waiver described in paragraph (a) above within ten (10) Business Days (or such longer time period in relation to any request which the Ultimate Parent and the Agent may agree) of that request being made: BD-#34696673-v11 97

 
(i) its Commitment(s) shall not be included for the purpose of calculating the Total Commitments under the relevant Facility when ascertaining whether any relevant percentage of Total Commitments has been obtained to approve that request; and (ii) its status as a Lender shall be disregarded for the purpose of ascertaining whether the agreement of any specified group of Lenders has been obtained to approve that request. (c) For the purpose of this Clause 35.4 (Replacement of Screen Rate) "Relevant Nominating Body" means any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or the Financial Stability Board. "Replacement Benchmark" means: (i) a benchmark rate which is formally designated, nominated or recommended as the replacement for a Screen Rate by: (A) the administrator of that Screen Rate (provided that the market or economic reality that such benchmark rate measures is the same as that measured by that Screen Rate); or (B) any Relevant Nominating Body, (C) and if replacements have, at the relevant time, been formally designated, nominated or recommended under both paragraphs, the "Replacement Benchmark" will be the replacement under paragraph (ii) above; (ii) a benchmark rate which is in the opinion of the Majority Lenders and the Obligors, generally accepted in the international or any relevant domestic syndicated loan markets as the appropriate successor to a Screen Rate; or (iii) a benchmark rate which is in the opinion of the Majority Lenders and the Obligors, an appropriate successor to a Screen Rate. 35.5 Conflict and KEXIM Guarantee override (a) Without limiting in any manner the rights of the Lenders under the Facilities (other than the KEXIM Guaranteed Facility), and subject and without prejudice to any amendments, consents or waivers as may be given, consented or agreed to by the Agent which is contrary to or inconsistent with any vote exercised by the KEXIM Guaranteed Facility Lenders (acting on the instructions of KEXIM as guarantor) but which are otherwise in accordance with the terms and conditions of the Finance Documents; (i) in case of any conflict between the Finance Documents and the KEXIM Guarantee, the KEXIM Guarantee shall, as between the KEXIM Guaranteed Facility Lenders and KEXIM as guarantor, prevail, and to the extent of such conflict or inconsistency, none of the KEXIM Guaranteed Facility Lenders or the KEXIM Agent shall assert to KEXIM as guarantor, the terms of the relevant Finance Documents; and (ii) nothing in this Agreement or any Finance Document shall permit or oblige any KEXIM Guaranteed Facility Lender or the KEXIM Agent to act (or omit to act) in a manner that is inconsistent with any requirement of KEXIM as guarantor under or in connection with the KEXIM Guarantee. (b) If, in the opinion of the KEXIM Agent (acting reasonably), any terms of this Agreement contradicts and/or conflicts with any provision of the KEXIM Guarantee BD-#34696673-v11 98

 
such that compliance by a Finance Party with the terms of the KEXIM Guarantee could result in a breach by a Finance Party of the terms of this Agreement, the relevant terms of this Agreement will be amended or supplemented as necessary so that compliance by any Finance Party with the terms of the KEXIM Guarantee will not result in a breach of the terms of this Agreement, provided that such amendment shall not affect the rights or obligations of an Obligor without the prior written consent of the relevant Obligor. 35.6 Prior consultation with KEXIM as guarantor The Borrowers acknowledge that the Agent may, under the terms of the KEXIM Guarantee, be required: (a) to consult with the KEXIM Agent (who shall in turn consult with KEXIM as guarantor), prior to the exercise of certain decisions under the Finance Documents (including the exercise of such voting rights in relation to any substantial amendment to any Finance Document); and (b) to follow certain instructions given by the KEXIM Agent (acting on the instructions of KEXIM as guarantor), and each KEXIM Guaranteed Facility Lender will be deemed to have acted reasonably if it has acted on the instructions of the Agent (given by the KEXIM Agent (acting on the instructions of KEXIM as guarantor) to the Agent in accordance with the terms of the KEXIM Guarantee in the making of any such decision or the taking or refraining from taking any action under any Finance Document to which it is a party). 35.7 Demand under KEXIM Guarantee Notwithstanding any other term as set forth herein and/or in any other Finance Document, the Agent (or, as the case may be, the KEXIM Agent) shall only make a written demand to KEXIM as guarantor for payment under the KEXIM Guarantee after the Agent has first made a written demand for payment of the relevant outstanding amount due from the Borrowers or the Guarantors in accordance with the terms of the Finance Documents to which they are a party. 35.8 Hedging No Hedge Provider shall be entitled to terminate or close out any Hedging Contract (as defined in the Assignment of Hedging Claims) prior to its stated maturity (in circumstances other than where the Loans are also reduced under this Agreement) except if the Borrowers have not paid amounts due under the Hedging Contract and such amounts remain unpaid for a period of five days after the due date for payment or for reasons entitling it to do so due to the occurrence of a Tax Event, Illegality or a Force Majeure event (as defined in any Hedging Agreement) and only then upon notice to the Agent. 36 Confidential Information 36.1 Confidentiality 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 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: (a) to any of its Affiliates and any of its or their officers, directors, employees, professional advisers, auditors, partners, insurance and reinsurance brokers, insurers and reinsurers and representatives such Confidential Information as that BD-#34696673-v11 99

 
Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this paragraph a) 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 such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information; (b) to any person and only such Confidential Information as that Finance Party shall consider appropriate: (i) to (or through) whom it transfers (or may potentially 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 and, in each case, to any of that person's Affiliates and professional advisers; (ii) with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and the Borrowers and to any of that person's Affiliates and professional advisers; (iii) appointed by any Finance Party or by a person to whom paragraph (b)(i) or (ii) above applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf (including, without limitation, any person appointed under paragraph (c) of Clause 26.14 (Relationship with the Lenders)); (iv) who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in paragraphs (b)(i) or (b)(ii) above; (v) to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation; (vi) to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes; (vii) to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 25.8 (Security over Lenders' rights); (viii) who is a Party; or (ix) with the consent of the Borrowers. 36.3 Disclosure to numbering service providers (a) Notwithstanding any other term of any Finance Document or any other agreement between the Parties to the contrary (whether express or implied), 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 Facility and/or one or more Obligors the following information: (i) names of Obligors; (ii) country of domicile of Obligors; (iii) place of incorporation of Obligors; BD-#34696673-v11 100

 
(iv) date of the Agreement; (v) governing law of the Agreement; (vi) names of the Agent and the Arrangers; (vii) date of each amendment and restatement of the Agreement; (viii) amounts of, and names of, the Facility (and any tranches); (ix) amount of Total Commitments; (x) currencies of the Facility; (xi) type of Facility; (xii) ranking of Facility; (xiii) Final Maturity Date for any Facility; (xiv) changes to any of the information previously supplied pursuant to sub-Clauses (i) to (xii) above; and (xv) such other information agreed between such Finance Party and the Ultimate Parent, to enable such numbering service provider to provide its usual syndicated loan numbering identification services. (b) The Parties acknowledge and agree that each identification number assigned to the Agreement, the Facility and/or one or more Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider. (c) Each Obligor represents that none of the information set out in sub-paragraphs (i) to (xiv) of paragraph (a) above is, nor will at any time be, unpublished price-sensitive information. (d) The Agent shall notify the Ultimate Parent and the other Finance Parties of: (i) the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Facility and/or one or more Obligors; and (ii) the number or, as the case may be, numbers assigned to the Agreement, the Facility and/or one or more Obligors by such numbering service provider. 36.4 Disclosure to administration/settlement services providers Notwithstanding any other term of any Finance Document or any other agreement between the Parties to the contrary (whether express or implied), any Finance Party may disclose to any person appointed by: (a) that Finance Party; (b) a person to (or through) whom that Finance Party 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 under the Agreement; and/or BD-#34696673-v11 101

 
(c) a person with (or through) whom that Finance Party enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made, or may be made, by reference to, one or more Finance Documents and/or one or more Obligors, 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 36.4 if the service provider to whom the Confidential Information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for use with Administration/ Settlement Services Providers or such other form of confidentiality undertaking agreed between the Ultimate Parent and the relevant Finance Party. 36.5 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. 36.6 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. 36.7 Notification of disclosure Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Borrowers: (a) of the circumstances of any disclosure of Confidential Information made pursuant to paragraph (b)(v) of Clause 36.2 (Disclosure of Confidential Information), except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and (b) upon becoming aware that Confidential Information has been disclosed in breach of this Clause 36. 36.8 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 twelve (12) months from the earlier of: (a) the date on which all amounts payable by the Obligors under or in connection with this Agreement have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and (b) the date on which such Finance Party otherwise ceases to be a Finance Party. 37 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. BD-#34696673-v11 102

 
38 Contractual Recognition of Bail-In Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding between the Parties, each Party and each Obligor acknowledges and accepts that any liability of any Party to any other Party under or in connection with the Finance Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of: (a) any Bail-In Action in relation to any such liability, including (without limitation): (i) a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability; (ii) a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and (iii) a cancellation of any such liability; and (b) a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability. BD-#34696673-v11 103

 
Section 12 - Governing Law and Enforcement 39 Governing Law and Enforcement 39.1 Governing law This Agreement and any non-contractual obligations connected with it are governed by English law. 39.2 Jurisdiction of English courts (a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement or any non-contractual obligations connected with it (including a dispute regarding the existence, validity or termination of this Agreement) (a "Dispute"). (b) The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary. (c) This Clause 39.2 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, the Finance Parties may take concurrent proceedings in any number of jurisdictions. 39.3 Service of process Without prejudice to any other mode of service, each Obligor: (a) appoints FLEX LNG Chartering Limited of 10 Eastcheap, London, England, EC3M 1AJ as its agent for the service of process in relation to any proceedings before the English courts in connection with any Finance Document; and (b) agrees that failure by such process agent to notify an Obligor of the process will not invalidate the proceedings concerned. If any process agent appointed pursuant to this Clause 39.3 (Service of process) (or any successor thereto) shall cease to exist for any reason where process may be served, the Obligor will forthwith appoint another process agent with an office in England where process may be served and will forthwith notify the Agent thereof. This Agreement has been entered into on the date stated at the beginning of this Agreement. BD-#34696673-v11 104

 
Schedule 1 THE ORIGINAL PARTIES AND COMMITMENTS The Borrowers Name of Borrower FLEX LNG Amber Limited Marshall Islands Original Jurisdiction 96759 Registration number (or equivalent, if any) Trust Company Complex, Ajeltake Road, Ajeltake Registered office Island, Majuro, MH96960, Marshall Islands Name of Borrower FLEX LNG Aurora Limited Marshall Islands Original Jurisdiction 96758 Registration number (or equivalent, if any) Trust Company Complex, Ajeltake Road, Ajeltake Registered office Island, Majuro, MH96960, Marshall Islands Name of Borrower FLEX Freedom Limited Marshall Islands Original Jurisdiction 98380 Registration number (or equivalent, if any) Trust Company Complex, Ajeltake Road, Ajeltake Registered office Island, Majuro, MH96960, Marshall Islands Name of Borrower FLEX LNG Reliance Limited Marshall Islands Original Jurisdiction 96931 Registration number (or equivalent, if any) Trust Company Complex, Ajeltake Road, Ajeltake Registered office Island, Majuro, MH96960, Marshall Islands BD-#34696673-v11 105

 
Name of Borrower FLEX LNG Resolute Limited Marshall Islands Original Jurisdiction 96932 Registration number (or equivalent, if any) Trust Company Complex, Ajeltake Road, Ajeltake Registered office Island, Majuro, MH96960, Marshall Islands The Original Commercial Facility Lenders Name of Original Commercial Facility Lender Commitment ABN AMRO BANK N.V., Oslo Branch USD 45,000,000 Registration no. 34334259 Citibank N.A., London Branch USD 25,000,000 Crédit Agricole Corporate and Investment Bank USD 12,500,000 Danske Bank A/S USD 37,500,000 Deutsche Bank AG USD 12,500,000 Nordea Bank Abp, filial I Norge USD 50,000,000 Skandinaviska Enskilda Banken AB (publ) USD 37,500,000 SpareBank 1 SR-Bank ASA USD 30,000,000 Total Commercial Facility Commitments USD 250,000,000 The Original KEXIM Facility Lenders Name of Original KEXIM Facility Lender Commitment The Export-Import Bank of Korea USD 189,879,000 Total KEXIM Facility Commitments USD 189,879,000 The Original KEXIM Guaranteed Facility Lenders Name of Original KEXIM Guaranteed Facility Lender Commitment ABN AMRO BANK N.V., Oslo Branch USD 5,121,000 Registration no. 34334259 BD-#34696673-v11 106

 
Citibank N.A., London Branch USD 25,000,000 Commonwealth Bank of Australia USD 40,000,000 Crédit Agricole Corporate and Investment Bank USD 22,000,000 Credit Suisse AG USD 40,000,000 Deutsche Bank Aktiengesellschaft Filiale Hong Kong (Incorporated in the USD 35,000,000 Federal Republic of Germany & members’ liability is limited) Sumitomo Mitsui Trust Bank, Limited (London Branch) USD 22,000,000 Total KEXIM Guaranteed Facility Commitments USD 189,121,000 The Hedge Providers Name of Hedge Provider ABN AMRO BANK N.V. Registration no. 34334259 Citibank Europe plc., Dublin Branch Danske Bank A/S Deutsche Bank AG Nordea Bank Abp Registration no. 2858394-9 Skandinaviska Enskilda Banken AB (publ) SpareBank 1 SR-Bank ASA BD-#34696673-v11 107

 
Schedule 2 CONDITIONS PRECEDENT PART I CONDITIONS PRECEDENT TO SIGNING 1 Corporate authorisations (a) A copy of each Obligor's constitutional documents; (b) A copy of resolutions passed by each Obligor's board of directors evidencing: (i) the approval of the terms of, and the transactions contemplated by, the Finance Documents; and (ii) the authorisation of its appropriate officer or officers or other representatives to execute the Finance Documents and any other documents necessary for the transactions contemplated by the Finance Documents, on its behalf. (c) To the extent required in the relevant jurisdictions, a copy of resolutions passed by the shareholders of each Obligor ratifying the resolutions of its board of directors; (d) To the extent not covered by resolutions, any powers of attorney (notarised and legalised, if required) granted by an Obligor to execute any Finance Documents; (e) A certificate of goodstanding (or equivalent) in respect of each Obligor; (f) A specimen of the signature (which can be by way of copy of passport) of each person signing the Finance Documents on behalf of each Obligor (g) A certificate of an authorised signatory of each Obligor certifying that each copy document relating to it specified in this Schedule 2 is correct, complete and in full force and effect and has not been amended or superseded as at a date no earlier than the date of this Agreement and confirming that borrowing or guaranteeing or securing, as appropriate, the Total Commitments would not cause any borrowing, guarantee, security or similar binding limit to be exceeded. 2 Authorisations All approvals, authorisations and consents required by any government or other authorities for the Obligors to enter into and perform their obligations under this Agreement and/or any of the Finance Documents to which they are respective parties. 3 Finance Documents (a) The Agreement (as approved by the Agent (acting on the instructions of all Lenders)); and (b) The Fee Letters, duly executed. 4 Vessel Documents (a) A copy of the Shipbuilding Contracts; (b) A copy of the Intermediate MOAs, including arrangements for the assignment of Yard's warranties in respect of the Vessel to the relevant Borrower; and (c) A copy of the Management Agreements. BD-#34696673-v11 108

 
5 Miscellaneous (a) Evidence that all fees referred to in Clause 11 (Fees) that are due have or will be paid on its due date; (b) Copy of the Original Financial Statements; (c) Evidence that all process agent appointments required by the Finance Documents listed in item 3 above have been duly accepted; and (d) Any other documentation authorization, opinion or assurance reasonably required by the Agent. 6 Legal opinions If required, such legal opinions relating to the Agreement, in such form (agreed draft or issued) as the Agent may require (acting on the instructions of the Lenders). BD-#34696673-v11 109

 
PART II CONDITIONS PRECEDENT TO DRAWDOWN NOTICE 1 Finance Documents (a) the Security Agreements, and deliverables thereunder; (b) the General Assignment, and deliverables thereunder; (c) if applicable, the Assignment of Hedging Claims, and deliverables thereunder; (d) the Share Pledges, and deliverables thereunder; All of the above Security Documents as approved by the Agent (acting on the instructions of all Lenders) duly executed and perfected. (e) the Mortgage in respect of the relevant Vessel (agreed form only); (f) The Drawdown Notice at least three (3) Business Days prior to the Drawdown Date; and (g) Any Hedging Agreements. 2 Vessel Documents For the relevant Vessel to which the proposed Loan relates: (a) evidence (by way of email confirmation from the registry) that the Vessel is ready to be registered in the name of the Borrower in an Approved Ship Registry upon receipt of the copy of the title documents on the Delivery Date, and that the agreed form Mortgage is pre-cleared for registration with its intended first priority against the Vessel; (b) copies of insurance policies/cover notes documenting that insurance cover has been taken out in respect of the Vessel in accordance with Clause 23.1 (Insurance), and evidencing that the Security Agent’s (on behalf of the Finance Parties) Security Interest in the insurance policies have been noted in accordance with the relevant notices as required under the Security Agreement; (c) the Insurance Report, with no outstanding pre-delivery action points; (d) the technical manager’s current DOC; (e) each Manager’s Undertaking as approved by the Agent (acting on the instructions of all Lenders) duly executed by the relevant Manager; (f) a copy of each charterparty or other employment contract entered into in respect of the Vessel with a fixed term exceeding twelve (12) months; and (g) evidence of the Market Value of the Vessel dating not more thirty (30) days prior to the proposed Drawdown Date. 3 Miscellaneous (a) Evidence that all fees referred to in Clause 11 (Fees), and costs and expenses referred to in 16 (Costs and expenses) that are due have or will be paid on its due date; (b) A Compliance Certificate confirming that the Obligors are in compliance with the financial covenants as set out in Clause 21 (Financial covenants), together with the latest consolidated financial statements of the Guarantor. (c) Evidence that all process agent appointments required by the Finance Documents have been duly accepted; BD-#34696673-v11 110

 
(d) Documentation evidencing all shareholder loans to any Obligor, as well as any intra- group loans or receivables to which any Obligor is a party; (e) Such other documentation and evidence required to complete the "know your customer" checks as described in Clause 20.9 ("Know your customer" checks). (f) If relevant, a closing memorandum agreed between the Yard, the Intermediate Buyer, the relevant Borrower and the Agent; (g) If relevant, an agreed wording of the conditional SWIFT; (h) If relevant, an irrevocable undertaking from the Intermediate Buyer (if relevant) and Borrower, and their representative at closing, not to sign any document triggering release under the MT199 SWIFT, unless they have first received the written consent of the Agent. (i) If relevant, evidence that any part of the delivery instalment for the Vessel not covered by the relevant Loan has been, or will at the latest together with the Loan be, paid by equity to the Yard or the relevant Intermediate Buyer (as the case may be). (j) Any other documentation authorization, opinion or assurance reasonably required by the Agent. 4 Legal opinions (a) A legal opinion regarding Norwegian law issued by Advokatfirmaet Thommessen AS; (b) A legal opinion regarding Bermuda law issued by Appleby (Bermuda) Limited; (c) A legal opinion regarding Marshall Islands law issued by Norton Rose Fulbright (US) LLP; (d) A legal opinion regarding English law issued by Norton Rose Fulbright LLP; and (e) (In the case of the first Drawdown Date) A legal opinion regarding the KEXIM Guarantee issued by Shin & Kim LLC, in such form (agreed draft or issued) as the Agent may require (acting on the instructions of the Lenders); and (f) Any such other favourable legal opinions in form and substance satisfactory to the Agent (acting on the instructions of the Lenders) from lawyers appointed by the Agent on matters concerning all relevant jurisdictions, including the jurisdiction of the Approved Ship Registry in which the Vessel is registered. BD-#34696673-v11 111

 
PART III CONDITIONS PRECEDENT – DELIVERY DATE 1 For the relevant Vessel to which the proposed Loan relates: (a) A copy of the duly executed Builder’s Certificate and/or Bill of Sale of the Vessel issued by the Yard and the Intermediate Buyer (as applicable); (b) A copy of the duly executed Protocol of Delivery and Acceptance both between the Yard and the Intermediate Buyer, and the Intermediate Buyer and the Borrower; (c) evidence (by way of transcript of registry) that the Vessel is, or will be, registered in the name of the Borrower in an Approved Ship Registry, that the Mortgage has been executed and recorded with its intended first priority against the Vessel and that no other encumbrances, maritime liens, mortgages or debts whatsoever are registered against the Vessel; (d) a copy of the interim or permanent class certificate related to the Vessel from the relevant classification society, confirming that the Vessel is classed with the highest class in accordance with Clause 23.3 (Classification and repairs), free of overdue recommendations and conditions; (e) a copy of the Vessel’s SMC and ISPS Certificates; and (f) such legal opinions as may not be issued prior to the Delivery Date. 2 KEXIM Guarantee (a) An original counterpart of the KEXIM Guarantee for the relevant KEXIM Guaranteed Facility Loan, duly executed by KEXIM as guarantor, including an English translation in form and substance acceptance to the KEXIM Guaranteed Facility Lenders. (b) Evidence that the KEXIM Guarantee Premium in relation to the KEXIM Guarantee and any costs and expenses which are then due and payable to KEXIM as guarantor has been paid by the Borrowers and received by KEXIM in full. (c) Confirmation from the Agent (as indicated by the KEXIM Agent) that: (i) it has not been informed that KEXIM as guarantor intends to, and KEXIM as guarantor has not stipulated its intention to, repudiate or suspend the application of the KEXIM Guarantee for any KEXIM Guaranteed Facility Loan; (ii) it is satisfied that the KEXIM Guarantee is in full force and effect; and (iii) it has received no instruction from KEXIM as guarantor that the relevant KEXIM Guaranteed Facility Loan should not be permitted or made available by the KEXIM Guaranteed Facility Lenders or, as the case may be, the Agent. (d) Evidence satisfactory to the KEXIM Guaranteed Facility Lenders that each of the documents specified under the KEXIM Guarantee for the relevant KEXIM Guaranteed Facility Loan have been duly delivered in accordance with the terms of the KEXIM Guarantee for the relevant KEXIM Guaranteed Facility Loan. BD-#34696673-v11 112

 
Schedule 3 FORM OF DRAWDOWN NOTICE To: [], as Agent From:[Borrowers] Date: [***] $629,000,000 FACILITY AGREEMENT DATED [] 2020 (THE “AGREEMENT”) We refer to Clause 5.1 (Delivery of the Drawdown Notice) of the Agreement. Terms defined in the Agreement shall have the same meaning when used in this Drawdown Notice. (a) You are hereby irrevocably notified that we wish to make the following drawdown on the following terms: Vessel: [] Proposed Drawdown Date: [] Principal Amount: USD $[] (represented by: $[] Commercial Facility Loan; $[] KEXIM Facility Loan; and $[] KEXIM Guaranteed Facility Loan) Interest Period: [] (b) The purpose of the Loan is the part financing of the Vessel and, in the case of the KEXIM Guaranteed Facility Loan, to fund the KEXIM Guarantee Premium, and all proceeds shall applied accordingly. (c) The proceeds of the Loan shall be credited to [**] [insert details of account]. (d) We confirm that, as of the date hereof (i) each condition specified in Clause 4 (Conditions Precedent) of the Agreement is satisfied; (ii) each of the Repeating Representations set out in Clause 19 (Representations and warranties) of the Agreement is true and correct; and (iii) no event or circumstances has occurred and is continuing which constitute or may constitute an Event of Default. Yours sincerely for and on behalf of [Borrowers] By: __________________________________ Name: Title: [authorised officer] BD-#34696673-v11 113

 
Schedule 4 FORM OF SELECTION NOTICE To: [], as Agent From:FLEX LNG Ltd. Date: [***] $629,000,000 FACILITY AGREEMENT DATED [] 2020 (THE “AGREEMENT”) We refer to the Agreement. Terms defined in the Agreement shall have the same meaning when used in this Selection Notice. (a) We refer to the amount outstanding under the Commercial Facility Loans with Interest Periods ending on [**]. (b) We request that the next Interest Period for the Commercial Facility Loans is [**]. This Selection Notice is irrevocable. Yours sincerely for and on behalf of FLEX LNG Ltd. By: ______________________________ Name: Title: BD-#34696673-v11 114

 
Schedule 5 FORM OF COMPLIANCE CERTIFICATE To: [], as Agent From:FLEX LNG Ltd. Date: [***] [To be delivered no later than 120/60 days after each Reporting Date] $629,000,000 FACILITY AGREEMENT DATED [] 2020 (THE “AGREEMENT”) We refer to the Agreement. Terms defined in the Agreement have their defined meanings when used in this Compliance Certificate. 5 We hereby represent and warrant that at the date of this Compliance Certificate, we are in compliance with Clause 21 (Financial covenants), that no Event of Default has occurred and that the Repeating Representations contained in Clause 19 (Representations and warranties) of the Agreement are true and correct at the date hereof as if made with respect to the facts and circumstances existing at this date. 6 Without limiting the generality of paragraph 1 above, we hereby further represent and warrant as follows: Equity Ratio For the purpose of Clause 21.3 a) (Equity Ratio) we confirm as follows: Total Assets USD [] Total Liabilities USD [] Equity (Total Assets less Total Liabilities) USD [] Equity Ratio [ ]:1.00 Requirement: Not lower than 0.25:1.00 Compliance: [Yes/No] Working Capital For the purpose of Clause 21.3 b) (Working Capital) we confirm as follows: Working Capital: USD [] Requirement: Working Capital > 0 Compliance: [Yes/No] Liquidity For the purpose of Clause 21.3 c) (Liquidity) we confirm as follows: Liquidity: USD [] of which Cash and Cash Equivalents is: USD [] Group’s total interest bearing Financial Indebtedness on a consolidated basis, net of USD [] (“NIBD”) Cash and Cash Equivalents. 5% of which is USD [] Requirement: Liquidity > Higher of (i) USD 25,000,000 and (ii) 5% of NIBD Compliance: [Yes/No] BD-#34696673-v11 115

 
Collateral Maintenance Test For the purpose of Clause 7.1 (Collateral Maintenance Test) we confirm as follows: Market Values* USD []/[Not delivered] Flex Artemis USD []/[Not delivered] Flex Resolute USD []/[Not delivered] Flex Freedom USD []/[Not delivered] Flex Aurora USD []/[Not delivered] Flex Amber USD []/[Not delivered] [Alternative Vessel] USD []/[Not delivered] (A) Aggregate Market Value: USD [] (B) Aggregate Loans: USD [] Ratio (A/B): [ ]% Requirement: (A/B) > 130% Compliance: [Yes/No] * Evidence of Market Values attached hereto 7 This Compliance Certificate shall be governed by and construed in accordance with English law. Yours sincerely for and on behalf of FLEX LNG Ltd. By: __________________________________ Name: Title: Principal Financial Officer BD-#34696673-v11 116

 
Schedule 6 FORM OF TRANSFER CERTIFICATE To: [], as Agent From:[**] (the “Existing Lender” and [**] (the “New Lender”) Date: [**] $629,000,000 FACILITY AGREEMENT DATED [] 2020 (THE “AGREEMENT”) 1 We refer to the Agreement. This is a Transfer Certificate. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate. 2 We refer to Clauses 25.3 (Limitations of responsibility of Existing Lenders), 25.4 (Procedure for Transfer) and 25.5 (Effects of the Transfer): (a) The Existing Lender assigns absolutely to the New Lender all the rights of the Existing Lender under the Agreement and the other Finance Documents which relate to that portion of the Existing Lender’s Commitment(s) and participations in the Loans under the 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 Loans under the 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) above. (d) 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 proposed Transfer Date is [●]. 4 This Transfer Certificate 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 Transfer Certificate. 5 This Transfer Certificate and any non-contractual obligations connected with it are governed by English law. 6 This Transfer Certificate has been entered into on the date stated at the beginning of this Transfer Certificate. BD-#34696673-v11 117

 
The Schedule Rights to be assigned and obligations to be released and undertaken [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 is accepted by the Agent as a Transfer Certificate and the Transfer Date is confirmed as []. Signature of this Transfer Certificate by the Agent constitutes confirmation by the Agent of receipt of notice of the assignment referred to herein, which notice the Agent receives on behalf of each Finance Party. [Agent] By: BD-#34696673-v11 118

 
Schedule 7 VESSELS Name of Vessel: Flex Amber Type of Vessel: LNG carrier Capacity: 174,000 cbm Shipbuilding Contract 6 March 2018 Hull No: 8011 Yard Hyundai Samho Heavy Industries Co., Ltd. Intermediate MOA 28 May 2018 Intermediate Buyer Sea America Inc. Scheduled Delivery Date 31 August 2020 Owner: FLEX LNG Amber Limited Flag State: Marshall Islands Port of Registry: Majuro Classification: +1A, Tanker for liquefied gas, Ship type 2G(-163°C, 500 kg/m3, 0.35bar), GF, E0, BIS, TMON, COAT-PSPC(B), CMON, LCS, BWM(T), Recyclable, ERS, NAUT(NAV), CLEAN, F(A, C) Classification Society: DNV GL Commitment ($) $125,800,000 BD-#34696673-v11 119

 
Name of Vessel: Flex Aurora Type of Vessel: LNG carrier Capacity: 174,000 cbm Shipbuilding Contract 6 March 2018 Hull No: 8010 Yard Hyundai Samho Heavy Industries Co., Ltd. Intermediate MOA 28 May 2018 Intermediate Buyer Sea Aurora Inc. Scheduled Delivery Date 30 June 2020 Owner: FLEX LNG Aurora Limited Flag State: Marshall Islands Port of Registry: Majuro Classification: +1A, Tanker for liquefied gas, Ship type 2G(-163°C, 500 kg/m3, 0.35bar), GF, E0, BIS, TMON, COAT-PSPC(B), CMON, LCS, BWM(T), Recyclable, ERS, NAUT(NAV), CLEAN, F(A, C) Classification Society: DNV GL Commitment ($) $125,800,000 BD-#34696673-v11 120

 
Name of Vessel: Flex Freedom Type of Vessel: LNG carrier Capacity: 173,400 cbm Shipbuilding Contract 5 July 2018 Hull No: 2492 Yard Daewoo Shipbuilding & Marine Engineering Co., Ltd. Intermediate MOA 15 October 2018 Intermediate Buyer Sea Freedom Shipowning Inc. Scheduled Delivery Date 30 November 2020 Owner: FLEX Freedom Limited Flag State: Marshall Islands Port of Registry: Majuro Classification: +1A, Tanker for liquefied gas, Ship type 2G(-163°C, 500 kg/m3, 0.35bar), GF, E0#1, BIS, TMON, COAT-PSPC(B), CMON, BWM(T), Clean, NAUT(OC)#2, Recyclable Classification Society: DNV GL Commitment ($) $125,800,000 BD-#34696673-v11 121

 
Name of Vessel: Flex Artemis Type of Vessel: LNG carrier Capacity: 173,400 cbm Shipbuilding Contract 26 February 2018 Hull No: 2479 Yard Daewoo Shipbuilding & Marine Engineering Co., Ltd. Intermediate MOA 15 October 2018 Intermediate Buyer Sea Reliance Inc. Scheduled Delivery Date 31 August 2020 Owner: FLEX LNG Reliance Limited Flag State: Marshall Islands Port of Registry: Majuro Classification: +1A, Tanker for Liquefied Gas, Ship type 2G(-163°C, 500 kg/m3, 0.35bar), GF, E0#1, BIS, TMON, COAT-PSPC(B), CMON, BWM(T), Clean, NAUT(OC)#2, Recyclable Classification Society: DNV GL Commitment ($) $125,800,000 BD-#34696673-v11 122

 
Name of Vessel: Flex Resolute Type of Vessel: LNG carrier Capacity: 173,400 cbm Shipbuilding Contract 26 February 2018 Hull No: 2480 Yard Daewoo Shipbuilding & Marine Engineering Co., Ltd. Intermediate MOA 15 October 2018 Intermediate Buyer Sea Resulute Inc. Scheduled Delivery Date 30 September 2020 Owner: FLEX LNG Resolute Limited Flag State: Marshall Islands Port of Registry: Majuro Classification: +1A, Tanker for Liquefied Gas, Ship type 2G(-163°C, 500 kg/m3, 0.35bar), GF, E0#1, BIS, TMON, COAT-PSPC(B), CMON, BWM(T), Clean, NAUT(OC)#2, Recyclable Classification Society: DNV GL Commitment ($) $125,800,000 BD-#34696673-v11 123

 
ALTERNATIVE VESSELS Name of Alternative Vessel: Flex Volunteer Type of Alternative Vessel: LNG carrier Capacity: 174,000 cbm Shipbuilding Contract 30 June 2018 Hull No: 8012 Yard Hyundai Samho Heavy Industries Co., Ltd. Scheduled Delivery Date 28 February 2021 Owner: FLEX Volunteer Limited Flag State: Marshall Islands Port of Registry: Majuro Classification: +1A, Tanker for liquefied gas, Ship type 2G(-163°C, 500 kg/m3, 0.35bar), GF, E0, BIS, TMON, COAT-PSPC(B), CMON, LCS, BWM(T), Recyclable, ERS, NAUT(NAV), CLEAN, F(A, C) Classification Society: DNV GL Commitment ($) $125,800,000 Name of Alternative Vessel: Flex Vigilant Type of Alternative Vessel: LNG carrier Capacity: 174,000 cbm Shipbuilding Contract 30 June 2018 Hull No: 8013 Yard Hyundai Samho Heavy Industries Co., Ltd. Scheduled Delivery Date 31 May 2021 Owner: FLEX Vigilant Limited Flag State: Marshall Islands Port of Registry: Majuro Classification: +1A, Tanker for liquefied gas, Ship type 2G(-163°C, 500 kg/m3, 0.35bar), GF, E0, BIS, TMON, COAT-PSPC(B), CMON, LCS, BWM(T), Recyclable, ERS, NAUT(NAV), CLEAN, F(A, C) Classification Society: DNV GL Commitment ($) $125,800,000 BD-#34696673-v11 124

 
Schedule 8 REPAYMENT SCHEDULE (USD) Per Vessel Period Commercial Facility Kexim Guaranteed Facility Kexim Facility Total Repayment Balance Repayment Balance Repayment Balance Total Repayment Total Balance 0 50,000,000.00 37,824,200.00 37,975,800.00 125,800,000.00 1 50,000,000.00 3,152,016.67 34,672,183.33 6,316.67 37,969,483.33 3,158,333.33 122,641,666.67 2 50,000,000.00 3,152,016.67 31,520,166.67 6,316.67 37,963,166.67 3,158,333.33 119,483,333.33 3 50,000,000.00 3,152,016.67 28,368,150.00 6,316.67 37,956,850.00 3,158,333.33 116,325,000.00 4 50,000,000.00 3,152,016.67 25,216,133.33 6,316.67 37,950,533.33 3,158,333.33 113,166,666.67 5 50,000,000.00 3,152,016.67 22,064,116.67 6,316.67 37,944,216.67 3,158,333.33 110,008,333.33 6 50,000,000.00 3,152,016.67 18,912,100.00 6,316.67 37,937,900.00 3,158,333.33 106,850,000.00 7 50,000,000.00 3,152,016.67 15,760,083.33 6,316.67 37,931,583.33 3,158,333.33 103,691,666.67 8 50,000,000.00 3,152,016.67 12,608,066.67 6,316.67 37,925,266.67 3,158,333.33 100,533,333.33 9 50,000,000.00 3,152,016.67 9,456,050.00 6,316.67 37,918,950.00 3,158,333.33 97,375,000.00 10 50,000,000.00 0.00 3,152,016.67 6,304,033.33 6,316.67 37,912,633.33 53,158,333.33 44,216,666.67 11 3,152,016.67 3,152,016.67 6,316.67 37,906,316.67 3,158,333.33 41,058,333.33 12 3,152,016.67 0.00 6,316.67 37,900,000.00 3,158,333.33 37,900,000.00 13 3,158,333.33 34,741,666.67 3,158,333.33 34,741,666.67 14 3,158,333.33 31,583,333.33 3,158,333.33 31,583,333.33 15 3,158,333.33 28,425,000.00 3,158,333.33 28,425,000.00 16 3,158,333.33 25,266,666.67 3,158,333.33 25,266,666.67 BD-#34696673-v11 125

 
17 3,158,333.33 22,108,333.33 3,158,333.33 22,108,333.33 18 3,158,333.33 18,950,000.00 3,158,333.33 18,950,000.00 19 3,158,333.33 15,791,666.67 3,158,333.33 15,791,666.67 20 3,158,333.33 12,633,333.33 3,158,333.33 12,633,333.33 21 3,158,333.33 9,475,000.00 3,158,333.33 9,475,000.00 22 3,158,333.33 6,316,666.67 3,158,333.33 6,316,666.67 23 3,158,333.33 3,158,333.33 3,158,333.33 3,158,333.33 24 3,158,333.33 0.00 3,158,333.33 0.00 BD-#34696673-v11 126

 
Schedule 9 FORM OF INCREASE CONFIRMATION To: [], as Agent, and [], for and on behalf of each Obligor From: [the Accordion Lender] (the Accordion Lender) Dated: [●] $629,000,000 Facility Agreement dated [] 2020 (the "Agreement") 1 We refer to the Agreement. This is an Increase Confirmation. Terms defined in the Agreement have the same meaning in this Increase Confirmation unless given a different meaning in this Increase Confirmation. 2 We refer to Clause 2.5 (Accordion option) of the Facility Agreement. 3 The Accordion Lender agrees to assume and will assume all of the obligations corresponding to the Commitment specified in the Schedule (the "Relevant Commitment") as if it was an Original Commercial Facility Lender under the Agreement. 4 The proposed date on which the increase in relation to the Accordion Lender and the Relevant Commitment is to take effect (the "Increase Date") is []. 5 On the Increase Date, the Accordion Lender becomes a party to the relevant Finance Documents as a Lender. 6 The Facility Office and address, fax number and attention details for notices to the Accordion Lender for the purposes of Clause 31.2 (Addresses) are set out in the Schedule. 7 This Increase Confirmation 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 Increase Confirmation. 8 This Increase Confirmation and any non-contractual obligations arising out of or in connection with it are governed by English law. 9 This Increase Confirmation has been entered into on the date stated at the beginning of this Increase Confirmation. BD-#34696673-v11 127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Exhibit 8.1


Company
 
Country of registration
 
Main operations
 
Ownership share
 
Voting share
Flex LNGC 1 Limited
 
Isle of Man
 
Shipping
 
100%
 
100%
Flex LNGC 2 Limited
 
Isle of Man
 
Shipping
 
100%
 
100%
Flex LNG Chartering Limited
 
United Kingdom
 
Chartering services
 
100%
 
100%
Flex LNG Management AS
 
Norway
 
Management services
 
100%
 
100%
Flex LNG Bermuda Management Limited
 
Bermuda
 
Management services
 
100%
 
100%
Flex LNG Management Limited
 
Isle of Man
 
Management services
 
100%
 
100%
Flex Petroleum Limited
 
British Virgin Islands
 
Shipping
 
100%
 
100%
Flex LNG Fleet Limited
 
Bermuda
 
Holding company
 
100%
 
100%
Flex LNG Endeavour Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Enterprise Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Ranger Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Rainbow Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Constellation Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Courageous Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Aurora Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Amber Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Resolute Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Reliance Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex Freedom Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex Vigilant Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex Volunteer Limited
 
Marshall Islands
 
Shipping
 
100%
 
100%
Flex LNG Shipping (Bermuda) Limited
 
Bermuda
 
Shipping
 
100%
 
100%





Exhibit 12.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Oystein Kalleklev, certify that:

1.
I have reviewed this annual report on Form 20-F of FLEX LNG Ltd.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.
The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
5.
The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date:
April 17, 2020
 
 
Oystein Kalleklev
Principal Executive Officer





Exhibit 12.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Harald Gurvin, certify that:

1.
I have reviewed this annual report on Form 20-F of FLEX LNG Ltd.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.
The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
5.
The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date:
April 17, 2020
 
 
Harald Gurvin
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 FLEX LNG Ltd. (the “Company”) on Form 20-F for the year ended December 31, 2019 as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Oystein Kalleklev, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request

Date:
April 17, 2020
 
 
Oystein Kalleklev
Principal Executive Officer






Exhibit 13.2

PRINCIPAL FINANCIAL OFFICER CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350

In connection with this Annual Report of FLEX LNG Ltd. (the “Company”) on Form 20-F for the year ended December 31, 2019 as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Harald Gurvin, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request

Date:
April 17, 2020
 
 
Harald Gurvin
Principal Financial Officer





Exhibit 14.1
CORPORATE CODE OF BUSINESS ETHICS AND CONDUCT
Introduction
Flex LNG Ltd. (the “Company” or “Flex”) and all entities controlled by the Company have a strong commitment to promoting honest conduct and ethical business conduct by all Employees (as defined below) and compliance with the laws that govern the conductof our business worldwide. We believe that a commitment to honesty, ethical conductand integrity is a valuable asset that builds trust with our customers, suppliers, employees, shareholders, and the communities in which we operate. To implement our commitment, we have developed a code of business ethics and conduct (“the Code”). This Code has been designed to deter wrongdoing and to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships and avoidance of conflicts of interest. The Code establishes rules and standards regarding behavior and performance and any violation of the rules and standards embodied in the Code is not tolerated and will subject those responsible to disciplinary action.
The Code applies to all entities controlled by the Company and all employees, directors, officers and agents of the Company, including representatives and agents of the Company’s manager, Frontline Management (Bermuda) Limited, Flex LNG Fleet Management AS and Frontline Management AS, (collectively, “Employee(s)”). All Employees are required to read and understand the Code and certain Employees will be required to provide a certification to that effect. We encourage all Employees to ask questions regarding the application of the Code. Employees may direct such questions to their manager (in the absence of an actual or potential conflict of interest), or to a Board member.
Employees individually are ultimately responsible for their compliance with the Code. Every manager will also be responsible for administering the Code as it applies to Employees and operations within each manager’s area of supervision.
The Company’s policy is to distribute the Code to affiliated companies and urge that they have in force similar policies and procedures to secure compliance with the principals of business integrity and ethics as set forth in this Code.
Employees who observe or become aware of a situation that they believe to be a violation of the Code have an obligation to notify their manager, an Audit Committee member or an Independent Director unless the Code directs otherwise. Violations involving a manager should be reported directly to an Audit Committee member or an Independent Director. When a manager receives a report of a violation, it will be the manager’s responsibility to handle the matter in consultation with an Audit Committee member or an Independent Director. If an Employee reporting a violation wishes to remain anonymous, all reasonable steps will be taken to keep their identity confidential. All communications will be taken seriously and, if warranted, any reports of violations will be investigated.
Procedures Regarding Waivers
Because of the importance of the matters involved in this Code, waivers will be granted only in limited circumstances and where circumstances would support a waiver. Waivers of the Code may only be made by the Board.
The Board of Directors

CORPORATE CODE OF BUSINESS ETHICS AND CONDUCT
Compliance with Laws, Rules and Regulations
All Employees are responsible for complying with the various laws, rules and regulations of the countries and regulatory authorities that affect the Company’s business. Questions with respect to your duties under the law should be directed to your manager.
Honest and Fair Dealing
Employees must endeavor to deal honestly, ethically and fairly with the Company’s customers, suppliers, charterers, competitors and Employees. No Employee should take unfair advantage of anyone through manipulation, concealment, abuse of privilege information, misrepresentation of material facts, or any other unfair-dealing practice.




Honest conduct is considered to be conduct that is free from fraud or deception and ethical conduct is considered to be conduct conforming to accepted professional standards of conduct.
Conflict of Interest and Corporate Opportunity
Employees must:
a)
avoid any interest that conflicts with the interests of the Company or that could reasonably be determined to harm the Company’s reputation, and
b)
report any actual or potential conflict of interest (including any material transaction or relationship that reasonably could be expected to give rise to such conflict) immediately to their manager or a Board member and adhere to instructions concerning how to address such conflict of interest.
A conflict of interest exists if actions by any Employee are, or could reasonably appear to be, influenced directly or indirectly by personal considerations, duties owed to persons or entities other than the Company, or by actual or potential personal benefit or gain.
Employees owe a duty to advance the legitimate interests of the Company when the opportunities to do so arise. Employees may not take for themselves personally opportunities that are discovered through the use of corporate property, information or position.
Confidentiality and Privacy
It is important that Employees protect the confidentiality of Company information. Employees may have access to proprietary and confidential information concerning the Company’s business, clients and suppliers. Confidential information includes such items as non-public information concerning the Company’s business, financial results and prospects and potential corporate transactions. Employees are required to keep such information confidential during employment as well as thereafter, and not to use, disclose, or communicate that confidential information other than in the course of employment. To ensure the confidentiality of any personal information collected and to comply with applicable laws, any Employee in possession of non-public, personal information about the Company’s customers, potential customers, or Employees, must maintain the highest degree of confidentiality and must not disclose any personal information unless authorization is obtained.
Proper Use of Company Assets
The Company’s assets are only to be used for legitimate business purposes and only by authorized Employees or their designees. This applies to tangible assets (such as office equipment, telephone, copy machines, etc.) and intangible assets (such as trade secrets and confidential information). Employees have a responsibility to protect the Company’s assets from theft and loss and to ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company’s profitability. If you become aware of theft, waste or misuse of the Company’s assets you should report this to your manager.
Securities Trading
Investment by Employees in Flex securities is encouraged. However, because we are a public company we are subject to a number of laws concerning the purchase of our shares and other publicly traded securities. Company policy prohibits Employees and their family members from trading securities while in possession of material, non-public information relating to the Company or any other company, including a customer or supplier that has a significant relationship with the Company.
Information is “material” when there is a substantial likelihood that a reasonable investor would consider the information important in deciding whether to buy, hold or sell securities. In short, any information that could reasonably affect the price of securities is material. Information is considered to be “public” only when it has been released to the public through appropriate channels and enough time has elapsed to permit the investment market to absorb and evaluate the information. If you have any doubt as to whether you possess material non-public information, you should contact your manager, an officer of the Company or the Company’s representative in charge of insider trading matters and the advice of legal counsel may be sought.
Directors, officers and senior managers (“primary insiders”) are subject to various reporting and insider trading requirements. All employees are required to obtain clearance in advance of any contemplated securities transactions from the Company’s representative in charge of insider trading matters or the Board and are also required to comply with all reporting requirements.




Policies against Discrimination and Harassment
The Company prohibits discrimination against any Employee, prospective Employee or any other person on the basis of sex, race, color, age, religion, sexual preference, marital status, national origin, disability, ancestry, political opinion, or any other basis prohibited by the laws that govern its operations.
The Company prohibits harassment. Employees are expected to treat all persons with respect. “Harassment” includes any conduct likely to cause offense or humiliation to any person or that might, on reasonable grounds, be perceived by a reasonable person to place a condition on employment or on any opportunity for training or promotion.
Integrity of Corporate Records
All business records, expense accounts, vouchers, bills, payrolls, service records, reports to government agencies and other reports must accurately reflect the facts. Without limiting the foregoing, all reports and documents filed with the U.S. Securities and Exchange Commission, as well as other public communications should be full, fair, accurate and understandable.
The books and records of Flex must be prepared with care and honesty and must accurately reflect our transactions. All corporate funds and assets must be recorded in accordance with Company procedures. No undisclosed or unrecorded funds or assets shall be established for any purpose.
The Company’s accounting personnel must provide the independent public accountants and the Board with all information they request. Employees must not, and must not direct others to, take any action to fraudulently influence, coerce, manipulate or mislead independent public accountants engaged in the audit or review of the Company’s financial statements for the purpose of rendering those financial statements materially misleading.
Special Ethics obligations for Employees with Financial Reporting Responsibilities
The Chief Executive Officer, the Chief Financial Officer and Principal Accounting Officer and those other employees designated by the Chief Financial Officer as being involved in the preparation of the Company’s financial statements (collectively, the “Financial Statement Reporting Employees”) have a special role both to adhere to the forgoing principals themselves and also promote a culture throughout the Company of the importance of full, fair, timely, accurate and understandable reporting of the Company’s financial results and conditions. Because of this special role, the Financial Statement Reporting Employees are bound by the following financial employee code of ethics, and by accepting the Code, each such Financial Statement Reporting Employee agrees that she or he will:
•
Act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships.
•
Provide constituents with information that is accurate, complete, objective, relevant, timely and understandable within accepted materiality standards. Provide full, fair, accurate, timely and understandable disclosure on SEC reports and other public communications.
•
Provide full, fair, accurate, timely and understandable disclosure on SEC reports and other public communications.
•
Comply with rules and regulations of federal, state, provincial and local governments, and other appropriate private and public regulatory agencies.
•
Act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing ones independent judgment to be subordinated.
•
Respect the confidentiality of information acquired in the course of ones work except when authorized or otherwise legally obligated to disclose.  Confidential information acquired in the course of ones work is not used for personal advantage.
•
Promptly report all material internal violations of the Code to ones supervisor, chief financial officer as appropriate.
•
Acknowledge that any material violation of the Code may subject one to disciplinary action up to and including termination.
The Financial Employee Code of Ethics is deemed to be the “code of ethics” required under Section 406 of the Sarbanes-Oxley Act of 2002.




Entertainment, Gifts, Payments and Bribery
Decisions by the Company and its agents relating to the procurement and provision of goods and services should always be free from even a perception that favorable treatment was sought, received or given as the result of furnishing or receiving gifts, favors, hospitality, entertainment or other similar gratuity. The giving or receiving of anything of value to induce such decisions is prohibited. Employees should never solicit a gift or favor from those with whom the Company does business. Providing or receiving gifts or entertainment of moderate value motivated by commonly accepted business courtesies is permissible, but not if such gifts or entertainment would reasonably be expected to cause favoritism or a sense of obligation.
No bribes or other similar payments and benefits, directly or indirectly, shall be paid to employees of suppliers or customers.
Compliance with Anti-Trust Laws
The Company’s business may be subject to United States, European Union and other foreign government anti-trust and similar laws. All Employees must comply with such laws and you should confer with your manager whenever you have a question with respect to the possible anti-competitive effect of particular transactions.
Reporting of Violations of the Code
Directors, officers and employees should promptly report to an Audit Committee member or an Independent Director information of any act by any director, officer or employee that violates the Code. Flex will treat such information in a confidential manner. Employees are encouraged to speak to supervisors, managers and other appropriate personnel when in doubt about the best course of action in a particular situation.