20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

F O R M 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

Commission file number 001-09987

B + H   O C E A N   C A R R I E R S   L T D.

(Exact name of Registrant as specified in its charter)

Liberia

(Jurisdiction of incorporation

or organization)

3rd Floor, Par La Ville Place

14 Par La Ville Road

Hamilton HM 08, Bermuda

(Address of principal executive offices)

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

    Name of each exchange

Title of each classon which registered   

       Common Stock, American Stock Exchange

par value  $.01 per share                            

Securities registered pursuant to Section 12(g) of the Act:

NONE

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

NONE

The number of shares outstanding of the registrant's common stock, $.01 par value, at December 31, 2006 was 6,964,745shares.

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 which financial statement item the registrant has elected to follow:

Item 17Item 18  X 

TABLE OF CONTENTS:
Item 1.	Identity of Directors, Senior Management and Advisers
Item 2.	Offer Statistics and Expected Timetable
Item 3.	Key Information
Item 4.	Information on the Company
Item 5.	Operating and Financial Review and Prospects
Item 6.	Directors, Senior Management and Employees
Item 7.	Major Shareholders and Related Party Transactions
Item 8.	Financial Information
Item 9.	The Offer and Listing
Item 10.	Additional Information
Item 11.	Quantitative and Qualitative Disclosures About Market Risk
Item 12.	Description of Securities Other than Equity Securities
Item 13.	Defaults, Dividend Arrearages and Delinquencies
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15.	Controls and Procedures
Item 16A.	Audit Committee Financial Expert
Item 16B.	Code of Ethics
Item 16C.	Principal Accountant Fees and Services
Item 17.	Financial Statements
Item 18.	Financial Statements
Item 19.	Exhibits

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
A. Selected financial information
The following selected consolidated financial data of the Company and its subsidiaries are derived from and should be read
in conjunction with the Consolidated Financial Statements and notes thereto appearing elsewhere in this annual report.
Income Statement Data:	Year ended December 31,
	2006			2005			2004			2003			2002
Voyage, time and bareboat charter revenues		95,591,276			71,388,561			51,362,910		$	55,156,875		$	64,537,505
Other operating income		1,287,775			514,491			-			-			27,881
Voyage expenses		(14,792,322	)		(6,033,470	)		(9,663,653	)		(19,373,318	)		(28,683,727	)
Vessel operating expenses		(34,159,942	)		(26,369,749	)		(19,742,875	)		(25,089,187	)		(16,282,104	)
Depreciation and amortization		(16,812,342	)		(11,917,359	)		(7,763,640	)		(9,024,806	)		(10,407,804	)
Gain (loss) on sale of vessels					828,115			(4,682,965	)		(16,187,604	)		-
General and administrative expenses		(5,254,323	)		(3,797,613	)		(3,755,136	)		(3,897,885	)		(3,503,418	)
Income (loss) from operations		25,860,122			24,612,976			5,754,641			(18,415,925	)		5,688,333
Gain on retirement of 9 7/8 First Preferred
Ship Mortgage Notes		-			-			-			6,803,965			797,875
Minority interest in net loss (income) of consolidated subsidiary		-			-			-			23,866			-
Interest expense, net		(8,298,750	)		(4,383,627	)		(1,328,896	)		(1,504,191	)		(3,405,876	)
Earn-out interest		-			-			-			-			1,004,150
Income from investment in Nordan OBO 2 Inc.		1,262,846
Other expense		(49,905	)		(130,704	)		(1,730	)		-			-
Net income (loss)	$	18,774,313		$	20,098,645		$	4,424,015		$	(13,092,285	)	$	4,084,482
Basic earnings (loss) per share (1)	$	2.67		$	3.44		$	1.15		$	(3.41	)	$	1.06
Diluted earnings (loss) per share (2)	$	2.59		$	3.30		$	1.00		$	(3.41	)	$	0.93
Dividends declared per share	$	-		$	-		$	-		$	-		$	-
(1) Based on weighted average number of shares outstanding of 7,027,343 in 2006, 5,844,301 in 2005, 3,839,242 in 2004, 3,835,269 in 2003 and 3,869,865 in 2002.
(2) Based on the weighted average number of shares outstanding, increased in 2006, 2005, 2004 and 2002 by the net effects of stock options using the
treasury stock method and by the assumed distribution of all shares to BHM under the 1998 agreement (See Item 7). The denominator for the diluted
earnings per share calculation is 7,237,453 in 2006, 6,092,522 in 2005, 4,404,757 in 2004, 3,835,269 in 2003 and 4,413,423 in 2002.
		Year ended December 31,
Balance Sheet Data:		2006			2005			2004			2003			2002
Current assets	$	85,870,618		$	65,719,790		$	19,344,004		$	6,534,213		$	14,589,138
Total assets		366,822,444			281,423,286			82,902,304			70,830,212			117,585,093
Current liabilities		63,688,354			44,305,700			20,073,194			17,024,634			23,819,743
Long-term liabilities		167,153,908			117,063,472			18,465,472			13,310,674			40,189,750
Noncontrolling interest in subsidiary		-			-			-			-			23,866
Working capital (deficit)		22,182,264			21,414,090			(729,190	)		(10,490,421	)		(9,230,605	)
Shareholders' equity	$	135,980,182		$	120,054,114		$	44,363,637		$	40,494,904		$	53,551,734

B. Capitalization and indebtedness

Not applicable

C.   Reasons for the offer and use of proceeds

Not applicable

D. Risk factors

You should consider carefully the following factors as well as other information set forth in this report. Some of the following risks relate principally to the industry in which the Company operates and its business in general. Other risks relate principally to the securities market and ownership of its stock. Any of the risk factors could significantly and negatively affect its business, financial condition or operating results and the trading price of its stock. You could lose all or part of your investment.

Industry Specific Risk Factors

The cyclical nature of the international shipping industry may lead to volatile changes in charter rates and vessel values, which may adversely affect its earnings

The shipping industry is generally known to be cyclical. Vessel values and charter freight rates fluctuate widely and frequently, and the Company expects they will continue to do so in the future. Growth within the largest economies will normally contribute to an increase in the ton-mile demand in global seaborne trade.

The operations of the Company on a worldwide basis may increase the volatility of the Company’s business

The operations of the Company are conducted primarily outside the United States and therefore may be affected by currency fluctuations and by changing economic, political and governmental conditions in the countries where its vessels operate and are registered. Future hostilities or other political instability in the regions in which the Company conducts its operations could affect the Company’s trade patterns and could adversely affect the Company’s business and results of operations. Although the substantial majority of the Company’s revenues and expenses have historically been denominated in United States dollars, there can be no assurance that the portion of the Company’s business conducted in other currencies will not increase in the future, which could expand the Company’s exposure to losses arising from currency fluctuations.

The Company is subject to regulation and liability under environmental laws that could require significant expenditures and affect its cash flows and net income

The Company’s operations are subject to extensive regulation in the form of local, national and foreign laws, as well as international treaties and conventions that can subject us to material liabilities for environmental events.

The operation of its vessels is affected by the requirements set forth in the International Management Code for the Safe Operation of Ships and Pollution Prevention (the “ISM Code”). The ISM Code requires shipowners 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. The failure of a shipowner 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. Currently, each of the vessels in the Company's fleet is ISM Code-certified. However, there can be no assurance that such certification will be maintained indefinitely.

The United States Oil Pollution Act of 1990, or OPA, provides that owners, operators and bareboat charterers are strictly liable for the discharge of oil in U.S. waters, including the 200 nautical mile zone off the U.S. coasts. OPA provides for unlimited liability in some circumstances, such as a vessel operator’s gross negligence or willful misconduct. However, in most cases OPA limits liability to the greater of $1,200 per gross ton or $10 million per vessel. OPA also permits states to set their own penalty limits. Most states bordering navigable waterways impose unlimited liability for discharges of oil in their waters.

The International Maritime Organization, or IMO, has adopted a similar liability scheme that imposes strict liability for oil spills, subject to limits that do not apply if the release is caused by the vessel owner’s intentional or reckless conduct.

The U.S. has established strict deadlines for phasing-out single-hull oil tankers, and both the IMO and the European Union have proposed similar phase-out periods. Under OPA, all oil tankers that do not have double hulls will be phased out by 2015 and will not be permitted to come to United States ports or trade in United States waters. Six of the Company’s product tankers, or approximately 33% by deadweight ton (“DWT”) of the Company’s combined fleet, will be prohibited from carrying crude oil and oil products in U.S. waters by August 2011, with the phase out of such tankers occurring over the course of the period from August 2006 until August 2011.

In December 2003, the IMO adopted a proposed amendment to the International Convention for the Prevention of Pollution from Ships to accelerate the phase out of single-hull and non-qualifying double sided tankers from 2015 to 2010 unless the relevant flag states extend the date to 2015. This amendment took effect in April 2005. The Company expects that its six single-hull medium range (“MR”) tankers and its double sided Panamax product tanker will be unable to carry crude oil and petroleum products in many markets commencing between 2007 and 2009. Moreover, the IMO or other regulatory bodies may adopt further regulations in the future that could adversely affect the useful lives of its tankers as well as its inability to generate income from them. Also, new IMO regulation came into force as of January 1^st 2007 requiring vegetable oils to be carried on IMO type 2 chemical tankers. This regulation effectively excluded the 6 MR ships from this trade. The company has therefore decided to convert these ships to meet the new requirements for both IMO Annex II and also Annex I, which regulates petroleum products. Two of the ships have already been converted and it is expected that the remaining ships will be converted in 2007. The company is also planning to convert the Sachem in 2007 to meet the same requirements as the MR’s.

The Panama Canal Authority (PCA) recently issued an Advisory announcing that it may exercise its authority to deny the transit of a single-hull oil tanker which has been granted a Flag State exemption from the phase-out provisions of MARPOL (the International Convention for the Prevention of Pollution from Ships). If it does allow such transit, all additional costs or resources provided to minimize the risk of environmental damage will be charged to the vessel. The PCA will evaluate each ship on a case-by-case basis.

These requirements can affect the resale value or useful lives of the Company’s vessels. As a result of accidents such as the November 2002 oil spill relating to the loss of the M/T Prestige, a 26-year old single-hull tanker, the Company believes that regulation of the tanker industry will continue to become more stringent and more expensive for the Company and its competitors. Substantial violations of applicable requirements or a catastrophic release from one of the Company’s vessels could have a material adverse impact on its financial condition and results of operations as well as its reputation in the crude oil and refined petroleum products sectors, and could therefore negatively impact its ability to obtain charters proceeding forward for the rest of its fleet.

The Company’s vessels are subject to inspection by a classification society

The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention. The Company’s fleet is currently enrolled with the American Bureau of Shipping, Bureau Veritas, Det Norske Veritas, Class NKK and Lloyds.

A vessel must undergo Annual Surveys, Intermediate Surveys 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. The Company’s vessels are on Special Survey cycles for hull inspection and continuous survey cycles for machinery inspection. Every vessel is also required to be drydocked every two to three years for inspection of the underwater parts of such vessel.

If any vessel does not maintain its class or fails any Annual Survey, Intermediate Survey or Special Survey, the vessel will be unable to trade between ports and will be unemployable and the Company could be in violation of certain covenants in its loan agreements. This would negatively impact its revenues.

Maritime claimants could arrest its vessels, which could interrupt its cash flow

Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lienholder may enforce its lien by arresting a vessel through foreclosure proceedings. The arrest or attachment of one or more of its vessels could interrupt its cash flow and require us to pay large sums of funds to have the arrest lifted.

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

Governments could requisition the Company’s vessels during a period of war or emergency, resulting in loss ofearnings

A government could requisition for title or seize the Company’s vessels. Requisition for title occurs when a government takes control of a vessel and becomes the owner. Also, a government could requisition its 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 its vessels may negatively impact its revenues.

The shipping business is subject to the effect of world events

Terrorist attacks such as the attacks on the United States on September 11, 2001, and the continuing response of the United States to these attacks, as well as the threat of future terrorist attacks, continue to cause uncertainty in the world financial markets and may affect the Company’s business, results of operations and financial condition. The recent conflict in Iraq may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets. These uncertainties could also adversely affect its ability to obtain additional financing on terms acceptable to us or at all.

Terrorist attacks, such as the attack on the vessel Limburg in October 2002, may in the future also negatively affect the Company’s operations and financial condition and directly impact the Company’s vessels or customers. Future terrorist attacks could result in increased volatility of the financial markets in the United States and globally and could result in an economic recession in the United States or the world. Any of these occurrences could have a material adverse impact on its operating results, revenue and costs.

Company Specific Risk Factors

The Company’s business is dependent on the markets for product tankers and OBOs, which can be cyclical

The Company’s fleet consists of product tankers and ore/bulk/oil combination carriers (“OBOs”). Thus, the Company is dependent upon the petroleum product industry, the vegetable oil and chemical industries and the dry bulk industry as its primary sources of revenue. These industries have historically been subject to substantial fluctuation as a result of, among other things, economic conditions in general and demand for petroleum products, steel and iron ore, coal, vegetable oil and chemicals, in particular. Any material seasonal fluctuation in the industry or any material diminution in the level of activity therein could have a material adverse effect on the Company’s business and operating results. The profitability of these vessels and their asset value results from changes in the supply of and demand for such capacity. The factors affecting such supply and demand are described in more detail under “Industry Specific Risk Factors” above.

Single hull and double sided vessels are being phased out

Six of the Company’s product tankers, or approximately 31% by DWT of its combined fleet, are single hull or double sided vessels. Under the United States Oil Pollution Act of 1990, all oil tankers that do not have double hulls will be phased out over a 20-year period (1995-2015) based on size, age and place of discharge, unless retrofitted with double-hulls, and will not be permitted to come to United States ports or trade in United States waters. The European Union has required the phase out of single hull vessels carrying “heavy oil” and as a result its single hull vessels are prohibited from carrying this product to European Union ports. In addition, due to regulations adopted by the IMO under Annex I (oil) of MARPOL single hull vessels carrying petroleum products tankers must be phased out over the course of the period between 2005 and 2010. As a result of the MARPOL regulations, the Company expects that its three remaining single hulled MR product tankers will be unable to carry crude oil and petroleum products in many markets commencing between 2007 and 2009. Two of the Company’s MR tankers were retrofitted with double-hulls in 2006 and early 2007 and one is currently being retrofitted. The remaining three are scheduled for 2007 and early 2008. Unless these vessels are converted to double hull vessels, they will no longer be marketable to charterers after such time and will be required to be scrapped. There is no assurance that the Company will be able to convert these vessels prior to the phase out time, and the cost of conversion could potentially impose a financial burden upon the Company.

The Company’s fleet consists of second-hand vessels

All of the vessels comprising the Company’s fleet were acquired second-hand. The Company intends to purchase additional second-hand vessels. In general, expenditures necessary for maintaining a vessel in good operating condition increase as the age of the vessel increases. Moreover, second-hand vessels typically carry very limited warranties with respect to their condition as compared to warranties available for newer vessels. Because of improvements in engine technology, older vessels are typically less fuel efficient than newer vessels. Changes in governmental regulations, safety or other equipment standards may require expenditures for alterations to existing equipment or the addition of new equipment to the vessels and restrict the cargoes that the vessels may transport. There can be no assurance that market conditions will justify such expenditures or enable the Company to generate sufficient income or cash flow to allow it to meet its debt obligations.

The Company is subject to financial risks related to the purchase of additional vessels

The Company’s current business strategy includes the acquisition of newer, high-quality second-hand vessels. Such vessels will likely be purchased at what are now historically high vessel prices. If charter rates fall in the future, the Company may not be able to recover its investments in the new ships or even satisfy its payment obligations on its debt facilities that will be increased to finance the purchase of such new vessels. There can also be no assurance that such acquisitions will be available on terms favorable to the Company or that, if acquired, such second-hand vessels will have sufficient useful lives or carry adequate warranties.

The Company may be subject to loss and liability for which it may not be fully insured

The operation of any ocean-going vessel carries an inherent risk, without regard to fault, of catastrophic marine disaster, mechanical failure, collision and property losses to the vessel. Also, the business of the Company is affected by the risk of environmental accidents, the risk of cargo loss or damage, the risk of business interruption because of political action in foreign countries, labor strikes and adverse weather conditions, all of which could result in loss of revenues, increased costs or loss of reputation.

The Company maintains, and intends to continue to maintain, insurance consistent with industry standards against these risks. The Company procures hull and machinery insurance, protection and indemnity insurance, which includes environmental damage and pollution insurance coverage and war risk insurance for its fleet. The Company does not maintain insurance against loss of hire for its product tankers, which covers business interruptions that result in the loss of use of a vessel. There can be no assurance that all risks will be adequately insured against, that any particular claim will be paid out of such insurance or that the Company will be able to procure adequate insurance coverage at commercially reasonable rates in the future. More stringent environmental and other regulations may result in increased costs for, or the lack of availability of, insurance against the risks of environmental damage, pollution, damages asserted against the Company or the loss of income resulting from a vessel being removed from operations. The Company’s insurance policies contain deductibles for which the Company will be responsible and limitations and exclusions which may increase its costs or lower its revenue.

The Company places a portion of its Hull and Machinery insurance with Northampton Assurance Ltd (“NAL”), the great majority of which NAL reinsures with market underwriters. NAL is a subsidiary of Northampton Holdings Ltd., a major stockholder. Although the reinsurers are investment grade insurance companies, it is possible that they might default in the settlement of a claim. Although the Company believes that NAL is adequately capitalized, in the event the reinsurers default, NAL, as primary insurer, may be unable in turn to settle the Company’s claim.

Moreover, even if insurance proceeds are paid to the Company to cover the financial losses incurred following the occurrence of one of these events, there can be no assurance that the Company’s business reputation, and therefore its ability to obtain future charters, will not be materially adversely affected by such event. Such an impact on the Company’s business reputation could have a material adverse effect on the Company’s business and results of operations. The Company may not be able to obtain adequate insurance coverage for its fleet in the future and the insurers may not pay particular claims.

Risks involved with operating ocean-going vessels could affect the Company’s business and reputation, which would adversely affect its revenues and stock price

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

·   marine disaster;

·   piracy;

·   environmental accidents;

·   cargo and property losses or damage; and

·   business interruptions caused by mechanical failure, human error, war, terrorism, political action in various countries, labor strikes or adverse weather conditions.

Any of these circumstances or events could increase the Company’s costs or lower its revenues. The involvement of its vessels in an oil spill or other environmental disaster may harm its reputation as a safe and reliable vessel operator and lead to a loss of customers and revenue.

The Company may suffer adverse consequences from the fluctuation in the market value of its vessels

The fair market value of its vessels may increase and decrease significantly depending on a number of factors including:

·   supply and demand for products, including crude oil, petroleum products, vegetable oil, ores, coal and grain;

·   general economic and market conditions affecting the shipping industry;

·   competition from other shipping companies;

·   types and sizes of vessels;

·   other modes of transportation;

·   cost of building new vessels;

·   governmental or other regulations;

·   prevailing level of charter rates; and

·   technological advances.

If the Company sells vessels at a time when vessel prices have fallen, the sale may be at less than the vessel’s carrying amount on its financial statements, resulting in a loss and a reduction in earnings.

In addition, the Company’s mortgage indebtedness at December 31, 2006 of $150.5 million is secured by mortgages on the existing fleet of vessels of the Company and its subsidiaries. If the market value of its fleet declines, the Company may not be in compliance with certain provisions of its existing credit facilities and the Company may not be able to refinance its debt or obtain additional financing. If the Company is unable to pledge additional collateral, its lenders could accelerate its debt and foreclose on its fleet.

The Company’s vessels may suffer damage and the Company may face unexpected drydocking costs, which could affect its cash flow and financial condition

If the Company’s vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and can be substantial. The Company may have to pay drydocking costs that its insurance does not cover. The loss of earnings while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, would decrease its earnings.

Purchasing and operating previously owned, or secondhand, vessels may result in increased operating costs and vessels off-hire, which could adversely affect its earnings

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

In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. As of December 31, 2006, the average age of the vessels in its fleet was 19 years. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers.

Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations, or the addition of new equipment, to its vessels and may restrict the type of activities in which the vessels may engage. The Company cannot assure that, as its vessels age, market conditions will justify those expenditures or enable us to operate its vessels profitably during the remainder of their useful lives. If the Company sell vessels, the Company is not certain that the price for which the Company sells them will equal at least their carrying amount at that time.

The Company is an international company and primarily conducts its operations outside the United States. Changing economic, political and governmental conditions in the countries where the Company are engaged in business or where its vessels are registered affect us. In the past, political conflicts, particularly in the Arabian Gulf, resulted in attacks on vessels, mining of waterways and other efforts to disrupt shipping in the area. For example, in October 2002, the vessel Limburg was attacked by terrorists in Yemen. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea. Following the terrorist attack in New York City on September 11, 2001, and the military response of the United States, the likelihood of future acts of terrorism may increase, and the Company’s vessels may face higher risks of being attacked in the Middle East region. In addition, future hostilities or other political instability in regions where the Company’s vessels trade could affect its trade patterns and adversely affect its operations and performance.

The market for product tanker and OBO charters is highly competitive

The ownership of the world’s product tanker fleet is fragmented. Competition in the industry among vessels approved by major oil companies is primarily based on price, but also vessel specification and age. There are approximately 1,100 crude oil and product tankers worldwide of between 25,000 and 50,000 DWT. Tankers are typically owned in groups or pools comprising up to about 25 vessels.

The OBO industry is also fragmented and competition is also primarily based on price, but also vessel specification and age. There are approximately 78 OBOs worldwide of between 50,000 and 100,000 DWT. In this size range, the largest ownership group has nine vessels. Otherwise vessels are owned in groups of six vessels or less.

The Company competes principally with other vessel owners through the global tanker and dry bulk charter market, which is comprised of shipbrokers representing both charterers and ship owners. Charterparties are quoted on either an open or private basis. Requests for quotations on an open charter are usually made by major oil companies on a general basis to a large number of vessel operators. Competition for open charters can be intense and involves vessels owned by operators such as other major oil companies, oil traders and independent ship owners. Requests for quotations on a private basis are made to a limited number of vessel operators and are greatly influenced by prior customer relationships. The Company bids for both open and private charters.

Competition generally intensifies during times of low market activity when several vessels may bid to transport the same cargo. Many of the Company’s competitors have greater financial strength and capital resources, as well as younger vessels.

The Company may be dependent on the spot market for charters

The Company’s vessels are operated on a mix of time charters and spot market voyages. The spot charter market is highly competitive and spot charter rates are subject to greater fluctuation than time charter rates. There can be no assurance that the Company will be successful in keeping its vessels fully employed in the spot market or that future spot charter rates will be sufficient to enable the Company’s vessels to be operated profitably.

The Company is dependent upon certain significant customers

Revenue from one customer accounted for $32.9 million (34.0%) of total revenues in 2006. In 2005, revenues from three significant customers accounted for $23.9 million (32.0%), $13.5 million (18.1%) and $9.8 million (13.1%) of total revenues. During 2004, revenues from three customers accounted for $8.2 million (15.9%), $7.2 million (13.9%) and $5.8 million (11.2%) of total revenues.

The Company will depend entirely on B+H Management Ltd. (“BHM”) to manage charter its fleet

The Company subcontracts the commercial and most of the technical management of its fleet, including crewing, maintenance and repair to BHM, an affiliated company with which the Company is under common control. The loss of BHM’s services or its failure to perform its obligations to the Company could materially and adversely affect the results of its operations. Although the Company may have rights against BHM if it defaults on its obligations to the Company, you will have no recourse against BHM. Further, the Company expects that it will need to seek approval from lenders to change its manager.

BHM is a privately held company and there is little or no publicly available information about it

The ability of BHM to continue providing services for its benefit will depend in part on its own financial strength. Circumstances beyond its control could impair BHM’s financial strength, and because it is privately held it is unlikely that information about its financial strength would become public unless BHM began to default on its obligations. As a result, an investor in the Company’s shares might have little advance warning of problems affecting BHM, even though these problems could have a material adverse effect on us.

The Company’s Chairman and Chief Executive Officer has affiliations with BHM which could create conflicts of interest

The Company’s majority shareholders, which are affiliated with Mr. Michael S. Hudner, own 50.1% of the Company and also own BHM. Mr. Hudner is also BHM’s Chairman and Chief Executive Officer. These responsibilities and relationships could create conflicts of interest between us, on the one hand, and BHM, on the other hand. These conflicts may arise in connection with the chartering, purchase, sale and operations of the vessels in its fleet versus vessels managed by other companies affiliated with BHM and Mr. Hudner. In particular, BHM may give preferential treatment to vessels that are beneficially owned by related parties because Mr. Hudner and members of his family may receive greater economic benefits.

If the Company fails to manage its planned growth properly, the Company may not be able to successfully expand its market share

The Company intends to increase substantially the size of its fleet via acquisitions. This will impose significant additional responsibilities on its management and staff, and the management and staff of BHM, and may necessitate that the Company, and they, increase the number of personnel. BHM may have to increase its customer base to provide continued employment for the vessels to be acquired.

The Company’s growth will depend on:

·   locating and acquiring suitable vessels;

·   identifying and consummating acquisitions or joint ventures;

·   integrating any acquired business successfully with its existing operations;

·   enhancing its customer base;

·   managing its expansion; and

·   Obtaining required financing.

Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty experienced in obtaining additional qualified personnel and managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures. The Company cannot give any assurance that the Company will be successful in executing its growth plans or that the Company will not incur significant expenses and losses in connection therewith.

There is no assurance that the Company will be able to pay dividends

The Company has a policy of investment for future growth and does not anticipate paying cash dividends on the common stock in the foreseeable future. Declaration and payment of any dividend is subject to the discretion of its Board of Directors. The timing and amount of dividend payments will be dependent upon its earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in its loan agreements, the provisions of Liberia law affecting the payment of distributions to shareholders and other factors. If there is a substantial decline in the petroleum product market or bulk charter market, its earnings would be negatively affected thus limiting its ability to pay dividends. Liberia law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or would be rendered insolvent upon the payment of such dividend. The current floating rate facilities restrict the Company from paying dividends.

Servicing future debt would limit funds available for other purposes such as the payment of dividends

To finance its future fleet expansion program, the Company expects to incur secured debt. The Company will need to dedicate a portion of its cash flow from operations to pay the principal and interest on its debt. These payments limit funds otherwise available for working capital, capital expenditures and other purposes. The need to service its debt may limit funds available for other purposes, including distributing cash to its shareholders, and its inability to service debt could lead to acceleration of its debt and foreclosure on its fleet.

The Company’s loan agreements contain restrictive covenants that may limit the Company’s liquidity and corporate activities

The Company’s loan agreements impose operating and financial restrictions on us. These restrictions may limit its ability to:

·   incur additional indebtedness;

·   create liens on its assets;

·   sell capital stock of its subsidiaries;

·   engage in mergers or acquisitions;

·   make capital expenditures;

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

·   sell its vessels.

Therefore, the Company may need to seek permission from its lender in order to engage in some corporate actions. The Company’s lender’s interests may be different from ours, and the Company cannot guarantee that the Company will be able to obtain its lender’s permission when needed. This may prevent us from taking actions that are in its best interest.

The Company is a holding company, and the Company depends on the ability of its subsidiaries to distribute funds to us in order to satisfy its financial obligations or to make dividend payments

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

The Company may not generate sufficient gross revenue to operate profitably or to service its indebtedness

The Company had net income of $18.8 million on gross revenue of $96.9 million in 2006. Income from vessel operations was $25.9 million for the year-end December 31, 2006. At December 31, 2006, the Company had approximately $201.9 million in indebtedness. There can be no assurance that future charter rates will be sufficient to generate adequate revenues or that the Company will be able to maintain efficiency levels to permit the Company to operate profitably or to service its indebtedness.

The creditworthiness and performance of its time charterers may affect its financial condition and its ability to obtain additional debt financing and pay dividends

The Company’s income is derived from the charter of its vessels. Any defaults by any of its charterers could adversely impact its financial condition, including its ability to service its debt and pay dividends. In addition, the actual or perceived credit quality of its charterers, and any defaults by them, may materially affect its ability to obtain the additional capital resources that the Company will require purchasing additional vessels or may significantly increase its costs of obtaining such capital. The Company’s inability to obtain additional financing at all or at a higher than anticipated cost may materially affect its results of operation and its ability to implement its business strategy.

As the Company expands its business, the Company will need to improve its operations and financial systems, staff and crew; if the Company cannot improve these systems or recruit suitable employees, its performance may be adversely affected

The Company’s current operating and financial systems may not be adequate as the Company implements its plan to expand the size of its fleet, and its attempts to improve those systems may be ineffective. In addition, as the Company expands its fleet, the Company will have to rely on BHM to recruit suitable additional seafarers and shoreside administrative and management personnel. The Company cannot assure you that BHM will be able to continue to hire suitable employees as the Company expands its fleet. If BHM’s unaffiliated crewing agent encounters business or financial difficulties, the Company may not be able to adequately staff its vessels. If the Company is unable to operate its financial and operations systems effectively or to recruit suitable employees as the Company expand its fleet, its performance may be adversely affected.

In the highly competitive international shipping industry, the Company may not be able to compete for charters with new entrants or established companies with greater resources

The Company employs its vessels in a highly competitive market that is capital intensive and highly fragmented. Competition arises primarily from other vessel owners some of whom have substantially greater resources than the Company does. Competition for the transportation of dry bulk and liquid cargo can be intense and depends on price, location, size, age, condition and the acceptability of the vessel and its managers to the charterers. Due in part to the highly fragmented market, competitors with greater resources could enter and operate larger fleets through consolidations or acquisitions that may be able to offer better prices and fleets.

The Company may be unable to attract and retain key management personnel and other employees in the shipping industry, which may negatively affect the effectiveness of its management and its results of operations

The Company’s success depends to a significant extent upon the abilities and efforts of its management team. The Company has no employment contract with its Chairman and Chief Executive Officer, Michael S. Hudner, or any other key individual; instead all management services are provided by BHM, Ltd. The Company’s success will depend upon BHM’s ability to hire and retain key members of its management team. The loss of any of these individuals could adversely affect its business prospects and financial condition. Difficulty in hiring and retaining personnel could adversely affect its results of operations.

The Company is subject to the reporting requirements of Sarbanes Oxley

Effective for its first fiscal year ending on or after July 15, 2008, the Company is subject to full compliance with all provisions of the Sarbanes Oxley Act of 2002. As directed by Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), the Securities and Exchange Commission adopted rules requiring public companies to include a report of management on the Company’s internal control over financial reporting in their annual reports on Form 20-F. Such a report is required to contain an assessment by management of the effectiveness of a company’s internal controls over financial reporting. In addition, the independent registered public accounting firm auditing a public company’s financial statements must attest to and report on management’s assessment of the effectiveness of the Company’s internal controls over financial reporting. While the Company would expend significant resources in developing the necessary documentation and testing procedures required by Section 404, there is a risk that the Company would not comply with all of the requirements imposed by Section 404. If the Company fails to implement required new or improved controls, the Company may be unable to comply with the requirements of Section 404 in a timely manner. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of its financial statements, which could cause the market price of its common stock to decline and make it more difficult for us to finance its operations.

The Company may have to pay tax on United States source income, which would reduce its earnings

Under the United States Internal Revenue Code of 1986, or the Code, 50% of the gross shipping income of a vessel-owning or chartering corporation, such as the Company and its subsidiaries, that is attributable to transportation that begins or ends, but that does not begin and end, in the United States is characterized as United States source shipping income and as such is subject to a four percent United States federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury Regulations promulgated thereunder in August 2003. Such Treasury Regulations became effective on January 1, 2005, for calendar year taxpayers such as the Company and its subsidiaries.

The Company expects that it will qualify for this statutory tax exemption and the Company will take this position for United States federal income tax return reporting purposes. If the Company is not entitled to this exemption under Section 883 for any taxable year, it would be subject for those years to a 4% United States federal income tax on its U.S. source shipping income. The imposition of this taxation could have a negative effect on its business and would result in decreased earnings available for distribution to its shareholders.

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

A foreign corporation will be treated as a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2) at least 50% of the average value of the corporation’s assets produce or are held for the production of those types of “passive income.” For purposes of these tests, “passive income” includes dividends, interest, 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 its proposed method of operation, the Company does not believe that the Company will be a PFIC with respect to any taxable year. In this regard, the Company intends to treat the gross income the Company derives or are deemed to derive from its time chartering activities as services income, rather than rental income. Accordingly, the Company believes that its income from time chartering activities does not constitute “passive income,” and the assets that the Company owns and operates 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 its proposed method of operation. Accordingly, no assurance can be given that the U.S. Internal Revenue Service, or IRS, or a court of law will accept its position, and there is a risk that the IRS or a court of law could determine that the Company is a PFIC. Moreover, no assurance can be given that the Company would not constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of its operations.

If the IRS were to find that the Company is or has been a PFIC for any taxable year, its U.S. shareholders will face adverse U.S. tax consequences. Under the PFIC rules, unless those shareholders make an election available under the Code (which election could itself have adverse consequences for such shareholders, as discussed below under “Tax Considerations—U.S. Federal Income Taxation of U.S. Holders”), such shareholders would be liable to pay U.S. federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of its common shares, as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of its common shares.

The Company may not be exempt from Liberian taxation, which would materially reduce its net income and cash flow by the amount of the applicable tax

The Republic of Liberia enacted a new income tax law generally effective as of January 1, 2001 (the “New Act”), which repealed, in its entirety, the prior income tax law in effect since 1977 pursuant to which the Company and its Liberian subsidiaries, as non-resident domestic corporations, were wholly exempt from Liberian tax.

In 2004, the Liberian Ministry of Finance issued regulations pursuant to which a non-resident domestic corporation engaged in international shipping such as ourselves will not be subject to tax under the New Act retroactive to January 1, 2001 (the “New Regulations”). In addition, the Liberian Ministry of Justice issued an opinion that the New Regulations were a valid exercise of the regulatory authority of the Ministry of Finance. Therefore, assuming that the New Regulations are valid, the Company and its Liberian subsidiaries will be wholly exempt from tax as under Prior Law.

If the Company were subject to Liberian income tax under the New Act, the Company and its Liberian subsidiaries would be subject to tax at a rate of 35% on its worldwide income. As a result, its net income and cash flow would be materially reduced by the amount of the applicable tax. In addition, shareholders would be subject to Liberian withholding tax on dividends at rates ranging from 15% to 20%.

The Company is incorporated in the Republic of the Liberia, which does not have a well-developed body of corporate law

The Company’s corporate affairs are governed by its Articles of Incorporation and By-laws and by the Liberia Business Corporations Act, or BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of the Liberia interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of the Liberia are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain United States jurisdictions. Shareholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, its public shareholders may have more difficulty in protecting their interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction.

Because most of its employees are covered by industry-wide collective bargaining agreements, failure of industry groups to renew those agreements may disrupt its operations and adversely affect its earnings

All of the seafarers on the ships in its fleet are covered by industry-wide collective bargaining agreements that set basic standards. The Company cannot assure you that these agreements will prevent labor interruptions. Any labor interruptions could disrupt its operations and harm its financial performance.

Item 4. INFORMATION ON THE COMPANY.

A. History and development of the Company

B+H Ocean Carriers Ltd. (the "Company"*) was organized in April 1988 to engage in the business of acquiring, investing in, owning, operating and selling vessels for dry bulk and liquid cargo transporta-tion. As of December 31, 2006, the Company owned and operated six MR product tankers, two Panamax product tankers and six OBOs. The Company also owns a 50% interest in a company which is the disponent owner of a 1992-built 75,000 DWT Combination Carrier, effected through a lease structure. Each vessel accounts for a significant portion of the Company’s revenues.

The Company’s fleet of product tankers consist of “handy-size” vessels which are between 30,000 and 50,000 summer dead-weight tons ("DWT"), and are able, by reason of their smaller size, to trans-port commodities to and from most ports in the world, includ-ing those located in less developed third-world countries. The Company’s Panamax product tankers are 61,000 and 68,500 DWT. Product tankers are single-deck oceangoing vessels designed to carry simulta-neously a number of segregated liquid bulk commodi-ties, such as refined petroleum products, vegetable oils, caustic soda and molasses. The Company’s fleet of OBOs are between 74,000 and 98,000 DWT. OBOs are combination carriers used to trans-port liquid, iron ore or bulk products such as coal, grain, bauxite, phosphate, sugar, steel products and other dry bulk commodities.

The Company is incorporated in Liberia and its princi-pal executive office is located at ParLaVille Place, 14 Par-La-Ville Road, Hamilton HM 08, Bermuda (telephone number (441) 295-6875).

* When referred to in the context of vessel ownership, the “Company” shall mean the wholly-owned subsidiaries of B+H Ocean Carriers Ltd. that are registered owners.

·   Acquisitions, Disposals and Other Significant Transactions

In January 2006, the Company, through a wholly-owned subsidiary, acquired a 1993-built, 83,000 DWT Combination Carrier for $36.4 million through an existing lease structure. The acquisition also included the continuation of a five-year Time Charter which commenced in October 2005. The Company purchased the vessel and terminated the lease in January 2007.

Also in January 2006, the Company, through a wholly-owned subsidiary, acquired a 50% shareholding in a company which is the disponent owner of a 1992-built 75,000 DWT Combination Carrier, effected through a lease structure. The terms of the transaction were based on a vessel value of $30.4 million. The vessel was fixed on a three-year charter commencing in February 2006. The charter includes a 50% profit sharing arrangement above a guaranteed minimum daily rate. On September 5, 2006, the Company, entered into an $8 million term loan facility agreement to finance a portion of the purchase price.

In June 2006, the Company, through a wholly-owned subsidiary, acquired a 61,000 DWT Panamax product tanker built in 1988 for $12.55 million. On October 17, 2006, the Company entered into a $12 million senior secured term loan to finance a portion of the purchase price.

·   Prior year acquisitions, disposals and other significant transactions

On May 25, 2005, the Company completed a private placement of 3,243,243 shares of Common Stock of the Company at a price of $18.50 per share, for aggregate gross proceeds of approximately $60 million. The newly issued shares traded over the counter in Norway until the Company obtained a listing on the Oslo Stock Exchange on April 12, 2006.

On February 4, 2005,the Company, through a wholly-owned subsidiary, acquired three 83,000 DWT OBO (Ore/Bulk/Oil), combination tanker/bulk carriers built in 1993 and 1994, for a total of $110.2 million. Two of the vessels are time chartered for five years at $26,600, $24,600, $23,600, $22,600 and $20,600 per day for the first through fifth years, respectively. The third vessel is time chartered for five years at $26,000, $24,000, $23,000, $22,000 and $20,000, respectively, for years one through five. The Company has a profit sharing arrangement with the charterers which entitles the Company to 35% of the charterer’s profits from this vessel for years 2 through 5. In conjunction with the sale, the Company entered into a floating rate loan facility totaling $102 million. SeeITEM 5B.

On June 15, 2005, the Company, through a wholly-owned subsidiary, acquired a 74,800 DWT OBO built in 1992 for $33.25 million. The vessel is time chartered for three years at $23,500 per day. On November 8, 2005, the Company completed an additional drawdown on its floating rate facility to finance a portion of the purchase price. SeeITEM 5 B.

On June 20, 2005, the Company, through a wholly-owned subsidiary, sold the vessel M/T COMMUTER for $8.5 million to an unaffiliated party. The excess of the sales proceeds over the book value of the vessel of $0.8 million is included in the Consolidated Statements of Operations for the year ended December 31, 2005.

On August 19, 2005, the Company, through a wholly-owned subsidiary, acquired a 68,500 DWT Panamax product tanker built in 1991 for $24.3 million. The vessel is time chartered for three years at $23,500 per day. On November 8, 2005, the Company completed an additional drawdown on its floating rate facility to finance a portion of the purchase price. SeeITEM 5B.

On March 12, 2004, the Company, through a 50%-owned consolidated subsidiary, acquired the 50% of Atlantic Bulker Shipping Corp. (“ABSC”) owned by an affiliated entity for $1.00.

On April 29, 2004, the Company, through a wholly-owned subsidiary, acquired a 98,000 DWT OBO built in 1986, for $19.4 million. Capital improvements made subsequent to acquisition to prepare the vessel for its intended use totaled $1.2 million, which were capitalized and included in the vessel’s carrying amount on the Consolidated Balance Sheets. The vessel, which was on timecharter until March, 2006, now trades on the spot market. In conjunction with the sale, the Company refinanced the existing floating rate loan facility and borrowed an additional $19 million. See “Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.”

On May 25, 2004, the Company, through a wholly-owned subsidiary, sold the vessel M/T SKOWHEGAN for $3.8 million to an unaffiliated party. The excess of the book value of the vessel over the sales proceeds of $4.1 million is included in the Consolidated Statements of Operations as of December 31, 2004. See “Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.”

On December 7, 2004, the Company, through a wholly-owned subsidiary, sold the vessel M/T ACOAXET for $5.7 million to an unaffiliated party. The excess of the book value of the vessel over the sales proceeds of $0.6 million is included in the Consolidated Statements of Operations as of December 31, 2004. See “Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.”

B. Business Overview

Management of the Company

The shipowning activities of the Company are managed by BHM under a Management Services Agreement (the “Management Agreement") dated June 27, 1988 and amended on October 10, 1995, subject to the oversight and direction of the Company's Board of Directors.

The shipowning activities of the Company entail three separate functions, all under the overall control and responsibility of BHM: (1) the shipowning function, which is that of an investment manager and includes the purchase and sale of vessels and other shipping interests; (2) the marketing and operations function which involves the deployment and operation of the vessels; and (3) the vessel technical management function, which encompasses the day-to-day physical maintenance, operation and crewing of the vessels.

BHM employs Navinvest Marine Services (USA) Inc. ("NMS"), a Connecticut corporation, under an agency agreement, to assist with the performance of certain of its financial reporting and administrative duties under the Management Agreement.

The Management Agreement may be terminated by the Company in the following circumstances: (i) certain events involving the bankruptcy or insolvency of BHM; (ii) an act of fraud, embezzlement or other serious criminal activity by Michael S. Hudner with respect to the Company; (iii) gross negligence or willful misconduct by BHM; or (iv) a change in control of BHM.

Marketing and Operations of Vessels

The Company’s vessels are time chartered to Product Transport Corp. Ltd, (“PROTRANS”), a Bermuda Corporation and wholly-owned subsidiary of the Company, on an open rate basis as described hereunder.

BHM is the manager of PROTRANS and has delegated certain administrative, marketing and operational functions to NMS and Product Transport (S) Pte. Ltd, a Singapore corporation, under agency agreements.

PROTRANS subcharters the vessels on a voyage charter or time charter basis to third party charterers. Under a voyage charter, PROTRANS agrees to provide a vessel for the transport of cargo between specific ports in return for the payment of an agreed freight per ton of cargo or an agreed lump sum amount. Voyage costs, such as canal and port charges and bunker (fuel) expenses, are the responsibility of PROTRANS. A single voyage charter (generally three to ten weeks) is commonly referred to as a spot market charter, and a voyage charter involving more than one voyage is commonly referred to as a consecutive voyage charter. Under a time charter, PROTRANS places a vessel at the disposal of a subcharterer for a given period of time in return for the payment of a specified rate per DWT capacity per month or a specified rate of hire per day. Voyage costs are the responsibility of the subcharterer. In both voyage charters and time charters, operating costs (such as repairs and maintenance, crew wages and insurance premiums) are the responsibility of the shipown-er.

Voyage and time charters can be for varying periods of time, ranging from a single trip to terms approximating the useful life of a vessel, depending on the evaluation of market trends by PROTRANS and by subcharterers. Long-term charters afford greater assurance that the Company will be able to cover their costs (including depreciation, debt service, and operating costs), and afford subcharterers greater stability of transporta-tion costs. Operating or chartering a vessel in the spot market affords both PROTRANS and subcharterers greater speculative opportunities, which may result in high rates when ships are in demand or low rates (possibly insufficient to cover costs) when ship availability exceeds demand. Charter rates are affected by world economic condi-tions, international events, weather condi-tions, strikes, govern-ment policies, supply and demand, and many other factors beyond the control of PROTRANS and the Company.

Vessel Technical Management

At December 31, 2006, BHM was the technical manager of all of the Company's vessels, under technical management agreements. BHM employs B+H Equimar Singapore Pte. Ltd. ("BHES"), a Singapore corporation, under agency agreements to assist with certain of its duties under the technical management agreements. The vessel technical manager is responsible for all technical aspects of day-to-day vessel operations, including physical maintenance, provisioning and crewing, and receives compensation of $12,834 per MR product tanker per month and $15,540 per Panamax product tanker or OBO per month, which may be adjusted annually for any increases in the Consumer Price Index. Such supervision includes the establishment of operating budgets and the review of actual operating expenses against budgeted expenses on a regular basis.

Insurance and Safety

The business of the Company is affected by a number of risks, including mechanical failure of the vessels, collisions, property loss to the vessels, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, the operation of any ocean-going vessel is subject to the inherent possibility of catastrophic marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. The Oil Pollution Act ‘90 (“OPA 90”), by imposing potentially unlimited liability upon owners, operators and bareboat charterers for certain oil pollution accidents in the United States, has made liability insurance more expensive for ship owners and operators and has also caused insurers to consider reducing available liability coverage.

The Company maintains hull and machinery and war risks insurance, which include the risk of actual or constructive total loss, protection and indemnity insurance with mutual assurance associations and loss of hire insurance on the four OBOs. The Company believes that its current insurance coverage is adequate to protect it against most accident-related risks involved in the conduct of its business and that it maintains appropriate levels of environmental damage and pollution insurance coverage. Currently, the available amount of coverage for pollution is $1 billion per vessel per incident. However, there can be no assurance that all risks are adequately insured against, that any particular claim will be paid or that the Company will be able to procure adequate insurance coverage at commercially reasonable rates in the future.

Competition

The product tanker industry is fragmented. Competition in the industry among vessels approved by major oil companies is primarily based on price. There are approximately 1100 crude oil and product tankers worldwide of between 30,000 and 50,000 DWT. Tankers are typically owned in groups or pools controlling up to 30 tankers.

The OBO industry is also fragmented and competition is also primarily based on price, but also vessel specification and age. There are approximately 80 OBOs worldwide of between 50,000 and 100,000 DWT. In this size range, the largest ownership group has nine vessels. Otherwise vessels are owned in groups of four or less.

The Company competes principally with other handysize vessel owners through the global tanker charter market, which is comprised of tanker brokers representing both charterers and ship owners. Charterparties are quoted on either an open or private basis. Requests for quotations on an open charter are usually made by major oil companies on a general basis to a large number of vessel operators. Competition for open charters can be intense and involves vessels owned by operators such as other major oil companies, oil traders and independent ship owners. Requests for quotations on a private basis are made to a limited number of vessel operators and are greatly influenced by prior customer relationships. The Company bids for both open and private charters.

Competition generally intensifies during times of low market activity when several vessels may bid to transport the same cargo. In these situations, the Company's customer relationships are paramount, often allowing the Company the opportunity of first refusal on the cargo. The Company believes that it has a significant competitive advantage in the handysize tanker market as a result of the quality and type of its vessels and through its close customer relationships, particularly in the Atlantic and in the Indo-Asia Pacific Region. Some of the Company’s competitors, however, have greater financial strength and capital resources.

Seasonality

Although the Company's liquid cargo trade is affected by season-al oil uses, such as heating in winter and increased automobile use in summer, the volume of liquid cargo transported generally remains the same through the year, with rates firmer in midwinter and midsummer and softer in the spring.

Inspection by Classification Society

The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention. The Company’s fleet is currently enrolled with the American Bureau of Shipping, Bureau Veritas, Det Norske Veritas,Class NKK and Lloyds.

A vessel must be inspected by a surveyor of the classi-fi-ca-tion society every year ("Annual Survey"), every two and a half years ("Inter-mediate Survey") and every five years ("Special Survey"). In lieu of a Special Survey, a shipowner has the option of arranging with the classification society for the vessel's machin-ery to be on a continuous survey cycle, under which the machinery would be surveyed over a five-year period. The Company's vessels are on Special Survey cycles for hull inspection and continu-ous survey cy-cles for machinery inspection. Every vessel 15 years and older is also re-quired to be drydocked at least twice in a five-year period for inspection of under-water parts of the vessel.

If any defects are found in the course of a survey or drydocki-ng, the clas-sification survey-or will require immediate rectification or issue a "condition of class" under which the appropriate repairs must be carried out within a prescribed time limit. The hull Special Survey includes measurements of the thickness of the steel structures in the hull of the vessel. Should the thickness be found to be less than class require-ments, steel renewals will be prescribed. Substantial expense may be incurred on steel renewal to pass a Special Survey if the vessel has suffered excessive cor-rosion.

In January 1997, BHES was awarded its International Safety Management (“ISM”) Document of Compliance by Lloyd's Register, certifying that BHES complied with the requirements of the International Management Code for the Safe Operation of Ships and for Pollution Prevention (ISM Code). Following the award of the Document of Compliance (“DOC”), each individual vessel in the fleet under management was audited by Lloyds Register for compliance with the documented BHES management procedures on which the DOC is based. After the audit, each vessel was awarded a ship specific Safe Management Certificate (“SMC”). Both the DOC and the SMC are subject to annual internal and external audits over a 5-year period. A successful renewal audit of the DOC was conducted by Lloyds Register on February 7, 2002. However, the Company entered into a Master Service Agreement (“MSA”) with the American Bureau of Shipping on April 27, 2000. To conform to the MSA and to streamline a periodic revision of our safety procedures, American Bureau of Shipping was requested to undertake an audit of the Company’s compliance with the ISM Code. This audit was successfully completed on November 8, 2002 and new DOC’s were issued by American Bureau of Shipping.

Regulation

The business of the Company and the operation of its vessels are materially affected by government regulation in the form of international conventions, national, state and local laws and regulations in force in the jurisdictions in which the vessels operate, as well as in the country or countries of their registration. Because such conventions, laws and regulations are subject to revision, it is difficult to predict what legislation, if any, may be promulgated by any country or authority. The Company also cannot predict the ultimate cost of complying with such conventions, laws and regulations, or the impact thereof on the resale price or useful life of its vessels. Various governmental and quasi-governmental agencies require the Company to obtain certain permits, licenses and certificates with respect to the operation of its vessels. Subject to the discussion below and to the fact that the required permits, licenses and certificates depend upon a number of factors, the Company believes that it has been and will be able to obtain all permits, licenses and certificates material to the conduct of its operations.

The Company believes that the heightened environmental and quality concerns of insurance underwriters, regulators and charterers will impose greater inspection and safety requirements on all vessels in the tanker market. The Company’s vessels are subject to both scheduled and unscheduled inspections by a variety of governmental and private interests, each of whom may have a different perspective and standards. These interests include Coast Guard, port state, classification society, flag state administration (country of registry) and charterers, particularly major oil companies which conduct vetting inspections and terminal operators.

Environmental Regulation-IMO. On March 6, 1992, the International Maritime Organization (“IMO”) adopted regulations under Annex I (oil) of MARPOL (the International Convention for the Prevention of Pollution from Ships) that set forth new pollution prevention requirements applicable to tankers. These regulations required that crude tankers of 20,000 DWT and above and product tankers of 30,000 DWT and above, which did not have protective segregated ballast tanks (PL/SBT) and which were 25 years old, were to be fitted with double sides and double bottoms. Product tankers of 30,000 DWT and above, which did have SBT, were exempt until they reached the age of 30. From July 6, 1993 all newbuilding tankers were required to be of double hull construction. In addition, existing tankers were subject to an Enhanced Survey Program.

On September 1, 2002, revised MARPOL regulations for the phase-out of single hull tankers took effect. Under these revised regulations, single hull crude tankers of 20,000 DWT and above and single hull product carriers of 30,000 DWT and above were to be phased out by certain scheduled dates between 2003-2015, depending on age, type of oil carried and vessel construction. The Revised Regulations applied only to tankers carrying petroleum products and thus did not apply to tankers carrying noxious liquid substances, vegetable or animal oils or other non-petroleum liquids.

Under further revisions to the MARPOL regulations, which were adopted on December 4, 2003, the final phasing out date for Category 1 tankers (principally those not fitted with PL/SBT) was brought forward to 2005 from 2007 and the final phasing out date for Category 2 tankers (principally those fitted with PL/SBT) was brought forward to 2010 from 2015. The Condition Assessment Scheme (CAS) was also to be made applicable to all single hull tankers of 15 years or older, rather than just to Category 1 tankers continuing to trade after 2005 and to Category 2 tankers continuing to trade after 2010. Flag states were permitted to allow continued operation of Category 2 tankers beyond 2010 subject to satisfactory results from the CAS and provided that the continued operation did not extend beyond 2015 or the date on which the vessel reached 25 years of age. Flag states were also permitted to allow continued operation of Category 2 tankers beyond 2010 if they were fitted with qualifying double sides or double bottoms, provided that the continued operation did not extend beyond the date on which the vessel reached 25 years of age. Notwithstanding these rights of flag states to allow continued operation beyond 2010, Port States were permitted to deny entry by single hull tankers after 2010 and tankers with qualifying double sides or double bottoms after 2015.

New MARPOL regulations were also introduced in respect of the carriage of Heavy Grade Oil (HGO). HGO includes crude oil having a density higher than 900kg/m3 at 15 degrees C and fuels oils having a density higher than 900kg/m3 at 15 degrees C or a kinematic viscosity higher than 180mm2/s at 50 degrees C. Notwithstanding these regulations, any party to MARPOL would be entitled to deny entry of single hull tankers carrying HGO, which had been otherwise allowed to carry such cargo under MARPOL, into the ports and offshore terminals under its jurisdiction. From October 21, 2003 and subject to certain exceptions, all HGO to or from European Union ports must be carried in tankers of double hull construction

The phase out dates for the purposes of carriage of petroleum products under MARPOL, for the vessels currently owned by the Company, are set out in the table below. In October 2004, a revision was adopted to MARPOL Annex II where noxious liquid substances (NLS) such as all vegetable oils will be required to be carried on vessels complying with the International Bulk Chemical Code (IBC). The revision comes into force on January 1, 2007. These regulatory changes have led the Company to believe that structural modifications to its existing fleet may provide the best solution to the phase-out issues for single hull tankers. Accordingly, two of the Company’s MR tankers were retrofitted with double-hulls in 2006 and early 2007 and one is currently being retrofitted. The remaining three are scheduled for 2007 and early 2008. Unless these vessels are converted to double hull vessels, they will no longer be marketable to charterers after such time and will be required to be scrapped. There is no assurance that the Company will be able to convert these vessels prior to the phase out time, and the cost of conversion could potentially impose a financial burden upon the Company.

In short, the IMO regulations, which have been adopted by over 150 nations, including many of the jurisdictions in which our tankers operate, provide for, among other things, phase-out of single-hulled tankers and more stringent inspection requirements; including, in part, that:

·   tankers between 25 and 30 years old must be of double-hulled construction or of a mid-deck design with double-sided construction, unless: (1) they have wing tanks or double-bottom spaces not used for the carriage of oil, which cover at least 30% of the length of the cargo tank section of the hull or bottom; or (2) they are capable of hydrostatically balanced loading (loading less cargo into a tanker so that in the event of a breach of the hull, water flows into the tanker, displacing oil upwards instead of into the sea);

·   tankers 30 years old or older must be of double-hulled construction or mid-deck design with double sided construction; and

·   all tankers are subject to enhanced inspections.

Also, under IMO regulations, a tanker must be of double-hulled construction or a mid-deck design with double-sided construction or be of another approved design ensuring the same level of protection against oil pollution if the tanker:

·   is the subject of a contract for a major conversion or original construction on or after July 6, 1993;

·   commences a major conversion or has its keel laid on or after January 6, 1994; or

·   completes a major conversion or is a newbuilding delivered on or after July 6, 1996.

The IMO has also negotiated international conventions that impose liability for oil pollution in international waters and a signatory’s territorial waters. In September 1997, the IMO adopted Annex VI to the MARPOL Convention to address air pollution from ships. Annex VI was ratified in May 2004, and will become effective May 19, 2005. Annex VI, when it becomes effective, will set limits on sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibit deliberate emissions of ozone depleting substances, such as chlorofluorocarbons. 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. Vessels built before 2002 are not obligated to comply with regulations pertaining to nitrogen oxide emissions. The Company believes that all our vessels are currently compliant in all material respects with these regulations. Additional or new conventions, laws and regulations may be adopted that could adversely affect our business, cash flows, results of operations and financial condition.

The IMO also has adopted the International Convention for the Safety of Life at Sea, or SOLAS Convention, which imposes a variety of standards to regulate design and operational features of ships. SOLAS standards are revised periodically. We believe that all our vessels are in substantial compliance with SOLAS standards.

Under the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or ISM Code, promulgated by the IMO, the party with operational control of a vessel is required 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. In 1994, the ISM Code became mandatory with the adoption of Chapter IX of SOLAS. We intend to rely on the safety management system that BHM has developed.

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 code requirements for a safety management system. No vessel can obtain a certificate unless its operator has been awarded a document of compliance, issued by each flag state, under the ISM Code. We believe that has all material requisite documents of compliance for its offices and safety management certificates for vessels in our fleet for which the certificates are required by the IMO. BHM will be required to review these documents of compliance and safety management certificates annually.

Noncompliance with the ISM Code and other IMO regulations may subject the shipowner 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. For example, the U.S. Coast Guard and European Union authorities have indicated that vessels not in compliance with the ISM Code will be prohibited from trading in U.S. and European Union ports.

Environmental Regulation-OPA 90/CERCLA.OPA 90 established an extensive regulatory and liability regime for environmental protection and cleanup of oil spills. OPA 90 affects all owners and operators whose vessels trade with the United States or its territories or possessions, or whose vessels operate in the waters of the United States, which include the United States territorial sea and the two hundred nautical mile exclusive economic zone of the United States. The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) applies to the discharge of hazardous substances, which the Company’s vessels are capable of carrying.

Under OPA 90, vessel owners, operators and bareboat (or “demise”) charterers are “responsible parties” who 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 oil spill containment and clean-up costs and other damages arising from oil spills caused by their vessels. These other damages are defined broadly to include (i) natural resource damages and the costs of assessment thereof, (ii) real and personal property damages, (iii) net loss of taxes, royalties, rents, fees and other lost natural resources damage, (v) net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards, (iv) loss of profits or impairment of earning capacity due to injury, destruction or loss of real property, personal property and natural resources, and (v) loss of subsistence use of natural resources. OPA 90 limits the liability of responsible parties to the greater of $1,200 per gross ton or $10 million per tanker that is over 3,000 gross tons and $600 per gross ton or $500,000 for non-tanker vessels (subject to possible adjustment for inflation). CERCLA, which applies to owners and operators of vessels, contains a similar liability regime and provides for cleanup, removal and natural resource damages. Liability under CERCLA is limited to the greater of $300 per gross ton or $5 million. These limits of liability would not apply if the incident were proximately caused by violation of applicable United States federal safety, construction or operating regulations, or by the responsible party’s gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with the oil removal activities. OPA and CERCLA each preserve the right to recover damages under other laws, including maritime tort law. OPA 90 specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states that have enacted legislation providing for unlimited liability for oil spills. In some cases, states, which have enacted such legislation, have not yet issued implementing regulations defining tanker owners’ responsibilities under these laws. Moreover, OPA 90 and CERCLA preserve the right to recover

damages under existing law, including maritime tort law. The Company intends to comply with all applicable state regulations in the ports where its vessels call.

The Company currently maintains and plans to continue to maintain pollution liability insurance for its vessels in the amount of $1 billion. A catastrophic spill could exceed the insurance coverage available, in which event there could be a material adverse effect on the Company. OPA 90 does not by its terms impose liability on lenders or the holders of mortgages on vessels.

Under OPA 90, with certain limited exceptions, all newly built or converted tankers operating in United States waters must be built with double-hulls, and existing vessels that do not comply with the double-hull requirement must be phased out over a 20-year period (1995-2015) based on size, age and place of discharge, unless retrofitted with double-hulls. Notwithstanding the phase-out period, OPA 90 currently permits existing single-hull tankers to operate until the year 2015 if their operations within United States waters are limited to discharging at the Louisiana Off-Shore Oil Platform, or off-loading by means of lightering activities within authorized lightering zones more than 60 miles offshore.

OPA 90 expands the preexisting financial responsibility requirements for vessels operating in United States waters and requires owners and operators of vessels to establish and maintain with the Coast Guard evidence of financial responsibility sufficient to meet the limit of their potential strict liability under OPA 90. In December 1994, the Coast Guard enacted regulations requiring evidence of financial responsibility in the amount of $1,500 per gross ton for tankers, coupling the OPA limitation on liability of $1,200 per gross ton with the CERCLA liability limit of $300 per gross ton. Under the regulations, such evidence of financial responsibility may be demonstrated by insurance, surety bond, self-insurance or guaranty. Under OPA 90 regulations, an owner or operator of more than one tanker will be required to demonstrate evidence of financial responsibility for the entire fleet in an amount equal only to the financial responsibility requirement of the tanker having the greatest maximum strict liability under OPA 90/CERCLA. The Company has provided requisite guarantees from a Coast Guard approved mutual insurance organization and received certificates of financial responsibility from the Coast Guard for each vessel required to have one.

The Coast Guard’s regulations concerning certificates of financial responsibility provide, in accordance with OPA 90 and CERCLA, that claimants may bring suit directly against an insurer or guarantor that furnishes certificates of financial responsibility; and, in the event that such insurer or guarantor is sued directly, it is prohibited from asserting any defense that it may have had against the responsible party and is limited to asserting those defenses available to the responsible party and the defense that the incident was caused by the willful misconduct of the responsible party. Certain insurance organizations, which typically provide guarantees for certificates of financial responsibility, including the major protection and indemnity organizations which the Company would normally expect to provide guarantees for a certificate of financial responsibility on its behalf, declined to furnish evidence of insurance for vessel owners and operators if they are subject to direct actions or required to waive insurance policy defenses.

Owners or operators of tankers operating in the waters of the United States were required to file vessel response plans with the Coast Guard, and their tankers were required to be operating in compliance with their Coast Guard approved plans by August 18, 1993. Such response plans must, among other things, (i) address a “worst case” scenario and identify and ensure, through contract or other approved means, the availability of necessary private response resources to respond to a “worst case discharge,” (ii) describe crew training and drills, and (iii) identify a qualified individual with full authority to implement removal actions. The Company has vessel response plans approved by the Coast Guard for tankers in its fleet operating in the waters of the United States. The Coast Guard has

announced it intends to propose similar regulations requiring certain tank vessels to prepare response plans for the release of hazardous substances.

As discussed above, OPA does not prevent individual states from imposing their own liability regimes with respect to oil pollution incidents occurring within their boundaries, including adjacent coastal waters. In fact, most U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law.

The phase out dates for the purposes of carriage of petroleum products under OPA 90, for the vessels currently owned by the Company, are set out in the table below.

VESSEL (as of MARCH 31, 2007)	HULL	DATE BUILT	DWT	PHASE OUT FOR CARRIAGE OF PETROLEUM PRODUCTS
				MARPOL/EU	OPA 90
M/T ACUSHNET	SH	Nov-81	40,454	Nov-07	Nov-06
M/T AGAWAM	DH	Jun-82	38,937	N/A	N/A
M/T ALGONQUIN	SH	Jan-83	40,454	Jan-09	Jan-08
M/T ANAWAN	DH	Aug-81	38,937	N/A	N/A
M/T AQUIDNECK	SH	Sep-81	40,454	Sep-07	Sep-06
M/T PEQUOD	SH	Jan-82	40,632	Jan-08	Jan-07
M/T SACHEM	DS	Mar-88	60,959	Mar-10	Feb-15
M/T SAGAMORE(1)	DS	Feb-91	68,536	Feb-10	Feb-15
OBO SACHUEST	DH	Sep-86	98,000	N/A	N/A
OBO RIP HUDNER	DH	Jul-94	83,155	N/A	N/A
OBO BONNIE SMITHWICK	DH	Dec-93	83,155	N/A	N/A
OBO SEAROSE G	DH	Apr-94	83,155	N/A	N/A
OBO ROGER M JONES	DH	Nov-92	74,868	N/A	N/A
OBO SAKONNET (2)	DH	May-93	83,155	N/A	N/A
OBO SEAPOWET (3)	DH	Sep-92	75,000	N/A	N/A

^1.   Vessel must comply with Reg.13F by Feb-10.

^2.   Disponent owners through a bareboat charter party.

^3.   50% owner of the entity which is the disponent owner through a bareboat charter party.

.

Environmental Regulation-Other. Although the United States is not a party to these conventions, many countries have ratified and follow the liability scheme adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage, 1969, as amended (the “CLC”) and the Convention for the Establishment of an International Fund for Oil Pollution of 1971, as amended (“Fund Convention”). Under these conventions, a vessel’s registered owner is strictly liable for pollution damage caused on the territorial waters of a contracting state by discharge of persistent oil, subject to certain complete defenses. Under an amendment to the 1992 Protocol that became effective on November 1, 2003, for vessels of 5,000 to 140,000 gross tons (a unit of measurement for the total enclosed spaces within a vessel), liability will be limited to approximately $6.88 million plus $962.24 for each additional gross ton over 5,000. For vessels of over 140,000 gross tons, liability will be limited to approximately $136.89 million. As the convention calculates liability in terms of a basket of currencies, these figures are based on currency exchange rates on January 19, 2005. Under the 1969 Convention, the right to limit liability is forfeited where the spill is caused by the owner’s actual fault; under the 1992 Protocol, a shipowner cannot limit liability where the spill is caused by the owner’s intentional or reckless conduct. Vessels trading in jurisdictions that are parties to these conventions must provide evidence of insurance covering the liability of the owner. In jurisdictions where the International Convention on Civil Liability for Oil Pollution Damage has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to that convention. We believe that our protection and indemnity insurance will cover the liability under the plan adopted by the IMO.

Additional U.S. Environmental Requirements. The U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990 (the “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. Our vessels that operate in such port areas are equipped with vapor control systems that satisfy these requirements. The CAA also requires states to draft State Implementation Plans, or SIPs, designed to attain national health-based air quality standards in primarily major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. As indicated above, our vessels operating in covered port areas are already equipped with vapor control systems that satisfy these requirements. Although a risk exists that new regulations could require significant capital expenditures and otherwise increase our costs, we believe, based on the regulations that have been proposed to date, that no material capital expenditures beyond those currently contemplated and no material increase in costs are likely to be required.

The Clean Water Act (“CWA”) prohibits the discharge of oil or hazardous substances into navigable waters 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. State laws for the control of water pollution also provide varying civil, criminal and administrative penalties in the case of a discharge of petroleum or hazardous materials into state waters. The CWA complements the remedies available under the more recent OPA and CERCLA, discussed above.

The National Invasive Species Act (“NISA”) was enacted in 1996 in response to growing reports of harmful organisms being released into U.S. ports through ballast water taken on by ships in foreign ports. NISA established a ballast water management program for ships entering U.S. waters. Under NISA, mid-ocean ballast water exchange is voluntary, except for ships heading to the Great Lakes, Hudson Bay, or vessels engaged in the foreign export of Alaskan North Slope crude oil. However, NISA’s exporting and record-keeping requirements are mandatory for vessels bound for any port in the United States. Although ballast water exchange is the primary means of compliance with the act’s guidelines, compliance can also be achieved through the retention of ballast water onboard the ship, or the use of environmentally sound alternative ballast water management methods approved by the U.S. Coast Guard. If the mid-ocean ballast exchange is made mandatory throughout the United States, or if water treatment requirements or options are instituted, the costs of compliance could increase for ocean carriers.

European Union Tanker Restrictions. In July 2003, in response to the MT Prestige oil spill in November 2002, the European Union adopted legislation that accelerates the IMO single hull tanker phase-out timetable and, by 2010 will prohibit all single-hulled tankers used for the transport of oil from entering into its ports or offshore terminals. The European Union, following the lead of certain European Union nations such as Italy and Spain, has also banned, as of October 21, 2003, all single-hulled tankers carrying heavy grades of oil, regardless of flag, from entering or leaving its ports or offshore terminals or anchoring in areas under its jurisdiction. Commencing in 2005, certain single-hulled tankers above 15 years of age will also be restricted from entering or leaving European Union ports or offshore terminals and anchoring in areas under European Union jurisdiction. The European Union is also considering legislation that would: (1) ban manifestly sub-standard vessels (defined as those over 15 years old that have been detained by port authorities at least twice in a six-month period) from European waters and create an obligation of port states to inspect vessels posing a high risk to maritime safety or the marine environment; and (2) provide the European Union with greater authority and control over classification societies, including the ability to seek to suspend or revoke the authority of negligent societies. It is impossible to predict what legislation or additional regulations, if any, may be promulgated by the European Union or any other country or authority.

In jurisdictions where the CLC has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to the CLC.

C. Organizational Structure

The Company owns each of its vessels through separate wholly-owned subsidiaries incorporated in Liberia and the Marshall Islands. The operations of the Company’s vessels are managed by B+H Management Ltd., under a management agreement. See ITEM 7.

As of March 31, 2006, the Company’s subsidiaries are as follows:

B+H OCEAN CARRIERS LTD.	Parent
CLIASHIP HOLDINGS LTD.	100% Wholly-owned
Subsidiaries:
ACUSHNET SHIPPING CORP.	100% Wholly-owned	Owns M/T ACUSHNET
AGAWAM SHIPPING CORP.	100% Wholly-owned	Owns M/T AGAWAM
ALGONQUIN SHIPPING CORP	100% Wholly-owned	Owns M/T ALGONQUIN
ANAWAN SHIPPING CORP.	100% Wholly-owned	Owns M/T ANAWAN
AQUIDNECK SHIPPING CORP.	100% Wholly-owned	Owns M/T AQUIDNECK
ISABELLE SHIPHOLDINGS CORP.	100% Wholly-owned	Owns M/T PEQUOD
SACHUEST SHIPPING LTD.	100% Wholly-owned	Owns M/V SACHUEST
OBO HOLDINGS LTD.	100% Wholly-owned
Subsidiaries:
BHOBO ONE LTD.	100% Wholly-owned	Owns M/V RIP HUDNER
BHOBO TWO LTD.	100% Wholly-owned	Owns M/V BONNIE SMITHWICK
BHOBO THREE LTD.	100% Wholly-owned	Owns M/V SEAROSE G
RMJ SHIPPING LTD.	100% Wholly-owned	Owns M/V ROGER M JONE
SAGAMORE SHIPPING CORP.	100% Wholly-owned	Owns M/T SAGAMORE
SEASAK OBO HOLDINGS LTD.	100% Wholly-owned
Subsidiaries:
SAKONNET SHIPPING LTD.	100% Wholly-owned	Disponent Owner of M/V SAKONNET (1)
SEAPOWET TRADING LTD.	100% Wholly-owned	Disponent Owner of 50% of M/V SEAPOWET (2)
SACHEM SHIPPING LTD.	100% Wholly-owned	Owns M/T SACHEM

(1) Disponent owner of M/V SAKONNET through a bareboat charter party.

(2) Disponent owner of M/V SEAPOWET as 50% owner of Nordan OBO II Ltd. which is disponent owner through a bareboat charter party.

D. Property, Plant and Equipment

Fleet

Each of the Company’s vessels is owned by a separate wholly-owned subsidiary, except as noted in the table above.

Other

Pursuant to the terms of the Management Agreement and as part of the services provided to the Company thereunder, BHM furnishes the Company with office space and administrative services at its offices in Hamilton, Bermuda.

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.   Operating results

The following is a discussion of our financial condition and results of operations for the years ended December 31, 2006, 2005 and 2004. You should read this section together with the consolidated financial statements including the notes to those financial statements for the periods mentioned above.

We are a provider of international liquid and dry bulk seaborne transportation services, carrying petroleum products, crude oil, vegetable oils and dry bulk cargoes. The Company operates a fleet consisting of six MR product tankers, two Panamax product tankers and seven combination carriers. The MR product tankers are all medium range or “handy-size” vessels which are between 30,000 and 50,000 summer deadweight tons (“DWT”), and are able, by reason of their small size, to transport commodities to and from most ports in the world, including those located in less developed third-world countries. The Panamax product tankers are 61,000 and 68,500 DWT. Product tankers are single-deck oceangoing vessels designed to carry simultaneously a number of segregated liquid bulk commodities, such as petroleum products and vegetable oils. The combination carriers, known as an OBOs (oil-bulk-ore carrier), are between 74,000 and 98,000 DWT (Aframax). Combination carriers can operate as tankers or as bulk carriers. They can be used to transport liquid cargo including crude, fuel oils and clean petroleum products (CPP), and they can also be used to transport dry bulk commodities, such as iron ore, coal, and grain.

The Company’s fleet operates under a mix of time and voyage charters. Our product tankers carry primarily petroleum products and vegetable oils and our OBOs carry crude oil, petroleum products, iron ore and coal. Historically, we deploy our fleet on both time charters, which can last from a few months to several years, and spot market charters, which generally last from several days to several weeks. Under spot market voyage charters, we pay voyage expenses such as port, canal and fuel costs. A time charter is generally a contract to charter a vessel for a fixed period of time at a specified daily rate. Under time charters, the charterer pays voyage expenses such as port, canal and fuel costs. Under both types of charters, we pay for vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs. We are also responsible for the vessel's intermediate and special survey costs.

Vessels operating on time charters provide more predictable cash flows, but can, in a strong market, yield lower profit margins than vessels operating in the spot market. Vessels operating in the spot market generate revenues that are less predictable but may enable us to capture increased profit margins during periods of improvements in tanker rates although we are exposed to the risk of declining tanker rates, which may have a materially adverse impact on our financial performance. We are constantly evaluating the appropriate balance between the number of our vessels deployed on time charter and the number employed on the spot market.

For discussion and analysis purposes only, we evaluate performance using time charter equivalent, or TCE revenues. TCE revenues are voyage revenues minus direct voyage expenses. Direct voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by a charterer under a time charter, as well as commissions. We believe that presenting voyage revenues on a TCE basis enables a proper comparison to be made between vessels deployed on time charter or those deployed on the spot market.

Our voyage revenues and voyage expenses are recognized ratably over the duration of the voyages and the lives of the charters, while vessel operating expenses are recognized on the accrual basis. We calculate daily TCE rates by dividing TCE revenues by voyage days for the relevant time period. We also generate demurrage revenue, which an owner charges a charterer for exceeding the agreed upon time to load or discharge a cargo. We calculate daily direct vessel operating expenses and daily general and administrative expenses for the relevant period by dividing the total expenses by the aggregate number of calendar days in the period.

We depreciate our vessels on a straight-line basis over their estimated useful lives determined to be 30 years from the date of their initial delivery from the shipyard. Depreciation is based on cost less the estimated residual value. We capitalize the total costs associated with special surveys, which take place every five years and amortize them on a straight-line basis over 60 months. Regulations and/or incidents may change the estimated dates of next drydockings.

Twelve Months Ended December 31, 2006 versus December 31, 2005

	2006			2005
Gross revenue	$	96,879,000		$	71,903,000
Voyage expenses		(14,792,000	)		(6,033,000	)
Net revenue		82,087,000			65,870,000
Gross voyage revenue		18,662,000			5,871,000
Less: direct voyage expenses		(9,294,000	)		(1,621,000	)
Time charter equivalent ("TCE") revenue		9,368,000			4,250,000
Time charter revenue		76,929,000			65,518,000
Less: brokerage commissions		(1,226,000	)		(1,202,000	)
Time charter revenue		75,703,000			64,316,000
Less: other voyage expenses		(4,272,000	)		(3,210,000	)
Other		1,288,000			514,000
Net revenue	$	82,087,000		$	65,870,000
Days revenue on voyage		746			201
Days revenue on time charter		3,719			3,527
		4,465			3,728
TCE rate		12,558			21,144
Average time charter rate		20,685			18,576
Company average TCE		18,385			17,669

Time Charter Equivalent (“TCE”) revenues, which is voyage revenues less voyage expenses, serves as an industry standard for measuring and managing fleet revenue and comparing results between geographical regions and among competitors.

Revenues

Revenues from voyage and time charters increased $24.2 million or 34% from 2005. The increase is due to a 20% increase in the number of total on-hire days from 2005 to 2006 and due to the fact that there were 545 more voyage days in 2006 than in 2005. Revenue from voyage charters is recorded on a gross basis, before voyage expenses. TCE increased $716 per day (4%). The number of voyage charter days increased after all of the MR tankers came off time charters during 2006 and were scheduled for conversion to double hull. Voyage charters allowed the Company more flexibility with respect to positioning for the conversions. Also, a combination carrier scheduled for special survey work was operated on voyage charters after the expiration of the two year time charter it was on since it was acquired in 2004. At December 31, 2006, the Company’s six MR product tankers were employed in the voyage charter market. The six combination carriers and two Panamax product tankers were employed on long-term time charters.

Other revenue primarily includes $0.8 million earned in respect of the combination carrier acquired in 2006, in lieu of time-charter revenue, from the January 15, 2006 effective date of the purchase until the closing date and $0.5 million representing settlement proceeds from the various insurance claims.

Voyage expenses

Voyage expenses consist of port, canal and fuel costs that are unique to a particular voyage and commercial overhead costs, including commercial management fees paid to BHM. Under a time charter, the Company does not incur port, canal or fuel costs. Voyage expenses increased $8.8 million, or 145%, to $14.8 million for the twelve month period ended December 31, 2006 compared to $6.0 million for the comparable period of 2005. This is due to the increase in voyage days from 201 in 2005 to 746 in 2006. Direct voyage expenses on a per day basis increased 54% or $4,400 per day, predominantly due to increases in port charges and bunkers. However, these increases are intrinsic in the gross voyage revenue rates, as indicated by the TCE rate discussed above.

Vessel operating expenses

The increase in vessel operating expenses is due to the increase in the number of vessels, as noted above. Vessel operating expenses increased $7.8 million (30%) from 2005 to 2006. The increase in total operating days of 1,036 (27%) accounted for approximately $6.9 million of the increase. In addition, there was an increase in average daily operating expenses of $380 per day for a total of $1.8 million. This was offset by a decrease in expenses for intermediate drydocking of approximately $0.9 million.

Depreciation and amortization

Depreciation and amortization, which includes depreciation of vessels as well as amortization of special surveys and debt issuance costs, increased by $4.9 million, or 41%, to $16.8 million for the twelve months ended December 31, 2006 compared to $11.9 million for the prior period. The increase is due to the increase in the number of vessels comprising the Company’s fleet, the completed conversion of one MR tanker to a double hull and the additional amortization of special survey costs incurred in 2006.

	2006		2005
Depreciation of vessels	$	14,959,000	$	10,199,000
Amortization of special survey costs		1,195,000		1,475,000
Amortization of vessel conversion costs		258,000		-
Amortization of debt issuance costs		401,000		243,000
Total depreciation and amortization	$	16,813,000	$	11,917,000

General and administrative expenses

General and administrative expenses include all of our onshore expenses and the fees that BHM charges for administration. Management fees increased by $0.3 million, or 36%, to $1.2 million for the twelve month period ended December 31, 2006 compared to $0.9 million for the prior period. The increase is due to the increase in the number of vessels and therefore the number of months during which fees were incurred also increased. Fees for consulting and professional fees and other expenses increased $1.1 million or 39%. The increase is comprised of increases in travel expenses, consulting fees and director and officer insurance premiums.

Interest Expense and Interest Income

The $5.1 million (90%) increase in interest expense is due to the increase in outstanding debt. The total long-term debt balance outstanding at December 31, 2006 was $201.9 million, as compared to $149.7 million at December 31, 2005 and $29.3 million at December 31, 2004. The Company incurred $12 million in new mortgage debt on October 12, 2006 for the acquisition of one vessel purchased in June 2006 and $8 million of additional new borrowings on September 5, 2006 to finance the acquisition of a 50% share in Nordan OBO 2 Inc. The Company also issued $25 million of Floating Rate Bonds in December 2006, of which $5 million were subscribed to by the Company. Both the interest paid on the Company’s debt and the interest earned on its cash balances are based on LIBOR. Interest income for 2006 of $2.4 million represented an increase of $1.2 million or 95% of the prior year’s interest income of $1.2 million. The increase in interest income is due to the fact that the Company had an average of $54.8 million in cash during 2006 as compared to $43.1 in 2005. In addition, average LIBOR rates of 5.1% for 2006 were approximately 1.7% higher than the 2005 average of 3.4%.

Equity in income of Nordan OBO II

Equity in income of Nordan OBO II of $1.3 million represents income from the Company’s 50% interest in an entity which is the disponent owner of a 1992-built 75,000 DWT combination carrier through a bareboat charter party which was acquired in March 2006.

Gain on fair value of interest rate swaps

During 2006, the Company entered into three interest rate swap agreements to mitigate the risk associated with the variable rate debt. Two of these interest rate swap agreements do not qualify for hedge accounting under US GAAP and as such, the changes the fair value of these swaps are reflected in the Company’s statement of operations. For the year ended December 31, 2006, the Company recognized aggregate gains of $0.3 million on these non-qualifying swap agreements. The aggregate fair value of these non-qualifying swap agreements is $0.3 million at December 31, 2006. The third swap agreement has been designated as a cashflow hedge by the Company and as such, the changes in the fair value of this swap are reflected as a component of other comprehensive income. The fair value of this cashflow hedge is $18,000 at December 31, 2006.

Loss on value of put option contracts

In 2006, the Company bought put options to mitigate the risk associated with the possibility of falling time charter rates. These put options do not qualify for special hedge accounting under US GAAP and as such, the aggregate changes in the fair value of these option contracts is reflected in the Company’s statement of operations. The aggregate unrealized loss on the value of the contracts totaled $0.3 million at December 31, 2006.

Year ended December 31, 2005 versus December 31, 2004

	2005			2004
Gross revenue	$	71,903,000		$	51,363,000
Voyage expenses		(6,033,000	)		(9,663,000	)
Net revenue		65,870,000			41,700,000
Gross voyage revenue		5,871,000			22,044,000
Less: direct voyage expenses		(1,621,000	)		(5,253,000	)
Time charter equivalent (TCE) revenue		4,250,000			16,791,000
Time charter revenue		65,518,000			29,319,000
Less: brokerage commissions		(1,202,000	)		(1,860,000	)
Time charter revenue		64,316,000			27,459,000
Less: other voyage expenses		(3,210,000	)		(2,550,000	)
Other		514,000			-
Net revenue	$	65,870,000		$	41,700,000
Days revenue on voyage		201			946
Days revenue on time charter		3,527			2,244
		3,728			3,190
TCE rate		21,144			17,749
Average time charter rate		18,576			13,066
Company average TCE		17,669			13,072

Revenues

Revenues from voyage and time charters increased $20.0 million or 39% from 2004. The increase is due to the Company’s ongoing vessel acquisition program, the composition of the fleet in terms of size and type of vessel and to higher time charter equivalent rates. A portion of the revenue earned in respect of certain long-term time charters with variable rates is included as deferred income on the Consolidated Balance Sheets at December 31, 2005. This treatment reflects US Generally Accepted Accounting Principles (“US GAAP”), but has no basis with respect to actual future liability under the terms of the Charter Party. The income deferred in respect of these time charters will be recognized as the time charter rates are reduced below the contract average in 2008, 2009 and 2010.

Voyage expenses

Voyage expenses consist of port, canal and fuel costs that are unique to a particular voyage and commercial overhead costs, including commercial management fees paid to BHM. Under a time charter, the Company does not incur port, canal or fuel costs. Voyage expenses decreased $3.6 million, or 38%, to $6.0 million for the year ended December 31, 2005 compared to $9.6 million for the comparable period of 2004. This is due to the significant decrease in voyage days from 946 in 2004 to 201 in 2005 as all of the Company’s MR product tankers and OBOs have been employed on long term time charters since March 2005. The newly acquired Panamax product tanker was employed on a voyage from the date of delivery to December 31, 2005 when it commenced on a three year time charter.

Vessel operating expenses

The increase in vessel operating expenses is due to the increase in the number of vessels, as noted above. Vessel operating expenses increased $6.6 million (34%) which is comprised of $7.9 million for five vessels acquired in 2005 and $1.4 million for a vessel owned less than nine months in 2004. This is offset by a $2.6 million decrease relating to the sale of one vessel in each of the second and fourth quarters of 2004 and one vessel sold in the third quarter of 2005.

Depreciation and amortization

Depreciation and amortization, which includes depreciation of vessels as well as amortization of special surveys and debt issuance costs, increased by $4.2 million, or 54%, to $11.9 million for the year ended December 31, 2005 compared to $7.8 million for the prior period. This increase is predominantly due to changes in the fleet, as noted above.

	2005		2004
Depreciation of vessels	$	10,199,000	$	5,526,000
Amortization of special survey costs		1,475,000		1,890,000
Amortization of debt issuance costs		243,000		348,000
Total depreciation and amortization	$	11,917,000	$	7,764,000

General and administrative expenses

General and administrative expenses include all of our onshore expenses, consulting fees, professional fees and the fees that BHM charges for administration of our vessels and shipowning companies. Management fees increased by $0.35 million, or 64%, to $0.89 million for the year ended December 31, 2005 compared to $0.55 million for the prior period. The increase is due to the increase in the number of vessels and therefore the number of months during which fees were incurred.

Gain on Sale of Vessels

The Company had a gain on the sale of the vessel M/T COMMUTER of $0.8 million for the year ended December 31, 2005 compared to losses of $4.7 million on the M/T SKOWHEGAN and M/T ACOAXET during 2004. The current market conditions were responsible for the dramatic shift in the value of MR product tankers in the course of the year.

Interest Expense and Interest Income

The $4.2 million (312%) increase in interest expense is due to the increase of $102 million in debt for the acquisition of three vessels in March 2005 and the additional drawdown of $43.0 million in the fourth quarter to finance the acquisition of two vessels. The increase in interest income of $1.2 million is due to the fact that the Company issued 3,243,243 shares of its common stock for net cash proceeds of $57 million in May 2005.

B.   Liquidity and capital resources

The Company requires cash to service its debt, fund the equity portion of investments in vessels, fund working capital and maintain cash reserves against fluctuations in operating cash flow. Net cash flow generated by continuing operations has historically been the main source of liquidity for the Company. Additional sources of liquidity have also included proceeds from asset sales and refinancings.

The Company’s ability to generate cash flow from operations will depend upon the Company’s future performance, which will be subject to general economic conditions and to financial, business and other factors affecting the operations of the Company, many of which are beyond its control.

The Company’s fleet consists of product tankers and OBOs thus, the Company is dependent upon the petroleum product, vegetable oil and chemical industries and the bulk products market as its primary sources of revenue. These industries have historically been subject to substantial fluctuation as a result of, among other things, economic conditions in general and demand for petroleum products, vegetable oil, ore, bulk, and chemicals in particular. Any material seasonal fluctuation in the industry or any material diminution in the level of activity therein could have a material adverse effect on the Company’s business and operating results. The profitability of product tankers and their asset value results from changes in the supply of and demand for such capacity. The supply of such capacity is a function of the number of new vessels being constructed and the number of older vessels that are laid-up or scrapped. The demand for product tanker capacity is influenced by global and regional economic conditions, increases and decreases in industrial production and demand for petroleum products, vegetable oils and chemicals, developments in international trade and changes in seaborne and other transportation patterns. The nature, timing and degree of change in these industry conditions are unpredictable as a result of the many factors affecting the supply of and demand for capacity. Although there can be no assurance that the Company’s business will continue to generate cash flow at or above current levels, the Company believes that the current market rates are sustainable which increases the likelihood that it will generate cash flow at levels sufficient to service its liquidity requirements in the future.

Cash at December 31, 2006, amounted to $78.4 million, an increase of $17.6 million as compared to December 31, 2005. The increase in the cash balance is attributable to net inflows from operations of $38.6 million and inflows from financing activities of $20.1 million. These inflows were offset by outflows for investing activities of $41.2 million, primarily related to the acquisition of additional vessels. Approximately $30.0 million of the Company’s cash is anticipated to be used for the Company’s double hull conversion program in 2007, another $30.0 million is anticipated to be used for additional fleet expansion.

During the year ended December 31, 2006, inflows for financing activities were primarily attributable to mortgage proceeds of $22.3 million to finance the acquisition of a Panamax product tanker and the 50% interest in Nordan OBO 2 Inc. and to net proceeds from issuance of Floating Rate Bonds of $20 million. This total was offset by the payment of mortgage principal of $21.4 million, payments for equity and debt issuance costs of $1.7 million, payment of unsecured debt of $1.4 million and the purchase of an aggregate of 160,800 shares of common stock for treasury, for an aggregate price of $2.9 million.

During the year ended December 31, 2006, outflows for investing activities were attributable to the purchase of one combination carrier and one Panamax product tanker for $16.2 million, to vessel conversion costs of $7.9 million, a net investment in Nordan OBO 2 Inc. of $10.6 million and the investment in freight forward contracts of $1.1 million. This total was offset by proceeds from the sale of marketable securities of $0.5 million.

The Company had working capital totaling $22.2 million at December 31, 2006 as compared to $21.4 million at December 31, 2004. It is important to note that it is customary for shipping companies and their lenders to exclude the current portion of long-term debt in any working capital analysis. At December 31, 2006, the current portion of long term debt includes both the additional down payment of $4.4 million for the purchase of the M/V Sakonnet in January, 2007 and $3.3 million of payments due on the loan to finance the vessel, which was entered into on January 24, 2007. This loan was a refinancing of unsecured debt on the balance sheet at December 31, 2006. Excluding the current portion of long-term debt, the Company had working capital of $62.0 million at December 31, 2006 as compared to $54.0 million at December 31, 2005.

At December 31, 2006, the Company’s largest three accounts receivable represented 74% of total accounts receivable. At December 31, 2005, the Company’s largest single accounts receivable balance represented 81% of total accounts receivable. The allowance for doubtful accounts was $120,000 at December 31, 2006 and $229,000 at December 31, 2005. To date, the Company’s actual losses on past due receivables have not exceeded their estimate of bad debts.

Revenue from one customer accounted for $32.9 million (34.0%) of total revenues in 2006. In 2005, revenues from three significant customers accounted for $23.9 million (32.0%), $13.5 million (18.1%) and $9.8 million (13.1%) of total revenues. During 2004, revenues from three customers accounted for $8.2 million (15.9%), $7.2 million (13.9%) and $5.8 million (11.2%) of total revenues.

Vessels and capital improvements, net of accumulated depreciation, amounted to approximately $261.7 million at December 31, 2006, an increase of $47.5 million as compared with December 31, 2005. The increase is attributable to the purchase of one OBO and one Panamax product tanker for a total of $48.9 million, to the conversion of single to double hulled vessels of $7.9 million and to the investment in capital improvements of $7.1 million. This was offset by depreciation and amortization of special survey costs totaling $16.4 million.

Inventories increased $1.7 million predominantly due to the fact that all of the MR product tankers were being operated in the spot market at December 31, 2006, but all were on time charter at December 31, 2005. Bunker inventory is owned by the shipowner on a voyage, but is owned by the charterer when the vessel is on time charter. Luboil inventory totaling $0.2 million was onboard the two vessels acquired during 2006 and the average value of the luboil inventory on board the Company’s ships increased approximately 19%.

Accounts payable increased $7.4 million and accrued liabilities increased $2.1 million from December 31, 2005 to December 31, 2006. The increase in accounts payable is due to the conversions of two tankers to double hulled vessels and to special surveys performed on two vessels. A significant portion of the cost to convert one of the vessels was financed by the ship yard for a period of 15 months beginning in November 2006. The increase in accrued liabilities is due to the timing of the second conversion which was completed in early 2007 as noted above.

Accrued interest represents interest payable on the Company’s outstanding debt, the increase in which is due to the additional borrowing of $78.6, net of payments of $26.4 million. The total long-term debt at December 31, 2006 was $201.9 million as compared to $149.7 million at December 31, 2005?.

Deferred income of $7.3 million at December 31, 2006 represents an increase of $1.9 million from 2005 due to the increase in the number of time charter contracts, for which revenue is paid in advance. In addition, the Company has deferred a portion of the revenue from long-term time charters with variable annual rates, recognizing income over the life of the time charter based on the average time charter rate as opposed to the actual rate received for the period. The total amount deferred revenue at December 31, 2006 related to these long-term variable-rate contracts is approximately $2.7 million. It is expected that an additional $0.2 million of revenue associated with these variable-rate charters will be deferred in 2007. Beginning in 2008, it is expected that the Company will recognize approximately $0.9 million of previously deferred revenue associated with these variable-rate charters as revenue. In 2009 and 2010, previously deferred revenue of approximately $2.9 million and $0.6 million, respectively, will be recognized in earnings.

The straight-lining of this revenue is prescribed under US GAAP, but has no basis with respect to actual future liability under the terms of the Charter Party.

On October 18, 2005 the Company entered into a $138.1 million Reducing Revolving and Term Loan Facilities Agreement which was used to refinance the outstanding balance of the loan entered into on February 23, 2005 and to provide an additional $43.0 million for the purpose of acquiring the M/V ROGER M JONES and the M/T SAGAMORE.

On August 29, 2006 the Company, through certain wholly-owned subsidiaries, entered into a $202,000,000 Reducing Revolving and Term Loan Facilities Agreement which amended the agreement entered into on October 18, 2005.

The Reducing Revolving and Term Loan Facilities Agreement is payable in ten quarterly installments of $5,450,000 beginning on December 15, 2006, ten quarterly installments of $5,100,000 beginning on June 15, 2009 and a balloon payment of $21,500,000 due on December 15, 2011.

Interest on the Reducing Revolving and Term Loan facility is equal to LIBOR plus 1.0%. Expenses associated with the incremental borrowing on the loan of $670,000 were capitalized and will be amortized over the 5 year term of the loan.

The Reducing Revolving and Term Loan facility contains certain restrictive covenants and mandatory prepayment in the event of the total loss or sale of a vessel. It also requires minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 125%. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2006, the Company was in compliance with these covenants.

On April 29, 2004, the Company entered into an amended and restated $36,000,000 floating rate loan facility (the “amended loan facility”). The amended loan facility made available an additional $19.0 million for the purpose of acquiring the OBO SACHUEST.

The amended loan facility is apportioned into two tranches with Tranche 1 attributable to the Existing Vessel fleet and Tranche 2 attributable to the OBO SACHUEST. Tranche 1 is payable in twelve quarterly installments of $1.2 million commencing on July 29, 2004, the twelfth installment being a balloon payment in an amount necessary to repay the tranche in full. Interest on the facility, which was reduced as of August 2005, is equal to LIBOR plus 1.0%. Tranche 2 is payable in twenty quarterly installments. The first eight installments of $1.5 million are followed by eleven installments of $0.6 million and a final installment of $0.4 million is due on the maturity date.

Expenses associated with the amended loan facility include arrangement fees of $360,000, which are capitalized and are being amortized over the five-year period of the loan.

The amended loan facility contains certain restrictive covenants and requires mandatory prepayment or delivery of additional security in the event of the total loss or sale of a vessel and in the event that the fair market value of the vessels acquired falls below 140% of the Tranche 1 balance outstanding, or the fair market value of the OBO SACHUEST falls below 110% of the Tranche 2 balance outstanding. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of (a) $2.0 million and (b) six percent (6%) of the aggregate amount of indebtedness of the Company on a consolidated basis. At December 31, 2006, the Company was in compliance with these covenants.

On September 5, 2006, the Company, through a wholly-owned subsidiary, entered into an $8 million term loan facility to finance the acquisition of its 50% interest in an entity which is the disponent owner of the OBO SEAPOWET through a bareboat charter party.

The facility contains certain restrictive covenants on the Company and requires mandatory prepayment in the event of the total loss or sale of a vessel. The facility requires a minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 125%. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2006, the Company was in compliance with these covenants.

The loan is repayable in sixteen quarterly installments of $500,000, beginning on December 7, 2006. Interest on the facility is equal to LIBOR plus 1.75%. Expenses associated with the loan of $221,000 were capitalized and will be amortized over the 4 year term of the loan.

On October 10, 2006, the Company, through a wholly-owned subsidiary, entered into a $12 million term loan facility to finance the acquisition of the M/T SACHEM.

The facility contains certain restrictive covenants on the Company, which among other things, restrict the payment of dividends and restrict leverage, investment and capital expenditures without consent of the lender. In addition, the agreement requires mandatory prepayment in the event of the total loss or sale of a vessel. The facility requires minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 125%. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2006, the Company was in compliance with these covenants.

The loan is repayable in sixteen quarterly installments of $550,000, beginning on January 17, 2007 and a balloon payment of $3,200,000 due on January 17, 2011. Interest on the facility is currently equal to LIBOR plus 1.25%. At such time as the vessel is fixed on a minimum two year charter at a sufficient rate (determined by the Administrative Agent), the applicable margin is reduced to 1.0% for the remainder of the term of such employment. Expenses associated with the loan of $135,000 were capitalized and will be amortized over the 4 year term of the loan.

On December 12, 2006, the Company issued $25 million of unsecured bonds of which the Company subscribed a total of $5 million. The net proceeds of the $20 million bonds will be used for general corporate purposes, including but not limited to: (i) product tanker conversion project (six vessels), (ii) conversion of the M/T SACHEM and M/T SAGAMORE to full double hull, (iii) acquisition of additional OBOs, (iv) acquisition of further product tankers, (v) continuance of share buy-back, and (vi) balance of equity payment on the OBO SAKONNET.

Interest on the bonds is equal to LIBOR plus 4%, payable quarterly in arrears. The bonds are in denominations of $100,000 each and rank pari passu. The term of the bond issue is seven years, payable in full on the maturity date.

In order to mitigate a portion of the risk associated with the variable rate interest on these bonds, the Company entered into an interest rate swap agreement to hedge the interest on $10 million of these bonds. Under the terms of the swap, which the Company has designated as a cash flow hedge, interest on the $10 million is converted from variable to a fixed rate of 4.995%.

All or a portion of the bonds may be redeemed at any time between June 2010 and June 2011 at 104.5%, between June 2011 and June 2012 at 103.25%, between June 2012 and June 2013 at 102.25% and between June 2013 and the maturity date at 101.00%.

The bond facility contains certain restrictive covenants which restrict the payment of dividends. The facility requires a minimum value adjusted equity ratio (as defined) of 25%. At December 31, 2006, the Company was in compliance with these covenants.

Management expects that the total expense for in-water survey, drydock and related repair work performed during 2007 will be approximately $0.6 million for three vessels. The expenses for drydock and related repair work totaled $0.1 million for one vessel in 2006, $0.9 million in 2005 for one vessel and $1.6 million in 2004 for two vessels. At December 31, 2006 there was one vessel in the shipyard being converted. The capitalized costs for scheduled classification survey and related vessel upgrades were $7.1 million for three vessels in 2006 and $2.1 million in 2005 for two vessels. There were no special surveys in 2004. Such capitalized costs are depreciated over the remaining useful life of the respective vessels.

Management does not believe that inflation has had any material impact on the Company's operations although certain of the Company's operating expenses (e.g., crewing, insurance and docking costs) are subject to fluctuation as a result of market forces. Inflationary pressures on bunker (fuel) costs are not expected to have a material effect on the Company's future operations because voyage charter rates are generally sensitive to the price of bunkers. However, a short-term fluctuation in bunker costs can impact the profitability of a voyage charter, which commenced prior to such fluctuation. Also, the Company is responsible for the bunker costs of its vessels while they are off hire.

Critical accounting policies

Basis of accounting:

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America or US GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting policies that involve a high degree of judgment and the methods of their application. For a description of all of our significant accounting policies, see Note 2 to the consolidated financial statements.

Principles of consolidation:

The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation.

Revenue recognition, trade accounts receivable and concentration of credit risk:

Revenues from voyage and time charters are recognized in proportion to the charter-time elapsed during the reporting periods. Charter revenue received in advance is recorded as a liability until charter services are rendered.

Under a voyage charter, the Company agrees to provide a vessel for the transport of cargo between specific ports in return for the payment of an agreed freight per ton of cargo or an agreed lump sum amount. Voyage costs, such as canal and port charges and bunker (fuel) expenses, are the Company’s responsibility. Voyage revenues and voyage expenses include estimates for voyage charters in progress which are recognized on a percentage-of-completion basis by prorating the estimated final voyage profit using the ratio of voyage days completed through year end to the total voyage days.

Under a time charter, the Company places a vessel at the disposal of a charterer for a given period of time in return for the payment of a specified rate per DWT capacity per month or a specified rate of hire per day. Voyage costs are the responsibility of the charterer.Revenue from time charters in progress is calculated using the daily charter hire rate, net of brokerage commissions, multiplied by the number of on-hire days through the year-end. Revenue recognized under long-term variable rate time charters is equal to the average daily rate for the term of the contract.

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the total losses likely in its existing accounts receivable. The allowance is based on historical write-off experience and patterns that have developed with respect to the type of receivable and an analysis of the collectibility of current amounts. Past due balances that are not specifically reserved for are reviewed individually for collectibility. Specific accounts receivable invoices are charged off against the allowance when the Company determines that collection is unlikely. Credit risk with respect to trade accounts receivable is limited due to the long standing relationships with significant customers and their relative financial stability. The Company performs ongoing credit evaluations of its customers’ financial condition and maintains allowances for potential credit losses when necessary. The Company does not have any off-balance sheet credit exposure related to its customers.

Vessels, capital improvements and depreciation:

Vessels are stated at cost, which includes contract price, acquisition costs and significant capital expenditures made within nine months of the date of purchase. Depreciation is provided using the straight-line method over the remaining estimated useful lives of the vessels, based on cost less salvage value. The estimated useful lives used are 30 years from the date of construction. When vessels are sold, the cost and related accumulated depreciation are reversed from the accounts, and any resulting gain or loss is reflected in the accompanying Consolidated Statements of Operations.

Capital improvements to vessels made during special surveys are capitalized when incurred and amortized over the 5-year period until the next special survey. The capitalized costs for scheduled classification survey and related vessel upgrades were $7.1 million for three vessels in 2006 and $2.1 million in 2005 for two vessels. There were no special surveys in 2004.

Impairment of long-lived assets:

The Company is required to review its long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Upon the occurrence of an indicator of impairment, long-lived assets are measured for impairment when the estimate of undiscounted future cash flows expected to be generated by the asset is less than its carrying amount. Measurement of the impairment loss is based on the asset grouping and is calculated based upon comparison of the fair value to the carrying value of the asset grouping.

Recent accounting pronouncements:

During 2006, the Company adopted the requirements of Statement of Financial Accounting Standards No. 123R Accounting for Stock Based Compensation (“SFAS No. 123R”). The adoption of SFAS No. 123R did not materially impact the Company’s 2006 statement of operations due to the fact that all of the Company’s previously existing stock options were fully vested at December 31, 2005 with no new options issued in 2006. Additionally, shares issued under the Company’s performance plan, vest immediately upon granting and have historically been reflected in operations.

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

Not applicable

D. Trend information

The Company’s fleet of product tankers consists of six single hull Medium Range (MR) tankers of about 40,000 DWT, and two double sided Long Range (LR) Panamax tanker of 61,000 and 68,000 DWT. All six of the MRs are currently operated in the spot market. One of the Panamax tankers is on a time charter with original length of three years and one is being operated in the spot market.

The Company’s operates seven OBOs of 74,000 to 98,000 DWT. All seven of these OBOs are currently on time charters with original length of two years or more.

The Company expects to operate these vessels in both the voyage (spot) markets and on long-term time charters as the existing time charters expire.

The Company entered into a contract in 2006 to convert its single hull product tankers to fully compliant double hull vessels in 2006-2007 to extend their useful trading life beyond IMO and OPA regulatory phase out dates for single hull tankers. Two vessels have been converted and the remainder will be converted in 2007 and early 2008.

E. Off-balance sheet arrangements

The Company entered into interest rate swaps during 2005 and 2006 to manage interest costs and the risk associated with increases in LIBOR. As of December 31, 2006 the Company had interest rate swaps aggregating notional amounts of $91.4 million designed to hedge debt tranches within a range of 3.86% to 5.07%, expiring from December 2009 to December 2013. The Company pays fixed-rate interest amounts and receives floating rate interest amounts based on three month LIBOR settings (for a term equal to the swaps’ reset periods). As of December 31, 2006 and 2005, the fair values of such swaps were not material.

F. Tabular disclosure of contractual obligations

At December 31, 2006, the Company’s contractual obligations consist of the OBO Holdings, Ltd., the Cliaship Holdings Corp., the Seapowet Trading Ltd., the Sachem Shipping Ltd. floating rate facilities and the B+H Ocean Carriers, Ltd. Open Bond Issue 2006/2013. The mortgage interest rates are stated as a margin (which varies from 1% to 4%) over LIBOR. The aggregate maturities, including an estimate of the interest payable are as follows:

	Principal		Interest1		Total
2007	$	32,065,000	$	10,779,000	$	42,844,000
2008		28,400,000		8,829,000		37,229,000
2009		25,950,000		7,029,000		32,979,000
2010		24,100,000		5,415,000		29,515,000
2011		40,000,000		4,049,000		44,049,000
Thereafter		20,000,000		3,744,000		23,744,000
	$	170,515,000	$	39,845,000	$	210,360,000

¹ Interest is calculated using the 3 month LIBOR rate in effect at December 31, 2006 and the balance outstanding for the period. The Company does not expect changes in the rate to have a material impact on the Company’s financial statements due to the mitigation of some of such risk resulting from interest rate swaps.

G. Forward Looking Statements

This Annual Report contains certain statements, other than statements of historical fact, that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used herein, the words “anticipates,” “believes,” “seeks,” “intends,” “plans,” or “projects” and similar expressions are intended to identify forward-looking statements. The forward-looking statements express the current beliefs and expectations of management and involve a number of known and unknown risks and uncertainties that could cause the Company’s future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such difference include, but are not limited to, those set forth in this Annual Report and the Company’s filings with the Securities and Exchange Commission. Further, although the Company believes that its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Annual Report will prove to be accurate.

Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and senior management

The directors and executive officers of the Company as of March 31, 2006 are as follows:

Name	Age	Position with the Company
Michael S. Hudner	60	Chairman of the Board, President and Chief Executive Officer and Class A Director
Trevor J. Williams	64	Vice President and Class A Director
R. Anthony Dalzell	62	Treasurer and Chief Financial Officer and Class B Director
Charles L. Brock	64	Class B Director
John M. LeFrere	61	Class A Director
Anthony J. Hardy	67	Class A Director
Per Ditlev-Simonsen	74	Class B Director
O. Michael Lewis	57	Class B Director

All directors and executive officers of the Company were first elected in June 1988 except Mr. LeFrere, who was elected a director in December 1995, Mr. Dalzell, who was appointed to his position as Treasurer and Chief Financial Officer in March 1997 and elected as Class B Director in June 1997, Messrs. Hardy and Ditlev-Simonsen, who were elected directors in February 1998 and Mr. Lewis, who was elected at the 2006 Annual Meeting of Shareholders.

Pursuant to the Company-'s Articles of Incorporation, the Board of Direc-tors is divided into two classes of at least three persons each. Each class is elected for a two-year term. The Class A directors will serve until the 2008 annual meeting and the Class B directors will serve until the 2007 annual meeting of shareholders. Officers are appointed by the Board of Directors and serve until their succes-sors are appointed and qualified.

Michael S. Hudner Michael S. Hudner has been President and Chief Executive Officer and a director of the Company since 1988 and Chairman of the Board of the Company since October 1993. He is also President and a director of BHM, a director of Protrans and has a controlling ownership interest, and is President and a director of NMS. Since 1978, Mr. Hudner, in his capacity as a partner in B+H Company ("BHC"), and its predecessor, was primarily responsible for the acquisition and financing of over 100 bulk carriers, product tankers and crude oil tankers for BHC and its affiliates and joint ventures (including all the vessels owned by the Company). Mr. Hudner is a member of the New York Bar, and is a member of the Council of the American Bureau of Shipping. Mr. Hudner is a US citizen and resides in Rhode Island, United States.

Trevor J. Williams Mr. Williams has been principally engaged since 1985 as President and Director of Consolidated Services Limited, a Bermuda-based firm providing management services to the shipping industry. He is a director of PROTRANS and has been for more than five years a director and Vice President of the Company and BHM. Mr. Williams is a British citizen and resides in Bermuda.

R. Anthony Dalzell Mr. Dalzell has been affiliated with BHM since October 1995. He was appointed Treasurer and Chief Financial Officer of the Company in March 1997. Mr. Dalzell was Managing Director of Ugland Brothers Ltd., a U.K. based shipowner and shipmanager from March 1982 until March 1988. From April 1988 until December 1992, he was General Manager of NMS and Secretary and a Vice President of the Company. From June 1993 until October 1995, Mr. Dalzell was affiliated with B+H Bulk Carriers Ltd. Mr. Dalzell is a British citizen and resides in the United Kingdom.

Charles L. Brock Mr. Brock has been a member of the law firm of Brock Partners since April 1995 which firm acted as United States counsel for the Company from 1995 to 2000 and since June 2002, a member of the investment banking firm of Brock Capital Group. Mr. Brock is a US citizen and resides in East Hampton, New York, United States.

John M. LeFrere Mr. LeFrere has been a private investor and consultant to several major corporations since March 1996. From February 1993 to March 1996, he was a Managing Director of Bankers Trust Company of New York in charge of equity research for the Capital Markets Division. Mr. LeFrere is President of J. V. Equities Corp., an investment banking firm and a partner in several research and investment banking firms. Mr. LeFrere is a US citizen and resides in Florida, United States.

Anthony J. Hardy Mr. Hardy has been Chairman since 1986 of A.J. Hardy Limited of Hong Kong, a consulting firm to the shipping industry. Prior thereto, he was Chairman (1972-1986) and Managing Director (1965-1981) of the Wallem Group of Companies, a major international shipping group headquartered in Hong Kong. Mr. Hardy has devoted 40 years to many aspects of the shipping industry, such as shipbroking, ship management, offshore oil rigs, and marine insurance. He was Chairman of the Hong Kong Shipowners Association (1970-1973). Mr. Hardy is a British citizen and resides in Hong Kong.

Per Ditlev-Simonsen Mr. Ditlev-Simonsen is Chairman of the Board of Eidsiva Rederi ASA, an Oslo Stock Exchange listed shipping company with its main interests in bulk, car and ro-ro carriers. Mr. Ditlev-Simonsen has more than 35 years experience in international shipping and offshore drilling. In the years 1991-1996, he was Chairman of the Board of Christiana Bank og Kreditkasse, Norway’s second largest commercial bank and one of the world’s largest shipping banks. Mr. Ditlev-Simonsen, the Mayor of Oslo since 1995, has served as a member of the Norwegian Parliament and the Oslo City Council, and as Chairman of the Conservative Party in Oslo. He was also Minister of Defense in the Norwegian Government from October 1989 to November 1990. Mr. Ditlev-Simonsen is a Norwegian citizen and resides in Oslo, Norway.

O. Michael Lewis Mr. Lewis was the Senior Partner of London law firm Peachey & Co from 1997 to 2005 having been a partner since 1979. Mr Lewis specialised in advising international shipping groups. Mr. Lewis is a trustee of the Boris Karloff Charitable Foundation.

No family relationships exist between any of the executive officers and directors of the Company.

B.   Compensation

The Company does not pay salaries or provide other direct compensa-tion to its executive officers. Directors who are not officers of the Company are entitled to receive annual fees of $15,000, and the Chairman of the Audit Committee is entitled to receive an additional fee of $2,000 per month. Certain direc-tors and executive officers of the Company earn compensation indirectly through entities which provide services to the Compa-ny. (See Item 7).

C.Board practices

The By-Laws of the Company provide for an Audit Committee of the Board of Directors consisting of two or more directors of the Company designated by a majority vote of the entire Board. The Audit Committee consists of directors who are not officers of the Company and who are not and have not been employed by the Manager or by any person or entity under the control of, controlled by, or under common control with, the Manager. The Audit Committee is currently comprised of Messrs. Brock (Chairman), Ditlev-Simonsen and Lewis and is currently charged under the By-Laws with reviewing the following matters and advising and consulting with the entire Board of Directors with respect thereto: (a) the preparation of the Company’s annual financial statements in collaboration with the Company’s independent registered public accounting firm; (b) the performance by the Manager of its obligations under the Management Services Agreement with the Company; and (c) all agreements between the Company and the Manager, any officer of the Company, or affiliates of the Manager or any such officer. The Audit Committee, like most independent Board committees of public companies, does not have the explicit authority to veto any actions of the entire Board of Directors relating to the foregoing or other matters; however, the Company’s senior management, recognizing their own fiduciary duty to the Company and its shareholders, is committed not to take any action contrary to the recommendation of the Audit Committee in any matter within the scope of its review. See also “Item 6.A. Directors and senior management.”

D. Employees

The Company employed, as of December 31, 2006, four non-salaried individuals on a part-time basis as officers of the Company and, through its vessel-owning subsidiaries, utilizes the services of ap-proximately 212 officers and crew. The Company's vessels are manned principally by crews from the Philippines, Pakistan, Croatia, Turkey and India.

E. Share ownership

See “Item 7.A. Major shareholders.”

Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.   Major shareholders

The following table sets forth information as of March 21, 2007, concerning the beneficial ownership of the common stock of the Company by (i) the only persons known by the Company's management to own beneficially more than 5% of the outstanding shares of common stock, (ii) each of the Company's directors and executive officers, and (iii) all executive officers and directors of the Company as a group:

Name of Beneficial Owner	Number of Shares Beneficially Owned	Percent of Common Stock (a)
Northampton Holdings Ltd.	2,011,926	28.57%
Michael S. Hudner (b)	3,556,823	50.51%
Fundamental Securities International Ltd.	1,290,257	18.32%
Devonport Holdings Ltd. (c)	1,290,257	18.32%
Harbor Holdings Corp. (d)	200,000	2.84%
B+H Management Ltd.	—	*
Charles L. Brock	—	*
R. Anthony Dalzell (e)	54,640	0.78%
Dean Investments Ltd.	54,540	0.77%
John M. LeFrere	—	*
Anthony J. Hardy	—	*
Per Ditlev-Simonsen	—	*
Trevor J. Williams (f)	3,356,823	47.67%
O. Michael Lewis	—	*
HBK Investments L.P. (g)	552,400	7.84%
Caiano Ship AS (j)	637,077	9.85%
Goldman Sachs International (j)	665,752	9.45%
Goldman Sachs (k)	414,330	5.88%
All executive officers and directors as a group (8 persons)	3,556,823	50.51%

 *Less than 1%

(a)   As used herein, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Exchange Act as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the power to dispose or direct the disposition) with respect to the security through any contract, arrangement, understanding, relationship, or otherwise, including a right to acquire such power(s) during the next 60 days. Unless otherwise noted, beneficial ownership consists of sole ownership, voting, and investment power with respect to all shares of common stock shown as beneficially owned by them.

(b)   Comprised of shares shown in the table as held by Northampton Holdings Ltd. (“NHL”), Fundamental Securities International Ltd. (“Fundamental”), Harbor Holdings, Ltd. and B+H Management Ltd. (“BHM”). Mr. Hudner is a general partner in the partnership which is the ultimate parent of Fundamental and a general partner in the ultimate owner of the general partner of B+H/Equimar 95 Associates, L.P. (“95 Associates”), which is a 60.6% owner of NHL. Fundamental is a 30.3% shareholder of NHL. Mr. Hudner is a 45% shareholder, a director and President of BHM. Accordingly, Mr. Hudner may be deemed to share voting and dispositive power as an indirect beneficial owner of the shares held by NHL, Fundamental, Harbor Holdings, Ltd. and BHM.

(c)   Devonport Holdings Ltd. is a general partner of the partnership that is the ultimate parent of Fundamental and is also a general partner in the ultimate owner of the general partner of 95 Associates.

(d)   Comprised of 200,000 shares originally granted to BHM.

(e)   Includes 54,540 shares held by an affiliated corporation of Mr.  Dalzell.

(f)   Comprised of shares shown in the table for NHL plus the shares held by Fundamental. Mr. Williams is president and a director of Fundamental and the president and a director of 95 Associates. Mr. Williams is a 20% shareholder and a Vice President of BHM. Accordingly, Mr.  Williams may be deemed to share voting and dispositive power as an indirect beneficial owner of the shares held by NHL, Fundamental and BHM.

(g) Per Schedule 13G, as filed with the United States Securities and Exchange Commission as of February 2007.

(j) Per VPS Registered Shareholder list dated March 22, 2007.

(k) Per DTCC Security Position Report dated March 16, 2007.

B. Related party transactions

BHM/NMS/BHES/PROTRANS

The shipowning activities of the Company are managed by an affiliate, B+H Management Ltd. (“BHM”) under a Management Services Agreement (the “Management Agreement") dated June 27, 1988 and amended on October 10, 1995, subject to the oversight and direction of the Company's Board of Directors.

The shipowning activities of the Company entail three separate functions, all under the overall control and responsibility of BHM: (1) the shipowning function, which is that of an investment manager and includes the purchase and sale of vessels and other shipping interests; (2) the marketing and operations function which involves the deployment and operation of the vessels; and (3) the vessel technical management function, which encompasses the day-to-day physical maintenance, operation and crewing of the vessels.

BHM employs Navinvest Marine Services (USA) Inc. ("NMS"), a Connecticut corporation, under an agency agreement, to assist with the performance of certain of its financial reporting and administrative duties under the Management Agreement.

The Management Agreement may be terminated by the Company in the following circumstances: (i) certain events involving the bankruptcy or insolvency of BHM; (ii) an act of fraud, embezzlement or other serious criminal activity by Michael S. Hudner, Chief Executive Officer, President, Chairman of the Board and significant shareholder of the Company, with respect to the Company; (iii) gross negligence or willful misconduct by BHM; or (iv) a change in control of BHM.

Mr. Hudner is President of BHM and the sole shareholder of NMS. BHM is technical manager of the Company’s wholly-owned vessels under technical management agreements. BHM employs B&H Equimar Singapore (PTE) Ltd., (“BHES”), to assist with certain duties under the technical management agreements. BHES is a wholly-owned subsidiary of BHM.

Currently, the Company pays BHM a monthly rate of $6,251 per vessel for general, administrative and accounting services, which may be adjusted annually for any increases in the Consumer Price Index. During the years ended December 31, 2006, 2005 and 2004, the Company paid BHM fees of approximately $970,000, $797,000 and $460,000, respectively for these services. The total fees vary due to the change in the number of fee months resulting from changes in the number of vessels owned during each period.

The Company also pays BHM a monthly rate of $12,834 per MR product tanker and $15,540 per Panamax product tanker or OBO for technical management services, which may be adjusted annually for any increases in the Consumer Price Index. Vessel technical managers coordinate all technical aspects of day to day vessel operations including physical maintenance, provisioning and crewing of the vessels. During the years ended December 31, 2006, 2005 and 2004, the Company paid BHM fees of approximately $2,360,000, $2,040,000 and $1,274,000, respectively for these services. Technical management fees are included in vessel operating expenses in the Consolidated Statements of Operations. The total fees have steadily increased due to the vessel acquisitions in 2005 and 2006.

The Company engages BHM to provide commercial management services at a monthly rate of $10,179 per vessel, which may be adjusted annually for any increases in the Consumer Price Index. BHM obtains support services from Protrans (Singapore) Pte. Ltd., which is owned by BHM. Commercial managers provide marketing and operations services. During the years ended December 31, 2006, 2005 and 2004, the Company paid BHM fees of approximately $1,558,000, $1,238,000 and $993,000, respectively for these services. Commercial management fees are included in voyage expenses in the Consolidated Statements of Operations. The total fees increased in 2006 due to the increase in the number of fee months resulting from the increase in the number of vessels owned.

The Company engaged Centennial Maritime Services Corp. (“Centennial”), a company affiliated with the Company through common ownership, to provide manning services at a monthly rate of $1,995 per vessel and agency services at variable rates, based on the number of crew members placed on board. During the years ended December 31, 2006, 2005 and 2004, the Company paid Centennial manning fees of approximately $519,000, $370,000 and $215,000, respectively. Manning fees are included in vessel operating expenses in the Consolidated Statements of Operations.

BHM received brokerage commissions of $85,000 in connection with the sale of the M/T COMMUTER in August 2005. BHM received brokerage commissions of $194,000 in connection with the purchase of the OBO SACHUEST in April 2004. The Company also paid BHM standard industry chartering commissions of $672,000 in 2006 and $333,000 in 2005 in respect of certain time charters in effect during those periods. Clearwater Chartering Corporation, a company affiliated through common ownership, was paid $1,062,000, $1,194,000 and $980,000 in 2006, 2005 and 2004, respectively for standard industry chartering commissions. Brokerage commissions are included in voyage expenses in the Consolidated Statements of Operations.

During 2006, 2005 and 2004, the Company paid fees of $501,000, $60,000 and $205,000 to J.V. Equities, Inc. for consulting services rendered. J.V. Equities is controlled by John LeFrere, a director of the Company.  In December, 2004, in a restructuring of the Company’s consulting arrangement, J.V. Equities terminated a consulting arrangement providing for payments of $240,000 per year, surrendered an option to purchase 307,000 shares of Company common stock exercisable at $1.00 per share, and received a fee of $644,000 as consideration for canceling the options, which was recorded as a charge to paid in capital in the Company’s Consolidated Balance Sheets at December 31, 2004.

During 2006, 2005 and 2004, the Company paid fees of $36,000, $49,334 and $27,000, respectively, to Dean Investments for consulting services rendered. Dean Investments is controlled by R. Anthony Dalzell, the Chief Financial Officer, Vice President and a director of the Company.

During 1998, the Company’s Board of Directors approved an agreement with BHM whereby up to 110,022 shares of common stock of the Company will be issued to BHM for distribution to individual members of management, contingent upon certain performance criteria. The Company will issue the shares of common stock to BHM at such time as the specific requirements of the agreement are met. During 2006, 13,855 shares, bringing the total to 62,246 shares, have been issued from treasury stock where these shares were held for this purpose. Compensation cost of $259,000, $102,000 and $89,000, based on the market price of the shares at the date of issue, was included as management fees to related parties in the Consolidated Statement of Operations as of December 31, 2006, 2005 and 2004 respectively.

Effective December 31, 2000, the Company granted 600,000 stock options, with a value of $78,000 to BHM as payment for services in connection with the acquisition of the Notes. The exercise price is the fair market value at the date of grant and the options are exercisable over a ten-year period. At December 31, 2005 all of the options are fully vested.

Information regarding these stock options is as follows:

	Shares		Option Price
Outstanding at January 1, 2006		231,460	$	1.00
Granted		-		-
Exercised		30,770		-
Canceled		-
Outstanding at December 31, 2006		200,690	$	1.00

As a result of BHM's possible future management of other shipowning companies and BHM's possible future involvement for its own account in other shipping ventures, BHM may be subject to conflicts of interest in connection with its management of the Company. To avoid any potential conflict of interest, the management agreement between BHM and the Company provides that BHM must provide the Company with full disclosure of any disposition of handysize bulk carriers by BHM or any of its affiliates on behalf of persons other than the Company.

For the policy period ending February 20, 2007, the Company placed 60% of its Hull and Machinery (“H&M”) insurance for machinery claims in excess of claims of $125,000 each incident with Northampton Assurance Ltd. (“NAL”), up to a maximum of $50,000 each incident on six vessels. It also placed an average of 37.5% of its H&M insurance for machinery claims in excess of $125,000 each incident with NAL up to a maximum of $37,500 each incident on one vessel. In addition, the Company placed  (a) 75% of its H&M insurance in excess of between $125,000 and  $220,000 each incident  and (b) 100% of its Loss of Hire insurance in excess of 14 or 21 days deductible with NAL, which risks NAL fully reinsured with third party carriers.

For the policy period ending February 20, 2006, the Company placed 100% of its Hull and Machinery (“H&M”) insurance in excess of claims of $125,000 each incident with NAL, up to a maximum of an average of $64,750 each incident on one  vessel, up to  an average of $42,500 each incident on six  vessels and up to an average of $61,250 each incident on one vessel. In addition, the Company placed  (a) 75% of its H&M insurance in excess of between $125,000 and  $220,000 each incident  and (b) 100% of its Loss of Hire insurance in excess of 14 or 21 days deductible with NAL, which risks NAL fully reinsured with third party carriers.

For the policy period ending February 20, 2005, the Company placed 100% of its H&M insurance in excess of claims of $125,000 each incident with NAL up to a maximum of an average of $76,250 each incident on two vessels, up to an average of $47,500 each incident on seven vessels and up to an average of $55,000 each incident on one vessel. In addition, the Company placed 70% of its H&M insurance in excess of between $125,000 and $175,000 each incident with NAL, which risk NAL fully reinsured.

For the periods ending December 31, 2006, 2005 and 2004, vessel operating expenses on the Consolidated Statements of Operations include approximately $972,000, $1,033,000 and $900,000, respectively, of insurance premiums paid to NAL (of which $884,000, $851,000 and $684,000, respectively, was ceded to reinsurers) and approximately $185,000, $189,000 and $133,000, respectively, of brokerage commissions paid to NAL.

The Company had accounts payable to NAL at December 31, 2006 of $295,000 and at December 31, 2005 of $340,000. NAL paid consulting fees of $174,000 during each of the three years ending December 31, 2006 to R. Anthony Dalzell and a company controlled by Mr. Dalzell.

The Company believes that the terms of all transactions between the Company and the existing officers, directors, shareholders and any of their affiliates described above are no less favorable to the Company than terms that could have been obtained from third parties.

C.   Interests of experts and counsel

Not applicable

Item 8. FINANCIAL INFORMATION

A.   Consolidated statements and other financial information

See Item 18.

A.7. Legal proceedings

There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of its or their property is the subject, other than ordinary routine litigation incidental to the Company's business.

A.8. Policy on dividend distributions

The Company has a policy of investment for future growth and does not anticipate paying cash dividends on the common stock in the foreseeable future. The payment of cash dividends on shares of common stock will be within the discretion of the Company’s Board of Directors and will depend upon the earnings of the Company, the Company’s capital requirements and other financial factors which are considered relevant by the Company’s Board of Directors. Both the Cliaship and the OBO Holdings Ltd. loan facilities restrict the payment of dividends.

B. Significant changes

Not applicable

Item 9. THE OFFER AND THE LISTING

A. Offer and listing details

The following table sets forth, for the last six months, the high and low sales price, for the two most recent fiscal years, the quarterly high and low sales prices and for the prior five fiscal years, the annual high and low sales price for a share of Common Stock on the American Stock Ex-change:

Sales price	High	Low
1st Quarter	20.55	18.21
2nd Quarter	20.00	17.30
3rd Quarter	18.00	15.75
4th Quarter	16.30	13.80
July	18.00	17.68
August	17.98	17.50
September	17.90	15.75
October	16.30	15.00
November	15.49	13.80
December	15.95	14.35
2005
1st Quarter	24.40	9.50
2nd Quarter	22.85	17.70
3rd Quarter	21.80	16.00
4th Quarter	20.80	17.00
Annual
2004	27.43	7.60
2003	16.65	6.50
2002	8.20	4.90
2001	6.25	0.40
2000	2.25	0.25

As of December 31, 2006, there were 191 record holders of Common Stock, 148 of whom, holding approximately 77% of the outstanding shares of Common Stock, had registered addresses in the United States.

B.   Plan of distribution

Not applicable

C. Markets

The Company's Common Stock has been publicly held and listed for trading on the American Stock Exchange since the completion of the Company's public offering in August 1988. The symbol for the Company's Common Stock on the American Stock Exchange is "BHO." The Company also has a Secondary listing on the Oslo Stock Exchange under BHOC.

Item 10. ADDITIONAL INFORMATION

A.   Share capital

Not applicable

B.   Memorandum and articles of association

The Articles of Incorporation of the Company as amended July 25, 1988, were filed as Ex-hibit 3.1 to the Company's Registra-tion State-ment on Form S-1, Registration No. 33-22811 (“the Registration Statement”). The Amendment adopted October 11, 1995 to the Articles of Incorporation of the Company, was filed as Exhibit 1.1(i) to the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 1995. The Amendment adopted October 21, 1998 to the Articles of Incorporation, was filed as Exhibit 1.2(ii) to the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 1998.

The By-Laws of the Company, were filed as Exhibit 3.2 to the Registration Statement. The Amendment adopted October 11, 1995 to the By-Laws of the Company, was filed as Exhibit 1.2(i) to the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 1995. The Amendment adopted October 21, 1998 to the By-Laws of the Company, was filed as Exhibit 1.2(iii) to the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 1998.

C.   Material contracts

Material contracts are listed as exhibits and described elsewhere in the text.

D. Exchange controls

Currently, there are no governmental laws, decrees or regulations in Liberia, the country in which the Company is incorporated, which restrict the export or import of capital (including foreign exchange controls), or which affect the remittance of dividends or other payments to nonresident holders of the securities of Liberian corporations. Also, there are no limitations currently imposed by Liberian law or by the Company's Articles of Incorporation and By-Laws on the right of nonresident or foreign owners to hold or vote the Company's Common Stock.

E. Taxation

United States shareholders of the Company are not subject to any taxes under existing laws and regulations of Liberia. There is currently no reciprocal tax treaty between Liberia and the United States regarding income tax withholding on dividends.

H. Documents on Display

 We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements we file reports and other information with the SEC. These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20459. 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 Commission at its principal office in Washington, D.C. 20549. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information that we and other registrant’s have filed electronically with the SEC. In addition, documents referred to in this annual report may be inspected at our offices located at 3rd Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton HM 08, Bermuda.

Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The carrying amount reported in the Consolidated Balance Sheets for cash and cash equivalents, trade accounts receivable, accounts payable and accrued liabilities approximates their fair value due to the short-term maturities. The carrying amount reported in the Consolidated Balance Sheets for long-term debt approximates its fair value due to variable interest rates, which approximate market rates.

Credit Risk. The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents and trade receivables. The Company maintains its cash accounts with various major financial institutions in the United States, the United Kingdom and Norway. The Company performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any one institution.

Credit risk with respect to trade accounts receivable is limited due to the long standing relationships with significant customers and their relative financial stability. The Company performs ongoing credit evaluations of its customers’ financial condition and maintains allowances for potential credit losses.

At December 31, 2006, the Company’s largest three accounts receivable represented 74% of total accounts receivable. At December 31, 2005, the Company’s largest single accounts receivable balance represented 81% of total accounts receivable. The allowance for doubtful accounts was $120,000 at December 31, 2006 and $229,000 at December 31, 2005. To date, the Company’s actual losses on past due receivables have not exceeded their estimate of bad debts.

Interest Rate Fluctuation.    The Company’s debt contains interest rates that fluctuate with LIBOR. Increasing interest rates could adversely impact future earnings. The Company does not expect this rate to fluctuate dramatically, however slight increases can be expected. The Company does not expect rate changes to have a material adverse effect on the liquidity and capital resources due to the mitigation of such risk resulting from interest rate swaps.

Foreign Exchange Rate Risk.    The Company generate all of its revenues in U.S. dollars but the Company incurs a portion of its expenses in currencies other than U.S. dollars. For accounting purposes, expenses incurred in foreign currencies are translated into U.S. dollars at exchange rates prevailing at the date of transaction. Resulting exchange gains and/or losses on settlement or translation are included in the accompanying Consolidated Statements of Operations.

Inflation.    Although inflation has had a moderate impact on its trading fleet’s operating and voyage expenses in recent years, management does not consider inflation to be a significant risk to operating or voyage costs in the current economic environment. However, in the event that inflation becomes a significant factor in the global economy, inflationary pressures would result in increased operating, voyage and financing costs.

Asset/Liability Risk Management. The Company continuously measures and quantifies interest rate risk and foreign exchange risk, in each case taking into account the effect of hedging activity. The Company uses derivatives as part of its asset/liability management program in order to reduce interest rate exposure arising from changes in interest rates. The Company does not use derivative financial instruments for the purpose of generating earnings from changes in market conditions or for speculative purposes. Before entering into a derivative transaction, the Company determines that there is a high correlation between the change in value of, or the cash flows associated with, the hedged asset or liability and the value of, or the cash flows associated with, the derivative instrument

Item 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable

PART II

Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable

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

Not Applicable

Item 15. CONTROLS AND PROCEDURES

A.   As of the end of the period covered by this annual report, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was carried out under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Company’s management has concluded that the Company’s disclosure controls and procedures are effective to ensure that material information relating to the Company and its consolidated subsidiaries is made known to them, particularly during the period when our periodic reports are being prepared.

B.   Subsequent to the date of management’s evaluation, there were no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

Item 16A. Audit Committee Financial Expert

The Company’s Board of Directors has determined that Charles Brock who is the Chairman of the Audit Committee, is duly qualified as a Financial Expert.

Item 16B.Code of Ethics

The Company has adopted a Code of Ethics that applies to all officers, directors and employees (collectively, the “Covered Persons”). The Company expects each of the Covered Persons to act in accordance with the highest standards of personal and professional integrity in all aspects of their activities, to comply with all applicable laws, rules and regulations, to deter wrongdoing, and to abide by the Code of Ethics.

Any change to or waiver of the Code of Ethics for Covered Persons must be approved by the Board and disclosed promptly to the Company’s shareholders.

The Company undertakes to provide a copy of the Code of Ethics, free of charge, upon written request to the Secretary at the following address: B+H Ocean Carriers, Ltd, 3^rd Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton HM 08, Bermuda, Attention: Deborah Paterson.

Item 16C. Principal Accounting Fees and Services

Fees, including reimbursements for expenses, for professional services rendered by Ernst & Young LLP for the audit of the Company’s financial statements for the years ended December 31, 2006 and 2005 was $109,100, and $86,000, respectively. The fees for PricewaterhouseCoopers, LLP for the audit of the Company’s annual financial statements for the year ended December 31, 2004 was $112,500. Neither Ernst & Young LLP nor PricewaterhouseCoopers, LLP provided other services to the Company.

Item 17.   FINANCIAL STATEMENTS

The Company has elected to furnish the financial statements and related information specified in Item 18.

Item 18.    FINANCIAL STATEMENTS.

The following Consolidated Financial Statements of the Company and its subsidiaries appear at the end of this Annual Report:

	Page No.
Consolidated Financial Statements:
Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2006 and 2005	F-4
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004	F-5
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004	F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	F-7
Notes to Consolidated Financial Statements	F-8

Item 19. EXHIBITS.

I.   Loan Agreement between B+H Ocean Carriers Ltd. and Norsk Tillitsmann ASA on behalf of Bondholders in the bond issue FRN B+H Ocean Carriers Ltd. Open Bond Issue 2006/2013 dated December 6, 2006.

II.   $8,000,000 Term Loan Facility Agreement for Seapowet Trading Ltd. provided by Nordea Bank Norge ASA dated September 5, 2006.

III.   $202,000,000 Reducing Revolving Credit Facility Agreement between Nordea Bank Norge ASA and OBO Holdings Ltd. dated August 29, 2006.

IV.   Loan Agreement providing for a Senior Secured Term Loan of up to $12,000,000 to be made available to Sachem Shipping Ltd. and B+H Ocean Carriers Ltd. by DVB Bank America NV dated October 10, 2006.

The following documents have been filed as Exhibits to the Annual Report on Form 20-F of B+H Ocean Carriers Ltd., incorporated herein by reference:

Revolving Reducing and Term Loan Agreement dated October 18, 2005 between Nordea Bank Norge ASA and OBO Holdings Ltd. Providing for a $138,100,000 Secured Term Loan Facility

Floating Rate Loan Agreement dated February 23, 2005 between Nordea Bank Norge ASA and OBO Holdings Ltd. Providing for a $102,000,000 Secured Term Loan Facility.

SIGNATURES

 Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 3, 2007	B+H OCEAN CARRIERS LTD
	(Registrant)
	By: /s/Michael S. Hudner
	Chairman of the Board, President and Chief Executive Officer

B+H Ocean Carriers Ltd.

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-4
Consolidated Statements of Operations for the three years ended December 31, 2006	F-5
Consolidated Statements of Changes in Shareholders’ Equity for the three years ended December 31, 2006.	F-6
Consolidated Statements of Cash Flows for the three years ended December 31, 2006.	F-7
Notes to Consolidated Financial Statements	F-8

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

B+H Ocean Carriers Ltd.

In our opinion, the accompanying consolidated balance sheets and the related statements of operations, of changes in shareholders’ equity and of cash flows present fairly, in all material respects, the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards generally of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Boston, MA

April 6, 2005

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

B+H Ocean Carriers Ltd.

We have audited the accompanying consolidated balance sheet of B+H Ocean Carriers Ltd. as of December 31, 2006 and 2005 and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of B+H Ocean Carriers Ltd. at December 31, 2006 and 2005 and the consolidated results of their operations and their cash flows for the two years then ended, in conformity with U.S. generally accepted accounting principles.

Ernst & Young LLP

Providence, RI

April 3, 2007

 B+H Ocean Carriers Ltd.

 Consolidated Balance Sheets

 December 31, 2006 and 2005

ASSETS	2006			2005
CURRENT ASSETS:
Cash and cash equivalents	$	78,391,028		$	60,827,651
Marketable equity securities		990,105			567,566
Trade accounts receivable, less allowance for doubtful accounts of $120,000 and $229,000 in 2006 and 2005, respectively		2,532,710			2,258,572
Inventories		2,547,776			855,086
Prepaid expenses and other current assets		1,408,999			1,210,915
Total current assets		85,870,618			65,719,790
Vessels, at cost:
Vessels		312,999,593			249,067,385
Less - Accumulated depreciation		(51,312,468	)		(34,900,653	)
		261,687,125			214,166,732
Investment in Nordan OBO 2 Inc.		10,576,398			-
Investment in debt securities		5,000,000
Fair value of derivative instruments		1,070,559			-
Other assets		2,617,744			1,536,764
Total assets	$	366,822,444		$	281,423,286
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	11,457,925		$	4,025,919
Accrued liabilities		3,877,579			1,747,909
Accrued interest		1,090,477			454,620
Current portion of mortgage payable and unsecured debt		39,765,472			32,602,000
Deferred income		7,346,190			5,415,416
Other liabilities		150,711			59,836
Total current liabilities		63,688,354			44,305,700
Mortgage payable		118,450,000			117,063,472
Unsecured debt		23,703,908
Floating rate bonds payable		25,000,000			-
Commitments and contingencies (Note 7)		-			-
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 20,000,000 shares authorized;
no shares issued and outstanding		-			-
Common stock, $0.01 par value; 30,000,000 shares authorized;
7,557,268 shares issued, 6,964,745 and 7,081,920 shares
outstanding as of December 31, 2006 and 2005, respectively		75,572			75,572
Paid-in capital		93,861,215			94,042,310
Retained earnings		48,680,252			29,905,939
Other comprehensive income		18,183			-
Treasury stock		(6,655,040	)		(3,969,707	)
Total shareholders' equity		135,980,182			120,054,114
Total liabilities and shareholders' equity	$	366,822,444		$	281,423,286

The Accompanying notes are an integral part of these financial statements

 B+H Ocean Carriers Ltd.

 Consolidated Statements of Operations

 For the years ended December 31, 2006, 2005 and 2004

	2006			2005			2004
Revenues:
Voyage, time and bareboat charter revenues	$	95,591,276		$	71,388,561		$	51,362,910
Other revenue		1,287,775			514,491			-
Total revenues		96,879,051			71,903,052			51,362,910
Operating expenses:
Voyage expenses		14,792,322			6,033,470			9,663,653
Vessel operating expenses, drydocking and survey costs		34,159,942			26,369,749			19,742,875
Depreciation		14,958,342			10,199,359			5,525,640
Amortization of deferred charges		1,854,000			1,718,000			2,238,000
(Gain) loss on sale of vessels		-			(828,115	)		4,682,965
General and administrative:
Management fees to related party		1,223,496			898,490			548,653
Consulting and professional fees, and other expenses		4,030,827			2,899,123			3,206,483
Total operating expenses		71,018,929			47,290,076			45,608,269
Income from vessel operations		25,860,122			24,612,976			5,754,641
Other income (expense):
Interest expense		(10,676,048	)		(5,604,637	)		(1,361,753	)
Interest income		2,377,298			1,221,010			32,857
Income from investment in Nordan OBO 2 Inc.		1,262,846			-			-
Other expense		(49,905	)		(130,704	)		(1,730	)
Total other expenses, net		(7,085,809	)		(4,514,331	)		(1,330,626	)
Net income	$	18,774,313		$	20,098,645		$	4,424,015
Basic earnings per common share	$	2.67		$	3.44		$	1.15
Diluted earnings per common share	$	2.59		$	3.30		$	1.00
Weighted average number of common shares outstanding:
Basic		7,027,343			5,844,301			3,839,242
Diluted		7,237,453			6,092,522			4,404,757

The Accompanying notes are an integral part of these financial statements

 B+H Ocean Carriers Ltd.

 Consolidated Statements of Changes in Shareholders' Equity

											Other
	Common		Treasury			Paid-in			Retained		Comprehensive
	Stock		Stock			Capital			Earnings		Income		Total
Balance, December 31, 2003	$	43,140	$	(3,073,858	)	$	38,142,343		$	5,383,279	$	-	$	40,494,904
Net income										4,424,015				4,424,015
307,000 Options cancelled (3)							(644,000	)						(644,000	)
8,065 Treasury shares issued (1)				48,392			40,326							88,718
Balance, December 31, 2004		43,140		(3,025,466	)		37,538,669			9,807,294		-		44,363,637
Net income										20,098,645				20,098,645
Common stock issued (4)		32,432					56,643,497							56,675,929
8,065 Treasury shares issued (1)				48,240			53,382							101,622
61,540 Treasury shares issued (2)				254,778			(193,238	)						61,540
70,170 Treasury shares acquired (5)				(1,247,259	)									(1,247,259	)
Balance, December 31, 2005		75,572		(3,969,707	)		94,042,310			29,905,939		-		120,054,114
Net income										18,774,313				18,774,313
Change in fair value of cash flow hedge												18,183		18,183
Comprehensive income		-		-			-			18,774,313		18,183		18,792,496
Common stock issued (4)							(234,649	)						(234,649	)
13,855 Treasury shares issued (1)				93,960			165,133							259,093
30,770 Treasury shares issued (2)				142,349			(111,579	)						30,770
161,800 Treasury shares acquired (5)				(2,921,642	)									(2,921,642	)
Balance, December 31, 2006	$	75,572	$	(6,655,040	)	$	93,861,215		$	48,680,252	$	18,183	$	135,980,182

Shares outstanding at December 31, 2006, 2005 and 2004 totaled 6,964,745, 7,081,920 and 3,839,242, respectively.

(1)   Treasury shares issued per 1998 Agreement, see NOTE 5.

(2)   Pursuant to a program to repurchase up to 600,000 shares for reissuance to B+H Management Ltd. (“BHM”) when options are exercised. See NOTE 5.

(3)   Options cancelled, see NOTE 5.

(4)   Expenses related to private placement of shares in 2005, see NOTE 3.

(5)   Pursuant to a program to repurchase up to 10% of the Company’s shares, which was authorized by the Board of Directors in October 2005.

Treasury shares outstanding are as follows:

Treasury shares outstanding at December 31, 2003	482,848
Treasury shares acquired	-
Treasury shares issued	(8,065	)
Trasury shares outstanding at December 31, 2004	474,783
Treasury shares acquired	70,170
Treasury shares issued	(69,605	)
Trasury shares outstanding at December 31, 2005	475,348
Treasury shares acquired	161,800
Treasury shares issued	(44,625	)
Trasury shares outstanding at December 31, 2006	592,523

The Accompanying notes are an integral part of these financial statements

 B+H Ocean Carriers Ltd.

 Consolidated Statements of Cash Flows

 For the years ended December 31, 2006, 2005 and 2004

	2006			2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	18,774,313		$	20,098,645		$	4,424,015
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Vessel depreciation		14,958,342			10,199,748			5,525,640
Amortization of deferred charges		1,854,000			1,717,611			2,238,000
(Gain) loss on sale of vessels		-			(828,115	)		4,682,965
(Reduction in) allowance for uncollectible accounts		(109,000	)		92,000			29,394
Other losses, net		49,905			130,704			1,730
Changes in assets and liabilities:
(Increase) decrease in trade accounts receivable		(165,138	)		3,194,932			(3,750,890	)
(Increase) decrease in inventories		(1,692,690	)		(84,705	)		137,566
(Increase) decrease in prepaid expenses and other current assets		(198,084	)		(444,088	)		126,606
Increase (decrease) in accounts payable		7,432,006			(1,305,109	)		(2,115,851	)
Increase (decrease) in accrued liabilities		2,129,670			(550,915	)		533,947
Increase in accrued interest		635,857			186,778			78,973
Increase in deferred income		1,930,774			4,116,002			569,159
Increase (decrease) in other liabilities		90,875			(16,250	)		(18,356	)
Payments for special surveys		(7,100,744	)		(2,084,866	)		-
Total adjustments		19,815,773			14,323,727			8,038,883
Net cash provided by operating activities		38,590,086			34,422,372			12,462,898
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase and investment in vessels		(16,190,000	)		(167,750,000	)		(20,589,234	)
Proceeds from sale of vessels		-			7,918,810			9,239,985
Investment in conversion to double hull vessels		(7,881,467	)		-			-
Investment in Nordan OBO II Inc.		(14,326,398	)		-			-
Dividends from Nordan OBO II Inc.		3,750,000			-			-
Investment in put option contracts		(1,055,813	)		-			-
Purchase of debt securities		(5,000,000	)		-			-
Purchase of equity securities		(469,006	)		(500,000	)		(200,000	)
Net cash (used in) provided by investing activities		(41,172,684	)		(160,331,190	)		(11,549,249	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for debt financing costs		(1,481,505	)		(1,318,385	)		(359,655	)
Issuance of common stock, net of issuance costs		(234,649	)		56,675,929
Purchase of treasury stock		(2,921,642	)		(1,247,259	)		-
Repurchase of options		-			-			(644,000	)
Issuance of treasury shares		289,863			163,162			88,718
Proceeds from mortgage financing		22,263,000			145,000,000			19,000,000
Proceeds from issuance of floating rate bonds		25,000,000			-			-
Related party loan		-			-			(944,686	)
Payments of unsecured debt		(1,356,092	)		-			-
Payments of mortgage principal		(21,413,000	)		(24,600,000	)		(8,899,828	)
Net cash provided by (used in) financing activities		20,145,975			174,673,447			8,240,549
Net increase (decrease) in cash and cash equivalents		17,563,377			48,764,629			9,154,198
Cash and cash equivalents, beginning of year		60,827,651			12,063,022			2,908,824
Cash and cash equivalents, end of year	$	78,391,028		$	60,827,651		$	12,063,022

Supplemental schedule of noncash financing and investing transactions (NOTE 9).

The Accompanying notes are an integral part of these financial statements

B+H OCEAN CARRIERS LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1-ORGANIZATION

B+H Ocean Carriers Ltd. (the "Company"), a Liberian Corporation, was incorporated in April 1988 and was initially capitalized on June 27, 1988. The Company is engaged in the business of acquiring, investing in, owning, operating and selling product tankers and bulk carriers. In August 1988, the Company completed a public offering of 4,000,000 shares of its common stock. In May 2005, the Company made a private offering of 3,243,243 shares of its common stock. See NOTE 3.

As of December 31, 2006, the Company owned and operated six medium range and two panamax product tankers and six OBO (Ore/Bulk/Oil) combination carriers. The Company also owns a 50% interest in the disponent owner of a combination carrier through its interest in Nordan OBO II (“Nordan”), which was acquired in March 2006. The Company accounts for its interest in Nordan under the equity method. As of December 31, 2005, the Company owned and operated six product tankers, one panamax product tanker and five combination carriers. As of December 31, 2004, the Company owned and operated seven product tankers and one combination carrier.

On April 12, 2006, the Company obtained a secondary listing on the Oslo Stock Exchange.

NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of accounting:

The accompanying Consolidated Financial Statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. A summary of significant accounting policies follows.

Principles of consolidation:

The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, including Cliaship Holdings Ltd. (“Cliaship”), OBO Holdings Ltd. (“OBO Holdings”), Product Transport Corporation Ltd. (“Protrans”) and Seasak Holdings Ltd. (“Seasak”). Additionally, the 2006 consolidated financial statements reflect the Company’s equity investment and related earnings associated with Nordan. All significant intercompany transactions and accounts have been eliminated in consolidation.

Revenue recognition, trade accounts receivable and concentration of credit risk:

Revenues from voyage and time charters are recognized in proportion to the charter-time elapsed during the reporting periods. Charter revenue received in advance is recorded as deferred income until charter services are rendered.

 Under a voyage charter, the Company agrees to provide a vessel for the transport of cargo between specific ports in return for the payment of an agreed freight per ton of cargo or an agreed lump sum amount. Voyage costs, such as canal and port charges and bunker (fuel) expenses, are the Company’s responsibility. Voyage revenues include estimates for voyage charters in progress which are recognized on a percentage-of-completion basis using the ratio of voyage days completed through year end to the total voyage days.

Under a time charter, the Company places a vessel at the disposal of a charterer for a given period of time in return for the payment of a specified rate of hire per day. Voyage costs are the responsibility of the charterer.Revenue from time charters in progress is calculated using the daily charter hire rate, net of brokerage commissions, multiplied by the number of on-hire days through the year-end. Revenue recognized under long-term variable rate time charters is equal to the average daily rate for the term of the contract.

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents and trade receivables. The Company maintains its cash accounts with various high quality financial institutions in the United States, the United Kingdom and Norway. The Company performs periodic evaluations of the relative credit standing of these financial institutions. At various times throughout the year, the Company may maintain certain US bank account balances in excess of Federal Deposit Insurance Corporation limits. The Company does not believe that significant concentration of credit risk exists with respect to these cash equivalents.

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the total losses likely in its existing accounts receivable. The allowance is based on historical write-off experience and patterns that have developed with respect to the type of receivable and the analysis of collectibility of current amounts. Past due balances that are not specifically reserved for are reviewed individually for collectibility. Specific accounts receivable invoices are charged off against the allowance when the Company determines that collection is unlikely. Credit risk with respect to trade accounts receivable is limited due to the long standing relationships with significant customers and their relative financial stability. The Company performs ongoing credit evaluations of its customers’ financial condition and maintains allowances for potential credit losses when necessary. The Company does not have any off-balance sheet credit exposure related to its customers.

At December 31, 2006, the Company’s largest three accounts receivable represented 74% of total accounts receivable. At December 31, 2005, the Company’s largest single accounts receivable balance represented 81% of total accounts receivable. The allowance for doubtful accounts was $120,000 at December 31, 2006 and $229,000 at December 31, 2005. To date, the Company’s actual losses on past due receivables have not exceeded their estimate of bad debts.

Revenue from one customer accounted for $32.9 million (34.0%) of total revenues in 2006. In 2005, revenues from three significant customers accounted for $23.9 million (32.0%), $13.5 million (18.1%) and $9.8 million (13.1%) of total revenues. During 2004, revenues from three customers accounted for $8.2 million (15.9%), $7.2 million (13.9%) and $5.8 million (11.2%) of total revenues.

Basic and diluted net income per common share:

Basic net income per common share is computed by dividing the net income for the year by the weighted average number of common shares outstanding in accordance with Statement of Financial Accounting Standards No. 128 (“SFAS No. 128”), Earnings per Share. Diluted earnings per share (“EPS”) is calculated by dividing net income for the year by the weighted average number of common shares, increased by potentially dilutive securities. Diluted EPS reflects the net effect on shares outstanding, using the treasury stock method, of the stock options granted to BHM in 2000 and the treasury shares held to satisfy the 1998 agreement discussed in NOTE 5.

	2006		2005		2004
Weighted average number of shares outstanding - basic		7,027,343		5,844,301		3,839,242
Net effect of outstanding stock options		207,834		232,090		541,319
Stock compensation shares not issued		2,276		16,131		24,196
Weighted average number of shares outstanding - diluted		7,237,453		6,092,522		4,404,757

Cash and cash equivalents:

Cash and cash equivalents include cash, certain money market accounts and overnight deposits with a maturity of 90 days or less when acquired.

Marketable Securities:

Marketable equity securities are recorded at fair value determined on the basis of quoted market price. Such investments are classified as trading securities in accordance with SFAS No. 115, Accounting For Investments In Debt And Equity Securities (“FAS 115”). Changes in the fair value of such investments are recorded in other income in the Consolidated Statements of Income.

Marketable debt securities are recorded at cost which approximates fair value and are classified as trading securities in accordance with FAS 115.

Fair value of financial instruments:

The following method and assumptions were used to estimate the fair value of financial instruments included in the following categories:

The carrying amount reported in the accompanying Consolidated Balance Sheets for cash and cash equivalents and accounts receivable approximates their fair value due to the current maturities of such instruments.

The carrying amount reported in the accompanying Consolidated Balance Sheets for short-term debt approximates its fair value due to the current maturity of such instruments coupled with interest at variable rates that are periodically adjusted to reflect changes in overall market rates. The carrying amount of the Company’s variable rate long-term debt approximates fair value.

Vessels, capital improvements and depreciation:

Vessels are stated at cost, which includes contract price, acquisition costs and significant capital expenditures made within nine months of the date of purchase. Depreciation is provided using the straight-line method over the remaining estimated useful lives of the vessels, based on cost less salvage value. The estimated useful lives used are 30 years from the date of construction. When vessels are sold, the cost and related accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is reflected in the accompanying Consolidated Statements of Operations.

Capital improvements to vessels made during special surveys are capitalized when incurred and amortized over the 5-year period until the next special survey. Capital improvements for classification surveys, vessel upgrades and related work (referred to as “special surveys”) totaled $7.1 million and $2.1 million for the years ended December 31, 2006 and 2005, respectively. There were no special surveys in 2004. Payments for special survey costs are characterized as operating activities on the Consolidated Statements of Cash Flows. Amortization of special survey costs is characterized as amortization of deferred charges on the Consolidated Statements of Income and of Cash Flows. Amortization of special survey costs was previously included in depreciation and amortization on the Consolidated Statements of Income and of Cash Flows.

Repairs and maintenance:

Expenditures for repairs and maintenance and interim drydocking of vessels are charged against income in the year incurred. Repairs and maintenance expense approximated $1.9 million, $1.8 million and $1.2 million for the years ended December 31, 2006, 2005 and 2004, respectively. Interim drydocking expense was approximately $0.1 million,$0.9 million and $1.6 million for the years ended December 31, 2006, 2005 and 2004 respectively.

Impairment of long-lived assets:

The Company is required to review its long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Upon the occurrence of an indicator of impairment, long-lived assets are measured for impairment when the estimate of undiscounted future cash flows expected to be generated by the asset is less than its carrying amount. Measurement of the impairment loss is based on the asset grouping and is calculated based upon comparison of the fair value to the carrying value of the asset grouping.

Segment Reporting:

The Company has determined that it operates in one reportable segment, the international transport of dry bulk and liquid cargo.

Inventories:

Inventories consist of engine and machinery lubricants and bunkers (fuel) required for the operation and maintenance of each vessel. Inventories are valued at cost, using the first-in, first-out method. Expenditures on other consumables are charged against income when incurred.

Taxation:

The Company is not subject to corporate income taxes on its profits in Liberia because its income is derived from non-Liberian sources. The Company is not subject to corporate income tax in other jurisdictions.

Derivatives and hedging activities:

The Company accounts for derivatives in accordance with the provisions of SFAS No. 133, as amended, “Accounting for Derivative Instruments and Hedging Activities,” (“SFAS No. 133”). The Company uses derivative instruments to reduce market risks associated with its operations, principally changes in interest rates and changes in charter rates. Derivative instruments are recorded as assets or liabilities and are measured at fair value.

Derivatives designated as cash flow hedges pursuant to SFAS No. 133 are recorded on the balance sheet at fair value with the corresponding changes in fair value recorded in other comprehensive income (equity). At December 31, 2006, the Company is party to one interest rate swap agreement that qualifies as a cash flow hedge; the fair value of this cash flow hedge is $18,183 at December 31, 2006. See NOTE 7-BONDS PAYABLE.

Derivatives that do not qualify for hedge accounting pursuant to SFAS No. 133 are recorded on the balance sheet at fair value with the corresponding changes in fair value recorded in operations. At December 31, 2006, the Company is party to two interest rate swap agreements, which were entered into during 2006, having an aggregate notional value of $81.4 million, which do not qualify for hedge accounting pursuant to SFAS No. 133. These swap agreements were entered into to hedge debt tranches within a range of 3.86% to 5.07%, expiring from December 2009 to December 2013. The aggregate fair value of these two non-qualifying swap agreements is $318,253 and is reflected within Fair Value of Derivative Instruments on the accompanying balance sheet and is recorded as income from changes in fair value in the consolidated statements of operations.

Additionally, at December 31, 2006, the Company is party to two put option agreements which are designed to mitigate the risk associated with changes in charter rates. These put option agreements, which were entered into during 2006, do not qualify for hedge accounting under SFAS No. 133; and the changes in their fair value is therefore recorded in operations. At December 31, 2006, the aggregate fair value of these non-qualifying put options is $734,123 and is reflected within Fair Value of Derivative Instruments on the accompanying balance sheet. During the year-end December 31, 2006, the Company recorded $321,690 of expense related to the change in fair value in the consolidated statements of operations.

The Company is exposed to credit loss in the event of non-performance by the counter party to the interest rate swap agreements; however, the Company does not anticipate non-performance by the counter party.

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.

Term loan issuance costs:

Term loan issuance costs are amortized over the life of the obligation using the straight-line method, which approximates the interest method.

Recent accounting pronouncements:

During 2006, the Company adopted the requirements of Statement of Financial Accounting Standards No. 123R Accounting for Stock Based Compensation (“SFAS No. 123R”). The adoption of SFAS No. 123R did not materially impact the Company’s 2006 statement of operations due to the fact that all of the Company’s previously existing stock options were fully vested at December 31, 2005 with no new options issued in 2006. Additionally, shares issued under the Company’s performance plan, vest immediately upon granting and have historically been reflected in operations. Total compensation expense recorded for the year ended December 31, 2006 was approximately $259,000 ($102,000 and $89,000 for the years ended December 31, 2005 and 2004, respectively) and related entirely to the Company’s performance plan.

NOTE 3-ACQUISITIONS AND OTHER SIGNIFICANT TRANSACTIONS:

On May 25, 2005, the Company executed a private placement of 3,243,243 shares of Common Stock of the Company at a price of $18.50 per share, for aggregate gross proceeds of approximately $60 million. The newly issued shares traded over the counter in Norway until the Company obtained a listing on the Oslo Stock Exchange on April 12, 2006. The proceeds from the private placement have been and are expected to continue to be used for the acquisition of ships, refinancing of debt and general working capital purposes.

Vessel acquisitions and related amendment of loan facility:

In January 2006, the Company, through a wholly-owned subsidiary, acquired a 1993-built, 83,000 DWT Combination Carrier for $36.4 million through an existing lease structure. The acquisition also included the continuation of a five-year Time Charter which commenced in October 2005. The Company made a down payment of $3.6 million and a entered into an agreement to recorded a corresponding liability

Also in January 2006, the Company, through a wholly-owned subsidiary, acquired a 50% shareholding in Nordan which is the disponent owner of a 1992-built 75,000 DWT Combination Carrier, effected through a lease structure. The terms of the transaction were based on a vessel value of $30.4 million. The vessel was fixed on a three-year charter commencing in February 2006. The charter includes a 50% profit sharing arrangement above a guaranteed minimum daily rate. On September 5, 2006, the Company, entered into an $8 million term loan facility agreement to finance a portion of the purchase price. See NOTE 6-MORTGAGE PAYABLE

In June 2006, the Company, through a wholly-owned subsidiary, acquired a 61,000 DWT Panamax product tanker built in 1988 for $12.55 million. On October 17, 2006, the Company entered into a $12 million senior secured term loan to finance a portion of the purchase price. See NOTE 6-MORTGAGE PAYABLE.

On February 4, 2005,the Company, through a wholly-owned subsidiary, acquired three 83,000 DWT OBO, combination tanker/bulk carriers built in 1993 and 1994, for a total of $110.2 million. Two of the vessels are time chartered for five years at $26,600, $24,600, $23,600, $22,600 and $20,600 per day for the first through fifth years, respectively. The third vessel is time chartered for five years at $26,000, $24,000, $23,000, $22,000 and $20,000, respectively, for years one through five. The Company has a profit sharing arrangement with the charterers which entitles the Company to 35% of the charterer’s profits from this vessel for years 2 through 5. In conjunction with the acquisition, the Company entered into a floating rate loan facility totaling $102 million. This loan facility was refinanced on August 29, 2006, when the Company entered into a $202.0 million floating rate loan facility. See NOTE 6-MORTGAGE PAYABLE

On June 15, 2005, the Company, through a wholly-owned subsidiary, acquired a 74,800 DWT OBO built in 1992 for $33.25 million. The vessel is time chartered for three years at $23,500 per day. On November 8, 2005, the Company completed an additional drawdown on its floating rate facility to finance a portion of the purchase price. See NOTE 6-MORTGAGE PAYABLE.

On August 19, 2005, the Company, through a wholly-owned subsidiary, acquired a 68,500 DWT Panamax product tanker built in 1991 for $24.3 million. The vessel is time chartered for three years at $23,500 per day commencing January 2006. On November 8, 2005, the Company completed an additional drawdown on its floating rate facility to finance a portion of the purchase price. SeeNOTE 6-MORTGAGE PAYABLE.

On April 29, 2004, the Company, through a wholly-owned subsidiary, acquired a 98,000 DWT OBO, a combination tanker/bulk carrier built in 1986, for $19.4 million. Capital improvements made subsequent to acquisition to prepare the vessel for its intended use totaled $1.2 million, which were capitalized and included in the vessel’s carrying amount. The vessel is currently employed on a one year timecharter at $27,000 per day which commenced in February 2007. In conjunction with the acquisition, the Company refinanced the existing floating rate loan facility and borrowed an additional $19 million. See NOTE 6-MORTGAGE PAYABLE.

Vessel disposals:

On June 20, 2005, the Company, through a wholly-owned subsidiary, sold the vessel M/T COMMUTER for $8.5 million to an unaffiliated party. The excess of the sales proceeds over the book value of the vessel of $0.8 million is included in the Consolidated Statements of Operations for the year ended December 31, 2005.

On May 25, 2004, the Company, through a wholly-owned subsidiary, sold the vessel M/T SKOWHEGAN for $3.8 million to an unaffiliated party. The excess of the book value of the vessel over the sales proceeds of $4.1 million is included in the Consolidated Statements of Operations for the year ended December 31, 2004.

On December 7, 2004, the Company, through a wholly-owned subsidiary, sold the vessel M/T ACOAXET for $5.7 million to an unaffiliated party. The excess of the book value of the vessel over the sales proceeds of $0.6 million is included in the Consolidated Statements of Operations for the year ended December 31, 2004. A portion of the net proceeds of the sale were used to repay a portion of the mortgage as required under the amended facility dated April 29, 2004. See NOTE 6.

NOTE 4-INVESTMENTS AND OTHER ASSETS:

Investments and other assets is comprised of the following:

	2006		2005
Debt financing and related fees, net	$	2,471,000	$	1,387,000
Other assets		147,000		150,000
Total other assets	$	2,618,000	$	1,537,000

Mortgage commitment and related fees incurred in connection with the Company’s loan facilities are being amortized over the terms of the respective loans. Unamortized mortgage commitment fees are written off in the event the facility is refinanced.

NOTE 5-RELATED PARTY TRANSACTIONS:

The shipowning activities of the Company are managed by an affiliate, B+H Management Ltd. (“BHM”) under a Management Services Agreement (the “Management Agreement") dated June 27, 1988 and amended on October 10, 1995, subject to the oversight and direction of the Company's Board of Directors.

The shipowning activities of the Company entail three separate functions, all under the overall control and responsibility of BHM: (1) the shipowning function, which is that of an investment manager and includes the purchase and sale of vessels and other shipping interests; (2) the marketing and operations function which involves the deployment and operation of the vessels; and (3) the vessel technical management function, which encompasses the day-to-day physical maintenance, operation and crewing of the vessels.

BHM employs Navinvest Marine Services (USA) Inc. ("NMS"), a Connecticut corporation, under an agency agreement, to assist with the performance of certain of its financial reporting and administrative duties under the Management Agreement.

The Management Agreement may be terminated by the Company in the following circumstances: (i) certain events involving the bankruptcy or insolvency of BHM; (ii) an act of fraud, embezzlement or other serious criminal activity by Michael S. Hudner, Chief Executive Officer, President, Chairman of the Board and significant shareholder of the Company, with respect to the Company; (iii) gross negligence or willful misconduct by BHM; or (iv) a change in control of BHM.

Mr. Hudner is President of BHM and the sole shareholder of NMS. BHM is technical manager of the Company’s wholly-owned vessels under technical management agreements. BHM employs B&H Equimar Singapore (PTE) Ltd., (“BHES”), to assist with certain duties under the technical management agreements. BHES is a wholly-owned subsidiary of BHM.

Currently, the Company pays BHM a monthly rate of $6,251 per vessel for general, administrative and accounting services, which may be adjusted annually for any increases in the Consumer Price Index. During the years ended December 31, 2006, 2005 and 2004, the Company paid BHM fees of approximately $970,000, $797,000 and $460,000, respectively for these services. The total fees vary due to the change in the number of fee months resulting from changes in the number of vessels owned during each period.

The Company also pays BHM a monthly rate of $12,834 per MR product tanker and $15,540 per Panamax product tanker or OBO for technical management services, which may be adjusted annually for any increases in the Consumer Price Index. Vessel technical managers coordinate all technical aspects of day to day vessel operations including physical maintenance, provisioning and crewing of the vessels. During the years ended December 31, 2006, 2005 and 2004, the Company paid BHM fees of approximately $2,360,000, $2,040,000 and $1,274,000, respectively for these services. Technical management fees are included in vessel operating expenses in the Consolidated Statements of Operations. The total fees have steadily increased due to the vessel acquisitions in 2005 and 2006.

The Company engages BHM to provide commercial management services at a monthly rate of $10,179 per vessel, which may be adjusted annually for any increases in the Consumer Price Index. BHM obtains support services from Protrans (Singapore) Pte. Ltd., which is owned by BHM. Commercial managers provide marketing and operations services. During the years ended December 31, 2006, 2005 and 2004, the Company paid BHM fees of approximately $1,558,000, $1,238,000 and $993,000, respectively for these services. Commercial management fees are included in voyage expenses in the Consolidated Statements of Operations. The total fees increased in 2006 due to the increase in the number of fee months resulting from the increase in the number of vessels owned.

The Company engaged Centennial Maritime Services Corp. (“Centennial”), a company affiliated with the Company through common ownership, to provide manning services at a monthly rate of $1,995 per vessel and agency services at variable rates, based on the number of crew members placed on board. During the years ended December 31, 2006, 2005 and 2004, the Company paid Centennial manning fees of approximately $519,000, $370,000 and $215,000, respectively. Manning fees are included in vessel operating expenses in the Consolidated Statements of Operations.

BHM received brokerage commissions of $85,000 in connection with the sale of the M/T COMMUTER in August 2005. BHM received brokerage commissions of $194,000 in connection with the purchase of the OBO SACHUEST in April 2004. The Company also paid BHM standard industry chartering commissions of $672,000 in 2006 and $333,000 in 2005 in respect of certain time charters in effect during those periods. Clearwater Chartering Corporation, a company affiliated through common ownership, was paid $1,062,000, $1,194,000 and $980,000 in 2006, 2005 and 2004, respectively for standard industry chartering commissions. Brokerage commissions are included in voyage expenses in the Consolidated Statements of Operations.

During 2006, 2005 and 2004, the Company paid fees of $501,000, $60,000 and $205,000 to J.V. Equities, Inc. for consulting services rendered. J.V. Equities is controlled by John LeFrere, a director of the Company.  In December, 2004, in a restructuring of the Company’s consulting arrangement, J.V. Equities terminated a consulting arrangement providing for payments of $240,000 per year, surrendered an option to purchase 307,000 shares of Company common stock exercisable at $1.00 per share, and received a fee of $644,000 as consideration for canceling the options, which was recorded as a charge to paid in capital in the Company’s Consolidated Balance Sheets at December 31, 2004.

During 2006, 2005 and 2004, the Company paid fees of $36,000, $49,334 and $27,000, respectively, to Dean Investments for consulting services rendered. Dean Investments is controlled by R. Anthony Dalzell, the Chief Financial Officer, Vice President and a director of the Company.

During 1998, the Company’s Board of Directors approved an agreement with BHM whereby up to 110,022 shares of common stock of the Company will be issued to BHM for distribution to individual members of management, contingent upon certain performance criteria. The Company will issue the shares of common stock to BHM at such time as the specific requirements of the agreement are met. During 2006, 13,855 shares, bringing the total to 62,246 shares, have been issued from treasury stock where these shares were held for this purpose. Compensation cost of $259,000, $102,000 and $89,000, based on the market price of the shares at the date of issue, was included as management fees to related parties in the Consolidated Statement of Operations as of December 31, 2006, 2005 and 2004 respectively.

Effective December 31, 2000, the Company granted 600,000 stock options, with a value of $78,000 to BHM as payment for services in connection with the acquisition of the Notes. The exercise price is the fair market value at the date of grant and the options are exercisable over a ten-year period. At December 31, 2005, all of the options outstanding were fully vested and exercisable.

Information regarding these stock options is as follows:

	Shares		Option Price
Outstanding at January 1, 2006		231,460	$	1.00
Granted		-		-
Exercised		30,770		-
Canceled		-
Outstanding at December 31, 2006		200,690	$	1.00

As a result of BHM's possible future management of other shipowning companies and BHM's possible future involvement for its own account in other shipping ventures, BHM may be subject to conflicts of interest in connection with its management of the Company. To avoid any potential conflict of interest, the management agreement between BHM and the Company provides that BHM must provide the Company with full disclosure of any disposition of handysize bulk carriers by BHM or any of its affiliates on behalf of persons other than the Company.

For the policy period ending February 20, 2007, the Company placed 60% of its Hull and Machinery (“H&M”) insurance for machinery claims in excess of claims of $125,000 each incident with Northampton Assurance Ltd. (“NAL”), an affiliated entity, up to a maximum of $50,000 each incident on six vessels. It also placed an average of 37.5% of its H&M insurance for machinery claims in excess of $125,000 each incident with NAL up to a maximum of $37,500 each incident on one vessel. In addition, the Company placed  (a) 75% of its H&M insurance in excess of between $125,000 and  $220,000 each incident  and (b) 100% of its Loss of Hire insurance in excess of 14 or 21 days deductible with NAL, which risks NAL fully reinsured with third party carriers.

For the policy period ending February 20, 2006, the Company placed 100% of its Hull and Machinery (“H&M”) insurance in excess of claims of $125,000 each incident with NAL, up to a maximum of an average of $64,750 each incident on one  vessel, up to  an average of $42,500 each incident on six  vessels and up to an average of $61,250 each incident on one vessel. In addition, the Company placed  (a) 75% of its H&M insurance in excess of between $125,000 and  $220,000 each incident  and (b) 100% of its Loss of Hire insurance in excess of 14 or 21 days deductible with NAL, which risks NAL fully reinsured with third party carriers.

For the policy period ending February 20, 2005, the Company placed 100% of its H&M insurance in excess of claims of $125,000 each incident with NAL up to a maximum of an average of $76,250 each incident on two vessels, up to an average of $47,500 each incident on seven vessels and up to an average of $55,000 each incident on one vessel. In addition, the Company placed 70% of its H&M insurance in excess of between $125,000 and $175,000 each incident with NAL, which risk NAL fully reinsured.

For the periods ending December 31, 2006, 2005 and 2004, vessel operating expenses on the Consolidated Statements of Operations include approximately $972,000, $1,033,000 and $900,000, respectively, of insurance premiums paid to NAL (of which $884,000, $851,000 and $684,000, respectively, was ceded to reinsurers) and approximately $185,000, $189,000 and $133,000, respectively, of brokerage commissions paid to NAL.

The Company had accounts payable to NAL at December 31, 2006 of $295,000 and at December 31, 2005 of $340,000. NAL paid consulting fees of $174,000 during each of the three years ending December 31, 2006 to R. Anthony Dalzell and a company controlled by Mr. Dalzell.

The Company believes that the terms of all transactions between the Company and the existing officers, directors, shareholders and any of their affiliates described above are no less favorable to the Company than terms that could have been obtained from third parties.

NOTE 6-MORTGAGE PAYABLE:

On October 18, 2005 the Company, through certain wholly-owned subsidiaries entered into a $138,100,000 Reducing Revolving and Term Loan Facilities Agreement which amended the agreement entered into on February 23, 2005. The amendment made available an additional $43.0 million for the purpose of acquiring the OBO ROGER M JONES and the M/T SAGAMORE.

On August 29, 2006 the Company, through certain wholly-owned subsidiaries entered into a $202,000,000 Reducing Revolving and Term Loan Facilities Agreement which amended the agreement entered into on October 18, 2005.

The facility is payable in ten quarterly installments of $5,450,000 beginning on December 15, 2006, ten quarterly installments of $5,100,000 beginning on June 15, 2009 and a balloon payment of $21,500,000 due on December 15, 2011.

Interest on the facility is equal to LIBOR plus 1.0%. Expenses associated with the incremental borrowing on the loan of $670,000 were capitalized and will be amortized over the 5 year term of the loan.

The facility contains certain restrictive covenants and mandatory prepayment in the event of the total loss or sale of a vessel. It also requires a minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 125%. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2006, the Company was in compliance with these covenants.

On April 29, 2004, the Company entered into an amended and restated $36,000,000 floating rate loan facility (the “amended loan facility”). The amended loan facility made available an additional $19.0 million for the purpose of acquiring the OBO SACHUEST.

The amended loan facility is apportioned into two tranches with Tranche 1 attributable to the Existing Vessel fleet and Tranche 2 attributable to the OBO SACHUEST. Tranche 1 is payable in twelve quarterly installments of $1.2 million commencing on July 29, 2004, the twelfth installment being a balloon payment in an amount necessary to repay the tranche in full. Interest on the facility, which was reduced as of August 2005, is equal to LIBOR plus 1.0%. Tranche 2 is payable in twenty quarterly installments. The first eight installments of $1.5 million are followed by eleven installments of $0.6 million and a final installment of $0.4 million is due on the maturity date.

Expenses associated with the amended loan facility include arrangement fees of $360,000, which are capitalized and are being amortized over the five-year period of the loan.

The amended loan facility contains certain restrictive covenants and requires mandatory prepayment or delivery of additional security in the event of the total loss or sale of a vessel and in the event that the fair market value of the vessels acquired falls below 140% of the Tranche 1 balance outstanding, or the fair market value of the OBO SACHUEST falls below 110% of the Tranche 2 balance outstanding. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of (a) $2.0 million and (b) six percent (6%) of the aggregate amount of indebtedness of the Company on a consolidated basis. At December 31, 2006,

the Company was in compliance with these covenants.

On September 5, 2006, the Company, through a wholly-owned subsidiary, entered into an $8 million term loan facility to finance the acquisition of its 50% interest in an entity which is the disponent owner of the OBO SEAPOWET through a bareboat charter party.

The facility contains certain restrictive covenants on the Company and requires mandatory prepayment in the event of the total loss or sale of a vessel. The facility requires a minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 125%. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2006, the Company was in compliance with these covenants.

The loan is repayable in sixteen quarterly installments of $500,000, beginning on December 7, 2006. Interest on the facility is equal to LIBOR plus 1.75%. Expenses associated with the loan of $221,000 were capitalized and will be amortized over the 4 year term of the loan.

On October 10, 2006, the Company, through a wholly-owned subsidiary, entered into a $12 million term loan facility to finance the acquisition of the M/T SACHEM.

The facility contains certain restrictive covenants on the Company, which among other things, restrict the payment of dividends and restrict leverage, investment and capital expenditures without consent of the lender. In addition, the agreement requires mandatory prepayment in the event of the total loss or sale of a vessel. The facility requires a minimum value adjusted equity of $50 million, a minimum value adjusted equity ratio (as defined) of 30% and an EBITDA to fixed charges ratio of at least 125%. The Company is also required to maintain liquid assets, as defined, in an amount equal to the greater of $15.0 million or 6% of the aggregate indebtedness of the Company on a consolidated basis, positive working capital and adequate insurance coverage. At December 31, 2006, the Company was in compliance with these covenants.

The loan is repayable in sixteen quarterly installments of $550,000, beginning on January 17, 2007 and a balloon payment of $3,200,000 due on January 17, 2011. Interest on the facility is currently equal to LIBOR plus 1.25%. At such time as the vessel is fixed on a minimum two year charter at a sufficient rate (determined by the Administrative Agent), the applicable margin is reduced to 1.0% for the remainder of the term of such employment. Expenses associated with the loan of $135,000 were capitalized and will be amortized over the 4 year term of the loan.

As of December 31, 2006, the aggregate maturities, including an estimate of the interest payable are as follows:

	Principal		Interest1		Total
2007	$	32,065,000	$	8,907,000	$	40,972,000
2008		28,400,000		6,957,000		35,357,000
2009		25,950,000		5,157,000		31,107,000
2010		24,100,000		3,543,000		27,643,000
2011		40,000,000		2,177,000		42,177,000
	$	150,515,000	$	26,741,000	$	177,256,000

¹ Interest is calculated using the LIBOR rate at December 31, 2006, and the average balance outstanding for the period.

NOTE 7-BONDS PAYABLE:

On December 12, 2006, the Company issued $25 million of unsecured bonds of which the Company subscribed a total of $5 million. The net proceeds of the bonds will be used for general corporate purposes, including but not limited to: (i) product tanker conversion project (six vessels), (ii) conversion of the M/T SACHEM and M/T SAGAMORE to full double hull, (iii) acquisition of additional OBOs, (iv) acquisition of further product tankers, (v) continuance of share buy-back, and (vi) balance of equity payment on the OBO SAKONNET.

Interest on the bonds is equal to LIBOR plus 4%, payable quarterly in arrears. The bonds are in denominations of $100,000 each and rank pari passu. The term of the bond issue is seven years, payable in full on the maturity date. In order to mitigate the risk of interest rate volatility associated with the variable interest rate on these bonds, the Company entered into an interest rate swap agreement to hedge $10 million of these bonds. Under the term of the interest rate swap agreement, which has similar attributes to the debt, the interest rate on the $10 million is converted from a variable rate to a fixed rate of 4.995%. The Company has designated this interest rate swap agreement as a cash flow hedge pursuant to SFAS No. 133 and the derivative qualifies for the short-cut method. At December 31, 2006, the fair value of this interest rate swap is $18,183 and is reflected on the balance sheet and within other comprehensive income.

All or a portion of the bonds may be redeemed at any time between June 2010 and June 2011 at 104.5%, between June 2011 and June 2012 at 103.25%, between June 2012 and June 2013 at 102.25% and between June 2013 and the maturity date at 101.00%.

The bond facility contains certain restrictive covenants which restrict the payment of dividends. The facility requires a minimum value adjusted equity ratio (as defined) of 25%. At December 31, 2006, the Company was in compliance with these covenants.

NOTE 8-COMMITMENTS AND CONTINGENCIES:

As discussed in NOTE 5, the Company’s Board of Directors approved an agreement with BHM whereby up to 110,022 shares of common stock of the Company will be issued to BHM for distribution to individual members of management, contingent upon certain performance criteria. The Company will issue the shares of common stock to BHM at such time as the specific requirements of the agreement are met. During 2006, an additional 13,855 shares, bringing the total to 62,246 shares, have been issued from treasury stock being held for this purpose.

The Company has entered into a contract for the conversion of its six single hull MR Product Tankers to fully double hull, Marpol compliant vessels suitable for trading in petroleum products and vegetable oils. Carrying out such conversions completely eliminates the present regulatory phaseout dates applicable to these vessels. The Company converted one of the six vessels in 2006 and was approximately two-thirds of the way through the second conversion at 12/31/2006. The Company expects to complete three more conversions in 2007 and the final in 2008.

NOTE 9-SUPPLEMENTAL CASH FLOW INFORMATION:

The Company acquired a vessel under an agreement whereby the Company placed a cash deposit of $3.6 million in escrow and was obligated to pay an amount equal to the seller’s obligation under a capital lease on a monthly basis until January 2007. The balance of the vessel cost was paid to the seller on January 8, 2007 and a portion of the vessel cost was financed by the Company on January 24, 2007.

The Company re-issued 13,855 shares from treasury stock in 2006 and 8,065 in 2005 and 2004 in accordance with the agreement discussed in NOTE 5. Compensation cost of $259,000, $102,000 and $89,000 based on the market price of the shares at the date of issue was included as management fees to related parties in the accompanying Consolidated Statements of Operations during the years ended December 31, 2006, 2005 and 2004, respectively. The excess of the market value of the shares at the date of issuance over the cost of the shares to the Company was charged to paid in capital.

Cash paid for interest was $9,971,000, $5,347,000 and $1,110,000 during the years ended December 31, 2006, 2005 and 2004, respectively.

NOTE 10-SUBSEQUENT EVENTS:

On January 29, 2007, the Company, through a wholly-owned subsidiary, entered into a $27 million term loan facility to finance the acquisition of the M/T SAKONNET, which vessel it had acquired in January 2006 under an unsecured financing agreement.

EX-1

USD 202,000,000

reducing revolving CREDIT facilitY Agreement

for

The Companies listed in Schedule 1

as Borrowers

provided by

The Financial Institutions

named herein

as Original Lenders

with

Nordea Bank Finland Plc.

as Swap Bank

and

Nordea Bank Norge ASA

as Agent

and

Nordea Bank Norge ASA

as Mandated Lead Arranger

Dated 29 August 2006

TABLE OF CONTENTS

1DEFINITIONS AND INTERPRETATION

2THE FACILITY

3PURPOSE

4CONDITIONS PRECEDENT

5DRAWDOWN

6SCHEDULED REDUCTIONS AND REPAYMENT

7PREPAYMENT AND CANCELLATION

8INTEREST

9INTEREST PERIODS

10CHANGES TO THE CALCULATION OF INTEREST

11FEES

12TAX GROSS-UP AND INDEMNITIES

13INCREASED COSTS

14OTHER INDEMNITIES

15MITIGATION BY THE LENDERS

16COSTS AND EXPENSES

17SECURITY

18REPRESENTATIONS AND WARRANTIES

19INFORMATION UNDERTAKINGS

20FINANCIAL COVENANTS

21GENERAL UNDERTAKINGS

22VESSELS’ COVENANTS

23EVENTS OF DEFAULT

24CHANGES TO THE LENDERS

25CHANGES TO THE BORROWERS

26ROLE OF THE AGENT AND THE ARRANGER

27SHARING AMONG THE FINANCE PARTIES

28PAYMENT MECHANICS

29SET-OFF

30NOTICES

31CALCULATIONS

32MISCELLANEOUS

33GOVERNING LAW AND ENFORCEMENT

SCHEDULES

1Original Parties, Commitments and Allocated Loan Amounts

2Conditions Precedent

3Form of Drawdown Notice

4Form of Compliance Certificate

5Form of Transfer Certificate

6Form of Accession Letter

7Scheduled reductions

8Form of Assignment Agreement

9Mandatory Cost Formulae

10Form of Guarantee

THIS REDUCING REVOLVING CREDIT FACILITY AGREEMENT is dated 29 August 2006 and made between:

(1) THE COMPANIES listed in Part I of Schedule 1 as original borrowers (together the “Original Borrowers”)

(2)The banks and financial institutions listed in Part II of Schedule 1, as original lenders (together, the “Lenders”);

(3)Nordea Bank Finland Plc. of TO1, FIN-00020 Nordea, Helsinki, Finland, as swap bank, (the “Swap Bank”);

(4)Nordea Bank Norge ASA of Middelthunsgate 17, N-0368 Oslo, Norway, organisation number 911 044 110, as bookrunner (the “Bookrunner”);

(5)Nordea Bank Norge ASA of Middelthunsgate 17, N-0368 Oslo, Norway, organisation number 911 044 110, as facility agent (the “Agent”);

(6)Nordea Bank Norge ASA of Middelthunsgate 17, N-0368 Oslo, Norway, organisation number 911 044 110, as mandated lead arranger (the “Arranger”) and underwriter (the “Underwriter”); and

(7)DVB Bank America NV of Zeelandia Office Park, Kaya W.F.G. Mensnig 14, P.O. Box 3107, Curacao, Netherlands Antilles, The Governor and Company of the Bank of Scotland of The Mound, Edinburgh, Scotland, EH1 1YZ and acting from their office at Pentland House, 8 Lochside Avenue, Edinburgh, Scotland, EH12 9DJ and HSH Nordbank AG of Gerhart Hauptmann Platz 50, 20095 Hamburg, Germany, as co-arrangers (the “Co-Arrangers”).

IT IS AGREED as follows:

1   DEFINITIONS AND INTERPRETATION

1.1   Definitions

In this Agreement, unless the context otherwise requires:

“Accession Letter” means a document substantially in the form set out in Schedule 6 (Form of Accession Letter).

“Account Charge” means the account charge collateral to this Agreement for the first priority charge over the Earnings Accounts to be made between the Borrowers and the Agent (on behalf of the Finance Parties and the Swap Bank) as security for the Borrowers’ obligations under the Finance Documents and any Swap Agreement, in form and acceptance acceptable to the Agent.

“Additional Borrower” means a company which becomes an Additional Borrower in accordance with Clause 25 (Changes to the Borrowers).

“Agreement” means this reducing revolving credit facility agreement, as it may be amended, supplemented and varied from time to time, including its Schedules and any Transfer Certificate.

“Allocated Loan Amount” means:

a)   in respect of each Existing Vessel, the amount set out in Part III of Schedule 1 (Original Parties, Commitments and Allocated Loan Amounts);

b)   in respect of MV “Sibohelle” (tbr “Sakonnet”), the lower of (i) USD 27,000,000 and (ii) seventy-five per cent (75.00%) of the Market Value of such vessel at such time, and always adjusted for the scheduled reductions in Schedule 7 (Scheduled reductions) up until the Drawdown Date for the Loan related to MV “Sibohelle” (tbr “Sakonnet”); and

c)   in respect of any New Vessel, as determined by the Agent (on behalf the Lenders).

“Approved Brokers” means (i) Compass Maritime Services, LLC, (ii) Barry Rogliano Salles S.A.S, (iii) Braemar Seascope Valuations Ltd., (iv) Lorentzen & Stemoco AS and (v) Associated Shipbroking A.S.M. being reputable and independent ship brokers appointed by the Lenders.

“Assignment Agreement” means the assignment agreement collateral to this Agreement for the first priority assignment of the Earnings, the Insurances, certain bank accounts with the Agent and the Charter Guarantees to be made between the Borrowers and the Agent (on behalf of the Finance Parties and the Swap Bank) as security for the Borrowers’ obligations under the Finance Documents and any Swap Agreement, substantially in the form set out in Schedule 8 (Form of Assignment Agreement) or such other form as is acceptable to the Agent.

“Availability Period” means the period from and including the date of this Agreement to and including the day falling one (1) month prior to the Final Maturity Date, however so that the first utilisation of the Allocated Loan Amounts in respect of the New Vessels must be made by 30 June 2007 in order for such amounts not to be automatically cancelled at such date in accordance with Clause 5.3 (Availability).

“Available Commitment” means a Lender’s Commitment less:

a)   the amount of its participation in any outstanding Loans; and

b)   in relation to any proposed Drawdown, the amount of its participation in any other Loans that are due to be made on or before the proposed Drawdown Date,

other than, in relation to any proposed Drawdown, that Lender’s participation in any Loans that are due to be repaid or repaid on or before the proposed Drawdown Date.

“BHOBO One” means BHOBO One Ltd. of Trust Company Complex, Ajeltake Island, Majuro, Marshall Islands, MH96960.

“BHOBO Two” means BHOBO Two Ltd. of Trust Company Complex, Ajeltake Island, Majuro, Marshall Islands, MH96960.

“BHOBO Three” means BHOBO Three Ltd. of Trust Company Complex, Ajeltake Island, Majuro, Marshall Islands, MH96960.

“Borrower” means an Original Borrower or an Additional Borrower.

“Break Costs” means the amount (if any) by which:

a)   the interest 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 relevant interbank market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

“Business Day” means a day (other than a Saturday or Sunday) on which banks are open for business in Oslo, New York and London (or any other relevant place of payment under Clause 28 (Payment mechanics).

“Cash and Cash Equivalents” has the meaning given to that term in Clause 20.1 (Financial definitions).

“Charter Guarantee” means each of the guarantees granted by the relevant Charter Guarantor in favour of the relevant Borrower as security for the due performance of all of the relevant Charterers’ obligations under the relevant Charterparty, in form and substance satisfactory to the Agent (on behalf of the Majority Lenders).

“Charter Guarantor” means:

a)   in respect of (i) MV “Rip Hudner”, (ii) MV “Bonnie Smithwick” and (iii) MV “Searose G”, Sempra Energy of 101 Ash Street, San Diego, U.S.A.;

b)   in respect of MV “Roger M. Jones”, Clearwater Advisors Corporation of Tortola, BVI;

c)   in respect of MT “Sagamore”, ENOC Supply & Trading LLC of Dubai, however only to the extent that the ENOC Supply & Trading LLC has nominated another company as charterers under the Charterparty for MT “Sagamore”; and

d)   any other charter guarantor for any of the New Vessels (if any), as approved by the Agent (on behalf of the Lenders) from time to time.

“Charterers”means:

a)   in respect of each of (i) MV “Rip Hudner”, MV “Bonnie Smithwick” and MV “Searose G”, TTMI Sarl. of Geneva, Switzerland;

b)   in respect of MV “Roger M. Jones”, Clearlake Shipping Ltd. of Tortola, BVI;

c)   in respect of MT “Sagamore”, ENOC Supply & Trading LLC of Dubai; and

d)   any other charterer of any of the New Vessels as approved by the Agent (on behalf of the Lenders) from time to time.

“Charterparty” means:

a)   in respect of each of MV “Rip Hudner” and MV “Bonnie Smithwick”, the time charterparties dated 4 February 2005, respectively, made between BHOBO Two and BHOBO One (as owners), respectively, and TTMI Sarl. (as charterers), for a period of five (5) years at a net daily charter rate of not less than USD 26,600 during year 1, USD 24,600 during year 2, USD 23,600 during year 3, USD 22,600 during year 4 and USD 20,600 during year 5;

b)   in respect of MV “Searose G”, the time charterparty dated 4 February 2005 made between BHOBO Three (as owner) and TTMI Sarl. (as charterers), for a charter period of five (5) years at a net daily charter rate of not less than USD 26,000 during year 1, USD 24,000 during year 2, USD 23,000 during year 3, USD 22,000 during year 4 and USD 20,000 during year 5 and with a 35.00% profit share in years 2 - 5;

c)   in respect of MV “Roger M. Jones”, the time charterparty made or to be made between RMJ OBO Shipping Ltd. (as owner) and Clearlake Shipping Ltd. (as charterers), for a period of three (3) years commencing on the relevant Drawdown Date, at a daily charter rate of not less than USD 23,500 (less 3.75% commission);

d)   in respect of MV “Sagamore”, the time charterparty made or to be made between Sagamore Shipping Ltd. (as owner) and ENOC Supply & Trading LLC (as charterers), for a charter period of three (3) years commencing at the relevant Drawdown Date, at a daily charter rate of not less than USD 23,500 (less 3.75% commission); and

e)   in respect of any of the New Vessels, (i) the time charterparty between the relevant Borrower and TTMI Sarl (in respect of MV “Sibohelle” (tbr “Sakonnet”) or (ii) any other time charterparty between the relevant Borrower and a Charterer,

in any event, in form and substance as approved by the Agent (on behalf of the Finance Parties).

“Charterparty Assignment” means each of the deeds of assignment collateral to this Agreement for the first priority assignments of the Charterparties to be made between the Borrowers and the Agent (on behalf of the Finance Parties and the Swap Bank) as security for the Borrowers’ obligations under the Finance Documents and any Swap Agreement(s), in form and substance as approved by the Agent (on behalf of the Finance Parties and the Swap Bank).

“Commercial Management Agreement” means the agreement made between the Commercial Manager and the Guarantor (and all of its Subsidiaries) for the management of the Guarantor (and its Subsidiaries, hereunder (but not limited to) the Borrowers and the Vessels.

“Commercial Manager” means B+H Management Ltd. of Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM JX, Bermuda.

“Commitment” means:

a)   in relation to a Lender, the amount set opposite its name under the heading “Commitments” in Part II of Schedule 1 (Original Parties, Commitments and Allocated Loan Amounts) and the amount of any other Commitment transferred to it pursuant to Clause 24.1 (Assignments and transfers by the Lenders); and

b)   in relation to any New Lender, the amount of any Commitment transferred to it pursuant to Clause 24.1 (Assignments and transfers by the Lenders),

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 4 (Form of Compliance Certificate).

“Deeds of Covenants” means (if relevant) each of the first priority deeds of covenants collateral to the Mortgages, to be entered into between the respective Borrower and the Agent (on behalf of the Finance Parties and the Swap Bank), in form and substance satisfactory to the Agent (on behalf of the Finance Parties and the Swap Bank).

“Default” means an Event of Default or any event or circumstance specified in Clause 23 (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 the Technical Manager a valid document of compliance issued to the Technical Manager pursuant to paragraph 13.2 of the ISM Code.

“Drawdown” means a utilisation under the Facility.

“Drawdown Date” means the Business Day on which the Borrowers have requested a Drawdown pursuant to this Agreement or, as the context requires, the date on which the relevant Loan is actually made.

“Drawdown Notice” means the 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 any of the Borrowers and which arise out of the use of or operation of any of the Vessels, including (but not limited to):

a)   all freight, hire and passage moneys payable to any of the Borrowers, including (without limitation) payments of any nature under any of the Charterparties or any other charter or agreement for the employment, use, possession, management and/or operation of any of the Vessels;

b)   any claim under any guarantees related to freight and hire payable to any of the Borrowers as a consequence of the operation of any of the Vessels;

c)   compensation payable to any of the Borrowers in the event of any requisition of any of the Vessels or for the use of any of the Vessels by any government authority or other competent authority;

d)   remuneration for salvage, towage and other services performed by any of the Vessels payable to any of the Borrowers;

e)   demurrage and retention money receivable by any of the Borrowers in relation to any of the Vessels;

f)   all moneys which are at any time payable under the Insurances in respect of loss of earnings;

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

h)   any other money whatsoever due or to become due to any of the Borrowers from third parties in relation to any of the Vessels, or otherwise.

“Earnings Accounts” means:

a)   account no. 52861102 in the name of OBO Holdings Ltd. with Nordea Bank Finland plc, London Branch;

b)   account no. 52862102 in the name of BHOBO One with the Nordea Bank Finland Plc. London Branch;

c)   account no. 52863102 in the name of BHOBO Two with the Nordea Bank Finland Plc. London Branch;

d)   account no. 52864102 in the name of BHOBO Three with Nordea Bank Finland Plc. London Branch;

e)   account no. 53182102 in the name of RMJ OBO Shipping Ltd. with Nordea Bank Finland Plc. London Branch; and

f)   account no. 53272102 in the name of Sagamore Shipping Ltd. with Nordea Bank Finland Plc. London Branch,

or any such other accounts of any of the Borrowers with the Agent and/or Nordea Bank Finland Plc. London Branch to which all the Earnings shall be paid, pledged in favour of the Agent (on behalf of the Finance Parties and the Swap Bank) under the Assignment Agreement.

“EBITDA” has the meaning given to that term in Clause 20.1 (Financial definitions).

“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 Vessels.

“Environmental Claim” means any claim, proceeding or investigation by any party in respect of any Environmental Law or Environmental Approval.

“Environmental Law” means any applicable law, regulation, convention or treaty in any jurisdiction in which any of the Borrowers and/or the Charterers conduct business which relates to the pollution or protection of the environment or to the carriage of material which is capable of polluting the environment.

“Event of Default” means any event or circumstance specified as such in Clause 23 (Events of Default).

“Existing Credit Facility” means the credit facility granted to the Original Borrowers under the USD 138,100,000 revolving reducing term loan facility agreement dated 18 October 2005.

“Existing Vessels” means:

a)   M/V “Bonnie Smithwick”, a 83,000 dwt OBO tanker built in 1993, with IMO number 9050084, registered in the name of BHOBO One in the Bahamas Ship Register;

b)   M/V “Rip Hudner”, a 83,000 dwt OBO tanker built in 1994, with IMO number 9077111, registered in the name of BHOBO Two in the Bahamas Ship Register;

c)   M/V “Searose G”, a 83,000 dwt OBO tanker built in 1994, with IMO number 9050096, registered in the name of BHOBO Three in the Bahamas Ship Register;

d)   M/V “Roger M. Jones”, a 75,000 dwt OBO tanker built in 1992, with IMO number 9009396to be registered in the name of RMJ OBO Shipping Ltd. in the Bahamas Ship Registry; and

e)   MT “Sagamore”, a 68,000 dwt product tanker built in 1991, with IMO number 9002192 to be registered in the name of Sagamore Shipping Ltd. in the Bahamas Ship Registry.

“FA Act” means the Norwegian Financial Agreements Act of 25 June 1999 no. 46 (as amended).

“Facility” means the reducing revolving credit facility made available under this Agreement as described in Clause 2.1 (The Facility)

“Fee Letter” means any letter or letters dated on or about the date of this Agreement between the Arranger and the Borrowers (or the Agent and the Borrowers) setting out any fees referred to in Clause 11 (Fees).

“Final Maturity Date” means 31 December 2011.

“Finance Documents” means this Agreement, the Security Documents, any Accession Letter, any Fee Letter and any other document (whether creating a Security Interest or not) which is executed at any time by any of the Borrowers or any other person as security for, or to establish any form of subordination to the Finance Parties under this Agreement or any of the other documents referred to herein or therein.

“Finance Party” means the Agent, the Arranger, the Bookrunner, the Co-Arrangers and the Lenders.

“Financial Indebtedness” means any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent.

“Fixed Charges” has the meaning given to that term in Clause 20.1 (Financial definitions).

“GAAP” means the generally accepted accounting principles in Norway, Bermuda and the United States (as the case may be).

“Group” means the Guarantor and its Subsidiaries from time to time.

“Guarantee” means an on-demand guarantee (selvskyldnerkausjon) to be provided by the Guarantor in favour of the Agent (on behalf of the Finance Parties and the Swap Bank) as security for the Borrowers’ obligations under the Finance Documents and any Swap Agreement(s), substantially in the form set out in Schedule 10 (Form of Guarantee).

“Guarantor” means B+H Ocean Carriers Ltd. of 80 Broad Street, Monrovia, Liberia.

“Insurances” means, in relation to the Vessels, all policies and contracts of insurance (which expression includes all entries of the Vessels 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 of the Borrowers and/or the Charterers (whether in the sole name of the Borrowers or in the joint names of the Borrowers and any other person) in respect of the Vessels or otherwise in connection with the Vessels 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 of the successive periods determined in accordance with Clause 9.1 (Interest Periods), and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default interest).

“ISM Code” means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevent.

“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.

“Lenders” means the banks and financial institutions listed in Part II of Schedule 1 (Original Parties, Commitments and Allocated Loan Amounts) and 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 rate per annum equal to the offered quotation for deposits in USD for the relevant Interest Period ascertained by the Agent to be the rate as displayed on the Reuters' screen, page LIBOR01, at or about 11:00 hours (London time) on the applicable Quotation Day; or

b)   if no such rate is available, the arithmetic means of the rate per annum at which the Lenders are able to acquire USD in the amount and for the relevant Interest Period of the Loan in the London interbank market at or about 11:00 hours (London time) on the applicable Quotation Day, as (in the absence of manifest error) conclusively certified by the Agent to the Borrowers.

“Loan” means a loan made or to be made under the Facility or the principal amount outstanding for the time being of that loan.

“Majority Lenders” means:

a)   if there are no Loans outstanding, a Lender or Lenders whose Commitments aggregate more than 66.67% of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66.67% of the Total Commitments immediately prior to the reduction); or

b)   at any other time, a Lender or Lenders whose participations in the Loan then outstanding aggregate more than 66.67% of the Loan then outstanding.

"Mandatory Cost" means the percentage rate per annum calculated by the Agent in accordance with Schedule 9 (Mandatory Cost formulae).

“Managers” means the Commercial Manager and the Technical Manager.

“Margin” means one per cent (1.00%) per annum.

“Market Value” means the fair market value of each of the Vessels in USD, being the average of valuations of the respective Vessel obtained from two (2) Approved Brokers, with or without physical inspection of the Vessels (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.

“Material AdverseEffect” means a material adverse effect on:

a)   the business, operation, assets or condition (financial or otherwise) of any of the Borrowers and/or the Guarantor and/or the Charterers and/or the Charter Guarantor (as the case may be);

b)   the ability of any of the Borrowers and/or the Guarantor (as the case may be) to perform any of their obligations under the Finance Documents; or

c)   the rights or remedies of the Lenders under the Finance Documents.

“Measurement Period” has the meaning given to that term in Clause 20.1 (Financial definitions).

“MOAs” means each of the Memoranda of Agreements (and any addenda thereto) being made between a Seller and a Borrower for the purchase of a New Vessel.

“Mortgages” means each of the first priority mortgages to be executed and recorded by the relevant Borrowers against the Vessels in the Bahamas Ship Registry (or such other ship registry as acceptable to the Lenders) in favour of the Agent (on behalf of the Finance Parties and the Swap Bank), in form and substance satisfactory to the Agent (on behalf of the Finance Parties and the Swap Bank).

“Net Interest” has the meaning given to that term in Clause 20.1 (Financial definitions).

“New Lender” has the meaning set out in Clause 24 (Changes to the Lenders).

“New Vessels” means:

a)   MV “Sibohelle” (tbr “Sakonnet”), a 75,000 dwt OBO carrier built in 1993 at B&W Shipyard in Denmark, however so that the principal amount of the Loan incurred to partly finance MV “Sibohelle” (tbr “Sakonnet”) shall not exceed seventy-five per cent (75.00%) of the Market Value of such vessel on the date of consummation of such vessel acquisition; and

b)   two (2) additional vessels (i) being a type of vessel complementary to the current business plan of the Guarantor and acceptable to the Majority Lenders, (ii) maintaining a flag and class acceptable to the Majority Lenders, (iii) for which the purchase price shall not exceed the Market Value of the respective vessel, (iv) of maximum fifteen (15) years of age and (v) for which the principal amount of the Loan incurred to partly finance each such new vessel shall not exceed seventy-five per cent (75.00%) of the Market Value of such new vessel on the date of consummation of such vessel acquisition.

“Original Borrowers” means OBO Holdings Ltd, BHOBO One, BHOBO Two, BHOBO Three, RMJ OBO Shipping Ltd. and Sagamore Shipping Ltd.

“Original Financial Statements” means the unaudited consolidated financial statements of the Guarantor and the Original Borrowers for the year ended 31 December 2005 and the opening balance sheets of the New Borrowers.

“Party” means a party to this Agreement (including its successors and permitted transferees).

“Quarter Date” has the meaning given to that term in Clause 20.1 (Financial definitions).

“Quotation Day” means the day occurring two (2) Business Days prior to the commencement of an Interest Period.

“Secured Party” means a Finance Party and the Swap Bank.

“Security Documents” means all or any security documents as may be entered into from time to time pursuant to Clause 17 (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 first Drawdown Date hereunder and ending the date on which the Agent notifies the Borrowers, the other Finance Parties and the Swap Bank that:

a)   all amounts which have become due for payment by any of the Borrowers or any other party under the Finance Documents and any Swap Agreement(s) have been paid;

b)   no amount is owing or has accrued (without yet having become due for payment) under any of the Finance Documents or any Swap Agreement(s);

c)   none of the Borrowers or any other party has any future or contingent liability under any provision of this Agreement, the other Finance Documents or any Swap Agreement(s); and

d)   none of the Agent, the Majority Lenders and the Swap Bank do consider that there is a significant risk that any payment or transaction under a Finance Document or any Swap Agreement(s) 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 Swap Agreement or any asset covered (or previously covered) by a Security Interest created by a Finance Document or any Swap Agreement.

“Seller” means a seller in respect of a New Vessel as set out in the respective MoA.

“SMC” means a valid safety management certificate issued for each the Vessels pursuant to paragraph 13.7 of the ISM Code.

“SMS” means a safety management system for the Vessels developed and implemented in accordance with the ISM Code and including the functional requirements duties and obligations that follow from the ISM Code.

“Subsidiaries” means any business entity of which more than fifty per cent (50.00%) of the outstanding voting stock or other equity interest is owned directly of indirectly by such person and/or one or more other Subsidiaries of such person.

“Swap Agreement” means any interest rate swap agreement or agreements, hereunder any ISDA Master Agreement and schedules thereto, to be made between the Guarantor and/or the Borrowers and the Swap Bank in relation to the Facility.

“Tax on Overall NetIncome” means a Tax imposed on a Finance Party by the jurisdiction under the laws of which it is incorporated, or in which it is located or treated as resident for tax purposes, on:

a)   the net income, profits or gains of that Finance Party world wide; or

b)   such of the net income, profits or gains of that Finance Party as are considered to arise in or relate to or are taxable in that jurisdiction.

“Taxes” means all present and future taxes, levies, imposts, duties, charges, fees, deductions and withholdings, and any restrictions and or conditions resulting in a charge together with interest thereon and penalties in respect thereof and “tax” and “taxation” shall be construed accordingly.

“Technical Management Agreements” means the agreement made or to be made between the relevant Borrower and the Technical Manager for the technical management of the Vessels.

“Technical Manager” means the Commercial Manager (in its capacity as technical manager).

“Total Commitments” means the aggregate of the Commitments, being USD 202,000,000 at the date of this Agreement.

“Total Debt” has the meaning given to that term in Clause 20.1 (Financial definitions).

“Total Loss” means, in relation to any of the Vessels:

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

b)   any expropriation, confiscation, requisition or acquisition of such Vessel, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a governmental or official authority (excluding a requisition for hire for a fixed period not exceeding one (1) year without any right to extension) unless it is within one (1) month from the Total Loss Date redelivered to the full control of the relevant Borrower; and

c)   any arrest, capture, seizure or detention of such Vessel (including any hijacking or theft) unless it is within one (1) month 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 any of the Vessels, the date on which it occurred or, if that is unknown, the date when the relevant Vessel was last heard of;

b)   in the case of a constructive, compromised, agreed or arranged total loss of any of the Vessels, the earlier of: (i) the date on which a notice of abandonment is given to the insurers (provided a claim for total loss is admitted by such insurers) or, if such insurers do not forthwith admit such a claim, at the date at which either a total loss is subsequently admitted by the insurers or a total loss is subsequently adjudged by a competent court of law or arbitration panel to have occurred or, if earlier, the date falling six (6) months after notice of abandonment of the relevant Vessel was given to the insurers; and (ii) the date of compromise, arrangement or agreement made by or on behalf of the relevant Borrower with the relevant Vessel’s insurers in which the insurers agree to treat such 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 the Finance Documents, the MOAs, the Charterparties, the Charter Guarantees, the Technical Management Agreements and the Swap Agreement(s), together with the other documents contemplated herein or therein.

“Transfer Certificate” means a certificate substantially in the form as set out in Schedule 5 (Form of Transfer Certificate) or any other form agreed between the Agent and the Borrowers.

“Transfer Date” means, in respect of a Transfer (as defined in Clause 24.1 (Assignments and transfers by Lenders), the proposed Transfer Date as set out in the Transfer Certificate relating to the Transfer.

“Unpaid Sum” means any sum due and payable but unpaid by any of the Borrowers and/or the Guarantor (as the case may be) under the Finance Documents.

“USD” means United States Dollars, being the lawful currency of the United States of America.

“ValueAdjusted Equity” has the meaning given to that term in Clause 20.1 (Financial definitions).

“Value Adjusted Equity Ratio” has the meaning given to that term in Clause 20.1 (Financial definitions).

“Value Adjusted Total Assets” has the meaning given to that term in Clause 20.1 (Financial definitions).

“VAT” means value added tax and any other tax of similar nature.

“Vessels” means the Existing Vessels and the New Vessels.

1.2   Construction

In this Agreement, unless the context otherwise requires:

a)   Clause and Schedule headings are for ease of reference only;

b)   words denoting the singular number shall include the plural and vice versa. In particular, for so long as Nordea Bank Norge ASA is the only Lender, references to “Lenders” or “Majority Lenders” shall be construed as a reference to Nordea Bank Norge ASA;

c)   references to Clauses and Schedules are references, respectively, to the Clauses and Schedules of this Agreement;

d)   references to a provision of law is a reference to that provision as it may be amended or re-enacted, and to any regulations made by the appropriate authority pursuant to such law;

e)   references to “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;

f)   references to “indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent; and

g)   references to 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).

2   THE FACILITY

2.1   The Facility

Subject to the terms of this Agreement, the Lenders make available to the Borrowers a reducing revolving credit facility up to an aggregate amount not exceeding the Total Commitments.

2.2   Finance Parties’ rights and obligations

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.

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 the Borrowers shall be a separate and independent debt. A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.

2.3   Nature of rights and obligations of the Borrowers

a)   The obligations of the Borrowers under this Agreement and the other Finance Documents shall be joint and several. Any Loans shall, once drawn, be deemed to have been made by the Lenders to the Borrowers jointly and severally, and the obligations of the Borrowers to repay a Loan and to perform all other obligations pursuant to this Agreement and the other Finance Documents shall be owed to the Lenders jointly and severally. The liability of a Borrower for Loans actually made to any of the other Borrowers shall not exceed USD 202,000,000 plus interest, fees and expenses under this Agreement and the Finance Documents.

b)   Each of the Borrowers hereby specifically agrees and accepts that the nature of their liability hereunder being joint and several shall not be affected by any reason or circumstances of legal or factual nature, including, but not limited to:

(i)   any waiver granted to any of the Borrowers, the Guarantor or any third party;

(ii)   any failure to enforce any rights, remedy or security against any of the other Borrowers, the Guarantor or any other third party;

(iii)   any legal limitation, incapacity or other circumstances relating to any of the other Borrowers, the Guarantor or any other third party;

(iv)   the liquidation, bankruptcy, insolvency or dissolution or the appointment of receiver for any of the other Borrowers, the Guarantor or any other third party; or

(v)   this Agreement or any of the Finance Documents becoming invalid or unenforceable against any of the other Borrowers and/or the Guarantor.

c)   Each of the Borrowers specifically waives all rights under the provisions of the Norwegian FA Act not being mandatory provisions, including (but not limited to) the relevant provisions of §§ 62, 63, 65, 66, 67, 70, 71, 72, 73 and 74.

2.4   Borrowers’ agent

a)   Each Borrower irrevocably appoints OBO Holdings Ltd. to act on its behalf as its agent in relation to the Finance Documents and irrevocably authorises:

(i)   OBO Holdings Ltd. on its behalf to supply all information concerning itself contemplated by this Agreement to the Finance Parties and to give and receive all notices, consents and instructions (including Drawdown Notices), to agree, accept and execute on its behalf all documents in connection with the Finance Documents (including amendments and variations and consents under any Finance Document) and to execute any new Finance Document and to take such other action as may be necessary or desirable under or in connection with the Finance Documents; and

(ii)   each Finance Party to give any notice, demand or other communication to that Borrower pursuant to the Finance Documents to the Company.

b)   Each Borrower confirms that:

(i)   it will be bound by any action taken by OBO Holdings Ltd. under or in connection with the Finance Documents; and

(ii)   each Finance Party may relay on any action purported to be taken by OBO Holdings Ltd. on behalf of that Borrower.

c)   The respective liabilities of each of the Borrowers and the Guarantor under the Finance Documents shall not be in any way affected by:

(i)   any actual or purported irregularity in any act done, or failure to act, by OBO Holdings Ltd.;

(ii)   OBO Holdings Ltd. acting (or purporting to act) in any respect outside any authority conferred upon it by any Borrower; or

(iii)   any actual or purported failure by, or inability of, OBO Holdings Ltd. to inform any Borrower of receipt by it of any notification under the Finance Documents.

d)   In the event of a conflict between any notices or other communications of OBO Holdings Ltd. and any Borrower, those of OBO Holdings Ltd. shall prevail.

3   PURPOSE

3.1   Purpose

The Borrowers shall apply all amounts borrowed by them as follows:

a)   to repay the amount outstanding under the Existing Credit Facility (provided that such repayment shall not exceed an amount equal to seventy- five per cent (75.00%) of the Market Value of the Existing Vessels);

b)   to part-finance the purchase price for the New Vessels;

c)   for the Borrowers’ and their Subsidiaries’ general corporate and working capital purposes; and

d)   for the payment of fees and expenses incurred in connection with the Facility.

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

The Borrowers may not deliver a Drawdown Notice unless the Agent has received originals or certified copies of all of the documents and other evidence listed in Part I of Schedule 2 (Conditions precedent) in form and substance satisfactory to the Agent, provided that to the extent that any such documents or evidence can solely as a result of the proceeds of the Loan being used to refinance any amount outstanding under the Existing Credit Facility, not be provided prior to the delivery of a Drawdown Notice, evidence must be received by the Agent that such documents and evidence will be provided on the initial Drawdown Date. The Agent shall notify the Borrowers and the Lenders promptly upon being so satisfied.

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 Loan; and

b)   the representations and warranties contained in Clause 18 (Representations and warranties) deemed to be repeated on those dates are true and correct in all respects.

4.3   Maximum number of Loans

The Borrower may not deliver a Drawdown Notice if, as a result of the proposed Drawdown more than eight (8) Loans would be outstanding (one Loan for each Vessel).

4.4   Waiver of conditions precedent

The conditions 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 the Majority Lenders).

5   DRAWDOWN

5.1   Delivery of a Drawdown Notice

The Borrowers may utilise the Facility by delivering to the Agent a duly completed Drawdown Notice no later than 10:00 hours (London time) three (3) Business Days prior to the proposed Drawdown Date.

5.2   Completion of a Drawdown Notice

Each Drawdown Notice is irrevocable and will not be regarded as having been duly completed unless:

a)   it is substantially in the form set out in Schedule 3 (Form of Drawdown Notice);

b)   the proposed Drawdown Date is a Business Day within the Availability Period;

c)   the currency specified is USD and the amount of the proposed Loan (which together with the other Loans outstanding) is an amount which is not more than the Total Commitments and

d)   the proposed Interest Period complies with Clause 9 (Interest Periods).

5.3   Availability

Any amount of the Total Commitments not utilised by the expiry of the Availability Period shall automatically be cancelled at close of business in Oslo on such date.

5.4   Lenders’ participation

Upon receipt of a Drawdown Notice, the Agent shall notify each Lender of the details of the requested Loan and the amount of each Lender’s participation in such Loan. If the conditions set out in this Agreement have been met, each Lender shall no later than 10:00 hours (London time) on the Drawdown Date make available to the Agent for the account of the relevant Borrower an amount equal to its participation in the Loan to be advanced pursuant to the Drawdown Notice.

6   SCHEDULED REDUCTIONS AND REPAYMENT

6.1   Roll-over of Loans

The Borrowers shall repay each Loan in full on the last day of its Interest Period, however, so that where a Loan (the “New Loan”), subject to and in accordance with the other terms of this Agreement, shall be made on a day when another Loan (the “Maturing Loan”) is due to be repaid, then:

a)   the Maturing Loan shall be deemed to be repaid on the last day of its Interest Period to the extent that the amount of the New Loan is equal to or greater than the amount of the Maturing Loan; and

b)   to that extent, the amount of the New Loan shall be deemed to have been credited to the account of the Borrower, and the Lenders shall only be obliged to make available an amount equal to the amount by which amount the New Loan exceeds the Maturing Loan.

6.2   Repayment of Loans

a)   The Allocated Loan Amount for each Existing Vessel and MV “Sibohelle” (tbr “Sakonnet”) shall be reduced on the dates and in such amounts as set out in Schedule 7 (Scheduled reductions) (and the Total Commitments shall be reduced accordingly).

b)   Each Allocated Loan Amount relating to any New Vessel (except for MV “Sibohelle” (tbr “Sakonnet”)) shall be subject to consecutive quarterly scheduled reductions (to be calculated by the Agent and Schedule 7 (Scheduled reductions) shall be amended accordingly) commencing on the first following reduction date of a Loan related to the Existing Vessels, each such reduction in equal quarterly amounts in accordance with a profile of twenty (20) years (so that each Allocated Loan Amount and the Total Commitments, related to a New Vessel except for MV “Sibohelle” (tbr “Sakonnet”)) shall be reduced quarterly to zero when such New Vessel except for MV “Sibohelle” (tbr “Sakonnet”) reaches twenty (20) years of age).

c)   The Borrowers shall ensure that sufficient Loans are repaid on an Interest Payment Date to the extent necessary so that the aggregate amount of the outstanding Loans (after that repayment) is equal to or less than the reduced amount of Total Commitments.

d)   Any reduction of the Total Commitments shall reduce rateably each Lender’s Commitment.

6.3   Final repayment

On the Final Maturity Date the Borrowers shall repay all 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).

7   PREPAYMENT AND CANCELLATION

7.1   Mandatory prepayment - Total Loss or sale

a)   If any of the Vessels is sold or becomes a Total Loss or early termination fees are paid under any of the Charterparties, the Borrowers shall be obliged to prepay the Facility by an amount equal to the sum of outstanding remaining scheduled reductions related to such Vessel as per Schedule 7 (Schedule reductions) and the Total Commitments shall be reduced by an amount equal to the Allocated Loan Amount for such Vessel:

(i)   in case of a sale, on or before the date on which the sale is completed by delivery of the relevant Vessel to the buyer; or

(ii)   in the case of a Total Loss, on the earlier of the date falling ninety (90) days after the Total Loss Date and 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 relevant Vessel, immediately upon receipt of the requisition proceeds relating to such requisition of title).

b)   In addition to the prepayment pursuant to sub-paragraph a) above, if the Market Value of the remaining Vessels is below one hundred and twenty per cent (120.00%) of the outstanding Loans following the prepayment under sub-paragraph a) above, the Borrowers shall within fifteen (15) Business Days, either:

(i)   prepay the Loans by such amount, upon which the Total Commitments shall be reduced by such amount; or

(ii)   provide the Lenders with such additional security, in form and substance satisfactory to the Agent (on behalf of the Lenders),

required to restore the aforesaid ratio.

7.2   Mandatory prepayment - Market Value

If the Market Value falls below one hundred and twenty per cent (120.00%) of the Loans at any time from the earlier of (i) the expiry of the Charterparty in respect of MT “Roger M. Jones” and (ii) 30 September 2008, the Borrowers shall within fifteen (15) Business Days, either:

a)   prepay the Loans by such amount, upon which the Total Commitments shall be reduced by such amount; or

b)   provide the Lenders with such additional security, in form and substance satisfactory to the Agent (on behalf of the Lenders),

required to restore the aforesaid ratio.

7.3   Mandatory prepayment - illegality

If it becomes unlawful in any applicable jurisdiction 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)   the Agent shall promptly notify the Borrowers (specifying the obligations the performance of which is thereby rendered unlawful and the law giving rise to the same) upon receipt of notification in accordance with litra a) above;

c)   upon the Agent notifying the Borrowers, the Commitment of that Lender will be immediately cancelled; and

d)   the Borrowers shall prepay that Lender’s participation in such Loan made to the Borrowers on the last day of the Interest Period occurring after the Agent has notified the Borrowers or, if earlier, the date specified by the 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

a)   If a change of control occurs:

(i)   the Borrowers shall promptly notify the Agent upon becoming aware of such event;

(ii)   a Lender shall not be obliged to fund a proposed Loan; and

(iii)   unless otherwise approved by the Majority Lenders (such approval not to be unreasonably withheld), the Agent shall, by notice to the Borrowers, cancel the Total Commitments and declare all outstanding Loans, together with accrued interest, and all other amounts accrued under the Finance Documents immediately due and payable, whereupon the Total Commitments will be cancelled and all such outstanding amounts shall be paid in full within sixty (60) days.

b)   For the purpose of paragraph a) above, the term “change of control” means an event by which two (2) or more persons acting in concert or any individual person:

(i)   acquires legally and/or beneficially (directly or indirectly) in excess of forty per cent (40.00%) of the issued share capital and/or voting rights of the Guarantor; or

(ii)   has the right or the ability to control (whether directly or indirectly), the affairs of or the composition of the majority of the board of director (or equivalent of it) of the Guarantor.

7.5   Voluntary prepayment

The Borrowers may, if they give the Agent not less than five (5) Business Days prior written notice, prepay the whole or any part of a Loan (but if in part, being an amount of minimum USD 100,000).

7.6   Voluntary cancellation

a)   The Borrowers may, if they give the Agent not less than three (3) Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part, being an amount that reduces the Total Commitments by a minimum amount of USD 5,000,000 and in integral multiples of USD 1,000,000.

b)   Any cancellation under this Clause 7.6 shall reduce the Commitments of the Lenders rateably.

7.7   Right of repayment and cancellation in relation to a single Lender

a)   If any of the Borrowers is required to pay a Lender any additional amount in accordance with Clauses 12 (Tax gross-up and indemnities) or 13 (Increased costs), then (without prejudice to the obligations of the Borrowers under those Clauses) the Borrowers may, whilst the circumstances giving rise to the requirement or indemnification continues, give the Agent a 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 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 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 that Loan.

7.8   Terms and conditions for prepayments and cancellation

7.8.1   Irrevocable notice

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.

7.8.2   Additional payments

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.

7.8.3   Time of prepayment and cancellation

The Borrowers shall not repay or prepay all or any part of a Loan or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.

7.8.4   No reinstatement

No amount of the Total Commitments cancelled under this Agreement may subsequently be reinstated.

7.8.5   Forwarding of notice of prepayment and cancellation

If the Agent receives a notice under this Clause 7 it shall promptly forward a copy of that notice to the Borrowers or the affected Lender, as appropriate.

7.8.6   Application

Any amount prepaid shall:

a)   in respect of the Existing Vessels, be used to reduce the remaining scheduled reductions as set out in Clause 6.2 a) and Schedule 7 (Scheduled reductions) on a pro rata basis between the Existing Vessels, and in inverse order of maturity;

b)   in respect of the New Vessels, be used to reduce the remaining scheduled reductions set out in Clause 6.2 b) (Repayment of Loans) on a pro rata basis between the New Vessels and in inverse order of maturity,

and shall in any event reduce rateably each Lender’s participation in the Facility.

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:

a)   the Margin;

b)   LIBOR; and

c)   the Mandatory Cost.

Effective interest pursuant to the FA Act has been calculated by the Agent as set out in a separate notice from the Agent to the Borrowers.

8.2   Payment of interest

The Borrowers shall pay accrued interest on a Loan on each Interest Payment Date (and if the Interest Period is longer than three (3) months, on the date falling at three (3) monthly intervals after the first day of the Interest Period).

8.3   Default interest

If any of the Borrowers fails to pay any amount payable by any of them 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 per cent (2.00%) 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 Borrowers on demand by the Agent. Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

8.4   Notification of rates of interest

The Agent shall promptly notify the Lenders and the Borrowers of the determination of a rate of interest under this Agreement.

9   INTEREST PERIODS

9.1   Selection of Interest Periods

a)   The Borrowers may select an Interest Period for a Loan in the Drawdown Notice, however so that the first Interest Period for a Loan drawn following drawing of the first Loan hereunder, shall end on the last day of the then current Interest Period for the first Loan drawn.

b)   The Borrowers may select an Interest Period of one (1), two (2), three (3) or six (6) months or any such other period agreed between the Borrowers and the Agent (on behalf of the Lenders). In addition, the Borrowers may select an Interest Period of a period of less than one (1) month, if necessary to ensure that there are sufficient Loans with an aggregate amount equal to or greater than the reduction instalment which have an Interest Period ending on a repayment date for the scheduled reduction to occur.

c)   An Interest Period for a Loan shall not extend beyond the Final Maturity Date, but shall be shortened so that it ends on the Final Maturity Date.

d)   Each Interest Period for a Loan shall start on the Drawdown Date.

e)   Each Loan may have one (1) Interest Period only.

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).

9.3   Notification of Interest Periods

The Agent will notify the Borrowers and the Lenders of the Interest Periods determined in accordance with this Clause 9.

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 such Loan for the Interest Period shall be the rate per annum which is the sum of:

(i)   the Margin;

(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 such Loan from whatever source it may reasonably select; and

(iii)   Mandatory Costs.

b)   In this Agreement, “Market Disruption Event” means:

(i)   at or about 11:00 hours (London time) on the Quotation Day for the relevant Interest Period LIBOR is not available; or

(ii)   before close of business in London on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in the 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

If a Market Disruption Event occurs and the Agent or the Borrowers so require, the Agent and the Borrowers shall enter into negotiations (for a period of not more than thirty (30) days) with a view to agreeing a substitute basis for determining the rate of interest. 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

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 any of the Borrowers on a day other than the last day of an Interest Period for a Loan or Unpaid Sum.

Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Cost for any Interest Period in which they accrue.

11   FEES

11.1   Agency fee

The Borrowers shall pay to the Agent an agency fee in the amount and at the times agreed in a separate Fee Letter.

11.2   Arrangement fee

The Borrowers shall pay to the Arranger an arrangement fee in the amount and at the times agreed in a separate Fee Letter.

11.3   Commitment Fee

The Borrower shall pay to the Agent (for distribution to the Lenders) a commitment fee of:

a)   twenty-five per cent (25.00%) per annum of the Margin accruing from the first Drawdown Date and up until 30 June 2007; and

b)   forty per cent (40.00%) per annum of the Margin thereafter and up until the Final Maturity Date,

on the Lenders’ Available Commitment, and in any event payable quarterly in arrears on the relevant Interest Payment Dates.

11.4   Other fees

The Borrowers shall pay to the Agent and the Arranger (as the case may be) (for distribution among the Lenders according to a separate agreement/invitation) the fees in the amount and at the times agreed in the Fee Letter.

12   TAX GROSS-UP AND INDEMNITIES

12.1   Taxes

12.1.1   No withholding

All payments by the Borrowers under the Finance Documents shall be made free and clear of and without deduction or withholding for or on account of any Tax or any other governmental or public payment imposed by the laws of any jurisdiction from which or through which such payment is made, unless a Tax deduction or withholding is required by law.

12.1.2   Tax gross-up

a)   The Borrowers shall promptly upon becoming aware that any of them must make a Tax deduction or withholding (or that there is any change in the rate or the basis of a Tax deduction or withholding) 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 Lender.

b)   If a Tax deduction or withholding is required by law to be made by any of the Borrowers:

(i)   the amount of the payment due from the Borrowers shall be increased to an amount which (after making any Tax deduction or withholding) leaves an amount equal to the payment which would have been due if no Tax deduction or withholding had been required; and

(ii)   the Borrowers shall make that Tax deduction or withholding within the time allowed and in the minimum amount required by law.

c)   Within thirty (30) days of making either a Tax deduction or withholding or any payment required in connection with that Tax deduction or withholding, the Borrowers shall deliver to the Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party that the Tax deduction or withholding has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

12.2   Tax indemnity

The Borrowers shall (within three (3) Business Days of demand by the Agent) pay to the Agent for the account of the relevant Finance Party an amount equal to the loss, liability or cost which a Finance Party determines will be or has been (directly or indirectly) suffered for or on account of any Tax by such Finance Party in respect of a Finance Document, save for any Tax on Overall Net Income assessed on a Finance Party or to the extent such loss, liability or cost is compensated under Clause 12.1 (Tax gross-up).

12.3   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.

13   INCREASED COSTS

13.1   Increased Costs

a)   The Borrowers shall, upon demand from the Agent, pay for the account of a Finance Party the amount of any Increased Cost 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 (including any laws and regulations implementing new or modified capital adequacy requirements) or (ii) compliance with any law or regulation made after the date of this Agreement.

b)   In this Agreement, the term “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 Commitments or funding or performing its obligations under any Finance Document.

c)   A Finance Party intending to make a claim pursuant to this Clause 13.1 shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrowers. Each Finance Party shall as soon as practicable after a demand by the Agent, provide a confirmation showing the amount of its Increased Costs.

13.2   Exceptions

Clause 13.1 (Increased Costs) does not apply to the extent any Increased Cost is:

a)   attributable to a Tax deduction or withholding required by law to be made by any of the Borrowers;

b)   compensated for by Clause 12.1 (Tax gross-up) or Clause 12.2 (Tax Indemnity); or

c)   attributable to the wilful breach by the relevant Finance Party or its affiliates of any law or regulation.

14   OTHER INDEMNITIES

14.1   Currency indemnity

a)   If any sum due from any of the Borrowers 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 any of the Borrowers;

(ii)   obtaining or enforcing an order, judgement or award in relation to any litigation or arbitration proceedings,

the Borrowers 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)   The Borrowers waive any right they may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

14.2   Other indemnities

The Borrowers shall 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 any of the Borrowers and/or the Guarantor (as the case may be) 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 27 (Sharing among the Finance Parties);

c)   the funding, or making arrangements to fund, its participation in a Drawing or a Loan (as the case may be) 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); or

d)   a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given by the Borrowers.

14.3   Indemnity to the Agent

The Borrowers 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; or

b)   acting or verifying any notice, request or instruction which it reasonably believes to be genuine, correct or appropriately authorised.

15   MITIGATION BY THE LENDERS

15.1   Mitigation

Without in any way limiting the obligations of the Borrowers hereunder, 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:

a)   Clause 7.1 (Mandatory prepayment - Total Loss or sale);

b)   Clause 7.2 (Mandatory prepayment - Market Value);

c)   Clause 7.3 (Mandatory prepayment - Illegality);

d)   Clause 7.4 (Mandatory prepayment - Change of control);

e)   Clause 12 (Tax gross-up and indemnities); and

f)   Clause 13 (Increased Costs),

including (but not limited to) transferring its rights and obligations under the Finance Documents to another affiliate.

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.

15.2   Indemnity

The Borrowers shall indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 15.1 (Mitigation).

16   COSTS AND EXPENSES

16.1   Transaction expenses

The Borrowers shall promptly on demand pay to the Agent and the Arranger the amount of all costs and expenses (including legal fees) reasonably 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 Borrowers shall, within three (3) Business Days of demand, reimburse the Agent or another Finance Party for the amount of all costs and expenses (including legal fees) reasonably 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.

17   SECURITY

17.1   Security - Loans

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 of the Borrowers towards the Lenders and the Agent in connection with this Agreement, shall at any time until all amounts due to the Lenders and the Agent hereunder have been paid and/or repaid in full, be secured by:

a)   the Mortgages;

b)   the Deeds of Covenants;

c)   the Assignment Agreements;

d)   the Charterparty Assignments;

e)   the Account Charges; and

f)   the Guarantee.

The Borrowers undertake to ensure that the above Security Documents are being duly executed by the parties thereto in favour of the Agent (on behalf of the Finance Parties) on or about the date of this Agreement, legally valid and in full force and effect, and to execute or procure the execution of such further documentation as the Agent may reasonable require in order for the relevant Finance Parties to maintain the security position envisaged hereunder.

17.2   Security and subordination - Swap Agreement(s)

The Agent and the Lenders have agreed that the Borrowers’ obligations under the Swap Agreement(s), if any, shall be secured by the Security Documents with the rights of the Swap Bank, being fully subordinated to and ranking in all respects after the rights of the Agent (on behalf of the Finance Parties under the Security Documents set out in Clause 17.1 (Security - Loans).

17.3   Enforcement of Security Documents - Swap Agreements

The Agent (on behalf of the Finance Parties) will notify the Swap Bank as soon as practicable possible if it intends to enforce any of its rights under the Security Documents whereupon the Swap Bank shall have the option (to be exercised immediately upon receipt of such notification if there is a case of emergency and the Agent (on behalf of the Finance Parties) has to act without delay, or otherwise within ten (10) Business Days from receipt of such notification during which period the Agent (on behalf of the Finance Parties) will not complete enforcement of any if its said rights and powers) of paying to the Agent (on behalf of the Finance Parties) within the said period of ten (10) Business Days all monies then due to the Agent and the Finance Parties under the Agreement and the Security Documents against an assignment and transfer (on a non-recourse basis) of this Agreement and the Security Documents that may be transferable to, and at the expense of, the Swap Bank in respect of all of the rights and powers of the Agent and the Finance Parties under this Agreement and the Security Documents. Such assignment and transfer shall be without any express of implied warranty or representation by the Agent and the Finance Parties as to the validity and enforceability of the Agreement and/or the Security Documents and/or such related documents or as to the recoverability of any moneys thereunder. The Agent shall not be liable to the Swap Bank for any failure or delay in giving notice of its intention to enforce and shall not be liable to the Swap Bank in respect of any loss, damage, or liability incurred by the Swap Bank arising out of or in connection with the Agent’s failure or delay in giving such notice.

Without prejudice to this Clause 17.3, nothing herein shall preclude the right of the Agent to demand payment of any money secured by the Security Documents or preclude the Agent from taking any action whatsoever in accordance with the Security Documents.

17.4   Swap Bank’s undertakings

The Swap Bank undertakes that:

a)   at the same time as giving any formal notice to the Borrowers that an event of default (as defined in the relevant Swap Agreement) has occurred, notify the Agent hereof;

b)   in the event that the Agent declares an Event of Default under the Agreement and following receipt by the Swap Bank of a notice from the Agent pursuant to Clause 17.3 (Enforcement of the Security Documents), any monies received thereafter by the Swap Bank, shall forthwith be paid to the Agent until all sums due to the Finance Parties under the Agreement and/or the Security Documents have been fully paid;

c)   it will not make or allow to be made any material variation, amendment or supplement to the Swap Agreement(s) without the prior written consent of the Borrowers and the Agent; and

d)   it shall not assign, transfer or otherwise dispose of its rights or obligations under the Swap Agreement(s) to any other party unless such party has first entered into an agreement with the Agent relating to the subordination of its rights under the Security Documents in form and substance satisfactory to the Agent and the Finance Parties.

18   REPRESENTATIONS AND WARRANTIES

Each of the Borrowers represents and warrants to each Finance Party as follows:

18.1   Status

a)   Each of the Borrowers is a corporation, duly incorporated and validly existing under the laws of the Marshall Island and has the power to own its assets and carry on its business as it is currently being conducted. Each of BHOBO One, BHOBO Two, BHOBO Three, RMJ OBO Shipping Ltd. and Sagamore Shipping Ltd. is one hundred per cent (100.00%) owned by OBO Holdings Ltd. which is one hundred per cent (100.00%) owned by the Guarantor.

b)   The Guarantor is a corporation, duly incorporated and validly existing under the laws of Liberia and has the power to own its assets and carry on its business as it is currently being conducted.

18.2   Binding obligations

The Transaction Documents to which any of the Borrowers and/or the Guarantor is a party constitute legal, valid, binding and enforceable obligations, and save as provided herein or therein and/or as have been or shall be completed prior to the relevant Drawdown Date, no registration, filing, payment of tax or fees or other formalities are necessary or desired to render the Transaction Documents enforceable against any of the Borrowers and/or the Guarantor, and in respect of the Vessels, for the Mortgages to constitute valid and enforceable first priority mortgages over the Vessels.

18.3   No conflict with other obligations

The entry into and performance by any of the Borrowers or the Guarantor of, and the transactions contemplated by, the Transaction Documents do not and will not conflict with:

a)   any law or regulation or any order or decree of any governmental agency or court by which it is bound;

b)   any constitutional documents of any of the Borrowers and/or the Guarantor (as the case may be); or

c)   any agreement or document to which it is a party or by which it or any of its assets are bound.

18.4   Power and authority

Each of the Borrowers and the Guarantor has the power to enter into, perform and deliver, and have taken all necessary actions to authorise their entry into, performance and delivery of, the Transaction Documents to which any of them is a party and the transactions contemplated by those Transaction Documents.

18.5   Authorisations and consents

All authorisations, approvals, consents and other matters, official or otherwise, required by any of the Borrowers and/or the Guarantor in connection with the entering into, performance, validity and enforceability of the Transaction Documents and the transactions contemplated hereby and thereby have been obtained or effected and are in full force and effect.

18.6   Taxes

Each of the Borrowers and the Guarantor has complied with all material taxation laws in all jurisdictions where any of them is subject to taxation and has paid all material Taxes and other amounts due to governments and other public bodies. No claims are being asserted against any of them with respect to any Taxes or other payments due to public or governmental bodies. None of the Borrowers or the Guarantor is required to make any withholdings or deductions for or on account of Tax from any payment any of them may make under any of the Finance Documents.

18.7   No Default

No Event of Default is continuing or might reasonably be expected to result from the making of a Drawing or a Loan (as the case may be). 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 any of the Borrowers, the Guarantor or any of their Subsidiaries or to which any of the Borrowers’, the Guarantor’s (or any of their Subsidiaries’) assets are subject which might have a Material Adverse Effect.

18.8   No misleading information

Any factual information, documents, exhibits or reports relating to any of the Borrowers and/or the Guarantor and which have been furnished to the Finance Parties by or on behalf of the Borrowers and/or the Guarantor 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.

18.9   Original Financial Statements

a)   Complete and correct. The Original Financial Statements fairly and accurately represent the assets, liabilities and the financial condition of the Borrowers and the Guarantor and have been prepared in accordance with GAAP consistently applied.

b)   No undisclosed liabilities. As of the date of the Original Financial Statements, the Borrowers and the Guarantor had no material liabilities, direct or indirect, actual or contingent, and there is no material, unrealised or anticipated losses from any unfavourable commitments not disclosed by or reserved against in the Original Financial Statements or in the notes thereto.

c)   No material change. Since the date of the Original Financial Statements, there has been no material adverse change in the business, operations, assets or condition (financial or otherwise) of the Borrowers and the Guarantor.

18.10   Pari passu ranking

The Borrowers’ and the Guarantor’s respective payment obligations under the Finance Documents rank at least pari passu with the claims of all their other unsecured and unsubordinated creditors, except for obligations preferred by mandatory law applying to companies generally.

18.11   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 in the reasonably opinion of the Lenders be expected to have a Material Adverse Effect, have (to the best of the Borrowers’ knowledge and belief) been started or threatened against any of the Borrowers and/or the Guarantor.

18.12   No existing Security Interest

Save as described in Clause 17 (Security), no Security Interest exists over all or any of the present or future revenues or assets of any of the Borrowers.

18.13   No immunity

The execution and delivery by the Borrowers and/or the Guarantor of each Transaction Document to which they are a party constitute, and their exercise of their respective rights and performance of their obligations under each Transaction Document will constitute, private and commercial acts performed for private and commercial purposes, and the Borrowers and/or the Guarantor will not (except for bankruptcy or any similar proceedings) be entitled to claim for themselves or any or all of their assets immunity from suit, execution, attachment or other legal process in any other proceedings taken in Norway and/or the Marshall Islands and/or Liberia (as the case may be) in relation to any Transaction Document.

18.14   No winding-up

Neither of the Borrowers nor the Guarantor has taken any corporate action nor have any other steps been taken or legal proceedings been started or threatened against any of them for their reorganisation, winding-up, dissolution or administration or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of any of them or any or all of their assets.

18.15   Environmental compliance

The Borrowers have 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.

18.16   Environmental Claims

No Environmental Claim has been commenced or (to the best of the Borrowers’ knowledge and belief) is threatened against any of the Borrowers or the Charterers where that claim would be reasonably likely, if adversely determined, to have a Material Adverse Effect on any of the Borrowers.

18.17   ISM Code and ISPS Code compliance

All requirements of the ISM Code and the ISPS Code as they relate to the Borrowers, the Managers, the Charterers and the Vessels have been complied with in all material respects.

18.18   The Vessels

The Vessels will on the relevant Drawdown Date be:

a)   in the absolute ownership of the relevant Borrower free and clear of all encumbrances (other than current crew wages and the relevant Mortgage) and the relevant Borrower will be the sole, legal and beneficial owner of the relevant Vessel;

b)   registered in the name of the relevant Borrower with the Bahamas Ship Registry (or such other ship registry as approved by the Lenders) under the laws and flag of The Bahamas (or under such other flag as approved by the Lenders);

c)   operationally seaworthy in every way and fit for service; and

d)   classed with Det norske Veritas, free of all overdue requirements and recommendations.

18.19   No money laundering

The Borrowers are acting for their own account in relation to the Loan and in relation to the performance and the discharge of their obligations and liabilities under the Finance Documents and the transactions and other arrangements effected or contemplated by the Finance Documents to which any of the Borrowers and/or the Guarantor 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 (91/308/EEC) and Directive 2001/97 of the European Parliament and of 4 December 2001 amending Council Directive 91/308).

18.20   Repetition

The representations and warranties set out in this Clause 18 are deemed to be made by the Borrowers on the date of this Agreement and shall be deemed to be repeated:

a)   on the date of a Drawdown Notice;

b)   on a Drawdown Date;

c)   on the first day of each Interest Period; and

d)   in each Compliance Certificate forwarded to the Agent pursuant to Clause 19.2 (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).

19   INFORMATION UNDERTAKINGS

Each of the Borrowers gives the undertakings set out in this Clause 19 to each Finance Party and such undertakings shall remain in force throughout the Security Period.

19.1   Financial statements

The Borrowers shall supply to the Agent in sufficient copies for all of the Lenders:

a)   as soon as available, but no later than hundred and twenty (120) days after the end of each of their fiscal years, complete copies of the financial reports of each of the Borrowers, all in reasonable detail, which shall include at least the balance sheet of each of the Borrowers as of the end of such year and the related statements of income and sources and uses of funds for such year, all in reasonable detail, unaudited, but certified to be true and complete by the chief financial officer of the Guarantor;

b)   as soon as available, but not less than forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Borrowers, a quarterly interim balance sheet of each of the Borrowers and the related profit and loss statements and sources and uses of funds, all in reasonable detail, unaudited, but certified to be true and complete by the chief financial officer of the Guarantor;

c)   as soon as available but not later than one hundred and twenty (120) days after the end of each fiscal year of the Guarantor, complete copies of the consolidated financial reports of the Guarantor and its Subsidiaries, all in reasonable detail, which shall include at least the consolidated balance sheet of the Guarantor and its Subsidiaries as of the end of such year and the related consolidated statements of income and sources and uses of funds for such year, which shall be audited reports prepared by an accounting firm acceptable to the Agent;

d)   as soon as available but not less than forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Guarantor, a quarterly interim consolidated balance sheet of the Guarantor and its Subsidiaries and the related consolidated profit and loss statements and sources and uses of funds, all in reasonable detail, unaudited, but certified to be true and complete by the chief financial officer of the Guarantor;

e)   within ten (10) days of the filing thereof, copies of all registration statements and reports on Forms 20-F and 8-K (or their equivalent) and other material filings which the Guarantor shall have filed with the Securities and Exchange Commission or any similar governmental authority;

f)   promptly upon the mailing thereof to the shareholders of the Guarantor, copies of all financial statements, reports, proxy statements and other communications provided to the Guarantor’s shareholders;

g)   within ten (10) days of any of the Borrowers’ or the Guarantor’s receipt thereof, copies of all audit letters or other correspondence from any external auditors including material financial information in respect of any of the Borrowers or the Guarantor, as the case may be;

h)   within December each year cash-flow projections for each of the Borrowers and the Guarantor (on a consolidated basis) for the twelve (12) months following the date of such financial statements in a form acceptable to the Agent (on behalf of the Finance Parties); and

i)   such other statements (including, without limitation, monthly consolidated statements of operating revenues and expenses), lists of assets and accounts, budgets, forecasts, reports and other financial information with respect to the theirs’ or the Guarantor’s business as the Agent may from time to time reasonably request, certified to be true and complete by the chief financial officer of the Guarantor.

19.2   Compliance Certificate

The Borrowers shall supply to the Agent, with each set of financial statements delivered on 30 June and 30 December pursuant to Clause 19.1 (Financial statements), a Compliance Certificate signed by the chief financial officer of the Guarantor setting out (in reasonable detail) computations as to compliance with Clause 20 (Financial covenants) as at the date at which those financial statements were drawn up.

19.3   Requirements as to financial statements

The Borrowers shall procure that each set of financial statements delivered pursuant to Clause 19.1 (Financial statements) is prepared using GAAP, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements for the Borrowers and/or the Guarantor unless, in relation to any set of financial statements, it notifies the Agent that there has been a change in GAAP, the accounting practices or reference periods and its auditors deliver to the Agent:

a)   a description of any change necessary for those financial statements to reflect GAAP, accounting practices and reference periods upon which the Borrower’s and/or the Guarantor’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 20 (Financial covenants) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and the Borrowers’ and/or the Guarantor’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.

19.4   Information - miscellaneous

The Borrowers shall notify the Agent and/or supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests):

a)   all material documents dispatched by the Borrowers and/or the Guarantor to their shareholders or their creditors generally and any press releases at the same time as they are dispatched;

b)   promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any of the Borrowers and/or the Guarantor and/or the Charterers and/or the Charter Guarantors, and which might, if adversely determined, have a Material Adverse Effect; and

c)   promptly, such further information regarding the business, assets and operations (financial or otherwise) of any of the Borrowers and/or the Guarantor as any Finance Party (through the Agent) may reasonably request.

19.5   Notification of default

The Borrowers shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

19.6   Notification of Environmental Claims

The Borrowers 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 Borrowers’ knowledge and belief) is threatened against any of the Borrowers or any of the Vessels; and

b)   of any fact and circumstances which will or are reasonably likely to result in any Environmental Claim being commenced or threatened against any of the Borrowers or any of the Vessels,

where the claim would be reasonably likely, if determined against any of the Borrowers or the Vessels, to have a Material Adverse Effect.

19.7   “Know your customer” requirements

a)   Each Borrower shall and shall procure that the Guarantor shall promptly on the request of any Finance Party supply to that Finance Party any documentation or other evidence which is reasonably requested by that Finance Party (whether for itself, on behalf of any Finance Party or any prospective new Lender) to enable a Finance Party or 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 must promptly on the request of the Agent supply to the Agent any documentation or other evidence which is reasonably required by 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.

20   FINANCIAL COVENANTS

20.1   Definitions

For the purposes of the financial covenants set out herein, the following definitions shall apply:

a)   “Cash and Cash Equivalents” means, in respect of the Group, and at any time:

(i)   cash in hand or on deposits with any acceptable bank available for cash management purposes;

(ii)   investment grade certificates or deposit or investment grade marketable debt securities, maturing within one (1) year after the relevant date of calculation; or

(iii)   any other instrument, security or investment approved by the Majority Lenders,

in each case, to which any member of the Group beneficially entitled at that time and which is capable of being applied against the Total Debt,

b)   “EBITDA” means, always in accordance with GAAP, the aggregate of operating profits of the Borrowers or the Guarantor (on a consolidated basis) for a Measurement Period before Taxes, financial items, depreciations and amortisations, excluding:

(i)   the profit or loss attributable to any extraordinary or exceptional items or any write-offs on investments during that Measurement Period; and

(ii)   the profit and loss arising on any disposal of fixed assets during that Measurement Period save for any disposals made in the ordinary course of business.

c)   “Fixed Charges” means:

(i)   Net Interest for any Measurement Period, plus

(ii)   the amount of scheduled repayments of the Facility and/or any other credit facilities and the interest and repayment element under capitalised charterparties in accordance with GAAP which fall due for repayment or payment during the Measurement Period, other than any amount prepaid under this Agreement,

less free and available cash (at the relevant Quarter Date) and marketable securities (acceptable to the Agent (on behalf of the Lenders)) in excess of the minimum requirement plus any dividends paid in such Measurement Period.

d)   “Measurement Period” means a rolling period of twelve (12) calendar months ending on a Quarter Date.

e)   “Quarter Date” means each 31 March, 30 June, 30 September and 31 December.

f)   “Net Interest” means all interest, arrangement fees and capitalised commissions and periodic fees (whether, in each case, paid or payable) as reported in accordance with GAAP being incurred (after having deducted any interest, arrangement fee and capitalised income earned) by the Borrowers and the Guarantor (on a consolidated basis) during a Measurement Period.

g)   “Total Debt” means, on a consolidated basis, the aggregate book value of all provisions, other long term liabilities and current liabilities of the Borrowers and the Guarantor (on a consolidated basis).

h)   “Value Adjusted Equity” means Value Adjusted Total Assets less Total Debt.

i)   “Value Adjusted Equity Ratio” means Value Adjusted Equity divided by Value Adjusted Total Assets.

j)   “Value Adjusted Total Assets” means, on a consolidated basis, the total market value of all of the assets of the Guarantor (on a consolidated basis).

20.2   Financial covenants

20.2.1   Minimum Value Adjusted Equity Ratio

The Borrowers shall procure that the Guarantor (on a consolidated basis) shall at all times during the Security Period maintain a minimum Value Adjusted Equity Ratio of minimum thirty per cent (30.00%).

20.2.2   Minimum Value Adjusted Equity

The Borrowers shall procure that the Guarantor (on a consolidated basis) shall at all times during the Security Period maintain a minimum Value Adjusted Equity of USD 50,000,000.

20.2.3   Ratio of EBITDA to Fixed Charges

The Borrowers shall procure that the Guarantor (on a consolidated basis) shall ensure that the ratio of EBITDA to Fixed Charges shall be 1.25:1.00 or greater on a twelve (12) months rolling basis on assumptions approved by the Agent.

20.2.4   Positive working capital

The Borrowers shall procure that the Guarantor (on a consolidated basis) shall at all times ensure that its current assets exceed its current liabilities (excluding the portion of long term debt), all as determined in accordance with GAAP.

20.2.5   Minimum value

The Borrowers shall ensure that the Market Value of the Vessels be at least one hundred and twenty per cent (120.00%) of the Loans at any time from the earlier of (i) the expiry of the Charterparty for MV “Roger M. Jones” and (ii) 30 September 2008.

20.2.6   Cash and Cash Equivalents

The Borrowers shall procure that the Guarantor (on a consolidated basis) shall at all times ensure that it has Cash and Cash Equivalents equal to or greater than (i) USD 15,000,000 and (ii) six per cent (6.00%) of the long term debt of the Guarantor.

20.2.7   Adjustments

The Agent (on behalf of the Lenders) is aware that the Guarantor (on a consolidated basis) for the purpose of calculating the financial covenants under this Clause 20, will have the right to adjust to the amounts booked as (i) average earnings in the profit and loss accounts and (ii) deferred income in the balance sheet related to the Charterparties for MV “Rip Hudner”, MV “Bonnie Smithwick” and MV “Searose G”, to ensure that the actual income under such Charterparties is taken into consideration in full.

21   GENERAL UNDERTAKINGS

Each of the Borrowers gives the undertakings set out in this Clause 21 to each Finance Party and such undertakings shall remain in force throughout the Security Period.

21.1   Authorisations etc.

The Borrowers shall, and shall procure that the Guarantor 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, consent, approval, resolution, licence, exemption, filing, notarisation or registration required under any law or regulation of its jurisdiction of incorporation to enable them to perform their respective obligations under the Transaction Documents and to ensure the legality, validity, enforceability or admissibility in evidence in their respective jurisdiction of incorporation of any Transaction Document.

21.2   Compliance with laws

The Borrowers shall and shall procure that the Guarantor shall comply in all respects with all laws to which any of them may be subject, if failure so to comply would materially impair their ability to perform their respective obligations under the Transaction Documents.

21.3   Pari passu ranking

The Borrowers shall and shall procure that the Guarantor shall ensure that their obligations under the Finance Documents do and will rank at least pari passu with all their 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.

21.4   Title

The Borrowers will hold legal title to and own the entire beneficial interest in the Vessels, the Insurances and the Earnings, free of all Security Interest and other interests and rights of any kind, except for those created by the Financial Documents and as set out in Clause 21.5 (Negative pledge).

21.5   Negative pledge

The Borrowers shall not create or permit to subsist any Security Interest over any of the Vessels nor upon any of their present or future undertakings, property, assets, rights or revenues, other than:

a)   Security Interest under the Security Documents;

b)   Security Interests arising in the ordinary course of business; and

c)   Security Interests consented to in writing by the Agent (acting upon instructions from the Majority Lenders).

21.6   Borrowings and guarantees

None of the Borrowers shall enter into any new Financial Indebtedness or assume or grant any guarantee liabilities, other than current liabilities related to the day to day operation of the Vessels.

21.7   Interest hedging

The Borrowers shall enter into interest hedging arrangements with the Swap Bank only and minimum fifty per cent (50.00%) of the total interest rate risk under the Finance Documents shall be hedged in a manner acceptable in the sole discretion of the Agent prior to the first Drawdown Date.

21.8   Disposals

None of the Borrowers shall sell, transfer or otherwise dispose of the whole or any part of their respective interest in the Vessels, the Earnings nor otherwise dispose of all or any substantial part of their assets without the prior written consent of the Agent (on behalf of the Lenders).

21.9   Distributions

Provided that the Borrowers and the Guarantor are in compliance with the provisions of the Finance Documents to which they are respective parties (including, but not limited to, the financial covenants set out in Clause 20 (Financial covenants)) both before and following such distributions, the Borrowers and the Guarantor may distribute dividends and make other distributions in whatever form to their shareholder(s) or any other person(s) without the prior written consent of the Agent (on behalf of the Lenders).

21.10   Investment restrictions

Provided that the Borrowers are in compliance with the provisions of the Finance Documents (including, but not limited to, the financial covenants in Clause 20 (Financial covenants)) both before and following such investments, the Borrowers may make new investments without the prior written consent of the Agent (on behalf of the Lenders).

21.11   Bank accounts

The Borrowers shall hold and maintain all their bank accounts (hereunder the Earnings Account) with the Agent and/or Nordea Bank Finland Plc London Branch and ensure that all Earnings are paid to the Earnings Account.

21.12   Shareholders and change of control

The Borrowers shall and shall procure that their shareholder(s) do not agree to any transfer of shares, the granting of options of ownership or change in ownership of any of the Borrowers without the prior written consent of the Agent (on behalf of the Lenders).

The Borrowers shall procure that the Guarantor at all times during the Security Period shall be controlled by Mr. Michael S. Hudner.

21.13   Change of business etc.

a)   The Borrowers shall, and shall procure that the Guarantor shall, ensure that no change is made to the general nature of the business of the Borrowers or the Guarantor (as the case may be) from that carried out at the date of this Agreement (for the Borrowers being single-purpose companies having no other business than owning and commercial ownership of the Vessels).

b)   None of the Borrowers shall and the Borrowers shall procure that neither the Guarantor shall change their legal names.

21.14   No mergers etc.

The Borrowers shall not and shall procure that the Guarantor shall not, enter into any merger, amalgamation, de-merger, split-up, divest, consolidation with or into any other person, be the subject of any reconstruction or change its type of organization, jurisdiction of organization without the prior consent of the Agent (on behalf of the Lenders).

21.15   Environmental compliance

The Borrowers shall comply in all material respects with all Environmental Laws subject to the terms and conditions of any Environmental Approval and obtain and maintain any Environmental Approval.

21.16   Commercial management

The Borrowers shall procure that the Commercial Manager shall continue to be commercial manager of the Borrowers and the Vessels and there shall be no change to such commercial management without the prior written consent of the Agent.

21.17   Transaction Documents

The Borrowers shall procure that none of the Transaction Documents are amended (save for immaterial amendments which will have no impact of the Borrowers’ ability to fulfil their obligations under the Finance Documents) or terminated, or any waiver or any material terms thereof are agreed thereunder without the prior written consent of the Agent (on behalf of the Finance Parties).

22   VESSELS’ COVENANTS

Each of the Borrowers gives the undertakings set out in this Clause 22 to each Finance Party and such undertakings shall remain in force throughout the Security Period.

22.1   Insurance

a)   The Borrowers 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 as normally adopted by the industry for similar vessels), Hull Interest and/or Freight Interest, Loss of Hire and War Risk insurances, in such amounts, on such terms and with such insurers as the Agent shall approve.

b)   The value of the Hull and Machinery insurance shall cover at least eighty per cent (80.00%) of the Market Value, and the aggregate insurance value of the Vessels (except Protection & Indemnity and Loss of Hire) shall be at least equal to the higher of the Market Value and one hundred and twenty per cent (120.00%) of the Loans.

c)   The Borrowers shall procure that the Agent (on behalf of the Finance Parties and the Swap Bank) 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.

d)   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 litra a) have been renewed and taken out in respect of the Vessels with insurance values as required by litra b), that such Insurances are in full force and effect and that the Agent (on behalf of the Finance Parties and the Swap Bank) have been noted by the relevant insurers.

e)   The Agent will, for the account of the Borrowers, take out a Mortgagee’s Interest Insurance and a Mortgagee’s Interest - Additional Perils Pollution Insurance (covering one hundred and ten per cent (110.00%) of the Loans) relevant to the Vessels.

f)   If any of the Insurances referred to in litra a) form part of a fleet cover, the Borrowers shall procure that the insurers shall undertake to the Agent that they shall neither set-off against any claims in respect of the Vessels 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.

g)   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.

h)   The Borrowers will not make any change to the Insurances described under litra a) and b) above without the prior written consent of the Agent (on behalf of the Lenders).

22.2   Classification and repairs

The Borrowers 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 its class at the highest level with Det norske Veritas or another classification society approved by the Agent, free of overdue recommendations and qualifications; 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 any of the Vessels may trade from time to time.

22.3   Market Value

a)   The Market Value of the Vessels shall at any time from the earlier of (i) the expiry of the Charterparty relating to MV “Roger M. Jones” and (ii) 30 September 2008 never be less than one hundred and twenty per cent. (120%) of the Loans.

b)   The Borrowers shall from such time, at their own expense, arrange for the Market Value for all of the Vessels to be determined semi-annually and shall include the amount of such Market Value in the relevant Compliance Certificate to be delivered together with the financial statements for each reporting date ending on 30 June and 31 December in any financial year.

22.4   Restrictions on chartering, appointment of Managers etc.

The Borrowers shall not without the prior written consent of the Agent (on behalf of the Majority Lenders):

a)   let the Vessels on bareboat charter for any period;

b)   enter into any agreement related to the chartering and operation of any of the Vessels exceeding twelve (12) months or any pooling arrangements related to the Earnings of the Vessels;

c)   appoint a technical manager for the Vessels other than the Technical Manager or agree to any alteration to the terms of the Technical Management Agreement;

d)   change the classification society of any of the Vessels; or

e)   neither terminate, cancel, amend (save for immaterial amendments which will have no impact on the Borrowers’ ability to fulfil their obligations under the Finance Documents) or supplement any of the Charterparties nor assign any of the Charterparties to any other person.

22.5   Notification of certain events

The Borrowers shall immediately notify the Agent of:

a)   any accident to any of the Vessels involving repairs where the costs will or is likely to exceed USD 500,000 (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 of the Vessels, the Earnings or the Insurances;

d)   any occurrence as a result of which any of the Vessels 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 any of the Borrowers, the Managers, the Charterers or otherwise in connection with the Vessels.

22.6   Operation of the Vessels

a)   The Borrowers shall comply, or procure the compliance in all material respects with the ISM Code and the ISPS Code, all Environmental Laws and all other laws or regulations relating to the Vessels, their ownership, operation and management or to the business of any of the Borrowers and shall not employ any of the Vessels nor allow their employment:

(i)   in any manner contrary to law or regulation in any relevant jurisdiction including but not limited to the ISM Code; and

(ii)   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 Vessels unless the Borrowers have (at their 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.

Without limitation to the generality of this Clause 22.6, 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.

b)   The Vessels shall be employed under the Charterparties or such other charterparty as approved by the Agent (on behalf of the Finance Parties) in writing.

22.7   ISM Code compliance

The Borrowers will:

a)   procure that the Vessels remain subject to a SMS for the duration of the Facility;

b)   procure that a valid and current SMC is maintained for each of the Vessels for the duration of the Facility;

c)   if not themselves, procure that the Technical Manager of the Vessels maintains a valid and current DOC for the duration of the Facility;

d)   immediately notify the Agent in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the SMC of any of the Vessels or of the DOC of the Technical Manager; and

e)   immediately notify the Agent in writing of any “accident” or “major non-conformity”, each as those terms is defined in the Guidelines in the application of the IMO International Safety Management Code issued by the International Chamber of Shipping and International Shipping Federation.

22.8   Inspections and class records

a)   The Borrowers shall permit, and shall procure that any charterers permit, one person appointed by the Agent to inspect the Vessels once a year for the account of the Borrowers upon the Agent giving prior written notice.

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.

22.9   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.

22.10   Arrest

The Borrowers 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 of the Vessels, the Earnings or the Insurances;

b)   all tolls, taxes, dues, fines, penalties and other amounts charged in respect of any of the Vessels, the Earnings or the Insurances; and

c)   all other outgoings whatsoever in respect of any of the Vessels, the Earnings and the Insurances,

and forthwith upon receiving a notice of arrest of any of the Vessels, or their detention in exercise or purported exercise of any lien or claim, the Borrowers shall or shall procure that the Charterers shall procure their release by providing bail or providing the provision of security or otherwise as the circumstances may require.

22.11   Total Loss

In the event that any of the Vessels 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 Loan in accordance with Clause 7.1 (Mandatory prepayment - Total Loss or sale).

22.12   Flag, name and registry

The Borrowers shall not, without the prior written consent of the Agent (on behalf of the Lenders), change the flag, name or registry of any of the Vessels.

23   EVENTS OF DEFAULT

Each of the events or circumstances set out in this Clause 23 is an Event of Default.

23.1   Non-payment

The Borrowers do 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)   their failure to pay is caused by administrative or technical error affecting the transfer of funds despite timely payment instructions by the Borrowers; and

b)   payment is made within three (3) Business Days of its due date.

23.2   Financial covenants

Any requirement in Clause 20 (Financial covenants) is not satisfied.

23.3   Other obligations

a)   The Borrowers do not comply with any provision of the Finance Documents (other than those referred to in Clause 23.1 (Non-payment) and Clause 23.2 (Financial covenants)).

b)   No Event of Default under litra a) above will occur if the failure to comply is capable of remedy and is remedied within thirty (30) days of the Agent giving notice to the Borrowers or any of the Borrowers becoming aware of the failure to comply.

23.4   Misrepresentations

Any representation or statement made or deemed to be made by the Borrowers and/or the Guarantor in the Finance Documents or any other document delivered by or on behalf of any of the Borrowers and/or the Guarantor 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.

23.5   Cross default

a)   Any Financial Indebtedness of any of the Borrowers and/or the Guarantor and/or any of the Charterers and/or any of the Charter Guarantors is not paid when due nor within any originally applicable grace period.

b)   Any Financial Indebtedness of any of the Borrowers and/or the Guarantor and/or any of the Charterers and/or any of the Charter Guarantors 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 of the Borrowers and/or the Guarantor and/or any of the Charterers and/or any of the Charter Guarantors is cancelled or suspended by a creditor of any of the Borrowers and/or the Guarantor and/or any of the Charterers and/or any of the Charter Guarantors as a result of an event of default (however described).

d)   Any creditor of any of the Borrowers and/or the Guarantor and/or any of the Charterers and/or any of the Charter Guarantors becomes entitled to declare any Financial Indebtedness of any of the Borrowers and/or the Guarantor and/or any of the Charterers and/or any of the Charter Guarantors due and payable prior to its specified maturity as a result of an event of default (however described).

However so that any event or circumstance as set out in this Clause 23.5 litra a) - d) with regard to the Charterers only, shall not constitute an Event of Default unless such event or circumstance may (in the reasonable opinion of the Agent) interfere with or effect the ability of the Charterers to comply with any and all of its obligations under the Charterparties (hereunder the obligation to pay charter hire) in any manner whatsoever.

23.6   Insolvency

a)   Any of the Borrowers and/or the Guarantor are unable or admits inability to pay their debts as they fall due, suspends making payments on any of their respective debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of their respective creditors with a view to rescheduling any of their indebtedness.

b)   The value of the assets of any of the Borrowers and/or the Guarantor (as the case may be) is less than their respective liabilities (taking into account contingent and prospective liabilities).

c)   A moratorium is declared in respect of any indebtedness of any of the Borrowers and/or the Guarantor (as the case may be).

23.7   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, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme or arrangement or otherwise) of any of the Borrowers and/or the Guarantor;

b)   a composition, compromise, assignment or arrangement with any creditor of any of the Borrowers and/or the Guarantor;

c)   the appointment of a liquidator, receiver, administrative receiver, administrator or other similar officer in respect of any of the Borrowers and/or the Guarantor; or

d)   enforcement of any Security Interest over any assets of any of the Borrower and/or the Guarantor.

23.8   Creditor’s process

Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of any of the Borrowers and/or the Guarantor having an aggregate value of USD 500,000 and is not discharged within thirty (30) days.

23.9   Unlawfulness

It is or becomes unlawful for any of the Borrowers and/or the Guarantor to perform any of their obligations under the Finance Documents.

23.10   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 on any of the Borrowers and/or the Guarantor and/or any of the Charterers and/or any of the Charter Guarantors.

23.11   Permits

Any licence, consent, permission or approval required in order to enforce, complete or perform any of the Transaction Documents is revoked, terminated or modified having a Material Adverse Effect on any of the Borrowers and/or the Guarantor (as the case may be).

23.12   Litigation

There is current, pending or threatened any claims, litigation, arbitration or administrative proceedings against any of the Borrowers and/or the Guarantor which might, if adversely determined, have a Material Adverse Effect on any of the Borrowers and/or Guarantor.

23.13   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 Borrowers:

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)   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 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.

24   CHANGES TO THE LENDERS

24.1   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:

a)   another Existing Lender or an affiliate of an Existing Lender; or

b)   with the prior consent of the Borrowers (such consent not to be unreasonably withheld or delayed, and is not required in the case an Event of Default has occurred), another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the “New Lender”),

provided that the minimum amount of such transfer shall be USD 5,000,000.

24.2   Limitations of responsibility of Existing Lenders

24.2.1   Borrowers’ performance, etc

Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to the New Lender for:

a)   the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;

b)   the financial condition of the Borrowers;

c)   the performance and observance by the Borrowers of their obligations under the Finance Documents or any other documents; or

d)   the accuracy of any statements (whether written or oral) made in or in connection with the Finance Documents or any other document.

24.2.2   New Lender’s own credit appraisal, etc

Each New Lender confirms to the Existing Lender and the other Finance Parties that it:

a)   has made (and will continue to make) its own independent investigation and assessment of the financial condition and affairs of the Borrowers and their 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

b)   will continue to make its own independent appraisal of the creditworthiness of the Borrowers and their related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.

24.2.3   Re-transfer to an Existing Lender, etc

Nothing in any Finance Document obliges an Existing Lender to:

a)   accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause 24; or

b)   support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by the Borrowers of their obligations under the Finance Documents or otherwise.

24.3   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 24.1 (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 24.1 (Assignments and transfers by the Lenders), the Transfer shall become effective on the Transfer Date.

24.4   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, the Borrowers 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)   the Borrowers 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 the Borrowers and the New Lender have assumed and/or acquired the same in place of the Borrowers and the Existing Lender;

c)   the Agent, the Arranger, 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 Arranger 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”.

24.5   Further assurances

The Borrowers undertake to procure that in relation to any Transfer, the Borrowers shall (at their 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.

24.6   Disclosure of information

Any Lender may disclose:

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 Borrowers; and

c)   to whom, to the extent that, information is required to be discloses by any applicable law,

such information about the Borrowers and the Finance Documents as that Lender shall consider appropriate.

24.7   Assignment or transfer fee

The New Lender shall, on the date upon which a Transfer takes effect, pay to the Agent (for its own account) a fee of USD 3,500.

25   CHANGES TO THE BORROWERS

25.1   Assignments and transfer by Borrowers

No Borrower may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

25.2   Additional Borrowers

a)   Subject to the compliance with the provisions of Clause 19.7 (“Know your customer” checks), OBO Holdings Ltd. may request that any of its Subsidiaries becomes an Additional Borrower. The Subsidiary shall become an Additional Borrower if:

(i)   OBO Holdings Ltd. delivers to the Agent a duly completed and executed Accession Letter; and

(ii)   the Agent has received all of the documents and other evidence listed in Part III of Schedule 2 (Conditions precedent) in relation to that Additional Borrower in form and substance satisfactory to the Agent.

b)   The Agent shall notify OBO Holdings Ltd. and the Lenders promptly upon being satisfied that it has received (in form and substance satisfactory to it) all the documents and other evidence listed in Part III of Schedule 2 (Conditions precedent).

25.3   Repetition of representations

Delivery of an Accession Letter constitutes confirmation by the relevant Subsidiary that the each of the representations and warranties set out in Clause 18 (Representations and warranties) are true and correct in relation to it as at the date of delivery as if made by reference to the facts and circumstances then existing.

26   ROLE OF THE AGENT AND THE ARRANGER

26.1   Appointment and authorisation of the Agent

a)   Each other Finance Party and the Swap Bank appoint the Agent to act as its facility agent and security agent under and in connection with the Finance Documents.

b)   Each other Finance Party and the Swap Bank authorises the Agent to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.

26.2   Duties of the Agent

The Agent shall not have any duties or responsibilities except those expressly set forth in the Finance Documents, and the Agent’s duties under the Finance Documents are solely mechanical and administrative in nature. The Agent shall:

a)   promptly forward to a Party the original or a copy of any document which is delivered to it in its capacity as Agent for the attention of that Party by another Party;

b)   supply the other Finance Parties and the Swap Bank with all material information which the Agent receives from the Borrowers;

c)   if it receives notice from a Party referring to this Agreement, describing an Event of Default and stating that the circumstance is an Event of Default, promptly notify the Finance Parties and the Swap Bank; and

d)   from it receives sufficient information; promptly notify the Lenders of the occurrence of any Event of Default arising under Clause 23 (Events of Default).

26.3   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.

26.4   Relationship

The relationship between the Agent and the other Finance Parties and the Swap Bank is that of agent and principal only. Nothing in this Agreement shall be construed as to constitute the Agent or the Finance Parties as trustee or fiduciary for any other person, and neither the Agent nor the Finance Parties or the Swap Bank shall be bound to account to any Finance Party for any sum or the profit element of any sum received by it for its own account.

26.5   Business with the Borrowers

The Agent and the Arranger may accept deposits from, lend money to and generally engage in any kind of banking or other business with any of the Borrowers.

26.6   Rights and discretions of the Agent

a)   The Agent may rely on:

(i)   any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and

(ii)   any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.

b)   The Agent may assume (unless it has received notice to the contrary in its capacity as Agent for the Lenders) that:

(i)   no Event of Default has occurred (unless it has actual knowledge of an Event of Default under Clause 23.1 (Non-payment)); and

(ii)   any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised.

c)   The Agent may engage, pay for and rely on the advise or services of any lawyers, accountants, surveyors or other experts.

d)   The Agent may act in relation to the Finance Documents through its personnel and agents.

e)   The Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.

f)   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 duty of confidentiality or render it liable to any person.

26.7   Majority Lenders’ instructions

a)   Unless a contrary indication appears in a Finance Document, the Agent shall (i) exercise any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from exercising any right, power, authority or discretion vested in it as Agent) and (ii) not be liable for any act (or omission) if it acts in accordance with an instruction of the Majority Lenders.

b)   Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be binding on all the Finance Parties.

c)   The Agent may refrain from acting in accordance with the instructions of the Majority Lenders (or, if appropriate, the Lenders) until it has received such security as it may require for any cost, loss or liability (together with any associated VAT) which it may incur in complying with the instructions.

d)   In the absence of instructions from the Majority Lenders (or, if appropriate, the Lenders) the Agent may act (or refrain from acting) as it considers to be in the best interest of the Lenders.

e)   The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document.

26.8   Responsibility for documentation

Neither the Agent nor the Arranger:

a)   is responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Agent, the Arranger, the Borrowers or any other person in or in connection with any Finance Document; or

b)   is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made in anticipation of or in connection with any Finance Document.

26.9   Exclusion of liability

a)   Without limiting litra b) below, the Agent will not be liable for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.

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 and agent of the Agent may rely on this Clause.

c)   The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose.

d)   Nothing in this Agreement shall oblige the Agent or the Arranger to carry out any “know your customer” or other checks in relation to any person on behalf of any Lender and each Lender confirms to the Agent and the Arranger that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or the Arranger.

26.10   Lenders’ indemnity to the Agent

Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then reduced to zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent, within three (3) Business Days of demand, against any cost, loss or liability 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 Borrowers or the Guarantor pursuant to a Finance Document).

26.11   Resignation of the Agent

a)   The Agent may resign and appoint one of its affiliates as successor by giving notice to the other Finance Parties, the Swap Bank and the Borrowers.

b)   Alternatively the Agent may resign by giving notice to the other Finance Parties, the Swap Bank and the Borrowers in which case the Majority Lenders (after consultation with the Borrowers) may appoint a successor Agent.

c)   If the Majority Lender have not appointed a successor Agent in accordance with litra b) above within thirty (30) days after notice of resignation was given, the Agent (after consultation with the Borrowers) may appoint a successor Agent.

d)   The retiring Agent shall, at its own cost, make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents.

e)   The Agent’s resignation notice shall only take effect upon appointment of a successor.

f)   Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 26. Its 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 litra b) above. In this event, the Agent shall resign in accordance with litra b) above.

26.12   Confidentiality

a)   In acting as agent for the Finance Parties and the Swap Bank, 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.

26.13   Credit appraisal by the Lenders

Without affecting the responsibility of the Borrowers for information supplied by any of them or on their 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 (without limitation):

a)   the financial condition, status and nature of the Borrowers and/or the Guarantor;

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; and

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.

26.14   Conduct of business of the Finance Parties

No provision of this Agreement will:

a)   interfere with the right of any Finance Party or the Swap Bank to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

b)   oblige any Finance Party or the Swap Bank 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 or the Swap Bank to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

27   SHARING AMONG THE FINANCE PARTIES

27.1   Payment to Finance Parties

If a Finance Party (a “Recovering Finance Party”) receives or recovers any amount from the Borrowers other than in accordance with Clause 28 (Payment mechanics) 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 28 (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 28.5 (Partly payments).

27.2   Redistribution of payments

The Agent shall treat the Sharing Payment as if it had been paid by the Borrowers and distribute it between the Finance Parties (other than the Recovering Finance Party) in accordance with Clause 28.5 (Partial payments).

27.3   Recovering Finance Party’s rights

a)   On a distribution by the Agent under Clause 27.2 (Redistribution of payments), the Recovering Finance Party will be subrogated to the rights of the Finance Parties which have shared in the redistribution.

b)   If and to the extent that the Recovering Finance Party is not able to rely on its rights under litra a) above, the Borrowers shall be liable to the Recovering Finance Party for a debt equal to the Sharing Payment which is immediately due and payable.

27.4   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 Finance Party which has received a share of the relevant Sharing Payment pursuant to Clause 27.2 (Redistribution of payments) 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); and

b)   that Recovering Finance Party’s rights of subrogation in respect of any reimbursement shall be cancelled and the Borrowers will be liable to the reimbursing Finance Party for the amount so reimbursed.

27.5   Exceptions

a)   This Clause 27 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 Borrowers.

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 proceedings, if:

(i)   it notified that other Finance Party of the legal 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.

28   PAYMENT MECHANICS

28.1   Payments to the Agent

All payments by the Borrowers or a Lender under the Finance 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 Borrowers 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.

28.2   Distributions by the Agent

Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 28.3 (Distributions to the Borrowers) and 28.4 (Clawback), 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.

28.3   Distributions to the Borrowers

The Agent may (with the consent of the Borrowers or in accordance with Clause 29 (Set-off)), apply any amount received by it for the Borrowers in or towards payment (on the date and in the currency and funds of receipt) of any amount due from the Borrowers under the Finance Documents or in or towards purchase of any amount of currency to be so applied.

28.4   Clawback

a)   Where a sum is to be paid to the Agent under the Finance Documents for distribution to another Party, the Agent is not obliged to pay that sum to that other Party until it has been able to establish to its satisfaction that it has actually received that sum.

b)   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 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.

28.5   Partial payments

If the Agent receives a payment that is insufficient to discharge all the amounts then due and payable by any of the Borrowers and/or the Guarantor under the Finance Documents, the Agent shall apply that payment towards the obligations of the Borrowers and/or the Guarantor under the Finance Documents in the following order:

a)   firstly, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent under the Finance Documents;

b)   secondly, in or towards payment pro rata of any accrued interest (including default interest), fee or commissions due but unpaid under this Agreement;

c)   thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and

d)   fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

28.6   Application following an Event of Default

On either (i) the completion of a sale of a Vessel, either by forced auction or private treaty, or (ii) the receipt of any monies by the Agent pursuant to the sale proceeds of a Vessel (as the case may be), such monies shall be applied in the following order:

a)   firstly, in respect of all costs and expenses whatsoever incurred in connection with or about incidental to the said sale;

b)   secondly, in or towards satisfaction of all prior claims (being any claims, liabilities or debts owed or taking priority in respect of such proceeds over the Security Interests constituted by the Security Documents) secured on the relevant Vessel;

c)   thirdly, in or towards payment pro rata of all sums owed to the Finance Parties under the Finance Documents;

d)   fourthly, in or towards payment of all sums owed to the Swap Bank under any Swap Agreement(s) at the time of default; and

e)   fifthly, the balance, if any to the Borrowers or to their order.

28.7   No set-off by the Borrowers

All payments to be made by the Borrowers under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

28.8   Payment on non-Business Days

a)   Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

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.

28.9   Currency of account

The Borrowers shall pay:

a)   any amount payable under this Agreement, 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   SET-OFF

A Finance Party may, to the extent permitted by applicable law, set off any matured obligation due from the Borrowers under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligations owed by that Finance Party to the Borrowers, 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.

Each Borrower hereby agrees and accept that this Clause 29 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.

30   NOTICES

30.1   Communication in writing

Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by telefax, e-mail or letter. Any such notice or communication addressed as provided in Clause 30.2 (Addresses) will be deemed to be given or made as follows:

a)if by letter, when delivered at the address of the relevant Party;

b)if by telefax or e-mail, when received.

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.

30.2   Addresses

Any communication or document to be made under or in connection with the Finance Documents shall be made or delivered to the address, telefax number or e-mail 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:Nordea Bank Norge ASA

Att: Shipping, Offshore and Oil Services

Middelthuns gate 17

P.O. Box 1166 Sentrum

N-0107 Oslo, Norway

Telefax No: +47 22 48 66 68

E-mail: olav.ringdal@nordea.com

If to the Borrowers:c/o B + M Management Ltd.

Par-la-Ville Place

14 Par-la-Ville Road

Hamilton HMJX

Bermuda

Telefax No: + 1 441 295 6796

E-mail: dpaterson@consolidated.bm, adazell@bhcousa.com and tcoleman@bhcousa.com

or any substitute address and/or telefax number and/or e-mail 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.

30.3   Communication with the Borrowers

All communication from or to the Borrowers shall be sent through the Agent.

30.4   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.

31   CALCULATIONS

All sums falling due by way of interest, fees and commissions under the Finance Documents accrue from day-to-day and shall be calculated on the basis of the actual number of days elapsed and a calendar year of 360 days and for the actual number of days elapsed. The calculations made by the Agent of any interest rate or any amount payable pursuant to this Agreement shall be conclusive and binding upon the Borrowers in the absence of any manifest error.

32   MISCELLANEOUS

32.1   Partial invalidity

If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provisions under any law of any other jurisdiction will in any way be affected or impaired.

32.2   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, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

32.3   Amendments and waivers

32.3.1   Required consents

a)   Subject to Clause 32.3.2 (Exceptions), any term of the Finance Documents may be amended or waived only with the written consent of the Majority Lenders and the Borrowers 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.

32.3.2   Exceptions

An amendment to or waiver that has the effect of changing or which relates to:

a)   the definition of “Majority Lenders”;

b)   an extension of the date of any payment of any amount under the Finance Documents;

c)   a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;

d)   an increase in or extension of any Commitment;

e)   a term of the Finance Documents which expressly requires the consent of all the Lenders;

f)   a proposed substitution or replacement of any of the Borrowers; or

g)   a change of Clauses 2.2 (Finance Parties’ rights and obligations), 18 (Security), 22.1 (Insurance), 24 (Changes to the Lenders) and this Clause 32.3,

shall not be made without the prior written consent of all the Lenders.

An amendment or waiver which relates to the rights or obligations of the Agent or the Arranger may not be effected without the consent of the Agent or the Arranger.

32.4   Disclosure of information and confidentiality

Each of the Finance Parties may disclose to each other or to their professional advisers any kind of information which the Finance Parties have acquired under or in connection with any Finance Document. The Parties are obliged to keep confidential all information in respect of the terms and conditions of this Agreement. This confidentiality obligation shall not apply to any information which:

a)   is publicised by a Party as required by applicable laws and regulations;

b)   has entered the public domain or is publicly known, provided that such information is not made publicly known by the receiving Party of such information; or

c)   was or becomes, as the Party is able to demonstrate by supporting documents, available to the such Party on a non-confidential basis prior to the disclosure thereof.

32.5   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.

33   GOVERNING LAW AND ENFORCEMENT

33.1   Governing law

This Agreement shall be governed by Norwegian law.

33.2   Jurisdiction

a)   For the benefit of each Finance Party, the Borrowers agree 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 each of the Borrowers accordingly submit to the non-exclusive jurisdiction of the Oslo District Court (Oslotingrett).

b)   Nothing in this Clause 33.2 shall limit the right of the Finance Parties to commence proceedings against any of the Borrowers 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.

33.3   Service of process

Without prejudice to any other mode of service, each of the Borrowers:

a)   irrevocably appoints Wikborg Rein & Co., Kronprinsesse Märthas plass 1, P.O. Box 1513 Vika, N-0117 Oslo, Norway as its agent for service of process in relation to any proceedings before Norwegian courts in connection with any Finance Document; and

b)   agrees that failure by its process agent to notify it of the process will not invalidate the proceedings concerned.

* * *

SCHEDULE 1

ORIGINAL PARTIES

PART I: ORIGINAL BORROWERS

Name	Address	Ownership
OBO Holdings Ltd.	Trust Company Complex, Ajeltake Island. Majuro, Marshall Islands, MH 96960	The Guarantor (100%)
BHOBO One Ltd.	Trust Company Complex, Ajeltake Island. Majuro, Marshall Islands, MH 96960	OBO Holdings (100%)
BHOBO Two Ltd.	Trust Company Complex, Ajeltake Island. Majuro, Marshall Islands, MH 96960	OBO Holdings (100%)
BHOBO Three Ltd.	Trust Company Complex, Ajeltake Island. Majuro, Marshall Islands, MH 96960	OBO Holdings (100%)
RMJ OBO Shipping Ltd.	Trust Company Complex, Ajeltake Island. Majuro, Marshall Islands, MH 96960	OBO Holdings (100%)
Sagamore Shipping Ltd.	Trust Company Complex, Ajeltake Island. Majuro, Marshall Islands, MH 96960	OBO Holdings (100%)

PART II: ORIGINAL LENDERS AND COMMITMENTS

Lenders:	Commitments:
DVB Bank America NV Zeelandia Office Park Kaya W.F.G. Mensing 14 P.O. Box 3107 Curacao, Netherlands Antilles	USD 40,000,000
The Governor and Company of the Bank of Scotland Pentland House 8 Lochside Avenue Edinburgh Scotland EH12 9DJ	USD 40,000,000
HSH Nordbank AG Gerhart Hauptmann Platz 50 20095 Hamburg Germany	USD 40,000,000
Nordea Bank Norge ASA Middelthusgate 17 N-0368 Oslo Norway	USD 82,000,000
Total:	USD 202,000,000

PART III: ALLOCATED LOAN AMOUNTS

Vessel	Market Value	Allocated Loan Amount
“Rip Hudner”	USD 38,310,000	USD 28,725,000
“Bonnie Smithwick”	USD 36,300,000	USD 27,212,000
“Searose G”	USD 38,310,000	USD 28,725,000
“Roger M. Jones”	USD 32,500,000	USD 24,625,000
“Sagamore”	USD 23,880,000	USD 17,713,000

SCHEDULE 2

CONDITIONS PRECEDENT

Part I

Conditions Precedent To initial Drawdown

1   CORPORATE AUTHORISATION

1.1   In respect of each of the Borrowers, the Guarantor, the Charterers and the Charter Guarantors:

a)   Certificate of Incorporation/Certificate of Registration;

b)   Memorandum and Articles of Association/Bye-laws;

c)   Resolutions passed at a board meeting of the relevant Party evidencing:

(i)   the approval of the terms of, and the transactions contemplated by, the Transaction Documents and the registration the Mortgage (if relevant); and

(ii)   the authorisation of its appropriate officer or officers or other representatives to execute the Transaction Documents and any other documents necessary for the transactions contemplated by the Transaction Documents, on its behalf;

d)   Power of Attorney (notarised and legalised);

e)   Updated Good Standing Certificate/Certificate of Compliance;

f)   Secretary’s Certificate (notarised and legalised); and

g)   A specimen of the signature of each person authorised by the resolution referred to in paragraph c) above.

2   AUTHORISATIONS

All approvals, authorisations and consents required by any government (domestic and foreign) or other authorities for the Borrowers, the Guarantor, the Charterers and/or the Charter Guarantors to enter into and perform their obligations under this Agreement and/or any of the Transaction Documents have been obtained and are in full force and effect and all applicable waiting periods have expired without any action being taken by any competent authority which, in the judgement of the Lenders, restraints, prevents or imposes materially adverse conditions upon the consummation of this Agreement or the transactions referred to herein.

3   THE EXISTING VESSELS

a)   The Charterparty;

b)   Evidence (by way of transcript of registry) that the relevant Vessel is, or will be, registered in the name of the relevant Borrower in the Bahamas Ship Registry (or such other ship registry as approved by the Lenders), that the relevant Mortgage has been, or will in connection with the utilisation of the first Drawdown be, executed and recorded with its intended first priority against the relevant Vessel and that no other encumbrances, maritime liens, mortgages or debts whatsoever are registered against the relevant Vessel;

c)   An updated class certificate related to the relevant Vessel from the relevant classification society, confirming that such Vessel is classed with the highest class in accordance with Clause 22.2 (Classification and repairs), free of extensions and overdue recommendations;

d)   Copies of confirmations from the insurers (copies of the insurance policies/cover notes to follow) documenting that insurance cover has been taken out in respect of the relevant Vessel in accordance with Clause 22.1 (Insurance), and evidencing that the Agent’s (on behalf of the Finance Parties and the Swap Bank) Security Interest in the insurance policies have been noted in accordance with the relevant notices as required under the Assignment Agreement;

e)   A report in form and scope acceptable to the Lenders from a firm of marine insurance brokers acceptable to the Lenders, with respect to the insurance maintained in respect of the Existing Vessels, together with a certificate from such broker certifying that such insurances:

(i)   are placed with insurance companies and/or underwriters and /or clubs, in such amounts, against such risks and in such form, as is acceptable to the Lenders; and

(ii)   conform with the requirements of Clause 22.1 (Insurances);

f)   Market Value evaluations from two (2) Approved Brokers, evidencing that the total Market Value of the Existing Vessels at the first Drawdown Date is equal to or greater than USD 169,300,000;

g)   The relevant Vessel’s current SMC;

h)   The Technical Manager’s current DOC;

i)   The ISPS Certificate.

4   FINANCE DOCUMENTS

a)   The Agreement;

b)   The Assignment Agreement;

c)   Notice of Assignment and Acknowledgement in respect of the Earnings;

d)   Notice of Assignment and Acknowledgement in respect of the Insurances;

e)   Notice of Assignment and Acknowledgement in respect of the Charter Guarantees;

f)   The Charterparty Assignments;

g)   Notice of Assignment and Acknowledgement in respect of the Charterparty;

h)   The Account Charge;

i)   The Mortgages;

j)   The Deeds of Covenants; and

k)   The Guarantee.

5   TRANSACTION DOCUMENTS

a)   The Charter Guarantees;

b)   The Technical Management Agreements; and

c)   The Fee Letter(s).

6   MISCELLANEOUS

a)   The Drawdown Notice at least three (3) Business Days prior to the Drawdown Date;

b)   Evidence that the Existing Vessels still employed under the respective Charterparties and that the respective Charter Guarantee are in full force and effect;

c)   Evidence that all fees referred to in Clause 11 (Fees), as are payable on or prior to the first Drawdown Date, have or will be paid on its due date;

d)   A Compliance Certificate confirming that the Borrowers and the Guarantor are in compliance with the financial covenants as set out in Clause 20 (Financial covenants);

e)   The effective interest letter.

f)   Evidence of capital structure of the Borrowers and the Guarantor satisfactory to the Agent;

g)   Evidence of release of the Security Interest granted as security under the Existing Credit Facility;

h)   Evidence that all required registrations and notifications have been made under the Security Documents in order to perfect the Security Interest contemplated thereby, including transcripts from the relevant public registers;

i)   Appointment of Wikborg Rein & Co. and the acceptance by Wikborg Rein & Co. as the Borrowers’ process agent in Norway under the Finance Documents;

j)   Appointment of Wikborg Rein & Co. and the acceptance by Wikborg Rein & Co. as the Guarantor’s process agent in Norway under the Guarantee; and

k)   Any other documents as reasonably requested by the Agent.

7   LEGAL OPINIONS

a)   A legal opinion from Thommessen Krefting Greve Lund AS related to Norwegian law issues;

b)   A legal opinion from Higgs & Johnson related to Bahamas law issues;

c)   A legal opinion from Seward & Kissel LLP related to Marshall Island law issues;

d)   A legal opinion from Seward & Kissel LLP related to Liberian law issues;

e)   A legal opinion from Prettys related to English law issues; and

f)   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.

Part II

Conditions Precedent Required to be

Delivered by an Additional Borrower and/or in respect of a New Vessel

1   CORPORATE AUTHORISATION

1.1   In respect of the Additional Borrower:

a)   Certificate of Incorporation/Certificate of Registration;

b)   Memorandum and Articles of Association/Bye-laws;

c)   Resolutions passed at a board meeting of the relevant Additional Borrower evidencing:

(i)   the approval of the terms of, and the transactions contemplated by, the Transaction Documents and the registration the Mortgage (if relevant); and

(ii)   the authorisation of its appropriate officer or officers or other representatives to execute the Transaction Documents and any other documents necessary for the transactions contemplated by the Transaction Documents, on its behalf;

d)   Power of Attorney (notarised and legalised);

e)   Updated Good Standing Certificate/Certificate of Compliance;

f)   Secretary’s Certificate (notarised and legalised); and

g)   A specimen of the signature of each person authorised by the resolution referred to in paragraph c) above.

1.2   In respect of the Sellers:

a)   Corporate resolutions to the sale and delivery of the relevant New Vessel; and

b)   Power of Attorney.

2   AUTHORISATIONS

All approvals, authorisations and consents required by any government or other authorities for the Additional Borrower, the relevant Charterers and/or the relevant Charter Guarantors to enter into and perform their obligations under this Agreement and/or any of the Transaction Documents.

3   THE NEW VESSELS

a)   The MoA;

b)   The Protocol of Delivery and Acceptance under the MoA;

c)   The Bill of Sale;

d)   The Charterparty;

e)   The Protocol of Delivery and Acceptance under the Charterparty;

f)   Evidence (by way of transcript of registry) that the relevant New Vessel is, or will be, registered in the name of the relevant Additional Borrower in the Bahamas Ship Registry (or such other ship registry as approved by the Lenders), that the relevant Mortgage has been, or will in connection with the utilisation of the relevant Drawdown be, executed and recorded with its intended first priority against the relevant New Vessel and that no other encumbrances, maritime liens, mortgages or debts whatsoever are registered against the relevant New Vessel;

g)   An updated class certificate related to the relevant New Vessel from the relevant classification society, confirming that such Vessel is classed with the highest class in accordance with Clause 22.2 (Classification and repairs), free of extensions and overdue recommendations;

h)   Copies of confirmations from the insurers (copies of the insurance policies/cover notes to follow) documenting that insurance cover has been taken out in respect of the relevant Vessel in accordance with Clause 22.1 (Insurance), and evidencing that the Agent’s (on behalf of the Finance Parties and the Swap Bank) Security Interest in the insurance policies have been noted in accordance with the relevant notices as required under the Assignment Agreement;

i)   A report in form and scope acceptable to the Lenders from a firm of marine insurance brokers acceptable to the Lenders, with respect to the insurance maintained in respect of the relevant New Vessel, together with a certificate from such broker certifying that such insurances:

(i)   are placed with insurance companies and/or underwriters and /or clubs, in such amounts, against such risks and in such form, as is acceptable to the Lenders; and

(ii)   conform with the requirements of Clause 22.1 (Insurances);

j)   The relevant New Vessel’s current SMC;

k)   The ISPS Certificate; and

l)   Deletion Certificate from the current ship registry (if applicable).

4   FINANCE DOCUMENTS

a)   The Assignment Agreement (or an amendment thereto);

b)   Notice of Assignment and Acknowledgement in respect of the Earnings;

c)   Notice of Assignment and Acknowledgement in respect of the Insurances;

d)   Notice of Assignment and Acknowledgement in respect of the Charter Guarantees;

e)   The Charterparty Assignment (or an amendment thereto);

f)   Notice of Assignment and Acknowledgement in respect of the Charterparty;

g)   The Account Charge;

h)   The Mortgage;

i)   The Deed of Covenants; and

j)   An Accession Letter, duly executed by the Additional Borrower and OBO Holdings Ltd.

5   TRANSACTION DOCUMENTS

a)   The Charter Guarantee; and

b)   The Technical Management Agreement.

6   MISCELLANEOUS

a)   The Drawdown Notice at least three (3) Business Days prior to the relevant Drawdown Date;

b)   Evidence that all fees referred to in Clause 11 (Fees), as are payable on or prior to the relevant Drawdown Date, have or will be paid on its due date;

c)   A Compliance Certificate confirming that the Borrowers and the Guarantor are in compliance with the financial covenants as set out in Clause 20 (Financial covenants);

d)   Evidence of the Market Value of such New Vessel, issued no later than two (2) months prior to the proposed Drawdown Date;

e)   Appointment of Wikborg Rein & Co. and the acceptance by Wikborg Rein & Co. as the Additional Borrower’s process agent in Norway under the Finance Documents; and

f)   Any other documents as reasonably requested by the Agent.

7   LEGAL OPINIONS

a)   A legal opinion from Higgs & Johnson related to Bahamas law issues;

b)   A legal opinion from Seward & Kissel LLP related to Marshall Island law issues;

c)   A legal opinion from Prettys related to English law issues; and

d)   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.

SCHEDULE 3

FORM OF DRAWDOWN NOTICE

To:Nordea Bank Norge ASA, as Agent

From:[·]

Date:[•]

USD 202,000,000 REDUCING REVOLVING CREDIT FACILITY AGREEMENT DATED 29 AUGUST 2006 (THE “AGREEMENT”)

We refer to Clause 5.1 (Delivery of a 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 of a Drawdown under:

Drawdown Date:[ ]

Principal Amount:[]

Interest Period:[]

b)   The proceeds of the Loan shall be credited to [•] [insert name and number of account].

c)   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 representations and warranties set out in Clause 18 (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

[·]

By: __________________________________

Name:

Title: [authorised officer]

SCHEDULE 4

FORM OF COMPLIANCE CERTIFICATE

To:Nordea Bank Norge ASA, as Agent

From:[·]

Date:[•] [To be delivered no later than [one hundred and twenty (120) /forty-five (45)] days after each Reporting Date]

USD 202,000,000 REDUCING REVOLVING CREDIT FACILITY AGREEMENT DATED 29 AUGUST 2006 (THE “AGREEMENT”)

We refer to the Agreement. Terms defined in the Agreement shall have the same meaning when used in this Compliance Certificate.

With reference to Clauses 19.1 (Compliance certificate) and 20 (Financial covenants) of the Agreement, we confirm that as at [•] [insert relevant Reporting Date]:

a)   Minimum Value Adjusted Equity Ratio. The Minimum Value Adjusted Equity Ratio of the Guarantor (on a consolidated basis) was [•].

The Guarantor shall at all times maintain a minimum Value Adjusted Equity Ratio of thirty per cent (30.00%). The covenant in Clause 20.2.1 (Minimum Value Adjusted Equity Ratio) is thus [not] satisfied.

b)   Minimum Value Adjusted Equity Ratio. The Minimum Value Adjusted Equity of the Guarantor (on a consolidated basis) was USD [•].

The Guarantor shall at all times maintain a Minimum Value Adjusted Equity of USD 50,000,000. The covenant set out in Clause 20.2.2 (Minimum cash balance) is thus [not] satisfied.

c)   Ratio EBITDA to Fixed Charges. The ratio of EBITDA to Fixed Charges of the Guarantor (on a consolidated basis) was [•].

The Guarantor (on a consolidated basis) shall at all times ensure that ratio of EBITDA to Fixed Charges 1.125:1.00 or greater on a twelve (12) months rolling basis up until the Final Maturity Date. The covenant in Clause 20.2.3 (Ratio EBITDA to Fixed Charges) is thus [not] satisfied.

d)   Positive working capital. The working capital of the the Guarantor (on a consolidated basis) was [·].

The Guarantor (on a consolidated basis) shall at all times ensure that its current assets exceeds its current liabilities (excluding the current portion of long term debt), all as determined in accordance with GAAP. The covenant set out in Clause 20.2.4 (Positive working capital) is thus [not] satisfied.

e)   [Minimum value. The Market Value of the Vessels pursuant to the attached survey is [•].

The Borrowers shall ensure that the Market Value of the Vessels shall be at least one hundred and twenty per cent (120.00%) of the Loans from the earlier of (i) the expiry of the Charterparty for MV “Roger M. Jones” and (ii) 30 September 2008, The covenant in Clause 20.2.4 (minimum value) is thus [not] satisfied.]

f)   Cash and Cash Equivalents. The Cash and Cash Equivalent of the Guarantor (on a consolidated basis) is [·].

The Guarantor (on a consolidated basis) shall at all times ensure that it has Cash and Cash Equivalents equal to or greater than (i) USD 15,000,000 and (ii) six per cent (6.00%) of the long term debt of the Guarantor.

g)   Insurance. We confirm that each of the Vessels is insured against such risks and in such amounts as set out in Appendix 1 hereto.

h)   We confirm that, as of the date hereof (i) each of the representations and warranties set out in Clause 18 (Representations and warranties) of the Agreement is true and correct; and (ii) 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

[·]

By: __________________________________

Name:

Title: [authorised officer]

Appendix 1

Name of Vessel	Hull & Machinery		Increased Value		Loss of Hire		Protection & Indemnity		War Risk
M/V “-Rip Hudner ”	Insurer:	Amount:	Insurer:	Amount:	Insurer:	Amount:	Insurer:	Amount:	Insurer:	Amount:
MV “Bonnie Smith- wick”	Insurer:	Amount:	Insurer:	Amount:	Insurer:	Amount:	Insurer:	Amount:	Insurer:	Amount:
MV “Searose G”	Insurer:	Amount:	Insurer:	Amount:	Insurer:	Amount:	Insurer:	Amount:	Insurer:	Amount:
MV “Roger M. Jones”
MT “Saga-more”

SCHEDULE 5

FORM OF TRANSFER CERTIFICATE

To:Nordea Bank Norge ASA, as Agent

From:[•] (the ”Existing Lender” and [•] (the ”New Lender”)

Date:[•]

USD 202,000,000 REDUCING REVOLVING CREDIT FACILITY AGREEMENT DATED 29 AUGUST 2006 (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 24 (Changes to the Lenders):

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 24 (Changes to the Lenders) 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 24.2 (Limitations of responsibility of Existing Lenders) of the Agreement.

e)   The New Lender hereby undertakes to the Existing Lender and the Borrowers 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.

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:[ ]

Telefax 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 and the Borrowers and the Transfer Date is confirmed as [].

Agent:Borrowers:

Nordea Bank Norge ASA[]

By: __________________________________By: ________________________________

Name:Name:

Title:Title:

SCHEDULE 6

FORM OF ACCESSION LETTER

To:Nordea Bank Norge ASA, as Agent

From:[·]

Date:[·]

USD 202,000,000 REDUCING REVOLVING CREDIT FACILITY AGREEMENT DATED 29 AUGUST 2006 (THE “AGREEMENT”)

1   We refer to the Agreement. This is an Accession Letter. Terms defined in the Agreement have the same meaning in this Accession Letter unless given a different meaning in this Accession Letter.

2   [Name of Subsidiary] agrees to become an Additional Borrower and to be bound by the terms of the Agreement as an Additional Borrower pursuant to Clause 25.2 (Additional Borrowers) of the Agreement. [Name of Subsidiary] is a company duly incorporated under the laws of [name of relevant jurisdiction].

3   [Name of Subsidiary]’s administrative details are as follows:

Address:

Fax No:

Attention:

4   This Accession Letter is governed by Norwegian law.

OBO Holdings Ltd.[Name of Subsidiary]

By: __________________________By: _____________________

Name:Name:

Title:Title:

SCHEDULE 7

SCHEDULED REDUCTIONS

Reduction No.		Today		1 *)	2	3	4	5	6	7	8	9	10
($1000)		jun. 06	sep. 06	des. 06	mar. 07	jun. 07	sep. 07	des. 07	mar. 08	jun. 08	sep. 08	des. 08	mar. 09
	Principal	84 662	84 662	81 362	78 062	74 762	71 462	68 162	64 862	61 562	58 262	54 962	51 662
Existing Vessels
M/V “Rip Hudner”	Reductions			1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100
M/V “Bonnie Smithwick”	Reductions			1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100
M/V “Searose G”	Reductions			1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100
				3 300	3 300	3 300	3 300	3 300	3 300	3 300	3 300	3 300	3 300
M/V ”Roger M. Jones”	Principal	24 625	24 625	23 425	22 225	21 025	19 825	18 625	17 425	16 225	15 025	13 825	12 625
	Reductions			1 200	1 200	1 200	1 200	1 200	1 200	1 200	1 200	1 200	1 200
M/V “Sagamore”	Principal	17 713	17 713	16 763	15 813	14 863	13 913	12 963	12 013	11 063	10 113	9 163	8 213
	Reductions			950	950	950	950	950	950	950	950	950	950
New Vessel
M/V “Sibohelle” (tbr “Sakonnet”) **)	Principal			27 000	25 750	24 500	23 250	22 000	20 750	19 500	18 250	17 000	15 750
	Reductions				1 250	1 250	1 250	1 250	1 250	1 250	1 250	1 250	1 250
		127 000	127 000
Reduction No.			11	12	13	14	15	16	17	18	19	20	21
($1000)			jun. 09	sep. 09	des. 09	mar. 10	jun. 10	sep. 10	des. 10	mar. 11	jun. 11	sep. 11	des. 11
	Principal		48 362	45 062	41 762	38 462	35 162	31 862	28 562	25 262	21 962	18 662	15 362
Existing Vessels
M/V “Rip Hudner”	Reductions		1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100
M/V “Bonnie Smithwick”	Reductions		1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100
M/V “Searose G”	Reductions		1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100	1 100
			3 300	3 300	3 300	3 300	3 300	3 300	3 300	3 300	3 300	3 300	3 300
M/V ”Roger M. Jones”	Principal		11 425	10 225	9 025	7 825	6 625	5 425	4 225	3 025	1 825	625	-
	Reductions		1 200	1 200	1 200	1 200	1 200	1 200	1 200	1 200	1 200	1 200	625
M/V “Sagamore”	Principal		7 613	7 013	6 413	5 813	5 213	4 613	4 013	3 413	2 813	2 213	1 613
	Reductions		600	600	600	600	600	600	600	600	600	600	600
New Vessel
M/V “Sibohelle” (tbr “Sakonnet”) **)	Principal		14 500	13 250	12 000	10 750	9 500	8 250	7 000	5 750	4 500	3 250	2 000
	Reductions		1 250	1 250	1 250	1 250	1 250	1 250	1 250	1 250	1 250	1 250	1 250

*)The first reduction to be made three (3) months after the first Drawdown Date

**) If the Allocated Loan Amount for MV “Sibohelle” (tbr “Sakonnet”) shall be less than USD 27,000,000, the scheduled reductions set out in this Schedule 7 shall be reduced accordingly on a pro rata basis.

SCHEDULE 8

FORM OF ASSIGNMENT AGREEMENT

THIS ASSIGNMENT AGREEMENT (the “Assignment Agreement”) is made on [·] August 2006 between:

(1)OBO Holdings Ltd.,of Trust Company Complex, Ajeltake Island, Marshall Islands, MH9696;

BHOBO One Ltd. of Trust Company Complex, Ajeltake Island, Marshall Islands, MH96960;

BHOBO Two Ltd. of Trust Company Complex, Ajeltake Island, Marshall Islands, MH96960;

BHOBO Three Ltd. of Trust Company Complex, Ajeltake Island, Marshall Islands, MH96960;

RMJ OBO SHIPPING LTD. of Trust Company Complex, Ajeltake Island, Marshall Islands MH96960; and

SAGAMORE SHIPPING LTD. of Trust Company Complex, Ajeltake Island, Marshall Islands MH96960,

as joint and several borrowers (the “Borrowers”); and

(2)Nordea Bank Norge ASA of Middelthunsgate 17, N-0368 Oslo, Norway, organisation number 911 044 110 as agent on behalf of the Finance Parties and the Swap Bank (as defined in the Agreement as referred to below) (the “Agent”).

Background:

(A)Pursuant to the terms and conditions of a reducing revolving credit facility agreement dated 29 August 2006 (the “Agreement”) between i.a. the Borrowers as joint and several borrowers, the banks and financial institutions listed in part II of schedule 1 thereto as lenders (the “Lenders”), Nordea Bank Finland Plc., as swap bank (the “Swap Bank”) and Nordea Bank Norge ASA as agent for the Lenders (the “Agent”) and mandated lead arranger (the “Arranger”), the Lenders have agreed to make available to the Borrowers a reducing revolving credit facility in the aggregate amount of USD 202,000,000 (the “Loans”); and

(B)it is a condition precedent to the Lenders making the Loans available to the Borrowers that the Borrowers execute and deliver, inter alia, this Assignment Agreement and grant the Security Interests set out herein as security for their obligations towards (i) the Finance Parties under the Agreement and (ii) the Swap Bank under any Swap Agreement(s).

NOW THEREFORE:

1   INTERPRETATION

1.1   Definitions

In this Assignment Agreement, including the preamble hereto (unless the context otherwise requires), any term or expression defined in the preamble shall have the meanings ascribed to it therein. In addition, terms and expressions not defined herein but whose meanings are defined in the Agreement shall have the meanings set out therein.

1.2   Construction

In this Assignment Agreement, unless the context otherwise requires:

a)   reference to Clauses or Appendices are to be construed as references to clauses or appendices of this Assignment Agreement unless otherwise stated;

b)   references to (or to any specified provision of) this Assignment Agreement or any other document shall be construed as references to this Assignment Agreement, that provision or that document as from time to time amended; and

c)   words importing the plural shall include the singular and vice versa.

2   ASSIGNMENT OF EARNINGS, INSURANCES AND CHARTER GUARANTEES

2.1   Assignment

To secure the payment and the discharge of the Borrowers’ obligations under the Agreement and any Swap Agreement and the payment of all sums which from time to time may become due thereunder, and to secure the performance and observance of and compliance with all the covenants, terms and conditions contained in the Agreement and any Swap Agreement, the Borrowers hereby assign to the Agent (on behalf of the Finance Parties and the Swap Bank) on first priority:

a)   the Earnings;

b)   the Insurances, and

c)   any and all rights to receive any monies under the Charter Guarantees (the “Charter Guarantees”).

2.2   Notice and acknowledgement, etc.

a)   The Borrowers undertake promptly to give notice of the assignment of the Earnings to the Charterers and any other third party from which any of the Earnings or amounts may become payable in the form set out in Appendix 1(A) hereto and procure that any recipient of such notice acknowledges receipt of the notice as set out therein in the form of Appendix 1(B) hereto.

b)   The Borrowers undertake to insure and keep the Vessels fully insured in accordance with Clause 22.1 (Insurance) of the Agreement; and

(i)   in the event that the Insurances, or any one of them, have been taken out on conditions other than the Norwegian Marine Insurance Plan of 1996, version 2003 (as amended from time to time) (the “Plan”), to give all the relevant insurers notice in the form of Appendix 2 (A) hereto, and procure that the said insurers acknowledge receipt of such notice in the form of Appendix 2 (B) hereto or give such other form of notice and procure such other form of acknowledgement as the Agent shall require in writing to the Borrowers; and

(ii)   in the event that the Insurances, or any one of them, have been taken out according to the Plan, to procure written statements from all the relevant insurers and/or approved brokers confirming that the Agent (on behalf of the Finance Parties and the Swap Bank) has been duly registered as co-insured first priority mortgagee on all such insurance policies taken out for the Vessels and that notice according to the Plan has been duly received by all the relevant insurers.

c)   The Borrowers undertake promptly to give notice of the assignment of the Charter Guarantees to the Charter Guarantors in the form set out in Appendix 3 (A) hereto and procure that the Charter Guarantor acknowledged receipt of the notice as set out in therein in the form of Appendix 3 (B) hereto.

2.3   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 any of the Vessels and claims payable in respect of a major casualty, that is to say any claim (or the aggregate of which) exceeding USD 500,000, shall be payable to the Agent. Subject thereto all other claims, unless and until the insurers have received notice from the Agent of an Event of Default which is unremedied under the Agreement in which event all claims shall be payable directly to the Agent up to the Lenders’ and the Swap Bank’s mortgage interest, shall be released directly for the repair, salvage or other charges involved or to the Borrowers as reimbursement if it has fully repaired the damage and paid all of the salvage or other charges or otherwise in respect of Borrowers’ actual costs in connection with repair, salvage and/or other charges. Any amounts paid to any of the Borrowers directly shall be paid to the Earnings Account.

3   PLEDGE OF ACCOUNTS

3.1   Pledge

The Borrowers have opened the account as listed in Appendix 4 hereto (the “Pledged Accounts”).

To secure payment and discharge of the Borrowers’ obligations under the Agreement and any Swap Agreement and to secure the performance and observance of and compliance with all of the covenants, terms and conditions contained in the Agreement and any Swap Agreement, the Borrowers hereby pledge to the Agent (on behalf of the Finance Parties and the Swap Bank) on first priority, the Pledged Accounts or such other account or accounts as may be agreed from time to time between the Agent and the Borrowers and any and all amounts deposited into and standing to the credit of any of the Pledged Accounts or such other account and accounts from time to time.

The Agent confirms, in its capacity as account holder and debtor of the Pledged Accounts, that the pledge of the Pledged Accounts is duly noted in its records.

3.2   Drawings

The Borrowers may draw funds from the Pledged Accounts as long as no Default has been declared by the Agent.

3.3   Blocking upon Event of Default

The Pledged Accounts shall, following an Event of Default, be blocked in favour of the Finance Parties, and any subsequent monies paid to any of the Pledged Accounts or paid directly to the Agent shall be applied towards the Borrowers’ obligations to the Lenders or the Swap Bank (as the case may be) under the Agreement and/or any Swap Agreement, respectively, with any balance to be promptly released.

4   MAXIMUM LIABILITY

The liability of each Borrower hereunder shall be limited to USD 215,000,000, plus any unpaid amount of interest, fees, liability and expenses under the Finance Documents and the Swap Agreement(s).

5   WAIVER OF RIGHTS

Each Borrower specifically waives all rights under the provisions of the Norwegian Financial Agreements Act 1999 (as amended) not being mandatory provisions.

6   PERFECTION

The Borrowers agree that at any time and from time to time upon the written request of the Agent, they will promptly and duly execute and deliver to the Agent any and all such further instruments and documents as the Agent (on behalf of the Finance Parties and the Swap Bank) may reasonably deem necessary or desirable to register this Assignment Agreement in any applicable registry, and to maintain and/or perfect the Security Interest created by this Assignment Agreement and the rights and powers herein granted.

7   ENFORCEMENT

Upon the occurrence of an Event of Default, the Agent is, to the extent possible and permitted under Norwegian law, entitled to:

a)   immediately sell, dispose, collect, transfer ownership to all or any of the claims pledged in favour of the Agent (on behalf of the Finance Parties and the Swap Bank) under this Assignment Agreement (the “Claims”), as provided for in the Financial Securities Act; and

b)   apply any and all proceeds from the Claims in satisfaction of all amounts owing to the Finance Parties in accordance with the Agreement and to the Swap bank in accordance with the relevant Swap Agreement, and keep and hold any surplus as security for any amount owing (actual or contingent) in accordance with the Agreement but not yet due.

8   ASSIGNMENT

The Agent may assign or transfer its rights hereunder to any person to whom the rights and obligations of the Agent and the Lenders under the Agreement are wholly or partially assigned in accordance with Clause 24 (Changes to the Lenders) of the Agreement.

9   NO FURTHER ASSIGNMENT OR PLEDGE

The Borrowers shall not, unless prior written consent has been obtained from the Agent, be entitled to further assign or pledge the Earnings, the Insurances, the Charter Guarantees and/or the Pledged Accounts.

10   ADDITIONAL AND CONTINUING SECURITY

The Security Interest contemplated by this Assignment Agreement shall be in addition to any other Security Interest granted in accordance with the Agreement and/or any Swap Agreement, and shall be a continuing security in full force and effect as long as any obligations are outstanding under the Agreement or any Swap Agreement (as the case may be).

11   MISCELLANEOUS

a)   Each of the Borrowers hereby specifically agrees and accepts that the nature of their liability hereunder being joint and several shall not be affected by any reason or circumstances of legal or factual nature, including, but not limited to:

(i)   any waiver granted to the other Borrowers, the Guarantor or any other third party;

(ii)   any failure to enforce any rights, remedy or security against any of the other Borrowers, the Guarantor or any other third party;

(iii)   any legal limitation, incapacity or other circumstances relating to any of the other Borrowers, the Guarantor or any other third party;

(iv)   the liquidation, bankruptcy, insolvency or dissolution or the appointment of receiver for any of the other Borrowers, the Guarantor or any other third party; or

(v)   the Agreement or any of the Finance Documents becoming invalid or unenforceable against any of the other Borrowers and/or the Guarantor.

b)   Each of the Borrowers specifically waives all rights under the provisions of the FA Act not being mandatory provisions, including (but not limited to) the relevant provisions of §§ 62, 63, 65, 66, 67, 70, 71, 72, 73 and 74.

c)   Each of the Borrowers acknowledges and agrees that it has full knowledge of the cross-default provision in the Agreement, and of the security which is to be granted in respect of the amounts outstanding under the Agreement and as listed in Clause 17 (Security) of the Agreement.

12   NOTICES

Any notice, demand or other communication to be made or delivered by any party pursuant to this Assignment Agreement shall (unless the addressee has by five (5) Business Days’ written notice to that party specified another address) be made or delivered as set out in Clause 30 (Notices) of the Agreement.

13   GOVERNING LAW - JURISDICTION

This Assignment Agreement shall be governed by and construed in accordance with the laws of Norway.

The Borrowers and the Finance Parties accept Oslo City Court (Oslo tingrett) as non-exclusive venue, but this choice shall not prevent the Agent (on behalf of the Finance Parties) to enforce any of the Finance Documents against any of the Vessels or other assets of any of the Borrowers wherever they may be found.

Borrowers:Agent:

OBO Holdings Ltd.Nordea Bank Norge ASA

By: ____________________________By:______________________________

Name:Name:

Title:Title:

BHOBO One Ltd.

By: ____________________________

Name:

Title:

BHOBO Two Ltd.

By: ___________________________

Name:

Title:

BHOBO Three Ltd.

By: ___________________________

Name:

Title:

RMJ OBO Shipping Ltd.

By: ___________________________

Name:

Title:

Sagamore Shipping Ltd.

By: ___________________________

Name:

Title:

Appendix 1 (A)

FORM OF NOTICE OF ASSIGNMENT

(Assignment of Earnings)

To:[]

M/V “[]”

We refer to the time charter party dated [•], (the “Charterparty”) made between you and us, whereby we agreed to let and you agreed to take on time charter for the period and upon the terms and conditions therein mentioned M/V “[]” (the “Vessel”).

We hereby give you notice that:

a)   by an agreement dated 29 August 2006 (the “Assignment Agreement”) made between among others us and Nordea Bank Norge ASA, Middelthunsgt. 17, N-0368 Oslo, Norway, acting as agent on behalf of certain other banks and swap bank (the “Agent”), related to a loan agreement of even date (the “Agreement”) and any Swap Agreement (as defined in the Agreement) made or to be entered into with the Swap Bank (as defined in the Agreement), we have assigned absolutely and have agreed to assign absolutely to and in favour of the Agent all our rights, title and interest, present and future, to all payments to be made to us under the Charterparty, including in respect of any breach by you thereunder; and

b)   you are herby irrevocably authorised and instructed to make all payments under the Charterparty to our account with Nordea Bank Finland Plc., London Branch account no [•]until such time as the Agent shall direct to the contrary whereupon all instructions or demands for actions shall be made by the Agent and payments are due to the Agent or as it may direct.

The authority and instructions herein contained cannot be revoked or varied by us without the written consent of the Agent.

[Place and date:] [•], [•]

Yours sincerely

for and on behalf of

[]

By: __________________________________

Name:

Title: [authorised officer]

Appendix 1 (B)

FORM OF ACKNOWLEDGEMENT

(Assignment of Earnings)

To:Nordea Bank Norge ASA

Middelthunsgate 17

N-0368 Oslo

Norway

Attn: Shipping, Offshore and Oil Services

MV “[·]”

We acknowledge receipt of the above Notice of Assignment dated [•] August 2006 from []. Terms used herein shall have the same meaning as defined therein.

We agree to the assignment set out therein.We confirm that we have received no notice of any previous assignment or pledge of all or any part of the charter hire and any monies payable thereunder.

We confirm that, until otherwise notified by you, we will make all payments due under the Charterparty, subject to all permitted set-offs and deductions thereunder, to the account specified in the said Notice of Assignment. We reserve all rights, claims and defences under the Charterparty, at law and in equity, including but not limited to any right to terminate the Charterparty, and do not agree to any other modification to such rights, claims or defences, whether included in, or intended by the Agreement or the Assignment Agreement.

[Alternatively: We further confirm that all written statements containing instructions or demanding actions or payments under the Charterparty may until further notice from the Agent to the contrary be made by [] and after such notice these instructions shall be given or demands shall be made by the Agent.]

Place and date: [•]

Yours sincerely

for and on behalf of

[ ]

By: __________________________________

Name:

Title: [authorised officer]

Appendix 2 (A)

FORM OF NOTICE OF ASSIGNMENT

(Assignment of Insurances)

To: The Insurers

M/V []

[] as owner (the “Owner”) of M/V [] (the “Vessel”) hereby gives you notice that all payments due to us from you in respect of the Vessel have been (by way of security) assigned to Nordea Bank Norge ASA, Middelthuns gate 17, N-0368 Oslo, Norway, as Agent for certain other banks and swap bank (the “Mortgagee”) according to an Assignment Agreement dated 29 August 2006 (the “Assignment Agreement”) related to a loan agreement of even date (the “Agreement”) and any Swap Agreements (as defined in the Agreement) made or to be made with the Swap Bank (as defined in the Agreement), and that all payments due to us under our policy(-ies) with yourselves must be made in accordance with the instruction, from time to time, of the Mortgagee.

Please note that all claims related to the insurances in respect of claims payable in respect of a major casualty, that is to say any claim (or the aggregate of which) exceeding USD 500,000, shall be payable to the Mortgagee and be applied by the Mortgagee in accordance with the terms of the Agreement. Subject thereto all other claims, unless and until the insurers have received notice from the Mortgagee of a default which is unremedied under the Agreement in which event all claims shall be payable directly to the Mortgagee up to their mortgage interest, shall be released directly for the repair or other charges involved or to the Owner as reimbursement if it has fully repaired the damage and paid all of the charges or otherwise in respect of the Owner’s actual costs in connection with repair and/or other charges. Any amounts paid to the Owner directly shall be paid to the Earnings Account, account no. [] with Nordea Bank Finland Plc., London Branch.

Please note that this instruction may not be varied except with the prior written consent of the Mortgagee.

Please confirm your acknowledgement of the terms of this notice by completing the Acknowledgement attached hereto. Please return the signed and dated Acknowledgement to the Mortgagee at the address set out above.

Place and date: [•], [•]

Yours sincerely

for and on behalf of

[]

By: __________________________________

Name:

Title: [authorised officer]

Appendix 2 (B)

FORM OF ACKNOWLEDGEMENT

(Assignment of Insurances)

To: Nordea Bank Norge ASA

Middelthunsgate 17

N-0368 Oslo

Norway

Att.: Shipping, Offshore and Oil Services

MV “[·]”

We hereby acknowledge receipt of a Notice of Assignment (the “Notice”) from [] (the “Owner”) dated [•] 2006 related to [] (the “Vessel”).

We have duly noted and do accept that our payments due to the Owner, under the insurance policy(-ies) taken out for the Vessel as an Owners’ Entry pursuant to our rules, shall be made in accordance with the instructions set out in the Notice, including the Loss Payable clause therein, and payment due to the mortgagees will be made to such account as from time to time instructed by Nordea Bank Norge ASA, Middelthunsgate 17, N-0368 Oslo, Norway, which bank has been duly noted by ourselves as the first priority mortgagee of the said Vessel on its own behalf and on behalf of certain other banks and swap bank as agent therefore.

Place and date: [•]

Yours sincerely

for and on behalf of

[INSURERS]

By: __________________________________

Name:

Title: [authorised officer]

Appendix 3 (A)

FORM OF NOTICE OF ASSIGNMENT

(Assignment of Charter Guarantee)

To:[]

M/V “[]”

We refer to the charter guarantee dated [•], (the “Charter Guarantee”) made by you in our favour, whereby you have guaranteed the due performance of [·] (the “Charterers”) of all of the Charterers’ obligations under the time charterparty dated [] related to M/V “[]” (the “Vessel”).

We hereby give you notice that:

a)   by an agreement dated 29 August 2006 (the “Assignment Agreement”) made between among others us and Nordea Bank Norge ASA, Middelthunsgt. 17, N-0368 Oslo, Norway, acting as agent on behalf of certain other banks and swap bank (the “Agent”), related to a loan agreement of even date (the “Agreement”) and any Swap Agreement (as defined in the Agreement) made or to be entered into with the Swap Bank (as defined in the Agreement), we have assigned absolutely and have agreed to assign absolutely to and in favour of the Agent all our rights, title and interest, present and future, to all payments to be made to us under the Charter Guarantee, including in respect of any breach by you thereunder; and

b)   you are herby irrevocably authorised and instructed to make all payments under the Charter Guarantee to our account with Nordea Bank Finland Plc., London Branch account no [•]until such time as the Agent shall direct to the contrary whereupon all instructions or demands for actions shall be made by the Agent and payments are due to the Agent or as it may direct.

The authority and instructions herein contained cannot be revoked or varied by us without the written consent of the Agent. The provisions of this notice shall be governed by Norwegian law.

[Place and date:] [•], [•]

Yours sincerely

for and on behalf of

[]

By: __________________________________

Name:

Title: [authorised officer]

Appendix 3 (B)

FORM OF ACKNOWLEDGEMENT

(Assignment of Charter Guarantee)

To:Nordea Bank Norge ASA

Middelthunsgate 17

N-0368 Oslo

Norway

Attn: Shipping, Offshore and Oil Services

MV “[·]”

We acknowledge receipt of the above Notice of Assignment dated [•] 2006 from []. Terms used herein shall have the same meaning as defined therein.

We agree to the assignment set out therein. We confirm that we have received no notice of any previous assignment or pledge of all or any part of any monies payable thereunder.

We confirm that, until otherwise notified by you, we will make all payments due under the Charter Guarantee, subject to all permitted set-offs and deductions thereunder, to the account specified in the said Notice of Assignment. We reserve all rights, claims and defences under the Charter Guarantee, at law and in equity, and do not agree to any modifications to such rights, claims or defences, whether included in. or intended by the Agreement or the Assignment Agreement.

[Alternatively: We further confirm that all written statements containing instructions or demanding actions or payments under the Charter Guarantee may until further notice from the Agent to the contrary be made by [] and after such notice these instructions shall be given or demands shall be made by the Agent.]

This acknowledgement and confirmation shall be governed by Norwegian law.

Place and date: [•]

Yours sincerely

for and on behalf of

[ ]

By: __________________________________

Name:

Title: [authorised officer]

Appendix 4

LIST OF PLEDGED ACCOUNTS

Account Holder	Account Number	Bank
OBO Holdings Ltd.	6019.04.44107	Nordea Bank Norge ASA
RMJ OBO Shipping Ltd.	6012.04.43049	Nordea Bank Norge ASA
Sagamore Shipping Ltd.	6012.04.43057	Nordea Bank Norge ASA

SCHEDULE 9

MANDATORY COST FORMULAE

1   The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2   On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the "Additional Cost Rate") for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders' Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.

3   The Additional Cost Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Agent. This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender's participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.

4   The Additional Cost Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Agent as follows:

a)   in relation to a sterling Loan:

[Missing Graphic Reference] per cent per annum

b)   in relation to a Loan in any currency other than sterling:

[Missing Graphic Reference] per cent per annum

Where:

Ais the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.

Bis the percentage rate of interest (excluding the Margin and the Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of interest specified in Clause 8.3 (Default interest)) payable for the relevant Interest Period on the Loan.

Cis the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.

Dis the percentage rate per annum payable by the Bank of England to the Agent on interest bearing Special Deposits.

Eis designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.

5   For the purposes of this Schedule:

a)   "Eligible Liabilities" and "Special Deposits" have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

b)   "Fees Rules" means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

c)   "Fee Tariffs" means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and

d)   "Tariff Base" has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

6   In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.

7   If requested by the Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.

8   Each Lender shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:

a)   the jurisdiction of its Facility Office; and

b)   any other information that the Agent may reasonably require for such purpose.

Each Lender shall promptly notify the Agent of any change to the information provided by it pursuant to this paragraph.

9   The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies the Agent to the contrary, each Lender's obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.

10   The Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.

11   The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8 above.

12   Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.

13   The Agent may from time to time, after consultation with the Company and the Lenders, determine and notify to all Parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.

SCHEDULE 10

FORM OF GUARANTEE

This Guarantee (this “Guarantee”) is made on [•] between:

(1)B+H Ocean Carriers Ltd., of 80 Broad Street, Monrovia, Liberia (the “Guarantor”); and

(2)Nordea Bank Norge ASA, organisation no. 911 044 110, Middelthunsgt. 17, N-0368 Oslo, Norway (the “Agent”), acting on behalf of itself and on behalf of the Finance Parties and the Swap Bank (as defined in the Agreement referred to below).

WHEREAS

(A)Pursuant to the terms and conditions of a reducing revolving credit facility agreement dated 29 August 2006 (the “Agreement”) between the companies listed in Part I of Schedule 1 from time to time as joint and several borrowers (the “Borrowers”), the banks and financial institutions listed in part II of Schedule 1 thereto as lenders (the “Lenders”), Nordea Bank Finland Plc., as swap bank (the “Swap Bank”) and Nordea Bank Norge ASA as agent for the Lenders (the “Agent”) and mandated lead arranger (the “Arranger”), the Lenders have agreed to make available to the Borrowers a reducing revolving credit facility in the aggregate amount of USD 202,000,000 (the “Loan”);

(B)subject to the terms and conditions of the Agreement, the Loan will be made available to the Borrowers for the purpose of (i) refinancing the loans under the Existing Credit Facility, (ii) part-financing of the purchase price for the New Vessels, (iii) the Borrowers’ and their Subsidiaries general corporate and working capital purposes and (iv) the payment of fees and expenses incurred in connection with the Facility; and

(C)it is a condition of the Agreement that the Guarantor enters into this Guarantee. A similar guarantee agreement may also be executed by other parties pursuant to the Agreement, but the execution and enforceability of such other guarantee agreements shall not be a condition to the effectiveness or enforceability of this Guarantee.

IT IS AGREED AS FOLLOWS:

1   DEFINITIONS

Capitalised terms used herein shall, save as expressly defined herein, have the same meanings as ascribed thereto in the Agreement.

2   GUARANTEE

2.1   Guarantee obligations

The Guarantor hereby unconditionally and irrevocably guarantees, as primary obligor as and for its own debt (as selvskyldnerkausjonist) and not merely as surety to the Agent (on behalf of the Finance Parties and the Swap Bank):

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 any of 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 any of the Borrowers under the Finance Documents or any Swap Agreement);

b)   the due and punctual performance by the Borrowers of all of the Borrowers’ obligations under or in respect of the Finance Documents and any Swap Agreement; and

c)   to indemnify each Finance Party and the Swap Bank immediately upon the Agent’s first written demand against any loss, liability, costs and expenses suffered, incurred or paid by that Finance Party or the Swap Bank if any obligation of the Guarantor is or becomes unenforceable, invalid or illegal,

(such amounts together referred to as the “Outstanding Indebtedness”).

2.2   Payment upon first demand

If any of the Borrowers shall fail to pay any sum under the Finance Documents or any Swap Agreement as and when such sum shall become due and payable, the Guarantor shall immediately upon the Agent’s first written demand pay to the Agent for the account of the relevant Finance Party or the Swap Bank an amount equal to such sum which any of 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.

2.3   No limitation on number of demands

Demands under this Guarantee may be made by the Agent from time to time and there shall be no limitation in the number of demands which can be made hereunder.

2.4   Maximum guarantee liability

The total liability of the Guarantor under this Guarantee shall, in the aggregate, always be limited to USD 215,000,000 (in principal only) plus all unpaid interest, default interest, fees, costs and expenses.

3   SURVIVAL OF THE GUARANTOR’S LIABILITY

3.1   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 and the Swap Bank) of the Outstanding Indebtedness.

3.2   No discharge

The obligations of the Guarantor under this Guarantee 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 the 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 Borrowers, the Finance Parties, the Swap Bank or any other person under the Finance Documents, any Swap Agreement or any other document or security;

b)   any time, waiver, consent or other indulgence granted to any of the Borrowers or any other person or any composition or arrangement made by any Finance Party, the Swap Bank or any other person with the Borrowers or any other person;

c)   any increase or reduction of the amount of the 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 the Loan);

d)   any amendment, modification, replacement, supplement, variation, compromise, extension or renewal of any Finance Document or any Swap Agreement or any right against any security over any assets of any of the Borrowers 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 Swap Agreement or any rights against or any security over any assets of any of the Borrowers 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 any of the Borrowers, 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 any of the Borrowers, a Lender, the Swap Bank 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 Swap Bank, the Borrowers or any other person; or

i)   any insolvency or similar proceedings concerning any of the Borrowers, a Lender, the Swap Bank or any other person.

3.3   Waiver

The Guarantor specifically waives all rights under the provisions of the Norwegian Financial Agreements Act of 25 June 1999 no. 46 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 the 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 or any Swap Agreement and to be kept informed thereof);

c)   § 63 (3) (to be notified of any extension granted to any of the Borrowers in payment of principal and/or interest);

d)   § 63 (4) (to be notified of any of the Borrowers’ 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 Agreement and any Swap Agreement 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 the 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 the Loan or the execution of the Guarantee, 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 Agreement, any Swap Agreement or the Security Documents);

j)   § 70 (as the Guarantor shall have no right of subrogation into the rights of the Finance Parties and the Swap Bank under the Agreement, any Swap Agreement or the Security Documents until and unless the Finance Parties and the Swap Bank shall have received all amounts due or to become due to them under the Agreement, any Swap Agreement and the Security Documents);

k)   § 71 (as the Finance Parties and the Swap Bank shall have no liability first to make demand upon or seek to enforce remedies against any of the Borrowers or any other security provided in respect of the Borrowers’ liabilities under the Agreement and/or any Swap Agreement and/or the Security Documents before seeking to enforce the security created hereunder);

l)   § 72 (as all interest and default interest due under the Agreement and/or any Swap Agreement and/or the Security Documents shall be secured hereunder);

m)   § 73 (1) - (2) (as all costs and expenses related to a default under the Agreement and/or the Swap Agreement and/or the Security Documents shall be secured hereunder); and

n)   § 74 (1) - (2) (as the Guarantor shall make no claim against any of the Borrowers for payment until and unless the Finance Parties and the Swap Bank first shall have received all amounts due or to become due to them under the Agreement, any Swap Agreement and the Security Documents).

3.4   Reinstatement

If any payment by any of the Borrowers, any other guarantor or any other provider of security under the Finance Documents or any Swap Agreement must be repaid, or any discharge given by a Lender or the Swap Bank (whether in respect of the obligations of the Borrowers, 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 Guarantor shall continue as if such payment, discharge, avoidance or reduction had not occurred; and

b)   the Finance Parties and the Swap Bank shall be entitled to recover the value or amount of that security or payment from the Guarantor, as if such payment, discharge, avoidance or reduction had not occurred.

4   UNDERTAKINGS

The Guarantor undertakes to the Agent that as long as this Guarantee is effective:

a)   it shall at all times comply with all its obligations, covenants, undertakings and representations under the Finance Documents (to which it is a party), and undertakes to comply with and perform all such obligations, covenants, undertakings and representations with relates to the Guarantor in the Agreement, hereunder (but not limited to) the financial covenants set out in Clause 20 (Financial covenants) of the Agreement and the obligation to deliver a Compliance Certificate as set out in Clause 19.2 (Compliance Certificate) of the Agreement;

b)   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 of the Borrowers or any other guarantor, or exercise any other right or remedy to which any of the Borrowers or any other guarantor are entitled to in respect of such moneys unless and until all moneys due and payable by any of the Borrowers have been irrevocably paid in full;

c)   if any of the Borrowers 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;

d)   if the Guarantor being in breach of litra b) and c) 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

e)   it will not take or has not taken from any of the Borrowers any security whatsoever for the obligations guaranteed hereunder.

5   REPRESENTATIONS AND WARRANTIES

The Guarantor represents and warrants to the Agent (for the benefit of each Finance Party and the Swap Bank) as follows:

a)   the Guarantor is duly organised and validly existing as a private limited liability company under the laws of Bermuda and has the corporate power and authority to own its assets and carry on its business as it is presently being conducted in each jurisdiction in which it owns assets or carry on business;

b)   the Guarantor has the power to enter into, perform and deliver, and has taken all necessary actions to authorise its entry into, performance and delivery of this Guarantee; and

c)   the Guarantee constitutes the legal, valid and binding obligations of the Guarantor, enforceable against the Guarantor in accordance with its terms and will be so treated in any relevant courts and this Guarantee is in proper form for enforcement in such courts.

6   ENFORCEMENT

6.1   Immediate recourse

The Agent shall not be required to take any action against any of the Borrowers, any other guarantor or any other person before claiming from the Guarantor under this Guarantee.

6.2   No right of recourse and no security

The Guarantor shall have no right of recourse against any of the Borrowers, any other guarantor or any of their respective bankruptcy estate for any amount paid by the Guarantor under this Guarantee for so long as any part of the Outstanding Indebtedness remains outstanding, and the Guarantor shall not be entitled to obtain from any of the Borrowers any security for any such right of recourse which the Guarantor may have after such time. Any such security which the Guarantor might obtain shall be regarded as supplementary security in favour of the Finance Parties and the Swap Bank. The Guarantor hereby renounces any and all such claims it has or may get against any of the Borrowers or any other guarantor for as long as any part of the Outstanding Indebtedness remains outstanding.

6.3   No subrogation in Finance Parties’ or Swap Bank’s security

The Guarantor shall have no right to subrogate, wholly or partly, in any security provided to the Finance Parties or the Swap Bank pursuant to the Finance Documents or any Swap Agreement or in any other way until all of the Outstanding Indebtedness has been fully and finally paid.

6.4   Action

Without affecting the obligations of the Guarantor hereunder, the Agent, the other Finance Parties and the Swap Bank may take such action as the Agent, the other Finance Parties and the Swap Bank, as the case may be, in their own discretion may consider appropriate against the Borrowers, the Guarantor or any other persons or parties or securities to recover monies due and payable in respect of the obligations under the Agreement and/or any Swap Agreement and/or the other Finance Documents.

6.5   Knowledge of the Agreement and additional security

The Guarantor acknowledges and agrees that:

a)   it has received a copy of and has full knowledge of the terms and provisions of the Agreement hereunder, but not limited to the cross-default provision therein, and that it has been informed of the security which is to be granted in respect of the amounts outstanding under the Agreement and as listed in Clause 17 (Security) of the Agreement;

b)   it has been informed by the Borrowers that no Event of Default under the Agreement has occurred as per today; and

c)   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 or the Swap Bank as security for the Borrowers’ obligations under the Agreement and any Swap Agreement(s).

7   ASSIGNMENT

The Agent and the Finance Parties may assign or transfer the rights hereunder 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 24 (Changes to the Lenders) of the Agreement.

8   EXPENSES

The Guarantor shall pay to the Agent on demand on a full indemnity basis all charges, costs and expenses (including the legal fees) properly incurred by the Finance Parties in connection with the preservation and enforcement of any of the rights of the Finance Parties and the Swap Bank hereunder.

9   MISCELLANEOUS

9.1   No implied waivers

No delay or failure by the Agent, any other Finance Party or the Swap Bank 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, such Finance Party or the Swap Bank. 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 or the Swap Bank 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.

9.2   Separable provisions

The provisions of this Guarantee are separable and, if any provision of this Guarantee is or becomes illegal, invalid or unenforceable in any respect in any jurisdiction, this shall not affect the legality, validity or enforceability of such provisions in any other jurisdiction or the legality, validity or enforceability of the remaining provisions of the Guarantee in that or any other jurisdiction.

9.3   Borrowers as agent for the Guarantor

The Borrowers shall be the agent of the Guarantor and any notice, statement or agreement by the Borrowers to or with the any of the Finance Parties or the Swap Bank shall be binding on the Guarantor.

9.4   Law and jurisdiction

9.4.1   Governing law

This Guarantee shall be governed by and construed in accordance with Norwegian law.

9.4.2   Main jurisdiction

The Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of the Norwegian courts, the venue to be Oslo City Court (Oslo tingrett) and the Guarantor agrees for the benefit of the Finance Parties and the Swap Bank that any legal action or proceedings arising out of or in connection with this Guarantee against the Guarantor or any of its assets may be brought in the said court.

9.4.3   Alternative jurisdiction

This Clause 9.4.3 is for the exclusive benefit of the Finance Parties and the Swap Bank each of which have the right:

a)   to commence proceedings against the Guarantor or its assets both in any court in Norway and any other jurisdiction; and

b)   to commence enforcement proceedings in any jurisdiction concurrently with or in addition to proceedings in Norway or without commencing proceedings in Norway.

The parties agree that only the courts of Norway and not those of any other state shall have jurisdiction to determine any claim which the Guarantor may have against the Agent, any other Finance Party or the Swap Bank and that the Guarantor shall only be entitled to commence legal action or proceedings against the Agent, any such other Finance Party and the Swap Bank in relation to this Guarantee in Oslo City Court (Oslo tingrett).

10   NOTICES

Every notice or demand under this Guarantee shall be made by letter or telefax.

Any such notice or communication given by the Guarantor shall be addressed to the Agent at the following address:

If to the Agent:Nordea Bank Norge ASA

Middelthunsgt. 17

P.O. Box 1166 Sentrum

N-0107 Oslo, Norway

Att: Shipping, Offshore and Oil Services

Telefax No: + 47 22 48 66 68

Any notice, demand or other communication to be given to the Guarantor shall be sent to the Guarantor at the following address:

If to the Guarantor:B + H Ocean Carriers Ltd.

c/o B + H Management Ltd.

Par-la-Ville Place

14 Par-la-Ville Road

Hamilton HMJX

Bermuda

Att.:

Telefax: + 1 441 295 6796

10.1   Service of process

Without prejudice to any other mode of service, the Guarantor:

a)   irrevocably appoints Wikborg Rein & Co., Kronprinsesse Märthas plass 1, P.O. Box 1513 Vika, N-0017 Oslo, Norway as its agent for service of process relating to any proceedings before Norwegian courts in connection with this Agreement; and

b)   agrees that failure by its process agent to notify it of the process will not invalidate the proceedings concerned.

IN WITNESS WHEREOF, the parties hereto have duly executed this Guarantee in two (2) original copies on the date and year first written above.

The Guarantor:The Agent:

B+ H Ocean Carriers Ltd.Nordea Bank Norge ASA

By: _____________________________By: ____________________________

Name:Name:

Title:Title:

SIGNATORIES

Borrowers:

OBO Holdings Ltd.

By: /s/ Anthony Dalzell

Name:Anthony Dalzell

Title:Attorney-in-Fact

BHOBO One Ltd.

By: /s/ Anthony Dalzell

Name:Anthony Dalzell

Title:Attorney-in-Fact

BHOBO Two Ltd.

By: /s/ Anthony Dalzell

Name:Anthony Dalzell

Title:Attorney-in-Fact

BHOBO Three Ltd.

By: /s/ Anthony Dalzell

Name:Anthony Dalzell

Title:Attorney-in-Fact

RMJ OBO Shipping Ltd.

By: /s/ Anthony Dalzell

Name:Anthony Dalzell

Title:Attorney-in-Fact

Sagamore Shipping Ltd.

By: /s/ Anthony Dalzell _

Name:Anthony Dalzell

Title:Attorney-in-Fact

Lenders:

Nordea Bank Norge ASA

By: __/s/_Olav Ringdal_____________

Name:

Title:Attorney-in-Fact

DVB Bank America NV

By: __/s/ Siri Wennevik________

Name:

Title:Attorney-in-Fact

HSH Nordbank AG

By: __/s/ Siri Wennevik________

Name:

Title:Attorney-in-Fact

The Governor and Company of the Bank of Scotland

By: __/s/ Siri Wennevik_________

Name:

Title:Attorney-in-Fact

Bookrunner:

Nordea Bank Norge ASA

By: __/s/_Olav Ringdal_____________

Name:

Title:Attorney-in-Fact

Agent:

Nordea Bank Norge ASA

By: __/s/_Olav Ringdal_____________

Name:

Title:Attorney-in-Fact

Arranger:

Nordea Bank Norge ASA

By: __/s/_Olav Ringdal_____________

Name:

Title:Attorney-in-Fact

Co-arrangers:

DVB Bank America NV

By: __/s/ Siri Wennevik________

Name:

Title:Attorney-in-Fact

HSH NordbankAG

By: __/s/ Siri Wennevik________

Name:

Title:Attorney-in-Fact

The Governor and Company of the Bank of Scotland

By: __/s/ Siri Wennevik________

Name:

Title:Attorney-in-Fact

Swap Bank:

Nordea Bank Finland Plc.

By: __/s/ Torbjorn Nulsund

Name:

Title:Attorney-in-Fact

We, B+H Ocean Carriers Ltd., hereby acknowledge and agree to the terms of this Agreement and agree to be bound by Clauses 18 (Representations and warranties), 19 (Information undertakings), 20 (Financial covenants), 21 (General undertakings) and 23 (Events of Default) of this Agreement to the extent applicable to the Guarantor as if we were a party to this Agreement.

29 August 2006

Guarantor:

B+H Ocean Carriers Ltd.

By: __/s/ R. Anthony Dalzell________________________________

Name: Anthony Dalzell

Title:Attorney-in-Fact

EX-2

LOAN AGREEMENT PROVIDING FOR A

SENIOR SECURED TERM LOAN

OF UP TO US$12,000,000

TO BE MADE AVAILABLE TO

SACHEM SHIPPING LTD.,

as Borrower,

BY

DVB BANK AMERICA NV,

as Administrative Agent and Security Agent,

and the Banks and Financial Institutions

identified on Schedule 1, as Lenders

October 12, 2006

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1.DEFINITIONS1

1.1.Specific Definitions1

1.2.Computation of Time Periods; Other Definitional Provisions12

1.3.Accounting Terms13

1.4.Certain Matters Regarding Materiality13

1.5.Forms of Documents13

2.REPRESENTATIONS AND WARRANTIES13

2.1.Representations and Warranties13

(a)Due Organization and Power13

(b)Authorization and Consents13

(c)Binding Obligations13

(d)No Violation14

(e)Filings; Stamp Taxes14

(f)Litigation14

(g)No Default14

(h)Vessel14

(i)Insurance15

(j)Financial Information15

(k)Tax Returns15

(l)Chief Executive Office15

(m)Foreign Trade Control Regulations15

(n)Equity Ownership15

(o)Environmental Matters and Claims15

(p)Compliance with ISM Code, the ISPS Code and the MTSA16

(q)No Threatened Withdrawal of DOC, ISSC or SMC16

(r)Liens16

(s)Debt16

(t)No Proceedings to Dissolve17

(u)Solvency17

(v)Compliance with Laws17

(w)Survival17

3.THE LOAN17

3.1.Purpose/Making of the Loan17

(a)Purpose17

(b)Making of the Loan.17

3.2.Drawdown Notice18

3.3.Effect of Drawdown Notice18

4.CONDITIONS19

4.1.Conditions Precedent to the Effectiveness of this Loan Agreement19

(a)Corporate Authority19

(b)The Loan Agreement20

(c)The Note20

(d)The Guarantor20

(e)The Vessel20

(f)Vessel Documents20

(g)Vessel Liens21

(h)ISM DOC21

(i)Environmental Claims21

(j)Fees21

(k)Accounts21

(l)Compliance Certificate21

(m)Vessel Appraisal21

(n)Charter Agreement21

(o)Money Laundering Due Diligence21

(p)Legal Opinions21

4.2.Further Conditions Precedent22

(a)Drawdown Notice22

(b)Representations and Warranties22

(c)No Event of Default22

(d)No Change in Laws22

(e)No Material Adverse Effect22

4.3.Breakfunding Costs22

4.4.Satisfaction after Drawdown22

5.REPAYMENT AND PREPAYMENT22

5.1.Repayment22

5.2.Voluntary Prepayment; No Re-Borrowing23

5.3.Mandatory Prepayment Sale or Loss of Vessel23

5.4.Interest and Costs with Prepayments/Application of Prepayments23

6.INTEREST AND RATE23

6.1.Applicable Rate23

6.2.Default Rate23

6.3.Interest Periods23

6.4.Interest Payments24

7.PAYMENTS24

7.1.Place of Payments, No Set Off24

7.2.Tax Credits24

7.3.Sharing of Setoffs24

7.4.Computations; Banking Days25

8.EVENTS OF DEFAULT25

8.1.Events of Default25

(a)Non-Payment of Principal25

(b)Non-Payment of Interest or Other Amounts25

(c)Representations25

(d)Impossibility; Illegality25

(e)Mortgage26

(f)Covenants26

(g)Debt26

(h)Ownership of Borrower26

(i)Bankruptcy26

(j)Termination of Operations; Sale of Assets26

(k)Judgments26

(l)Inability to Pay Debts27

(m)Change in Financial Position27

(n)Change in Control27

(o)Cross-Default27

8.2.Indemnification27

8.3.Application of Moneys28

9.COVENANTS28

9.1.Affirmative Covenants28

(a)Performance of Agreements28

(b)Notice of Default, etc28

(c)Obtain Consents28

(d)Financial Information29

(e)Vessel Valuations30

(f)Corporate Existence30

(g)Books and Records30

(h)Taxes and Assessments30

(i)Inspection30

(j)Inspection and Survey Reports30

(k)Compliance with Statutes, Agreements, etc30

(l)Environmental Matters30

(m)Vessel Management31

(n)Vessel Employment31

(o)Assignment of Charter31

(p)ISM Code, ISPS Code and MTSA Matters31

(q)Brokerage Commissions, etc31

(r)Operating Account; Assignment31

(s)Insurance32

9.2.Negative Covenants32

(a)Liens32

(b)Debt32

(c)Change of Flag, Class, Management or Ownership32

(d)Chartering32

(e)Change in Business33

(f)Sale or Pledge of Shares33

(g)Sale of Assets33

(h)Changes in Offices33

(i)Consolidation and Merger33

(j)Change Fiscal Year33

(k)Use of Corporate Funds33

(l)Issuance of Shares33

(m)No Money Laundering34

(n)Use of Proceeds34

9.3.Asset Maintenance34

10.ASSIGNMENT34

11.ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC34

11.1.Illegality35

11.2.Increased Costs35

11.3.Nonavailability of Funds36

11.4.Lender's Certificate Conclusive36

11.5.Compensation for Losses36

12.CURRENCY INDEMNITY36

12.1.Currency Conversion36

12.2.Change in Exchange Rate36

12.3.Additional Debt Due37

12.4.Rate of Exchange37

13.FEES AND EXPENSES37

13.1.Fees37

13.2.Expenses37

14.APPLICABLE LAW, JURISDICTION AND WAIVER37

14.1.Applicable Law37

14.2.Jurisdiction38

14.3.WAIVER OF JURY TRIAL38

15.THE AGENTS38

15.1.Appointment of Agents38

15.2.Security Agent as Trustee38

15.3.Distribution of Payments39

15.4.Holder of Interest in Note39

15.5.No Duty to Examine, Etc39

15.6.Agents as Lenders39

15.7.Acts of the Agents39

(a)Obligations of the Agents39

(b)No Duty to Investigate39

(c)Discretion of the Agents39

(d)Instructions of Majority Lenders39

15.8.Certain Amendments40

15.9.Assumption re Event of Default40

15.10.Limitations of Liability40

15.11.Indemnification of the Agents41

15.12.Consultation with Counsel41

15.13.Resignation41

15.14.Representations of Lenders41

15.15.Notification of Event of Default42

15.16.No Agency or Trusteeship if not Syndicated42

16.NOTICES AND DEMANDS42

16.1.Notices42

17.MISCELLANEOUS42

17.1.Time of Essence42

17.2.Unenforceable, etc., Provisions-Effect42

17.3.References43

17.4.Further Assurances43

17.5.Prior Agreements, Merger43

17.6.Entire Agreement; Amendments43

17.7.Indemnification43

17.8.Headings44

17.9.Waiver of Immunity44

17.10.USA Patriot Act Notice; OFAC and Bank Secrecy Act44

--

SCHEDULE

1The Lenders and the Commitments

EXHIBITS

AForm of Note

BForm of Guaranty

CForm of Accounts Pledge

DForm of Statutory Mortgage and Deed of Covenants

EForm of Earnings Assignment

FForm of Insurances Assignment

GForm of Charter Assignment

HForm of Compliance Certificate

IForm of Drawdown Notice

JForm of Assignment and Assumption Agreement

KForm of Interest Notice

--

SENIOR SECURED TERM LOAN AGREEMENT

THIS SENIOR SECURED TERM LOAN AGREEMENT (this "Loan Agreement") is made as of the 12^th day of October, 2006, by and among (1) SACHEM SHIPPING LTD., a corporation organized and existing under the laws of the Republic of the Marshall Islands (the “Borrower”), (2) the banks and financial institutions listed on Schedule 1, as lenders (together with any bank or financial institution which becomes a Lender pursuant to Section 10, the “Lenders”) and (3) DVB BANK AMERICA NV (“DVB”), as administrative agent for the Lenders (in such capacity, the “Administrative Agent”) and as Security Agent for the Lenders (in such capacity, the “Security Agent”), and is consented to and agreed to by B+H OCEAN CARRIERS LTD., a corporation organized and existing under the laws of the Republic of Liberia, as guarantor (the “Guarantor”).

WITNESSETH THAT:

WHEREAS, at the request of the Borrower, the Administrative Agent and Security Agent have agreed to serve in such capacities under the terms of this Loan Agreement and the Lenders have agreed to provide to the Borrower a senior secured a term loan to be made available in an amount equal to US$12,000,000;

NOW, THEREFORE, in consideration of the premises set forth above, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as set forth below:

1.DEFINITIONS

1.1.Specific Definitions. In this Loan Agreement, including in the preamble and recitals hereof, the words and expressions specified below shall, except where the context otherwise requires, have the meanings attributed to them below:

“Acceptable Accounting Firm”	means Ernst & Young, or such other recognized international accounting firm as shall be approved by the Administrative Agent, such approval not to be unreasonably withheld;
“Acceptable Charterer”	means a company having a rating of at least A- from S&P or a rating of at least A3 from Moody’s, or such other charterer acceptable to the Lenders in their sole discretion;
“Account Pledge”	means the pledge agreement to be executed by the Borrower in favor of the Security Agent in respect of the Operating Account and all other accounts held by the Borrower pursuant to Section 4.1(j), substantially in the form set out in Exhibit B;
“Accounting Period”	means each consecutive period of three months falling during the period (ending on the last day in March, June, September and December of each year) for which quarterly accounting information is required to be provided to the Administrative Agent hereunder;
“Administrative Agent”	shall have the meaning ascribed thereto in the preamble;
“Affiliate”	means with respect to any Person, any other Person directly or indirectly controlled by or under common control with such Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) as applied to any Person means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of that Person whether through ownership of voting securities or by contract or otherwise;
"Agents"	means each of the Administrative Agent and the Security Agent;
“Applicable Margin”	means (a) other than as described in (b) below, at all times during the term of this Loan one and twenty five one-hundredths of one percent (1.25%) per annum or, (b) upon fixing of employment of the Vessel with an Acceptable Charterer for a minimum of two years at charter rates sufficient, in the sole determination of the Administrative Agent, to cover estimated operating expenses of the Vessel and debt service (principal plus interest) of this Loan, one percent (1.0%) per annum for the term of such employment;
“Applicable Rate”	means any rate of interest applicable to the Loan from time to time pursuant to Section 6.1;
“Assigned Moneys”	means sums assigned to or received by the Agents pursuant to any Security Document;
“Assignment and Assumption Agreement(s)”	means the Assignment and Assumption Agreement(s) executed pursuant to Section 10 substantially in the form set out in Exhibit J;
“Assignment Notices”	means: (i)notices with respect to the Earnings Assignment substantially in the form set out in Exhibit 1 thereto; (ii)notices with respect to any Charter Assignment substantially in the form set out in Exhibit 1 thereto; and (ii)notices with respect to the Insurances Assignments substantially in the form set out in Exhibit 3 thereto;
“Assignments”	means the Earnings Assignment, the Charter Assignment and the Insurances Assignment;
“Banking Day(s)”	means day(s) on which banks are open for the transaction of business in London, England, New York, New York, Amsterdam, The Netherlands, and Curacao, Netherlands Antilles;
“BONNIE SMITHWICK”	means that certain 1993 built, 83,155 dwt, ore/bulk/oil carrier registered under Bahamas flag and bearing IMO No.9050084;
“Borrower”	shall have the meaning ascribed thereto in the preamble;
"Cash and Cash Equivalents"	means, in respect of the Guarantor Group, and at any time, (i) cash in hand or on deposit with any bank acceptable to the Administrative Agent available for cash management purposes, (ii) investment grade certificates of deposit or investment grade marketable debt securities, maturing within one (1) year after the relevant date of calculation, or (iii) any other instrument, security or investment approved by the Majority Lenders; in each case, to which any member of the Guarantor Group is beneficially entitled at that time and which is capable of being applied against the Total Debt;
“Change of Control”	means (a) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 35% of the total voting power or ownership interest of the Borrower or (b)  the Board of Directors of the Borrower ceases to consist of a majority of the directors existing on the date hereof or directors nominated by at least two-thirds (2/3) of the then existing directors;
“Charter”	means that certain time charter by and between Redina Maritime Ltd. and Stena Bulk AB dated as of October 11, 2004 and novated by Redina Maritime Ltd. pursuant to a novation agreement dated June 23, 2006 in favor of the Borrower relating to the Vessel at a rate of $18,400 per day;
"Charter Assignment"	means the assignment in respect of any charter of the Vessel, for a period of twelve months or longer, to be executed by the Borrower in favor of the Security Agent pursuant to Section 9.1(o) substantially in the form set out in Exhibit F;
“Classification Society”	means a member of the International Association of Classification Societies with whom the Vessel is entered and who conducts periodic physical surveys and/or inspections of the Vessel;
“CLO"	shall have the meaning ascribed thereto in Section 10;
“Collateral”	means all property or other assets, real or personal, tangible or intangible, whether now owned or hereafter acquired in which any Agent or any Lender has been granted a security interest pursuant to a Security Document;
“Commitment(s)”	means in relation to a Lender, the portion of the Loan set out opposite its name in Schedule 1 or, as the case may be, as reduced by or set out in any relevant Assignment and Assumption Agreement, as such amount shall be reduced from time to time pursuant to Section 5;
“Compliance Certificate”	means a certificate certifying the compliance by the Borrower and/or the Guarantor, as the case may be, with all of its respective covenants contained herein and showing the calculations thereof in reasonable detail, executed and delivered by the chief financial officer of such party to the Administrative Agent from time to time pursuant to Section 9.1(d) in the form set out in Exhibit H, or in such other form as the Administrative Agent may agree;
"Creditors"		means, collectively, the Lenders and the Agents;
“Current Assets”	means, measured at the end of each Accounting Period, the aggregate of the cash and marketable securities, trade and other receivables of the Guarantor Group on a consolidated basis from persons (other than a member of the Guarantor Group) which can be realized within one year, inventories and prepaid expenses which are to be charged to income within one year less any doubtful debts and any discounts or allowances given as stated in the then most recent accounting information delivered to the Administrative Agent hereunder;
“Debt”	means, in relation to any of the members of the Guarantor Group (the “debtor”): (a) Financial Indebtedness of the debtor; (b) liability for any credit to the debtor from a supplier of goods or services or under any installment purchase or payment plan or similar arrangement; (c) contingent liabilities of the debtor (including without limitation any taxes or other payments under dispute) which have been or, under GAAP, should be recorded in the notes to the accounting information; (d) deferred tax of the debtor; and (e) liability under a guaranty, indemnity or similar obligation entered into by the debtor in respect of a liability of another person who is not a Security Party which would fall within (a) to (d) if the references to the debtor referred to the other Person;
“Default Rate”	shall have the meaning ascribed thereto in Section 6.2;
“Depositary”	means Nordea Bank PLC, London, England;
“DOC”	means a document of compliance issued to an Operator in accordance with rule 13 of the ISM Code;
“Dollars” and the sign “$”	means the legal currency, at any relevant time hereunder, of the United States of America and, in relation to all payments hereunder, in same day funds settled through the New York Clearing House Interbank Payments System (or such other Dollar funds as may be determined by the Administrative Agent to be customary for the settlement in New York City of banking transactions of the type herein involved);
“Drawdown Date”	means the date, being a Banking Day, upon which the Borrower has requested that the Loan be made available to the Borrower, as provided in Section 3; provided, however, that the Drawdown Date shall not fall later than October 31, 2006;
“Drawdown Notice”	shall have the meaning ascribed thereto in Section 3.2;
“DVB”	shall have the meaning ascribed thereto in the preamble;
“EBITDA”	means, always in accordance with GAAP, the aggregate of operating profits of the Guarantor Group (on a consolidated basis) for a Measurement Period before Taxes, financial items, depreciations and amortizations, excluding (i) the profit or loss attributable to any extraordinary or exceptional items or any write-offs on investments during such Measurement Period and (ii) the profit and loss arising on any disposal of fixed assets during such Measurement Period save for any disposals made in the ordinary course of business;
“Earnings Assignment”	means the assignment in respect of the earnings of the Vessel from any and all sources, to be executed by the Borrower in favor of the Security Agent pursuant to Section 4.2(b), substantially in the form set out in Exhibit D;
“Environmental Affiliate(s)”	means any person or entity, the liability of which for Environmental Claims any Security Party or Subsidiary of any Security Party may have assumed by contract or operation of law;
“Environmental Approval(s)”	shall have the meaning ascribed thereto in Section 2.1(o);
“Environmental Claim(s)”	shall have the meaning ascribed thereto in Section 2.1(o);
“Environmental Law(s)”	shall have the meaning ascribed thereto in Section 2.1(o);
“Event(s) of Default”	means any of the events set out in Section 8.1;
“Exchange Act”	shall mean the Securities and Exchange Act of 1934, as amended;
“Fair Market Value”	means the value of the Vessel as determined by the average of two charter-free valuations from two independent shipbrokers appointed by the Administrative Agent;
“Final Payment Date”	means that date which is four years after the Drawdown Date; provided, however, that the Final Payment Date shall not fall later than October 31, 2010;
“Financial Covenants Commencement Date”	means the date on which the Administrative Agent ceases to be a “Lender” under that certain Credit Facility Agreement dated as of August 29, 2006 by and among the Guarantor, OBO Holdings Ltd., BHOBO One Ltd., BHOBO Two Ltd., BHOBO Three Ltd., RMJ OBO Shipping Ltd. and Sagamore Shipping Ltd., as borrowers and Nordea Bank Finland plc, as swap bank, Nordea Bank Norge ASA, as agent, and Nordea Bank Norge ASA, as mandated lead arranger;
“Financial Indebtedness”	means, in relation to any member of the Guarantor Group (the “debtor”), a liability of the debtor: (a) for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor; (b) under any loan stock, bond, note or other security issued by the debtor; (c) under any acceptance credit, Guaranty or letter of credit facility made available to the debtor; (d) under a financial lease, a deferred purchase consideration arrangement (in each case, other than in respect of assets or services obtained on normal commercial terms in the ordinary course of business) or any other agreement having the commercial effect of a borrowing or raising of money by the debtor; (e) under any foreign exchange transaction, interest or currency swap or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; or (f) under a guaranty, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within (a) to (e) if the references to the debtor referred to the other person;
“Fixed Charges”	means (i) Net Interest for any Measurement Period, plus (ii) the amount of scheduled repayments of the Loan and/or any other credit facilities and the interest and repayment element under capitalized charterparties in accordance with GAAP which fall due for repayment or payment during the Measurement Period, other than any amount prepaid under this Loan Agreement, minus (iii) free and available cash (at the relevant Quarter Date) and marketable securities (acceptable to the Administrative Agent (on behalf of the Lenders)) in excess of the minimum requirement plus any dividends paid in such Measurement Period;
“GAAP”	shall have the meaning ascribed thereto in Section 1.3;
“Guarantor”	shall have the meaning ascribed thereto in the preamble;
“Guarantor Group”	means the Guarantor and each of its Subsidiaries;
“Indemnitee”	shall have the meaning ascribed thereto in Section 17.7;
“Initial Payment Date”	means the date which is three (3) months after the Drawdown Date;
“Insurances Assignment”	means the assignment in respect of the insurances over the Vessel to be executed by the Borrower in favor of the Security Agent pursuant to Section 4.2(b), substantially in the form set out in Exhibit E;
“Interest Notice”	means a notice from the Borrower to the Administrative Agent specifying the duration of any relevant Interest Period, each substantially in the form set out in Exhibit K;
“Interest Period(s)”	means period(s) of one (1), three (3) or six (6) months as selected by the Borrower, or as otherwise agreed by the Administrative Agent and the Borrower;
“ISM Code”	means the International Safety Management Code for the Safe Operating of Ships and for Pollution Prevention constituted pursuant to Resolution A.741(18) of the International Maritime Organization and incorporated into the Safety of Life at Sea Convention and includes any amendments or extensions thereto and any regulation issued pursuant thereto;
“ISPS Code”	means the International Ship and Port Loan Security Code adopted by the International Maritime Organization (as the same may be amended from time to time);
“ISSC”	means a valid and current International Ship Security Certificate issued under the ISPS Code;
“Lender(s)”	shall have the meaning ascribed thereto in the preamble;
“LIBOR”	means the rate (rounded upward to the nearest 1/16th of one percent) for deposits of Dollars for a period equivalent to the relevant Interest Period at or about 11:00 a.m. (London time) on the second London Banking Day before the first day of such period as displayed on Telerate page 3750 (British Bankers’ Association Interest Settlement Rates) (or such other page as may replace such page 3750 on such system or on any other system of the information vendor for the time being designated by the British Bankers’ Association to calculate the BBA Interest Settlement Rate (as defined in the British Bankers’ Association’s Recommended Terms and Conditions (“BBAIRS” terms) dated August 1985)), provided that if on such date no such rate is so displayed for the relevant Interest Period, LIBOR for such period shall be the rate quoted to the Administrative Agent by the Reference Bank at the request of the Administrative Agent as the offered rate for deposits of Dollars in an amount approximately equal to the amount in relation to which LIBOR is to be determined for a period equivalent to the relevant Interest Period to prime banks in the London Interbank Market at or about 11:00 a.m. (London time) on the second Banking Day before the first day of such period;
“Loan”	means the loan facility to be made available by the Lenders to the Borrower in a single advance pursuant to Section 3 in an amount equal to Twelve Million Dollars ($12,000,000);
“Loan Agreement”	means this agreement, as the same shall be amended, modified or supplemented from time to time;
“Majority Lenders”	means, at any time, Lenders holding an aggregate of more than 66.66% of the Loan then outstanding;
“Material Adverse Effect”	shall mean a material adverse effect on (i) the ability of the Borrower to repay the Loan or perform any of its obligations hereunder or under the Note, (ii) the ability of any Security Party to perform its obligations under any Security Documents or (iii) the business, property, assets, liabilities, operations, condition (financial or otherwise) or prospects of the Security Parties taken as a whole;
"Measurement Period"	means a rolling period of twelve (12) calendar months ending on a Quarter Date;
“Mortgage”	means the Bahamas statutory ship mortgage on the Vessel and the deed of covenants appurtenant thereto, to be executed by the Borrower in favor of the Security Agent (as trustee for the Lenders) pursuant to Section 4.3(b), substantially in the form set out in Exhibit C;
“MTSA”	means the Maritime and Transportation Security Act, 2002, as amended, interalia, by Public Law 107-295;
"Net Interest"	means all interest, arrangement fees and capitalized commissions and periodic fees (whether, in each case, paid or payable) as reported in accordance with GAAP being incurred (after having deducted any interest, arrangement fee and capitalized income earned) by the Guarantor Group (on a consolidated basis) during a Measurement Period;
“Note”	means the promissory note to be executed by the Borrower to the order of the Administrative Agent pursuant to Section 4.1(b), to evidence the Loan, substantially in the form set out in Exhibit A;
“Operating Account”	shall have the meaning ascribed thereto in Section 4.1(j);
“Operator”	means the Person who is concerned with the operation of the Vessel and falls within the definition of “Company” set out in rule 1.1.2 of the ISM Code;
“Payment Dates”	means the Initial Payment Date and the dates falling at three month intervals thereafter, the last of which is the Final Payment Date;
“Permitted Percentage”	means (i) for the period beginning on the Drawdown Date and ending on the second anniversary thereof, eighty percent (80%); and (ii) at all times thereafter, seventy-five percent (75%);
“Person”	means any individual, sole proprietorship, corporation, partnership (general or limited), limited liability company, business trust, bank, trust company, joint venture, association, joint stock company, trust or other unincorporated organization, whether or not a legal entity, or any government or agency or political subdivision thereof;
“Proceeding”	shall have the meaning ascribed thereto in Section 8.1(i);
"Quarter Date"	means each March 31, June 30, September 30 and December 31;
“Reference Bank”	means DVB;
“Regulation T”	means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time;
“Regulation U”	means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time;
“Regulation X”	means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time;
“RIP HUDNER”	means that certain 1994 built, 83,155 dwt, ore/bulk/oil carrier registered under Bahamas flag and bearing IMO No. 9077111;
“SEAROSE G”	means that certain 1994 built, 83,155 dwt, ore/bulk/oil carrier registered under Bahamas flag and bearing IMO No. 9050096;
“Security Agent”	shall have the meaning ascribed thereto in the preamble;
“Security Document(s)”	means the Account Pledge, the Mortgage, the Guaranty, the Assignments and any other documents that may be executed as security for the Loan and the Borrower’s obligations in connection therewith;
“Security Party(ies)”	means the Borrower and the Guarantor;
“SMC”	means the safety management certificate issued in respect of the Vessel in accordance with rule 13 of the ISM code;
“Subsidiary(ies)”	means, with respect to any Person, any business entity of which more than 50% of the outstanding voting stock or other equity interest is owned directly or indirectly by such Person and/or one or more other Subsidiaries of such Person;
“Taxes”	means any present or future income or other taxes, levies, duties, charges, fees, deductions or withholdings of any nature now or hereafter imposed, levied, collected, withheld or assessed by any taxing authority whatsoever, except for taxes on or measured by the overall net income of each Lender imposed by its jurisdiction of incorporation or applicable lending office, the United States of America, the State or City of New York or any governmental subdivision or taxing authority of any thereof or by any other taxing authority having jurisdiction over such Lender (unless such jurisdiction is asserted by reason of the activities of any of the Security Parties or any other member of the Guarantor Group);
"Total Debt"	means, on a consolidated basis, the aggregate book value of all provisions, other long term liabilities and current liabilities of the Guarantor Group (on a consolidated basis);
“Total Loss”	shall have the meaning ascribed thereto in the Mortgage;
"Value Adjusted Equity"	means Value Adjusted Total Assets less Total Debt;
"Value Adjusted Equity Ratio"	means Value Adjusted Equity divided by Value Adjusted Total Assets;
"Value Adjusted Total Assets"	means, on a consolidated basis, the total market value of all of the assets of the Guarantor; and
“Vessel”	means that certain 1988 built, 61,000 dwt, double sided Panamax tanker named REDINA (tbr SACHEM) and registered under Bahamas flag and bearing Official No. 8000303.

1.2.Computation of Time Periods; Other Definitional Provisions. In this Loan Agreement, the Note and the Security Documents, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”; words importing either gender include the other gender; references to “writing” include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words “including,” “includes” and “include” shall be deemed to be followed by the words “without limitation”; references to articles, sections (or subdivisions of sections), exhibits, annexes or schedules are to this Loan Agreement, the Note or such Security Document, as applicable; references to agreements and other contractual instruments (including this Loan Agreement, the Note and the Security Documents) shall be deemed to include all subsequent amendments, amendments and restatements, supplements, extensions, replacements and other modifications to such instruments (without, however, limiting any prohibition on any such amendments, extensions and other modifications by the terms of this Loan Agreement, the Note or any Security Document); references to any matter that is “approved” or requires “approval” of a party shall mean approval given in the sole and absolute discretion of such party unless otherwise specified.

1.3.Accounting Terms. Unless otherwise specified herein, all accounting terms used in this Loan Agreement, the Note and in the Security Documents shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Administrative Agent or to the Lenders under this Loan Agreement shall be prepared, in accordance with generally accepted accounting principles for the United States (“GAAP”) as from time to time in effect.

1.4.Certain Matters Regarding Materiality. To the extent that any representation, warranty, covenant or other undertaking of the Borrower or the Guarantor in this Loan Agreement is qualified by reference to those which are not reasonably expected to result in a “Material Adverse Effect” or language of similar import, no inference shall be drawn therefrom that any Agent or Lender has knowledge or approves of any noncompliance by the Borrower or the Guarantor with any governmental rule.

1.5.Forms of Documents. Except as otherwise expressly provided in this Loan Agreement, references to documents or certificates “substantially in the form” of Exhibits to another document shall mean that such documents or certificates are duly completed in the form of the related Exhibits with substantive changes subject to the provisions of Section 17.6 of this Loan Agreement, as the case may be, or the correlative provisions of the Security Documents.

2.REPRESENTATIONS AND WARRANTIES

2.1.Representations and Warranties. In order to induce the Agents and the Lenders to enter into this Loan Agreement and to induce the Lenders to make the Loan available, the Borrower hereby represents and warrants to the Agents and the Lenders (which representations and warranties shall survive the execution and delivery of this Loan Agreement and the Note and the drawdown hereunder) that:

(a)Due Organization and Power. each Security Party is duly formed and is validly existing in good standing under the laws of its jurisdiction of incorporation, has full power to carry on its business as now being conducted and to enter into and perform its obligations under this Loan Agreement, the Note and the Security Documents to which it is a party, and has complied with all statutory, regulatory and other requirements relative to such business and such agreements;

(b)Authorization and Consents. all necessary corporate action has been taken to authorize, and all necessary consents and authorities have been obtained and remain in full force and effect to permit, each Security Party to enter into and perform its obligations under this Loan Agreement, the Note and the Security Documents, to which it is a party, and, in the case of the Borrower, to borrow, service and repay the Loan and, as of the date of this Loan Agreement, no further consents or authorities are necessary for the service and repayment of the Loan or any part thereof;

(c)Binding Obligations. this Loan Agreement, the Note and the Security Documents constitute or will, when executed and delivered, constitute the legal, valid and binding obligations of each Security Party as is a party thereto enforceable against such Security Party in accordance with their respective terms, except to the extent that such enforcement may be limited by equitable principles, principles of public policy or applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting generally the enforcement of creditors' rights;

(d)No Violation. the execution and delivery of, and the performance of the provisions of, this Loan Agreement, the Note and those of the Security Documents to which it is to be a party by each Security Party do not contravene any applicable law or regulation existing at the date hereof or any contractual restriction binding on such Security Party or the certificate of incorporation or by-laws (or equivalent instruments) thereof and that the proceeds of the Loan shall be used by the Borrower exclusively for its own account or for the account of a Subsidiary or Affiliate of the Borrower;

(e)Filings; Stamp Taxes. other than the recording of the Mortgage with the appropriate authorities for the Commonwealth of the Bahamas, and the filing of UCC Financing Statements in the District of Columbia in respect of the Assignments, and the payment and filing or recording fees consequent thereto, it is not necessary for the legality, validity, enforceability or admissibility into evidence of this Loan Agreement, the Note or the Security Documents that any of them or any document relating thereto be registered, filed, recorded or enrolled with any court or authority in any relevant jurisdiction or that any stamp, registration or similar Taxes be paid on or in relation to this Agreement, the Note or any of the Security Documents;

(f)Litigation. except as has been disclosed in writing by the Security Parties to the Administrative Agent, no action, suit or proceeding is pending or threatened against any Security Party or any Subsidiary thereof before any court, board of arbitration or administrative agency which is reasonably likely to result in a Material Adverse Effect;

(g)No Default. neither the Borrower, the Guarantor nor any of their Subsidiaries is in default under any material agreement by which it is bound, or is in default in respect of any financial commitment or obligation;

(h)Vessel. upon the date of the making of the Loan, the Vessel:

(i)   will be in the sole and absolute ownership of the Borrower and duly registered in the Borrower's name under Bahamian flag, unencumbered, save and except for the Mortgage recorded against it and as permitted thereby;

(ii)   will be classed in the highest classification and rating for vessels of the same age and type with its Classification Society without any material outstanding recommendations;

(iii)   will be operationally seaworthy and in every way fit for its intended service; and

(iv)   will be insured in accordance with the provisions of the Mortgage recorded against it and the requirements thereof in respect of such insurances will have been complied with;

(i)Insurance. each of the Security Parties has insured its properties and assets against such risks and in such amounts as are customary for companies engaged in similar businesses;

(j)Financial Information. on or prior to the date hereof, all financial statements, information and other data furnished by the Security Parties to the Administrative Agent are complete and correct, such financial statements have been prepared in accordance with GAAP and accurately and fairly present the financial condition of the parties covered thereby as of the respective dates thereof and the results of the operations thereof for the period or respective periods covered by such financial statements, and, since the date of each Security Party's financial statements most recently delivered to the Administrative Agent, there has been no Material Adverse Effect as to any of such parties and none thereof has any contingent obligations, liabilities for taxes or other outstanding financial obligations, except as disclosed in such statements, information and data;

(k)Tax Returns. the Security Parties and each of their respective Subsidiaries have filed all tax returns required to be filed by them and have paid all taxes payable by them which have become due, other than those not yet delinquent and except for those taxes being contested in good faith and by appropriate proceedings or other acts and for which adequate reserves shall have been set aside on its books;

(l)Chief Executive Office. the Security Parties' chief executive office and chief place of business and the office in which the records relating to the earnings and other receivables of each Subsidiary are kept is located at 3^rd Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton HM, 11 Bermuda;

(m)Foreign Trade Control Regulations. none of the transactions contemplated herein will violate the provisions of any statute or regulation enacted to prohibit or limit economic transactions with foreign Persons including, without limitation, the Foreign Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 500, as amended), any of the provisions of the Cuban Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 515, as amended), any of the provisions of the Iranian Transaction Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 560, as amended), any of the provisions of the Iraqi Sanctions Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 575, as amended) or any of the provisions of the Regulations of the United States of America Governing Transactions in Foreign Shipping of Merchandise (Title 31, Code of Federal Regulations, Chapter V, Part 505, as amended);

(n)Equity Ownership. the Borrower is a wholly-owned subsidiary of Seasak OBO Holdings Ltd., which is a wholly-owned subsidiary of the Guarantor;

(o)Environmental Matters and Claims. (a) except as heretofore disclosed in writing to the Administrative Agent and the Lenders (i) the Borrower and its Affiliates will, when required to operate their business as then being conducted, be in compliance with all applicable United States federal and state, local, foreign and international laws, regulations, conventions and agreements relating to pollution prevention or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, navigable waters, waters of the contiguous zone, ocean waters and international waters), including, without limitation, laws, regulations, conventions and agreements relating to (1) emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous materials, oil, hazardous substances, petroleum and petroleum products and by-products (“Materials of Environmental Concern”), or (2) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (“Environmental Laws”); (ii) the Borrower and its Affiliates will, when required, have all permits, licenses, approvals, rulings, variances, exemptions, clearances, consents or other authorizations required under applicable Environmental Laws (“Environmental Approvals”) and will, when required, be in compliance with all Environmental Approvals required to operate their business as then being conducted; (iii) neither the Borrower nor its Affiliates has received any notice of any claim, action, cause of action, investigation or demand by any person, entity, enterprise or government, or any political subdivision, intergovernmental body or agency, department or instrumentality thereof, alleging potential liability for, or a requirement to incur, material investigator costs, cleanup costs, response and/or remedial costs (whether incurred by a governmental entity or otherwise), natural resources damages, property damages, personal injuries, attorneys' fees and expenses, or fines or penalties, in each case arising out of, based on or resulting from (1) the presence, or release or threat of release into the environment, of any Materials of Environmental Concern at any location, whether or not owned by such person, or (2) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law or Environmental Approval (“Environmental Claim”) (other than Environmental Claims that have been fully and finally adjudicated or otherwise determined and all fines, penalties and other costs, if any, payable by the Borrower in respect thereof have been paid in full or which are fully covered by insurance (including permitted deductibles)); and (iv) there are no circumstances that may prevent or interfere with such full compliance in the future; and (b) except as heretofore disclosed in writing to the Administrative Agent there is no Environmental Claim pending or threatened against the Borrower or any Affiliate thereof and there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge or disposal of any Materials of Environmental Concern, that could form the basis of any Environmental Claim against such persons the adverse disposition of which may result in a Material Adverse Effect;

(p)Compliance with ISM Code, the ISPS Code and the MTSA. the Vessel complies and the Operator complies with the requirements of the ISM Code, the ISPS Code and the MTSA including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto;

(q)No Threatened Withdrawal of DOC, ISSC or SMC. there is no actual or, to the best of the Borrower’s knowledge, threatened withdrawal of the Operator’s DOC or the Vessel’s ISSC or SMC or other certification or documentation related to the ISM Code or otherwise required for the operation of the Vessel;

(r)Liens. other than as permitted hereby, there are no liens of any kind on any property owned by the Borrower or any Subsidiary of the Borrower;

(s)Debt. other than as permitted hereby, the Borrower has no Debt;

(t)No Proceedings to Dissolve. there are no proceedings or actions pending or contemplated by any Security Party, or, contemplated by any third party, to dissolve or terminate any Security Party;

(u)Solvency. in the case of each of the Security Parties, (a) the sum of its assets, at a fair valuation, does and will exceed its liabilities, including, to the extent they are reportable as such in accordance with GAAP, contingent liabilities, (b) the present fair market salable value of its assets is not and shall not be less than the amount that will be required to pay its probable liability on its then existing debts, including, to the extent they are reportable as such in accordance with GAAP, contingent liabilities, as they mature, (c) it does not and will not have unreasonably small working capital with which to continue its business and (d) it has not incurred, does not intend to incur and does not believe it will incur, debts beyond its ability to pay such debts as they mature;

(v)Compliance with Laws. each of the Security Parties is in compliance with all applicable laws except where the failure to comply would not alone or in the aggregate result in a Material Adverse Effect; and

(w)Survival. all representations, covenants and warranties made herein and in any certificate or other document delivered pursuant hereto or in connection herewith shall survive the making of the Loan and the issuance of the Note.

3.THE LOAN

3.1.Purpose/Making of the Loan.

(a)Purpose. The Lenders shall make the Loan available to the Borrower for the purpose of financing a portion of the acquisition price to be paid for the Vessel.

(b)Making of the Loan.

(i)   Each of the Lenders, relying upon each of the representations and warranties set out in Section 2, hereby severally and not jointly agrees with the Borrower that, subject to and upon the terms of this Loan Agreement, it will, not later than 11:00 A.M. (New York time) on the Drawdown Date (except as provided in subsection (ii) of this Section), make its portion of the Loan, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address and to such account as set forth on Schedule 1 or to such account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. Unless the Administrative Agent determines that any applicable condition specified in Section 4.1 or 4.2 has not been satisfied, the Administrative Agent will make the funds so received from the Lenders available to the Borrower at the aforesaid address, subject to the receipt of the funds by the Administrative Agent as provided in the immediately preceding sentence, not later than 10:00 A.M. (New York City time) on the Drawdown Date, and in any event as soon as practicable after receipt. The Loan shall be repayable as provided in Section 5.

(ii)   Unless the Administrative Agent shall have received notice from a Lender prior to the Drawdown Date that such Lender will not make available to the Administrative Agent such Lender’s share of the Loan, the Administrative Agent may assume that such Lender has made such share available to the Administrative Agent on the Drawdown Date in accordance with this Section 3.1 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such share available to the Administrative Agent, such Lender and the Borrower (but without duplication and not if such Lender is an affiliate of the Administrative Agent) severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of (y) the LIBOR rate for overnight or weekend deposits plus the Applicable Margin and (z) the interest rate applicable thereto pursuant to Section 6.1 and (ii) in the case of such Lender, the LIBOR rate for overnight or weekend deposits. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender’s share of the Loan included in such amount for purposes of this Loan Agreement as of the date such amount was repaid. Nothing in this subsection (b)(ii) shall be deemed to relieve any Lender of its obligation to make its share of the Loan to the extent provided in this Loan Agreement. In the event that the Borrower is required to repay the Loan to the Administrative Agent pursuant to this Section 3.1(b)(ii), as between the Borrower and the defaulting Lender, the liability for any breakfunding costs as described in Section 4.3 shall be borne by the defaulting Lender. If the defaulting Lender has not paid any such breakage costs upon demand by the Administrative Agent therefor, the Borrower shall pay such breakage costs upon demand by the Administrative Agent and the Borrower shall be entitled to recover any such payment for breakfunding costs made by the Borrower from the defaulting Lender.

3.2.Drawdown Notice. The Borrower shall, by 11:00 a.m. New York time, at least three (3) Banking Days before the Drawdown Date, serve a notice (a “Drawdown Notice”), substantially in the form of Exhibit I, on the Administrative Agent, which notice shall (a) be in writing addressed to the Administrative Agent, (b) be effective on receipt by the Administrative Agent, (c) specify the amount of the Loan to be drawn, (d)  specify the Banking Day on which the Loan is to be drawn and, subject to the terms of Section 6.3 hereof, the Interest Period, (e) specify the disbursement instructions and (f) be irrevocable. The Administrative Agent shall deliver the Drawdown Notice to Lenders as soon as practicable after its receipt thereof.

3.3.Effect of Drawdown Notice. The Drawdown Notice shall be deemed to constitute a warranty by the Borrower (a) that the representations and warranties stated in Section 2 (updated mutatis mutandis) are true and correct on and as of the date of the Drawdown Notice and will be true and correct on and as of the Drawdown Date as if made on such date, and (b) that no Event of Default nor any event which with the giving of notice or passage or both would constitute an Event of Default has occurred and is continuing.

4.CONDITIONS

4.1.Conditions Precedent to the Effectiveness of this Loan Agreement. The effectiveness of this Loan Agreement and the obligation of the Lenders to make the Loan available to the Borrower under this Loan Agreement shall be expressly subject to the following conditions precedent:

(a)Corporate Authority. the Administrative Agent shall have received the following documents in form and substance satisfactory to the Administrative Agent:

(i)   copies, certified as true and complete by an officer of the Borrower, of the resolutions of the board of directors of the Borrower evidencing approval of this Loan Agreement and the Note and authorizing an appropriate officer or officers or attorney-in-fact or attorneys-in-fact to execute the same on its behalf, or other evidence of such approvals and authorizations;

(ii)   copies, certified as true and complete by an officer of the Guarantor, of the resolutions of the board of directors evidencing approval of this Loan Agreement, and those Security Documents to which it is to be a party and authorizing an appropriate officer or officers or attorney-in-fact or attorneys-in-fact to execute the same on its behalf, or other evidence of such approvals and authorizations;

(iii)   copies, certified as true and complete by an officer of each Security Party, of all documents evidencing any other necessary action (including actions by such parties thereto other than such Security Party as may be required by the Administrative Agent), approvals or consents with respect to this Loan Agreement, the Note and the Security Documents;

(iv)   copies, certified as true and complete by an officer of the respective Security Party, of the certificate of incorporation and by-laws, certificate of formation and operating agreement, or equivalent instruments thereof;

(v)   certificate of an authorized officer of the Guarantor certifying that it legally and beneficially directly owns, all of the issued and outstanding capital stock, of Seasak OBO Holdings Ltd., and that Seasak OBO Holdings Ltd. legally and beneficially owns all of the issued and outstanding capital stock of the Borrower, and all such capital stock is free and clear of any liens, claims, pledges or other encumbrances whatsoever;

(vi)   certificate of an officer of the Guarantor confirming the solvency of the Guarantor;

(vii)   certificate of an authorized officer of the Guarantor (other than the Borrower) certifying as to the record ownership of all of its issued and outstanding capital stock; and

(viii)   certificates of the jurisdiction of incorporation or formation, as the case may be, of each Security Party as to the good standing thereof;

(b)The Loan Agreement. the Borrower shall have duly executed and delivered this Loan Agreement to the Administrative Agent;

(c)The Note. the Borrower shall have duly executed and delivered the Note to the Administrative Agent;

(d)The Guarantor. the Guarantor shall have duly executed and delivered the Consent and Agreement and the Guaranty to the Administrative Agent;

(e)The Vessel. the Administrative Agent shall have received evidence satisfactory to it that the Vessel:

(i)   has been delivered to the Borrower;

(ii)   is in the sole and absolute ownership of the Borrower and duly registered in the Borrower’s name under Bahamian flag, unencumbered, save and except for the Mortgage, recorded against it and as otherwise permitted thereby;

(iii)   is classed in the highest classification and rating for vessels of the same age and type with its Classification Society without any material outstanding recommendations;

(iv)   is operationally seaworthy and in every way fit for its intended service;

(v)   is insured in accordance with the provisions of the Mortgage recorded against it and the requirements thereof in respect of such insurance have been complied with;

(f)Vessel Documents. Upon the delivery of the Vessel, the Borrower shall have duly executed and delivered to the Administrative Agent:

(i)   the Mortgage over the Vessel;

(ii)   an Insurances Assignment with respect to the Vessel;

(iii)   an Earnings Assignment with respect to the Vessel;

(iv)   the Assignment Notices with respect to the Insurances Assignment and Earnings Assignment;

(v)   Uniform Commercial Code Financing Statements for filing with the District of Columbia and in such other jurisdictions as the Administrative Agent may reasonably require;

(g)Vessel Liens. the Administrative Agent shall have received evidence satisfactory to it and to its legal advisor that, save for the liens created by the Mortgage and the Assignments relating to the Vessel, there are no liens, charges or encumbrances of any kind whatsoever on the Vessel or on its earnings except as permitted hereby or by any of the Security Documents;

(h)ISM DOC. the Administrative Agent shall have received a copy of the DOC for the Vessel;

(i)Environmental Claims. the Administrative Agent shall be satisfied that neither the Borrower nor any of its Affiliates is subject to any Environmental Claim;

(j)Fees. the Administrative Agent shall have received payment in full of all fees and expenses then due to the Agents and/or the Lenders under Section 13;

(k)Accounts. the Borrower shall have established a master operating account into which Assigned Moneys are to be paid (the “Operating Account”) with the Depositary and shall have pledged its interest in the Operating Account and all other accounts in the Borrower’s name to the Security Agent pursuant to an Account Pledge;

(l)Compliance Certificate. the Administrative Agent having received a Compliance Certificate from each Security Party with respect to the most recently ended fiscal quarter;

(m)Vessel Appraisal. the Administrative Agent having received an appraisal with respect to the Fair Market Value on or about thirty (30) days prior to the date hereof;

(n)Charter Agreement. the Administrative Agent having received a copy of the Charter Agreement;

(o)Money Laundering Due Diligence. the Administrative Agent having received such documentation and other evidence as is reasonably requested by the Administrative Agent in order for each of the Lenders to carry out and be satisfied with the results of all necessary “know your client” or other checks which is required to carry out in relation to the transactions contemplated by this Loan Agreement, the Note and the Security Documents;

(p)Legal Opinions. the Administrative Agent, on behalf of the Agents and the Lenders, shall have received legal opinions addressed to the Administrative Agent from (i) Parker Wise, Esq., counsel for the Security Parties, (ii) Higgs & Johnson, special Bahamian counsel to the Agents and the Lenders, and (iii) Seward & Kissel LLP, special counsel to the Agents and Lenders, in each case in such form as the Administrative Agent may require, as well as such other legal opinions as the Administrative Agent shall have required as to all or any matters under the laws of the United States of America, the State of New York, the Republic of the Marshall Islands, the Republic of Liberia and the Commonwealth of the Bahamas covering the representations and conditions which are the subjects of Section 2 and this Section 4.1.

4.2.Further Conditions Precedent. The obligation of the Lenders to make the Loan available to the Borrower under this Loan Agreement shall be expressly and separately subject to the following further conditions precedent on the Drawdown Date:

(a)Drawdown Notice. the Administrative Agent having received a Drawdown Notice in accordance with the terms of Section 3.2;

(b)Representations and Warranties. the representations stated in Section 2 (updated mutatis mutandis to such date) being true and correct as if made on and as of that date;

(c)No Event of Default. no Event of Default having occurred and being continuing and no event having occurred and being continuing which, with the giving of notice or passage, or both, would constitute an Event of Default;

(d)No Change in Laws. the Administrative Agent being satisfied that no change in any applicable laws, regulations, rules or in the interpretation thereof shall have occurred which make it unlawful for any Security Party to make any payment as required under the terms of this Loan Agreement, the Note, the Security Documents or any of them; and

(e)No Material Adverse Effect. there having been no Material Adverse Effect since the date hereof.

4.3.Breakfunding Costs. In the event that, on the date specified for the making of the Loan in the Drawdown Notice, the Lenders shall not be obliged under this Loan Agreement to make the Loan available, the Borrower shall indemnify and hold the Lenders fully harmless against any losses which the Lenders (or any thereof) may sustain as a result of borrowing or agreeing to borrow funds to meet the drawdown requirement of the Drawdown Notice and the certificate of the relevant Lender or Lenders shall, absent manifest error, be conclusive and binding on the Borrower as to the extent of any such losses.

4.4.Satisfaction after Drawdown. Without prejudice to any of the other terms and conditions of this Loan Agreement, in the event the Lenders, in their sole discretion, make the Loan available prior to the satisfaction of all or any of the conditions referred to in Sections 4.1 or 4.2, the Borrower hereby covenants and undertakes to satisfy or procure the satisfaction of such condition or conditions within fourteen (14) days after the Drawdown Date (or such longer period as the Lenders, in their sole discretion, may agree).

5.REPAYMENT AND PREPAYMENT

5.1.Repayment. Subject to the provisions of this Section 5 regarding prepayments and the application thereof, the Borrower shall repay the principal amount of the Loan on each of the Payment Dates in sixteen (16) consecutive installments payable quarterly in arrears commencing on the date occurring three (3) months after the Drawdown Date, each installment being in the amount of Five Hundred Fifty Thousand Dollars ($550,000), the final such installment to be paid together with a balloon payment in the amount of Three Million Two Hundred Thousand Dollars ($3,200,000).

5.2.Voluntary Prepayment; No Re-Borrowing. The Borrower may prepay, upon five (5) Banking Days written notice, the outstanding amount of the Loan or any portion thereof, without penalty, provided that if such prepayment is made on a day other than the last day of the Interest Period such prepayment shall be made together with the costs and expenses provided for in Section 5.4. Each prepayment shall be in a minimum amount of One Million Dollars ($1,000,000) plus any Five Hundred Thousand Dollar ($500,000) multiple thereof or the full amount of the Loan then outstanding. Prepayments shall be applied to the remaining installments in the inverse order of their due date for payment and will not be available for re-borrowing.

5.3.Mandatory Prepayment Sale or Loss of Vessel. On (i) any sale of the Vessel or (ii) the earlier of (x) ninety (90) days after the Total Loss of the Vessel or (y) the date on which the insurance proceeds in respect of such loss are received by the Borrower or the Security Agent as assignee thereof, the Borrower shall repay the Loan in full and all other amounts owed under the Loan or otherwise in connection with the Loan.

5.4.Interest and Costs with Prepayments/Application of Prepayments. Any prepayment of the Loan made hereunder (including, without limitation, those made pursuant to Sections 5 and 10.4) shall be subject to the condition that on the date of prepayment all accrued interest to the date of such prepayment shall be paid in full, together with any and all costs or expenses incurred by any Lender in connection with any breaking of funding (as certified by such Lender, which certification shall, absent any manifest error, be conclusive and binding on the Borrower).

6.INTEREST AND RATE

6.1.Applicable Rate. The Loan shall bear interest at the Applicable Rate, which shall be the rate per annum which is equal to the aggregate of (a) LIBOR for the relevant Interest Period, plus (b) the Applicable Margin. The Applicable Rate shall be determined by the Administrative Agent two (2) Banking Days prior to the first (1^st) day of the relevant Interest Period and the Administrative Agent shall promptly notify the Borrower in writing of the Applicable Rate as and when determined. Each such determination, absent manifest error, shall be conclusive and binding upon the Borrower.

6.2.Default Rate. Any amounts due under this Loan Agreement, not paid when due, whether by acceleration or otherwise, shall bear interest thereafter from the due date thereof until the date of payment at a rate per annum equal to the sum of (i) the Applicable Rate, plus (ii) two percent (2%) per annum (the “Default Rate”). In addition, following the occurrence of any Event of Default and until such Event of Default is cured to the satisfaction of the Majority Lenders, the Loan shall bear interest at the Default Rate.

6.3.Interest Periods. The Borrower shall give the Administrative Agent an Interest Notice specifying the Interest Period selected for the next subsequent Interest Period by 11:00 a.m. New York time at least three (3) Banking Days prior to the end of any then existing Interest Period, which notice the Administrative Agent agrees to forward on to all Lenders on a same day basis or as soon as practicable. If at the end of any then existing Interest Period the Borrower fail to give an Interest Notice, the relevant Interest Period shall be three (3) months. The Borrower’s right to select an Interest Period shall be subject to the restriction that no selection of an Interest Period shall be effective unless each Lender is satisfied that the necessary funds will be available to such Lender for such period and that no Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default shall have occurred and be continuing. The Borrower shall reimburse the Lenders for any and all costs or expenses incurred by the Lenders in connection with any breaking of funding (as certified by each Lender, which certification, absent manifest error, shall be conclusive and binding in the Borrower) as a consequence of such consolidation.

6.4.Interest Payments. Accrued interest on the Loan shall be payable in arrears on the last day of each Interest Period, except that if the Borrower shall select an Interest Period in excess of three (3) months, accrued interest shall be payable during such Interest Period on each three (3) month anniversary of the commencement of such Interest Period and upon the end of such Interest Period.

7.PAYMENTS

7.1.Place of Payments, No Set Off. All payments to be made hereunder by the Borrower shall be made to the Administrative Agent, not later than 10 a.m. New York time (any payment received after 10 a.m. New York time shall be deemed to have been paid on the next Banking Day) on the due date of such payment, at its office located at 609 Fifth Avenue, Fifth Floor, New York, New York 10017-1021, or to such other office of the Administrative Agent as the Administrative Agent may direct, without set-off or counterclaim and free from, clear of, and without deduction or withholding for, any Taxes, provided, however, that if the Borrower shall at any time be compelled by law to withhold or deduct any Taxes from any amounts payable to the Lenders hereunder, then the Borrower shall pay such additional amounts in Dollars as may be necessary in order that the net amounts received after withholding or deduction shall equal the amounts which would have been received if such withholding or deduction were not required and, in the event any withholding or deduction is made, whether for Taxes or otherwise, the Borrower shall promptly send to the Administrative Agent such documentary evidence with respect to such withholding or deduction as may be required from time to time by the Lenders.

7.2.Tax Credits. If any Lender obtains the benefit of a credit against the liability thereof for federal income taxes imposed by any taxing authority for all or part of the Taxes as to which the Borrower has paid additional amounts as aforesaid in Section 7.1, then such Lender shall pay an amount to the Borrower which that Lender determines will leave it (after such payment) in the same position as it would have been had the Tax payment not been made by the Borrower. Each Lender agrees that in the event that Taxes are imposed on account of the situs of its loans hereunder, such Lender, upon acquiring knowledge of such event, shall, if commercially reasonable and if, in the opinion of that Lender, is not prejudicial to it, shift such loans on its books to another office of such Lender so as to avoid the imposition of such Taxes. Nothing contained in this clause shall in any way prejudice the right of the Lenders to arrange their tax affairs in such way as they, in their sole discretion, deem appropriate. In particular, no Lender shall be required to obtain such tax credit, if this interferes with the way such Lender normally deals with its tax affairs.

7.3.Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim or pursuant to a secured claim under Section 506 of the Federal Bankruptcy Code or other security or interest arising from, or in lieu of, such secured claim, exercised or received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) as a result of which its funded Commitment shall be proportionately less than the funded Commitment of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the funded Commitment of such other Lender so that the aggregate funded Commitment of each Lender shall be in the same proportion to the aggregate funded Commitments then outstanding as its funded Commitment prior to such exercise of banker's lien, setoff or counterclaim or other event was to the principal amount of all funded Commitments outstanding prior to such exercise of banker's lien, setoff or counterclaim or other event; provided, however, that, if any such purchase or purchases or adjustments shall be made pursuant to this Section 7.3 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. Any Lender holding a participation in a funded Commitment deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing to such Lender by reason thereof as fully as if such Lender had made available its share of the Loan. The Borrower expressly consents to the foregoing arrangement.

7.4.Computations; Banking Days. (a) All computations of interest and fees shall be made by the Administrative Agent or the Lenders, as the case may be, on the basis of a 360-day year, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which interest or fees are payable. Each determination by the Administrative Agent or the Lenders of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error;

(b)Whenever any payment hereunder or under the Note shall be stated to be due on a day other than a Banking Day, such payment shall be due and payable on the next succeeding Banking day unless the next succeeding Banking Day falls in the following calendar month, in which case it shall be payable on the immediately preceding Banking Day.

8.EVENTS OF DEFAULT

8.1.Events of Default. The occurrence of any of the following events shall be an Event of Default:

(a)Non-Payment of Principal. any payment of principal is not paid when due; or

(b)Non-Payment of Interest or Other Amounts. any interest or any other amount becoming payable to any Creditor under this Loan Agreement, under the Note or under any of the Security Documents is not paid within three (3) Banking Days of the due date or date of demand (as the case may be); or

(c)Representations. any representation, warranty or other statement made by any Security Party in this Loan Agreement or any of the Security Documents or in any other instrument, document or other agreement delivered in connection herewith or therewith proves to have been untrue or misleading in any material respect as at the date as of which made or confirmed; or

(d)Impossibility; Illegality. it becomes impossible or unlawful for the Borrower or the Guarantor to fulfill any of its covenants or obligations hereunder, under the Note or under any of the Security Documents or for any of the Lenders to exercise any of the rights vested in any of them hereunder, under the Note or under any of the Security Documents; or

(e)Mortgage. there is an event of default under the Mortgage; or

(f)Covenants. any Security Party (i) defaults in the due and punctual observance or performance of Sections 9.1(a), 9.1(c), 9.1(d), 9.1(h), 9.1(j), 9.1(k), 9.1(p), 9.2(i) or 9.2(l) and such default continued unremedied for a period of sixty (60) days or (ii) defaults under any other term, covenant or agreement contained in this Loan Agreement, in the Note, in any of the Security Documents or in any other instrument, document or other agreement delivered in connection herewith or therewith, or there occurs any other event which constitutes a default under this Loan Agreement, under the Note or under any of the Security Documents, in each case other than an Event of Default referred to elsewhere in this Section 8.1; or

(g)Debt. (i) any Security Party shall default in the payment when due of (x) any Financial Indebtedness, or (y) any Debt other than Financial Indebtedness or any other debt, in either case, in the outstanding principal amount equal to or exceeding Five Hundred Thousand Dollars ($500,000); or (ii) such Debt or debt is, or by reason of such default is subject to being, accelerated or any party becomes entitled to enforce the security for any such Debt or debt and such party shall take steps to enforce the same, unless such default or enforcement is being contested in good faith and by appropriate proceedings or other acts and the Security Party, Subsidiary or Affiliate of the Guarantor, as the case may be, shall set aside on its books adequate reserves with respect thereto; or

(h)Ownership of Borrower. the Guarantor shall cease to own directly or indirectly, one hundred percent (100%) of the Borrower; or

(i)Bankruptcy. any Security Party, any Subsidiary or any Affiliate of the Guarantor commences any proceeding under any reorganization, arrangement or readjustment of debt, dissolution, winding up, adjustment, composition, bankruptcy or liquidation law or statute of any jurisdiction, whether now or hereafter in effect (a “Proceeding”), or there is commenced against any thereof any Proceeding and such Proceeding remains undismissed or unstayed for a period of thirty (30) days or any receiver, trustee, liquidator or sequestrator of, or for, any thereof or any substantial portion of the property of any thereof is appointed and is not discharged within a period of thirty (30) days or any thereof by any act indicates consent to or approval of or acquiescence in any Proceeding or the appointment of any receiver, trustee, liquidator or sequestrator of, or for, itself or of, or for, any substantial portion of its property; or

(j)Termination of Operations; Sale of Assets. except as expressly permitted under this Loan Agreement, any Security Party ceases its operations or sells or otherwise disposes of all or substantially all of its assets or all or substantially all of the assets of any Security Party are seized or otherwise appropriated; or

(k)Judgments. any judgment or order is made, the effect whereof would be to render ineffective or invalid this Loan Agreement, the Note or any of the Security Documents or any material provision thereof, or the Borrower or any Security Party asserts that any such agreement or provision thereof is invalid; or

(l)Inability to Pay Debts. any Security Party, any Subsidiary or any Affiliate of the Guarantor is unable to pay or admits its inability to pay its debts as they fall due or a moratorium shall be declared in respect of any material indebtedness of the Borrower or any Affiliate of the Borrower; or

(m)Change in Financial Position. any change in the financial position of the any Security Party or any Affiliate thereof which, in the opinion of the Majority Lenders, shall have a Material Adverse Effect; or

(n)Change in Control. a Change of Control shall occur with respect to any Security Party; or

(o)Cross-Default. any Security Party, any Subsidiary or any Affiliate thereof defaults under any material contract or material agreement to which it is a party or by which it is bound; or

Upon and during the continuance of any Event of Default, the Lenders' obligation to make its share of the Loan available shall cease and the Administrative Agent may, and on the instructions of the Majority Lenders shall, by notice to the Borrower, declare the entire unpaid balance of the then outstanding Loan, accrued interest and any other sums payable by the Borrower hereunder or under the Note due and payable, whereupon the same shall forthwith be due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; provided that upon the happening of an event specified in subsections (i) or (l) of this Section 8.1 with respect to any Security Party, the Note shall be immediately due and payable without declaration or other notice to such Security Party. In such event, the Lenders may proceed to protect and enforce their rights by action at law, suit in equity or in admiralty or other appropriate proceeding, whether for specific performance of any covenant contained in this Loan Agreement, in the Note or in any Security Document, or in aid of the exercise of any power granted herein or therein, or the Lenders may proceed to enforce the payment of the Note or to enforce any other legal or equitable right of the Lenders, or proceed to take any action authorized or permitted under the terms of any Security Document or by applicable law for the collection of all sums due, or so declared due, on the Note. Without limiting the foregoing, the Security Parties agree that during the continuance of any Event of Default each of the Lenders shall have the right to appropriate and hold or apply (directly, by way of set-off or otherwise) to the payment of the obligations of such Security Party to the Lenders hereunder and/or under the Note (whether or not then due) all moneys and other amounts of such Security Party then or thereafter in possession of any Lender, the balance of any deposit account (demand or time, mature or unmatured) of such Security Party then or thereafter with any Lender and every other claim of such Security Party then or thereafter against any of the Lenders.

8.2.Indemnification. The Borrower agrees to, and shall, indemnify and hold the Agents and the Lenders harmless against any loss, as well as against any costs or expenses (including legal fees and expenses), which any of the Agents or the Lenders sustains or incurs as a consequence of any default in payment of the principal amount of the Loan, interest accrued thereon or any other amount payable hereunder, under the Note or under any Security Documents, including, but not limited to, all actual losses incurred in liquidating or re-employing fixed deposits made by third parties or funds acquired to effect or maintain the Loan or any portion thereof. Any Lenders' certification of such costs and expenses shall, absent any manifest error, be conclusive and binding on the Borrower.

8.3.Application of Moneys. Except as otherwise provided in any Security Document, all moneys received by the Creditors under or pursuant to this Loan Agreement, the Note or any of the Security Documents after the happening of any Event of Default (unless cured to the satisfaction of the Majority Lenders) shall be applied by the Administrative Agent in the following manner:

(a)first, in or towards the payment or reimburse-ment of any expenses, including breakfunding costs, or liabilities incurred by the Agents, or the Lenders in connection with the ascertainment, protection or enforcement of their rights and remedies hereunder, under the Note and under any of the Security Documents;

(b)secondly, in or towards payment of any interest owing in respect of the Loan;

(c)thirdly, in or towards repayment of principal of the Loan;

(d)fourthly, in or towards payment of all other sums which may be owing to the Agents, or any of them, or the Lenders under this Loan Agreement, under the Note or under any of the Security Documents; and

(e)fifthly, the surplus (if any) shall be paid to the Borrower or to whosoever else may be entitled thereto.

9.COVENANTS

9.1.Affirmative Covenants. The Borrower hereby covenants and undertakes with the Lenders that, from the date hereof and so long as any principal, interest or other moneys are owing in respect of this Loan Agreement, under the Note or under any of the Security Documents, the Borrower will:

(a)Performance of Agreements. duly perform and observe, and procure the observance and performance by all other parties thereto (other than the Agents and the Lenders) of, the terms of this Loan Agreement, the Note and the Security Documents;

(b)Notice of Default, etc. promptly upon, and in any event no later than five (5) Banking Days after, obtaining knowledge thereof, inform the Administrative Agent of the occurrence of (a) any Event of Default or of any event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, (b) any litigation or governmental proceeding pending or threatened against it or against any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect, including but not limited to, in respect of any Environmental Claim, (c) the withdrawal of the Vessel's rating by its Classification Society or the issuance by the Classification Society of any material recommendation or notation affecting class and (d) any other event or condition which is reasonably likely to have a Material Adverse Effect;

(c)Obtain Consents. without prejudice to Section 2.1 and this Section 9.1, obtain every consent and do all other acts and things which may from time to time be necessary or advisable for the continued due performance of all its and the other Security Parties’ respective obligations under this Loan Agreement, under the Note and under the Security Documents;

(d)Financial Information. deliver to each Lender:

(i)   as soon as available but not later than one hundred fifty (150) days after the end of each fiscal year of the Borrower, complete copies of the financial reports of the Borrower (and after the Financial Covenants Commencement Date, together with a Compliance Certificate), all in reasonable detail, which shall include at least the balance sheet of the Borrower as of the end of such year and the related statements of income and sources and uses of funds for such year, and such reports may be unaudited, but shall be certified to be true and complete by the chief financial officer of the Borrower;

(ii)   as soon as available but not later than seventy-five (75) days after the end of each of the first three quarters of each fiscal year of the Borrower, a quarterly interim balance sheet of the Borrower and the related profit and loss statements and sources and uses of funds (and after the Financial Covenants Commencement Date, together with a Compliance Certificate), all in reasonable detail, unaudited, but certified to be true and complete by the chief financial officer of the Borrower;

(iii)   as soon as available but not later than one hundred fifty (150) days after the end of each fiscal year of the Guarantor, complete copies of the consolidated financial reports of the Guarantor and its Subsidiaries (and after the Financial Covenants Commencement Date, together with a Compliance Certificate), all in reasonable detail, which shall include at least the consolidated balance sheet of the Guarantor and its Subsidiaries as of the end of such year and the related consolidated statements of income and sources and uses of funds for such year, which shall be audited reports prepared by an Acceptable Accounting Firm;

(iv)   as soon as available but not later than seventy-five (75) days after the end of the first three quarters of each fiscal year of the Guarantor, a quarterly interim consolidated balance sheet of the Guarantor and the related consolidated profit and loss statements and sources and uses of funds (and after the Financial Covenants Commencement Date, together with a Compliance Certificate), all in reasonable detail, which shall be audited reports prepared by an Acceptable Accounting Firm;

(v)   within ten (10) days of a Security Party’s receipt thereof, copies of all audit letters or other correspondence from any external auditors including material financial information in respect of such Security Party;

(vi)   such other statements (including, without limitation, monthly consolidated statements of operating revenues and expenses), lists of assets and accounts, budgets, forecasts, reports and other financial information with respect to its business as the Administrative Agent may from time to time request, certified to be true and complete by the chief financial officer of the respect Security Party;

(e)Vessel Valuations. reimburse the Administrative Agent for the cost of appraisals of the Fair Market Value. The Administrative Agent shall be entitled to obtain such valuations from two ship brokers approved by the Lenders two times in each calendar year and upon the occurrence of an Event of Default;

(f)Corporate Existence. do or cause to be done, and procure that the Guarantor shall do or cause to be done, all things necessary to preserve and keep in full force and effect its corporate existence, and all licenses, franchises, permits and assets necessary to the conduct of its business;

(g)Books and Records. at all times keep proper books of record and account into which full and correct entries shall be made in accordance with GAAP;

(h)Taxes and Assessments. pay and discharge, and cause each Subsidiary to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or property prior to the date upon which penalties attach thereto; provided, however, that it shall not be required to pay and discharge, or cause to be paid and discharged, any such tax, assessment, charge or levy so long as the legality thereof shall be contested in good faith and by appropriate proceedings or other acts and it shall set aside on its books adequate reserves with respect thereto;

(i)Inspection. allow, upon ten (10) Banking Days notice from the Administrative Agent, any representative or representatives designated by the Administrative Agent, subject to applicable laws and regulations, to visit and inspect any of its properties, and, on request, to examine its books of account, records, reports, agreements and other papers and to discuss its affairs, finances and accounts with its officers, all at such times and as often as the Administrative Agent requests;

(j)Inspection and Survey Reports. if the Administrative Agent shall so request and upon reasonable notice, the Borrower shall permit the Administrative Agent to inspect the Vessel and shall provide the Administrative Agent with copies of all internally generated inspection or survey reports on the Vessel and, once in any twelve month period, the Administrative Agent may require a review of class records and an inspection report prepared by a surveyor appointed by the Administrative Agent, the results of such class record review and inspection report to be satisfactory to the Administrative Agent;

(k)Compliance with Statutes, Agreements, etc. do or cause to be done all things necessary to comply with all contracts or agreements to which it, or any Subsidiary is a party, and all laws, and the rules and regulations thereunder, applicable to the Borrower, including, without limitation, those laws, rules and regulations relating to employee benefit plans and environmental matters;

(l)Environmental Matters. promptly upon the occurrence of any of the following conditions, provide to the Administrative Agent a certificate of an executive officer thereof, specifying in detail the nature of such condition and its proposed response or the response of its Environmental Affiliates: (a) its receipt or the receipt by any other Security Party or any Environmental Affiliates of the Borrower or any other Security Party of any written communication whatsoever that alleges that such person is not in compliance with any applicable Environmental Law or Environmental Approval, if such noncompliance could reasonably be expected to have a Material Adverse Effect, (b) knowledge by it, or by any other Security Party or any Environmental Affiliates of the Borrower or any other Security Party that there exists any Environmental Claim pending or threatened against any such person, which could reasonably be expected to have a Material Adverse Effect, or (c) any release, emission, discharge or disposal of any material that could form the basis of any Environmental Claim against it, any other Security Party or against any Environmental Affiliates of the Borrower or any other Security Party, if such Environmental Claim could reasonably be expected to have a Material Adverse Effect. Upon the written request by the Administrative Agent, it will submit to the Administrative Agent at reasonable intervals, a report providing an update of the status of any issue or claim identified in any notice or certificate required pursuant to this subsection;

(m)Vessel Management. cause the Vessel to be managed technically by B+H Management Ltd., a Bermuda Corporation, or an affiliate of the Guarantor or a company selected by the Borrower and approved by the Lenders; provided, however, that the Vessel may be technically managed by Paradise Navigation S.A. until March 31, 2007, and the Borrower will procure that the Guarantor shall supervise the special survey of the Vessel scheduled to be conducted in December 2006, which is to be undertaken by Paradise Navigation S.A.;

(n)Vessel Employment. cause the Vessel to be employed under the Charter through and including March 11, 2007, and thereafter to trade from time to time on spot or time charter or under a contract of affreightment with an Acceptable Charterer;

(o)Assignment of Charter. upon the entry by the Borrower into any charter in respect of the Vessel with a duration of twelve (12) months or more, execute a Charter Assignment in respect of such charter;

(p)ISM Code, ISPS Code and MTSA Matters. (i) procure that the Operator will comply with and ensure the Vessel will comply with the requirements of the ISM Code, ISPS Code and MTSA in accordance with the implementation schedule thereof, including (but not limited to) the maintenance and renewal of valid certificates and when required, security plans, pursuant thereto; and (ii) will procure that the Operator will immediately inform the Administrative Agent if there is any threatened or actual withdrawal of its DOC, SMC or the ISSC in respect of the Vessel; and (iii) will procure that the Operator will promptly inform the Administrative Agent upon the issuance to the Borrower or Operator of a DOC and the issuance to the Vessel of an SMC or ISSC;

(q)Brokerage Commissions, etc. indemnify and hold each of the Creditors and the Lenders harmless from any claim for any brokerage commission, fee, or compensation from any broker or third party resulting from the transactions contemplated hereby;

(r)Operating Account; Assignment. maintain an Operating Account with the Depositary and, upon the request of the Administrative Agent, shall procure that all earnings of the Vessel shall be paid into the Operating Account and, hereby pledges, assigns and grants to the Security Agent, for the benefit of the Lenders, a security interest in all funds from time to time in the Operating Account; and

(s)Insurance. maintain, and cause each other Security Party to maintain, with financially sound and reputable insurance companies, insurance on all their respective properties and against all such risks and in at least such amounts as are usually insured against by companies of established reputation engaged in the same or similar business from time to time.

9.2.Negative Covenants. The Borrower covenants and undertakes with the Lenders that, from the date hereof and so long as any principal, interest or other moneys are owing in respect of this Loan Agreement, under the Note or under any of the Security Documents, the Borrower will not, and will procure that the Guarantor will not, to the extent of Sections 9.2(e), (g), (h), (i), or (j), without the prior written consent of the Majority Lenders (or all of the Lenders if required by Section 15.8):

(a)Liens. create, assume or permit to exist, any mortgage, pledge, lien, charge, encumbrance or any security interest whatsoever upon any Collateral except:

(i)   liens for taxes not yet payable for which adequate reserves have been maintained;

(ii)   the Mortgage, the Assignments and other liens in favor of the Security Agent;

(iii)   liens, charges and encumbrances against the Vessel permitted to exist under the terms of the Mortgage; and

(iv)   pledges of certificates of deposit or other cash collateral securing any Security Party's reimbursement obligations in connection with letters of credit now or hereafter issued for the account of such Security Party in connection with the establishment of the financial responsibility of the Security Parties under 33 C.F.R. Part 130 or 46 C.F.R. Part 540, as the case may be, as the same may be amended or replaced;

(b)Debt. with respect to the Borrower (i) incur any Debt, excluding Debt to the Agents or any of the Lenders hereunder, other than in the ordinary course of business, (ii) incur any Debt that would cause the Borrower to be in default under any provision of Section 8.3 or (iii) make advances or extend credit to, or become obligated, contingently or otherwise, in respect of any Debt of, a third party;

(c)Change of Flag, Class, Management or Ownership. change the flag of the Vessel other than to a jurisdiction acceptable to the Majority Lenders, their Classification Society other than to another member of the International Association of Classification Societies, the technical management of the Vessel other than to one or more technical management companies acceptable to the Majority Lenders or the immediate or ultimate ownership of the Vessel;

(d)Chartering. enter into any charter with respect to the Vessel with any party other than the Guarantor or a Subsidiary or an Affiliate thereof, having a duration, including any options to extend such charter, of more than twelve (12) months without the prior consent of the Majority Lenders;

(e)Change in Business. materially change the nature of its business or commence any business materially different from its current business;

(f)Sale or Pledge of Shares. sell, assign, transfer, pledge or otherwise convey or dispose of any of the shares (including by way of spin-off, installment sale or otherwise) of the capital stock of the Borrower;

(g)Sale of Assets. sell, or otherwise dispose of, the Vessel (unless otherwise in accordance with this Loan Agreement) or, with respect to the Guarantor, any other asset (including by way of spin-off, installment sale or otherwise) which is substantial in relation to its assets taken as a whole; unless immediately before and after giving effect to such sale or disposition, no Event of Default shall have occurred and be continuing, and the acquirer in such sale or disposition shall have assumed all liabilities and obligations of the Borrower shall have provided not less than ten (10) Banking Days in advance, a certificate declaring that no Event of Default exists or would result from such sale or disposition and demonstrating compliance on a pro-forma basis with all covenants contained in this Loan Agreement. Such acquirer shall be required to make the same representations and warranties made by the Borrower and the Guarantor herein;

(h)Changes in Offices. change the location of the chief executive office of any Security Party, the office of the chief place of business of any such parties or the office of the Security Parties in which the records relating to the earnings or insurances of the Vessel are kept unless the Lenders shall have received thirty (30) days prior written notice of such change;

(i)Consolidation and Merger. consolidate with, or merge into, any corporation or other entity, or merge any corporation or other entity into it; unless immediately before and after giving effect to such consolidation or merger, no Event of Default shall have occurred and be continuing, and the survivor in such consolidation or merger shall have assumed all liabilities and obligations of the parties thereto and the Borrower shall have provided not less than ten (10) Banking Days in advance, a certificate declaring that no Event of Default exists or would result from such consolidation or merger and demonstrating compliance on a pro-forma basis with all covenants contained in this Loan Agreement. Such surviving entity shall be required to make the same representations and warranties made by the Borrower and the Guarantor herein;

(j)Change Fiscal Year. change its fiscal year;

(k)Use of Corporate Funds. the Borrower will not pay out any funds to any company or person except (i) in the ordinary course of business in connection with the management of the business of the Borrower and its Subsidiaries, including the operation and/or repair of the Vessel and other vessels owned or operated by such parties and (ii) the servicing of the Debt permitted hereunder if immediately before and after the making of such payment, an Event of Default shall have occurred or be continuing;

(l)Issuance of Shares. permit the Borrower to issue or dispose of any shares of its own capital stock to any person other than the Guarantor;

(m)No Money Laundering. in connection with this Loan Agreement or any of the Security Documents, contravene or permit any Subsidiary to contravene, any law, official requirement or other regulatory measure or procedure implemented to combat “money laundering” (as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Communities) and comparable United States Federal and state laws. In addition, the Borrower confirms that it is the beneficiary (within the meaning of Section 8 of the German Money Laundering Act (Geldw’schegesetz)) for the Loan made available to it. The Borrower will promptly inform the Lenders (by written notice to the Agent) if the Borrower is not or ceases to be the beneficiary and will provide in writing the name and address of the beneficiary;

(n)Use of Proceeds. will not use the proceeds of the Loan in violation of Regulation T, U or X; and

9.3.Asset Maintenance. If at any time during the term of the Loan Agreement, the outstanding amount of the Loan is greater than the Permitted Percentage of the Fair Market Value, the Borrower shall, within a period of thirty (30) days following receipt by the Borrower of written notice from the Administrative Agent notifying the Borrower of such excess and specifying the amount thereof (which amount shall, in the absence of manifest error, be deemed to be conclusive and binding on the Borrower), either (i) deliver to the Security Agent such additional collateral as may be satisfactory to the Lenders in their sole discretion of sufficient value to make the aggregate of Fair Market Value plus the additional collateral, equal to the Required Percentage of the outstanding amount of the Loan or (ii) the Borrower shall prepay such amount of the Loan (together with interest thereon and any other monies payable in respect of such prepayment pursuant to Section 5.4) as shall result in the Fair Market Value being not less than the Required Percentage

10.ASSIGNMENT

This Loan Agreement shall be binding upon, and inure to the benefit of, the Borrower and the Lenders, the Agents and their respective successors and assigns, except that the Borrower may not assign any of its rights or obligations hereunder. Each Lender shall be entitled to assign their respective rights and obligations under this Loan Agreement or grant participation(s) in the Loan to any subsidiary, holding company or other affiliate of such Lender, to any subsidiary or other affiliate company of any thereof or to any other bank or financial institution or collateralized loan obligation trust or fund (a “CLO”) without the consent of the Borrower. Except for the Agent, which shall retain an interest in this Loan in an amount equal to at least 25% thereof, each Lender may transfer all or any part of its rights, benefits and its obligations under this Loan Agreement and any of the other Security Documents to any subsidiary or other affiliate company of any thereof or to any other bank or financial institution or CLO (the “Transferee”) if the Transferee, by delivery of such undertaking, becomes bound by the terms of this Loan Agreement and agrees to perform all or, as the case may be, part of such Lender’s obligations under this Loan Agreement. Each Lender may disclose to a prospective assignee, transferee or to any other person who may propose entering into contractual relations with such Lender in relation to the Loan Agreement and such information about the Borrower as such Lender shall consider appropriate. The Borrower will take all actions requested by the Agents or any Lender to effect such assignment, including, without limitation, the execution of a written consent to any Assignment and Assumption Agreement.

11.ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.

11.1.Illegality. In the event that by reason of any change in any applicable law, regulation or regulatory requirement or in the interpretation thereof, a Lender has a basis to conclude that it has become unlawful for any Lender to maintain or give effect to its obligations as contemplated by this Loan Agreement, such Lender shall inform the Administrative Agent and the Borrower to that effect, whereafter the liability of such Lender to make its Commitment available shall forthwith cease and the Borrower shall be required either to repay to such Lender that portion of the Loan advanced by such Lender immediately or, if such Lender so agrees, to repay such portion of the Loan to such Lender on the last day of any then current Interest Period in accordance with and subject to the provisions of Section 11.5. In any such event, but without prejudice to the aforesaid obligations of the Borrower to repay such portion of the Loan, the Borrower and the relevant Lender shall negotiate in good faith with a view to agreeing on terms for making such portion of the Loan available from another jurisdiction or otherwise restructuring such portion of the Loan on a basis which is not unlawful.

11.2.Increased Costs. If any change in applicable law, regulation or regulatory requirement (including any applicable law, regulation or regulatory requirement which relates to capital adequacy or liquidity controls or which affects the manner in which any Lender allocates capital resources under this Loan Agreement), or in the interpretation or application thereof by any governmental or other authority, shall:

(i)   subject any Lender to any Taxes with respect to its income from the Loan, or any part thereof; or

(ii)   change the basis of taxation to any Lender of payments of principal or interest or any other payment due or to become due pursuant to this Loan Agreement (other than a change in the basis effected by the jurisdiction of organization of such Lender, the jurisdiction of the principal place of business of such Lender, the United States of America, the State or City of New York or any governmental subdivision or other taxing authority having jurisdiction over such Lender (unless such jurisdiction is asserted by reason of the activities of the Borrower or any of the other Security Parties) or such other jurisdiction where the Loan may be payable); or

(iii)   impose, modify or deem applicable any reserve requirements or require the making of any special deposits against or in respect of any assets or liabilities of, deposits with or for the account of, or loans by, a Lender; or

(iv)   impose on any Lender any other condition affecting the Loan or any part thereof;

and the result of the foregoing is either to increase the cost to such Lender of making available or maintaining its Commitment or any part thereof or to reduce the amount of any payment received by such Lender, then and, in any such case, if such increase or reduction, in the opinion of such Lender, materially affects the interests of such Lender under or in connection with this Loan Agreement:

(i)   the Lender shall notify the Administrative Agent and the Borrower of the happening of such event, and

(ii)   the Borrower agrees forthwith upon demand to pay to such Lender such amount as such Lender certifies to be necessary to compensate such Lender for such additional cost or such reduction.

11.3.Nonavailability of Funds. If the Administrative Agent shall determine that, by reason of circumstances affecting the London Interbank Market generally, adequate and reasonable means do not or will not exist for ascertaining the Applicable Rate for the Loan for any Interest Period, the Administrative Agent shall give notice of such determination to the Borrower. The Majority Lenders shall then determine the interest rate and/or Interest Period to be substituted for those which would otherwise have applied under this Loan Agreement. If the Majority Lenders are unable to agree upon such a substituted interest rate and/or Interest Period within thirty (30) days of the giving of such determination notice, the Administrative Agent shall set an interest rate and Interest Period to take effect from the expiration of the Interest Period in effect at the date of determination, which rate shall be equal to the Margin plus the cost to the Lenders (as certified by each Lender) of funding the Loan. In the event the state of affairs referred to in this Section 11.3 shall extend beyond the end of the Interest Period, the foregoing procedure shall continue to apply until circumstances are such that the Applicable Rate may be determined pursuant to Section 6.

11.4.Lender's Certificate Conclusive. A certificate or determination notice of any Lender as to any of the matters referred to in this Section 11 shall, absent manifest error, be conclusive and binding on the Borrower.

11.5.Compensation for Losses. Where the Loan or any portion thereof is to be repaid by the Borrower pursuant to this Section 11, the Borrower agrees simultaneously with such repayment to pay to the relevant Lender all accrued interest to the date of actual payment on the amount repaid and all other sums then payable by the Borrower to the relevant Lender pursuant to this Loan Agreement, together with such amounts as may be certified by the relevant Lender to be necessary to compensate such Lender for any actual loss, premium or penalties incurred or to be incurred thereby on account of funds borrowed to make, fund or maintain its Commitment or such portion thereof for the remainder (if any) of the then current Interest Period or Interest Periods, if any, but otherwise without penalty or premium.

12.CURRENCY INDEMNITY

12.1.Currency Conversion. If, for the purpose of obtaining or enforcing a judgment in any court in any country, it becomes necessary to convert into any other currency (the “judgment currency”) an amount due in Dollars under this Loan Agreement, the Note or any of the Security Documents, then the conversion shall be made, in the discretion of the Administrative Agent, at the rate of exchange prevailing either on the date of default or on the day before the day on which the judgment is given or the order for enforcement is made, as the case may be (the “conversion date”), provided that the Administrative Agent shall not be entitled to recover under this section any amount in the judgment currency which exceeds at the conversion date the amount in Dollars due under this Loan Agreement, the Note, the Guaranty and/or any of the Security Documents.

12.2.Change in Exchange Rate. If there is a change in the rate of exchange prevailing between the conversion date and the date of actual payment of the amount due, the Borrower shall pay such additional amounts (if any, but, in any event, not a lesser amount) as may be necessary to ensure that the amount paid in the judgment currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount then due under this Loan Agreement, the Note and/or any of the Security Documents in Dollars; any excess over the amount due received or collected by the Lenders shall be remitted to the Borrower.

12.3.Additional Debt Due. Any amount due from the Borrower under this Section 12 shall be due as a separate debt and shall not be affected by judgment being obtained for any other sums due under or in respect of this Loan Agreement, the Note and/or any of the Security Documents.

12.4.Rate of Exchange. The term “rate of exchange” in this Section 12 means the rate at which the Administrative Agent in accordance with its normal practices is able on the relevant date to purchase Dollars with the judgment currency and includes any premium and costs of exchange payable in connection with such purchase.

13.FEES AND EXPENSES

13.1.Fees. The Borrower shall pay to the Administrative Agent an arrangement fee of One Hundred Thousand Dollars ($100,000) payable upon the execution of this Agreement.

13.2.Expenses. The Borrower agrees, whether or not the transactions hereby contemplated are consummated, on demand to pay, or reimburse the Agents for their payment of, the expenses of the Agents and (after the occurrence and during the continuance of an Event of Default) the Lenders incident to said transactions (and in connection with any supplements, amendments, waivers or consents relating thereto or incurred in connection with the enforcement or defense of any of the Agents' and the Lenders' rights or remedies with respect thereto or in the preservation of the Agent's and the Lenders' priorities under the documentation executed and delivered in connection therewith), including, without limitation, all costs and expenses of preparation, negotiation, execution and administration of this Loan Agreement and the documents referred to herein (including, but not limited to, value added tax imposed on any Lender related to those expenses), the fees and disbursements of the Agents' and Lenders' counsel in connection therewith, as well as the fees and expenses of any independent appraisers, surveyors, engineers, inspectors and other consultants retained by the Agents in connection with this Agreement and the transactions contemplated hereby and under the Security Documents, all costs and expenses, if any, in connection with the enforcement of this Loan Agreement, the Note and the Security Documents and stamp and other similar taxes, if any, incident to the execution and delivery of the documents (including, without limitation, the Note) herein contemplated and to hold the Agents and the Lenders free and harmless in connection with any liability arising from the nonpayment of any such stamp or other similar taxes. Such taxes and, if any, interest and penalties related thereto as may become payable after the date hereof shall be paid immediately by the Borrower to the Agents or the Lenders, as the case may be, when liability therefor is no longer contested by such party or parties or reimbursed immediately by the Borrower to such party or parties after payment thereof (if the Agents or the Lenders, at their sole discretion, chooses to make such payment).

14.APPLICABLE LAW, JURISDICTION AND WAIVER

14.1.Applicable Law. This Loan Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

14.2.Jurisdiction. The Borrower hereby irrevocably submits to the jurisdiction of the courts of the State of New York and of the United States District Court for the Southern District of New York in any action or proceeding brought against it by any of the Lenders or the Agents under this Loan Agreement or under any document delivered hereunder and hereby irrevocably agrees that valid service of summons or other legal process on it may be effected by serving a copy of the summons and other legal process in any such action or proceeding on the Borrower by mailing or delivering the same by hand to the Borrower at the address indicated for notices in Section 16.1. The service, as herein provided, of such summons or other legal process in any such action or proceeding shall be deemed personal service and accepted by the Borrower as such, and shall be legal and binding upon such Security Party for all the purposes of any such action or proceeding. Final judgment (a certified or exemplified copy of which shall be conclusive evidence of the fact and of the amount of any indebtedness of the Borrower to the Lenders or the Agent) against the Borrower in any such legal action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment. Each Security Party will advise the Administrative Agent promptly of any change of address for the purpose of service of process. Notwithstanding anything herein to the contrary, the Lenders may bring any legal action or proceeding in any other appropriate jurisdiction.

14.3.WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE BORROWER, THE AGENT AND THE LENDERS THAT EACH OF THEM HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE NOTE OR THE SECURITY DOCUMENTS.

15.THE AGENTS

15.1.Appointment of Agents. Each of the Lenders irrevocably appoints and authorizes the Agents severally each to take such action as agent on its behalf and to exercise such powers under this Loan Agreement, the Note and the Security Documents as are delegated to such Agent by the terms hereof and thereof. No Agent nor any of their respective directors, officers, employees or agents shall be liable for any action taken or omitted to be taken by it or them under this Loan Agreement, the Note or the Security Documents or in connection therewith, except for its or their own gross negligence or willful misconduct.

15.2.Security Agent as Trustee. Each of the Lenders irrevocably appoints the Security Agent as trustee on its behalf with regard to (i) the security, powers, rights, titles, benefits and interests (both present and future) constituted by and conferred on the Lenders or any of them or for the benefit thereof under or pursuant to this Loan Agreement, the Note or any of the Security Documents (including, without limitation, the benefit of all covenants, undertakings, representations, warranties and obligations given, made or undertaken to any Lender in the Agreement, the Note or any Security Document), (ii) all moneys, property and other assets paid or transferred to or vested in any Lender or any agent of any Lender or received or recovered by any Lender or any agent of any Lender pursuant to, or in connection with, this Loan Agreement, the Note or the Security Documents whether from any Security Party or any other person and (iii) all money, investments, property and other assets at any time representing or deriving from any of the foregoing, including all interest, income and other sums at any time received or receivable by any Lender or any agent of any Lender in respect of the same (or any part thereof). The Security Agent hereby accepts such appointment.

15.3.Distribution of Payments. Whenever any payment is received by the Administrative Agent from the Borrower or any other Security Party for the account of the Lenders, or any of them, whether of principal or interest on the Note, commissions, fees under Section 13 or otherwise, it will thereafter cause to be distributed on the same day if received before 3 p.m. New York time, or on the next day if received thereafter, like funds relating to such payment ratably to the Lenders according to their respective Commitments, in each case to be applied according to the terms of this Loan Agreement.

15.4.Holder of Interest in Note. The Agents may treat each Lender as the holder of all of the interest of such Lender in the Note.

15.5.No Duty to Examine, Etc. The Agents shall not be under a duty to examine or pass upon the validity, effectiveness or genuineness of any of this Loan Agreement, the Note, the Security Documents or any instrument, document or communication furnished pursuant to this Loan Agreement or in connection therewith or in connection with the Note or any Security Document, and the Agents shall be entitled to assume that the same are valid, effective and genuine, have been signed or sent by the proper parties and are what they purport to be.

15.6.Agents as Lenders. With respect to that portion of the Loan made available by it, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not an Agent, and the term “Lender” or “Lenders” shall include each Agent in its capacity as a Lender. Each Agent and its affiliates may accept deposits from, lend money to and generally engage in any kind of business with, the Borrower and the other Security Parties, as if it were not an Agent.

15.7.Acts of the Agents. Each Agent shall have duties and reasonable discretion, and shall act as follows:

(a)Obligations of the Agents. The obligations of each Agent under this Loan Agreement, under the Note and under the Security Documents are only those expressly set forth herein and therein.

(b)No Duty to Investigate. No Agent shall at any time be under any duty to investigate whether an Event of Default, or an event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, has occurred or to investigate the performance of this Loan Agreement, the Note or any Security Document by any Security Party.

(c)Discretion of the Agents. Each Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights which may be vested in it by, and with respect to taking or refraining from taking any action or actions which it may be able to take under or in respect of, this Loan Agreement, the Note and the Security Documents, unless the Administrative Agent shall have been instructed by the Majority Lenders to exercise such rights or to take or refrain from taking such action; provided, however, that no Agent shall be required to take any action which exposes such Agent to personal liability or which is contrary to this Loan Agreement or applicable law.

(d)Instructions of Majority Lenders. Each Agent shall in all cases be fully protected in acting or refraining from acting under this Loan Agreement, under the Note, or under any Security Document in accordance with the instructions of the Majority Lenders, and any action taken, or failure to act pursuant to such instructions, shall be binding on all of the Lenders.

15.8.Certain Amendments. Neither this Loan Agreement, the Note nor any of the Security Documents nor any terms hereof or thereof may be amended unless such amendment is approved by the Borrower and the Majority Lenders, provided that no such amendment shall, without the written consent of each Lender affected thereby, (i)  reduce the interest rate or extend the time of a scheduled payment of principal or interest or fees on the Loan, or reduce the principal amount of the Loan or any fees hereunder, (ii) increase or decrease the Commitment of any Lender or subject any Lender to any additional obligation (it being understood that a waiver of any Event of Default, other than a payment default, or any mandatory repayment of Loan shall not constitute a change in the terms of any Commitment of any Lender), (iii) amend, modify or waive any provision of this Section 15.8, (iv) amend the definition of Majority Lenders or any other definition referred to in this Section 15.8, (v) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Loan Agreement, (vi) release any Security Party from any of its obligations under any Security Document except as expressly provided herein or in such Security Document or (vii) amend any provision relating to the maintenance of collateral under Section 9.4; provided, further, that approval by all Lenders shall be required for any amendment or waivers with respect to Section 5.3 of this Loan Agreement. All amendments approved by the Majority Lenders under this Section 15.8 must be in writing and signed by the Borrower and consented to and acknowledged by the Guarantor, each of the Lenders comprising the Majority Lenders and, if applicable, each Lender affected thereby and any such amendment shall be binding on all the Lenders; provided, however, that any amendments or waivers with respect to Section 5.3 of this Loan Agreement must be in writing and signed by the Security Parties and all of the Lenders.

15.9.Assumption re Event of Default. Except as otherwise provided in Section 15.15, the Administrative Agent shall be entitled to assume that no Event of Default, or event which with the giving of notice or passage of time, or both, would constitute an Event of Default, has occurred and is continuing, unless the Administrative Agent has been notified by any Security Party of such fact, or has been notified by a Lender that such Lender considers that an Event of Default or such an event (specifying in detail the nature thereof) has occurred and is continuing. In the event that the Administrative Agent shall have been notified, in the manner set forth in the preceding sentence, by any Security Party or any Lender of any Event of Default or of an event which with the giving of notice or passage, or both, would constitute an Event of Default, the Administrative Agent shall notify the Lenders and shall take action and assert such rights under this Loan Agreement, under the Note and under Security Documents as the Majority Lenders shall request in writing.

15.10.Limitations of Liability. Neither any Agent nor any of the Lenders shall be under any liability or responsibility whatsoever:

(a)to any Security Party or any other person or entity as a consequence of any failure or delay in performance by, or any breach by, any other Lenders or any other person of any of its or their obligations under this Loan Agreement or under any Security Document;

(b)to any Lender or Lenders as a consequence of any failure or delay in performance by, or any breach by, any Security Party of any of its respective obligations under this Loan Agreement, under the Note or under the Security Documents; or

(c)to any Lender or Lenders for any statements, representations or warranties contained in this Loan Agreement, in any Security Document or in any document or instrument delivered in connection with the transaction hereby contemplated; or for the validity, effectiveness, enforceability or sufficiency of this Loan Agreement, the Note, any Security Document or any document or instrument delivered in connection with the transactions hereby contemplated.

15.11.Indemnification of the Agents. The Lenders agree to indemnify each Agent (to the extent not reimbursed by the Security Parties or any thereof), pro rata according to the respective amounts of their Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including legal fees and expenses incurred in investigating claims and defending itself against such liabilities) which may be imposed on, incurred by or asserted against, such Agent in any way relating to or arising out of this Loan Agreement, the Note or any Security Document, any action taken or omitted by such Agent thereunder or the preparation, administration, amendment or enforcement of, or waiver of any provision of, this Loan Agreement, the Note or any Security Document, except that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct.

15.12.Consultation with Counsel. Each of the Agents may consult with legal counsel reasonably selected by such Agent and shall not be liable for any action taken, permitted or omitted by it in good faith in accordance with the advice or opinion of such counsel.

15.13.Resignation. Any Agent may resign at any time by giving thirty (30) days' written notice thereof to the other Agents, the Lenders and the Borrower. Upon any such resignation, the Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a bank or trust company of recognized standing. Any resignation by an Agent pursuant to this Section 15.13 shall be effective only upon the appointment of a successor Agent. The appointment of any successor Agent shall be subject to the prior written consent of the Borrower, such consent not to be unreasonably withheld. After any retiring Agent's resignation as Agent hereunder, the provisions of this Section 15 shall continue in effect for its benefit with respect to any actions taken or omitted by it while acting as Agent.

15.14.Representations of Lenders. Each Lender represents and warrants to each other Lender and each Agent that:

(a)in making its decision to enter into this Loan Agreement and to make its Commitment available hereunder, it has independently taken whatever steps it considers necessary to evaluate the financial condition and affairs of the Security Parties, that it has made an independent credit judgment and that it has not relied upon any statement, representation or warranty by any other Lender or any Agent; and

(b)so long as any portion of its Commitment remains outstanding, it will continue to make its own independent evaluation of the financial condition and affairs of the Security Parties.

15.15.Notification of Event of Default. The Administrative Agent hereby undertakes to promptly notify the Lenders, and the Lenders hereby promptly undertake to notify the Administrative Agent and the other Lenders, of the existence of any Event of Default, which shall have occurred and be continuing, of which the Administrative Agent or Lender has actual knowledge.

15.16.No Agency or Trusteeship if not Syndicated. Unless and until the Loan is syndicated or at any other time DVB is the only Lender, all references to the terms “Agent” and “Security Agent” shall be deemed to be references to DVB as Lender and not as agent or Security Agent.

16.NOTICES AND DEMANDS

16.1.Notices. All notices, requests, demands and other communications to any party hereunder shall be in writing (including prepaid overnight courier, facsimile transmission or similar writing) and shall be given to the Security Parties at the address or facsimile number set forth below and to the Lenders and the Agents at their address and facsimile numbers set forth in Schedule 1 or at such other address or facsimile numbers as such party may hereafter specify for the purpose by notice to each other party hereto. Each such notice, request or other communication shall be effective (i) if given by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section 16.1 and telephonic confirmation of receipt thereof is obtained or (ii) if given by mail, prepaid overnight courier or any other means, when received at the address specified in this Section or when delivery at such address is refused.

If to the Security Parties:

c/o B+H Shipping Group

3^rd Floor, Par La Ville Place,

14 Par La Ville Road,

Hamilton HM, 11

Bermuda

Fax: 441-295-6796

17.MISCELLANEOUS

17.1.Time of Essence. Time is of the essence with respect to this Loan Agreement but no failure or delay on the part of any Lender or any Agent to exercise any power or right under this Loan Agreement shall operate as a waiver thereof, nor shall any single or partial exercise by any Lender or any Agent of any power or right hereunder preclude any other or further exercise thereof or the exercise of any other power or right. The remedies provided herein are cumulative and are not exclusive of any remedies provided by law.

17.2.Unenforceable, etc., Provisions-Effect. In case any one or more of the provisions contained in this Loan Agreement, the Note or in any Security Document would, if given effect, be invalid, illegal or unenforceable in any respect under any law applicable in any relevant jurisdiction, said provision shall not be enforceable against the relevant Security Party, but the validity, legality and enforceability of the remaining provisions herein or therein contained shall not in any way be affected or impaired thereby.

17.3.References. References herein to Sections, Exhibits and Schedules are to be construed as references to sections of, exhibits to, and schedules to, this Loan Agreement, unless the context otherwise requires.

17.4.Further Assurances. Each Security Party agrees that if this Loan Agreement or any Security Document shall, in the reasonable opinion of the Lenders, at any time be deemed by the Lenders for any reason insufficient in whole or in part to carry out the true intent and spirit hereof or thereof, it will execute or cause to be executed such other and further assurances and documents as in the opinion of the Lenders may be required in order to more effectively accomplish the purposes of this Loan Agreement, the Note or any Security Document.

17.5.Prior Agreements, Merger. Any and all prior understandings and agreements heretofore entered into between the Security Parties on the one part, and the Agents or the Lenders, on the other part, whether written or oral are superseded by and merged into this Loan Agreement and the other agreements (the forms of which are exhibited hereto) to be executed and delivered in connection herewith to which the Security Parties, the Agents and/or the Lenders are parties, which alone fully and completely express the agreements between the Security Parties, the Agents and the Lenders.

17.6.Entire Agreement; Amendments. This Loan Agreement constitutes the entire agreement of the parties hereto, including all parties added hereto pursuant to an Assignment and Assumption Agreement. Subject to Section 15, any provision of this Loan Agreement, the Note or any Security Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower, the Agents and the Majority Lenders. This Loan Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute one and the same instrument.

17.7.Indemnification. The Borrower and, by its execution and delivery of the Consent and Agreement set forth below, the Guarantor, both jointly and severally agree to indemnify each Lender and each Agent, their respective successors and assigns, and their respective officers, directors, employees, representatives and agents (each an “Indemnitee”) from, and hold each of them harmless against, any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the fees and disbursements of counsel for such Indemnitee in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may at any time (including, without limitation, at any time following the payment of the obligations of the Borrower hereunder) be imposed on, asserted against or incurred by, any Indemnitee as a result of, or arising out of or in any way related to or by reason of, (a) any violation by any Security Party (or any charterer or other operator of the Vessel) of any applicable Environmental Law, (b) any Environmental Claim arising out of the management, use, control, ownership or operation of property or assets by any Security Party (or, after foreclosure, by any Lender or any Agent or any of their respective successors or assigns), (c) the breach of any representation, warranty or covenant set forth in Sections 2.1 (o) or 9.1(l), (d) the Loan (including the use of the proceeds of the Loan and any claim made for any brokerage commission, fee or compensation from any Person), or (e) the execution, delivery, performance or non-performance of this Loan Agreement, the Note, any Security Document, or any of the documents referred to herein or contemplated hereby (whether or not the Indemnitee is a party thereto). If and to the extent that the obligations of the Borrower and, by its execution of the Consent and Agreement set forth below, under this Section are unenforceable for any reason, the Security Parties jointly and severally agree to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. The obligations of the Security Parties under this Section 17.7 shall survive the termination of this Loan Agreement and the repayment to the Lenders of all amounts owing thereto under or in connection herewith.

17.8.Headings. In this Loan Agreement, section headings are inserted for convenience of reference only and shall not be taken into account in the interpretation of this Loan Agreement.

17.9.Waiver of Immunity. TO THE EXTENT THAT ANY SECURITY PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM SUIT, JURISDICTION OF ANY COURT OR ANY LEGAL PROCESS (WHETHER THROUGH ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OF A JUDGMENT, OR FROM ANY OTHER LEGAL PROCESS OR REMEDY) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH SECURITY PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS LOAN AGREEMENT AND THE OTHER SECURITY DOCUMENTS.

17.10.USA Patriot Act Notice; OFAC and Bank Secrecy Act. The Agent hereby notifies each Security Party that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Act”), and the Agent’s policies and practices, the Agent and each of the Lenders is required to obtain, verify and record certain information and documentation that identifies each Security Party, which information includes the name and address of each Security Party and such other information that will allow the Agent and the Lenders to identify each Security Party in accordance with the Act. In addition, each Security Party shall (a) ensure that no Person who owns a controlling interest in or otherwise controls any Security Party or any subsidiary of any thereof is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or included in any Executive Orders, (b) not use or permit the use of the proceeds of the Loan to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, and cause any of its subsidiaries to comply, with all applicable Bank Secrecy Act laws and regulations, as amended.

IN WITNESS whereof, the parties hereto have caused this Loan Agreement to be duly executed by their duly authorized representatives as of the day and year first above written.

SACHEM SHIPPING LTD.

By:__/s/ Parker S. Wise

Name: Parker S. Wise

Title: Attorney-in-Fact

DVB BANK AMERICA NV,

as Administrative Agent and Security Agent

By:___________________________________

Name:

Title:

By:___________________________________

Name:

Title:

The Lenders:

DVB BANK AMERICA NV,

By:___________________________________

Name:

Title:

By:___________________________________

Name:

Title:

CONSENT AND AGREEMENT

The undersigned, referred to in the foregoing Loan Agreement as the “Guarantor”, hereby consents and agrees to said Loan Agreement and to the documents contemplated thereby and to the provisions contained therein relating to conditions to be fulfilled and obligations to be performed by the undersigned pursuant to or in connection with said Loan Agreement and agrees particularly to be bound by the representations, warranties and covenants relating to the undersigned contained in Sections 2 and 9 of said Loan Agreement to the same extent as if the undersigned were a party to said Loan Agreement, and expressly agrees to the grant of a security interest in favor of the Security Agent pursuant to Section 9.1(q) of said Loan Agreement.

B+H OCEAN CARRIERS LTD.,

as Guarantor

By:__/s/ Parker S. Wise_

Name: Parker S. Wise

Title:  Attorney-in-fact

Schedule 1

LendersCommitment

DVB Bank America NV Zeelandia Office Park Kaya W.F.G. Mensing 14 P.O. Box 3107 Curacao, Netherlands Antilles Attention: Richard Van Heel & Eric Maduro Fax: +599-9-465-2366	$12,000,000
Agents DVB Bank America NV Zeelandia Office Park Kaya W.F.G. Mensing 14 P.O. Box 3107 Curacao, Netherlands Antilles Attention: Richard Van Heel & Eric Maduro Fax: +599-9-465-2366

SK 01029 0031 707841 v6

EX-3

USD 8,000,000

TERM Loan facilitY Agreement

for

Seapowet Trading Ltd.

as Borrower

and

provided by

Nordea Bank Norge ASA

as Lender

Dated 5 September 2006

TABLE OF CONTENTS

SCHEDULES

1Conditions Precedent

2Form of Drawdown Notice

3Form of Selection Notice

4Form of Compliance Certificate

5 Form of Guarantee

THIS TERM LOAN AGREEMENT is dated 5 September 2006 and made between:

(1) Seapowet Trading Ltd., of Marshall Islands with its business address at 3^rd Floor Par La Place, 14 Par La Ville Road, Hamilton HM 08 Bermuda as borrower (the “Borrower”); and

(2)Nordea Bank Norge ASA of Middelthunsgate 17, N-0368 Oslo, Norway, organisation number 911 044 110, as lender (the “Lender”).

IT IS AGREED as follows:

1   DEFINITIONS AND INTERPRETATION

1.1   Definitions

In this Agreement, unless the context otherwise requires:

“Accounts” means account no. 0053601102 in the name of the Borrower with Nordea Bank Finland plc, London Branch or any such other accounts of the Borrower with the Lender and/or Nordea Bank Finland Plc. London Branch, pledged in favour of the Lender under the Account Charge.

“Account Charge” means the account charge collateral to this Agreement for the first priority charge over the Accounts to be made between the Borrower and the Lender as security for the Borrower’s obligations under the Finance Documents, in form and substance acceptable to the Lender.

“Agreement” means this term loan facility agreement, as it may be amended, supplemented and varied from time to time, including its Schedules.

“Availability Period” means the period from and including the date of this Agreement to and including 30 September 2006.

“Available Commitment” means the Commitment less the amount of the outstanding Loan.

“Break Costs” means the amount (if any) by which:

a)   the interest which the Lender should have received for the period from the date of receipt of all or part of its participation in the Loan or Unpaid Sum to the last day of the current Interest Period in respect of the Loan or Unpaid Sum, had the principal amount or Unpaid Sum been paid on the last day of that Interest Period; exceeds

b)   the amount which the Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the relevant interbank market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

“Business Day” means a day (other than a Saturday or Sunday) on which banks are open for business in Oslo, New York and London (or any other relevant place of payment under Clause 25 (Payment mechanics).

“Cash and Cash Equivalents” has the meaning given to that term in Clause 20.1 (Financial definitions).

“Charterparty” means the bareboat charterparty made between the Company (as charterer) and the Owning Company (as owner) of 22 June 1990 and as amended, under which the Company has a purchase option for the purchase of the Vessel, in form and substance as approved by the Lender.

“Company“ means Nordan OBO II Inc. of 80 Broad Street, Monrovia, Liberia.

“Company Shares” means fifty per cent (50.00%) of the shares in the Company which was acquired by the Borrower under the Share Purchase Agreement.

“Commitment” means USD 8,000,000 at the date of this Agreement to the extent not cancelled or reduced.

“Compliance Certificate” means a certificate substantially in the form as set out in Schedule 4 (Form of Compliance Certificate).

“Default” means an Event of Default or any event or circumstance specified in Clause 23 (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 the technical manager of the Vessel a valid document of compliance issued to such technical manager pursuant to paragraph 13.2 of the ISM Code.

“Drawdown” means the utilisation under the Facility.

“Drawdown Date” means the Business Day on which the Borrower has requested the Drawdown pursuant to this Agreement or, as the context requires, the date on which the Loan is actually made.

“Drawdown Notice” means the notice substantially in the form set out in Schedule 2 (Form of Drawdown Notice).

“EBITDA” has the meaning given to that term in Clause 20.1 (Financial definitions).

“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 applicable law, regulation, convention or treaty in any jurisdiction in which any of the Company and/or the Owning Company conduct business which relates to the pollution or protection of the environment or to the carriage of material which is capable of polluting the environment.

“Event of Default” means any event or circumstance specified as such in Clause 23 (Events of Default).

“FA Act” means the Norwegian Financial Agreements Act of 25 June 1999 no. 46 (as amended).

“Facility” means the term loan facility made available under this Agreement as described in Clause 2.1 (The Facility).

“Final Maturity Date” means the date falling four (4) years after the Drawdown Date.

“Finance Documents” means this Agreement, the Security Documents and any other document (whether creating a Security Interest or not) which is executed at any time by the Borrower or any other person as security for, or to establish any form of subordination to the Lender under this Agreement or any of the other documents referred to herein or therein.

“Financial Indebtedness” means any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent.

“Fixed Charges” has the meaning given to that term in Clause 20.1 (Financial definitions).

“GAAP” means the generally accepted accounting principles in the United States (as the case may be).

“Group” means the Guarantor and its Subsidiaries from time to time.

“Guarantee” means the Guarantee and Indemnity issued by the Guarantor in favour of the Lender guaranteeing the obligations of the Borrower under this Agreement and in the form as set out in Schedule 5 (Form of Guarantee).

“Guarantor” means B + H Ocean Carriers Ltd. of 80 Broad Street, Monrovia, Liberia

“Insurances” means, in relation to the Vessel, all 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 any of the Company and/or the Owning Company (whether in the sole name of the Company or in the joint names of the Company 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 the Loan, each of the successive periods determined in accordance with Clause 9.1 (Selection of Interest Periods), and, in relation to an Unpaid Sum, each period determined in accordance with Clause 8.3 (Default interest).

“ISM Code” means the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevent.

“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.

“LIBOR” means in relation to the Loan:

a)   the rate per annum equal to the offered quotation for deposits in USD for the relevant Interest Period ascertained by the Lender to be the rate as displayed on the Reuters' screen, page LIBOR01, at or about 11:00 hours (London time) on the applicable Quotation Day; or

b)   if no such rate is available, the arithmetic means of the rate per annum at which the Lender is able to acquire USD in the amount and for the relevant Interest Period of the Loan in the London interbank market at or about 11:00 hours (London time) on the applicable Quotation Day, as (in the absence of manifest error) conclusively certified by the Lender to the Borrower.

“Loan” means a loan made or to be made under the Facility or the principal amount outstanding for the time being of the loan.

“Margin” means one point seventy-five per cent (1.75%) per annum.

“Market Value” means the fair market value of the Vessel in USD, being the average of valuations of the Vessel obtained from two (2) brokers approved by the Lender, with or without physical inspection of the Vessel (as the Lender 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.

“Material AdverseEffect” means a material adverse effect on:

a)   the business, operation, assets or condition (financial or otherwise) of the Borrower, the Guarantor and/or the Company (as the case may be); or

b)   the ability of the Borrower and/or the Guarantor to perform any of their obligations under the Finance Documents; or

c)   the rights or remedies of the Lender under the Finance Documents.

“Measurement Period” has the meaning given to that term in Clause 20.1 (Financial definitions).

“Net Interest” has the meaning given to that term in Clause 20.1 (Financial definitions).

“NIS” means the Norwegian International Ship Register.

“Original Financial Statements” means the unaudited consolidated financial statements of the Guarantor and the Borrower for the year ended 31 December 2005.

“Owning Company” means K/S Difko LXXIII of Denmark, being the owner of the Vessel.

“Party” means a party to this Agreement (including its successors and permitted transferees).

“Quarter Date” has the meaning given to that term in Clause 20.1 (Financial definitions).

“Quotation Day” means the day occurring two (2) Business Days prior to the commencement of an Interest Period.

“Security Documents” means all or any security documents as may be entered into from time to time pursuant to Clause 17 (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 Drawdown Date hereunder and ending the date on which the Lender notifies the Borrower that:

a)   all amounts which have become due for payment by the Borrower or any other party under the Finance Documents have been paid;

b)   no amount is owing or has accrued (without yet having become due for payment) under any of the Finance Documents;

c)   the Borrower has no future or contingent liability under any provision of this Agreement or the other Finance Documents; and

d)   the Lender does 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 3 (Form of Selection Notice) given in accordance with Clause 9.1 (Selection of Interest Periods).

“Seller” means Tschudi Rederi AS, being the seller of the Company Shares under the Share Purchase Agreement.

“Share Pledge Agreement” means the share pledge agreement collateral hereto to be made between the Borrower and the Lender for the first priority pledge over the Company Shares and any right to receive dividends in favour of the Lender, in form and substance satisfactory to the Lender.

“Share Purchase Agreement” means the agreement entered into between the Borrower and the Seller for the purchase by the Borrower of the Company Shares.

“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.

“Subsidiaries” means any business entity of which more than fifty per cent (50.00%) of the outstanding voting stock or other equity interest is owned directly of indirectly by such person and/or one or more other Subsidiaries of such person.

“Swap Agreement” means any interest rate swap agreement or agreements, hereunder any ISDA Master Agreement and scheduled thereto, to be made between the Borrower and Nordea Bank Finland Plc. (as swap bank) in relation to the Facility.

“Tax on Overall NetIncome” means a Tax imposed on the Lender by the jurisdiction under the laws of which it is incorporated, or in which it is located or treated as resident for tax purposes, on:

a)   the net income, profits or gains of the Lender world wide; or

b)   such of the net income, profits or gains of the Lender as are considered to arise in or relate to or are taxable in that jurisdiction.

“Taxes” means all present and future taxes, levies, imposts, duties, charges, fees, deductions and withholdings, and any restrictions and or conditions resulting in a charge together with interest thereon and penalties in respect thereof and “tax” and “taxation” shall be construed accordingly.

“Total Debt” has the meaning given to that term in Clause 20.1 (Financial definitions).

“Total Loss” means:

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 claiming to be or to represent a governmental or official authority (excluding a requisition for hire for a fixed period not exceeding one (1) year without any right to extension) unless it is within one (1) month from the Total Loss Date redelivered to the full control of the Owning Company; and

c)   any arrest, capture, seizure or detention of the Vessel (including any hijacking or theft) unless it is within one (1) month from the Total Loss Date redelivered to the full control of the Owning Company.

“Total Loss Date” means:

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 (provided a claim for total loss is admitted by such insurers) or, if such insurers do not forthwith admit such a claim, at the date at which either a total loss is subsequently admitted by the insurers or a total loss is subsequently adjudged by a competent court of law or arbitration panel to have occurred or, if earlier, the date falling six (6) months after notice of abandonment of the Vessel was given to the insurers; and (ii) the date of compromise, arrangement or agreement made by or on behalf of the Owning Company 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 Lender that the event constituting the total loss occurred.

“Transaction Documents” means the Finance Documents, the Charterparty and the Share Purchase Agreement, together with the other documents contemplated herein or therein.

“Unpaid Sum” means any sum due and payable but unpaid by the Borrower and/or the Guarantor under the Finance Documents.

“USD” means United States Dollars, being the lawful currency of the United States of America.

“ValueAdjusted Equity” has the meaning given to that term in Clause 20.1 (Financial definitions).

“Value Adjusted Equity Ratio” has the meaning given to that term in Clause 20.1 (Financial definitions).

“Value Adjusted Total Assets” has the meaning given to that term in Clause 20.1 (Financial definitions).

“VAT” means value added tax and any other tax of similar nature.

“Vessel” means M/V “Sibotessa”, a 75,000 dwt OBO tanker built in Denmark in 1992, with IMO number 9012729, registered in the name of the Owner in NIS and later to be registered in the Bahamas.

1.2   Construction

In this Agreement, unless the context otherwise requires:

a)   Clause and Schedule headings are for ease of reference only;

b)   words denoting the singular number shall include the plural and vice versa;

c)   references to Clauses and Schedules are references, respectively, to the Clauses and Schedules of this Agreement;

d)   references to a provision of law is a reference to that provision as it may be amended or re-enacted, and to any regulations made by the appropriate authority pursuant to such law;

e)   references to “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;

f)   references to “indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent; and

g)   references to 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).

2   THE FACILITY

Subject to the terms of this Agreement, the Lender makes available to the Borrower a term loan facility up to an aggregate amount not exceeding the Commitments.

3   PURPOSE

3.1   Purpose

The Borrower shall apply all amounts borrowed by it towards:

a)   partly refinancing the purchase price paid by it for the Company Shares under the Share Purchase Agreement; and

b)   payment of fees and expenses incurred in connection with the Facility.

3.2   Monitoring

Without prejudice to the obligations of the Borrower under this Clause 3, the Lender is not bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

4   CONDITIONS PRECEDENT

4.1   Initial conditions precedent

The Borrower may not deliver the Drawdown Notice unless the Lender has received originals or certified copies of all of the documents and other evidence listed in Schedule 1 (Conditions precedent) in form and substance satisfactory to the Lender. The Lender shall notify the Borrower upon being so satisfied.

4.2   Further conditions precedent

The Lender will only be obliged to pay the Loan to the Borrower if on the date of the Drawdown Notice and on the proposed Drawdown Date:

a)   no Default is continuing or would result from the proposed Loan; and

b)   the representations and warranties contained in Clause 18 (Representations and warranties) deemed to be repeated on those dates are true and correct in all respects.

4.3   Maximum number of drawings

Only one Drawing may be made hereunder.

4.4   Waiver of conditions precedent

The conditions specified in this Clause 4 are solely for the benefit of the Lender and may be waived in whole or in part and with or without conditions by the Lender.

5   DRAWDOWN

5.1   Delivery of the Drawdown Notice

The Borrower may utilise the Facility by delivering to the Lender the duly completed Drawdown Notice no later than 10:00 hours (London time) three (3) Business Days prior to the proposed Drawdown Date.

5.2   Completion of the Drawdown Notice

The Drawdown Notice is irrevocable and will not be regarded as having been duly completed unless:

a)   it is substantially in the form set out in Schedule 2 (Form of Drawdown Notice);

b)   the proposed Drawdown Date is a Business Day within the Availability Period;

c)   the currency specified is USD and the amount of the proposed Loan is an amount which is not more than the Commitments; and

d)   the proposed Interest Period complies with Clause 9 (Interest Periods).

5.3   Availability

Any amount of the Commitments not utilised by the expiry of the Availability Period shall automatically be cancelled at close of business in Oslo on such date.

6   REPAYMENT

a)   The Borrower shall repay the Loan in sixteen (16) quarterly consecutive instalments, each being in an amount of USD 500,000, the first instalment falling due three (3) months after the Drawdown Date.

b)   On the Final Maturity Date the Borrower shall repay all amounts then outstanding under this Agreement in full, together with all other sums due and outstanding under the Finance Documents at such date (if any).

7   PREPAYMENT AND CANCELLATION

7.1   Mandatory prepayment - Total Loss or sale of the Vessel

If the Vessel is sold or becomes a Total Loss, the Borrower shall be obliged to prepay the Loan:

a)   in case of a sale, on or before the date on which the sale is completed by delivery of the Vessel to the buyer; or

b)   in the case of a Total Loss, on the earlier of the date falling ninety (90) days after the Total Loss Date (or in the event of a requisition for title of the Vessel, immediately upon receipt of the requisition proceeds relating to such requisition of title).

7.2   Mandatory prepayment - sale of the Company Shares

If any of the Company Shares are sold, the Borrower shall be obliged to prepay the Loan on or before the date on which the sale is completed by delivery of the relevant Company Shares to the buyer.

7.3   Mandatory prepayment - illegality

If it becomes unlawful in any applicable jurisdiction for the Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in the Loan:

a)   the Lender shall promptly notify the Borrower (specifying the obligations the performance of which is thereby rendered unlawful and the law giving rise to the same);

b)   upon the Lender notifying the Borrower, the Commitments will be immediately cancelled; and

c)   the Borrower shall prepay the Loan on the last day of the Interest Period occurring after the Lender has notified the Borrower or, if earlier, the date specified by the Lender in the notice delivered to the Borrower (being no earlier than the last day of any applicable grace period permitted by law).

7.4   Voluntary prepayment

The Borrower may, if it gives the Lender not less than fourteen (14) days prior written notice, prepay the whole or any part of the Loan.

7.5   Voluntary cancellation

The Borrower may, if it gives the Lender not less than fourteen (14) days’ (or such shorter period as the Lender may agree) prior notice, cancel the whole or any part of the Facility.

7.6   Terms and conditions for prepayments and cancellation

7.6.1   Irrevocable notice

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.

7.6.2   Additional payments

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.

7.6.3   Time of prepayment and cancellation

The Borrower shall not repay or prepay all or any part of the Loan or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.

7.6.4   No reinstatement

No amount of the Commitments cancelled under this Agreement may subsequently be reinstated.

7.6.5   Application

Any amount prepaid shall be applied against the remaining instalments as set out in Clause 6.1 (Repayment) in inverse order of maturity.

8   INTEREST

8.1   Calculation of interest

The rate of interest for the Loan for each Interest Period is the percentage rate per annum which is the aggregate of:

a)   the Margin; and

b)   LIBOR.

Effective interest pursuant to the Norwegian Financial Agreement Act 1999 has been calculated by the Borrower as set out in a separate notice from the Lender to the Borrower.

8.2   Payment of interest

The Borrower shall pay accrued interest on the Loan on each Interest Payment Date (and if the Interest Period is longer than three (3) months, on the date falling at three (3) monthly intervals after the first day of the Interest Period).

8.3   Default interest

If the Borrower 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 Lender to be two per cent (2.00%) higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted the Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Lender (acting reasonably). Any interest accruing under this Clause 8.3 shall be immediately payable by the Borrower on demand by the Lender. Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

8.4   Notification of rates of interest

The Lender shall promptly notify the Borrower of the determination of a rate of interest under this Agreement.

9   INTEREST PERIODS

9.1   Selection of Interest Periods

a)   The Borrower may select an Interest Period for the Loan in the 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 Lender not later than 11:00 hours (London time) two (2) Business Day before the Quotation Day for that Interest Period.

c)   If the Borrower fails to deliver a Selection Notice to the Lender in accordance with litra b) above, the relevant Interest Period will be three (3) months.

d)   The Borrower may select an Interest Period of three (3) or six (6) months or any such other period agreed between the Borrower and the Lender.

e)   An Interest Period for the Loan shall not extend beyond the Final Maturity Date, but shall be shortened so that it ends on the Final Maturity Date.

f)   Each Interest Period for the Loan shall start on the Drawdown Date or (if already made) on the last day of its preceding Interest Period.

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).

9.3   Notification of Interest Periods

The Lender will notify the Borrower of the Interest Periods determined in accordance with this Clause 9.

10   CHANGES TO THE CALCULATION OF INTEREST

10.1   Market disruption

a)   If a Market Disruption Event occurs in relation to the Loan for any Interest Period, then the rate of interest on the Loan for the Interest Period shall be the rate per annum which is the sum of:

(i)   the Margin; and

(ii)   the rate that which expresses as a percentage rate per annum the cost to the Lender of funding the Loan from whatever source it may reasonably select.

b)   In this Agreement, “Market Disruption Event” means:

(i)   at or about 11:00 hours (London time) on the Quotation Day for the relevant Interest Period LIBOR is not available; or

(ii)   before close of business in London on the Quotation Day for the relevant Interest Period, the cost to the Lender of obtaining matching deposits in the London interbank market would be in excess of LIBOR.

10.2   Alternative basis of interest or funding

If a Market Disruption Event occurs and the Lender or the Borrower so require, the Lender and the Borrower shall enter into negotiations (for a period of not more than thirty (30) days) with a view to agreeing a substitute basis for determining the rate of interest.

10.3   Break Costs

The Borrower shall, within three (3) Business Days of demand by the Lender, pay to the Lender its Break Cost attributable to all or any part of the Loan or Unpaid Sum being paid by the Borrower on a day other than the last day of an Interest Period for the Loan or Unpaid Sum.

Each Lender shall, as soon as reasonably practicable after a demand, provide a certificate confirming the amount of its Break Cost for any Interest Period in which they accrue.

11   FEES

11.1   Arrangement fee

The Borrower shall pay to the Lender an arrangement fee of zero point seventy-five per cent (0.75%) of the Commitment, payable on the Drawdown Date.

11.2   Commitment Fee

The Borrower shall pay to the Lender a commitment fee of one per cent (1.00%) per annum on the Available Commitment accruing from 7 July 2006 and up to the Drawdown Date, and in any event payable quarterly in arrears.

12   TAX GROSS-UP AND INDEMNITIES

12.1   Taxes

12.1.1   No withholding

All payments by the Borrower under the Finance Documents shall be made free and clear of and without deduction or withholding for or on account of any Tax or any other governmental or public payment imposed by the laws of any jurisdiction from which or through which such payment is made, unless a Tax deduction or withholding is required by law.

12.1.2   Tax gross-up

a)   The Borrower shall promptly upon becoming aware that any of them must make a Tax deduction or withholding (or that there is any change in the rate or the basis of a Tax deduction or withholding) notify the Lender accordingly. Similarly, the Lender shall notify the Borrower on becoming so aware in respect of a payment payable to the Lender.

b)   If a Tax deduction or withholding is required by law to be made by the Borrower:

(i)   the amount of the payment due from the Borrower shall be increased to an amount which (after making any Tax deduction or withholding) leaves an amount equal to the payment which would have been due if no Tax deduction or withholding had been required; and

(ii)   the Borrower shall make that Tax deduction or withholding within the time allowed and in the minimum amount required by law.

c)   Within thirty (30) days of making either a Tax deduction or withholding or any payment required in connection with that Tax deduction or withholding, the Borrower shall deliver to the Lender evidence reasonably satisfactory to the Lender that the Tax deduction or withholding has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

12.2   Tax indemnity

The Borrower shall (within three (3) Business Days of demand by the Lender) pay to the Lender an amount equal to the loss, liability or cost which the Lender determines will be or has been (directly or indirectly) suffered for or on account of any Tax in respect of a Finance Document, save for any Tax on Overall Net Income assessed on the Lender or to the extent such loss, liability or cost is compensated under Clause 12.1 (Tax gross-up).

12.3   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 Lender an amount equal to such VAT.

13   INCREASED COSTS

13.1   Increased Costs

a)   The Borrower shall, upon demand from the Lender, pay the amount of any Increased Cost incurred by the Lender or any of its affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation (including any laws and regulations implementing new or modified capital adequacy requirements) or (ii) compliance with any law or regulation made after the date of this Agreement.

b)   In this Agreement, the term “Increased Costs” means:

(i)   a reduction in the rate of return from the Facility or on the Lender’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 the Lender or any of its affiliates to the extent that it is attributable to the Lender having entered into the Commitments or funding or performing its obligations under any Finance Document.

13.2   Exceptions

Clause 13.1 (Increased Costs) does not apply to the extent any Increased Cost is:

a)   attributable to a Tax deduction or withholding required by law to be made by the Borrower;

b)   compensated for by Clause 12.1 (Tax gross-up) or Clause 12.2 (Tax Indemnity); or

c)   attributable to the wilful breach by the Lender or its affiliates of any law or regulation.

14   OTHER INDEMNITIES

14.1   Currency indemnity

a)   If any sum due from the Borrower under the Finance Documents (a “Sum”), or any order, 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 the Borrower;

(ii)   obtaining or enforcing an order, judgement or award in relation to any litigation or arbitration proceedings,

the Borrower shall as an independent obligation, within three (3) Business Days of demand, indemnify the Lender against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.

b)   The Borrower waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

14.2   Other indemnities

The Borrower shall within three (3) Business Days of demand, indemnify the Lender against any costs, loss or liability incurred by the Lender as a result of:

a)   the occurrence of any Event of Default;

b)   a failure by the Borrower to pay any amount due under the Finance Documents on its due date;

c)   the funding, or making arrangements to fund, the Loan requested by the Borrower in the 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 the Lender); or

d)   the Loan (or part of the Loan) not being prepaid in accordance with a notice of prepayment given by the Borrower.

14.3   Indemnity to the Lender

The Borrower shall promptly indemnify the Lender against any cost, loss or liability incurred by the Lender (acting reasonably) as a result of:

a)   investigating any event which it reasonably believes is a possible Event of Default; or

b)   acting or verifying any notice, request or instruction which it reasonably believes to be genuine, correct or appropriately authorised.

15   MITIGATION BY THE LENDER

15.1   Mitigation

Without in any way limiting the obligations of the Borrower hereunder, the Lender 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:

a)   Clause 7.1 (Mandatory prepayment - Total Loss or sale - the Vessel);

b)   Clause 7.2 (Mandatory prepayment - sale of Company Shares);

c)   Clause 7.3 (Mandatory prepayment - Illegality);

d)   Clause 12 (Tax gross-up and indemnities); and

e)   Clause 13 (Increased Costs),

including (but not limited to) transferring its rights and obligations under the Finance Documents to another affiliate.

The Lender Party is not obliged to take any steps under this Clause 15.1 if, in the opinion of the Lender (acting reasonably), to do so might be prejudicial to it.

15.2   Indemnity

The Borrower shall indemnify the Lender for all costs and expenses reasonably incurred by the Lender as a result of steps taken by it under Clause 15.1 (Mitigation).

16   COSTS AND EXPENSES

16.1   Transaction expenses

The Borrower shall promptly on demand pay to the Lender the amount of all costs and expenses (including legal fees) reasonably incurred by it in connection with the negotiation, preparation, printing, perfection, execution and registration 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 Lender for the amount of all costs and expenses (including legal fees) reasonably 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 Lender under the Finance Documents.

17   SECURITY

17.1   Security

The Borrower’s obligations and liabilities under the Finance Documents and any Swap Agreement(s), including (without limitation) the Borrower’s obligation to repay the Loan together with all unpaid interest, default interest, commissions, charges, expenses and any other derived liability whatsoever of the Borrower towards the Lender in connection with this Agreement and any Swap Agreement(s), shall at any time until all amounts due to the Lender hereunder or any Swap Agreement(s) have been paid and/or repaid in full, be secured by:

a)   the Share Pledge Agreement;

b)   the Account Charge; and

c)   the Guarantee

The Borrower undertakes to ensure that the above Security Documents are being duly executed by the parties thereto in favour of the Lender on or about the date of this Agreement, legally valid and in full force and effect, and to execute or procure the execution of such further documentation as the Lender may reasonable require in order for the Lender to maintain the security position envisaged hereunder.

17.2   Set-off

a)   The Lender may, to the extent permitted by applicable law, set off any matured obligation due from an Borrower under the Finance Documents, (and to the extent beneficially owned by the Lender) against any matured obligations owed by the Lender to that Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

b)   The Borrower hereby agrees and accept that this Clause 17.2 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.

18   REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lender as follows:

18.1   Status

a)   The Borrower is a corporation, duly incorporated and validly existing under the laws of the Marshall Islands and has the power to own its assets and carry on its business as it is currently being conducted. The Borrower is indirectly one hundred per cent (100.00%) owned by the Guarantor.

b)   The Guarantor is a corporation, duly incorporated and validly existing under the laws of Liberia and has the power to own its assets and carry on its business as it is currently being conducted.

18.2   Binding obligations

The Transaction Documents to which the Borrower and/or the Guarantor is a party constitute legal, valid, binding and enforceable obligations, and 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 Transaction Documents enforceable against the Borrower and/or the Guarantor.

18.3   No conflict with other obligations

The entry into and performance by the Borrower of, and the transactions contemplated by, the Transaction Documents do not and will not conflict with:

a)   any law or regulation or any order or decree of any governmental agency or court by which it is bound;

b)   any constitutional documents of the Borrower; or

c)   any agreement or document to which it is a party or by which it or any of its assets are bound.

18.4   Power and authority

The Borrower and the Guarantor have the power to enter into, perform and deliver, and have taken all necessary actions to authorise their entry into, performance and delivery of, the Transaction Documents to which any of them is a party and the transactions contemplated by those Transaction Documents.

18.5   Authorisations and consents

All authorisations, approvals, consents and other matters, official or otherwise, required by the Borrower in connection with the entering into, performance, validity and enforceability of the Transaction Documents and the transactions contemplated hereby and thereby have been obtained or effected and are in full force and effect.

18.6   Taxes

The Borrower has complied with all material taxation laws in all jurisdictions where it is subject to taxation and has paid all material Taxes and other amounts due to governments and other public bodies. No claims are being asserted against it with respect to any Taxes or other payments due to public or governmental bodies. The Borrower is not required to make any withholdings or deductions for or on account of Tax from any payment it may make under any of the Finance Documents.

18.7   No Default

No Event of Default is continuing or might reasonably be expected to result from the making of the Loan. 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 the Borrower or any of its Subsidiaries or to which the Borrower’s (or any of its Subsidiaries’) assets are subject which might have a Material Adverse Effect.

18.8   No misleading information

Any factual information, documents, exhibits or reports relating to the Borrower and/or the Guarantor and which have been furnished to the Lender by or on behalf of the Borrower 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.

18.9   Original Financial Statements

a)   Complete and correct. The Original Financial Statements fairly and accurately represent the assets, liabilities and the financial condition of the Guarantor and the Borrower and have been prepared in accordance with GAAP consistently applied.

b)   No undisclosed liabilities. As of the date of the Original Financial Statements, none of the Borrower or the Guarantor had any material liabilities, direct or indirect, actual or contingent, and there is no material, unrealised or anticipated losses from any unfavourable commitments not disclosed by or reserved against in the Original Financial Statements or in the notes thereto.

c)   No material change. Since the date of the Original Financial Statements, there has been no material adverse change in the business, operations, assets or condition (financial or otherwise) of the Borrower and/or the Guarantor.

18.10   Pari passu ranking

The Borrower’s and the Guarantor’s respective payment obligations under the Finance Documents rank at least pari passu with the claims of all their other unsecured and unsubordinated creditors, except for obligations preferred by mandatory law applying to companies generally.

18.11   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 in the reasonably opinion of the Lender be expected to have a Material Adverse Effect, have (to the best of the Borrower’s knowledge and belief) been started or threatened against the Borrower and/or the Guarantor.

18.12   No existing Security Interest

Save as described in Clause 17 (Security), no Security Interest exists over all or any of the present or future revenues or assets of the Borrower.

18.13   No immunity

The execution and delivery by the Borrower of each Transaction Document to which it is a party constitute, and its exercise of its rights and performance of its obligations under each Transaction Document will constitute, private and commercial acts performed for private and commercial purposes, and the Borrower 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 the Marshall Islands and/or Liberia (as the case may be) in relation to any Transaction Document.

18.14   No winding-up

Neither of the Borrower nor the Guarantor has taken any corporate action nor have any other steps been taken or legal proceedings been started or threatened against any of them for their reorganisation, winding-up, dissolution or administration or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of any of them or any or all of their assets.

18.15   Environmental compliance

The Borrower 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.

18.16   Environmental Claims

No Environmental Claim has been commenced or (to the best of the Borrower’s knowledge and belief) is threatened against the Borrower where that claim would be reasonably likely, if adversely determined, to have a Material Adverse Effect on the Borrower.

18.17   ISM Code and ISPS Code compliance

All requirements of the ISM Code and the ISPS Code as they relate to the Owning Company, the Company, any technical manager of the Vessel and the Vessel have been complied with in all material respects.

18.18   The Vessel

The Vessel will on the Drawdown Date be:

a)   in the absolute ownership of the Owning Company and the Owning Company will be the sole, legal and beneficial owner of the Vessel;

b)   registered in the name of the Owning Company in NIS or the Bahamas (or such other ship registry as approved by the Lender) under the laws and flag of Norway or the Bahamas (or under such other flag as approved by the Lender);

c)   operationally seaworthy in every way and fit for service; and

d)   classed with Det norske Veritas, free of all overdue requirements and recommendations.

18.19   No money laundering

The Borrower is acting for its own account in relation to the Loan 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 the Borrower 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 (91/308/EEC) and Directive 2001/97 of the European Parliament and of 4 December 2001 amending Council Directive 91/308).

18.20   Repetition

The representations and warranties set out in this Clause 18 are deemed to be made by the Borrower on the date of this Agreement and shall be deemed to be repeated:

a)   on the date of the Drawdown Notice;

b)   on the Drawdown Date;

c)   on the first day of each Interest Period; and

d)   in each Compliance Certificate forwarded to the Lender pursuant to Clause 19.2 (Compliance certificate) (or, if no such Compliance Certificate is forwarded, on each day such certificate should have been forwarded to the Lender at the latest).

19   INFORMATION UNDERTAKINGS

The Borrower gives the undertakings set out in this Clause 19 to the Lender and such undertakings shall remain in force throughout the Security Period.

19.1   Financial statements

The Borrower shall supply to the Lender:

a)   as soon as available, but no later than one hundred and twenty (120) days after the end of each of its fiscal years, complete copies of the financial reports of the Borrower, all in reasonable detail, which shall include at least the balance sheet of the Borrower as of the end of such year and the related statements of income and sources and uses of funds for such year, all in reasonable detail, unaudited, but certified to be true and complete by the chief financial officer of the Guarantor;

b)   as soon as available, but not less than forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Borrower, a quarterly interim balance sheet of the Borrower and the related profit and loss statements and sources and uses of funds, all in reasonable detail, unaudited, but certified to be true and complete by the chief financial officer of the Guarantor;

c)   as soon as available but not later than one hundred and twenty (120) days after the end of each fiscal year of the Guarantor, complete copies of the consolidated financial reports of the Guarantor and its Subsidiaries, all in reasonable detail, which shall include at least the consolidated balance sheet of the Guarantor and its Subsidiaries as of the end of such year and the related consolidated statements of income and sources and uses of funds for such year, which shall be audited reports prepared by an accounting firm acceptable to the Lender;

d)   as soon as available but not less than forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Guarantor, a quarterly interim consolidated balance sheet of the Guarantor and its Subsidiaries and the related consolidated profit and loss statements and sources and uses of funds, all in reasonable detail, unaudited, but certified to be true and complete by the chief financial officer of the Guarantor;

e)   within ten (10) days of the filing thereof, copies of all registration statements and reports on Forms 20-F and 8-K (or their equivalent) and other material filings which the Guarantor shall have filed with the Securities and Exchange Commission or any similar governmental authority;

f)   promptly upon the mailing thereof to the shareholders of the Guarantor, copies of all financial statements, reports, proxy statements and other communications provided to the Guarantor’s shareholders;

g)   within ten (10) days of the Borrower’s and/or the Guarantor’s receipt thereof, copies of all audit letters or other correspondence from any external auditors including material financial information in respect of the Borrower and/or the Guarantor, as the case may be;

h)   as soon as available but not less than forty-five (45) days after the end of each of the quarters of each fiscal year of the Company, a quarterly interim consolidated balance sheet of the Company and the related consolidated profit and loss statements and sources and uses of funds, all in reasonable detail, unaudited, but certified to be true and complete; and

i)   such other statements (including, without limitation, monthly consolidated statements of operating revenues and expenses), lists of assets and accounts, budgets, forecasts, reports and other financial information with respect to the Borrower’s business as the Lender may from time to time reasonably request, certified to be true and complete by the chief financial officer of the Guarantor.

19.2   Compliance Certificate

The Borrower shall supply to the Lender, with each set of financial statements delivered on 30 June and 30 December pursuant to Clause 19.1 (Financial statements), a Compliance Certificate signed by it and the chief financial officer of the Guarantor setting out (in reasonable detail) computations as to compliance with Clause 20 (Financial covenants) as at the date at which those financial statements were drawn up.

19.3   Requirements as to financial statements

The Borrower shall procure that each set of financial statements delivered pursuant to Clause 19.1 (Financial statements) is prepared using GAAP, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements for the Borrower and/or the Guarantor unless, in relation to any set of financial statements, it and/or the Guarantor notifies the Lender that there has been a change in GAAP, the accounting practices or reference periods and its or the Guarantor’s auditors deliver to the Lender:

a)   a description of any change necessary for those financial statements to reflect GAAP, accounting practices and reference periods upon which the Borrower's and the Guarantor’s Original Financial Statements were prepared; and

b)   sufficient information, in form and substance as may be reasonably required by the Lender, to enable it to determine whether Clause 20 (Financial covenants) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and the Borrower’s and the Guarantor’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.

19.4   Information - miscellaneous

The Borrower shall notify the Lender:

a)   all material documents dispatched by the Borrower to its shareholders or its creditors generally and any press releases at the same time as they are dispatched;

b)   promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against the Borrower and/or the Guarantor and/or the Owning Company and/or the Company, and which might, if adversely determined, have a Material Adverse Effect; and

c)   promptly, such further information regarding the business, assets and operations (financial or otherwise) of the Borrower and/or the Guarantor and/or the Company as the Lender may reasonably request.

19.5   Notification of default

The Borrower shall notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

19.6   Notification of Environmental Claims

The Borrower shall inform the Lender 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 Borrower’s knowledge and belief) is threatened against the Company 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 the the Company or the Vessel,

where the claim would be reasonably likely, if determined against the Company or the Vessel, to have a Material Adverse Effect.

19.7   “Know your customer” requirements

The Borrower must promptly on the request of the Lender supply to the Lender any documentation or other evidence which is reasonably requested by the Lender to it 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.

20   FINANCIAL COVENANTS

20.1   Definitions

For the purposes of the financial covenants set out herein, the following definitions shall apply:

a)   “Cash and Cash Equivalents” means, in respect of the Group, and at any time:

(i)   cash in hand or on deposits with any acceptable bank available for cash management purposes;

(ii)   investment grade certificates or deposit or investment grade marketable debt securities, maturing within one (1) year after the relevant date of calculation, issued by an acceptable bank; or

(iii)   any other instrument, security or investment approved by the Lender,

in each case, to with any member of the Group beneficially entitled at that time and which is capable of being applied against Total Senior Debt,

b)   “EBITDA” means, always in accordance with GAAP, the aggregate of operating profits of the Borrower and the Guarantor (on a consolidated basis) for a Measurement Period before Taxes, financial items, depreciations and amortisations, excluding:

(i)   the profit or loss attributable to any extraordinary or exceptional items or any write-offs on investments during that Measurement Period; and

(ii)   the profit and loss arising on any disposal of fixed assets during that Measurement Period save for any disposals made in the ordinary course of business.

c)   “Fixed Charges” means:

(i)   Net Interest for any Measurement Period, plus

(ii)   the amount of scheduled repayments of the Facility and/or any other credit facilities and the interest and repayment element under capitalised charterparties in accordance with GAAP which fall due for repayment or payment during the Measurement Period, other than any amount prepaid under this Agreement,

less free and available cash (at the relevant Quarter Date) and marketable securities (acceptable to the Lender)) in excess of the minimum requirement plus any dividends paid in such Measurement Period.

d)   “Measurement Period” means a rolling period of twelve (12) calendar months ending on a Quarter Date.

e)   “Quarter Date” means each 31 March, 30 June, 30 September and 31 December.

f)   “Net Interest” means all interest, arrangement fees and capitalised commissions and periodic fees (whether, in each case, paid or payable) as reported in accordance with GAAP being incurred (after having deducted any interest, arrangement fee and capitalised income earned) by the Borrower and the Guarantor (on a consolidated basis) during a Measurement Period.

g)   “Total Debt” means, on a consolidated basis, the aggregate book value of all provisions, other long term liabilities and current liabilities of the Borrower and the Guarantor (on a consolidated basis).

h)   “Value Adjusted Equity” means Value Adjusted Total Assets less Total Debt.

i)   “Value Adjusted Equity Ratio” means Value Adjusted Equity divided by Value Adjusted Total Assets.

j)   “Value Adjusted Total Assets” means, on a consolidated basis, the total market value of all of the assets of the Guarantor (on a consolidated basis).

20.2   Financial covenants

20.2.1   Minimum Value Adjusted Equity Ratio

The Borrower shall procure that the Guarantor (on a consolidated basis) at all times during the Security Period shall maintain a minimum Value Adjusted Equity Ratio of minimum thirty per cent (30.00%).

20.2.2   Minimum Value Adjusted Equity

The Borrower shall procure that the Guarantor (on a consolidated basis) at all times during the Security Period shall maintain a minimum Value Adjusted Equity of USD 50,000,000.

20.2.3   Ratio of EBITDA to Fixed Charges

The Borrower shall procure that the Guarantor (on a consolidated basis) shall ensure that the ratio of EBITDA to Fixed Charges shall be minimum one hundred and twenty-five per cent (125.00%) on a twelve (12) months rolling basis on assumptions approved by the Lender.

20.2.4   Positive working capital

The Borrower shall procure that the Guarantor (on a consolidated basis) at all times shall ensure that its current assets exceed its current liabilities (excluding the portion of long term debt), all as determined in accordance with GAAP.

20.2.5   Cash and Cash Equivalents

The Borrower shall procure that the Guarantor (on a consolidated basis) at all times shall ensure that it has Cash and Cash Equivalents equal to or greater than (i) USD 15,000,000 and (ii) six per cent (6.00%) of the long term debt of the Guarantor.

20.2.6   Adjustments

a)   The Lender is aware that the Guarantor (on a consolidated basis) for the purpose of calculating the financial covenants under this Clause 20, will have the right to adjust to the amounts booked as (i) average earnings in the profit and loss accounts and (ii) deferred income in the balance sheet related to the Charterparties for MV “Rip Hudner”, MV “Bonnie Smithwick” and MV “Searose G”, to ensure that the actual income under such Charterparties is taken into consideration in full.

b)   If there is any amendment(s) to the financial covenants relating to the Guarantor (on a consolidated basis) under the USD 202,000,000 reducing revolving credit facility agreement dated 29 August 2006 and made between among others OBO Holdings Ltd., BHOBO One Ltd., BHOBO Two Ltd., BHOBO Three Ltd., RMJ OBO Shipping Ltd. and Sagamore Shipping Ltd. (as joint and several borrowers) and the Lender (in its capacity as mandated lead arranger, agent for a syndicate of banks and lender), the financial amendments as set out in this Clause 20 shall be amended accordingly.

21   GENERAL UNDERTAKINGS

The Borrower gives the undertakings set out in this Clause 21 to the Lender and such undertakings shall remain in force throughout the Security Period.

21.1   Authorisations etc.

The Borrower 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 Lender (if so requested) of,

any authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Transaction Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Transaction Document.

21.2   Compliance with laws

The Borrower shall comply and shall procure the compliance by the Company in all respects with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Transaction Documents.

21.3   Pari passu ranking

The Borrower shall ensure that its and the Guarantor’s obligations under the Finance Documents do and will rank at least pari passu with all their 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.

21.4   Title

The Borrower shall procure that the Company shall use its best efforts (in its capacity as bareboat charterer of the Vessel) to ensure that the Owning Company holds legal title to and own the entire beneficial interest in the Vessel and the Insurances, free of all Security Interest and other interests and rights of any kind, except for those created by the Financial Documents and as set out in Clause 21.5 (Negative pledge).

21.5   Negative pledge

The Borrower shall not create or permit to subsist any Security Interest over the Vessel nor upon any of its present or future undertakings, property, assets, rights or revenues, other than:

a)   Security Interest under the Security Documents;

b)   the existing first priority mortgage in favour of Den Danske Skibskredit and the second priority mortgage in favour of the Company;

c)   Security Interests arising in the ordinary course of business; and

d)   Security Interests consented to in writing by the Lender.

21.6   Borrowings and guarantees

The Borrower shall not and the Borrower shall procure that the Company shall not enter into any new Financial Indebtedness or assume or grant any guarantee liabilities, other than current liabilities related to the day to day operation of the Vessel.

21.7   Disposals

The Borrower shall not sell, transfer or otherwise dispose of any substantial part of its assets without the prior written consent of the Lender.

21.8   Distributions

Provided that the Borrower and the Guarantor are in compliance with the provisions of the Finance Documents to which they are respective parties (including, but not limited to, the financial covenants set out in Clause 20 (Financial covenants)) both before and following such distributions, the Borrower may distribute dividends and make other distributions in whatever form to its shareholder(s) or any other person(s) without the prior written consent of the Lender.

21.9   Investment restrictions

Provided that the Borrower and the Guarantor are in compliance with the provisions of the Finance Documents (including, but not limited to, the financial covenants in Clause 20 (Financial covenants)) both before and following such investments, the Borrower may make new investments without the prior written consent of the Lender.

21.10   Bank accounts

The Borrower shall hold and maintain all its bank accounts (hereunder the Account) with the Lender and/or Nordea Bank Finland Plc London Branch and ensure that all amounts payable to it are paid to the Account.

21.11   Shareholders and change of control

The Borrower shall and shall procure that its shareholder(s) do not agree to any transfer of shares, the granting of options of ownership or change in ownership of the Borrower without the prior written consent of the Lender.

21.12   Change of business etc.

a)   The Borrower shall ensure that no change is made to the general nature of the business of the Borrower, and the Borrower shall procure that no change is made to the general nature of the business of the Company from that carried out at the date of this Agreement (for the Company being the bareboat charterer of the Vessel).

b)   The Borrower shall not change its legal name.

21.13   No mergers etc.

The Borrower shall not and shall procure that the Company shall not enter into any merger, amalgamation, de-merger, split-up, divest, consolidation with or into any other person, be the subject of any reconstruction or change its type of organization, jurisdiction of organization without the prior consent of the Lender.

21.14   Environmental compliance

The Borrower shall comply and shall procure the compliance by the Company in all material respects with all Environmental Laws subject to the terms and conditions of any Environmental Approval and obtain and maintain any Environmental Approval.

21.15   Commercial management and technical management

The Borrower shall procure that B + H Management Ltd. shall continue to be commercial manager and that Tesma Singapore Pte. Ltd. or B + H Management Ltd. shall continue to be the technical manager of the Vessel and there shall be no change to such commercial or technical management without the prior written consent of the Lender.

21.16   Transaction Documents

The Borrower shall procure that none of the Transaction Documents are amended (save for immaterial amendments which will have no impact of the Borrower’s ability to fulfil its obligations under the Finance Documents) or terminated, or any waiver or any terms thereof are agreed thereunder without the prior written consent of the Lender.

22   VESSEL’S COVENANTS

The Borrower gives the undertakings set out in this Clause 22 to the Lender and such undertakings shall remain in force throughout the Security Period.

22.1   Insurance

a)   The Borrower shall 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 as normally adopted by the industry for similar vessels), Hull Interest and/or Freight Interest, Loss of Hire and War Risk insurances, in such amounts, on such terms and with such insurers as the Lender shall approve.

b)   The value of the Hull and Machinery insurance shall cover at least eighty per cent (80.00%) of the Market Value, and the aggregate insurance value of the Vessel (except Protection & Indemnity and Loss of Hire) shall be at least equal to the higher of the Market Value and one hundred and twenty per cent (120.00%) of the Loan.

22.2   Classification and repairs

The Borrower procure that the Company 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 its class at the highest level with Det norske Veritas or another classification society approved by the Lender, free of overdue recommendations and qualifications; 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.

22.3   Notification of certain events

The Borrower shall immediately notify the Lender of:

a)   any accident to the Vessel involving repairs where the costs will or is likely to exceed USD 500,000 (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 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, the Company or otherwise in connection with the Vessel.

22.4   Operation of the Vessel

a)   The Borrower shall procure the compliance in all material respects with the ISM Code and the ISPS Code, all Environmental Laws and all other laws or regulations relating to the Vessel, its ownership, operation and management or to the business of the Company and shall procure that the Company employs the Vessel and allow its employment:

(i)   in any manner contrary to law or regulation in any relevant jurisdiction including but not limited to the ISM Code; and

(ii)   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 Company 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 Lender.

Without limitation to the generality of this Clause 22.4, the Borrower shall 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.

b)   The Vessel shall be employed under the Charterparty.

22.5   ISM Code compliance

The Borrower will:

a)   procure that the Vessel remains subject to a SMS for the duration of the Facility;

b)   procure that a valid and current SMC is maintained for the Vessel for the duration of the Facility;

c)   procure that any technical manager of the Vessel maintains a valid and current DOC for the duration of the Facility;

d)   immediately notify the Lender in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the SMC of the Vessel or of the DOC of the technical manager of the Vessel; and

e)   immediately notify the Lender in writing of any “accident” or “major non-conformity”, each as those terms is defined in the Guidelines in the application of the IMO International Safety Management Code issued by the International Chamber of Shipping and International Shipping Federation.

22.6   Inspections and class records

a)   The Borrower shall procure that the Company and any charterers permit, one person appointed by the Lender to inspect the Vessel once a year for the account of the Borrower upon the Lender giving prior written notice.

b)   The Borrower shall procure that the Company instructs the classification society to send to the Lender, following a written request from the Lender, copies of all class records held by the classification society in relation to the Vessel.

22.7   Surveys

The Borrower shall 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 Lender copies of all survey reports and confirmations of class issued in respect thereof whenever such is required by the Lender, however limited to once a year.

22.8   Arrest

The Borrower shall procure that the Company 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 or the Insurances;

b)   all tolls, taxes, dues, fines, penalties and other amounts charged in respect of the Vessel or the Insurances; and

c)   all other outgoings whatsoever in respect of the Vessel and the Insurances,

and forthwith upon receiving a notice of arrest of the Vessel, or its detention in exercise or purported exercise of any lien or claim, the Borrower shall procure that the Company or any charterer shall procure their release by providing bail or providing the provision of security or otherwise as the circumstances may require.

22.9   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 Lender, a written confirmation from the relevant insurers that the claim relating to the Total Loss has been accepted in full.

23   EVENTS OF DEFAULT

Each of the events or circumstances set out in this Clause 23 is an Event of Default.

23.1   Non-payment

The Borrower do 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 Borrower; and

b)   payment is made within three (3) Business Days of its due date.

23.2   Financial covenants

Any requirement in Clause 20 (Financial covenants) is not satisfied.

23.3   Other obligations

a)   The Borrower do not comply with any provision of the Finance Documents (other than those referred to in Clause 23.1 (Non-payment) and Clause 23.2 (Financial covenants)).

b)   No Event of Default under litra a) above will occur if the failure to comply is capable of remedy and is remedied within thirty (30) days of the Lender giving notice to the Borrower or the Borrower becoming aware of the failure to comply.

23.4   Misrepresentations

Any representation or statement made or deemed to be made by the Borrower in the Finance Documents or any other document delivered by or on behalf of the Borrower 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.

23.5   Cross default

a)   Any Financial Indebtedness of the Borrower and/or any member of the Group and/or the Company is not paid when due nor within any originally applicable grace period.

b)   Any Financial Indebtedness of the Borrower and/or any member of the Group and/or the Company and/or the Owning Company is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).

c)   Any commitment for any Financial Indebtedness of the Borrower and/or any member of the Group and/or the Company and/or the Owning Company is cancelled or suspended by a creditor of the Borrower and/or any member of the Group and/or the Company and/or the Owning Company as a result of an event of default (however described).

d)   Any creditor of the Borrower and/or any member of the Group and/or the Company and/or the Owning Company becomes entitled to declare any Financial Indebtedness of the Borrower and/or any member of the Group and/or the Company and/or the Owning Company due and payable prior to its specified maturity as a result of an event of default (however described).

23.6   Insolvency

a)   The Borrower 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 the Borrower is less than its liabilities (taking into account contingent and prospective liabilities).

c)   A moratorium is declared in respect of any indebtedness of the Borrower.

23.7   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, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme or arrangement or otherwise) of the Borrower;

b)   a composition, compromise, assignment or arrangement with any creditor of the Borrower;

c)   the appointment of a liquidator, receiver, administrative receiver, administrator or other similar officer in respect of the Borrower; or

d)   enforcement of any Security Interest over any assets of the Borrower.

23.8   Creditor’s process

Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of the Borrower having an aggregate value of USD 100,000 and is not discharged within thirty (30) days.

23.9   Unlawfulness

It is or becomes unlawful for the Borrower to perform any of its obligations under the Finance Documents.

23.10   Material adverse change

Any event or series of events occur which, in the opinion of the Lender, might have a Material Adverse Effect on the Borrower and/or any member of the Group and/or the Owning Company and/or the Company.

23.11   Permits

Any licence, consent, permission or approval required in order to enforce, complete or perform any of the Transaction Documents is revoked, terminated or modified having a Material Adverse Effect on the Borrower.

23.12   Litigation

There is current, pending or threatened any claims, litigation, arbitration or administrative proceedings against the Borrower which might, if adversely determined, have a Material Adverse Effect on the Borrower, the Owning Company and/or the Company.

23.13   Charterparty

The Charterparty has been amended without prior written consent of the Agent.

23.14   Acceleration

Upon the occurrence of an Event of Default, the Lender may, and shall if so directed by the Lender, by written notice to the Borrower:

a)   cancel the Commitments whereupon they shall immediately be cancelled;

b)   declare that all or part of the Loan together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents, be 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)   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 Lender by any of the Finance Documents or by any applicable law or regulation or otherwise as a consequence of such Event of Default.

24   CHANGES TO THE PARTIES

24.1   Assignments and transfer by the Borrower

The Borrower may not assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

24.2   Assignment and transfer by the Lender

The Lender may at any time assign, transfer or have assumed its rights or obligations under the Finance Documents with the prior consultation of the Borrower.

25   PAYMENT MECHANICS

25.1   Payments to the Lender

All payments by the Borrower under the Finance Documents shall be made:

a)   to the Lender to its account with such office or bank as the Lender may from time to time designate in writing to the Borrower for this purpose; and

b)   for value on the due date at such times and in such funds as the Lender 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.

25.2   Distributions by the Lender

Each payment received by the Lender under the Finance Documents for another Party shall, subject to Clause 25.3 (Distributions to the Borrower) and 25.4 (Clawback), be made available by the Lender 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 Lender by not less than five (5) Business Days’ notice.

25.3   Distributions to the Borrower

The Lender may (with the consent of the Borrower or in accordance with Clause 26 (Set-off)), apply any amount received by it for the Borrower in or towards payment (on the date and in the currency and funds of receipt) of any amount due from the Borrower under the Finance Documents or in or towards purchase of any amount of currency to be so applied.

25.4   Clawback

a)   Where a sum is to be paid to the Lender under the Finance Documents for distribution to another Party, the Lender is not obliged to pay that sum to that other Party until it has been able to establish to its satisfaction that it has actually received that sum.

b)   If the Lender pays an amount to another Party and it proves to be the case that the Lender had not actually received that amount, then the Party to whom that amount was paid by the Lender shall on demand refund the same amount to the Lender, together with interest on that amount from the date of payment to the date of receipt by the Lender, calculated by the Lender to reflect its cost of funds.

25.5   Partial payments

If the Lender receives a payment that is insufficient to discharge all the amounts then due and payable by the Borrower under the Finance Documents, the Lender shall apply that payment towards the obligations of the Borrower under the Finance Documents in the following order:

a)   firstly, in or towards payment pro rata of any unpaid fees, costs and expenses of the Lender under the Finance Documents;

b)   secondly, in or towards payment pro rata of any accrued interest (including default interest), fee or commissions due but unpaid under this Agreement;

c)   thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and

d)   fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

25.6   No set-off by the Borrower

All payments to be made by the Borrower under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

25.7   Payment on non-Business Days

a)   Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

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.

25.8   Currency of account

The Borrower shall pay:

a)   any amount payable under this Agreement, 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.

26   SET-OFF

The Lender may, to the extent permitted by applicable law, set off any matured obligation due from the Borrower under the Finance Documents (to the extent beneficially owned by the Lender) against any matured obligations owed by the Lender to the Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

27   NOTICES

27.1   Communication in writing

Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by telefax or letter. Any such notice or communication addressed as provided in Clause 27.2 (Addresses) will be deemed to be given or made as follows:

a)if by letter, when delivered at the address of the relevant Party;

b)if by telefax, when received.

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.

27.2   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 telefax number of each Party and marked for the attention of the department or persons set out below:

If to the Lender:Nordea Bank Norge ASA

Att: Shipping, Offshore and Oil Services

Middelthuns gate 17

P.O. Box 1166 Sentrum

N-0107 Oslo, Norway

Telefax No: +47 22 48 66 68

If to the Borrower:c/o B + M Management Ltd.

Par-la-Ville Place

14 Par-la-Ville Road

Hamilton HMJX

Bermuda

Telefax No: + 1 441 295 6796

or any substitute address and/or telefax number and/or marked for such other attention as the Party may notify to the other Party by not less than five (5) Business Days’ prior notice.

27.3   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 Lender, 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.

28   CALCULATIONS

All sums falling due by way of interest, fees and commissions under the Finance Documents accrue from day-to-day and shall be calculated on the basis of the actual number of days elapsed and a calendar year of 360 days and for the actual number of days elapsed. The calculations made by the Lender of any interest rate or any amount payable pursuant to this Agreement shall be conclusive and binding upon the Borrower in the absence of any manifest error.

29   MISCELLANEOUS

29.1   Partial invalidity

If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provisions under any law of any other jurisdiction will in any way be affected or impaired.

29.2   Remedies and waivers

No failure to exercise, nor any delay in exercising on the part of the Lender, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

29.3   Amendments and waivers

Any term of the Finance Documents may be amended or waived only with the written consent of the Lender and the Borrower.

29.4   Disclosure of information and confidentiality

The Parties are obliged to keep confidential all information in respect of the terms and conditions of this Agreement. This confidentiality obligation shall not apply to any information which:

a)   is publicised by a Party as required by applicable laws and regulations;

b)   has entered the public domain or is publicly known, provided that such information is not made publicly known by the receiving Party of such information; or

c)   was or becomes, as the Party is able to demonstrate by supporting documents, available to the such Party on a non-confidential basis prior to the disclosure thereof.

29.5   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.

30   GOVERNING LAW AND ENFORCEMENT

30.1   Governing law

This Agreement shall be governed by Norwegian law.

30.2   Jurisdiction

a)   For the benefit of the Lender, the Borrower 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 Borrower accordingly submit to the non-exclusive jurisdiction of the Oslo District Court (Oslotingrett).

b)   Nothing in this Clause 30.2 shall limit the right of the Lender to commence proceedings against the Borrower in any other court of competent jurisdiction. To the extent permitted by law, the Lender may take concurrent proceedings in any number of jurisdictions.

30.3   Service of process

Without prejudice to any other mode of service, the Borrower:

a)   irrevocably appoints Wikborg Rein & Co., Kronprinsesse Märthas plass 1, P.O. Box 1513 Vika, N-0117 Oslo, Norway as its agent for service of process in relation to any proceedings before Norwegian courts in connection with any Finance Document; and

b)   agrees that failure by its process agent to notify it of the process will not invalidate the proceedings concerned.

* * *

SCHEDULE 1

CONDITIONS PRECEDENT

1   CORPORATE AUTHORISATION

1.1   In respect of the Borrower:

a)   Certificate of Incorporation/Certificate of Registration;

b)   Memorandum and Articles of Association/Bye-laws;

c)   Resolutions passed at a board meeting of the Borrower evidencing:

(i)   the approval of the terms of, and the transactions contemplated by, the Transaction Documents; and

(ii)   the authorisation of its appropriate officer or officers or other representatives to execute the Transaction Documents and any other documents necessary for the transactions contemplated by the Transaction Documents, on its behalf;

d)   Power of Attorney (notarised and legalised);

e)   Updated Good Standing Certificate/Certificate of Compliance;

f)   Secretary’s Certificate (notarised and legalised); and

g)   A specimen of the signature of each person authorised by the resolution referred to in paragraph c) above.

1.2   In respect of the Guarantor

a)   Certificate of Incorporation/Certificate of Registration;

b)   Memorandum and Articles of Association/Bye-laws;

c)   Resolutions passed at a board meeting of the Guarantor evidencing:

(i)   the approval of the terms of, and the transactions contemplated by, the Transaction Documents; and

(ii)   the authorisation of its appropriate officer or officers or other representatives to execute the Transaction Documents and any other documents necessary for the transactions contemplated by the Transaction Documents, on its behalf;

d)   Power of Attorney (notarised and legalised);

e)   Updated Good Standing Certificate/Certificate of Compliance;

f)   Secretary’s Certificate (notarised and legalised); and

g)   A specimen of the signature of each person authorised by the resolution referred to in paragraph c) above.

2   AUTHORISATIONS

All approvals, authorisations and consents required by any government (domestic and foreign) or other authorities for the Borrower and/or the Company and/or the Owning Company to enter into and perform their obligations under this Agreement and/or any of the Transaction Documents have been obtained and are in full force and effect and all applicable waiting periods have expired without any action being taken by any competent authority which, in the judgement of the Lender, restraints, prevents or imposes materially adverse conditions upon the consummation of this Agreement or the transactions referred to herein.

3   THE VESSEL

a)   Evidence (by way of transcript of registry) that the Vessel is registered in the name of the Owning Company in the NIS (or such other ship registry as approved by the Lender) and that the Vessel is free of any mortgage or registered encumbrances, liens etc. save as set out in Clause 21.5 (Negative pledge);

b)   An updated 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 22.2 (Classification and repairs), free of extensions and overdue recommendations;

c)   The Vessel’s current SMC;

d)   The DOC;

e)   The ISPS Certificate.

4   FINANCE DOCUMENTS

a)   The Agreement;

b)   The Share Pledge Agreement (and any documents thereunder, including (but not limited to) any share certificates (if applicable));

c)   The Account Charge; and

d)   The Guarantee.

5   TRANSACTION DOCUMENTS

a)   The Charterparty; and

b)   The Share Purchase Agreement.

6   MISCELLANEOUS

a)   The Drawdown Notice at least three (3) Business Days prior to the Drawdown Date;

b)   Evidence that all fees referred to in Clause 11 (Fees), as are payable on or prior to the Drawdown Date, have or will be paid on its due date;

c)   A Compliance Certificate confirming that the Borrower and the Guarantor (on a consolidated basis) is in compliance with the financial covenants as set out in Clause 20 (Financial covenants);

d)   The effective interest letter;

e)   Evidence that the Financial Indebtedness of the Owning Company is not more than USD 8,700,000;

f)   Evidence of the time charterparty of the Vessel between the Company (as owner) and ST Shipping Ltd. (acting under a guarantee of Glencore International A.G.) for a period of not less than three (3) years from February 2006 at a daily net hire of USD 22,000 in year 1 and 2 and USD 21,000 in year 3 with a profit split for all three (3) years;

g)   Evidence (in form acceptable to the Lender) that the Company is able, and not restricted in any way from paying dividends;

h)   Evidence of capital structure of the Borrower satisfactory to the Lender;

i)   Evidence that all required registrations and notifications have been made under the Security Documents in order to perfect the Security Interest contemplated thereby, including transcripts from the relevant public registers;

j)   Appointment of Ince Process Agents Limited and the acceptance by Ince Process Agents Limited as the Borrower’s process agent in England under the Account Charge;

k)   Appointment of Bugge Arentz-Hansen & Rasmussen and the acceptance by Bugge Arentz-Hansen & Rasmussen as the Borrower’s and the Guarantor’s process agent in Norway under the Finance Documents; and

l)   Any other documents as reasonably requested by the Lender.

7   LEGAL OPINIONS

a)   A legal opinion from Thommessen Krefting Greve Lund AS related to Norwegian law issues;

b)   A legal opinion from Seward & Kissel LLP related to Marshall Island law issues;

c)   A legal opinion from Seward & Kissel LLP related to Liberian law issues;

d)   A legal opinion from Prettys related to English law issues; and

e)   Any such other favourable legal opinions in form and substance satisfactory to the Lender from lawyers appointed by the Lender on matters concerning all relevant jurisdictions.

SCHEDULE 2

FORM OF DRAWDOWN NOTICE

To:Nordea Bank Norge ASA, as Lender

From:Seapowet Trading Ltd.

Date:[•]

SEAPOWET TRADING LTD. - USD 8,000,000 TERM LOAN FACILITY AGREEMENT DATED 5 SEPTEMBER 2006 (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 of a Drawdown under:

Proposed Drawdown Date:[ ]

Principal Amount:[]

Interest Period:[]

b)   The proceeds of the Loan shall be credited to [•] [insert name and number of account].

c)   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 representations and warranties set out in Clause 18 (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

Seapowet Trading Ltd.

By: __________________________________

Name:

Title: [authorised officer]

SCHEDULE 3

FORM OF SELECTION NOTICE

To:Nordea Bank Norge ASA, as Lender

From:Seapowet Trading Ltd.

Date:[•] 2006

SEAPOWET TRADING LTD. - USD 8,000,000 TERM LOAN FACILITY AGREEMENT DATED 5 SEPTEMBER 2006 (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

Seapowet Trading Ltd.

By: ____________________________________

Name:

Title:

SCHEDULE 4

FORM OF COMPLIANCE CERTIFICATE

To:Nordea Bank Norge ASA, as Lender

From:Seapowet Trading Ltd.

Date:[•] [To be delivered no later than [one hundred and twenty (120) /forty-five (45)] days after each Reporting Date]

SEAPOWET TRADING LTD. - USD 8,000,000 TERM LOAN FACILITY AGREEMENT DATED [·] 2006 (THE “AGREEMENT”)

We refer to the Agreement. Terms defined in the Agreement shall have the same meaning when used in this Compliance Certificate.

With reference to Clauses 19.1 (Compliance certificate) and 20 (Financial covenants) of the Agreement, we confirm that as at [•] [insert relevant Reporting Date]:

a)   Minimum Value Adjusted Equity Ratio. The Minimum Value Adjusted Equity Ratio of the Guarantor (on a consolidated basis) was [•].

The Guarantor shall at all times maintain a minimum Value Adjusted Equity Ratio of thirty per cent (30.00%). The covenant in Clause 20.2.1 (Minimum Value Adjusted Equity Ratio) is thus [not] satisfied.

b)   Minimum Value Adjusted Equity Ratio. The Minimum Value Adjusted Equity of the Guarantor (on a consolidated basis) was USD [•].

The Guarantor shall at all times maintains a Minimum Value Adjusted Equity of USD 50,000,000. The covenant set out in Clause 20.2.2 (Minimum cash balance) is thus [not] satisfied.

c)   Ratio EBITDA to Fixed Charges. The ratio of EBITDA to Fixed Charges of the Guarantor (on a consolidated basis) was [•].

The Guarantor (on a consolidated basis) shall at all times ensure that ratio of EBITDA to Fixed Charges shall be minimum one hundred and twenty-five per cent (125.00%) on a twelve (12) months rolling basis up until the Final Maturity Date. The covenant in Clause 20.2.3 (Ratio EBITDA to Fixed Charges) is thus [not] satisfied.

d)   Positive working capital. The working capital of the Guarantor (on a consolidated basis) was [·].

The Guarantor (on a consolidated basis) shall at all times ensure that its current assets exceeds its current liabilities (excluding the current portion of long term debt), all as determined in accordance with GAAP. The covenant set out in Clause 20.2.4 (Positive working capital) is thus [not] satisfied.

e)   Cash and Cash Equivalents. The Guarantor (on a consolidated basis) shall at all times ensure that it has Cash and Cash Equivalents equal to or greater than (i) USD 15,000,000 and (ii) six per cent (6.00%) of the long term debt of the Guarantor.

f)   We confirm that, as of the date hereof (i) each of the representations and warranties set out in Clause 18 (Representations and warranties) of the Agreement is true and correct; and (ii) 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

B+H Ocean Carriers Ltd.Seapowet Trading Ltd.

By: __________________________________By: _______________________________

Name:Name:

Title: [authorised officer]Title:

SCHEDULE 5

FORM OF GUARANTEE

Guarantee and Indemnity

This Guarantee (this “Guarantee”) is made on [•] between:

(1)B+H Ocean Carriers Ltd., of 80 Broad Street, Monrovia, Liberia (the “Guarantor”); and

(2)Nordea Bank Norge ASA, organisation no. 911 044 110, Middelthunsgt. 17, N-0368 Oslo, Norway (the “Lender”).

WHEREAS

(A)Pursuant to the terms and conditions of a term loan facility agreement dated [·] 2006 (the “Agreement”) between Seapowet Trading Ltd. as borrower (the “Borrower”) and the Lender, the Lender has agreed to make available to the Borrower a term loan in the aggregate amount of USD 8,000,000 (the “Loan”);

(B)subject to the terms and conditions of the Agreement, the Loan will be made available to the Borrower for the purpose of (i) partly refinancing the purchase price paid by the Borrower for fifty per cent (50.00%) of the shares in Nordan OBO II Inc. of 80 Broad Street, Monrovia, Liberia and (ii) the payment of fees and expenses incurred in connection with the Facility; and

(C)it is a condition of the Agreement that the Guarantor enters into this Guarantee. A similar guarantee agreement may also be executed by other parties pursuant to the Agreement, but the execution and enforceability of such other guarantee agreements shall not be a condition to the effectiveness or enforceability of this Guarantee.

IT IS AGREED AS FOLLOWS:

1   DEFINITIONS

Capitalised terms used herein shall, save as expressly defined herein, have the same meanings as ascribed thereto in the Agreement.

2   GUARANTEE

2.1   Guarantee obligations

The Guarantor hereby unconditionally and irrevocably:

a)   guarantees to the Lender, as and for its own debt and not merely as surety (as selvskyldnerkausjonist), the punctual performance by the Borrower of all of the Borrower’s obligations under the Finance Documents and any Swap Agreement(s);

b)   undertakes with the Lender that whenever the Borrower does not pay any amount when due under or in connection with any Finance Document and/or any Swap Agreement(s), the Guarantor shall immediately on demand by the Lender pay that amount as if it were the principal obligor; and

c)   indemnifies the Lender immediately on demand against any cost, loss or liability suffered by the Lender if any obligation guaranteed by the Guarantor is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which that Lender would otherwise have been entitled to recover.

2.2   Payment upon first demand

If the Borrower shall fail to pay any sum under the Finance Documents and/or any Swap Agreement(s) as and when such sum shall become due and payable, the Guarantor shall immediately upon the Lender’s first written demand pay to the Lender 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 Lender, as the Lender 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.

2.3   Continuing guarantee

The obligations of the Guarantor hereunder (the “Guarantee Obligations”) are continuing obligations and will extend to the ultimate balance of sums payable by the Borrower under the Finance Documents and any Swap Agreement(s), regardless of any intermediate payment or discharge in whole or in part.

2.4   Maximum liability

The liability of the Guarantor hereunder shall be limited to USD 8,500,000, plus any unpaid amount of interest, fees, liability and expenses under the Finance Documents and any Swap Agreement(s).

2.5   Reinstatement

If any payment by the Borrower or any discharge given by the Lender (whether in respect of the obligations of the Borrower 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 Borrower shall continue as if the payment, discharge, avoidance or reduction had not occurred; and

b)   the Lender shall be entitled to recover the value or amount of that security or payment from the Borrower, as if the payment, discharge, avoidance or reduction had not occurred.

2.6   Waiver of defences

The obligations of the Guarantor under this Clause 2 will not be affected by an act, omission, matter or thing which, but for this Clause 2, would reduce, release or prejudice any of its obligations under this Clause 2 (without limitation and whether or not known to it or the Lender including (but not limited to:

a)   any time, waiver or consent granted to, or composition with, the Borrower or other person;

b)   the release of the Borrower or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;

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, the Borrower or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

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

e)   any amendment (however fundamental) or replacement of a Finance Document, a Swap Agreement or any other document or security;

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

g)   any insolvency or similar proceedings.

2.7   Waiver of rights under the FA Act

The Guarantor specifically waives all rights under the provisions of the Norwegian Financial Agreements Act (“FA Act”)of 25 June 1999 no. 46 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 the 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/or any Swap Agreement and to be kept informed thereof);

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 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 Agreement and/or any Swap Agreement 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 the Loan, is released by the Lender 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 the Loan or the execution of the Guarantee, 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 Agreement, any Swap Agreement or the Security Documents);

j)   § 70 (as the Guarantor shall have no right of subrogation into the rights of the Lender under the Agreement, any Swap Agreement or the Security Documents until and unless the Lender shall have received all amounts due or to become due to it under the Agreement, any Swap Agreement and the Security Documents);

k)   § 71 (as the Lender 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 Agreement and/or any Swap Agreement and/or the Security Documents before seeking to enforce the security created hereunder);

l)   § 72 (as all interest and default interest due under the Agreement and/or any Swap Agreement and/or the Security Documents shall be secured hereunder);

m)   § 73 (1) - (2) (as all costs and expenses related to a default under the Agreement and/or any Swap Agreement and/or the Security 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 Lender first shall have received all amounts due or to become due to them under the Agreement, any Swap Agreement and the Security Documents).

2.8   Immediate recourse

The Guarantor waives any right it may have of first requiring the Lender (or any agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from the Guarantor under this Clause 2. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.

2.9   Appropriations

Until all amounts which may be or become payable by the Borrower under or in connection with the Finance Documents and/or any Swap Agreement have been irrevocably paid in full, the Lender (or any agent on its behalf) may:

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

b)   hold in an interest-bearing suspense account any moneys received from the Guarantor or on account of the Guarantor’s liability under this Clause 2.

2.10   Deferral of Guarantor’s rights

Until all amounts which may be or become payable by the Borrower under or in connection with the Finance Documents and/or any Swap Agreement have been irrevocably paid in full and unless the Lender otherwise directs, the Guarantor will not exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents and/or any Swap Agreement:

a)   to be indemnified by the Borrower;

b)   to claim any contribution from any other guarantor of the Borrower’s obligations under the Finance Documents and/or any Swap Agreement; and/or

c)   to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Lender under the Finance Documents and/or any Swap Agreement or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents and/or any Swap Agreement by the Lender.

2.11   Additional security

This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by the Lender.

3   UNDERTAKINGS

The Guarantor undertakes to the Lender that as long as this Guarantee is effective:

a)   it shall at all times comply with all its obligations, covenants, undertakings and representations under the Finance Documents and/or any Swap Agreement, and undertakes to comply with and perform all such obligations, covenants, undertakings and representations with relates to the Guarantor in the Agreement, hereunder (but not limited to) the information undertakings as set out in Clause 19 (Information undertakings), the financial covenants as set out in Clause 20 (Financial covenants) and the general undertakings as set out in Clause 21 (General undertakings) of the Agreement and the obligation to deliver a Compliance Certificate as set out in Clause 19.2 (Compliance Certificate) of the Agreement;

b)   following receipt of a notice from the Lender 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;

c)   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 Lender 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 Lender) make any claim in such insolvency, winding-up or liquidation until all the Loan owing or due has been irrevocably paid in full;

d)   if the Guarantor being in breach of litra b) and c) 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 Lender to apply the same as if they were money received or recovered by the Lender under this Guarantee; and

e)   it will not take or has not taken from the Borrower any security whatsoever for the obligations guaranteed hereunder.

4   REPRESENTATIONS AND WARRANTIES

The Guarantor represents and warrants to the Lender as follows:

a)   the Guarantor is duly organised and validly existing as a private limited liability company under the laws of Liberia and has the corporate power and authority to own its assets and carry on its business as it is presently being conducted in each jurisdiction in which it owns assets or carry on business;

b)   the Guarantor has the power to enter into, perform and deliver, and has taken all necessary actions to authorise its entry into, performance and delivery of this Guarantee; and

c)   the Guarantee constitutes the legal, valid and binding obligations of the Guarantor, enforceable against the Guarantor in accordance with its terms and will be so treated in any relevant courts and this Guarantee is in proper form for enforcement in such courts.

5   ASSIGNMENT

The Lender may assign or transfer the rights hereunder to any person to whom the rights and obligations of the Lender under the Agreement are wholly or partly assigned or transferred to in accordance with Clause 24.2 (Assignment and transfer by the Lender) of the Agreement.

6   EXPENSES

The Guarantor shall pay to the Lender on demand on a full indemnity basis all charges, costs and expenses (including the legal fees) properly incurred by the Lender in connection with the preservation and enforcement of any of the rights of the Lender hereunder.

7   MISCELLANEOUS

7.1   No implied waivers

No delay or failure by the Lender 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 Lender. 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 Lender 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.

7.2   Separable provisions

The provisions of this Guarantee are separable and, if any provision of this Guarantee is or becomes illegal, invalid or unenforceable in any respect in any jurisdiction, this shall not affect the legality, validity or enforceability of such provisions in any other jurisdiction or the legality, validity or enforceability of the remaining provisions of the Guarantee in that or any other jurisdiction.

7.3   Borrower as agent for the Guarantor

The Borrower shall be the agent of the Guarantor and any notice, statement or agreement by the Borrower to or with the Lender shall be binding on the Guarantor.

7.4   Law and jurisdiction

7.4.1   Governing law

This Guarantee shall be governed by and construed in accordance with Norwegian law.

7.4.2   Main jurisdiction

The Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of the Norwegian courts, the venue to be Oslo City Court (Oslo tingrett) and the Guarantor agrees for the benefit of the Lender that any legal action or proceedings arising out of or in connection with this Guarantee against the Guarantor or any of its assets may be brought in the said court.

7.4.3   Alternative jurisdiction

This Clause 7.4.3 is for the exclusive benefit of the Lender which has the right:

a)   to commence proceedings against the Guarantor or its assets both in any court in Norway and any other jurisdiction; and

b)   to commence enforcement proceedings in any jurisdiction concurrently with or in addition to proceedings in Norway or without commencing proceedings in Norway.

The parties agree that only the courts of Norway and not those of any other state shall have jurisdiction to determine any claim which the Guarantor may have against the Lender and that the Guarantor shall only be entitled to commence legal action or proceedings against the Lender in relation to this Guarantee in Oslo City Court (Oslo tingrett).

8   NOTICES

Every notice, demand or other communication under this Guarantee shall be made by letter or telefax. Any such notice or communication given by any of the parties hereto shall be made to the other party at the following address:

a)   If to the Lender:Nordea Bank Norge ASA

Middelthunsgt. 17

P.O. Box 1166 Sentrum

N-0107 Oslo, Norway

Att: Shipping, Offshore and Oil Services

Telefax No: + 47 22 48 66 68

b)   If to the Guarantor:B + H Ocean Carriers Ltd.

c/o B + H Management Ltd.

Par-la-Ville Place

14 Par-la-Ville Road

Hamilton HMJX

Bermuda

Att.:

Telefax: + 1 441 295 6796

8.2   Service of process

Without prejudice to any other mode of service, the Guarantor:

a)   irrevocably appoints Wikborg Rein & Co., Kronprinsesse Märthas plass 1, P.O. Box 1513 Vika, N-0017 Oslo, Norway as its Lender for service of process relating to any proceedings before Norwegian courts in connection with this Agreement; and

b)   agrees that failure by its process Lender to notify it of the process will not invalidate the proceedings concerned.

IN WITNESS WHEREOF, the parties hereto have duly executed this Guarantee in two (2) original copies on the date and year first written above.

The Guarantor:The Lender:

B+ H Ocean Carriers Ltd.Nordea Bank Norge ASA

By: _____________________________By: ____________________________

Name:Name:

Title:Title:

SIGNATORIES

The Borrower:The Lender:

Seapowet Trading Ltd.Nordea Bank Norge ASA

By: __/s/ Haakon Flaaten______By: __/s/ Siri Wennevik____________________________

Name:Name:

Title:Attorney-in-FactTitle: Attorney-in-Fact

We, B+H Ocean Carriers Ltd., hereby acknowledge and agree to the terms of this Agreement and agree to be bound by Clauses 18 (Representations and warranties), 19 (Information undertakings), 20 (Financial covenants), 21 (General undertakings) and 23 (Events of Default) of this Agreement to the extent applicable to the Guarantor as if we were a party to this Agreement.

5 September 2006

Guarantor:

B+H Ocean Carriers Ltd.

By: __/s/ Haakon Flaaten______

Name:

Title:Attorney-in-Fact

EX-4

ISIN NO 001 0345374

LOAN AGREEMENT

between

B+H Ocean Carriers Ltd

(Borrower)

and

Norsk Tillitsmann ASA

(Loan Trustee)

on behalf of

the Bondholders

in the bond issue

FRN B+H Ocean Carriers Ltd Open Bond Issue 2006/2013

TABLE OF CONTENTS

1 Definitions

2 The Loan

3 Listing

4 Registration in a Securities Depository

5 The functions, duties and liability of the Loan Trustee

6 Conditions Precedent

7 Representations and Warranties

8 Status of the Loan

9 Interest

10Maturity of the Loan and Call Option

11 Interest in the event of late payment

12 Borrower's acquisition of Borrower’s Bonds

13 Covenants

14 Fees and expenses

15 Events of Default

16 Authority of the Bondholders' meeting and the Loan Trustee

17 Procedural rules

18 Repeated Bondholders' meeting

19Change of Loan Trustee

20 Limitation

21 Dispute resolution and legal venue

This agreement (the "Loan Agreement") has been entered into on December 11, 2006 between B+H Ocean Carriers Ltd (Company No C51934) as borrower (the “Borrower”) and Norsk Tillitsmann ASA (Company No 963 342 624) as loan trustee (the “Loan Trustee”).

Through their subscription in the Loan the Bondholders have acceded to the Loan Agreement (i.e.):

*The Bondholders are bound by the terms of the Loan Agreement provided that information about the accession was given in the subscription documents.

*The Loan Trustee has through the Bondholders subscription been granted authority to act on behalf of the Bondholders to the extent provided for in the Loan Agreement.

The Loan Agreement is available to anyone and may be obtained from the Loan Trustee or the Borrower. The Borrower shall ensure that the Loan Agreement is available to the general public throughout the entire term of the Loan.

1 Definitions

Whenever used in this Loan Agreement the following terms shall have the following meaning:

Banking Day:any day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) in Oslo, London and New York.

Bondholders:the holders of the Bonds.

Bonds:bonds in the Loan, as described in Clause 2.1, each individually a “Bond”.

Borrower’s Bonds:Bonds in the Remaining Loan, owned by the Borrower or any party over whom the Borrower has decisive influence or any party who has decisive influence over the Borrower.

Change of Control Event:means that a shareholder or a group of affiliated shareholders, or companies, (direct or indirect), ref Securities Trading Act § 1-4, exclusive of Michael S. Hudner and Trevor J. Williams and companies under control of Michael S. Hudner and Trevor J. Williams, obtain (including purchase, merger, dilution etc.) ownership or control of more than 50 - fifty - per cent of the share capital of the Borrower.

Disbursement Date:12 December 2006.

Event of Default:means each event defined as an event of default in Clause 15.1.

Exchange:securities exchange or other reputable market place for securities having satisfactory requirements as to listing and trading, where the Loan is listed or applied for listing.

Finance Documents:means (i) this Loan Agreement, (ii) the fee agreement according to Clause 14.1, and (iiii) any other document which is executed at any time by the Borrower in relation to any amount payable under this Loan Agreement or any of the other documents referred to in this definition.

Group:the Borrower and its subsidiaries (if any).

Interest Determination Date:8 December 2006 and thereafter two Banking Days prior to each Interest Payment Date.

Interest Payment Date:12 March, 12 June, 12 September and 12 December each year. If the Interest Payment Date is not a Banking Day, the Interest Payment Date shall be postponed to the next Banking Day. However, if this day falls in the following calendar month, the Interest Payment Date is moved to the first Banking Day preceding the original date.

Margin:4.00 percentage points.

Maturity Date:12 December 2013. If the Maturity Date is not a Banking Day, the Maturity Date shall be postponed to the next Banking Day. However, if this day falls in the following calendar month, the Maturity Date is moved to the first Banking Day preceding the original date.

Net Asset Value: Value Adjusted Assets less Net Debt on a consolidated basis and according to IFRS.

Net Debt: book value of all liabilities minus cash

LIBOR:- the interest rate rounded off to five decimal places for a 3 - three - months period that is quoted on Reuters Screen LIBOR01 page as of 11.00 a.m. London time on the Interest Determination Date.

Should the contents of the Reuters Screen LIBOR01 page be changed such that, in the opinion of the Loan Trustee, the interest rates shown no longer represent the same kind of interest rates as when the Loan was disbursed, or the relevant page is removed from the Reuters Screen, another news page shall be used. This page may be another Reuters Screen’s page or, possibly, that of another electronic news agency, if it, in the opinion of the Loan Trustee, specifies the same kind of interest rates as Reuters Screen LIBOR01 page did on the disbursement of the loan. Any disagreement of opinion between the Borrower and the Loan Trustee concerning the use of a new page must be treated as described in sub-clause 9.3 of the Loan Agreement.

LIBOR -

Reference Banks:- interest rate determined on the basis of the interest on deposits in U.S. Dollars in the inter-bank market in London, quoted by four large authorised exchange banks in the London market at approximately 11.00 a.m. London time on the Interest Determination Date in London, for a 3 - three - months period, starting on the Interest Payment Date and applicable to a comparable amount. The Loan Trustee will ask the head office of each of the banks for a quotation on such interest. If two or more quotations are given, the interest rate will be set at the arithmetic mean of the quotations. If less than two quotations are given, the interest rate will be set to the arithmetic mean of the rates that banks selected by the Loan Trustee quote at approximately 11.00 a.m. London time on the Interest Determination Date for deposits in U.S. Dollars to leading European banks for a 3 - three - months period starting on the Interest Payment Date and applicable to a comparable amount. An interest rate determined by calculation of the arithmetic mean shall be rounded off to five decimal places.

Outstanding Loan:Remaining Loan less Borrower’s Bonds.

Payment Date:in relation to the Loan the dates specified for payment of interest or principal. If Payment Date is not a Banking Day payments should be made the following Banking Day.

Put Option:each Bondholder’s right to demand an early redemption of its Bonds as set out in Clause 10.2.

Remaining Loan:the aggregate principal amount of all Bonds outstanding in the Loan less the principal amount of the Bonds redeemed by the Borrower and discharged through the Securities Depository.

Securities Depository:the securities depository in which the Loan is registered. On Disbursement Date the Securities Depository is Verdipapirregisteret (“VPS”).

Securities Depository act:the Norwegian act of 2002 no. 64 regarding securities depository.

Value Adjusted

Equity Ratio: the ratio of Net Asset Value to Value Adjusted Assets, based on minimum two independent shipbrokers valuation.

Value Adjusted Assets:on a consolidated basis, the sum of the book value of the Borrower’s assets (total book value of assets) in accordance with IFRS, adjusted for actual market value for all vessels based on independent shipbroker valuations. Cash shall not be included. For vessels under construction, shipbroker valuations minus remaining yard installments shall be used in the calculation.

2 The Loan

2.1 The Borrower has resolved to issue a series of Bonds at a maximum amount of USD 60,000,000 (US Dollars sixtymillion), herein referred to as the “Loan". The Loan may comprise of one or more tranches issued on different issue dates. The first tranche will be in the amount of USD 25,000,000 (US Dollar twentyfivemillion).

The Loan is an open (tap) issue, from and including Disbursement Date and will be closed no later than 5 Banking Days prior to Maturity Date.

The Bonds will be in denominations of USD 100,000 each and rank pari passu.

The Loan will be described as “FRN B+H Ocean Carriers Ltd Open Bond Issue 2006/2013”.

The registration number (ISIN) of the Loan will be NO 001 0345374.

The tenor of the Loan is from and including the Disbursement Date to the Maturity Date.

The net proceeds of the Loan will be employed for the general corporate purpose, including but not limited to the following: (i) product tanker conversion project (six vessels), (ii) conversion of “Redina” (tbr “Sachem”) and “Sagamore” to full D/H, (iii) acquisition of additional OBOs, (iv) acquisition of further product tankers, (v) continuance of share buy-back, and (vi) balance of equity payment on “Sakonnet” (ex-“Sibohelle”).

2.2 All tranches under the Loan will be subject to identical terms in all respects. The rights and obligations of all parties to the Loan will also apply for later tranches issued within the maximum amount of the Loan.

The Loan Trustee will when issuing additional tranches prepare an addendum to the Loan Agreement regulating the conditions precedent to disbursement of the relevant tranche.

3 Listing

3.1The Loan will initially not be applied for listing. An application may later be made for the bonds to be listed on Oslo Børs or Oslo Børs’ Alternative Bond Market (ABM) at the Borrower’s discretion.

4 Registration in a Securities Depository

4.1The Loan must prior to disbursement be registered in a Securities Depository according to the Securities Depository act and the conditions from the Securities Depository.

4.2The Borrower shall promptly arrange for notification to the Securities Depository of any changes in the terms and conditions of the Loan. The Loan Trustee shall have a copy of the notification.

4.3The Borrower is responsible for the implementation of correct registration in the Securities Depository. The registration may be executed by an agent for the Borrower provided that the agent is qualified according to relevant regulations.

5 The functions, duties and liability of the Loan Trustee

5.1 The Loan Trustee shall pursuant to this Loan Agreement and in compliance with laws and regulations monitor the Bondholders' interests and rights vis-à-vis the Borrower, inter alia,

-monitor the Borrower’s fulfilment of his obligations under the Loan Agreement,

-exercise necessary discretion in carrying out the duties assigned to the Loan Trustee under the Loan Agreement,

-ensure that valid decisions made at Bondholder meetings are carried out,

-make the decisions and implement the measures that are assigned to or imposed on the Loan Trustee pursuant to this Loan Agreement,

-forward to the Bondholders necessary information which is obtained and received in its capacity as Bondholder’s representative,

-verify the timely and correct payment of interest and principal, and

-provided the Loan is listed, inform the Exchange of circumstances which are of importance to the listing and quotation of the Loan; however, this only applies to cases in which the Loan Trustee gains knowledge of or should have knowledge of such circumstances and the Borrower fails to fulfil its duty of information towards the Exchange after having been urged to do so by the Loan Trustee.

5.2 In performing its functions as Bondholder’s representative, the Loan Trustee is not obligated to assess the Borrower's financial situation or ability to service the Loan except to the extent such duty may clearly be inferred from the Loan Agreement.

5.3 The Loan Trustee shall be liable to pay damages for financial losses suffered by the Bondholders as a result of negligence of the Loan Trustee in performing its functions and duties under the Loan Agreement. The Loan Trustee is not responsible for the content of the information the Loan Trustee has submitted on behalf of the Borrower.

6 Conditions Precedent

6.1 Disbursement of the Loan will be subject to the Loan Trustee having received the following documents, in form and substance satisfactory to it, at least two Banking Days prior to the Disbursement Date:

(a)   the Loan Agreement duly executed,

(b)   certified copies of all necessary corporate resolutions to issue the Bonds and execute the Finance Documents,

(c)   a power of attorney from the Borrower to relevant individuals for their execution of the relevant Finance Documents,

(d)   certified copies of the Certificate of Incorporation and Articles of Association of the Borrower, and extracts from the relevant registrar or similar documentation evidencing the individuals authorised to sign on behalf of the Borrower,

(e)   the latest available annual and interim report (if applicable) of the Borrower and the Group,

(f)   to the extent necessary, certified copies of authorisations required for the validity of and execution, delivery and performance by and the enforceability against the Borrower of the Loan Agreement, i.a. - confirmation that the subscription documents have been controlled by the Exchange, or confirmation from the manager of the Loan that the subscription documents have been controlled and that a prospectus is not required according to Norwegian law and any other applicable law,

(g)   confirmation that the Loan has been registered in a Securities Depository,

(h)   written confirmation from the Borrower in accordance with Clause 7.1,

(i)   the agreement set forth in Clause 14.1, duly executed, and

(j)   any written documentation made public in connection with the Loan.

6.2 Subject to the conditions set out above the first tranche of the Loan will be made available to the Borrower at Disbursement Date.

6.3 The Loan Trustee is entitled to accept a delay in receiving documents listed above.

7 Representations and Warranties

7.1The Borrower shall in writing represent and warrant that:

(a)   the Borrower is a public limited liability company, duly incorporated and validly existing under the law in which it is registered, and has the power to own its assets and carry on its business as presently conducted;

(b)   the Borrower has the power to enter into and perform, and has taken all necessary corporate action to authorise the entry into, performance and delivery of the Finance Documents;

(c)   theFinance Documents constitute (or will constitute, when executed by the respective parties thereto) legal, valid and binding obligations of such parties, enforceable in accordance with its terms, and (save as provided for therein) no registration, filing, payment of tax or fees or other formalities are necessary or desirable to render the said documents enforceable against the Borrower;

(d)   the entry into and performance by the Borrower of the Finance Documents and the transactions contemplated thereby do not and will not conflict with (i) any present law or regulation or judicial or official order; (ii) its articles of association, by-laws or other constitutional documents; or (iii) any document or agreement which is binding on the Borrower;

(e)   no Event of Default exists; and no other circumstances exist which constitute or (with the giving of notice, lapse of time, determination of materiality or the fulfilment of any other applicable condition, or any combination of the foregoing) would constitute a default under any document which is binding on the Borrower or any of its assets, and which may have a material adverse effect on the ability of the Borrower to perform its obligations under the Finance Documents;

(f)   all documents and information which has been provided in connection with this Loan, represent the latest available financial information concerning the Group and there has been no change in the Group’s financial position which could have a material adverse effect on the Borrower’s ability to perform its duties under the Finance Documents;

(g)   all authorisations, consents, licenses or approvals of governmental authorities required for the Borrower in connection with the execution, performance validity or enforceability of the Finance Documents, and the transactions contemplated thereby, have been obtained and are valid;

(h)   all authorisations, consents, licenses or approvals of governmental authorities required for the Borrower to carry on its business as presently conducted, have been obtained and are in full force and effect,

(i)   no litigation, arbitration or administrative proceeding is pending or, to the best of the Borrower’s knowledge, threatened against it which would materially and adversely affect the affairs, assets or financial condition of the Borrower or its ability to perform its obligations under the Finance Documents;

(j)   the Borrower is not required to make any deduction or withholding from any payment which it may become obliged to make to the Loan Trustee (on behalf of the Bondholders) under the Finance Documents;

(k)   the Borrower's 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 mandatory preferred by law applying to companies generally; and

(l)   the representations and warranties set out in this Clause 7.1, are made by the Borrower on the signing date of the Loan Agreement.

7.2The Borrower shall indemnify the Loan Trustee for any economic losses suffered as a result of complying with the representations and warranties provided by the Borrower herein both prior to disbursement of the Loan, and during its life.

8 Status of the Loan

8.1 The Loan shall rank pari passu with all other senior debt of the Borrower, save for obligations which are mandatory preferred by law and shall rank ahead of subordinated capital.

8.2The Loan shall be unsecured.

9 Interest and interest calculations

9.1   Interest accrues from and including the Disbursement Date based on LIBOR plus Margin. The interest rate is set on the first Interest Determination Date. Should LIBOR not be available, the interest rate will be set based on LIBOR Reference Banks plus Margin.

The interest rate is reset in accordance with sub-clause 9.2.

The interest is paid in arrears on each Interest Payment Date, the first Interest Payment Date falling in March 2007.

9.2The interest rate on the Loan is reset with effect from each Interest Payment Date. The new interest rate is reset on the Interest Determination Date based on LIBOR plus Margin. Should LIBOR not be available, the interest rate will be reset based on LIBOR Reference Banks plus Margin.

When the interest is set for the first time and on subsequent interest rate resets, the next Interest Payment Date and the actual number of calendar days up to that date must be notified to the Bondholders in writing via the Securities Depository. This communication must also include the interest rate applicable up to the next Interest Payment Date. The Loan Trustee and, if the Loan is listed, the Exchange shall be notified of the new interest rate immediately.

9.3In the event that the interest rate is fixed in accordance with quotes from LIBOR Reference Banks, the Borrower or Bondholders representing at least 1/10th of the Outstanding Loan may appeal against the interest rate fixing. Such an appeal must be presented in writing to the Loan Trustee within 20 Banking Days of the Bondholders being informed of the interest rate fixing. The appeal will be dealt with by a committee comprising three members, of which one representative is nominated by the Borrower, one representative is nominated by the Loan Trustee and a chairman agreed by the representatives of the two parties. If the parties cannot agree on a chairman, this person will be nominated by the Lord Chief Justice of the Oslo City Court. The decision of the committee is final.

Bondholders and the Exchange (if applicable) shall receive written notice from the Securities Depository that an appeal has been made against the procedure for fixing the interest rate in accordance with sub-clause 9.3.

9.4 The interest is calculated on the basis of the actual number of elapsed calendar days from and including the Disbursement date to the following Interest Payment Date, and subsequently from each interest fixing date to the next or the maturity date. The number of days is divided by 360.

10Maturity of the Loan, call option, put option and mandatory redemption

10.1The Loan will run without installments and mature in whole on the Maturity Date at par (100%).

10.2 The Borrower may redeem the Loan or any portion of the Loan (the "Call Option") as follows:

(i)   at any time (American option) from and included the Interest Payment Date in June 2010 to, but not included, the Interest Payment Date in June 2011 at 104.50 % of par value plus accrued unpaid interest on redeemed amount,

(ii)   at any time (American option) from and included the Interest Payment Date in June 2011 to, but not included, the Interest Payment Date in June 2012 at 103.25 % of par value plus accrued unpaid interest on redeemed amount,

(iii)   at any time (American option) from and included the Interest Payment Date in June 2012 to, but not included, the Interest Payment Date in June 2013 at 102.25 % of par value plus accrued unpaid interest on redeemed amount, and

(iv)   at any time (American option) from and included the Interest Payment Date in June 2013 to, but not included, the Maturity Date at 101.00 % of par value plus accrued unpaid interest on redeemed amount.

Should the Borrower exercise the Call Option, the Loan Trustee and the Bondholders must be informed of this (the Bondholders in writing via VPS) no later than 30 - thirty - Banking Days before the date of redemption. The Exchange (if applicable) shall immediately be informed.

Partial redemption of the Loan must be carried out by drawing of lots between the bonds (by a full repayment of individual Bonds, allocated randomly between the bonds).

10.3Upon a Change of Control Event, each Bondholder shall have a right of redemption (put option) of its bonds at 100% (par value) plus unpaid interest on redeemed amount.

The Put Option must be exercised within two months after the Borrower has given notification as set out in Clause 13.1 (g).

The Put Option shall be exercised by the Bondholders by giving written notice of the request to the Bondholder’s VPS account manager. The Bondholder’s VPS account manager shall notify the paying agent of the Loan (the “Paying Agent”) of the pre-payment request. The Put Date shall be fifteen - 15 - Banking Days following the date when the Paying Agent received the pre-payment request.

A written request for redemption must be received by each Bondholder’s account manager at the latest 15 - fifteen - Banking Days prior to the redemption date pursuant to this Clause 10.3.

11 Interest in the event of late payment

11.1 In the event that payment of interest or principal is not made on the relevant Payment Date, the amount outstanding shall bear interest from the Payment Date at an interest rate equivalent to the interest rate according to Clause 9 plus 5.00 percentage points.

11.2 The outstanding amounts shall bear interest as mentioned above until payment is made, whether or not the Loan is declared to be in default pursuant to Clause 15.1 (a), cf. Clauses 15.2 - 15.4.

12 Borrower's acquisition of Borrower’s Bonds

12.1 The Borrower has the right to acquire and own Borrower’s Bonds. Borrower’s Bonds may at the Borrower's discretion be retained by the Borrower, sold or used for partial redemption of the Remaining Loan.

13 Covenants

13.1 During the term of the Loan the Borrower shall comply with the following information covenants:

(a)   immediately inform the Loan Trustee of any default of the Loan pursuant to Clause 15 as well as of any circumstances which the Borrower understands or should understand may lead to default,

(b)   of its own accord, make annual and interim reports available on the Borrower’s website (alternatively by sending them to the Loan Trustee) as soon they are available, and not later than 150 days after the end of the financial year and not later than 60 days after the end of the relevant interim report,

(c)   at the request of the Loan Trustee send a report outlining the balance of Borrower’s Bonds,

(d)   forward to the Loan Trustee copies of any creditors’ notifications of the Borrower, including but not limited to; mergers, demergers and reduction of shareholders capital,

(e)   at the request of the Loan Trustee provide the documents and information necessary to maintain the listing and quotation of the Loan on Exchange (if applicable) and to otherwise enable the Loan Trustee to carry out its rights and duties pursuant to the Loan Agreement, laws and regulations,

(f)   within a reasonable time limit provide information about the Borrower's financial condition as the Loan Trustee may reasonably request

(g)   immediately notify the Bondholders (via Securities Depository), the Loan Trustee and the Exchange (if listed) if a Change of Control Event takes place, and

(h)   in connection with reporting under 13.1 (b) confirm to the Loan Trustee the Borrower’s compliance with Clause 13.2 (a) and Clauses 13.3 (b) and (c);

13.2During the term of the Loan, the Borrower shall comply with the following financial covenants:

(a)each quarter demonstrate to the Loan Trustee a Value Adjusted Equity Ratio of minimum 25 % based on independent shipbroker valuations.

13.3 During the term of the Loan, the Borrower shall (unless the Loan Trustee or the Bondholders’ meeting (as the case may be) in writing has agreed to otherwise) comply with the following general covenants:

(a)   not in any calender year make any dividend payment, repurchase of shares or make other capital distributions to its shareholders, exceeding 50 per cent of the Group’s (on consilidatet basis) net profit after taxes bases on the accounts of preceding financial year (any un-utilized amount of the permitted dividend pursuant to the above may not be carried forward to any subsequent calendar year),

(b)   not cease to carry on its business, and

(c)   not (i) sell or dispose of all or a substantial part of its operations or (ii) change the nature of its business in a manner which might jeopardize the Borrower's fulfillment of its obligations under the Loan Agreement.

(d)   not engage in, or permit any member of the Group to 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 in the ordinary course of business and pursuant to the reasonable requirement of the Borrower's or such member of the Group's business and upon fair and reasonable terms that are no less favorable to the Borrower or such member of the Group, as the case may be, than those which might be obtained in an arm's length transaction at the time.

14 Fees and expenses

14.1The Borrower shall pay an annual fee to the Loan Trustee, the amount of which is set out in a separate agreement between the Borrower and the Loan Trustee.

14.2The Borrower shall cover all expenses in connection with the Loan (and any security for the Loan), such as preparation of the Loan Agreement (and any security for the Loan), listing of the Loan on the Exchange (if applicable) and registration and administration of the Loan in the Securities Depository in accordance with the agreement between the Borrower and the Securities Depository.

14.3The Borrower shall cover any document fee and other public fees in connection with the Loan (and any security for the Loan). Any public fees or taxes on sales of Bonds in the secondary market shall be paid by the Bondholders, unless otherwise decided by law or regulation.

The Borrower is responsible for withholding any withholding tax imposed by Norwegian law.

14.4 In addition to the fee of the Loan Trustee pursuant to Clause 14.1 and normal expenses pursuant to Clauses 14.2 and 14.3, the Borrower shall on demand cover extraordinary expenses incurred by the Loan Trustee in connection with the Loan, as determined in separate agreement between the Borrower and the Loan Trustee. See however Clause 19.2.

15 Events of Default

15.1The Loan may be declared to be in default upon the occurrence of any of the following events (Events of Default):

(a)the Borrower shall on any Payment Date fail to pay any interest or principal due or any other amount payable under the Finance Document; provided, however, that such failure shall not include failures which are remedied within 5 - five - Banking Days after the Payment Date, and it is obvious the Borrower will remedy the failure within this time.

(b) the Borrower shall fail to duly perform any other covenant or obligation, to be performed under Finance Documents and such failure is not remedied within 10 - ten - Banking Days after notice thereof is given to the Borrower by the Loan Trustee,

(c) if, for each member of the Group, the aggregate amount of financial indebtedness or commitment for financial indebtedness falling within paragraphs (i) to (iv) below exceeds a total of NOK 10 million - or the equivalent thereof in other currencies;

(i)any financial indebtedness of, or guaranteed by, is not paid when due nor within any originally applicable grace period,

(ii)any financial indebtedness 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),

(iii)any commitment for any financial indebtedness is cancelled or suspended by a creditor as a result of an event of default (however described), or

(iv)any creditor becomes entitled to declare any financial indebtedness of due to and payable prior to its specified maturity as a result of an event of default (however described),

(d)   if, for any member of the Group;

(i)it 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,

(ii)   the value of the assets is less than its liabilities (taking into account contingent and prospective liabilities), or

(iii)   a moratorium is declared,

(iv)a substantial part of its assets are impounded, confiscated or subject to distraint,

(e)if, for any member of the Group; any corporate action, legal proceedings or other procedure or step (or any analogous procedure or step is taken in any jurisdiction) is taken in relation to;

(i)the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) other than solvent liquidation or reorganisation,

(a)   a composition, compromise, assignment or arrangement with any creditor,

(b)   the appointment of a liquidator (other than in respect of a solvent liquidation), receiver, administrative receiver, administrator, compulsory manager or other similar officer or any of its assets; or

(c)   enforcement of any security over any of its assets, or

(f)   any representation or statement made or deemed to be made by the Borrower in the Finance Documents or any other document delivered by or on behalf of any Borrower under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made.

15.2In the event that one or more of the circumstances mentioned in Clause 15.1 occurs and is continuing, the Loan Trustee can, in order to protect the interests of the Bondholders, declare the entire Remaining Loan including accrued interest and expenses to be in default and due for immediate payment. The Loan Trustee may at his discretion, on behalf of the Bondholders, take every measure necessary to recover the Loan, and all other amounts outstanding under the Loan Agreement.

15.3In the event that one or more of the circumstances mentioned in Clause 15.1 occurs and is continuing, the Loan Trustee shall declare the entire Remaining Loan including accrued interest and costs to be in default and due for payment if:

(a)the Loan Trustee receives a demand in writing with respect to the above from Bondholders representing at least 1/5 of the Outstanding Loan, and the Bondholders' meeting has not decided on other solutions, or

(b)the Bondholders' meeting has decided to declare the Loan in default and due for payment.

In either case the Loan Trustee shall on behalf of the Bondholders take every measure necessary to recover the Remaining Loan. The Loan Trustee can request satisfactory security for anticipated expenses from those Bondholders who requested that the declaration of default be made pursuant to sub clause a) above and/or those who voted in favour of the decision pursuant to sub clause b) above.

15.4 In the event that the Loan Trustee pursuant to the terms of Clauses 15.2 or 15.3 declares the Loan to be in default and due for payment, the Loan Trustee shall immediately deliver to the Borrower a notice demanding payment of interest and principal due to the Bondholders under the Loan including accrued interest and interest on overdue amounts and, in the case of the Borrower, expenses.

15.5 The individual Bondholder cannot of his own accord recover his bond(s) directly from the Borrower.

16 Authority of the Bondholders' meeting and the Loan Trustee

16.1To the extent creditor's approval is required according to law, regulation or agreement, the Bondholders' meeting may make decisions in all questions concerning the Loan, such as:

(a) change of Loan Trustee,

(b) change of Borrower,

(c) changes to the Loan Agreement regarding interest, payment, maturity or other conditions,

(d) changes in the Borrower's corporate structure, such as mergers, demergers, capital reduction or conversion,

(e)approve the sale or other transactions concerning the Borrower’s assets,

(f) declaring the Loan to be in default.

The Bondholders' meeting may attach conditions to its decisions.

The Bondholders' meeting cannot make decisions that are liable to give certain Bondholders or others an unreasonable advantage at the expense of other Bondholders.

16.2The Loan Trustee can, subject as aforesaid, on its own make a decision as mentioned in Clause 16.1 d), provided that:

(a) the changes in the Borrower's corporate structure are not, in the judgement of the Loan Trustee, of significant importance for the fulfilment of the Loan Agreement, or

(b) any security provided by the Borrower in connection with the change offers, in the judgment of the Loan Trustee, adequate security for the fulfilment of the Loan Agreement.

The Loan Trustee can make a decision regarding other changes in the Loan Agreement as mentioned in Clause 16.1 (c), provided that the matters in question are, in the judgment of the Loan Trustee, of minor importance to the Bondholders' financial and legal rights in the Loan. Before such a decision is made, the Bondholders shall be notified in writing through the Securities Depository. The notification shall clearly describe the proposal and the opinion of the Loan Trustee of it, and shall also inform that the proposal cannot be approved by the Loan Trustee alone if any Bondholder submits a written protest against the proposal, and such protest is dispatched within a time limit which shall not be shorter than 5 - five - Banking Days from the dispatchment of the notification.

The Loan Trustee may attach conditions to its decision.

The Loan Trustee cannot make a decision under the Loan Agreement that is liable to give certain Bondholders or others unreasonable advantages at the expense of other Bondholders.

16.3 The Loan Trustee is free, subject as aforesaid, to submit any question to the Bondholders' meeting.

16.4 The Loan Trustee has the right and obligation to implement all decisions validly made at the Bondholders' meeting.

16.5 The Borrower, the Bondholders and - if the Loan is listed - the Exchange shall be notified of decisions made in accordance with Clauses 16.1 and 16.2 as soon as possible and in a suitable manner.

17 Procedural rules

17.1A Bondholders' meeting shall be held at the request of:

(a)the Borrower,

(b)Bondholders representing at least 1/10 of Outstanding Loan or

(c)the Exchange - if the Loan is listed - or

(d)the Loan Trustee.

A request of a Bondholders' meeting shall be made in writing and clearly state the matters to be discussed and the provisions of this Loan Agreement on which the request is based. The request shall be sent to the Loan Trustee.

17.2 The Bondholders' meeting shall be summoned by the Loan Trustee pursuant to the provisions of Clause 17.3. Simultaneously with the decision to summon the Bondholders' meeting, the Loan Trustee can demand that the Borrower does not increase the Outstanding Loan.

If the Loan Trustee has not complied with a valid request for a Bondholders' meeting as set forth in Clause 17.1 within five Banking Days after having received such request, then the Borrower and the relevant Bondholder(s) and - if the Loan is listed - the Exchange have the right themselves to summon the meeting pursuant to the provisions of Clause 17.3.

17.3The summons to a Bondholders' meeting shall be dispatched and if necessary notified at the latest five Banking Days before the date of the meeting.

The summons shall be effected by written notification through the Securities Depository to every Bondholder with known place of residence and - if the Loan is listed - the Exchange for publication. The notification through the Securities Depository shall also state the number of Bonds in the Loan (print-out) owned by the Bondholder in question at the time the print-out is made.

The summons shall clearly state the matters to be discussed at the Bondholders' meeting, and the provisions of this Loan Agreement on which the request is based and inform that the relevant documents are available from the Loan Trustee, the Borrower or at such other place as stated in the summons. If any change of the Loan Agreement has been proposed, the main content of the proposal shall be stated in the summons.

The meeting can only make decisions regarding the matters which were stated in the summons, unless all the Bondholders in the Outstanding Loan agree otherwise subject to the provisions hereof.

If in order to make a valid decision it is necessary, pursuant to Clause 18, to hold a new Bondholders' meeting and discuss the matter a second time, such new Bondholders' meeting cannot be summoned before the first meeting has been held. The summons to the second meeting shall inform of the turnout and result of the vote at the first Bondholders' meeting.

17.4 The meeting shall be held at the premises of the Loan Trustee or at premises designated by the Loan Trustee.

The meeting shall be presided over by the Loan Trustee, unless the Bondholders' meeting decides otherwise. If the Loan Trustee is not present, the meeting shall be presided over by a Bondholder or representative of the Bondholders, elected by the Bondholders.

The minutes of the meeting shall be kept, showing the Bondholders present - personally or by proxy - as well as how many votes each Bondholder can cast. Further, the decisions made at the meeting, as well as the result of the vote, shall be recorded. The minutes shall be signed by the chairman and two Bondholders or proxies. The minutes shall be kept in a safe manner by the Loan Trustee, and shall be available to the Bondholders.

17.5 Bondholders, the Borrower, the Loan Trustee and - if the Loan is listed - the Exchange have the right to attend the Bondholders' meeting. The Bondholders' meeting can grant entrance to the meeting to other parties. The participants at the meeting have the right to meet with an advisor and/or by proxy.

17.6 At the Bondholders' meeting each Bondholder has one vote for each Bond he owns. The notification of the number of Bonds in the Loan (print-out) which was sent to each Bondholder through the Securities Depository in the summons to the meeting, see Clause 17.3, serves as proof of ownership of the Bonds and of each owner's right to vote. In the event that Bonds have been transferred after the print-out was made, the new Bondholder must bring to the meeting the original summons and the print-out, endorsed so as to document the transfer.

The Borrower’s Bonds do not give the right to vote and are not taken into account when determining the number of voting Bonds.

In case of doubt, the Bondholders' meeting decides which Bondholders can vote and how many votes each one has.

17.7 In order for the Bondholders' meeting to be able to make valid decisions, Bondholders representing at least 5/10 of the Outstanding Loan must be represented, see however Clause18.

Valid decisions may be made by a simple majority, see however Clause 17.8.

17.8 In the following matters a majority of 2/3 of the Bonds represented at the meeting must vote in favour of the decision:

(a) change of bondholders’ representative,

(b) change of borrower,

(c) changes in the Loan Agreement's conditions, including interest, maturity, term and security/collateral, or

(d) corporate or business changes in the Borrower which are of significant importance for the fulfilment of the Loan Agreement.

17.9 In all matters where unanimity is not attained, the voting shall be in writing and the number of votes shall be recorded in the minutes of the meeting. In the case of a tie in the votes, the matter shall be decided by the chairman, even if he is not a Bondholder or proxy.

Decisions made at a Bondholders' meeting which entail changes to the Loan Agreement shall be attached to the Loan Agreement in the form of a certified copy of the minutes of the meeting.

18Repeated Bondholders' meeting

18.1In the event that less than 5/10 of the Outstanding Loan are represented, a valid decision may not be made at the first Bondholders' meeting at which the matter is discussed. After a new meeting has been summoned and the matter discussed a second time, a valid decision may be made pursuant to the voting rules set forth above; this also applies to cases in which less than 5/10 of the Outstanding Loan are represented.

19Change of Loan Trustee

19.1 In the event that the Borrower or Bondholders in accordance with sub-clause 17.1 b) wish to replace the Loan Trustee, or a change of Loan Trustee is necessary according to law, regulation or ordinance, or the Loan Trustee has requested such change, the Loan Trustee shall immediately summon a Bondholders' meeting to discuss the matter.

The Loan Trustee shall put before the Bondholders' meeting a proposal for a new loan trustee. The bondholders, the Borrower and the Exchange - if the Loan is listed - can submit proposals.

The Bondholders and the Exchange - if the Loan is listed - shall after the Bondholders' meeting, be notified of the decision and the date on which the change of loan trustee becomes effective.

19.2The Loan Trustee shall act as Loan Trustee until a new loan trustee has been elected. In the event that the Loan Trustee does not act properly and the interests of the bondholders suffer, the Exchange may appoint a temporary loan trustee. The cost of the temporary loan trustee shall be covered by the Borrower pursuant to sub-clause 14.4, but may be recovered wholly or in part from the former loan trustee if the change is due to breach of the loan trustee's duties under the Loan Agreement, or other circumstances for which the loan trustee is responsible.

19.3 The Loan Trustee shall co-operate so that the new loan trustee is given, without undue delay after the Bondholders' meeting, the documents and information necessary to perform his functions and duties under the Loan Agreement. The Loan Trustee shall provide a summary of the following up of conditions of the Loan Agreement.

20 Limitation

20.1Claims for interest and principal shall be limited in time pursuant to the Norwegian Act relating to the Limitation Period for Claims of May 18, 1979 nr. 18.

21 Dispute resolution and legal venue

21.1 Disputes arising out of or in connection with the Loan Agreement which are not resolved amicably, shall be resolved in accordance with Norwegian law and in the Norwegian courts.

21.2 Legal suits shall be served at the competent legal venue of the Loan Trustee.

Oslo, 11 December 2006

B+H Ocean Carriers LtdNorsk Tillitsmann ASA

BorrowerLoan Trustee

......................................................................................

The Loan Agreement has been executed in 2 copies (originals), of which the Borrower and the Loan Trustee keep one each.

EX-5

CERTIFICATION PURSUANT TO SECTION 302 (RULES 13A - 14(A) AND 15D - 14(A)) OF THE SARBANES-OXLEY ACT OF 2002

I, Michael S. Hudner, certify that:

1. I have reviewed this annual report on Form 20-F of B+H Ocean Carriers Ltd.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or to 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 annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this annual report.

4. The Company’s other certifying officers 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 registrant 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual 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 registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual 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 this annual report that has materially affected, or is reasonably likely to materially affect the Company’s internal control over financial reporting; and

5. The Company’s other certifying officers 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:

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over 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 registrant’s internal controls over financial reporting.

Date: May l 3, 2007

By: /s/ Michael S. Hudner

Michael S. Hudner

Chairman of the Board, President andChief Executive Officer

CERTIFICATION PURSUANT TO SECTION 302 (RULES 13A - 14(A) AND 15D - 14(A)) OF THE SARBANES-OXLEY ACT OF 2002

I, R. Anthony Dalzell, certify that:

1. I have reviewed this annual report on Form 20-F of B+H Ocean Carriers Ltd.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or to 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 annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

4. The Company’s other certifying officers 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 registrant 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual 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 registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual 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 this annual report that has materially affected, or is reasonably likely to materially affect the Company’s internal control over financial reporting; and

5. The Company’s other certifying officers 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:

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over 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 registrant’s internal controls over financial reporting.

Date: May 3, 2007

By: /s/R. Anthony Dalzell

R. Anthony Dalzell Treasurer and Chief Financial Officer

EX-7

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of B+H Ocean Carriers Ltd.; (the “Company”) on Form 20-F for the year ending December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael S. Hudner, Chairman of the Board, President and Chief Executive Officer and Class A Director of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13 (a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 3, 2007

By: /s/ Michael S. Hudner

Michael S. Hudner

Chairman of the Board, President and

Chief Executive Officer

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - continued --------------------------

In connection with the Annual Report of B+H Ocean Carriers Ltd.; (the “Company”) on Form 20-F for the year ending December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Anthony Dalzell, Treasurer and Chief Financial Officer and Class B Director of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13 (a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 3, 2007

By: /s/R. Anthony Dalzell

R. Anthony Dalzell

Treasurer and Chief Financial Officer